1
STOCK PURCHASE AGREEMENT Exhibit 10.37
This Stock Purchase Agreement ("Agreement") is made and entered into as
of the 7th day of July, 1999, by and between NATIONAL DATA CORPORATION, a
Delaware corporation ("Purchaser"), and MEDSCAPE, INC., a Delaware corporation
("Seller").
In consideration of the mutual promises and covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. BASIC TRANSACTION
1.1 Authorization of Shares. Seller has authorized the issuance and
sale to Purchaser of 400,000 shares (the "PS Shares") of its Series E Preferred
Stock, par value $.01 per share, having all of the powers, designations,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions of such preferences and rights set
forth in the Amended and Restated Certificate of Incorporation of Seller (the
"Amended and Restated Certificate"), substantially in the form of Exhibit A
attached hereto, and 1,000,000 shares (the "CS Shares") of Class A Common Stock,
par value $.01 per share (the CS Shares, together with the PS Shares,
collectively referred to herein as the "Shares"), for the aggregate
consideration of Twenty Million Dollars ($20,000,000.00) ($25.00 per PS Share
and $10.00 per CS Share) to be paid as follows: (i) Ten Million Dollars
($10,000,000.00) in cash (the "Cash Equity Amount") and (ii) Ten Million Dollars
($10,000,000.00) as the non-cash equity amount of consideration provided by
Purchaser to Seller (the "Non-Cash Equity Amount") pursuant to the License and
Product Development Agreement (as hereinafter defined), the Non-Cash Equity
Amount to be attributed as set forth in Exhibit 11.1 to the License and Product
Development Agreement.
1.2 Issuance of the Shares. Subject to the terms and conditions hereof
and in reliance upon the representations, warranties, covenants and agreements
contained herein, Seller will issue, sell and deliver the Shares to Purchaser,
and Purchaser will purchase the Shares from Seller, in each case at the Closing
(as hereinafter defined).
1.3 Use of Proceeds. Seller, as determined by the Board of Directors
thereof, will use the Cash Equity Amount from the sale of the Shares for general
working capital.
2. CLOSING
2.1 Time and Place. Subject to the satisfaction (or waiver) of the
conditions set forth in Section 7 below, the closing of the transaction provided
for in Section 1.2 above (the "Closing") shall take place on the third business
day after the satisfaction (or
2
waiver) of the last to be satisfied (or waived) of such conditions (the "Closing
Date") at the offices of Patterson, Belknap, Xxxx & Xxxxx LLP, 0000 Xxxxxx xx
xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other location and time as
the parties hereto may otherwise mutually agree, unless this Agreement is sooner
terminated pursuant to the provisions of Section 8 below and provided that in no
event shall the Closing Date occur after the Outside Termination Date (as
hereinafter defined).
2.2 Closing Deliveries.
(a) Seller shall deliver the following to Purchaser at
the Closing:
(i) A copy of the Amended and Restated
Certificate, duly certified by the Secretary
of State of Delaware;
(ii) A copy of the Bylaws of Seller, as amended,
duly certified by the Secretary of Seller;
(iii) Certificates representing the Shares to be
purchased at the Closing duly executed on
behalf of Seller and registered in the name
of Purchaser for the number of shares set
forth in Section 1.1 above;
(iv) A counterpart copy of the Amended and
Restated Stockholders Agreement, by and
among Seller, Purchaser and the other
stockholders of Seller set forth therein
(the "Stockholders Agreement"), attached
hereto as Exhibit B, duly executed on behalf
of Seller and the other parties thereto
other than Purchaser;
(v) A counterpart copy of the License and
Product Development Agreement, by and
between Purchaser and Seller (the "License
and Product Development Agreement"),
attached hereto as Exhibit C, duly executed
on behalf of Seller;
(vi) An opinion from the legal counsel to Seller
addressed to Purchaser, dated the Closing
Date, in the form of Exhibit D attached
hereto;
(vii) A waiver executed and delivered by each of
the parties to the Existing Stockholders
Agreement (as hereinafter defined) waiving
each of their preemptive rights to purchase
the Shares;
2
3
(viii) The certificate described in Section
7.1(b)(vii) below; and
(ix) Any other information, documents or
certificates reasonably requested by
Purchaser.
(b) Purchaser shall deliver the following to Seller at
the Closing:
(i) The Cash Equity Amount set forth in Section
1.1 above by wire transfer in immediately
available funds to an account specified by
Seller at least two business days prior to
the date of the Closing;
(ii) A counterpart copy of the Stockholders
Agreement duly executed on behalf of
Purchaser (for purposes of the Stockholders
Agreement, Purchaser and Seller hereby
acknowledge and agree that upon its
execution and delivery by Purchaser,
Purchaser shall be deemed an Investor
Stockholder (as such term is defined
therein));
(iii) A counterpart copy of the License and
Product Development Agreement duly executed
on behalf of Purchaser;
(iv) The certificate described in Section
7.1(c)(vi) below; and
(v) Any other item, documents or certificates
reasonably requested by Seller.
(c) The deliveries referred to in clauses (a) and (b) of
this Section 2.2 shall be deemed to take place
simultaneously with one another, and no proceedings
shall be deemed taken and no documents executed and
delivered until all have been taken, executed and
delivered.
3. REPRESENTATIONS AND WARRANTIES OF SELLER.
In order to induce Purchaser to enter into this Agreement and
purchase the Shares, Seller represents and warrants to Purchaser as follows:
3.1 Organization, Good Standing and Corporate Power. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware with all requisite corporate power and authority to own
its properties and to conduct its business as presently conducted. Seller is
qualified to do business and is in good standing in each jurisdiction in which
the failure to be so qualified would
3
4
have a Material Adverse Effect (as hereinafter defined), Seller has all
requisite corporate power and authority to enter into this Agreement, the
Stockholders Agreement and the License and Product Development Agreement
(collectively, the "Documents") and to perform its obligations hereunder and
thereunder, including, without limitation, the issuance and sale of the Shares.
3.2 Due Authorization; Enforceability; No Conflicts. Seller has taken
all corporate and stockholder action necessary (i) to authorize the execution,
delivery and performance by it of each of the Documents, (ii) for the
authorization, issuance and delivery by it of the Shares and (iii) for the
authorization and reservation of the shares of the Common Stock (as hereinafter
defined) issuable upon conversion of the PS Shares (the "Conversion Shares").
Assuming the due execution and delivery of this Agreement by Purchaser, this
Agreement constitutes a valid and binding obligation of Seller, enforceable
against Seller in accordance with its terms and assuming the due execution and
delivery by Purchaser of each of the other Documents at the Closing, upon
execution and delivery thereof by Seller each of the other Documents will
constitute a valid and binding obligation of Seller, enforceable against Seller
in accordance with its terms. Except as set forth on Schedule 3.2, the
execution, delivery and performance by Seller of each of the Documents and
compliance by Seller with the terms hereof and thereof will not violate,
conflict with or cause an event of default under (i) Seller's Amended and
Restated Certificate, Seller's Bylaws, the existing stockholders agreement,
dated as of October 31, 1997, as amended on February 19, 1998, October 23, 1998,
March 5, 1999 and May 24, 1999 (as so amended, the "Existing Stockholders
Agreement"), the stockholders agreement to be entered into between Seller and
CBS Corporation pursuant to the terms of the Stock Purchase Agreement, dated as
of the date hereof, between Seller and CBS Corporation or any resolutions of
Seller's Board of Directors or stockholders, or (ii) any agreement, instrument,
judgment, order, law, rule or regulation by which Seller is bound or to which
any of Seller's properties are subject, except where a violation, conflict or
event of default under this subsection (ii) would not result in a material
adverse effect on Seller's business, financial condition, results of operations
or properties (a "Material Adverse Effect"). The Shares, upon
4
5
issuance in accordance with the terms of this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable, free of any liens,
claims or encumbrances ("Encumbrances") other than the terms and provisions of
the Amended and Restated Certificate, the Stockholders Agreement and
restrictions imposed by applicable United States and state securities laws and
will not be subject to any preemptive rights, rights of first refusal or
redemption rights, other than as provided in the Amended and Restated
Certificate or the Stockholders Agreement. The Conversion Shares have been duly
and validly reserved, and neither they nor the issuance thereof are subject to
any preemptive rights or rights of first refusal or redemption rights, and upon
issuance, they will be validly issued, fully paid and nonassessable, free of any
Encumbrances other than the terms and provisions of the Amended and Restated
Certificate, the Stockholders Agreement and restrictions imposed by applicable
United States and state securities laws and will not be subject to any
preemptive rights, rights of first refusal or redemption rights, other than as
provided in the Amended and Restated Certificate or the Stockholders Agreement.
3.3 Capitalization. The authorized capital stock of Seller consists of
(a) 42,500,000 shares of common stock, par value $.01 per share (the "Common
Stock"), of which 27,500,000 shares have been designated Class A Common Stock
and 15,000,000 shares have been designated Class B (Non-Voting) Common Stock,
and of which 1,079,000 shares of Class A Common Stock and 6,995,602.5 shares of
Class B (Non-Voting) Common Stock shares are issued and outstanding as of the
date hereof, and (b) 4,956,643 shares of preferred stock (the "Preferred
Stock"), of which 788,200 shares have been designated Series A Preferred Stock,
1,478,359 shares have been designated Series C Preferred Stock, 932,401 shares
have been designated Series C-1 Preferred Stock and 1,757,683 shares have been
designated Series D Preferred Stock, all of which are issued and outstanding as
of the date hereof. All of the issued and outstanding shares of capital stock of
Seller have been duly authorized and validly issued, are fully paid and
nonassessable and are owned beneficially and of record by the shareholders and
in the amounts set forth on the stock ledger of Seller. All outstanding shares
of capital stock of Seller were offered, issued, sold and delivered by Seller in
compliance with all applicable federal and state securities laws. Except for
this Agreement or as set forth on Schedule 3.3, there are no outstanding
subscriptions, rights, options, warrants, conversion rights, agreements or other
claims for the purchase or acquisition from Seller of any shares of its capital
stock or obligating Seller to issue, repurchase or otherwise acquire, any shares
of its capital stock or any securities convertible into, exercisable or
exchangeable for, or otherwise entitling the holder to acquire, any shares of
capital stock of Seller. Except as set forth in the Existing Stockholders
Agreement, no person is entitled to any preemptive or similar rights with
respect to the issuance of any capital stock of Seller. Except as set forth on
Schedule 3.3 or as contemplated by the Existing Stockholders Agreement, no
person has the right to nominate or elect one or more directors of Seller.
Seller's registration statement on Form S-1, filed with the Securities and
Exchange Commission on May 4,
5
6
1999, as amended in the form to be filed with the Securities and Exchange
Commission on July 8, 1999 and previously delivered to Purchaser (as so amended,
the "Registration Statement") sets forth the names of the stockholders of Seller
who beneficially own 5.0% or more of any class of the capital stock of Seller.
3.4 Certificate of Incorporation and Bylaws. The copies of the Amended
and Restated Certificate of Incorporation of Seller and Seller's Bylaws provided
to Purchaser prior to the date hereof are true, correct and complete copies
thereof as currently in effect, and prior to the Closing Date the Amended and
Restated Certificate will have been filed with the Secretary of State of the
State of Delaware.
3.5 Subsidiaries. As of the date hereof, Seller has no subsidiaries,
and does not own of record or beneficially, and has no commitment or obligation
to acquire any capital stock or equity interest or investment in any
corporation, partnership, limited liability company, joint venture, association,
trust or other business entity except as set forth on Schedule 3.5.
3.6 Taxes. All tax returns that were required to be filed by Seller
prior to the date hereof have been filed on a timely basis; all tax returns
filed by Seller prior to the date hereof were complete and accurate except where
any inaccuracy would not result in a Material Adverse Effect; and all taxes
shown as due and owing on such tax returns have been paid by Seller, except
where the payment of such taxes is the subject of a current bona fide dispute
being contested by appropriate proceedings and for which appropriate reserves
have been established on Seller's books. Seller is not a party to any pending
action, proceeding or investigation by any governmental authority for the
assessment or collection of taxes nor does Seller have knowledge of any such
threatened action, proceeding or investigation. No deficiency assessment or
proposed adjustment of Seller's federal or state or municipal taxes, if any, is
pending, and Seller has no knowledge of any proposed liability for any tax to be
imposed on Seller's properties or assets for which there is not an adequate
reserve reflected in the Seller Financial Statements (as hereinafter defined).
Seller has withheld and paid all taxes required to be withheld in connection
with any amounts paid or owing to any employee, creditor, independent contractor
or other third party with respect to the business of Seller.
3.7 Consents. No consent of, order or approval by, or filing with any
governmental agency or authority or other third party is required in connection
with Seller's execution, delivery and performance of each of the Documents,
including the issuance of the Shares to Purchaser hereunder, other than the
filing of the Amended and Restated Certificate with the Secretary of State of
the State of Delaware, the waiver of the provisions of the Existing Stockholders
Agreement by the parties thereto contemplated under Section 2(a)(vii) above, and
the termination or expiration of the
6
7
required waiting period under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvement Act of
1976, as amended (the "HSR Waiting Period").
3.8 Offering. Based on the representations, warranties and covenants of
Purchaser set forth herein, and assuming due compliance by Purchaser with the
terms of this Agreement and the other Documents in all relevant respects, the
offer, sale and issuance of the Shares to Purchaser as contemplated by this
Agreement are exempt from the registration requirements of the Securities Act of
1933, as amended (the "Securities Act"), and applicable blue sky laws.
3.9 Certain Agreements. As of the date hereof, other than the Documents
and as set forth on Schedule 3.9, there are no agreements to which Seller is a
party pursuant to which Seller is under any obligation to any person to register
for sale under the Securities Act any of its currently outstanding securities or
any of its securities that may hereafter be issued, and, except for the Existing
Stockholders Agreement, Seller is not a party to, and has no knowledge of, any
agreements relating to the voting of Seller's capital stock.
3.10 Litigation. There is neither pending nor, to Seller's knowledge,
threatened, any action, suit, proceeding or claim, to which Seller is named as a
party, or to which the properties of Seller may be subject, which, if determined
adversely to Seller, could reasonably be expected to have a Material Adverse
Effect.
3.11 Properties. Except for its properties which are leased as to which
Seller has a valid leasehold interest, Seller has good and marketable title to
its properties, in each case free from all mortgages, pledges, conditional sale
agreements or Encumbrances except (a) tax or like liens for obligations not yet
due or payable or being contested in good faith by appropriate proceedings and
for which appropriate reserves have been established on Seller's books and (b)
other imperfections of title or Encumbrances that do not impair in any material
respect the current or proposed use or marketability of the properties subject
thereto ((a) and (b) are referred to collectively as "Permitted Liens"). All
such properties that are necessary for Seller's business as presently conducted
are maintained and kept in good condition, repair and working order, subject to
normal wear and tear. Seller owns, leases or licenses all properties necessary
for the conduct of its business as presently conducted. With respect to real and
personal property that it leases, Seller is not in violation in any material
respect of the terms of the applicable leases and holds valid and enforceable
leasehold interests free from all mortgages, pledges and Encumbrances except (i)
Permitted Liens and (ii) easements, covenants, rights of way and other
Encumbrances and restrictions arising as a matter of law that do not impair in
any material respect the current use of the property subject thereto.
7
8
3.12 Intellectual Property. (a) Schedule 3.12 sets forth a true,
correct and complete list or description of all registered and unregistered
trademarks, trademark registrations, service marks, service xxxx registrations,
domain names, trade names, company names, patents, design patents, copyright
registrations and copyrights and pending applications therefor, in each case
which are used in or required for the business of Seller as currently being
conducted or which is distributed by Seller to third parties (together with all
inventions, processes, computer software, know-how, formulas, pattern designs
and trade secrets of Seller, the "Intellectual Property Rights"). Except as
disclosed on Schedule 3.12, Seller is the sole and exclusive owner of, with all
right, title and interest in and to (free and clear of any lien except for
Permitted Liens) the Intellectual Property Rights and has sole and exclusive
rights, without being contractually obligated to pay any compensation to any
third party in respect thereof, for which they are being used as of the date of
this Agreement and as otherwise stated in the description of goods and services
contained in the relevant materials relating to any Intellectual Property Rights
filed with the United States Copyright Office or the United States Patent and
Trademark Office.
(b) Seller has not violated or infringed any patent,
copyright, trade secret, trademark, service xxxx or other intellectual property
right of any other person or entity. Except as set forth on Schedule 3.12, (i)
Seller has not been sued or charged or been a defendant in any claim, suit,
action or proceeding which involves a claim of infringement of any Intellectual
Property Rights, (ii) to the knowledge of Seller, there are no other claims that
Seller is infringing any existing patent, trademark or copyright and (iii) to
the knowledge of Seller, the use of the Intellectual Property Rights in
connection with the business of Seller as currently being conducted does not
infringe the patent, trademark, copyright or any other right of any third party.
(c) Seller has not made or asserted any claim of violation or
infringement of any Intellectual Property Rights against any other person or
entity, and Seller does not have any knowledge of any such violation or
infringement.
3.13 Financial Statements. Seller has heretofore delivered to Purchaser
the following financial statements of Seller: (i) the audited balance sheets as
of December 31, 1998 and 1997, (ii) the audited statements of income and of cash
flows for the fiscal years ended December 31, 1998 and 1997 and (iii) the
unaudited balance sheet as of March 31, 1999 and statements of income and of
cash flows for the fiscal quarter ended March 31, 1999 (collectively, the
"Seller Financial Statements"). Except as set forth on Schedule 3.13, the Seller
Financial Statements have been prepared from the books and records of Seller and
fairly present in all material respects the financial condition of Seller as of
the dates indicated therein and the results of operations and cash flows of
Seller for the periods covered thereby in accordance with generally accepted
accounting principles consistently applied throughout the periods presented.
8
9
3.14 No Material Adverse Change. Except as set forth on Schedule 3.14,
since March 31, 1999, Seller has conducted its business in the ordinary course
consistent with past practice, and there has not been any material adverse
change in the business, assets, condition (financial or otherwise) or results of
operations of Seller since such date.
3.15 No Defaults. There is no existing default, or any event, act or
circumstance which, with the passage of time, the giving of notice or both,
would become a default, by Seller under any contract or agreement to which
Seller is a party or by which any part of its assets or properties is bound, the
result of which could reasonably be expected to have a Material Adverse Effect.
To the knowledge of Seller, there is no existing default by any other party
under any such contract or any event, act or circumstance which, with the
passage of time, the giving of notice or both, would reasonably be expected to
become a default by such other party under any such contract, the result of
which could reasonably be expected to have a Material Adverse Effect.
3.16 Compliance With Laws. The conduct of the business of Seller
currently complies and at all times has complied with all statutes, laws,
regulations, ordinances, rules, judgments, orders or decrees applicable thereto,
except where the failure to comply therewith could not reasonably be expected to
have a Material Adverse Effect. Seller has not received notice of any alleged
material violation of any statute, law, regulation, ordinance, rule, judgment,
order or decree from any governmental authority applicable to Seller or any of
its assets or properties which has not been satisfactorily disposed of.
3.17 Insurance. All of the businesses and assets of Seller that are of
insurable character are covered by insurance with reputable insurers against
risk of liability, casualty and fire and other losses and liabilities
customarily obtained to cover comparable businesses and assets in amounts, scope
and coverage which are consistent with prudent industry practice.
3.18 Contracts. Except for contracts listed on Schedule 3.18 (the
"Contracts"), Seller is not a party to or bound by, or derives any benefit from,
any material contract which is a:
(a) contract not made in the ordinary course of business;
(b) covenant not to compete;
(c) contract for the sale of any of the material assets of
Seller (other than sales of inventory to customers in the ordinary course of
business) or the grant of
9
10
any preferential rights to purchase any material assets of Seller or requiring
the consent of any party to the transfer thereof;
(d) any loan agreement, indenture, promissory note or
conditional sales agreement or any pledge, security agreement, deed of trust,
financing statement or other document granting any lien on any asset or property
of Seller;
(e) any revocable or irrevocable power of attorney to any
person for any reason;
(f) contract with or permit by or from any governmental entity
(except those as to which the failure to possess could not reasonably be
expected to have a Material Adverse Effect); or
(g) contract which involves or is reasonably expected to
involve aggregate future payments, obligations or revenues in excess of One
Hundred Thousand Dollars ($100,000.00) (whether in payment of a debt, as a
result of any guarantee or indemnification, for services or goods or otherwise
and including any barter arrangements) or which, as of the Closing Date, will
have a remaining term exceeding one year, in each case other than orders to
purchase or sell goods or services in the ordinary course of business consistent
with past practice.
3.19 Employees. All material employment agreements Seller has entered
into with its named executive officers (as defined in Section 402 of Regulation
S-K promulgated by the Securities and Exchange Commission) are accurately
described in the Registration Statement. Seller is not a party to any agreements
with labor unions or associations representing employees of Seller. No work
stoppage against Seller is pending or, to the knowledge of Seller, threatened.
Seller is not involved in or, to the knowledge of Seller, threatened with any
labor dispute, arbitration, lawsuit or administrative proceeding (other than
immaterial grievances) relating to labor matters involving the employees of
Seller (excluding workers compensation and unemployment compensation claims). No
union or association organizing or election activities involving any employees
of Seller, to the knowledge of Seller, are in progress or have been threatened.
3.20 Employee Benefits. The Registration Statement accurately describes
all of the material bonus, stock option, stock purchase, restricted stock,
incentive, deferred compensation, retiree medical or life insurance,
supplemental retirement, severance or other benefit plans, programs or
arrangements to which Seller is a party or which are maintained, contributed to
or sponsored by Seller for the benefit of any current or former employee,
officer or director of Seller.
10
11
3.21 Interested Party Transactions. The Registration Statement
accurately describes all material transactions required to be described therein
pursuant to Section 404 of Regulation S-K promulgated by the Securities and
Exchange Commission between Seller and any current or past officer, director,
employee or shareholder of Seller (or any affiliate of any such individual)
other than for current employment services.
3.22 Disclosure. No representation or warranty of Seller made to
Purchaser in this Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary to make such statement made not
misleading in light of the circumstances under which it was made.
3.23 No Negotiations. Except as set forth on Schedule 3.23, Seller is
not engaged in any substantive discussions or negotiations relating to (i) the
sale of shares of capital stock of Seller which would enable the purchaser, upon
consummation of such sale, to exercise voting control of the business and
affairs of Seller, (ii) the sale of all or substantially all of the assets of
Seller or (iii) any merger or consolidation involving Seller in which the
stockholders of Seller immediately prior to the consummation thereof would cease
to be entitled to exercise voting control of the surviving or resulting entity
immediately following the consummation thereof.
3.24 Dilutive Events. Since March 5, 1999, as of the date hereof no
event has occurred which would result in a decrease in the conversion price of
any series of the outstanding Preferred Stock other than the 2.5 to 1.0 stock
split effected with respect to the Common Stock.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER
In order to induce Seller to enter into this Agreement and
issue and sell the Shares, Purchaser represents and warrants to Seller as
follows:
4.1 Organization, Good Standing and Corporate Power. Purchaser is a
corporation, validly existing and in good standing under the laws of the State
of Delaware with all requisite corporate power and authority to own its
properties, conduct its business, enter into this Agreement and the other
Documents and perform its obligations hereunder and thereunder.
4.2 Due Authorization; Enforceability; No Conflicts. Purchaser has
taken all corporate action necessary to authorize the execution, delivery and
performance by it of each of the Documents. Assuming the due execution and
delivery of this Agreement by Seller, the Agreement constitutes a valid and
binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms and assuming the due execution and delivery by Seller of each of
the other Documents at the Closing, upon
11
12
execution and deliver thereof by Purchaser each of the other Documents will
constitute a valid and binding obligation of Purchaser, enforceable against
Purchaser in accordance with its terms. The execution, delivery and performance
by Purchaser of each of the Documents and compliance by Purchaser with the terms
hereof and thereof will not violate, conflict with or cause an event of default
under (i) Purchaser's Certificate of Incorporation, or (ii) any other agreement,
instrument, judgment, order, law, rule or regulation by which Purchaser is bound
or to which any properties of Purchaser are subject, except where a violation,
conflict or event of default under this subsection (ii) would not result in a
material adverse effect on Purchaser's business, financial condition, results of
operations or properties.
4.3 Consents. No consent of, order or approval by, or filing with any
governmental authority or other third party is required in connection with
Purchaser's execution, delivery and performance of each of the Documents,
including the purchase of the Shares by Purchaser hereunder, other than the
termination or expiration of the HSR Waiting Period.
4.4 Suitability as an Investor. Purchaser represents that it can bear
the economic risk of its investment in the Shares and is investing in its own
name and for its own account. Purchaser hereby represents and warrants that it
is a sophisticated investor with knowledge and experience in business and
financial matters and is able to bear the economic risk of purchasing the Shares
and the Conversion Shares issuable upon conversion of the PS Shares, including
the loss of the economic benefits of its entire investment.
4.5 Investment Intent. Purchaser is acquiring the Shares and the
Conversion Shares issuable upon the conversion of the PS Shares for investment
for its own account and not with view to, or for resale in connection with, any
distribution thereof. Purchaser understands that the Shares and the Conversion
Shares issuable upon the conversion of the PS Shares have not been registered
under the Securities Act or applicable state securities laws by reason of
certain exemptions from the registration provisions thereof that depend upon,
among other things, the truth and accuracy of Purchaser's representations and
warranties herein.
4.6 Restricted Transferability. Purchaser acknowledges that the Shares
and the Conversion Shares issuable upon the conversion of the PS Shares must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. It is understood that
the certificates evidencing the Shares and the Conversion Shares issuable upon
the conversion of the PS Shares may bear one or all of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933 or any applicable state securities laws. They may not be
sold, offered for sale,
12
13
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Securities Act or an opinion of
counsel reasonably satisfactory to the Company that such registration is not
required or unless sold pursuant to an exemption to such Securities Act."
(b) "A statement of all the designations, preferences, rights
and qualifications, limitations or restrictions granted to or imposed upon the
respective classes and/or series of shares of stock of the Company and upon the
holders thereof may be obtained by any shareholder upon request and without
charge, at the principal office of the Company."
(c) "The shares evidenced by this certificate are subject to
the terms and conditions of a certain Stockholders Agreement which includes a
voting agreement. Copies of the Stockholders Agreement may be obtained upon
written request to the Company's secretary."
(d) Any legend required by any applicable securities laws of
any state.
5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
5.1 Survival of Representations, Warranties and Covenants. The
representations and warranties of Seller set forth in Section 3 above shall
survive the Closing until the eighteen month anniversary of the Closing Date.
The representations and warranties of Purchaser set forth in Section 4 above
shall survive the Closing until the eighteen month anniversary of the Closing
Date. The covenants of Seller set forth in this Agreement which relate to
periods following the Closing shall survive the Closing in accordance with the
provisions of Section 6 below.
5.2 Indemnification by Seller. Seller agrees to indemnify and hold
harmless Purchaser from and against any and all assessments, judgments, debts,
obligations, liabilities, losses, costs, damages or expenses (collectively,
"Damages"), suffered, paid or incurred by Purchaser resulting from or caused by
or arising out of: (i) any breach of any representation or warranty made by
Seller to Purchaser in this Agreement or (ii) any failure by Seller to perform
any covenant or agreement of Seller contained in this Agreement; provided,
however, that Seller shall not have any obligation to indemnify Purchaser from
and against any Damages resulting from, arising out of, relating to, in the
nature of, or caused by the breach (or alleged breach) of any representation or
warranty of Seller contained herein until Purchaser has suffered Damages in
excess of a Two Hundred Fifty Thousand Dollars ($250,000.00) threshold (at which
point Seller will be obligated to indemnify Purchaser from and against all such
Damages above such dollar figure); and provided, further, that in the absence of
fraud the aggregate amount of Damages for which Seller may be liable under this
Section 5.2 shall not exceed Twenty Million Dollars ($20,000,000.00) in the
aggregate.
13
14
5.3 Indemnification by Purchaser. Purchaser agrees to indemnify and
hold harmless Seller from and against any and all Damages suffered, paid or
incurred by Seller resulting from or caused by or arising out of: (i) any breach
of any representation or warranty made by Purchaser to Seller in this Agreement
or (ii) any failure by Purchaser to perform any covenant or agreement of
Purchaser contained in this Agreement; provided, however, that Purchaser shall
not have any obligation to indemnify Seller from and against any Damages
resulting from, arising out of, relating to, in the nature of, or caused by the
breach (or alleged breach) of any representation or warranty of Purchaser
contained herein until Seller has suffered Damages in excess of a Two Hundred
Fifty Thousand Dollars ($250,000.00) threshold (at which point Purchaser will be
obligated to indemnify Seller from and against all such Damages above such
dollar figure); and provided, further, that in the absence of fraud the
aggregate amount of Damages for which Purchaser may be liable under this Section
5.3 shall not exceed Twenty Million Dollars ($20,000,000.00) in the aggregate.
5.4 Exclusive Remedy. Purchaser and Seller acknowledge and agree that
in the absence of fraud or other intentional malfeasance the foregoing
indemnification provisions in this Section 5 shall be the exclusive remedy of
Purchaser and Seller with respect to the transactions contemplated by this
Agreement; provided, however, that the foregoing indemnification provisions are
in addition to, and not in derogation of, any non-monetary equitable remedies
available to the parties and any statutory, equitable or common law remedy any
party hereto may have for fraud or other intentional malfeasance.
6. COVENANTS
6.1 Covenants. For so long as Seller is not subject to the periodic
reporting requirements of Section 12 of the Securities Exchange Act of 1934, as
amended:
(a) Seller will permit Purchaser or any representative of
Purchaser to visit and inspect Seller's premises and properties, including its
books and records of account, from time to time, and to discuss Seller's
business, finances and accounts with Seller's officers at reasonable times
during Seller's regular business hours, upon reasonable advance written notice
to Seller and in a manner that will not unreasonably interfere with the normal
business operations of Seller.
(b) Seller shall deliver to Purchaser annual audited financial
statements and quarterly unaudited financial statements for Seller, including
the balance sheet, the statements of income and of cash flows for the fiscal
quarter ending June 30, 1999, when such statements have been prepared.
(c) The books of account and other financial and corporate
records of Seller shall be maintained in accordance with good business and
accounting practices.
14
15
(d) Seller shall maintain in full force and effect its
corporate existence, rights, governmental approvals and franchises and all
licenses and other rights to use patents, processes, licenses, trademarks, trade
names or copyrights owned or possessed by it and deemed by Seller to be material
to the conduct of its business.
(e) Seller shall comply with all applicable laws, rules,
regulations and orders in all material respects.
(f) Seller shall keep its properties in good repair, working
order and condition, reasonable wear and tear excepted, and from time to time
make all needful and proper, or legally required, repairs, renewals,
replacements, additions or improvements thereto; and Seller shall at all times
comply in all material respects with each provision of all leases pursuant to
which it occupies, or has possession of, property necessary in the conduct of
its business.
(g) Seller shall keep its business and assets which are of an
insurable character insured by reputable insurers against risk of liability,
casualty and fire and other losses and liabilities customarily obtained to cover
comparable businesses and assets in amounts, scope and coverage which are
consistent with prudent industry practices.
(h) Seller shall cause all Intellectual Property Rights,
including, without limitation, technological developments, inventions,
discoveries or improvements made by employees or agents of Seller to be fully
documented in appropriate engineering form in accordance with the prevailing
industrial professional standards, and where possible and appropriate, file and
prosecute United States and foreign patent applications relating to and
protecting such developments. In addition, Seller shall use its commercially
reasonable efforts to cause all Intellectual Property Rights, including, without
limitation, all technological developments, inventions, discoveries or
improvements made by any employee of Seller to be owned by Seller and, where
possible and appropriate, obtain legal protection for the benefit of Seller with
respect to such property.
7. CONDITIONS PRECEDENT.
7.1 Conditions Precedent.
(a) Conditions to Each Party's Obligations. The obligations of
the parties hereto to consummate the transactions contemplated hereby shall be
subject to the satisfaction on or prior to the Closing Date of the following
conditions:
(i) No temporary restraining order, preliminary
or permanent injunction or other legal
restraint or prohibition preventing
15
16
the consummation of the transactions
contemplated by this Agreement shall be in
effect and no application therefor shall be
pending.
(ii) The HSR Waiting Period shall have expired or
been terminated.
(b) Conditions to the Obligations of Purchaser. The obligation
of Purchaser to purchase the Shares is subject to the satisfaction on or prior
to the Closing Date of each of the following conditions:
(i) The Amended and Restated Certificate shall
have been duly executed and filed with the
Secretary of State of the State of Delaware.
(ii) The waiver contemplated under Section
2.2(a)(vii) above shall have been duly
executed and delivered by each of the
parties to the Existing Stockholders
Agreement.
(iii) Seller shall have executed and delivered the
License and Product Development Agreement.
(iv) Seller shall have executed and delivered the
Stockholders Agreement.
(v) The representations and warranties of Seller
contained in Section 3 above which are
qualified as to materiality shall be true
and correct and all other representations
and warranties of Seller shall be true and
correct in all material respects, in each
case on and as of the Closing Date with the
same force and effect as though such
representations and warranties had been made
on and as of the Closing Date, except for
representations that speak as of a
particular date which shall be true and
correct as of that date.
(vi) Seller shall have performed and complied in
all material respects with all agreements,
obligations and covenants contained in this
Agreement that are required to be performed
or complied with by it on or before the
Closing.
(vii) The Chief Executive Officer of Seller shall
have delivered to Purchaser a certificate
dated as of the Closing Date
16
17
certifying that the conditions set forth in
Section 7.1(b)(v) and 7.1(b)(vi) above have
been fulfilled.
(viii) Purchaser shall have received from legal
counsel to Seller an opinion addressed to
Purchaser dated the Closing Date in the form
of Exhibit D attached hereto.
(ix) Purchaser shall have received evidence of
the third party consents required to be
obtained by Seller pursuant to Section 3.7
above.
(c) Conditions to the Obligations of Seller. The obligations
of Seller to issue and sell the Shares to Purchaser is subject to the
satisfaction on or prior to the Closing Date of each of the following
conditions:
(i) The waiver contemplated under Section
2.2(a)(vii) above shall have been duly
executed and delivered by each of the
parties to the Existing Stockholders
Agreement.
(ii) Purchaser shall have executed and delivered
the License and Product Development
Agreement.
(iii) Purchaser shall have executed and delivered
the Stockholders Agreement.
(iv) The representations and warranties of
Purchaser contained in Section 4 above which
are qualified as to materiality shall be
true and correct and all other
representations and warranties of Purchaser
shall be true and correct in all material
respects, in each case on and as of the
Closing Date with the same force and effect
as though such representations and
warranties had been made on and as of the
Closing Date, except for representations
that speak as of a particular date which
shall be true and correct as of that date.
(v) Purchaser shall have performed and complied
in all material respects with all
agreements, obligations and covenants
contained in this Agreement that are
required to be performed or complied with by
it on or before the Closing.
(vi) An authorized officer of Purchaser shall
have delivered to Seller a certificate dated
as of the Closing Date certifying
17
18
that the conditions set forth in Section
7.1(c)(iv) and 7.1(c)(v) above have been
fulfilled.
8. TERMINATION
8.1 Termination. Notwithstanding anything to the contrary in this
Agreement, this Agreement may be terminated and the transactions contemplated
hereby abandoned at any time prior to the Closing:
(a) by written consent of Seller and Purchaser;
(b) by Purchaser, if Purchaser is prepared to close and all
conditions to Seller's obligations to close pursuant to Section 7(c) above have
been satisfied and Seller fails to close in accordance with Section 2 above;
(c) by Purchaser, if Seller fails to cure any material breach
of this Agreement by Seller within ten (10) days after receiving written notice
thereof from Purchaser;
(d) by Seller, if Seller is prepared to close and all
conditions to Purchaser's obligations to close pursuant to Section 7(b) above
have been satisfied and Purchaser fails to close in accordance with Section 2
above;
(e) by Seller, if Purchaser fails to cure any material breach
of this Agreement by Purchaser within ten (10) days after receiving written
notice thereof from Seller; or
(f) by Seller or Purchaser, if the Closing does not occur on
or prior to August 31, 1999 (the "Outside Termination Date");
provided, however, that the party seeking termination pursuant to clauses (b)
through (e) is not in material breach of any of its representations, warranties,
covenants or agreements contained in this Agreement.
8.2 Notice of Termination. In the event of termination by Seller or
Purchaser pursuant to Section 8.1 above, written notice thereof shall forthwith
be given to the other party and the transactions contemplated by this Agreement
shall be terminated, without further action by the other party upon receipt of
such notice.
8.3 Effects of Termination. Each party's right of termination under
Section 8.1 above is in addition to any other rights it may have under this
Agreement and the exercise of such right of termination shall not be deemed to
be an election of remedies. If this Agreement is terminated and the transactions
contemplated hereby are
18
19
abandoned as described in Section 8.1 above, this Agreement shall become null
and void and of no further force and effect except that the respective
obligations of the parties in Sections 9.1 and 9.10 below shall survive such
termination; provided, however, that nothing in this Section 8.3 shall be deemed
to release either party from any liability for any breach by such party of any
of its covenants set forth in this Agreement which occurs on or before the date
of the termination of this Agreement.
9. MISCELLANEOUS
9.1 Expenses. Each party will pay all of its own expenses in connection
with the negotiation of this Agreement, the performance of its obligations
hereunder and the consummation of the transactions contemplated hereby.
9.2 Further Assurance. Purchaser and Seller covenant and agree to take
any and all such further action and to execute, acknowledge and deliver such
instruments, documents and agreements as the other party hereto may reasonably
request to effectuate, consummate or confirm the transactions contemplated
hereby.
9.3 Amendment and Waiver. This Agreement may be amended only in a
writing signed by both parties hereto. Any provision of this Agreement may be
waived by the party entitled to the benefit thereof only in a writing executed
by the party against whom such waiver is sought to be enforced. No waiver shall
be deemed a waiver of any other provision of this Agreement, and no waiver of a
breach hereunder shall be deemed a waiver of any other or subsequent breach of
this Agreement.
9.4 Notice. All notices, demands and other communications to be given
or delivered hereunder shall be in writing and will be deemed to have been given
if personally delivered, sent by overnight courier or telecopied (in each such
case delivery will be effective upon receipt) or mailed by certified mail,
postage prepaid, return receipt requested (delivery will be effective three days
after the date of mailing) to the addresses indicated below or to such other
addresses as the parties may specify on notice as herein provided:
If to Seller:
Medscape, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xx. Xxxx Xxxxxx
Chief Executive Officer
Telecopier: (000) 000-0000
With a copy to:
19
00
Xxxxxxxxx, Xxxxxxx, Xxxx & Tyler LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. XxXxxxx, Esq.
Telecopier: (000) 000-0000
If to Purchaser:
National Data Corporation
Xxxxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xx. Xxxxxx X. Xxxx
President & Chief Executive Officer
NDC Health Information Services
Telecopier: (000) 000-0000
With a copy to:
National Data Corporation
National Data Plaza
Atlanta, Georgia 30329
Attention: Corporate Secretary
Telecopier: (000) 000-0000
and:
Xxxxxxxx Xxxxxxx LLP
000 Xxxxxxxxx Xxxxxx, XX
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telecopier: (000) 000-0000
9.5 Binding Agreement; Assignment. This Agreement and all of the
provisions hereof will be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Purchaser will not
be entitled to assign any of its rights and obligations hereunder to any third
party without the prior written consent of Seller which may be granted or
withheld in the sole and absolute discretion of Seller.
9.6 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such a manner as to be effective and valid under
applicable
20
21
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
9.7 Captions. The captions used in this Agreement are for convenience
of reference only and do not constitute a part of this Agreement and will not be
deemed to limit, characterize or in any way affect any provision of this
Agreement and all provisions of this Agreement will be enforced and construed as
if no captions had been used in this Agreement.
9.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which need not contain signatures of more than one party,
but all such counterparts taken together will constitute one and the same
instrument. Signatures may be exchanged by telecopy, with original signatures to
follow. Each party to this Agreement agrees that it will be bound by its own
telecopied signature and that it accepts the telecopied signatures of the other
party to this Agreement.
9.9 Governing Law. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of New York, without reference
to the choice of law provisions thereof.
9.10 Confidentiality. Unless and until the Closing has been
consummated, each party hereto shall hold, and shall be responsible to cause its
respective counsel, accountants, appraisers, investors and investment bankers to
hold, in confidence any and all confidential data or information made available
to such party by the other party hereto using the same standard of care to
protect such confidential data or information as is used to protect the
recipient's own confidential information. If the transactions contemplated by
this Agreement are not consummated, each party hereto agrees that it shall
return or cause to be returned to the providing party all written materials and
all copies thereof that were supplied to the recipient and that contain any such
confidential data or information.
9.11 Best Efforts to Consummate Transaction. Seller and Purchaser shall
each use its commercially reasonable best efforts to cause the Closing to take
place as promptly as practicable, including taking such action as is reasonably
required to satisfy all conditions to the Closing within the reasonable control
or direction of each such party and to comply promptly with all legal
requirements which may be imposed on it with respect to the Closing.
9.12 Notification of Changes.
(a) Seller shall promptly notify Purchaser by written updates
to each of its representations and warranties contained herein of any matters
occurring after the
21
22
date hereof which, if existing or occurring on the date hereof, would have been
required to be set forth on a schedule to this Agreement or which would render
inaccurate any of the representations or warranties made by Seller in this
Agreement (each, a "Supplement"). Upon Purchaser's receipt of a Supplement, such
representation or warranty shall be deemed to be automatically updated as set
forth therein; provided, however, that no Supplement provided pursuant to this
Section 9.12(a) shall be deemed to cure any breach of any representation or
warranty existing as of the execution and delivery of this Agreement; provided,
further, that if Purchaser does not reject any Supplement in writing within
three business days following Purchaser's receipt thereof, or if Purchaser
elects to close despite such Supplement, the Supplement shall be deemed accepted
by Purchaser and the representations and warranties of Seller shall be deemed
modified and supplemented as indicated in such Supplement for all purposes
hereof.
(b) Between the date hereof and the Closing Date each party
will promptly notify the other party of the occurrence of any breach of any
representation, warranty or covenant of such party set forth in this Agreement
or of the occurrence of any event that may make satisfaction of the conditions
set forth in Section 7 above impossible or unlikely.
9.13 "Market Stand-Off" Agreement. Purchaser hereby agrees that it
shall not sell or otherwise transfer or dispose of any Shares or Conversion
Shares during the period of one hundred eighty (180) days after the Registration
Statement has been declared effective; provided, however, that all officers,
directors and ten percent (10%) or greater stockholders of Seller then holding
Common Stock of Seller shall enter into similar agreements and; provided,
further, that Purchaser may transfer a portion of the Shares to its investment
advisor, Lazard Freres & Co. LLC in partial payment of its fees in connection
with the transactions contemplated hereby if Lazard Freres & Co. LLC executes
and delivers a counterpart copy of the Stockholders Agreement.
22
23
IN WITNESS WHEREOF, each of the parties hereto have caused
this Preferred Stock Purchase Agreement to be executed and delivered on its
behalf as of the day and year first above written.
NATIONAL DATA CORPORATION
By: /s/ Xxxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Vice President
MEDSCAPE, INC.
By: /s/ Xxxx X. Xxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxx
Title: President and CEO
23
24
Exhibits and Schedules
Exhibit A Amended and Restated Certificate of Incorporation
Exhibit B Stockholders Agreement
Exhibit C License and Product Development Agreement
Exhibit D Opinion of Counsel
Schedule 3.2 Conflicts
Schedule 3.3 Capitalization
Schedule 3.5 Subsidiaries
Schedule 3.9 Agreements
Schedule 3.12 Intellectual Property
Schedule 3.13 Financial Statements
Schedule 3.14 Changes
Schedule 3.18 Contracts
Schedule 3.23 Negotiations
24
25
EXHIBIT A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF MEDSCAPE, INC.
Xxxx X. Xxxxxx hereby certifies that:
1. The present name of this corporation is Medscape, Inc. (the
"Corporation"). The Corporation was originally incorporated under the name
Medscape (DEL.), Inc., and the date of filing the original Certificate of
Incorporation of the Corporation with the Secretary of State of the State of
Delaware is August 25, 1998, as amended on December 23, 1998, March 5, 1999, May
17, 1999 and July __, 1999.
2. He is the duly elected President of the Corporation.
3. The Certificate of Incorporation of the Corporation, as
amended, is hereby amended and restated to read as follows:
FIRST: The name of the Corporation is Medscape, Inc.
SECOND: The purpose of the Corporation is to engage
in any lawful act or activity for which a corporation may be
organized under the General Corporation Law of the State of
Delaware.
THIRD: The address of the registered office in the State of
Delaware is 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, XX 00000, and the name of the
registered agent of the Corporation in the State of Delaware is The Corporation
Trust Company in the County of New Castle.
FOURTH: (A) The total number of shares of all classes of stock
which the Corporation is authorized to issue is sixty- two million seven hundred
ninety-five thousand eleven (62,795,011), of which thirty-five million eight
hundred ninety- seven thousand two hundred eight (35,897,208) shares shall be
Class A Common Stock with a par value of one cent ($.01) per share, twenty-one
million, five hundred forty-one thousand, one hundred sixty (21,541,160) shares
shall be Class B (NonVoting) Common Stock with a par value of one cent ($.01)
per share, and five million three hundred fifty-six thousand six hundred
forty-three (5,356,643) shares shall be Preferred Stock with a par value of one
cent ($.01) per share.
(B) The Class A Common Stock and the Class B (NonVoting)
Common Stock (collectively the "Common Stock") shall have identical powers,
rights, preferences, limitations and other characteristics, share for share,
except that as otherwise required by law, the holders of shares of the Class B
(NonVoting) Common Stock shall not have any voting power or vote for the
election of directors or vote for any other purpose. Upon consummation of a firm
commitment underwritten public offering of any class of common stock of the
Corporation filed pursuant to a registration statement under the Securities Act
of 1933, as amended (a "Public Offering") or immediately prior to the
consummation of a "Corporate Change" (as hereafter defined), all shares of Class
B Common Stock shall automatically convert on a one-for-one basis
26
2
into Class A Common Stock, which shall be redesignated as Common Stock, $.01 par
value, of the Corporation. A "Corporate Change" shall mean any event or
transaction where: (i) the Corporation shall not be the surviving entity in any
merger, consolidation or other reorganization (or survives only as a subsidiary
of an entity other than a previously wholly owned subsidiary of the
Corporation), (ii) the Corporation sells, leases or exchanges or agrees to sell,
lease or exchange all or substantially all of its assets to any other person or
entity (other than a wholly owned subsidiary of the Corporation), (iii) the
Corporation is to be dissolved and liquidated (including pursuant to Section
4(b) hereof), (iv) any person or entity, including a "group" as contemplated by
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, acquires or
gains ownership or control (including, without limitation, power to vote) of
more than 50% of the outstanding shares of the Corporation's voting stock (based
upon voting power), provided, that the fact that a stockholder is a party to the
Amended and Restated Stockholders Agreement dated March 5, 1999 among the
Corporation and the other parties thereto, as amended, or any successor
agreement thereto and the Stockholders Agreement dated July __, 1999 between the
Corporation and CBS Corporation, as amended or any successor agreement thereto
(collectively, the "Stockholders Agreement"), shall not be deemed to constitute
the formation of a group, or (v) as a result of or in connection with a
contested election of directors, the persons who were directors of the
Corporation before such election shall cease to constitute a majority of the
Board of Directors of the Corporation.
(C) The rights, preferences and privileges and qualifications,
limitations and restrictions granted to and imposed on the capital stock of the
Corporation shall be as set forth below in this Article Fourth. References
hereinafter made to Sections shall mean the Sections contained in this Article
Fourth (C).
1. Definitions. As used herein, the following terms shall have
the following definitions:
(a) "Additional Stock" shall have the meaning set
forth in Section 5(c)(ii) hereof.
(b) "Bylaws" shall mean the Bylaws of the
Corporation.
(c) "Common Stock" shall mean (a) the Corporation's
Class A Common Stock and Class B Common stock, par value $.01 per share, as
authorized on the date hereof, and (b) any other capital stock of any class or
classes (however designated) of the Corporation, authorized on or after the date
hereof, the holders of which shall have the right, without limitation as to
amount, either to all or to a share of the balance of current dividends and
liquidating distributions after the payment of dividends and distributions on
any shares entitled to
27
3
preference under this Certificate of Incorporation (as the same may be further
amended from time to time).
(d) "Common Stock Equivalents" shall have the meaning
set forth in Section 5(c)(iii) hereof.
(e) "Conversion Price" shall have the meaning set
forth in Section 5(a)(i) hereof.
(f) "Conversion Rights" shall have the meaning set
forth in Section 5 hereof.
(g) "Convertible Securities" means any indebtedness
or shares of stock convertible into or exchangeable for Common Stock.
(h) "Effective Price" of shares of Additional Stock
means the quotient determined by dividing (i) the total number of such shares of
Additional Stock issued or sold, or deemed to have been issued or sold, by the
Corporation under Section 5 hereof, into (ii) the consideration received by the
Corporation under Section 5 hereof for the issuance of such shares of Additional
Stock.
(i) "Initial Redemption Date" shall have the meaning
set forth in Section 8(c) hereof.
(j) "Option" means rights, options or warrants to
subscribe for, purchase or otherwise acquire Common Stock or Convertible
Securities.
(k) "Option Holders" shall have the meaning set forth
in Section 8(a) hereof.
(l) "Optional Redemption Notice" shall have the
meaning set forth in Section 8(c) hereof.
(m) "Optional Series C Redemption" shall have the
meaning set forth in Section 8(a) hereof.
(n) "Original Series A Issue Price" means $0.0269 per
share of Series A Preferred Stock (appropriately adjusted for stock splits,
reverse stock splits and similar type transactions or occurrences with respect
to the Series A Preferred Stock).
28
4
(o) "Original Series C Issue Price" means $4.60 per
share of Series C Preferred Stock and Series C-1 Preferred Stock (appropriately
adjusted for stock splits, reverse stock splits and similar type transactions or
occurrences with respect to the Series C Preferred Stock or Series C-1 Preferred
Stock).
(p) "Original Series D Issue Price" means $11.72 per
share of Series D Preferred Stock (appropriately adjusted for stock splits,
reverse stock splits and similar type transactions or occurrences with respect
to the Series D Preferred Stock).
(q) "Original Series E Issue Price" means $25.00 per
share of Series E Preferred Stock (appropriately adjusted for stock splits,
reverse stock splits and similar type transactions or occurrences with respect
to the Series E Preferred Stock).
(r) "Public Offering" means the consummation of an
offering of equity securities of the Corporation pursuant to an effective
registration statement under the Securities Act under which the aggregate gross
proceeds received by the Corporation equals or exceed $20 million.
(s) "Qualified Public Offering" means the
consummation of an offering of equity securities of the Corporation pursuant to
an effective registration statement under the Securities Act under which the
public offering price per share is not less than $7.03 per share (as adjusted
for any stock split, stock dividend or recapitalization after July __, 1999) and
the aggregate gross proceeds received by the Corporation equals or exceed $20
million.
(t) "Series A Liquidation Preference" means, as to
each share of Series A Preferred Stock, the greater of (i) $.0269 per share,
plus all declared but unpaid dividends thereon, if any, as adjusted for stock
splits, reverse stock splits and similar type transactions or occurrences with
respect to the Series A Preferred Stock or (ii) the amount per share the holders
would be entitled to receive if the holders had converted such shares of Series
A Preferred Stock into Class A Common Stock immediately prior to the
effectiveness of the event constituting the liquidation, dissolution or winding
up of the Corporation.
(u) "Series C Liquidation Preference" means, as to
each share of Series C Preferred Stock and Series C-1 Preferred Stock, the
greater of (i) the Original Series C Issue Price plus cumulative dividends
thereon at the rate of six percent (6%) per annum, as adjusted for stock splits,
reverse stock splits and similar transactions or occurrences with respect to the
Series C Preferred Stock or Series C-1 Preferred Stock or (ii) the amount per
share the holders would be entitled to receive if the holders had converted such
shares of Series C Preferred Stock or Series
29
5
C-1 Preferred Stock into Class A Common Stock immediately prior to the
effectiveness of the event constituting the liquidation, dissolution or winding
up of the Corporation.
(v) "Series D Liquidation Preference" means, as to
each share of Series D Preferred Stock, the greater of (i) the Original Series D
Issue Price plus cumulative dividends thereon at the rate of six percent (6%)
per annum, as adjusted for stock splits, reverse stock splits and similar
transactions or occurrences with respect to the Series D Preferred Stock or (ii)
the amount per share the holders would be entitled to receive if the holders had
converted such shares of Series D Preferred Stock into Class A Common Stock
immediately prior to the effectiveness of the event constituting the
liquidation, dissolution or winding up of the Corporation.
(w) "Series E Liquidation Preference" means, as to
each share of Series E Preferred Stock, the greater of (i) the Original Series E
Issue Price plus cumulative dividends thereon at the rate of six percent (6%)
per annum, as adjusted for stock splits, reverse stock splits and similar
transactions or occurrences with respect to the Series E Preferred Stock or (ii)
the amount per share the holders would be entitled to receive if the holders had
converted such shares of Series E Preferred Stock into Class A Common Stock
immediately prior to the effectiveness of the event constituting the
liquidation, dissolution or winding up of the Corporation.
(x) "Series C Issuance Date" means October 31, 1997.
(y) "Series D Issuance Date" means March 5, 1999.
(z) "Series E Issuance Date" means July __, 1999.
2. Series and Number of Shares. The authorized number of
shares of Series A Preferred Stock shall be 788,200, the authorized number of
shares of Series C Preferred Stock shall be 1,478,359, the authorized number of
shares of Series C-1 Preferred Stock shall be 932,401, the authorized number of
shares of Series D Preferred Stock shall be 1,757,683 and the authorized number
of shares of Series E Preferred Stock shall be 400,000. Shares of Series A,
Series C, Series C-1, Series D and Series E Preferred Stock retired, redeemed,
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be canceled and shall not be reissued, sold or transferred.
3. Dividend Rights.
(a) The holders of Series D Preferred Stock shall be
entitled to receive cumulative compound annual dividends per share at the rate
of six percent (6%) of the Original Series D Issue Price (as adjusted for any
stock dividends, combinations, or splits with respect to such shares), prior and
in preference to any dividends on any other capital stock of the Corporation
other than the Series E Preferred Stock. Such dividends shall begin accruing on
30
6
March 5, 1999, shall be cumulative and shall be payable on the earlier of a
Corporate Change or a Public Offering. Notwithstanding the foregoing, in the
event that the Corporation files, prior to March 5, 2000, a registration
statement under the Securities Act covering the sale of its Common Stock which
results in the consummation of the sale of such securities before the later of
March 5, 2000 or four months after the date of filing of such registration
statement at a public offering price of not less than $7.03 per share (as
adjusted for any stock split, stock dividend or recapitalization after July __,
1999), then the cumulative dividend described in this Section 3(a) shall not be
due and payable.
(b) The holders of Series E Preferred Stock shall be
entitled to receive cumulative compound annual dividends per share at the rate
of six percent (6%) of the Original Series E Issue Price (as adjusted for any
stock dividends, combinations or splits with respect to such shares), prior and
in preference to any dividends on any other capital stock of the Corporation
other than the Series D Preferred Stock. Such dividends shall begin accruing on
the Series E Issuance Date, shall be cumulative and shall be payable on the
earlier of a Corporate Change or a Public Offering. Notwithstanding the
foregoing, in the event that the Corporation files, prior to the first
anniversary of the Series E Issuance Date, a registration statement under the
Securities Act covering the sale of its Common Stock which results in the
consummation of the sale of such securities before the later of the first
anniversary of the Series E Issuance Date or four months after the date of
filing of such registration statement, then the cumulative dividend described in
this Section 3(b) shall not be due and payable.
(c) No dividends shall be declared, paid or set apart
on any capital stock of the Corporation until the cumulative dividends set forth
in Section 3(a) and Section 3(b) have been paid on all outstanding shares of
Series D Preferred Stock and Series E Preferred Stock (such payments to be made
on a pari passu basis). After such payment, any additional dividends declared by
the Board of Directors shall be payable (i) first to the holders of shares of
Series C Preferred Stock and Series C-1 Preferred Stock on the basis of the
shares of Class A Common Stock into which such shares are then convertible at a
rate of six percent (6%) of the Original Series C Issue Price per annum (but in
no event more than the amount per share paid to the Series D Preferred holders
pursuant to Section 3(a) and the Series E Preferred holders pursuant to Section
3(b)) and (ii) then ratably among the holders of shares of Series E Preferred
Stock, Series D Preferred Stock, Series C Preferred Stock, Series C-1 Preferred
Stock, Class A Common Stock and Class B Common Stock (on the basis of the shares
of Class A Common Stock into which such shares are then convertible); provided,
that dividends on outstanding shares of Series E Preferred Stock, Series D
Preferred Stock, Series C Preferred Stock and Series C-1 Preferred Stock shall
be paid or declared and set apart for payment before any dividends shall be paid
or declared and set apart for payment on any other capital stock of the
Corporation with respect to
31
7
the same dividend period. No dividends shall be payable on the shares of Series
A Preferred Stock.
(d) With respect to any dividends declared in
accordance with Section 3(c) above, no right shall accrue to holders of Series C
Preferred Stock, Series C-1 Preferred Stock, Series D Preferred Stock or Series
E Preferred Stock by reason of the fact that dividends on said shares are not
declared in any prior year, nor shall any undeclared or unpaid dividend bear or
accrue any interest. In addition, except for the dividends set forth in Section
3(a) hereof and Section 3(b) hereof, no dividends shall be paid on the Series C
Preferred Stock, Series C-1 Preferred Stock, Series D Preferred Stock or Series
E Preferred Stock if such payment would violate the terms of any instrument
governing indebtedness of the Corporation or any directly or indirectly owned
subsidiary of the Corporation.
4. Liquidation Preference.
(a) Priority. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the assets of the Corporation legally available for distribution to its
shareholders, shall be distributed in the following order of priority:
(i) The holders of shares of Series D
Preferred Stock and Series E Preferred Stock shall be entitled to
receive, prior and in preference to any distribution in such
liquidation, dissolution or winding up of any of the assets of the
Corporation to the holders of shares of Class A and Class B Common
Stock and Series A Preferred Stock, Series C Preferred Stock and Series
C-1 Preferred Stock by reason of their ownership thereof, an amount per
share on a pari passu basis equal to the Series D Liquidation
Preference for each outstanding share of Series D Preferred Stock then
held by them and an amount per share equal to the Series E Liquidation
Preference for each outstanding share of Series E Preferred Stock then
held by them; the holders of shares of Series C Preferred Stock and
Series C-1 Preferred Stock shall be entitled to receive, prior and in
preference to any distribution in such liquidation, dissolution or
winding up of any assets of the Corporation to the holders of shares of
Class A and Class B Common Stock and Series A Preferred Stock by reason
of their ownership thereof, an amount per share equal to the Series C
Liquidation Preference for each outstanding share of Series C Preferred
Stock or Series C-1 Preferred Stock held by them; and the holders of
shares of Series A Preferred Stock shall be entitled to receive, prior
and in preference to any distribution in such liquidation, dissolution
or winding up of any assets of the Corporation to the holders of shares
of Class A and Class B Common Stock by reason of their ownership
thereof, an amount per share equal to the Series A Liquidation
Preference for each outstanding share of Series A Preferred Stock held
by them. If upon the occurrence
32
8
of any such distribution, the assets of the Corporation thus
distributed among the holders of shares of Series A, Series C, Series
C-1, Series D and Series E Preferred Stock shall be insufficient to
permit the payment to such holders of the full aforesaid preferential
amounts, then the entire assets of the Corporation legally available
for distribution shall be distributed first to the holders of shares of
Series D Preferred Stock and the shares of Series E Preferred Stock pro
rata in proportion to the full preferential amounts to which such
holders are entitled, second to the holders of shares of Series C
Preferred Stock and Series C-1 Preferred Stock and third to the holders
of shares of Series A Preferred Stock all payable to the extent that
such holders are satisfied in full in accordance with the foregoing
priority of distributions.
(ii) After the distributions described in
Section 4(a)(i) hereof have been made, then, to the extent available,
the remaining assets of the Corporation shall be distributed among the
holders of shares of Series C Preferred Stock, Series C-1 Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock and Class A
and Class B Common Stock pro rata based on the number of shares of
Class A Common Stock held (or deemed to be held, on an as-converted
basis, for the holders of the Series C, Series C-1, Series D and Series
E Preferred Stock) by each.
(b) Consolidation, Merger, Etc. For purposes of this
Section 4, (i) any transaction or series of related transactions involving a
consolidation or merger or other corporate reorganization of the Corporation in
which the stockholders of the Corporation who were stockholders immediately
prior to such consolidation, merger or reorganization own less than 50% of the
voting power of the Corporation immediately after such consolidation, merger or
reorganization or in which outstanding shares of the Corporation are exchanged
for securities or other consideration issued, or caused to be issued, by the
acquiring corporation or its subsidiary (other than a mere reincorporation
transaction) and in which stockholders of the Corporation who were stockholders
immediately prior to such transaction receive less than 50% of the voting power
of the surviving corporation, or (ii) a sale, lease or other disposition of all
or substantially all of the assets of the Corporation shall be deemed to be a
liquidation, dissolution or winding up within the meaning of this Section 4.
5. Conversion. The holders of shares of Series A Preferred
Stock, Series C Preferred Stock, Series C-1 Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock shall have conversion rights as follows (the
"Conversion
Rights"):
33
9
(a) Right to Convert.
(i) Each share of Series A, Series C, Series
C-1, Series D and Series E Preferred Stock shall be convertible, at the
option of the holder thereof, at any time or from time to time after
the date of issuance of such share, at the office of the Corporation or
any transfer agent for the Preferred Stock, into such number of fully
paid and nonassessable shares of Class A Common Stock as is determined
by (A) dividing the Original Issue Price for such share by the
conversion price (the "Conversion Price") at the time in effect for
such share and (B) multiplying the quotient obtained by 2.5. The
Original Issue Price and the initial Conversion Price per share for
shares of Series A Preferred Stock shall be the Original Series A Issue
Price; the Original Issue Price per share for shares of Series C
Preferred Stock shall be the Original Series C Issue Price and the
Conversion Price per share for the Series C Preferred Stock shall be
$4.29; the Original Issue Price and the initial Conversion Price per
share for shares of Series C-1 Preferred Stock shall be $4.29; and the
Original Issue Price and the initial Conversion Price per share for
shares of Series D Preferred Stock shall be the Original Series D Issue
Price and the Original Issue Price and the initial Conversion Price per
share for shares of Series E Preferred Stock shall be the Original
Series E Issue Price; provided, however, that the Conversion Price for
the Preferred Stock shall be subject to adjustment as set forth in
Section 5(c) hereof .
(ii) Each share of Series A Preferred Stock,
Series C Preferred Stock, Series C-1 Preferred Stock and Series D
Preferred Stock shall automatically be converted into fully paid and
nonassessable shares of Class A Common Stock at the Conversion Price at
the time in effect for such series, immediately prior to the
consummation of the Corporation's sale of its Common Stock in a
Qualified Public Offering and each share of Series E Preferred Stock
shall automatically be converted into fully paid and nonassessable
shares of Class A Common Stock at the Conversion Price at the time in
effect for such shares, immediately prior to the consummation of the
Corporation's sale of its Common Stock in a Public Offering; provided,
however, that the Conversion Price for the Series E Preferred Stock
shall be subject to adjustment in connection with the consummation of a
Public Offering as provided in clause (c) of this Section 5 in the
event that the public offering price in such Public Offering is less
than the Conversion Price for the Series E Preferred Stock as in effect
immediately prior thereto. In addition, (1) each share of Series A
Preferred Stock shall automatically be converted into fully paid and
nonassessable shares of Class A Common Stock at the Conversion Price at
the time in effect for such series in the event that the holders of at
least 70% of the Series A Preferred Stock then outstanding consent in
writing to such conversion; and (2) each share of Series C Preferred
Stock and Series C-1 Preferred Stock shall automatically
34
10
be converted into fully paid and nonassessable shares of Class A Common
Stock at the Conversion Price at the time in effect for such series in
the event that the holders of at least 70% of the Series C Preferred
Stock and Series C-1 Preferred Stock then outstanding consent in
writing to such conversion.
(b) Mechanics of Conversion. Before any holder of
shares of Series A Preferred Stock, Series C Preferred Stock, Series C-1
Preferred Stock, Series D Preferred Stock or Series E Preferred Stock shall be
entitled to convert any of such shares into shares of Common Stock, such holder
shall surrender the certificate or certificates therefor, duly endorsed, at the
office of the Corporation or of any transfer agent for the Preferred Stock and
shall give written notice by mail, postage prepaid, or hand delivery, to the
Corporation at its principal corporate office, of the election to convert the
same and shall state therein the name or names in which the certificate or
certificates for shares of Class A Common Stock are to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holders of shares of Series A Preferred Stock, Series C Preferred
Stock, Series C-1 Preferred Stock, Series D Preferred Stock or Series E
Preferred Stock, as the case may be, or to the nominee or nominees of such
holders, a certificate or certificates for the number of shares of Class A
Common Stock to which such holder shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Series A Preferred
Stock, Series C Preferred Stock, Series C-1 Preferred Stock, Series D Preferred
Stock or Series E Preferred Stock to be converted, and the person or persons
entitled to receive the shares of Class A Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Class A Common Stock as of such date. If the conversion is in
connection with an underwritten offering of securities registered pursuant to
the Securities Act of 1933, as amended, the conversion may, at the option of any
holder tendering the Series A Preferred Stock, Series C Preferred Stock, Series
C-1 Preferred Stock, Series D Preferred Stock or Series E Preferred Stock for
conversion, be conditioned upon the closing with the underwriter of the sale of
securities pursuant to such offering, in which event the person(s) entitled to
receive Class A Common Stock issuable upon such conversion of the Series A
Preferred Stock, Series C Preferred Stock, Series C-1 Preferred Stock, Series D
Preferred Stock or Series E Preferred Stock, as the case may be, shall not be
deemed to have converted such Preferred Stock until immediately prior to the
closing of such sale of securities.
(c) Conversion Price Adjustments of Series A
Preferred Stock, Series C Preferred Stock, Series C-1 Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock. The Conversion Price of the Series
A Preferred Stock, Series C Preferred Stock, Series C-1 Preferred Stock, Series
D Preferred Stock and Series E Preferred Stock shall be subject to adjustment
from time to time as follows:
35
11
(i) (A) Upon each issuance (or deemed
issuance pursuant to the provisions hereof) by the Corporation of any
Additional Stock after the Series D Issuance Date, without
consideration or for an Effective Price per share less than the
Conversion Price with respect to any series of Preferred Stock in
effect immediately prior to the issuance (or deemed issuance) of such
Additional Stock, then (1) the Conversion Price for the Series E
Preferred Stock in effect immediately prior to each issuance (or deemed
issuance) shall be adjusted to reflect two hundred and fifty percent
(250%) of the Effective Price of the Additional Stock so issued until
the Conversion Price for the Series E Preferred Stock has been adjusted
downward to $17.58 per share, (2) the Conversion Price for the Series D
Preferred Stock in effect immediately prior to each issuance (or deemed
issuance) shall be adjusted to reflect the Effective Price of the
Additional Stock so issued until the Conversion Price for the Series D
Preferred Stock has been adjusted downward to $8.68 per share and (3)
the Conversion Prices for the Series A Preferred Stock, the Series C
Preferred Stock and the Series C-1 Preferred Stock, the Conversion
Price of the Series E Preferred Stock once it has been adjusted
downward to $17.58 in accordance with subparagraph (1) above and the
Conversion Price of the Series D Preferred Stock once it has been
adjusted downward to $8.68 in accordance with subparagraph (2) above,
in effect immediately prior to each issuance (or deemed issuance) shall
be adjusted to a price determined by multiplying such Conversion Price
by a fraction, (i) the numerator of which shall be the number of
outstanding shares of Common Stock and shares of Common Stock then
issuable upon exercise or conversion of outstanding securities of the
Corporation immediately prior to such issuance plus the number of
shares of Common Stock which the aggregate consideration received (or
deemed received) by the Corporation for such issuance would purchase at
such Conversion Price; and (ii) the denominator of which shall be the
number of outstanding shares of Common Stock and shares of Common Stock
then issuable upon exercise or conversion of outstanding securities of
the Corporation immediately after such issuance including the
Additional Stock so issued.
(B) No adjustment of the Conversion
Price for the Preferred Stock shall be made in an amount less than one-half of
one cent ($0.005) per share, provided that any adjustments which are not
required to be made by reason of this sentence shall be carried forward and
shall be taken into account in any subsequent adjustment to the Conversion
Price. No adjustment of the Conversion Price for any series of Preferred Stock
pursuant to this Section 5(c)(i) shall have the effect of increasing such
Conversion Price for such series above the Conversion Price for such series in
effect immediately prior to such adjustment.
(C) In the case of the issuance of
securities of the Corporation for cash, the amount of consideration received by
the Corporation for such securities
36
12
shall be deemed to be the amount of cash paid therefor before deducting any
discounts, commissions or other expenses allowed, paid or incurred by the
Corporation for any underwriting or otherwise in connection with the issuance
and sale thereof.
(D) In the case of the issuance of
securities of the Corporation for a consideration in whole or in part other than
cash, the consideration other than cash shall be deemed to have a dollar value
equal to the fair market value of such noncash consideration, irrespective of
any accounting treatment thereof, as determined by the Board of Directors.
(E) In the case of the issuance
(whether before, on or after the Series D Issuance Date) of Options or
Convertible Securities, the following provisions shall apply for all purposes of
this Section 5(c)(i) and Section 5(c)(ii) hereof:
(1) With respect to Options
to purchase Class A or Class B Common Stock, the aggregate maximum number of
shares of Common Stock deliverable upon exercise of such Options shall be deemed
to have been issued at the time such options were issued and for a consideration
equal to the consideration (determined in the manner provided in Section
5(c)(i)(C) and Section 5(c)(i)(D) hereof), if any, received by the Corporation
for such Options plus the minimum exercise price provided in such Options for
Common Stock covered thereby.
(2) With respect to
Convertible Securities and Options to purchase Convertible Securities, the
aggregate maximum number of shares of Common Stock deliverable upon the
conversion or exchange of any such Convertible Securities and the aggregate
maximum number of shares of Common Stock issuable upon the exercise of such
Options to purchase Convertible Securities and the subsequent conversion or
exchange of such Convertible Securities shall be deemed to have been issued at
the time such Convertible Securities or such Options were issued and for a
consideration equal to the consideration, if any, received by the Corporation
for any such Convertible Securities and Options (excluding any cash received on
account of accrued interest or accrued dividends), plus the minimum additional
consideration, if any, to be received by the Corporation upon the conversion or
exchange of such Convertible Securities or the exercise of such Options and the
conversion or exchange of the Convertible Securities issuable upon exercise of
such Options (the consideration in each case to be determined in the manner
provided in Section 5(c)(i)(C) and 5(c)(i)(D) hereof).
(3) In the event of any
change in the number of shares of Common Stock deliverable, or in the
consideration payable to the Corporation, upon exercise of such Options or upon
conversion or exchange of such Convertible Securities,
37
13
including, but not limited to, a change resulting from the antidilution
provisions thereof, the applicable Conversion Prices of the Series A, C, C-1, D
and E Preferred Stock, to the extent in any way affected by or computed using
such Options or Convertible Securities, shall be recomputed to reflect such
change, but no further adjustment shall be made for the actual issuance of
Common Stock or any payment of such consideration upon the exercise of any such
Options or the conversion or exchange of such Convertible Securities.
(4) Upon the expiration or
termination of any such Options or any such rights to convert or exchange
Convertible Securities, the applicable Conversion Prices of the Series A, C,
C-1, D and E Preferred Stock, to the extent in any way affected by or computed
using such Options or Convertible Securities, shall be recomputed to reflect the
issuance of only the number of shares of Common Stock (and Options and
Convertible Securities which remain in effect) that were actually issued upon
the exercise of such Options or upon the conversion or exchange of such
Convertible Securities.
(5) The number of shares of
Common Stock deemed issued and the consideration deemed paid therefor pursuant
to Section 5(c)(i)(E)(1) and (2) hereof shall be appropriately adjusted to
reflect any change, termination or expiration of the type described in either
Section 5(c)(i)(E)(3) or (4) hereof.
(ii) "Additional Stock" shall mean any
shares of Common Stock issued (or deemed to have been issued pursuant
to Section 5(c)(i)(E) hereof) by the Corporation after the Series D
Issuance Date other than:
(a) Common Stock issued pursuant to
a transaction described in Section 5(c)(iii) hereof;
(b) shares of Common Stock or
options to purchase such Common Stock issued or to be issued to
officers, employees or directors of, or consultants to, the
Corporation, pursuant to any agreement, plan or arrangement approved by
the Board of Directors of the Corporation;
(c) Common Stock issued or issuable
upon conversion of shares of Series A Preferred Stock, Series C
Preferred Stock, Series C-1 Preferred Stock, Series D Preferred Stock
and Series E Preferred Stock;
(d) Common Stock issued or to be
issued by the Corporation pursuant to equipment lease financing
arrangements with equipment lessors, or Common Stock reissued after the
repurchase thereof by the Corporation as a result of
38
14
any termination of a restricted stock purchase agreement or other
employee equity plan or arrangement to which the Corporation is a
party, which are approved by the Board of Directors; and
(e) warrants to purchase up to
22,500 shares of Class A Common Stock (and the Common Stock issuable
upon exercise thereof).
(iii) In the event the Corporation at any
time or from time to time after the Series E Issuance Date fixes a
record date for the effectuation of a split or subdivision of the
outstanding shares of Common Stock or the determination of holders of
shares of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof
to receive directly or indirectly, additional shares of Common Stock
(hereinafter referred to as "Common Stock Equivalents") without payment
of any consideration by such holder for the additional shares of Common
Stock or Common Stock Equivalents (including the additional shares of
Common Stock issuable upon conversion or exercise thereof), then, as of
such record date (or the date of such dividend, distribution, split or
subdivision if no record date is fixed), the applicable Conversion
Prices of the Series A Preferred Stock, Series C Preferred Stock,
Series C-1 Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock shall be appropriately decreased so that the number of
shares of Class A Common Stock issuable on conversion of each share of
Series A Preferred Stock, Series C Preferred Stock, Series C-1
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock
shall be increased in proportion to such increase in the aggregate
number of shares issuable with respect to Common Stock Equivalents,
with the number of shares issuable with respect to Common Stock
Equivalents determined from time to time in the manner provided for
deemed issuances in Section 5(c)(i)(E) hereof.
(iv) If the number of shares of Common Stock
outstanding at any time after the Series E Issuance Date is decreased
by a combination of the outstanding shares of Common Stock, then,
following the record date of such combination, the applicable
Conversion Prices for the Series A Preferred Stock, Series C Preferred
Stock, Series C-1 Preferred Stock, Series D Preferred Stock and Series
E Preferred Stock shall be appropriately increased so that the number
of shares of Class A Common Stock issuable on conversion of each share
of Series A Preferred Stock, Series C Preferred Stock, Series C-1
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock
shall be decreased in proportion to such decrease in the outstanding
shares of Common Stock.
39
15
(d) Other Distributions. In the event the Corporation
shall declare a distribution payable in securities of other persons, evidences
of indebtedness issued by the Corporation or other persons, assets (excluding
cash dividends) or options or rights not referred to in Section 5(c)(iii)
hereof, then, in each such case for the purpose of this Section 5(d), the
holders of shares of Series A Preferred Stock, Series C Preferred Stock, Series
C-1 Preferred Stock, Series D Preferred Stock and Series E Preferred Stock shall
be entitled to a proportionate share of any such distribution as though they
were holders of the number of shares of Class A Common Stock into which their
shares of Series A Preferred Stock, Series C Preferred Stock, Series C-1
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
shares of Common Stock entitled to receive such distribution.
(e) Recapitalization. If at any time or from time to
time there shall be a recapitalization of Common Stock (other than a
subdivision, combination or consolidation, merger or sale of assets or stock
transaction otherwise provided for herein), provision shall be made so that each
holder of shares of Series A Preferred Stock, Series C Preferred Stock, Series
C-1 Preferred Stock, Series D Preferred Stock and Series E Preferred Stock shall
thereafter be entitled to receive, upon conversion of the Series A Preferred
Stock, Series C Preferred Stock, Series C-1 Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock, the number of shares of stock or other
securities or property of the Corporation or otherwise, receivable upon such
recapitalization by a holder of the number of shares of Common Stock into which
such shares of Series A Preferred Stock, Series C Preferred Stock, Series C-1
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock could
have been converted immediately prior to such recapitalization. In any such
case, appropriate adjustment shall be made in the application of the provisions
of this Section 5 with respect to the rights of the holders of shares of Series
A Preferred Stock, Series C Preferred Stock, Series C-1 Preferred Stock, Series
D Preferred Stock and Series E Preferred Stock after the recapitalization to the
end that the provisions of this Section 5 (including adjustments of the
applicable Conversion Prices then in effect and the number of shares purchasable
upon conversion of the Series A Preferred Stock, Series C Preferred Stock,
Series C-1 Preferred Stock, Series D Preferred Stock and Series E Preferred
Stock) shall be applicable after that event as nearly equivalent as may be
practicable.
(f) No Impairment. The Corporation will not, by
amendment of this Certificate of Incorporation or through any reorganization,
recapitalization or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 5 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of shares of the Series A
40
16
Preferred Stock, Series C Preferred Stock, Series C-1 Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock against impairment.
(g) No Fractional Shares. No fractional shares shall
be issued upon conversion of the Series A Preferred Stock, Series C Preferred
Stock, Series C-1 Preferred Stock, Series D Preferred Stock or Series E
Preferred Stock, and the number of shares of Class A Common Stock to be issued
shall be rounded down to the nearest whole share, and there shall be no payment
to a holder of shares of Series A Preferred Stock, Series C Preferred Stock,
Series C-1 Preferred Stock, Series D Preferred Stock or Series E Preferred Stock
for any such rounded fractional share. Whether or not fractional shares result
from such conversion shall be determined on the basis of the total number of
shares of Series A Preferred Stock, Series C Preferred Stock, Series C-1
Preferred Stock, Series D Preferred Stock or Series E Preferred Stock the holder
is at the time converting into Class A Common Stock and the number of shares of
Class A Common Stock issuable upon such aggregate conversion.
(h) Certificate as to Adjustments. Upon the
occurrence of each adjustment or readjustment of the applicable Conversion
Prices of the Series A Preferred Stock, Series C Preferred Stock, Series C-1
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock pursuant
to this Section 5, the Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of shares of Series A Preferred Stock, Series C Preferred
Stock, Series C-1 Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Corporation shall, upon the written request at any time of any holder of
shares of Series A Preferred Stock, Series C Preferred Stock, Series C-1
Preferred Stock, Series D Preferred Stock or Series E Preferred Stock, furnish
or cause to be furnished to such holder a like certificate setting forth (i)
such adjustment and readjustment, (ii) the applicable Conversion Prices at the
time in effect and (iii) the number of shares of Class A Common Stock and the
amount, if any, of other property which at the time would be received upon the
conversion of a share of Series A Preferred Stock, Series C Preferred Stock,
Series C-1 Preferred Stock, Series D Preferred Stock or Series E Preferred
Stock.
(i) Notices of Record Date. In the event of any
taking by the Corporation of a record of the holders of any class of securities
for the purpose of determining the holders thereof who are entitled to receive
any dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of shares of Series A Preferred Stock, Series C
Preferred Stock, Series C-1 Preferred Stock, Series D Preferred Stock and Series
E Preferred Stock, at least twenty (20) days
41
17
prior to the date specified therein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion.
The Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Class A Common Stock, solely for the purpose
of effecting the conversion of the shares of Series A Preferred Stock, Series C
Preferred Stock, Series C-1 Preferred Stock, Series D Preferred Stock and Series
E Preferred Stock, such number of its shares of Class A Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of Series A Preferred Stock, Series C Preferred Stock, Series C-1
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, and if
at any time the number of authorized but unissued shares of Class A Common Stock
shall not be sufficient to effect the conversion of all then outstanding shares
of Series A Preferred Stock, Series C Preferred Stock, Series C-1 Preferred
Stock, Series D Preferred Stock and Series E Preferred Stock, then in addition
to such other remedies as shall be available to the holder of such shares of
Series A Preferred Stock, Series C Preferred Stock, Series C-1 Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock, the Corporation will take
such corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Class A Common Stock to such
number of shares as shall be sufficient for such purposes.
(k) Notices. Any notice required by the provisions of
this Section 5 to be given to the holders of shares of Series A Preferred Stock,
Series C Preferred Stock, Series C-1 Preferred Stock, Series D Preferred Stock
and Series E Preferred Stock shall be deemed given when received if delivered
via courier or sent by facsimile, by telex, or by United States mail, postage
prepaid, and addressed to each holder of record at his, her or its address
appearing on the books of the Corporation.
6. Status of Converted Stock. In the event any shares of
Series A Preferred Stock, Series C Preferred Stock, Series C-1 Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock are converted pursuant to
Section 5 hereof, the shares so converted shall be canceled, retired and
eliminated and shall not be reissued by the Corporation.
7. Voting Rights.
(a) Each holder of a share of Series A Preferred
Stock, Series C Preferred Stock, Series C-1 Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock shall have the right to one vote for each
share of Class A Common Stock into which such Series A Preferred Stock, Series C
Preferred Stock, Series C-1 Preferred Stock, Series D
42
18
Preferred Stock and Series E Preferred Stock could then be converted (with any
fractional share determined on an aggregate conversion basis being rounded down
to the nearest whole share).
(b) The Board of Directors of the Corporation shall
be determined and shall be elected in accordance with the provisions of the
Stockholders Agreement.
(c) At any meeting called for the purpose of electing
directors, the presence in person or by proxy of the holders of record of a
majority in interest of the Corporation's voting securities shall constitute a
quorum for the election of directors to be elected by such holders.
(d) Any action required to be taken at any meeting of
stockholders, or any action which may be taken at any meeting of such
stockholders, may be taken without a meeting, without prior notice and without a
vote if a consent in writing, setting forth the action as taken, shall be signed
by the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less than unanimous
consent shall be given to those stockholders who have not consented in writing.
(e) Except as otherwise provided in this Certificate
of Incorporation of the Corporation or by applicable law, the holders of shares
of Series A Preferred Stock, Series C Preferred Stock, Series C-1 Preferred
Stock, Series D Preferred Stock and Series E Preferred Stock shall be entitled
to notice of any shareholders' meeting in accordance with the Bylaws of the
Corporation and applicable law, and shall vote, together with the holders of
shares of Class A Common Stock (and any other class or series of stock entitled
to vote together as one class with the Class A Common Stock), with respect to
any question upon which holders of shares of Class A Common Stock have the right
to vote, as a single class.
8. Optional Redemption of Series E Preferred Stock, Series D
Preferred Stock, Series C Preferred Stock and Series C-1 Preferred Stock.
(a) Series C Preferred Stock. Subject to the
provisions of Section 8(b) and Section 8(c) below, at any time after five (5)
years from the Series C Issuance Date, but in no event more frequently than once
per year, the holders of at least sixty percent (60%) (the "Option Holders") of
the then outstanding shares of Series C Preferred Stock and Series C-1 Preferred
Stock, voting together as a class, may notify the Corporation that all or some
of the shares of Series C Preferred Stock and Series C-1 Preferred Stock held by
such holders shall be redeemed (an "Optional Series C Redemption"). Upon its
receipt of such notice, the Corporation shall (to
43
19
the extent it is then lawfully able to do so), but subject to the provisions of
Section 8(b) and Section 8(c) below, redeem from the holders requesting such
redemption (including those holders who later request redemption on a timely
basis as hereinafter provided) the outstanding shares of Series C Preferred
Stock and Series C-1 Preferred Stock specified in said request by payment in
cash in respect of each share redeemed of an amount equal to the Series C
Liquidation Preference. Upon receipt of any such request as to an Optional
Series C Redemption, the Corporation shall promptly give written notice of the
redemption request to each nonrequesting holder of record of the shares of
Series C Preferred Stock and Series C-1 Preferred Stock and to each holder of
shares of Series E Preferred Stock and Series D Preferred Stock, postage
prepaid, at the post office address last shown on the records of the
Corporation. With respect to an Optional Series C Redemption, nonrequesting
holders of shares of Series C Preferred Stock and Series C-1 Preferred Stock
shall have thirty (30) days from the date such notice is mailed to request in
writing redemption of their Series C Preferred Stock and Series C-1 Preferred
Stock on the terms contained herein and on the date of redemption set forth in
Section 8(c), and all such requests shall be deemed to have been received by the
Corporation on the date of the initial request by the Option Holders.
Notwithstanding the foregoing, if the Series D Preferred Stock has elected to be
redeemed pursuant to Section 8(b) below and/or if the Series E Preferred Stock
has elected to be redeemed pursuant to Section 8(c) below, no payments shall be
made with respect to this Section 8(a) until the Series D Liquidation Preference
(including any principal, interest or other amounts represented by a promissory
note) with respect to each share of Series D Preferred Stock then outstanding
shall have been paid in full and/or the Series E Liquidation Preference
(including any principal, interest or other amounts represented by a promissory
note) with respect to each share of Series E Preferred Stock then outstanding
shall have been paid in full.
(b) Series D Preferred Stock. If (i) the Series D
Preferred Stock has not been converted to Common Stock pursuant to Section 5(a)
(ii) on or before March 5, 2004 or (ii) in the event that any other capital
stock of the Corporation (or any securities convertible into or exercisable or
exchangeable into capital stock of the Corporation) is to be redeemed for any
reason, upon the election (the "Series D Election") by the holders of sixty-six
and two-thirds of the then outstanding shares of Series D Preferred Stock, the
Corporation shall redeem all of the shares of Series D Preferred Stock by paying
a per share sum equal to the Series D Liquidation Preference. The Series D
Liquidation Preference shall be paid on a pari passu basis with the Series E
Liquidation Preference (if the Series E Preferred Stock has elected to be
redeemed pursuant to Section 8(c) below) and before any redemption payment is
made in respect of any other capital stock of the Corporation (or any securities
convertible into or exercisable or exchangeable into capital stock of the
Corporation). The Corporation shall pay to each holder of Series D Preferred
Stock (who has not converted pursuant to Section 5 prior to the date of such
redemption) on the 90th day after the date of the Series D Election the Series D
Liquidation Preference in cash in an amount equal to one-third of the Series D
Liquidation Preference and in
44
20
the form of a promissory note in an aggregate amount equal to two-thirds of the
Series D Liquidation Preference. The note shall bear interest, compounded
quarterly, through the date of payment, at the Defined Rate (as defined herein)
on the Initial Redemption Date (as defined below), such rate to be computed on
the basis of a 360-day year. Payments on the promissory note shall be payable in
two annual installments on each of the first and second anniversaries of the
Initial Redemption Date (each a "Redemption Date") for such Series D Preferred
Stock unless such anniversary falls on a day which is not a business day in San
Francisco, California, in which case the applicable redemption installment shall
be due and payable on the next business day.
(c) Series E Preferred Stock. If (i) the Series E
Preferred Stock has not been converted into Common Stock pursuant to Section
5(a)(ii) on or before the fifth anniversary of the Series E Issuance Date or
(ii) in the event that any other capital stock of the Corporation (or any
securities convertible into or exercisable or exchangeable into capital stock of
the Corporation) is to be redeemed for any reason upon the election (the "Series
E Election") by the holders of sixty-six and two-thirds of the then outstanding
shares of Series E Preferred Stock, the Corporation shall redeem all of the
shares of Series E Preferred Stock by paying a per share sum equal to the Series
E Liquidation Preference. The Series E Liquidation Preference shall be paid on a
pari passu basis with the Series D Liquidation Preference (if the Series D
Preferred Stock has elected to be redeemed pursuant to Section 8(b) above) and
before any redemption payment is made in respect to any other capital stock of
the Corporation (or any securities convertible into or exercisable or
exchangeable into capital stock of the Corporation). The Corporation shall pay
to each holder of Series E Preferred Stock (who has not converted pursuant to
Section 5 prior to the date of such redemption) on the 90th day after the date
of the Series E Election, the Series E Liquidation Preference in cash in an
amount equal to one-third of the Series E Liquidation Preference and in the form
of a promissory note in an aggregate amount equal to two-thirds of the Series E
Liquidation Preference. The note shall bear interest, compounded quarterly,
through the date of payment, at the Defined Rate (as defined below) on the
Initial Redemption Date (as defined below), such rate to be computed on the
basis of a 360-day year. Payments on the promissory note shall be payable in two
annual installments on each of the first and second anniversaries of the Initial
Redemption Date for such Series E Preferred Stock unless such anniversary falls
on a day which is not a business day in Atlanta, Georgia, in which case the
applicable redemption installment shall be due and payable on the next business
day.
(d) Redemption Date. Subject to Section 8(b) and
Section 8(c), the Corporation shall redeem the shares of Series C Preferred
Stock, Series C-1 Preferred Stock, Series D Preferred Stock or Series E
Preferred Stock to be redeemed hereunder no later than ninety (90) days after
the date of the request by the initially requesting holders of shares of Series
C Preferred Stock, Series C-1 Preferred Stock, Series D Preferred Stock or
Series E Preferred Stock, as the case may be. Such date shall be the "Initial
Redemption Date" as described herein.
45
(e) Procedure. At least thirty (30) days prior to the
Initial Redemption Date, written notice shall be mailed, postage prepaid, to the
holder of record of shares of Series C Preferred Stock, Series C-1 Preferred
Stock, Series D Preferred Stock or Series E Preferred Stock to be redeemed, at
such holder's post office address last shown on the records of the Corporation,
notifying such holder of the redemption of such shares to be redeemed at that
time, specifying the Initial Redemption Date, the applicable redemption price,
and calling upon such holder to surrender to the Corporation, in the manner and
at the place designated, such holder's certificate or certificates representing
the shares to be redeemed (such notice is hereinafter referred to as the
"Optional Redemption Notice"). On or after the Initial Redemption Date, each
holder of shares of Series C Preferred Stock, Series C-1 Preferred Stock, Series
D Preferred Stock or Series E Preferred Stock to be redeemed shall surrender
such holder's certificate or certificates representing shares to the
Corporation, in the manner and at the place designated in the Optional
Redemption Notice, and thereupon the applicable redemption price of such shares
shall be payable to the order of the person whose name appears on such
certificate or certificates as the owner of such shares and each surrendered
certificate shall be canceled. In the event less than all the shares represented
by any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
(f) Insufficient Funds. If the funds of the
Corporation legally available for redemption of shares of Series C Preferred
Stock, Series C-1 Preferred Stock, Series D Preferred Stock or Series E
Preferred Stock on any Redemption Date are insufficient to redeem the total
number of shares of Series C Preferred Stock, Series C-1 Preferred Stock, Series
D Preferred Stock or Series E Preferred Stock to be redeemed on such date, those
funds that are legally available shall be used to redeem the maximum number of
shares of Series D Preferred Stock and Series E Preferred Stock first ratably
among the holders of such shares to be redeemed. To the extent that funds remain
after payment of the full Series D Liquidation Preference (including any and all
principal, interest and other amounts represented by any promissory notes issued
to the holders upon redemption and the full Series E Liquidation Preference
(including any and all principal, interest and other amounts represented by any
promissory notes issued to the holders upon redemption)), those funds will be
used to redeem the maximum number of shares of Series C Preferred Stock and
Series C-1 Preferred Stock ratably. The shares of Preferred Stock not redeemed
shall remain outstanding and entitled to all the rights and preferences provided
herein. At any time thereafter when additional funds of the Corporation are
legally available for redemption of shares of Preferred Stock such funds shall
immediately be used to redeem the balance of the shares which the Corporation
has become obligated to redeem on any Redemption Date but which it has not
redeemed, at a price per share equal to the applicable redemption price (as
previously determined), plus interest, compounded quarterly and calculated on
the basis of a 360 day year, on the Initial Redemption Price at the Defined Rate
(as defined hereinafter) accrued from and after the Initial Redemption Date to
the date of actual redemption. As used herein, the
46
22
"Defined Rate" shall mean a rate per annum equal to (i) the highest rate then
paid by the Corporation for indebtedness for borrowed money, plus one hundred
(100) basis points, or (ii) if the Corporation has no indebtedness for borrowed
money then outstanding, then ten percent (10%), but in no event more than the
maximum amount permissible by law.
(g) Limitation on Optional Redemption of Series C and
C-1 Preferred Stock. If the aggregate Series C Liquidation Preference payable on
a Redemption Date exceeds fifty percent (50%) of the Corporation's cumulative
retained earnings (as adjusted to reflect previous repurchases), calculated in
accordance with generally accepted accounting principles consistently applied,
on such date, then the Corporation only need redeem the maximum number of shares
of Series C Preferred Stock and Series C-1 Preferred Stock ratably among the
holders of such shares to be redeemed, such that the aggregate Series C
Liquidation Preference does not exceed fifty percent of cumulative retained
earnings. The shares of Series C Preferred Stock and Series C-1 Preferred Stock
not redeemed shall remain outstanding and entitled to all the rights and
preferences provided herein. At the end of each fiscal quarter thereafter when
the Corporation has generated additional retained earnings, fifty percent of
such additional retained earnings shall immediately be used to redeem the
balance of the shares which the Corporation has become obligated to redeem on
any Redemption Date but which it has not redeemed, at a price per share equal to
the Series C Liquidation Preference (as previously determined), plus interest,
compounded quarterly and calculated on the basis of a 360 day year, on the
Series C Liquidation Preference at the Defined Rate accrued from and after the
Redemption Date to the date of actual redemption.
(h) Deposit of Optional Redemption Price. On or prior
to the Initial Redemption Date, the Corporation shall deposit the redemption
price with respect to all shares of Series C Preferred Stock, Series C-1
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock
designated for redemption in the Optional Redemption Notice, the Series D
Election or the Series E Election and not yet redeemed with a bank or trust
company having aggregate capital and surplus in excess of $50,000,000.00 as a
trust fund for the benefit of the respective holders of the shares designated
for the redemption and not yet redeemed, with irrevocable instructions and
authority to the bank or trust company to pay the redemption price for such
shares to their respective holders on or after the Initial Redemption Date upon
receipt of notification from the Corporation that such holder has surrendered
his shares certificate to the Corporation pursuant to Section 8(d) hereof,
subject to the priority provision contained in Section 8(b) and Section 8(c)
providing for payment of the Series D Liquidation Preference and/or the Series E
Liquidation Preference in absolute priority to the redemption payments to other
shareholders. Such instructions shall also provide that any funds deposited by
the Corporation pursuant to this Section 8(h) for the redemption of shares
subsequently converted into shares of Common Stock no later than the third (3rd)
day preceding the Initial Redemption Date shall be
47
23
returned to the Corporation forthwith upon such conversion. The balance of any
funds deposited by the Corporation pursuant to this Section 8(h) remaining
unclaimed at the expiration of two (2) years following the Initial Redemption
Date shall be returned to the Corporation upon its request expressed in a
resolution of its Board of Directors; provided, however, that the Corporation's
obligation to pay the applicable redemption price shall continue.
(i) Notwithstanding any provision of this Section 8
to the contrary, the Corporation shall not make any redemption payments in
respect of its capital stock (or any securities convertible into or exercisable
or exchangeable into capital stock of the Corporation), from and after any
election by the holders of the Series D Preferred Stock and/or the holders of
the Series E Preferred Stock to cause such shares to be redeemed hereunder
unless and until the aggregate Series D Liquidation Preference in respect of the
shares of Series D Preferred Stock (including, without limitation, any
principal, interest and any other amounts due on any promissory notes issued to
such holders upon redemption) and/or the aggregate Series E Liquidation
Preference in respect of the shares of Series E Preferred Stock (including,
without limitation, any principal, interest and any other amounts due on any
promissory notes issued to such holders upon redemption) shall have been paid in
full.
(j) The Corporation will not, by amendment of its
Certificate if Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by this
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 8 and in taking all action as may be
necessary or appropriate to protect the redemption rights of the holders of the
Series E Preferred Stock, Series D Preferred Stock, Series C Preferred Stock and
Series C-1 Preferred Stock against impairment.
9. Common Stock.
(a) Dividend Rights. The holders of shares of Class A
Common Stock and Class B Common Stock shall be entitled to receive, when, as and
if declared by the Board of Directors, out of any asset of the Corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors, subject to the preference, liquidation and
participation rights of the Series A Preferred Stock, Series C Preferred Stock,
Series C-1 Preferred Stock, Series D Preferred Stock and Series E Preferred
Stock, more fully set forth in Sections 3 and 4 hereof.
48
24
(b) Liquidation Rights. Upon the liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation
shall be distributed as provided in Section 4 hereof.
(c) Redemption. Common Stock is not redeemable
without the consent of the holder thereof.
(d) Voting Rights. The holder of each share of Class
A Common Stock shall have the right to one vote, and shall be entitled to notice
of any meeting in accordance with the Bylaws of the Corporation, and shall be
entitled to vote upon such matters and in such manner as may be provided by law.
Class B Common Stock shall have no voting rights.
10. Restrictions and Limitations. (a) So long as shares of
Series C Preferred Stock, Series C-1 Preferred Stock or Series D Preferred Stock
remain outstanding, the Corporation shall not, without the consent of the
holders of a majority of the Series C Preferred Stock and Series C-1 Preferred
Stock then outstanding, voting together as a separate class, and the consent of
the holders of sixty-six and two-thirds of the Series D Preferred Stock then
outstanding, voting as a separate class.
(i) Authorize or issue, or obligate itself
to issue, any other equity security (including any security convertible
into or exercisable for any equity security) senior to or on a parity
with the Series D Preferred Stock as to dividend rights or redemption
rights or liquidation preferences;
(ii) Pay, declare or set aside any dividend
on any equity security not in accordance with Sections 3 and 4 hereof;
(iii) Authorize or enter into any merger,
consolidation, recapitalization or reorganization, or sale of
substantially all of its assets unless in such merger, consolidation,
recapitalization, reorganization or sale the holders of the Series D
Preferred receive at least $17.58 (as adjusted for stock splits,
reverse stock splits and similar type transactions or occurrences after
March 5, 1999) per share of Series D Preferred Stock; or
(iv) Repurchase or acquire its own shares
other than pursuant to this Certificate of Incorporation or in
connection with shares held by employees upon the termination of such
employee's employment with the Corporation pursuant to the terms and
conditions of an employment agreement previously approved by the
Corporation's Board of Directors.
49
25
(b) So long as shares of Series E Preferred Stock
remain outstanding, the Corporation shall not, without the consent of the
holders of sixty-six and two-thirds of the Series E Preferred Stock then
outstanding, voting as a separate class, effect any of the transactions
described in subclauses (i), (ii) or (iv) of clause (a) of this Section 10.
(c) So long as shares of Series C Preferred Stock or
Series C-1 Preferred Stock remain outstanding, the Corporation shall not,
without the consent of the holders of a majority of the Series C Preferred Stock
and Series C-1 Preferred Stock then outstanding, voting together as a separate
class, amend or repeal any provision of the Certificate of Incorporation or
Bylaws of the Corporation if such amendment would change any of the rights,
preferences or privileges provided herein for the benefit of, or adversely
affect, the Series C Preferred Stock or Series C-1 Preferred Stock.
(d) So long as shares of Series D Preferred Stock
remain outstanding, the Corporation shall not, without the consent of the
holders of sixty-six and two-thirds of the Series D Preferred Stock then
outstanding, voting as a separate class, amend or repeal any provision of the
Certificate of Incorporation or Bylaws of the Corporation if such amendment
would change any of the rights, preferences or privileges provided herein for
the benefit of, or adversely affect, the Series D Preferred Stock.
(e) So long as shares of Series E Preferred Stock
remain outstanding, the Corporation shall not, without the consent of the
holders of sixty-six and two-thirds of the Series E Preferred Stock then
outstanding, voting as a separate class, amend or repeal any provision of the
Certificate of Incorporation or Bylaws of the Corporation if such amendment
would change any of the rights, preferences or privileges provided herein for
the benefit of, or adversely affect, the Series E Preferred Stock.
FIFTH: A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for (i) any breach of the director's duty
of loyalty to the Corporation or its stockholders, (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) any matter in respect of which such director shall be liable under
Section 174 of the Delaware General Corporation Law or any amendment thereto or
successor provision thereof, or (iv) any transaction from which the director
derived an improper personal benefit. If the General Corporation Law of the
State of Delaware is amended hereafter to authorize further elimination or
limitation of liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the General Corporation Law of the State of Delaware. Neither the amendment nor
repeal of this Article FIFTH, nor the adoption of any provision of this
Certificate of Incorporation inconsistent with this Article FIFTH, shall
eliminate or reduce the effect of this Article FIFTH in respect of any matter
occurring, or any
50
26
cause of action, suit, or claim that, but for this Article FIFTH, would accrue
or arise, prior to such amendment, repeal, or adoption of an inconsistent
provision. The Corporation shall, to the full extent permitted by Section 145 of
the Delaware General Corporation Law, as amended from time to time, indemnify
all persons whom it has the power to indemnify pursuant thereto.
51
27
* * *
4. The foregoing Amended and Restated Certificate of
Incorporation has been duly adopted by the Corporation's Board of Directors and
stockholders in accordance with the provisions of Section 228, 242 and 245 of
the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned has duly executed this
Amended and Restated Certificate of Incorporation this __ day of July, 1999 and
declares under the penalty of perjury that the matters set forth in the
foregoing Certificate are true of his own knowledge.
--------------------------------
Xxxx X. Xxxxxx
President
52
Exhibit B
AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
THIS AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this
"Agreement") made as of this day of July, 1999, by and among MEDSCAPE, INC., a
Delaware corporation (the "Corporation"), having its principal office at 000 X.
00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000, certain existing stockholders of the
Corporation listed on Schedule I attached hereto under "Existing Stockholders,"
each having an address as indicated thereon (the "Existing Stockholders"), the
persons listed on Schedule I under "Investor Stockholders," each having an
address as indicated on Schedule I (collectively, the "Investor Stockholders"),
and any subsequent stockholder of the Corporation who becomes a party to this
Agreement pursuant to the terms and conditions hereof (the "Additional
Stockholders", and collectively, with the Existing Stockholders and the Investor
Stockholders, the "Stockholders"). This Agreement amends and restates in its
entirety the Stockholders Agreement, dated as of October 31, 1997, as amended on
February 19, 1998, October 23, 1998, March 5, 1999 and May 24, 1999, by and
among the Corporation and the Existing Stockholders (the "Antecedent
Agreement").
BACKGROUND
The Corporation is a corporation duly organized and existing
under the laws of the State of Delaware with a total authorized capitalization
of shares of which (a) shares are designated as Series A Preferred
Stock, par value $.01 per share, of which shares are issued and
outstanding as of this date; (b) shares are designated as Series C
Preferred Stock, par value $.01 per share, of which shares are issued and
outstanding as of this date, (c) shares are designated as Series C-1
Preferred Stock, par value $.01 per share, of which shares are issued and
outstanding as of this date, (d) shares are designated as Series D
Preferred Stock, par value $.01 per share, of which shares are issued and
outstanding as of this date, (e) 1,000,000 shares are designated as Series E
Preferred Stock, par value $.01 per share, of which 1,000,000 shares shall be
issued effective upon the Closing, (f) shares are designated as Class A
Common Stock, par value $.01 per share, of which shares are issued and
outstanding as of this date, shares are duly reserved for issuance in
connection with the conversion of Series C Preferred Stock, shares are
duly reserved for issuance in connection with the conversion of the Series C-1
Preferred Stock, shares are duly reserved for issuance in connection with
conversion of Series D Preferred Stock and 1,000,000 shares are duly reserved
for issuance in connection with conversion of Series E Preferred Stock and (g)
shares are designated as Class B Common Stock, par value $.01 per share,
of which (i) shares are issued and outstanding as of this date and (ii)
shares are duly reserved for issuance to officers, directors and
53
employees of the Corporation pursuant to the Corporation's stock option plan or
other arrangements approved by the Corporation's Board of Directors. This
Agreement is being entered into in connection with the Closing to amend and
restate the Antecedent Agreement in accordance with Section 12 thereof.
Each of the Stockholders owns that number of shares of
Preferred Stock and Common Stock (together with any other shares of capital
stock of the Corporation now owned or hereafter acquired by the Stockholders and
their successors or assigns from any Person by any means, including without
limitation, any acquisition by gift, purchase, dividend, conversion, stock
split, recapitalization or otherwise, collectively, the "Shares") set forth
opposite the name of each such Stockholder on Schedule II attached hereto. It is
deemed to be in the best interest of the Corporation and the Stockholders that
provision be made for the continuity and stability of the business and policies
of the Corporation and, to that end, the Corporation and the Stockholders hereby
set forth their agreement with respect to the Shares.
NOW, THEREFORE, in consideration of the premises and of the
mutual consents and obligations hereinafter set forth, the parties hereto hereby
further agree as follows:
SECTION Definitions. All capitalized terms used in this
Agreement shall have the meanings assigned to them elsewhere in this Agreement
or as specified below:
"Affiliate" of any Person shall mean any Person directly or
indirectly controlling, controlled by or under common control with such Person.
"Closing" shall mean the closing of the transactions
contemplated under the Purchase Agreement which shall take place effective as of
the first date set forth above.
"Commission" shall mean the United States Securities and
Exchange Commission.
"Common Directors" shall have the meaning set forth in Section
2(b)(vii) hereof.
"Common Stock" shall mean (a) the Corporation's Class A
Common Stock, par value $.01 per share, as authorized on the date of this
Agreement, (b) the Corporation's Class B Common Stock, par value $.01 per share,
as authorized on the date of this Agreement, (c) any other capital stock of any
class or classes (however designated) of the Corporation, authorized on or after
the date hereof, the holders of which shall have the right, without limitation
as to amount, either to all or to a share of
-2-
54
the balance of current dividends and liquidating distributions after the payment
of dividends and distributions on any shares entitled to preference under the
Restated Certificate of Incorporation (as the same may be further amended from
time to time after the Closing), and (d) any other securities into which or for
which any of the securities described in clause (a), (b) or (c) of this
definition may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
"Corporation Notice" shall have the meaning set forth in
Section 4(b) hereof.
"Designated Offering" shall mean a firmly underwritten public
offering registered under the Securities Act with an aggregate minimum gross
offering price to the public of $20,000,000 with a per share price equal to no
less than $7.03 per share (as adjusted for any stock split, stock dividend or
recapitalization after July , 1999).
"Equity Securities" shall have the meaning set forth in
Section 3(a) hereof.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission promulgated
thereunder, all as the same shall be in effect at the time.
"Exchange Act Registration Statement" shall mean a
registration statement filed pursuant to the Exchange Act, relating to any class
of equity securities of the Corporation.
"Excluded Form" shall mean a registration statement filed
pursuant to the Securities Act on Form X-0, X-0 or any similar or successor
forms.
"Excluded Securities" shall mean those securities described
in Section 3(g) hereof.
"Existing Registrable Securities" shall mean: (a) all the
shares of Common Stock of the Corporation, other than Investor Registrable
Securities, that are now owned or may hereafter be acquired by any Holder or its
permitted successors and assigns, and any other shares of Common Stock acquired
by such Holder pursuant to Sections 3 or 4 of this Agreement; and (b) any shares
of Common Stock of the Corporation issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of
all such shares of Common Stock described in clause (a) of this definition;
excluding in all cases, however, (i) any Existing Registrable Securities sold
pursuant to registration under the Securities Act or (ii) any
-3-
55
Existing Registrable Securities sold, subsequent to the Corporation's initial
public offering of securities registered under the Securities Act, pursuant to
Rule 144 (or similar or successor rule) promulgated under the Securities Act.
"Form S-3" shall mean the form under the Securities Act as is
in effect on the date hereof or any successor registration form under the
Securities Act subsequently adopted by the Commission which permit inclusion or
incorporation of substantial information by reference to other documents filed
by the Corporation with the Commission.
"Holder" shall mean any holder of Common Stock owning of
record Registrable Securities that have not been sold to the public and, for
purposes of this Agreement, a record holder of the Series C Stock, Series D
Preferred Stock or Series E Preferred Stock convertible into such Registrable
Securities shall be deemed to be the Holder of such Registrable Securities;
provided, however, that the Corporation shall in no event be obligated to
register the Series C Stock, Series D Preferred Stock or Series E Preferred
Stock, and that Holders of Registrable Securities shall not be required to
convert their shares of Series C Stock, Series D Preferred Stock or Series E
Preferred Stock into Common Stock in order to exercise the registration rights
granted under Section 6 hereof, until immediately before the closing of the
offering to which the registration relates.
"Initiating Holders" shall have the meaning set forth in
Section 6(d)(ii) hereof.
"Investor Notice" shall have the meaning set forth in Section
4(c) hereof.
"Investor Registrable Securities" shall mean: (a) all the
shares of Common Stock of the Corporation issued or issuable upon the conversion
of the shares of Series C Stock, Series D Preferred Stock or Series E Preferred
Stock that are now owned or may hereafter be acquired by any Holder or its
permitted successors and assigns, all the shares of Common Stock issued pursuant
to the Purchase Agreement and any other shares of Common Stock acquired by such
Holder pursuant to Sections 3 or 4 of this Agreement; and (b) any shares of
Common Stock of the Corporation issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of
all such shares of Common Stock described in clause (a) of this definition;
excluding in all cases, however, (i) any Investor Registrable Securities sold
pursuant to registration under the Securities Act or (ii) any Investor
Registrable Securities sold, subsequent to the Corporation's initial public
offering of securities registered under the Securities Act, pursuant to Rule 144
(or similar or successor rule) promulgated under the Securities Act.
-4-
56
"Investor Registrable Securities then outstanding" shall mean
the number of shares of Investor Registrable Securities that are then issued and
outstanding or are then issuable pursuant to the exercise or conversion of then
outstanding and then exercisable options, warrants or convertible securities.
"Limited Sales" shall mean, for the period of one year after
the date hereof, (a) aggregate sales of no more than 5% of the outstanding
Series A Preferred Stock and (b) aggregate sales of no more than 5% of the
outstanding Series C Stock.
"MTV Director" shall have the meaning set forth in Section
2(b)(i) hereof.
"Notice of Acceptance" shall have the meaning set forth in
Section 3(c) hereof.
"Offer" shall have the meaning set forth in Section 3(a)
hereof.
"Permitted Transfer" and "Permitted Transferee" shall have the
meanings set forth in Section 4(d) hereof.
"Person" shall mean and include an individual, a corporation,
a partnership, a trust, an unincorporated organization and a government or any
department, agency or political subdivision thereof.
"Preferred Stock" shall mean (a) the Corporation's Series A
Preferred Stock, par value $.01 per share, as authorized on the date of this
Agreement, (b) the Corporation's Series C Preferred Stock, par value $.01 per
share, as authorized on the date of this Agreement, (c) the Corporation's Series
C-1 Preferred Stock, par value $.01 per share, as authorized on the date of this
Agreement, (d) the Corporation's Series D Preferred Stock, par value $.01 per
share, as authorized on the date of this Agreement, (e) Series E Preferred
Stock, par value $.01 per share, as authorized on the date of this Agreement,
and (f) any other securities into which or for which any of the securities
described in clause (a), (b), (c), (d) or (e) of this definition may be
converted or exchanged pursuant to a plan of recapitalization, reorganization,
merger, sale of assets or otherwise.
"Purchase Agreement" shall mean the Stock Purchase Agreement,
dated as of July , 1999, between the Corporation and National Data Corporation,
as the same may be amended from time to time.
"registered" and "registration" shall refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement.
-5-
57
"Registrable Securities" shall mean, collectively, Existing
Registrable Securities and Investor Registrable Securities.
"Registration Expenses" shall have the meaning set forth in
Section 6(d) hereof.
"Remaining Securities" shall have the meaning set forth in
Section 3(d) hereof.
"Restated Certificate of Incorporation" shall mean the
Corporation's Restated and Amended Certificate of Incorporation, filed in the
Office of the Secretary of State of Delaware on July , 1999, a copy of which is
attached hereto as Exhibit A.
"Sale Shares" shall have the meaning set forth in Section
4(a) hereof.
"Section 4 Shares" shall mean any shares of Common Stock or
Preferred Stock issued to the Section 4 Stockholders.
"Section 4 Shares Transfer" shall have the meaning set forth
in Section 4(a) hereof.
"Section 4 Stockholders" shall mean Xxxxxxx X. Xxxxxxx,
Excelsior Fund 1, Xxxxx Xxxxxxxx, Xxxxxx Xxxxx and Xxxx Xxxxxx.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission promulgated thereunder,
all as the same shall be in effect at the time.
"Series C Director" shall have the meaning set forth in
Section 2(b)(ii) hereof.
"Series D Director" shall have the meaning set forth in
Section 2(b)(iii) hereof.
"Series A Preferred Stock" shall mean the Corporation's
authorized and outstanding shares of Series A Convertible Preferred Stock, par
value $.01 per share, having the designations, rights, preferences and
privileges and qualifications, limitations and restrictions set forth in the
Restated Certificate of Incorporation, of which 788,200 shares are outstanding
as of the date hereof.
"Series C Preferred Stock" shall mean the Corporation's
authorized and outstanding shares of Series C Convertible Preferred Stock, par
value $.01 per share,
-6-
58
having the designations, rights, preferences and privileges and qualifications,
limitations and restrictions set forth in the Restated Certificate of
Incorporation.
"Series C-1 Preferred Stock" shall mean the Corporation's
authorized and outstanding shares of Series C-1 Convertible Preferred Stock, par
value $.01 per share, having the designations, rights, preferences and
privileges and qualifications, limitations and restrictions set forth in the
Restated Certificate of Incorporation.
"Series C Stock" shall mean the Series C Preferred Stock and
the Series C-1 Preferred Stock taken together.
"Series D Preferred Stock" shall mean the Corporation's
authorized and outstanding shares of Series D Convertible Preferred Stock, par
value $.01 per share, having the designations, preferences and privileges and
qualifications, limitations and restrictions set forth in the Restated
Certificate of Incorporation.
"Series E Preferred Stock" shall mean the Corporation's
authorized and outstanding shares of Series E Convertible Preferred Stock, par
value $.01 per share, having the designations, preferences and privileges and
qualifications, limitations and restrictions set forth in the Restated
Certificate of Incorporation.
"transfer" shall mean any sale, assignment, transfer,
disposition, donation, pledge, bequest, hypothecation, gift, conveyance,
encumbrance or any other disposition or transfer of a Share or any interest or
rights (legal or equitable) therein by any means whatsoever, whether direct or
indirect, absolute or conditional, voluntary or involuntary, by operation of law
(including without limitation, by operation of the laws of descent and
distribution) or otherwise.
"Transferring Stockholder" shall have the meaning set forth in
Section 4(a) hereof.
"TS Notice" shall have the meaning set forth in Section 4(a)
hereof.
"Violation" shall have the meaning set forth in Section
6(j)(i) hereof.
SECTION 2. Election of Directors.
(a) The Stockholders shall take all steps necessary, acting
in their respective capacities as stockholders, directors or officers of the
Corporation, as the case may be, to perform their obligations and agreements
hereunder, to cause the Corporation to perform its obligations and agreements
hereunder and under the Purchase Agreement and to implement and cause the
Corporation to implement the provisions of this Agreement and the Purchase
Agreement, including without limitation,
-7-
59
the calling and holding of stockholders' meetings for the election of directors
or the election of directors by consent in writing.
(b) The Board of Directors of the Corporation shall consist
of a maximum of nine (9) directors. At each annual meeting of the stockholders
of the Corporation, and at each special meeting of the stockholders of the
Corporation called for the purpose of electing directors of the Corporation, and
at any time at which stockholders of the Corporation shall have the right to, or
shall, vote for or consent in writing to the election of directors of the
Corporation, then, and in each such event, the Stockholders agree that they
shall vote all Shares owned by them for the election of the Board of Directors
in the following manner:
(i) Media Technology Ventures, L.P. and Media
Technology Ventures Entrepreneurs Fund, L.P (collectively,
"MTV") shall be entitled, but not obligated, so long as MTV
is the holder of record of at least five percent (5%) of a
class of voting equity securities of the Corporation then
outstanding, to elect one (1) director (the "MTV Director");
(ii) the holders of record of shares of Series C
Stock, excluding MTV, voting together as a separate class,
shall be entitled, but not obligated, so long as such holders
are the holders of record, in the aggregate, of at least five
percent (5%) of the outstanding shares of Series C Stock
constituting at least 200,000 shares, to elect one (1)
director, who shall be nominated by the holders of record of
a majority of the shares of Series C Stock, excluding MTV,
then outstanding (the "Series C Director");
(iii) the holders of record of shares of Series D
Preferred Stock, voting together as a separate class, shall
be entitled, but not obligated, to elect one (1) director,
who shall be nominated
by the holders of record of a majority of the shares of
Series D Preferred Stock then outstanding (the "Series D
Director");
(iv) TBG Information Investors, LLC ("TBG") shall be
entitled, but not obligated, so long as TBG is the holder of
record of at least five percent (5%) of a class of voting
equity securities of the Corporation then outstanding, to
elect one (1) director (the "TBG Director");
(v) upon nomination by the Board of Directors and
for so long as he is employed as Chief Executive Officer of
the Corporation, the Stockholders shall elect Xxxx X. Xxxxxx
as a director of the Corporation;
-8-
60
(vi) upon nomination by the Board of Directors and
for so long as he is employed as Executive Vice President of
the Corporation, the Stockholders shall elect Xxxxxxx X.
Xxxxxxx, M.D., Ph.D., as a director of the Corporation; and
(vii) the holders of record of shares of Class A
Common Stock and Series A Preferred Stock, voting together as
a single class, shall elect three (3) directors, two (2) of
whom shall be nominated by the holders of record of a
majority of the shares of Class A Common Stock and Series A
Preferred Stock then outstanding, and one (1) of whom shall
be nominated by a majority of the two directors so nominated
pursuant this Section 2(b)(vii) and the MTV Director
(collectively, the "Common Directors"); provided, however,
that (1) Xx. Xxxxx Xxxxxxxx or his designee shall hold and
continue to hold one (1) of the Common Directors seats
provided for in this Section 2(b)(vii) so long as Mr.
Frishauf or his nominee is the holder of record of, in the
aggregate, at least five percent (5%) of a class of voting
equity securities of the Corporation and (2) Mr. Xxxx
Xxxxxxxx or his designee shall hold and continue to hold one
(1) of the Common Directors seats provided for in this
Section 2(b)(vii) so long as The Excelsior Fund I, APA
Excelsior IV, L.P., APA Excelsior IV Offshore, L.P. or The
Patricof Private Investment Club, or their nominees, are the
holders of record of, in the aggregate, at least five percent
(5%) of a class of voting equity securities of the
Corporation.
(c) In the event that either MTV or the holders of Series C
Stock is no longer entitled to elect to the Board of Directors the MTV Director
or the Series C Director as provided in Section 2(b)(i) and 2(b)(ii) above,
respectively, then such director(s) shall be nominated by a majority vote of the
Board of Directors.
(d) At any such meeting called for the purpose of electing
directors, the presence in person or by proxy of (i) MTV or its authorized
representative, in the case of the election of the MTV Director, (ii) TBG or its
authorized representative, in the case of the election of the TBG
Director, (iii) the holders of record of a majority of the shares of Series C
Stock (excluding MTV) then outstanding, in the case of the election of the
Series C Director, (iv) the holders of record of a majority of the shares of the
Series D Preferred Stock outstanding in the case of the Series D Director, and
(v) the holders of record of a majority of the shares of the Class A Common
Stock and the Series A Preferred Stock then outstanding, in the case of the
election of the Common Directors, shall constitute a quorum for the election of
directors to be elected by such holders. The Stockholders agree to take any
actions deemed advisable by the Board to amend the Bylaws of the Corporation to
reflect the quorum conditions reflected in this Section 2(e).
-9-
61
(e) A vacancy in any directorship entitled to be elected by
MTV (including without limitation, a vacancy resulting from the decision during
an earlier election by MTV not to fill the directorship to be held by the MTV
Director) shall be filled only by vote or written consent of MTV, in the manner
set forth herein. A vacancy in any directorship entitled to be elected by TBG
(including without limitation, a vacancy resulting from the decision during an
earlier election by TBG not to fill the directorship to be held by the TBG
Director) shall be filled only by vote or written consent of TBG, in the manner
set forth herein. A vacancy in any directorship entitled to be elected by the
holders of record of shares of Series C Stock (including without limitation, a
vacancy resulting from the decision during an earlier election by the holders of
the Series C Stock not to fill the directorship to be held by the Series C
Director) shall be filled only by vote or written consent of the holders of
record of shares of Series C Stock (excluding MTV), in the manner set forth
herein. A vacancy in any directorship elected by the holders of record of shares
of Class A Common Stock and Series A Preferred Stock shall be filled only by
vote or written consent of the holders of record of shares of Class A Common
Stock and Series A Preferred Stock, in the manner set forth herein. A vacancy in
any directorship elected by the holders of record of shares of Series D
Preferred Stock shall be filled only by vote or written consent of the holders
of record of Series D Preferred Stock.
(f) Except as may otherwise be provided by law, each MTV
Director who shall have been elected as provided in this Section 2 may be
removed during his term of office, whether with or without cause, only by MTV.
Except as may otherwise be provided by law, each TBG Director who shall have
been elected as provided in this Section 2 may be removed during his term of
office, whether with or without cause, only by TBG. Except as may otherwise be
provided by law, each Series C Director who shall have been elected as provided
in this Section 2 may be removed during his term of office, whether with or
without cause, only by the holders of record of a majority of the shares of
Series C Stock (excluding MTV) then outstanding. Except as may otherwise be
provided by law, each Common Director who shall have been elected as provided in
this Section 2 may be removed during his term of office, whether with or without
cause, only by the holders of record of a majority of the shares of Class A
Common Stock and Series A Preferred Stock then outstanding. Except as may
otherwise be provided by law, each Series D Director who shall have been elected
in this Section 2 may be removed during his term of office, whether with or
without cause, only by the holders of record of a majority of the Series D
Preferred Stock then outstanding.
(g) Each MTV Director, Series C Director, Series D Director
and Common Director shall be entitled to one (1) vote on all matters which
directors are entitled to vote on. In addition to the rights granted to all
directors as contained in the Corporation's By-laws, the MTV Director, the
Series C Director and the Series D Director shall each have the right to call
meetings of the Board of Directors and
-10-
62
management of the Corporation, upon no less than five (5) days' prior written
notice; provided, that any such meetings are called no more frequently than once
per fiscal quarter.
(h) Highland Capital Partners ("Highland") shall be entitled
to have one observer (the "Highland Observer") selected by Highland present at
all meetings of the Board and at all meetings of any committee of the Board and
such observer shall be notified of any such meetings, including such meetings'
time and place, in the same manner as the directors of the Corporation and the
members of the respective committee of the Board, as applicable. The Highland
Observer shall have the same access to information concerning the business and
operations of the Corporation and at the same time as the directors of the
Corporation, and shall be entitled to participate in discussions and consult
with, and make proposals and furnish advice to, the Board and the committees of
the Board, but shall not have the right to vote.
(i) Unless otherwise agreed by the respective Series D
Director or the Highland Observer, the Corporation shall pay all reasonable
travel expenses and other out-of-pocket reasonable disbursements incurred by the
Series D Director and the Highland Observer, as the case may be, in connection
with their attending meetings of the Board or of any committee thereof.
(j) The rights and obligations of the Corporation and the
Stockholders set forth in this Section 2 shall terminate upon the consummation
of a Designated Offering.
SECTION 3. Right of First Offer. So long as a Stockholder is
a holder of at least 50,000 shares of Common Stock (as presently constituted and
subject to subsequent adjustments for stock splits, stock dividends, reverse
stock splits, and the like), or at least 50,000 shares Series C Stock, Series D
Preferred Stock or Series E Preferred Stock convertible into shares of Common
Stock, or any combination thereof (as presently constituted and subject to
subsequent adjustments for stock splits, stock dividends, reverse stock splits,
and the like), such Stockholder shall be entitled to the following right of
first offer:
(a) Except in the case of Excluded Securities, the
Corporation shall not issue, sell or exchange, agree to issue, sell or exchange,
or reserve or set aside for issuance, sale or exchange, (i) any shares of Common
Stock, (ii) any other equity security of the Corporation, (iii) any debt
security of the Corporation which by its terms is convertible into or
exchangeable for, with or without consideration, any equity security of the
Corporation, or (iv) any option, warrant or other right to subscribe for,
purchase or otherwise acquire any equity security of the Corporation
(collectively, the "Equity Securities"), unless in each case the Corporation
shall have first offered to sell to such Stockholder the Equity Securities, at
a price and on such other terms as shall
-11-
63
have been specified by the Corporation in writing delivered to the Stockholder
(the "Offer"), which Offer by its terms shall remain open and irrevocable for a
period of thirty (30) days from the date the Offer is received by such
Stockholder.
(b) Each such Stockholder shall have the right to purchase up
to its pro rata share of the Equity Securities. As used in this Section 3, each
such Stockholder's "pro rata share" shall be that amount of the Equity
Securities which would result in the Stockholder's owning the same percentage of
the Corporation's issued and outstanding Common Stock after the issuance of
Equity Securities as the Stockholder owned immediately prior to the issuance
(assuming in each case the issuance of all shares issuable upon the conversion
or exercise, as the case may be, of (i) the shares of Series A Preferred Stock,
Series C Stock, Series D Preferred Stock and Series E Preferred Stock held by
such Stockholder, if any, and (ii) the Equity Securities).
(c) Notice of a Stockholder's intention to accept, in whole
or in part, an Offer shall be evidenced by a writing signed by such Stockholder
and delivered to the Corporation at or prior to the end of the 30-day period
commencing with the date the Offer is received by such Stockholder (or, if
later, within 10 days after the giving of any written notice of a material
change in such Offer), setting forth such portion (specifying number of shares,
principal amount or the like) of the Equity Securities as such Stockholder
elects to purchase (the "Notice of Acceptance").
(d) The Corporation shall have 90 days from the expiration of
the foregoing 30-day period to sell all or any part of such Equity Securities as
to which a Notice of Acceptance has not been given by the Stockholders (the
"Remaining Securities") to any other Person or Persons, but only upon terms and
conditions in all material respects, including without limitation, unit price
and interest rates (but excluding payment of legal fees of counsel of the
purchaser), which are no more favorable, in the aggregate, to such other Person
or Persons or less favorable to Corporation than those set forth in the Offer.
Upon the closing of the sale to such other Person or Persons of all the
Remaining Securities, which shall include payment of the purchase price to the
Corporation in accordance with the terms of the Offer, if a Stockholder has
timely submitted a Notice of Acceptance, it shall purchase from the Corporation,
and the Corporation shall sell to such Stockholder, the Equity Securities in
respect of which a Notice of Acceptance was delivered to the Corporation by the
Stockholder at the terms specified in the Offer. The purchase by a Stockholder
of any Equity Securities is subject in all cases to the preparation, execution
and delivery by the Corporation and such Stockholder of a purchase agreement and
other customary documentation relating to such Equity Securities as is
satisfactory in form and substance to such Stockholder and its counsel.
(e) In each case, any Equity Securities not purchased by
eligible Stockholders or by a Person or Persons in accordance with Section 3(d)
may not be
-12-
64
sold or otherwise disposed of until they are again offered to the
Stockholders under the procedures specified in Sections 3(a), (b), (c) and (d)
hereof.
(f) The Corporation agrees that on or before the issuance to
any Person of any Equity Securities not purchased by the Stockholders, it shall
cause such Person to agree in writing to be bound by the obligations imposed
upon Stockholders under this Agreement as if such Person were originally a
signatory to this Agreement.
(g) The rights of the eligible Stockholders under this
Section 3 shall not apply to the following securities (the "Excluded
Securities"):
(i) up to 8,250,000 shares (or such higher
number of shares as may be approved from time to time by (w) a majority
in interest of the outstanding voting stock of the Corporation, (x) a
majority in interest of the Series C Stock voting separately as a
single class, (y) 66 2/3 in interest of the Series D Preferred Stock
voting separately as a single class and (z) 66 2/3 in interest of the
Series E Preferred Stock voting separately as a single class) of Common
Stock or options to purchase shares of Common Stock, issued or to be
issued to officers, employees or directors of, or consultants to, the
Corporation, pursuant to any agreement, plan or arrangement approved by
the Board of Directors of the Corporation and the Stockholders;
(ii) Common Stock issued as a stock dividend
or upon any stock split or other subdivision or combination of shares
of Common Stock;
(iii) Common Stock issued upon conversion of
any shares of Preferred Stock;
(iv) any securities issued for consideration
other than cash pursuant to a merger, consolidation, acquisition or
similar business combination;
(v) Common Stock issued or to be issued by
the Corporation pursuant to equipment lease financing with equipment
lessors, or Common Stock reissued after the repurchase thereof by the
Corporation as a result of any termination of a restricted stock
purchase agreement or other employee equity plan or arrangement to
which the Corporation is a party, which are approved by the Board of
Directors;
(vi) Common Stock issued pursuant to
transactions or agreements which have been approved by (w) a majority
in interest of the outstanding voting stock of the Corporation, (x) a
majority in interest of the Series C Stock voting separately as a
single class, (y) 66 2/3 in interest of the
-13-
65
Series D Preferred Stock voting separately as a single class and (z) 66
2/3 in interest of the Series E Preferred Stock voting separately as a
single class; and
(vii) warrants to purchase up to 22,500
shares of Class A Common Stock (and the Common Stock issuable upon
exercise thereof).
(h) Notwithstanding the foregoing provisions of this Section
3, the rights of the Stockholders and the obligations of the Corporation under
this Section 3 shall be inapplicable to a Designated Offering and the provisions
of this Section 3 shall terminate upon the consummation of such Designated
Offering.
SECTION 4. Right of First Refusal. The Corporation and the
Investor Stockholders shall be entitled to the following right of first
refusal:
(a) Transfer of Shares. The Section 4 Stockholders shall not
transfer (each, a "Transferring Stockholder"), either in a single transaction or
in a series of transactions, in the aggregate, in excess of ten percent (10%) of
the Section 4 Shares or any right or interest therein then owned by him or it
except by a transfer that meets the requirements of this Section 4 and of this
Agreement generally. In the event that a Transferring Stockholder proposes to
transfer any portion of the Section 4 Shares in excess of ten percent (10%)
thereof (each, a "Section 4 Shares Transfer"), whether voluntarily or
involuntarily, other than a Permitted Transfer, then at least ninety (90) days
prior to any Section 4 Shares Transfer, such Transferring Stockholder shall give
notice (the "TS Notice") to the Corporation and the Investor Stockholders of his
or its intention to effect the Section 4 Shares Transfer. The TS Notice shall
set forth (i) the class, series and number of Section 4 Shares in excess of ten
percent (10%) thereof to be sold by the Transferring Stockholder (the "Sale
Shares"), (ii) the date or proposed date of the Section 4 Shares Transfer and
the name and address of the proposed transferee, (iii) the principal terms of
the Section 4 Shares Transfer, including the cash or other property or
consideration to be received upon such Section 4 Shares Transfer, and (iv) the
percentage which the number of Sale Shares constitutes with respect to the
aggregate number of Section 4 Shares then held by the Transferring Stockholder.
In the case of a proposed transfer by way of gift or if the nature of the
transfer is such that no readily determinable consideration is to be paid for
the transfer of the Sale Shares, then a bona fide transfer price for purposes of
this Section 4(a) shall be determined by the Board of Directors of the
Corporation promptly upon the Corporation's receipt of, and as of the date of,
the TS Notice.
(b) Corporation's Option. The Corporation shall have the
option, but not the obligation, to purchase any or all of the Sale Shares on the
same terms as specified in the TS Notice. Within thirty (30) days after the
receipt of the TS Notice, the Corporation shall give written notice to the
Transferring Stockholder and the Investor Stockholders (the "Corporation
Notice") stating whether or not it elects to exercise its
-14-
66
option to purchase, the number of Sales Shares, if any, it elects to purchase,
and a date and time for consummation of the purchase not more than ninety (90)
days after the receipt of the Corporation Notice by the Transferring
Stockholder. The Transferring Stockholder shall not be entitled to vote, either
as a stockholder or a director (if applicable), in connection with the decision
of the Corporation whether to exercise its option to purchase the Sale Shares,
provided, that, if his or its vote is required for valid corporate action, then
he or it shall vote, insofar as legally permissible, in accordance with the
decision of the majority of the other directors or stockholders, as the case may
be. Failure by the Corporation to give such notice within such time period shall
be deemed an election by it not to exercise its option.
(c) Investor Stockholders' Option. If the Corporation fails
to exercise its right to purchase under subparagraph (b) hereof, or exercises
its right to purchase for less than all of the Sale Shares, then the Investor
Stockholders shall have the option, but not the obligation, to purchase, pro
rata to their ownership interest in the shares of Common Stock issued or
issuable to such stockholder upon the conversion of shares of Series C Stock,
Series D Preferred Stock and Series E Preferred Stock, any or all of the
remaining Sale Shares on the same terms as specified in the TS Notice. Not later
than thirty (30) days after the Investor Stockholders receive the Corporation
Notice, each Investor Stockholder shall give written notice to the Transferring
Stockholder and the Corporation (the "Investor Notice") stating whether or not
it elects to exercise its option to purchase, the number of the remaining Sales
Shares, if any, it elects to purchase, and a date and time for consummation of
the purchase not more than sixty (60) days after the receipt of the Investor
Notice by the Transferring Stockholder. Failure by an Investor Stockholder to
give such notice within such time period shall be deemed an election by it not
to exercise its option. If the Corporation and Investor Stockholders exercise
their respective rights to purchase for less than all the Sale Shares, then the
Transferring Stockholder shall thereafter be free to transfer the remaining Sale
Shares on the terms provided in the TS Notice (subject to the provisions of
Section 5); provided, however, that the Sale Shares shall continue to be subject
to the terms of this Agreement and any such transferee shall agree in writing to
be bound by the obligations imposed upon Stockholders under this Agreement as if
such transferee were originally a signatory to this Agreement.
(d) Definitions. For purposes of this Agreement, the term
"Permitted Transfer" shall mean a Section 4 Shares Transfer to a spouse (other
than pursuant to any divorce or separation proceedings or settlement), parents,
children (natural or adopted), stepchildren or grandchildren or a trust for any
of their benefit in the case of a Transferring Stockholder that is an individual
(each recipient being a "Permitted Transferee"); provided, however, that prior
to such Section 4 Shares Transfer, such Permitted Transferee shall agree in
writing to be bound by the obligations imposed upon Stockholders under this
Agreement as if such transferee were originally a signatory to this Agreement.
-15-
67
(e) Application of Provisions. In each case, any Sale Shares
not purchased by the proposed transferee in accordance with Section 4(c) hereof
may not be sold or otherwise disposed of until they are again offered to the
Corporation and the Investor Stockholders under the procedures specified in
Sections 4(a), (b) and (c) hereof.
(f) Transfers Void. Any attempted Section 4 Shares Transfer
by the Section 4 Stockholders in violation of the terms of this Section 4 shall
be ineffective to vest in any transferee any interest held by the Transferring
Stockholder in the Section 4 Shares. Without limiting the foregoing, any
purported Section 4 Shares Transfer in violation hereof shall be ineffective as
against the Investor Stockholders and the Corporation, and the Corporation and
the Investor Stockholders shall have a continuing right and option (but not an
obligation), until the restrictions contained in this Section 4 terminate, to
purchase the shares purported to be transferred by the Transferring Stockholders
for a price and on terms the same as those at which the purported Section 4
Shares Transfer was effected.
(g) Termination of Restrictions. The restrictions in this
Section 4 shall terminate upon the consummation of a Designated Offering, except
that the restrictions in this Section 4 may terminate earlier with respect to
The Excelsior Fund I in the event that all of the Section 4 Shares owned by The
Excelsior Fund I are distributed to its partners.
SECTION 5. Rights to Participate in Transfer.
(a) Transfers by Transferring Stockholder. In the event the
Transferring Stockholder desires to effect a Section 4 Shares Transfer, other
than a Permitted Transfer, and all the Sale Shares have not been purchased by
the Investor Stockholders or the Corporation in the exercise of their respective
rights of first refusal in accordance with the terms of Section 4, then, upon
receipt of the TS Notice specified in Section 4(a), each Investor Stockholder
shall have the right (by written notice to the Transferring Stockholder and the
Corporation to be sent within sixty (60) days after the Investor Stockholder
receives the TS Notice) to require the Transferring Stockholder to cause to be
purchased from such Investor Stockholder the number of shares of Common Stock
issued or issuable upon conversion of shares of Series C Stock, Series D
Preferred Stock and Series E Preferred Stock then held by such Investor
Stockholder that equals (x) the number of remaining Sale Shares that the
Transferring Stockholder proposes to transfer, multiplied by (y) the percentage
determined by dividing (i) the number of shares of Series C Stock, Series D
Preferred Stock or Series E Preferred Stock (or Class A Common Stock, as the
case may be) then held by the Investor Stockholder by (ii) the sum of the number
of shares of Series C Stock, Series D Preferred Stock and Series E Preferred
Stock (or Class A Common Stock, as the case may be) then held by all of the
Investor Stockholders plus the number of Section 4
-16-
68
Shares then held by the Transferring Stockholder. For purposes of this Section
5, the Series C Stock, Series D Preferred Stock and Series E Preferred Stock
shall be treated as if it had been converted into the number of shares of Class
A Common Stock then issuable upon such conversion.
(b) Terms of Purchase. The purchase from the Investor
Stockholders pursuant to this Section 5 shall be on the same terms and
conditions, including per Share price (which shall in all events be paid by bank
cashier's or certified check) and date of Section 4 Shares Transfer, as are
received by the Transferring Stockholder and stated in the TS Notice provided to
the Investor Stockholders.
(c) Termination of Restrictions. The restrictions in this
Section 5 shall terminate upon the consummation of a Designated Offering, except
that the restrictions in this Section 5 may terminate earlier with respect to
The Excelsior Fund I in the event that all of the Section 4 Shares owned by The
Excelsior Fund I are distributed to its partners.
SECTION 6. Transfer of Securities; Registration Rights.
(a) Restriction on Transfer. The Shares shall not be
transferable except upon the conditions specified in this Section 6, which
conditions are intended to ensure compliance with the provisions of the
Securities Act and applicable state securities laws in respect of the transfer
thereof.
(b) Restrictive Legend. Each certificate for the Shares
issued after the date hereof and each certificate for any such securities issued
to subsequent transferees of any such certificate or any Shares issued prior to
the date hereof shall (unless otherwise permitted by the provisions of Section
6(c)) be stamped or otherwise imprinted with the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES LAW. THESE SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAW. ADDITIONALLY, THE TRANSFER OF THESE
SECURITIES IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT DATED JULY ,
1999, AMONG MEDSCAPE, INC. AND CERTAIN OTHER SIGNATORIES
THERETO (AS THE SAME MAY BE AMENDED AND/OR RESTATED FROM TIME
TO TIME), AND NO TRANSFER OF THESE SECURITIES SHALL BE
-17-
69
VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED.
UPON THE FULFILLMENT OF CERTAIN OF SUCH CONDITIONS, MEDSCAPE,
INC. HAS AGREED TO DELIVER TO THE HOLDER HEREOF A NEW
CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES
REPRESENTED HEREBY REGISTERED IN THE NAME OF THE HOLDER
HEREOF. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY
WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS
CERTIFICATE TO THE SECRETARY OF MEDSCAPE, INC."
(c) Notice of Transfer. The holder of any Shares, by
acceptance thereof agrees, prior to any transfer thereof, to give written notice
to the Corporation of such holder's intention to effect such transfer and to
comply in all other respects with the provisions of this Section 6(c) and the
other applicable provisions of this Agreement. Each such notice shall describe
the manner and circumstances of the proposed transfer and shall be accompanied
by (i) the written opinion, addressed to the Corporation, of counsel for the
holder of such Shares, as to whether in the opinion of such counsel (which
counsel shall be reasonably satisfactory to counsel to the Corporation) such
proposed transfer involves a transaction requiring registration of such shares
under the Securities Act, and (ii) in the case of Registrable Securities, if in
the opinion of such counsel such registration is required, a written request
addressed to the Corporation by the Holder of Registrable Securities, describing
in detail the proposed method of disposition and requesting the Corporation to
effect the registration of such Registrable Securities pursuant to the terms and
conditions of Sections 6(d), 6(e) or 6(f), as the case may be; provided,
however, that no such opinion shall be required in the case of a transfer by any
Holder of Registrable Securities (A) which is a (1) partnership to a partner of
such Holder, or a retired partner of such Holder who retires after the date
hereof, or the estate of any such partner or retired partner, if the transferee
agrees in writing to be subject to the terms of this Section 6 to the same
extent as if such transferee were originally a signatory to this Agreement, or
(2) corporation to any Affiliate of such corporation, including without
limitation, any officer, director or stockholder of such corporation, or (B) in
connection with a transaction complying with the requirements of Rule 144 (as
amended from time to time) promulgated under the Securities Act (or successor
rule thereto). If in such opinion of counsel the proposed transfer may be
effected without registration under the Securities Act, the holder shall
thereupon be entitled to transfer the Shares in accordance with the terms of the
notice delivered by it to the Corporation, subject to the other requirements of
this Agreement. Each certificate or other instrument evidencing the securities
issued upon the transfer of any Shares (and each certificate or other instrument
evidencing any untransferred balance of such securities) shall bear the legend
set forth in Section 6(b) unless (x) in such opinion of counsel registration of
future transfer is not required by the applicable provisions of the Securities
Act or (y) the Corporation shall have waived the requirement of such legend;
provided, however,
-18-
70
that such legend shall not be required (1) on any certificate or other
instrument evidencing the securities issued upon such transfer in the event such
transfer shall be made in compliance with the requirements of Rule 144 (as
amended from time to time) promulgated under the Securities Act (or successor
rule thereto) or (2) on any certificate or other instrument which is immediately
resalable (whether or not such resale is proposed) under Rule 144(k) or
successor thereto. The Corporation agrees, upon the request of a Stockholder, to
make available to such Stockholder and to any prospective transferee of its
Shares or Registrable Securities the information concerning the Corporation
described in Rule 144A(d)(4) under the Securities Act.
(d) Demand Registration.
(i) If the Corporation receives at any time
after six (6) months after the closing of the Corporation's first
underwritten public offering of shares pursuant to a registration
statement, a written request from (A) the Holders of at least fifty
percent (50%) of shares of the Investor Registrable Securities then
outstanding excluding Holders described in clause (B) or (C) hereof,
(B) any Holder who purchased more than 650,000 shares of Series D
Preferred Stock (a "Series D Holder") or (C) any Holder who purchased
more than 260,000 shares of Series E Preferred Stock issued pursuant to
the Purchase Agreement (a "Series E Holder"), that the Corporation file
a registration statement on Form S-1 (or similar successor forms) under
the Securities Act covering the registration of the Investor
Registrable Securities having an aggregate offering price, before
deduction of underwriter discounts and commissions, of at least
$5,000,000, then the Corporation shall, within ten (10) business days
after the receipt thereof, give written notice of such request to all
Holders, and use its best efforts to effect, as soon as practicable,
the registration under the Securities Act of all Investor Registrable
Securities which the Holders request to be registered and included in
such registration, subject only to the limitations of this Section
6(d).
(ii) If the Holders initiating the
registration request under this Section 6(d) ("Initiating Holders")
intend to distribute the Investor Registrable Securities covered by
their request by means of an underwriting, they shall so advise the
Corporation as a part of their request made pursuant to this Section
6(d) and the Corporation shall include such information in the written
notice referred to in Section 6(d)(i) hereof. In such event, the right
of any Holder to include such Holder's Investor Registrable Securities
in such registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Investor Registrable Securities in the underwriting (unless otherwise
mutually agreed by a majority in interest of the Initiating Holders and
such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall enter into
an
-19-
71
underwriting agreement in customary form with the managing underwriter
or underwriters selected for such underwriting by the Investor
Stockholders and reasonably acceptable to the Corporation.
(iii) The Corporation shall not be obligated
to effect, or take any action to effect, any such registration pursuant
to this Section 6(d):
(A) In any particular jurisdiction
in which the Corporation would be required to qualify to do business or
to execute a general consent to service of process in effecting such
registration, qualification or compliance except as may be required by
the Securities Act;
(B) After the Corporation has
initiated five (5) such registrations pursuant to this Section 6(d),
two of which may only be initiated by a Series D Holder, one of which
may only be initiated by a Series E Holder and two of which may only be
initiated by Holders of Registrable Securities who are not Series D
Holders or Series E Holders;
(C) During the period starting with
the date sixty (60) days prior to the Corporation's good faith estimate
of the date of filing of, and ending on a date one hundred eighty (180)
days after the effective date of, a Corporation-initiated registration;
provided that the Corporation is actively employing in good faith all
reasonable efforts to cause such registration statement to become
effective;
(D) If the Initiating Holders
propose to dispose of shares of Investor Registrable Securities which
may be immediately registered on Form S-3 pursuant to a request made
under Section 6(f) hereof;
(E) If, (1) in the good faith
judgement of the Board of Directors of the Corporation such
registration would be seriously detrimental to the Corporation and the
Board of Directors of the Corporation concludes, as a result, that it
is essential to defer the filing of such registration statement at such
time, and (2) the Corporation shall furnish to the Holders a
certificate signed by the President of the Corporation stating that in
the good faith judgement of the Board of Directors of the Corporation,
it would be seriously detrimental to the Corporation for such
registration statement to be filed in the near future and that it is,
therefore, essential to defer the filing of such registration
statement, then the Corporation shall have the right to defer such
filing (except as provided in clause (C) above) for a period of not
more than one hundred twenty (120) days after receipt of the request of
the Initiating Holders, and, provided further, that the Corporation
shall not defer its obligation in this manner more than once in any
twelve-month period.
-20-
72
(iv) All expenses incurred in connection
with any demand registration effected pursuant to this Section 6(d),
including without limitation all federal and "blue sky" registration
and qualification fees, printers' and accounting fees, and fees and
disbursements of counsel for the Corporation (but excluding
underwriters' discounts and commissions and expenses of special counsel
of selling Holders)(the "Registration Expenses") shall be borne by the
Corporation. In addition, each Holder participating in a registration
pursuant to this Section 6(d) shall bear its proportionate share of all
discounts, commissions or other amounts payable to underwriters in
connection with such offering.
(e) Piggyback Registrations.
(i) The Corporation shall notify all Holders
of Existing Registrable Securities and Investor Registrable Securities
in writing at least thirty (30) days prior to filing any registration
statement under the Securities Act for purposes of effecting a public
offering of securities of the Corporation (including, but not limited
to, registration statements initiated upon the request of Holders of
Investor Registrable Securities and registration statements relating to
secondary offerings of securities of the Corporation, but excluding
registration statements on an Excluded Form or relating to any employee
benefit plan or a corporate reorganization) and shall afford each such
Holder an opportunity to include in such registration statement all or
any part of the Registrable Securities then held by such Holder. Each
Holder desiring to include in any such registration statement all or
any part of the Registrable Securities held by such Holder shall,
within twenty (20) days after receipt of the above-described notice
from the Corporation, so notify the Corporation in writing, and in such
notice shall inform the Corporation of the number of Registrable
Securities such Holder wishes to include in such registration
statement. If a Holder decides not to include all of its Registrable
Securities in any registration statement thereafter filed by the
Corporation, such Holder shall nevertheless continue to have the right
to include any Registrable Securities in any subsequent registration
statement or registration statements as may be filed by the Corporation
with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
(ii) If the registration statement under
which the Corporation gives notice under this Section 6(e) is for an
underwritten offering, the Corporation shall so advise the Holders of
Registrable Securities. In such event, the right of any such Holder's
Registrable Securities to be included in a registration pursuant to
this Section 6(e) shall be conditioned upon such Holder's participation
in such underwriting and the inclusion of such Holder's Registrable
Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Securities through
such
-21-
73
underwriting shall enter into an underwriting agreement in such
customary form with the managing underwriter or underwriters selected
for such underwriting. If any Holder disapproves of the terms of any
such underwriting, such Holder may elect to withdraw therefrom by
written notice to the Corporation and the underwriter, delivered at
least five (5) business days prior to the effective date of the
registration statement. Any Registrable Securities withdrawn from such
underwriting shall be withdrawn from the registration.
(iii) Notwithstanding any other provision of
Section 6(e)(ii), if the registration is the first registered offering
of the Corporation's securities to the general public, the Corporation
may limit, to the extent so advised by the underwriters, the amount of
securities (including the Registrable Shares) to be included in the
registration by the Corporation's stockholders (including the Holders),
or may exclude, to the extent so advised by the underwriters, such
underwritten securities entirely from such registration. If the
registration is the second or any subsequent registered offering of the
Corporation's securities to the general public, the Corporation may
limit, to the extent so advised by the underwriters, the amount of
securities to be included in the registration by the Corporation's
stockholders (including the Holders); provided, however, that the
aggregate value of securities (including Registrable Securities) to be
included in such registration by the Holders may not be so reduced to
less than thirty percent (30%) of the total value of all securities
included in such registration. The Corporation shall so advise all
Holders of securities requesting registration, and the number of shares
of securities that are entitled to be included in the registration and
underwriting shall be allocated first to the Corporation for securities
being sold for its own account, second to Holders of Investor
Registrable Securities pro rata based upon the number of Registrable
Securities held by any such Holder, and thereafter as set forth in this
Section 6(e). Any Registrable Securities excluded from such
underwriting shall be excluded from the registration.
(iv) If any shares are withdrawn from the
registration or if the number of shares of Registrable Securities to be
included in such registration was previously reduced as a result of
marketing factors as provided in this Section 6(e), the Corporation
shall then offer to all persons who have retained the right to include
securities in the registration the right to include additional
securities in a subsequent registration in the aggregate amount equal
to the number of shares so withdrawn, with such shares to be allocated
among the persons requested additional inclusion in accordance with
this Section 6(e).
(v) All Registration Expenses incurred in
connection with a registration pursuant to this Section 6(e) shall be
borne by the Corporation.
-22-
74
(f) Form S-3 Registration. In the event that the Corporation
receives from (A) the Holders of at least thirty percent (30%) of the
Registrable Securities held by all Holders other than Series D Holders or Series
E Holders, (B) a Series D Holder or (C) a Series E Holder, a written request or
requests that the Corporation effect a registration on Form S-3, and any related
qualification or compliance with respect to all or part of the Registrable
Securities owned by such Holders, then the Corporation shall:
(i) Promptly give written notice of the
proposed registration and the Holders' request therefor, and any
related qualification or compliance, to all Holders of Registrable
Securities; and
(ii) As soon as practicable, effect such
registration and all such qualifications and compliances as may be so
requested and as would permit or facilitate the sale and distribution
of all or such portion of such Holders' Registrable Securities as are
specified in such request, together with all or such portion of the
Registrable Securities of any other Holder or Holders joining in such
request as are specified in a written request given within twenty (20)
days after receipt of such written notice from the Corporation;
provided, however, that the Corporation shall not be obligated to
effect any such registration, qualification or compliance pursuant to
this Section 6(f): (A) if S-3 is not available for such offering by the
Holders; (B) if the Holders propose to sell Registrable Securities at
an aggregate gross offering price to the public of less than
$1,000,000.00; (C) if the Corporation has, within the six (6)-month
period preceding the date of such request, already effected one
registration for the Holders pursuant to Section 6(e) or 6(f); or (D)
in any particular jurisdiction in which the Corporation would be
required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or
compliance.
(iii) The Corporation is obligated to effect
that number of registrations on Form S-3 requested by the Holders
pursuant to this Section 6(f), but shall not be obligated to effect
more than two (2) such registrations per year.
(iv) Subject to the foregoing, the
Corporation shall file a Form S-3 registration statement, as the case
may be, covering the Registrable Securities to be registered pursuant
to this Section 6(f) as soon as practicable after receipt of the
request or requests of the Holders for such registration. The
Corporation shall pay all Registration Expenses in connection with each
demand for registration pursuant to this Section 6(f).
(v) Form S-3 registrations shall not be
deemed registrations as described in Section 6(d) above.
-23-
75
(g) Additional Registration Rights. If the Corporation grants
registration rights to holders of any security of the Corporation which are more
favorable to such holders than the registration rights granted hereunder, then
such more favorable registration rights shall also be deemed to be granted to
the Holders of the Registrable Securities hereunder, and the Corporation
covenants and agrees to take any and all steps necessary to modify the terms of
this Agreement to so provide.
(h) Obligations of the Corporation. Whenever required to
effect the registration of any Registrable Securities under this Agreement, the
Corporation shall, as expeditiously as reasonably possible:
(i) Prepare and file with the Commission a
registration statement with respect to such Registrable Securities and
use its best efforts to cause such registration statement to become and
remain effective;
(ii) Prepare and file with the Commission
such amendments and supplements to such registration statement and the
prospectus used in connection with such registration statement as may
be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such
registration statement and to keep such registration statement
effective, in the case of a firm commitment underwriting, until each
underwriter has completed the distribution of all securities purchased
by it and, in the case of any other offering, until the earlier of the
sale of all Registrable Securities covered thereby or one hundred
eighty (180) days after the effective date thereof; provided, however,
that such 180-day period shall be extended for a period of time equal
to the period the Holder refrains from selling any Registrable
Securities included in such registration at the request of an
underwriter of the Common Stock or if the Corporation has provided the
notice described in subparagraph (vii) below;
(iii) Furnish to the Holders such number of
copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents as they may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by them that are
included in such registration;
(iv) Use its best efforts to register and
qualify the securities covered by such registration statement under
such other securities or blue sky laws of such jurisdictions as shall
be reasonably requested by the Holders, provided, that the Corporation
shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions;
-24-
76
(v) Use its best efforts to list the
securities covered by such registration statement with any securities
exchange, if any, on which the Common Stock of the Corporation is then
listed;
(vi) In the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing
underwriter(s) of such offering. Each Holder participating in such
underwriting shall also enter into and perform its obligations under
such an agreement;
(vii) Notify each Holder of Registrable
Securities and each underwriter under such registration statement at
any time when a prospectus relating thereto is required to be delivered
under the Securities Act of the happening of any event as a result of
which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances then existing;
(viii) Furnish, at the request of any Holder
requesting registration of Registrable Securities, on the date that
such Registrable Securities are delivered to the underwriters for sale,
if such securities are being sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that
the registration statement with respect to such securities becomes
effective, a "comfort" letter dated as of such date, from the
independent certified public accountants of the Corporation, in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to
the Holders requesting registration of the Registrable Securities; and
(ix) Make available for inspection by each
seller of Registrable Securities, any underwriter participating in any
distribution pursuant to such registration statement, and any attorney,
accountant or other agent retained by such seller or underwriter, all
financial and other records, pertinent corporate documents and
properties of the Corporation, and cause the Corporation's officers,
directors and employees to supply all information reasonably requested
by any such seller, underwriter, attorney, accountant or agent in
connection with such registration statement.
(i) Furnish Information. It shall be a condition precedent to
the obligations of the Corporation to take any action pursuant to Sections 6(d),
6(e) and
-25-
77
6(f) that the selling Holders shall furnish to the Corporation such information
regarding themselves, the Registrable Securities held by them, and the intended
method of disposition of such securities as shall be required to effect the
registration of their Registrable Securities.
(j) Indemnification. In the event any Registrable Securities
are included in a registration statement under Sections 6(d), 6(e) or 6(f):
(i) To the extent permitted by law, the
Corporation shall indemnify and hold harmless each Holder, the
partners, officers and directors of each Holder, any underwriter (as
defined in the Securities Act) for such Holder and each Person, if any,
who controls such Holder or underwriter within the meaning of the
Securities Act or the Exchange Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become
subject under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively, a
"Violation"):
(A) any untrue statement or alleged
untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus
or final prospectus contained therein or any amendments or
supplements thereto,
(B) the omission or alleged
omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein
not misleading, or
(C) any violation or alleged
violation by the Corporation of the Securities Act, the
Exchange Act, any federal or state securities law or any rule
or regulation promulgated under the Securities Act, the
Exchange Act or any federal or state securities law in
connection with the offering covered by such registration
statement,
and the Corporation shall reimburse each such Holder, or a partner,
officer or director, underwriter or controlling Person of such Holder
for any legal or other expenses reasonably incurred by them, as
incurred, in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this Section 6(j) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the
Corporation (which consent shall not be unreasonably withheld), nor
shall the Corporation be liable in any case for any such loss, claim,
damage, liability or
-26-
78
action to the extent that it arises out of or is based upon a Violation
which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such
registration by such Holder, or a partner, officer, director,
underwriter or controlling Person of such Holder.
(ii) To the extent permitted by law, each
selling Holder shall indemnify and hold harmless the Corporation, each
of its directors and officers who have signed the registration
statement, each Person, if any, who controls the Corporation within the
meaning of the Securities Act, any underwriter and any other Holder
selling securities under such registration statement or any of such
other Holder's partners, directors or officers or any Person who
controls such Holder within the meaning of the Securities Act or the
Exchange Act, against any losses, claims, damages or liabilities (joint
or several) to which the Corporation or any such director, officer,
controlling Person, underwriter or other such Holder, or a partner,
director, officer or controlling Person of such other Holder may become
subject under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection
with such registration; and each such Holder shall reimburse any legal
or other expenses reasonably incurred by the Corporation or any such
director, officer, controlling Person, underwriter or other Holder,
partner, officer, director or controlling Person of such other Holder
in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the indemnity
agreement contained in this Section 6(j) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which
consent shall not be unreasonably withheld; and provided, further, that
the total amounts payable in indemnity by a Holder under this Section
6(j)(ii) in respect of any Violation shall not exceed the net proceeds
received by such Holder in the registered offering out of which such
Violation arises.
(iii) Promptly after receipt by an
indemnified party under this Section 6(j) of notice of the commencement
of any action (including any governmental action), such indemnified
party shall, if a claim in respect thereof is to be made against any
indemnifying party under this Section 6(j), deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying
party shall have the right to participate in, and, to the extent the
indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an
indemnified party shall have the right to
-27-
79
retain its own counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due
to actual or potential differing interests between such indemnified
party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action,
if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this
Section 6(j), but the omission so to deliver written notice to the
indemnifying party shall not relieve it of any liability that it may
have to any indemnified party otherwise than under this Section 6(j).
(iv) In order to provide for just and equitable
contribution to joint liability under the Securities Act in any case in
which either (A) any Holder exercising rights under this Agreement, or
any controlling Person of any such Holder, makes a claim for
indemnification pursuant to this Section 6(j) but it is judicially
determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not
be enforced in such case notwithstanding the fact that this Section
6(j) provides for indemnification in such case, or (B) contribution
under the Securities Act may be required on the part of any such
selling Holder or any such controlling Person in circumstances for
which indemnification is provided under this Section 6(j), then, and in
each such case, the Corporation or such Holder shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that
such Holder is responsible for the portion represented by the
percentage that the public offering price of its Registrable Securities
offered by and sold under such registration statement bears to the
public offering price of all securities offered by and sold under such
registration statement, and the Corporation and other selling Holders
are responsible for the remaining portion; provided, however, that, in
any such case, (1) no such Holder shall be required to contribute any
amount in excess of the public offering price of all such Registrable
Securities offered and sold by such Holder pursuant to such
registration statement; and (2) no Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who
was not guilty of such fraudulent misrepresentation.
(v) The obligations of the Corporation and Holders
under this Section 6(j) shall survive the completion of any offering of
Registrable Securities in a registration statement, and the termination
of this Agreement.
-28-
80
(k) "Market Stand-Off" Agreement and Coordination of Certain
Sales. Each Holder hereby agrees that it shall not, to the extent requested by
the Corporation and an underwriter of Common Stock of the Corporation, sell or
otherwise transfer or dispose of any Registrable Securities (other than
Registrable Securities being registered in such offering) for up to that period
of time following the effective date of a registration statement of the
Corporation filed under the Securities Act as is requested by the managing
underwriter(s) of such offering, not to exceed 90 days; provided, however, that
all officers, directors and ten percent (10%) or greater stockholders of
the Corporation then holding Common Stock of the Corporation shall enter into
similar agreements. Each Holder further agrees that, except for the Limited
Sales, it shall not sell or otherwise transfer or dispose of any securities of
the Corporation for a period beginning on the date hereof and ending on March 5,
2000 unless such securities are sold pursuant to an underwritten public offering
in which all Holders of Investor Registrable Securities are offered the
opportunity to participate in the registration pro rata based on the total
number of securities held by them. All Holders agree that they shall be solely
responsible for the coordination of any Limited Sales among themselves.
In order to enforce the foregoing covenant, the Corporation may impose stop
transfer instructions with respect to the then-remaining Registrable Securities
of each Holder (and the shares or securities of every other Person subject to
the foregoing restriction) until the end of such period.
(l) Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Registrable Securities to the public without
registration, after such time as a public market exists for the Common Stock of
the Corporation, the Corporation agrees to:
(i) Make and keep public information available, as
those terms are understood and defined in Rule 144 under the Securities
Act, at all times after the effective date of the first registration
under the Securities Act filed by the Corporation for an offering of
its securities to the general public;
(ii) File with the Commission in a timely manner all
reports and other documents required of the Corporation under the
Securities Act and the Exchange Act (at any time after it has become
subject to such reporting requirements); and
(iii) So long as a Holder owns any Registrable
Securities, furnish to the Holder forthwith upon request a written
statement by the Corporation as to its compliance with the reporting
requirements of said Rule 144 (at any time after 90 days after the
effective date of the first registration
-29-
81
statement filed by the Corporation for an offering of its securities to
the general public), and of the Securities Act and the Exchange Act (at
any time after it has become subject to the requirements of the
Exchange Act), a copy of the most recent annual or quarterly report of
the Corporation, and such other reports and documents of the
Corporation as a Holder may reasonably request in availing itself of
any rule or regulation of the Commission allowing a Holder to sell any
such securities without registration (at any time after the Corporation
has become subject to the reporting requirements of the Exchange Act).
(m) Removal of Legends, Etc. Notwithstanding the foregoing
provisions of this Section 6, the restrictions imposed by this Section 6 upon
the transferability of any Registrable Securities shall cease and terminate when
any such Registrable Securities are sold or otherwise disposed of in
accordance with the intended method of disposition by the seller or sellers
thereof set forth in the registration statement or as otherwise contemplated by
Section 6(c) which does not require that the securities transferred bear the
legend set forth in Section 6(b). Whenever the restrictions imposed by this
Section 6 shall terminate as herein provided, the Holder of any Registrable
Securities as to which such restrictions have terminated shall be entitled to
receive from the Corporation, without expense, one or more new certificates not
bearing the restrictive legend set forth in Section 6(b) and not containing any
other reference to the restrictions imposed by this Section 6.
(n) Filing of Reports Under the Exchange Act. The Corporation
shall give prompt notice to the Stockholders of:
(i) the filing of an Exchange Act
Registration Statement; and
(ii) the effectiveness of such Exchange Act
Registration Statement and the number of shares of such class of equity
securities outstanding as reported in such Exchange Act Registration
Statement, in order to enable the Stockholders to comply with any
reporting requirements under the Exchange Act or the Securities Act.
The Corporation shall, at any time after the Corporation shall register
any shares of Common Stock under the Securities Act and upon the
written request of a Stockholder, file an Exchange Act Registration
Statement relating to any class of Equity Securities of the Corporation
then held by such Stockholder, whether or not the class of equity
securities with respect to which such request is made shall be held by
at least the number of Persons which would require the filing of a
registration statement under Section 12(g)(1) of the Exchange Act. If
the Corporation shall have filed an Exchange Act Registration Statement
or a registration statement (including an offering circular under
Regulation A promulgated under the Securities Act) pursuant to the
requirements of the Securities Act (and in any event, at all times
following the initial public offering of any of the securities of the
Corporation), the Corporation
-30-
82
shall comply with all the reporting requirements of the Exchange Act
(whether or not it shall be required to do so), and shall comply with
all other public information reporting requirements of the Commission
as a condition to the availability of an exemption from the Securities
Act (under Rule 144 thereof, as amended from time to time, or successor
rule thereto or otherwise) for the sale of Common Stock by the
Stockholders. The Corporation shall cooperate with the Stockholders in
supplying such information as may be necessary for the Stockholders to
complete and file any information reporting forms presently or
hereafter required by the Commission as a condition to the availability
of an exemption from the Securities Act (under Rule 144 thereof or
otherwise) for the sale of Common Stock by the Stockholders.
(o) Transfer or Assignment of Registration Rights. The rights
to cause the Corporation to register securities granted to a Holder by the
Corporation pursuant to this Section 6 may be transferred or assigned by a
Holder only to a transferee or assignee of not less than 50,000 shares of
Registrable Securities (as presently constituted and subject to subsequent
adjustments for stock splits, stock dividends, reverse stock splits, and the
like), provided that the Corporation is given written notice at the time of or
within a reasonable time after said transfer and assignment, stating the name
and address of the transferee or assignee and identifying the securities with
respect to which such registration rights are being transferred or assigned,
and, provided further, that the transferee or assignee of such rights assumes in
writing the obligations of such Holder under this Section 6.
(p) Termination of Registration Rights. The right of any
Holder to request registration or inclusion in any registration pursuant to
Section 6(d), 6(e) or 6(f) shall terminate on the earlier of (i) ten (10) years
after the closing of the first registered public offering of Common Stock of the
Corporation, or (ii) on such date as all shares of Registrable Securities held
or entitled to be held upon conversion or exercise by such Holder may
immediately be sold under Rule 144 during any 90-day period.
(q) Information Rights. Until the closing of the Designated
Offering, the Corporation shall either deliver to each Investor Stockholder who
owns directly or indirectly at least 85,000 shares of Series C Stock, Series D
Preferred Stock or Series E Preferred Stock (or Class A Common Stock issued upon
conversion thereof).
(i) as soon as practicable, but in any event
within one hundred twenty (120) days after the end of each fiscal year of the
Corporation, an income statement for such fiscal year, a balance sheet of the
Corporation and a statement of stockholder's equity as of the end of such year,
and a schedule as to the sources and applications of funds for such year, such
year-end financial reports to be in reasonable detail, prepared in accordance
with generally accepted accounting
-31-
83
principles, and audited and certified by independent public accountants approved
by the Board of Directors of the Corporation;
(ii) as soon as practicable, but in any
event within thirty (30) days of the end of each month, an unaudited income
statement (showing actual, budget and prior month) and schedule as to the
sources and application of funds and balance sheet for and as of the end of such
month, in reasonable detail;
(iii) as soon as practicable, but in any
event within forty-five (45) days of the end of each fiscal quarter, an
unaudited income statement, schedule as to the sources and applications of funds
and balance sheet for and as of the end of each such quarter, in reasonable
detail; and
(iv) as soon as practicable, but in any
event thirty (30) days prior to the end of each fiscal year, a budget for the
next fiscal year, prepared on a monthly basis, including income statements,
balance sheets and applications of funds statements for such months and, as soon
as practicable after the adoption thereof, any revisions to such annual budget.
SECTION 7. Duration of Agreement. Except for those provisions
that, by their terms, terminate sooner, all rights and obligations of each
Stockholder under this Agreement shall terminate as to such Stockholder upon the
earlier of (a) the transfer in accordance with this Agreement of all Shares held
by such Stockholder, or (b) upon written consent of (i) the Stockholders holding
a majority of the shares of Series C Stock (or the Class A Common Stock issued
upon conversion thereof), (ii) the Stockholders holding at least 66 2/3 of the
shares of Series D Preferred Stock, (iii) the Stockholders holding at least 66
2/3 of the shares of Series E Preferred Stock and (iv) the Stockholders holding
a majority of the shares of Class A Common Stock (other than those shares
specified in subparagraph (i) above).
SECTION 8. Severability; Governing Law. If any provisions of
this Agreement shall be determined to be illegal and unenforceable by any court
of law, the remaining provisions shall be severable and enforceable in
accordance with their terms. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York, without giving effect to
the conflict of laws principles thereof; provided, however, in the event that
any provision of this Agreement is unenforceable under the laws of the State of
New York and is enforceable under the laws of the State of Delaware, then such
provision shall be construed in accordance with the laws of the State of
Delaware to permit the enforceability of this Agreement to the fullest extent.
-32-
84
SECTION 9. Conflicting Agreements. This Agreement supersedes
all other existing agreements or understandings between the stockholders of the
Corporation.
SECTION 10. Benefits of Agreement. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns, legal representatives and heirs. Subject to the terms of
this Agreement, the Stockholders may transfer any or all of its rights hereunder
to any purchaser or transferee of all or a portion of its shares of Preferred
Stock or Common Stock, including any right or interest therein, without the
prior written consent of the Corporation or any Stockholder. In the event of
such transfer, such transferee shall be deemed to be the "Stockholder" and a
"Holder", as appropriate, for purposes of this Agreement, and may again transfer
such rights in accordance with, and subject to, the terms of this Agreement.
SECTION 11. Notices. All notices, requests, consents and
other communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or duly sent by first
class registered or certified mail, return receipt requested, postage prepaid,
addressed to such party at the address set forth below or such other address as
may hereafter be designated in writing by the addressee to the addressor listing
all parties:
(a) If to the Corporation, to:
Medscape, Inc.
000 X. 00xx Xxxxxx
Xxx Xxxx, XX 00000-0000
Fax (000) 000-0000
Attention: President & CEO
with a copy to:
Patterson, Belknap, Xxxx & Xxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
-33-
85
(b) If to the Stockholders, at the addresses specified on
Schedule I attached hereto.
All such notices, advises and communications shall be deemed to have been
received (a) in the case of personal delivery, on the date of such delivery and
(b) in the case of mailing, on the third day after the posting thereof.
SECTION 12. Changes. The terms and provisions of this
Agreement may not be modified or amended, or any of the provisions hereof
waived, temporarily or permanently, except pursuant to the written consent of
(a) the Corporation, (b) the Stockholders holding a majority of the shares of
Series C Stock, (c) the Stockholders holding at least 66 2/3 of the shares of
Series D Preferred Stock (or the Class A Common Stock issued upon conversion
thereof), (d) the Stockholders holding at least 66 2/3 of the shares of Series E
Preferred Stock (or the Class A Common Stock issued upon conversion thereof) and
(e) the Stockholders holding a majority of the shares of Class A Common Stock
(other than those shares specified in subparagraph (b) above). Any rights
applicable to a Stockholder may be waived by such Stockholder without the
consent of the Corporation or the other Stockholders. Any modification or
amendment pursuant to this Section may terminate any right or obligation
provided for herein whether or not deemed vested or accrued. Upon approval of
modifications or amendments by the requisite percentages of the Stockholders
hereunder, the Corporation shall not be required to independently give its
consent.
SECTION 13. Rights of Xx. Xxxxxxx as a Stockholder. Xx.
Xxxxxxx X. Xxxxxxx ("Xx. Xxxxxxx") shall (a) have all the rights of an Investor
Stockholder as are set forth in Sections 4, 5 and Subsection 6(e) of this
Agreement (including under Subsection 6(e) as it relates to the piggyback rights
to be included within a demand registration initiated pursuant to Subsection
6(d), and, for such purposes, it is understood that the last sentence of
Subsection 6(d)(i) shall be read as if it were amended to include at its end:
"and Section 6(e)(iii)"), (b) have the right to vote in connection with a
modification to the Stockholder Agreement in accordance with Section 12 thereof,
(c) have the rights of an Additional Stockholder with respect to all other
provisions of this Agreement, and (d) be bound by the other terms and conditions
of this Stockholders' Agreement. It is understood and agreed that, in regard to
restricted shares issued pursuant to the Employment and Restricted Stock
Purchase Agreement, dated October 27, 1998, by and between the Corporation and
Xx. Xxxxxxx, Xx. Xxxxxxx shall only have rights under this Agreement for such
restricted shares after they have vested in accordance with the terms thereof
(such vested shares, along with the 642,553 shares issued to Xx. Xxxxxxx
pursuant to the Purchase Agreement, dated October 27, 1998, by and among the
Corporation, Xx. Xxxxxxx and certain other parties thereto, or to be acquired by
Xx. Xxxxxxx upon realization of the pledge of 36,509 shares by Xxxxx Xxxxxxxxx
to Xx. Xxxxxxx, the "Vested Shares"). For purposes of effectuating Dr. Drezner's
rights as an Investor Stockholder pursuant to Sections 4 and
-34-
86
5 of this Agreement, to the extent that Xx. Xxxxxxx exercises his rights
pursuant to Subsections 4(c) or 5(a) thereof, (x) the Vested Shares held by Xx.
Xxxxxxx shall be counted as shares of Class A Common Stock issuable upon
conversion of the Series C Stock for purposes of the formulas set forth therein;
and (y) each of the Corporation and Xx. Xxxxxxx agrees to exchange any Vested
Shares for which Xx. Xxxxxxx seeks to require the Transferring Stockholder to
cause to be purchased in accordance with such Subsection 5(a) for a like number
of shares of Class A Common Stock, such exchange to be effective immediately
prior to such purchase (without any additional consideration) with the intent
that the purchaser receive Class A Common Stock pursuant to such transaction. In
connection with any vote pursuant to Section 12 of this Agreement, Xx. Xxxxxxx
shall vote with the holders of Series C Stock as a single class, with each
Vested Share held by Xx. Xxxxxxx having the rights to the number of votes as
each share of Class A Common Stock has under the Corporation's Amended and
Restated Certificate of Incorporation (the "Certificate"), and each share of
Series C Stock having the rights to the number of votes for such series as is
set forth in the Certificate.
SECTION 14. Captions. The captions herein are inserted for
convenience only and shall not define, limit, extend or describe the scope of
this Agreement or affect the construction hereof.
SECTION 15. Nouns and Pronouns. Whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms and the singular form of names and pronouns shall
include the plural and vice-versa.
SECTION 16. Merger Provision. This Agreement (as the same may
be amended from time to time) and the Purchase Agreement constitute the entire
agreement among the parties pertaining to the subject matter hereof and
supersede all prior and contemporaneous agreements therewith.
SECTION 17. 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 taken together shall constitute one and the same instrument.
[The remainder of this page intentionally left blank]
-35-
87
IN WITNESS WHEREOF, the parties hereto have caused this
Amended and Restated Stockholders Agreement to be executed as of the date and
year first written above.
MEDSCAPE, INC.
By:
-----------------------------------------
Xxxx X. Xxxxxx
President and Chief Executive Officer
[Signature page to
Stockholders Agreement - 1]
88
(STOCKHOLDER WITH RIGHTS UNDER SECTION 13)
--------------------------------
Xxxxxxx X. Xxxxxxx, M.D., Ph.D.
--------------------------------
Xxxxxxx Xxxxx
--------------------------------
Xxxxxx Xxxx
--------------------------------
Xxxxx Xxxxxxxxx
[Signature page to
Stockholders Agreement - 2]
89
INVESTOR STOCKHOLDERS
(EXISTING SERIES C CONVERTIBLE PREFERRED STOCK)
CSK VENTURE CAPITAL CO., LTD.,
---------------------------------------
XXXXXX XXXXX as investment manager for CSK-1(B)
Investment Fund
APA EXCELSIOR IV, L.P.
By:
-----------------------------------
Name: Xxxxx Xxxxxxxx
By: Title: Managing Director
-----------------------------------
Name: Xxxx Xxxxxxxx
Title:
CSK VENTURE CAPITAL CO., LTD.,
as investment manager for CSK-2
XXXXXX & CO. (CAYMAN) LTD., C/F Investment Fund
APA EXCELSIOR IV/OFFSHORE, L.P.
By: By:
----------------------------------- -----------------------------------
Name: Xxxx Xxxxxxxx Name: Xxxxx Xxxxxxxx
Title: Title: Managing Director
THE PATRICOF PRIVATE
INVESTMENT CLUB MEDIA TECHNOLOGY VENTURES,
L.P.
By:
-----------------------------------
Name: Xxxx Xxxxxxxx By:
-----------------------------------
Title: Name: Xxxxx X. Xxxxxxx
Title: Managing Member of the General
Partner
CSK VENTURE CAPITAL CO., LTD.,
as investment manager for CSK-1(A) MEDIA TECHNOLOGY VENTURES
Investment Fund ENTREPRENEURS FUND, L.P.
By: By:
----------------------------------- -----------------------------------
Name: Kinya Nakogome Name: Xxxxx X. Xxxxxxx
Title: Managing Director Title: Managing Member of the General
Partner
[Signature page to
Stockholders Agreement - 3]
90
XXXXXX X. XXXXXXXX, XXXXXXX X. RHL VENTURES LLC
XXXXXXXX, XXXXX X. XXXX, AND
XXXXXXXX X. XXXXXXXXXXXX,
TRUSTEES U/A DATED 9/3/64 F/B/O By:
-----------------------------------
XXXXXX X. XXXXXXXX FAMILY Name:
Title:
By: TOLEDOT INVESTMENTS, L.P.
-----------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Trustee
By:
-----------------------------------
XXXXXXX XXXXXXX, GENERAL
PARTNER
XXXXXX X. XXXXXXXX, XXXXXXX X.
XXXXXXXX, XXXX X. XXXX, AND
XXXXXXXX X. XXXXXXXXXXXX,
-----------------------------------
TRUSTEES U/W/D XXXXXXX X. XXXXXXX XXXXXXX
XXXXXXXX F/B/O XXXXXX X.
XXXXXXXX ARTICLE 9TH
-----------------------------------
By: XXXXXX XXXXXXXXXX
-----------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Trustee BE PARTNERS
XXXXXXX FRERES By:
-----------------------------------
Name: Xxxxxxx Xxxxxxxxxxx
By: Title: Partner
-----------------------------------
Name: Xxxxxx Xxxxxxx
Title: Administrateur
Xxxxxxx Freres, Paris -----------------------------------
XXXX XXXXXXXXXX, M.D.
XXXXXXXXXXX & CO., INC. TBG INFORMATION INVESTORS, L.L.C.
By: By:
----------------------------------- -----------------------------------
Name: Xxxxxx Xxxxxxxx Name: Oakleigh Xxxxxx
Title:Vice Chairman Title: Chairman & CEO
-----------------------------------
XXXXX XXXXXXXXX
-----------------------------------
XXXX XXXXXXXXX
[Signature page to
Stockholders Agreement - 4]
91
EXISTING STOCKHOLDERS
(SERIES A PREFERRED STOCKHOLDER)
THE EXCELSIOR FUND I
By:
-----------------------------
Name: Xxxx Xxxxxxxx
Title:
(CLASS A COMMON STOCKHOLDER)
---------------------------------
XXXXX X. XXXXXXXX
[Signature page to
Stockholders Agreement - 5]
92
INVESTOR STOCKHOLDERS
SERIES D CONVERTIBLE PREFERRED STOCK
CSK VENTURE CAPITAL CO., LTD. CSK VENTURE CAPITAL CO., LTD. AS
AS INVESTMENT MANAGER FOR INVESTMENT MANAGER FOR
CSK-1(B) INVESTMENT FUND CSK-1(A) INVESTMENT FUND
By: By:
--------------------------------- ---------------------------------
Name: Xxxxx Xxxxxxxx Name: Xxxxx Xxxxxxxx
Title: Managing Director Title: Managing Director
Address: Kenchikukaikan, 7F Address: Kenchikukaikan, 7F
5-26-20 Shiba, Minato-ku 0-00-00 Xxxxx, Xxxxxx-xx
Xxxxx 000-0000 Xxxxx Tokyo 108-0014 Japan
CSK VENTURE CAPITAL CO., LTD.
AS INVESTMENT MANAGER FOR
CSK-2 INVESTMENT FUND
By:
--------------------------------
Name: Xxxxx Xxxxxxxx
Title: Managing Director
Address: Kenchikukaikan, 7F
0-00-00 Xxxxx, Xxxxxx-xx
Xxxxx 000-0000 Xxxxx
HEARST COMMUNICATIONS, INC.
By:
---------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Senior Vice President
Address: 000 0xx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
[Signature page to
Stockholders Agreement - 6]
93
XXXXXXX FRERES
By:
Name: Xxxxxx Xxxxxxx
Title: Administrateur, Xxxxxxx Freres, Paris
Address: Banque D'Escompte
13 Blvd. Haussmann
00000 Xxxxx Xxxxxx
[Signature page to
Stockholders Agreement - 7]
94
MEDIA TECHNOLOGY VENTURES,
L.P.
By:
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Managing Member of the General Partner
MEDIA TECHNOLOGY VENTURES
ENTREPRENEURS FUND, L.P.
By:
-------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Managing Member of the General Partner
[Signature page to
Stockholders Agreement - 8]
95
APA EXCELSIOR IV, L.P.
By: APA EXCELSIOR IV PARTNERS, L.P.,
its General Partner
By: PATRICOF & CO. MANAGERS, INC.,
its General Partner
By:
---------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Chairman
APA EXCELSIOR IV/OFFSHORE, L.P.
By: PATRICOF & CO. VENTURES, INC.,
its Investment Advisor
By:
---------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Chairman
PATRICOF PRIVATE INVESTMENT CLUB, L.P.
By: APA EXCELSIOR IV PARTNERS, L.P.,
its General Partner
By: PATRICOF & CO. MANAGERS, INC.,
its General Partner
By:
---------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Chairman
[Signature page to
Stockholders Agreement - 9]
00
XXXXXX XXXXXXXX XXXXXXX XX, X.X.
By: Weston Presidio Capital Management II,
LP, its General Partner
By:
----------------------------
WESTON PRESIDIO CAPITAL III, L.P.
By: Weston Presidio Capital Management
III, LLC, its General Partner
By:
---------------------------------
WPC ENTREPRENEUR FUND, L.P.
By: Weston Presidio Capital Management
III, LLC, its General Partner
By:
---------------------------------
HIGHLAND CAPITAL PARTNERS IV
LIMITED PARTNERSHIP
By: Highland Management Partners IV LLC,
its General Partner
By:
---------------------------------
Member
HIGHLAND ENTREPRENEURS' FUNDS IV,
LIMITED PARTNERSHIP
By: Highland Entrepreneurs' Fund IV LLC,
its General Partner
By:
---------------------------------
Member
[Signature page to
Stockholders Agreement - 10]
97
[Signature page to
Stockholders Agreement - 11]
98
(SECTION 4 STOCKHOLDERS NOT
SIGNING IN ANOTHER CAPACITY)
--------------------------------------
Xxxxxx Xxxxx
--------------------------------------
Xxxx Xxxxxx
[Signature page to
Stockholders Agreement - 12]
99
INVESTOR STOCKHOLDERS
SERIES E CONVERTIBLE PREFERRED STOCK
AND CLASS A COMMON STOCK
NATIONAL DATA CORPORATION
By:
--------------------------------------
Name:
Title:
[LAZARD FRERES]
By:
--------------------------------------
Name:
Title:
[Signature page to
Stockholders Agreement - 13]
100
EXHIBIT D
[LETTERHEAD OF PATTERSON, BELKNAP, XXXX & XXXXX LLP]
[Date]
National Data Corporation
National Data Plaza
Atlanta, Georgia 30329
Attention: Xx. Xxxxxx X. Xxxx
President and Chief Executive Officer
NDC Health Information Services
Dear Sirs and Mesdames:
We have acted as counsel to Medscape, Inc., a Delaware
corporation (the "Company"), in connection with the negotiation, execution and
delivery by the Company of (i) the Stock Purchase Agreement, dated as of July 7,
1999 (the "Purchase Agreement"), by and between the Company and National Data
Corporation ("NDC"), (ii) the Stockholders Agreement (as defined in the Purchase
Agreement), (iii) the License and Product Development Agreement (as defined in
the Purchase Agreement) and (iv) the Amended and Restated Certificate (as
defined in the Purchase Agreement). The Purchase Agreement, the Stockholders
Agreement and the License and Product Development Agreement are collectively
referred to in this opinion letter as the "Documents," and the transactions
contemplated by the Documents are collectively referred to in this opinion as
the "Transactions."
This opinion letter is delivered to you pursuant to Section
7.2(b)(viii) of the Purchase Agreement. Capitalized terms used but not defined
herein have the respective meanings assigned to them in the Purchase Agreement.
For purposes of this opinion letter, "Actual Knowledge" means
the conscious awareness of facts or other information by the partner who has
signed this opinion letter, any lawyer in our firm who has been actively
involved in negotiating or preparing the Documents or this opinion letter or any
lawyer in our
101
[Date]
Page 2
firm who has been primarily responsible for providing the responses in this
opinion letter which are limited to our Actual Knowledge.
For purposes of this opinion letter, we have examined such
documents as we have deemed appropriate, including, without limitation, the
Purchase Agreement, the other Documents, the Certificate of Incorporation, as
amended by the Amended and Restated Certificate, the Bylaws of the Company,
certificates, faxes or other electronically transmitted documents issued by
public officials in the State of Delaware as to the incorporation and good
standing of the Company ("Public Authority Documents"), the documents listed in
any exhibit to this opinion letter, and minutes of the proceedings taken by the
Company for the purpose of authorizing the execution and delivery of the
Documents. As to certain matters of fact material to the opinions expressed in
this opinion letter, we have relied on the representations made by NDC in the
Purchase Agreement, the Public Authority Documents and certificates of officers
of the Company and others. We have not independently established the facts so
relied on.
We have no Actual Knowledge of any indenture, mortgage, deed
of trust, contract or other instrument relating to the borrowing of money or to
the leasing (as lessee) or purchasing of material amounts of property or other
assets by the Company ("Other Agreements"), other than those listed in Exhibit A
to this opinion. Other than receipt of a certificate (the "Officers'
Certificate") from the chief executive officer and chief financial officer of
the Company, however, we have made no special investigation or inquiry with
respect to the existence of any additional Other Agreements for purposes of our
opinion set forth in paragraph 7 below. In addition, for purposes of our
opinions in paragraphs 3 and 7 below, we have relied upon statements in the
Officers' Certificate (i) with respect to the outstanding capital stock of the
Company and related matters and (ii) to the effect that, except as set forth in
Exhibit B to this opinion, the Company is not subject to any court or
administrative order, writ, judgment or decree which names the Company or is
specifically directed to the Company or its property ("Court Order").
We have also made such investigations of law as we have deemed
necessary for purposes of this opinion letter. We express no opinion as to any
laws other than the laws of the State of New York, the General Corporation Law
of the State of Delaware and the federal laws of the United States of America.
The opinions set forth below are also based upon and subject to the assumptions,
exceptions and limitations customary in New York practice for opinion letters of
this type, including, without limitation, the effects of applicable
102
[Date]
Page 3
bankruptcy, insolvency, reorganization, fraudulent transfer and other similar
laws affecting the enforcement of creditors' rights and remedies in general and
of general principles of equity (regardless of whether considered in a
proceeding in equity or in law), and others described in the Report of the
TriBar Opinion Committee entitled Third Party "Closing" Opinions, 53 Bus. Law.
592 (1998).
On the basis of and subject to the foregoing, it is our
opinion that:
1. The Company is a corporation validly existing and in good
standing under the laws of the State of Delaware and has the corporate power
under Delaware law to own its property and assets and to transact business as
currently being conducted.
2. The Company's authorized capital stock consists of only
_________ shares of common stock, par value $.01 per share, of which _________
shares have been designated Class A Common Stock and 15,000,000 have been
designated Class B (Non-Voting) Common Stock, and 5,356,643 shares of preferred
stock, par value $.01 per share, of which 788,200 shares have been designated
Series A Preferred Stock, 1,478,359 shares have been designated Series C
Preferred Stock, 932,401 shares have been designated Series C-1 Preferred Stock,
1,757,683 shares have been designated Series D Preferred Stock and 400,000
shares have been designated Series E Preferred Stock. The Shares issuable
pursuant to the Purchase Agreement have been duly authorized and, when issued
pursuant thereto, will be validly issued, fully paid, nonassessable and free of
any preemptive rights. The PS Shares have the rights, powers and preferences and
qualifications, limitations and restrictions thereof as are set forth in the
Amended and Restated Certificate. The forms of certificates representing the
Shares are in proper form under the General Corporation Law of the State of
Delaware.
3. Based solely on our review of the minute books and stock
transfer records of the Company, the outstanding shares of capital stock of the
Company as of the date hereof but prior to the consummation of the Transactions
consist only of (i) ______ shares of Class A Common Stock, (ii) ______ shares of
Class B (Non-Voting) Common Stock, (iii) ______ shares of Series A Preferred
Stock, (iv) _____ shares of Series C Preferred Stock, (v) ______ shares of
Series C-1 Preferred Stock and (vi) ______ shares of Series D Preferred Stock.
All of such shares have been duly authorized and are validly issued, fully paid,
nonassessable and free of preemptive rights. Except as set forth in the Amended
and Restated Certificate, to our Actual Knowledge there are no outstanding
securities issued by the Company which are convertible into
103
[Date]
Page 4
or exchangeable for shares of Common Stock. Except as set forth in the
Stockholders Agreement, to our Actual Knowledge there are no preemptive rights
which would entitle the holders of any shares of capital stock of the Company to
acquire any of the Shares. Except as set forth on the Disclosure Schedules of
Medscape, Inc. which are attached to the Purchase Agreement, to our Actual
Knowledge there are no outstanding warrants or options to acquire any shares of
capital stock of the Company or any other rights or agreements to which the
Company is a party or by which it is bound which entitle or would entitle, with
the passage of time, the giving of notice or otherwise, any person or entity to
purchase or acquire any shares of capital stock of the Company.
4. The Board of Directors of the Company has duly authorized
the reservation of a sufficient number of Conversion Shares for issuance upon
the conversion of the PS Shares in accordance with the terms of the Amended and
Restated Certificate and no further action of the Board of Directors of the
Company is required in connection with the conversion of any of the PS Shares
into Conversion Shares in accordance with the terms thereof. The Conversion
Shares issued upon conversion of the PS Shares in accordance with the terms and
conditions set forth in the Amended and Restated Certificate will, when issued,
be validly issued, fully paid, nonassessable and free of any preemptive rights.
5. The Company has the corporate power to execute and deliver
each of the Documents, to perform its obligations thereunder and to consummate
the Transactions and has taken all requisite corporate action to authorize the
execution, delivery and performance by it of each of the Documents. Each of the
Documents has been duly executed and delivered by the Company.
6. Each of the Documents constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms.
7. The execution and delivery by the Company of, and
performance by the Company of its obligations under, the Documents will not (i)
contravene any applicable provision of any New York law, the Delaware General
Corporation Law or federal statutory law or regulation; (ii) violate any
provisions of the Court Orders, if any, listed in Exhibit B to this opinion
letter; (iii) result in any breach of any of the terms, covenants, conditions or
provisions of, or constitute a default under, result in the acceleration of (or
entitle any party to accelerate) any obligation of the Company under, or result
in the creation or
104
[Date]
Page 5
imposition of (or the obligation to create or impose) any lien or encumbrance
upon any of the property or assets of the Company pursuant to the terms of, any
of the Other Agreements listed in Exhibit A to this opinion letter; (iv) violate
any provision of the Certificate of Incorporation or Bylaws of the Company, in
each case as amended to date; or (v) require any approval from or any filings
with any governmental authority that have not been received or made on or prior
to the date hereof under the Delaware General Corporate Law, any federal or New
York State law, or any rule or regulation thereunder. To our Actual Knowledge,
the Company is not subject to any Court Order other than as set forth on Exhibit
B to this opinion letter.
8. It is not necessary in connection with the offering, sale
and delivery of the Shares under the circumstances contemplated by the Purchase
Agreement to register the Shares under the Securities Act of 1933.
9. To our Actual Knowledge, the Company is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
This opinion letter may be relied upon by you only in
connection with the Transactions and may not be used or relied upon by you or
any other person for any other purpose whatsoever, without in each instance our
prior written consent; provided, however, that it may be used without such
consent (i) in connection with a review of the Transactions by any regulatory
agency having supervisory authority over you, for the purpose of confirming the
existence of this opinion letter, (ii) in connection with the enforcement of
your rights and remedies under the Documents or the assertion of a defense as to
which this opinion letter is relevant and necessary or (iii) in response to a
court order.
Very truly yours,
PATTERSON, BELKNAP, XXXX & XXXXX LLP
By:________________________________
A Member of the Firm
cc: Xx. Xxxx X. Xxxxxx
105
EXHIBIT A
Other Agreements
106
EXHIBIT B
Court Orders
107
DISCLOSURE SCHEDULES OF MEDSCAPE, INC.
TO
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
MEDSCAPE, INC. (THE "COMPANY")
AND
NATIONAL DATA CORPORATION
NOTE: CAPITALIZED TERMS NOT DEFINED HEREIN SHALL HAVE THE MEANINGS ASCRIBED
TO THEM IN THE STOCK PURCHASE AGREEMENT.
108
Schedule 3.2
Conflicts
The execution, delivery and performance by the Company of the Agreement would
trigger the preemptive rights of the parties to the Existing Stockholders
Agreement.
109
Schedule 3.3
Capitalization
- The Company's registration statement on Form S-1, filed with the
Securities and Exchange Commission (the "SEC") on May 4, 1999, as
amended in the form to be filed with the SEC on July 8, 1999 and
previously delivered to Purchaser (the "S-1"), describes options
outstanding pursuant to the Company's 1996 Option Plan as of May 31,
1999.
- All of the Series A, C, C-1 and D Preferred Stock is convertible into
shares of Class A Common Stock.
- Parties to the Existing Stockholders Agreement are entitled to
preemptive rights with respect to the issuance of capital stock of the
Company.
- Under the terms of the Common Stock Purchase Agreement, by and between
the Company and CBS Corporation ("CBS"), (the "CBS Stock Purchase
Agreement" and, together with the other agreements executed therewith,
the "CBS Documents") CBS has the right to nominate 3 directors to the
Board of Directors of the Company.
- Under the terms of the CBS Stock Purchase Agreement, CBS has the right
to acquire shares of Class A Common Stock, including through the
exercise of the warrant referred to in the Shareholders Agreement
referred to therein.
Refer to capitalization table (attached).
110
MEDSCAPE, INC.
SUMMARY OF EQUITY POSITION
SCHEDULE 3.4
AS OF JUNE 15, 1999
Count PR P/SH Investment Price per share
Excelsior I Fund $ 28,277 0.01074
Patricof & Co., Ventures, Inc. $ 838 0.01074
1 A. Patricof & designees $ 162 0.01080
2 Xxxxx Xxxxxxxx $ 14,886 0.00910
3 Xxxxxxx Xxxxxx
4 Xxxxxx Xxxxxxxx $ 7,090 0.01863
5 Xxxxxxxxx X. Xxxx $ 1,872 0.00800
Xxxxxxx Xxxxxxxx $ 865 0.01075
Louis Del Xxxxxxx $ 419 0.01074
Xxxxxx Xxxx $ 312 0.01076
Xxxxxxx Xxxxxx $ 107 0.01070
111
6 Xxxxxxxx Xxxxx $ 54
7 Xxxxxx X. Xxxxxxxx $ 215
8 Xxxxxxx X. Xxxxxxxx $ 269
SCP EMPLOYEE MIRROR
Xxxxx Xxxxxxx $ 205 0.01074
Xxx Xxxxxxx Treasury Stock $ 205 0.01074
Xxxxxxxxx X. Xxxx $ 464 0.00811
Xxxxxxx X. Xxxxxxxx $ 409
Xxxxxx X. Xxxxxxxx $ 79
9 Xxx X. Xxxxx
10 Xxxxx Xxxxxxxxx
11 Xxx Xxxxxxx $ 79 0.00716
12 Xxxxxxxxx Xxxxxxx
13 Xxxxxx X. Xxxxxxx $ 131
14 Xxxxxxx X. Xxxxx
15 Xxxxx X. Xxxxxxxx $ 79
16 Xxxxxxx X. Xxxxxxx, Xx. $ 105
17 Xxxxxxx Xxxxxxx
112
18 Xxxxxx X. Xxxxxx $ 131
19 Xxxxxx Xxxxxxxx
Xxxxxxx X. Xxxx
00 Xxxxx X. Xxxxxxx
00 Xxxx Xxxxx $ 61
Xxxx X. Xxxxxxx
22 Xxxx X. Xxxxxx $ 61 0.00716
23 Xxxxxx Xxxxxx $ 76
24 Xxxxxx XxXxxxx
25 Xxxxxxxx X. Xxxxxx $ 52
26 Xxxxx X. XxXxxxx $ 66
27 Xxxxxx Xxxxx $ 66
Xxxxxx Xxxxxxxx
28 Xxxxxxxx Xxxx
29 Xxxxxxxx Xxxxxxx $ 13
30 Xxxxxxxx Xxxxxxx
31 Xxxx X. Xxxx $ 13
32 Xxxxxx Xxxxxxxxx $ 3
Xxxxx Xxxxxx
33 Xxxxxxx Xxxxxx $ 3
113
34 Xxxxxxx Xxxxxxx
Xxxx Xxxxxxxxx
Xxxxx Xxxxxx
Xxxx Xxxx
Xxxx Xxxxxx $ 2
Xxxxx X. Xxxxxx
Xxxxxxx Xxxx
Xxxxxxxx Xxxxxxx
35 Xxxxx X. Xxxxxx
36 Xxxxxxx Xxxxxxxxx $ 2
37 Xxxx Xxxxx
Xxxxxxx Xxxxx
38 Xxxxx X. Xxxxx.
39 Xxx Xxxxx
Total SCP Employees
----------
TOTAL FOUNDERS $ 57,668.3
----------
INVESTORS
Media Technology Ventures $3M $1.72 $ 3,000,447 1.71600
Thorn Xxxxxxxxxxx Xxxxxxx $3M $1.72 $ 3,000,000 1.71600
CSK Venture Capital Co. Ltd - $2M $1.72 $ 2,000,000 1.71600
114
Excelsior IV/Patricof $1.0M $1.72 $ 999,999 1.71600
Xxxxxxx Freres - Private Investor @$500,000 $1.72 $ 500,000 1.71600
Xxxxxx Xxxxxxxx - Trust @$300,000 $1.72 $ 300,000 1.71600
Xxxxxxxxxxx & Co. @ $300,000 $1.72 $ 300,000 1.71600
Xxxxxx Lesson Ventures @$250,000 $1.72 $ 250,000 1.71600
Xxxxxxx Xxxxxxx - Private Investor @$100,000 $1.72 $ 100,000 1.71600
Xxxxxx Xxxxxxxxxx - Private Investor @$100,000 $1.72 $ 100,000 1.71600
BE Partners - Private Family @$100,000 $1.72 $ 100,000 1.71600
Xxxxxx Xxxxx - Private Investor @$50,000 $1.72 $ 50,000 1.71600
Xxxxxxxxx Family - Private Investor @$50,000 $1.72 $ 50,000 1.71600
Xxxx Xxxxxxxxxx - Private Investor @$50,000 $1.72 $ 50,000 1.71600
Media Technology Ventures $1,000,009 $4.69 1,000,009 4.68800
CSK Venture Capital Co. Ltd - $1,000,009 $4.69 1,000,009 4.68800
Hearst Communications, Inc. $4.69 1,000,000 4.68796
Xxxxxxx Freres - Private Investor $4.69 600,000 4.68796
Weston Presidio Capital - Boston VC - $8,002,000 $4.69 8,000,002 4.68800
Highland Capital - $8,002,000 $4.69 8,000,002 4.68800
115
Excelsior IV/Patricof $1.0M 4.69 999,997 4.68795
--------------
TOTAL INVESTORS $ 31,400,464.6
Xxxxxx/Xxxxxx
Credit Suisse/First Boston
Sub Total Investors, R/B & CS/FB $ 31,400,464.6
--------------
NON FOUNDING DIRECTORS & FORMER DIRECTORS
40 X. Xxxxxxx
41 X. Xxxxxx
42 X. Xxxxx $ 81 0.00227
43 X. Xxxxxxx $ 3,402 0.07560
TOTAL NON FOUNDING DIRECTORS & FORMER DIRECTORS $ 3,483.0
--------------
MANAGEMENT
44 Xxxx Xxxxxx
Xxxx Xxxxxxx restricted 10% shares (A) $ 1,569,874
Xxxx Xxxxxxx 88% of 10% @ closing $ 1,381,489
116
45 Xxxxx Xxxxx
46 Xxxxxxx X. Xxxxx $ 3,803
47 Xxxx Xxxxxx $ 7,000
48 Xxxxxxx X. Xxxxx
49 Xxxxxx XxXxxxx
50 Xxxxxx Xxxxxxxx
51 Xxx Xxxxxxxxxxxx
52 Xxx Xxxxx
53 Xxxx Xxxxxxxxx
3/14/95 54 Xxxxx Xxxxxxxxxxx
3/25/95 55 Xxxx Xxxxxxx
3/30/95 56 Xxxx Xxxxxxx
Xxxxx Xxxxxxxx * $52,500
3/24/95 57 Xxx Xxxxxxx
Total Management $3,014,666.7
------------
Medscape Employees
58 XxxxXxxx Xxxxxxxxx
117
59 Xxxxxxx X. Xxxxx
60 Xxxx Xxxx
61 Xxx Xxxxxx $ 2,399
62 Xxxx Xxxxxxxxx
63 Xxxx Xxxxxxx
64 Xxxxxx Xxxxxxxxx
65 Floss X'Xxxxxxxx
66 Xxxxx Xxxxxx
Xxxxxx Xxxxxxx $ 205
67 Xxxxxxxx X. Xxxxxx
Xxxxxxx Xxxxxxxxx $ 83
68 Xxxxxxxx X'Xxxxxx
69 Xxxxx Xxxxx
Xxxx Xxxxxxx
70 Xxxxxxx X. Xxxxxx
71 Xxxxx Xxxxxxx $ 629
Xxxxx Xxxxxx $ 450
118
72 Xxxxxx Bukzspan
73 Xxxxxxx Xxxxxxx $ 540
Xxxxx Xxxxxx
Xxxxx Xxxxxxxx $ 3
Xxxxxxx Xxxxx $ 78,494
Xxxxx Xxxxxxxxx $ 78,494
Xxxxxx Xxxx $ 31,396
74 Xxxxxx Xxxx
75 Xxxxxxxx Xxxxxx
76 Xxx Xxxxxxx
77 Xxxxxxx Xxxxxxxxx
78 Xxxxxxx Xxxxx
79 Xxxxx Xxxxxxx
80 Xxxxx Xxxxx
81 Xxxxxx Xxxxxxxxx
Xxxxxxx Xxxxxxx
82 Xxxxx Xxxxxxx
83 Xxxxx Xxx
119
84 Xxxx XxXxxxx
85 Xxxxxxx Xxxxxxxx
86 Xxxxxxx Xxxxx
87 Xxxx Xxxxx
88 Xxxxxxxx Xxxxx
89 Xxxxxxx Xxxxxxxx
90 Xxxxxxx Xxx
91 Xxxxx Xxxxxxxxxx
92 Xxxxxx Xxxxx
93 Xxxx XxXxxxx
94 Xxxxxxx Xxxxxxxx
95 Xxxxx Xxxxx
96 Xxxxxxx Xxxxxx
97 Xxxxxxxx Xxxxxxx
98 Xxxxx Xx
99 Xxxxxxxxxxx Xxxxxx
100 Xxxxxx X. Xxxxx
120
101 Xxxxx Xxxx
1/3/95 102 Xxxx Xxxxxxxxxx
1/3/95 103 Xxxxx Xxxxx
104 Xxxxxxx Xxxxxx
1/24/95 105 Xxxxx Xxxx
106 Xxxxxx Xxxxxxx
107 Xxxx Xxxxxxx
108 Xxxxx Xxxxx Xxxxxxx
2/21/95 109 Xxxx Xxxxx
110 Xxxx Xxxxx Xxxxxxxxx
111 Xxxxx Xxxxxxxx
3/21/95 112 Xxxxxx Xxxxxx
113 Xxxx Xxxxxx
3/3/95 114 Xxx Drill
3/24/95 115 Xxxxxxxxx Xxxxxxx
3/24/95 116 Xxxxx Xxxxxxx
3/24/95 117 Xxxxxxx Xxxxxxxx
3/24/95 118 Xxxx XxXxxxxx
121
119 Xxxxxxx Xxxxxxx
3/28/95 120 Xxxxxx Xxxxxx
121 Xxxxxxxxx Xxxxx
122 Xxxxxxxx Xxxxxxxxx
123 Xxx Xxxxxx
124 Xxxxx Xxx
125 Xxxxxx Xxxxxxxx
126 Xxxx Xxxxxxxx
127 Xxxx Xxxxxxxx
128 Xxxxx Xxxxxxx
129 Xxx Xxxxxxxxx
130 Xxxxxxx Xxxxxxx
131 Xxx Xxxxxx
132 Xxx Xxxxxx
NEW OPTIONS TO BE ISSUED
TOTAL MEDSCAPE EMPLOYEES
Employee Reserved Options
122
Total Available for Employees
$ 192,693.9
-----------
$ 34,668,976.6
----------------------------
Total $ 34,668,977 20,733,275
Weighted average of Stock
Note: This capitalization table includes 730,174 Shares issued in accordance
with the Purchase Agreement between Medscape, Inc., and Xxxxxxx Xxxxxxx,
Xxxxxxx Xxxxx, Xxxxxx Xxxx, and Xxxxx Xxxxxxxxx
(2) This capitalization table includes 730,174 restricted shares issued as part
of Xxxxxxx Xxxxxxx'x Employment Agreement.
123
Note: Vesting-All
Options vest over 3 or 4
Years:
1996 Options step vest on 31-May-93
31-May-94
31-May-95
June 1997 Options vest 1/3 on
7/1/98 and monthly thereafter
December 1997 Options vest
1/3 on 12/15/98 and monthly
thereafter
February 1998 Options vest
1/3 on 2/19-2/23/99 and monthly
thereafter
October 1998 Options vest 1/4
on 10/99 and monthly thereafter
Options vest 1/4 on
anniversary date and monthly
thereafter
MARCH 17, 1998 SERIES C & C-1
PREFERRED INVESTMENT ROUND
124
Amount % of Total # of Shares
----------- ---------- -----------
Pre Money $14,000,000 56.5% 20,949,078
MTV 1,771,690 7.1% 1,032,452.5
MTE 228,758 0.9% 133,310.0
MTV $2,000,448 2,000,448 8.1% 1,165,763
MTV-Preferred C-1 885,598 3.6% 516,082.5
MTE Preferred C-1 114,401 0.5% 66,667.5
MTV $1.0M 999,999 4.0% 582,750
----------- -----------
MTV $3.0M 3,000,447 12.1% 1,748,513
----------- -----------
MTV Summary $3.0M
MTV 2,657,288 10.7% 1,548,535.0
MTE 343,159 1.4% 199,977.5
TOTAL MTV 3,000,447 12.1% 1,748,252.5
----------- -----------
TBG@3 3.0M Preferred & C-1 3,000,000 12.1% 1,748,252.5
CSK @ $1.5M 1,500,000 6.0% 874,125.0
CSK @ $0.5M 500,000 2.0% 291,375.0
CSK @ $2.0M 2,000,000 8.1% 1,165,500
----------- -----------
APA Excelsior IVLP 836,400 3.4% 487,412.5
Counts & Co (Cayman) Ltd. o/f
APA Excelsior IV/offshore L.P. 147,600 0.6% 86,015.0
Patricof Private Investment Club 15,999 0.1% 9,322.5
Excelsior IV/Patricof $1.0M 999,999 4.0% 582,750
Xxxxxxx Freres @ $500,000 500,000 2.0% 291,375.0
Xxxxxx Xxxxxxxx - Trust 9/3/64 150,000 0.6% 87,412.5
Xxxxxx Xxxxxxxx - Trust Art 9th 150,000 0.6% 87,412.5
Xxxxxx Xxxxxxxx - Trust @ $300,000 300,000 1.2% 174,825
----------- -----------
Xxxxxxxxxxx & Co. @ $300,000 300,000 1.2% 174,825.0
RHL Ventures @ $250,000 250,000 1.0% 145,687.5
Toledot Investments (Xxxxxxx) 50,000 0.2% 29,137.5
Xxxxxxx Xxxxxxx 50,000 0.2% 29,137.5
Xxxxxxx @ $100,000 100,000 0.4% 58,275.0
Xxxxxx Xxxxxxxxxx @ $100,000 100,000 0.4% 58,275.0
BE Partners @ $100,000 100,000 0.4% 58,275.0
Xxxxxx Xxxxx @ $50,000 50,000 0.2% 29,137.5
Xxxxx Xxxxxxxxx 15,000 0.1% 8,742.5
Xxxx Xxxxxxxxx 35,000 0.1% 20,395.0
Total Xxxxxxxxx @ $50,000 50,000 0.2% 29,138
----------- -----------
Xxxx Xxxxxxxxxx @ $50,000 50,000 0.2% 29,137.5
Total Investment 10,800,446 43.5% 6,293,965
Post Money $24,800,446 100.0% 27,243,043
----------- -----------
MARCH 5, 1999 SERIES D
PREFERRED INVESTMENT ROUND
Amount % of Total # of Shares
----------- ---------- -----------
Pre Money $100,000,000 82.9% 22,848,835
Media Technology Ventures, L.P. 885,656,96 0.7% 188,920.0
125
MTV Entrepreneurs Fund, L.P. 114,352.04 0.1% 24,392.5
MTV $1,000,009 1,000,009.00 0.8% 213,313
CSK - 1(A) 333,340.24 0.3% 71,105.0
CSK - 1(B) 333,340.24 0.3% 71,105.0
CSK - 2 333,328.52 0.3% 71,102.5
CSK @ $1,000,009 1,000,009.00 0.8% 213,313
Hearst Communications, Inc. 1,000,000.00 0.8% 213,312.5
Xxxxxxx Freres 600,000.00 0.5% 127,987.5
Weston Presidio Capital II, L.P. 3,000,003.56 2.5% 639,932.5
Weston Presidio Capital III, L.P. 4,762,914.24 3.9% 1,015,980.0
WPC Entrepreneur Fund, L.P. 237,083.88 0.2% 50,572.5
Weston @ $8,000,002 8,000,001.68 6.6% 1,706,485
Highland Capital Partners IV 7,679,998.80 6.4% 1,638,225.0
Highland Entrepreneurs Fund IV 320,002.88 0.3% 68,260.0
Highland @ $8,000,002 8,000,001.68 6.6% 1,706,485
APA Excelsior IV LP 836,391.94 0.7% 178,412.5
APA Excelsior IV/Offshore, L.P. 147,607.54 0.1% 31,487.5
Patricof Private Investment Club 15,997.80 0.0% 3,412.5
Excelsior IV/Patricof $1.0M 999,997.28 0.8% 213,313
Total Investment 20,600,018.64 17.1% 4,394,208
-----------
Post Money 120,600,018.64 100.0% 27,243,043
-------------- -----------
OPTIONS
SUMMARY OF OPTIONS AVAILABLE OPTION POOL ISSUED
--------------------------------------------------------------------------------------
PRICE Medscape Initial Stock Option
Pool 4,250,000.0
$0.011 SCP OptionHolders @4/1/96-
Option's (1,299,500.0) 1,299,500
$0.011 Medscape 1996 Director Grants (157,500.0) 157,500
$0.011 Medscape 5/23/96 Employee
Option Grant (312,110.0) 312,110
$0.011 SCP 5/28/96 Optionees-Mirror
Grants (517,912.5) 517,913
$0.144 June 1997 Grant (681,250.0) 681,250
$0.172 Dec 1997 Grant (51,250.0) 51,250
$0.172 Feb 1998 Grant (1,000,000.0) 1,000,000
$0.172 Xxxx Xxxxxxx (45,000.0) 45,000
$0.172 Oakleigh Xxxxxx-3 yr vesting (45,000.0) 45,000
$0.172 Xxxx Xxxxxxxxx-3 yr vesting (25,000.0) 25,000
$0.344 August 1998 Grant-4 year
vesting (315,000.0) 315,000
$0.344 October 1998 Grant Xx Xxxx (25,000.0) 25,000
$0.344 October 1998 Grant Xxxxx Xxxxx (195,000.0) 195,000
June 1998 increase in options 1,250,000.0
$0.344 December 1998 Option Grant (340,117.5) 340,118
February 1999 increase in 1,250,000.0
126
options
$0.344 Xxxxx Xxxx (1,250.0) 1,250
$0.480 Xxxx Xxxxxxxxxx (1,250.0) 1,250
$0.480 Xxxxx Xxxxx (1,250.0) 1,250
$0.480 Xxxxxxx Xxxxxx (1,875.0) 1,875
$0.480 Xxxxx Xxxx (18,750.0) 18,750
$0.480 Sophia Carlati (5,000.0) 5,000
$0.480 Xxxx Xxxxxxx (1,250.0) 1,250
$1.000 Xxxxx Xxxxx Xxxxxxx (1,250.0) 1,250
$1.000 Xxx Xxxxxxxxxxxx (250,000.0) 250,000
$1.000 Xxxxxx Xxxxxxxx (150,000.0) 150,000
$1.000 Xxxxxx XxXxxxx (56,250.0) 56,250
$1.000 Xxxx Xxxxx (1,250.0) 1,250
$1.000 Xxxx Xxxxxx (250,000.0) 250,000
$1.000 Xxxxx Xxxxx (55,000.0) 55,000
$1.000 Xxxx Xxxxxx (2,500.0) 2,500
$1.000 Xxx Drill (62,500.0) 62,500
$1.000 Xxx Xxxxx (387,500.0) 387,500
$3.400 Xxxx Xxxxx Xxxxxxxxx (1,875.0) 1,875
$3.400 Xxxxx Xxxxxxxx (1,875.0) 1,875
$3.400 Xxxxxx Xxxxxx (1,250.0) 1,250
$3.400 Xxx Xxxxxxx (250,000.0) 250,000
$3.400 Xxxxxxxxx Xxxxxxx (15,000.0) 15,000
$3.400 Xxxxx Xxxxxxx (15,000.0) 15,000
$3.400 Xxxxxxx Xxxxxxxx (1,875.0) 1,875
$3.400 Xxxx XxXxxxxx (15,000.0) 15,000
$3.400 Xxxxx Xxxxxxxxxxx (87,500.0) 87,500
$3.400 Xxxx Xxxxxxx (62,500.0) 62,500
$3.400 Xxxxxxx Xxxxxxx (1,875.0) 1,875
$3.400 Xxxxxx Xxxxxx (750.0) 750
$3.400 Xxxx Xxxxxxx (75,000.0) 75,000
Options Terminated to 12/98 281,227.5 (1,775,125)
Options Terminated Q1 to 1999 28,650.0 695,550
$10,000 Xxxxxxxxx Xxxxx (1,250.0) 1,250
$10,000 Xxxxxxxx Xxxxxxxxx (2,500.0) 2,500
$10,000 Xxx Xxxxxx (18,750.0) 18,750
$10,000 Xxxxx Xxx (1,500.0) 1,500
$10,000 Xxxxxx Xxxxxxxx (17,500.0) 17,500
$10,000 Xxxx Xxxxxxxx (1,250.0) 1,250
April 1999 increase in options 1,500,000.0
$10,000 Xxxx Xxxxxxxx (6,000.0) 6,000
$10,000 Xxxxx Xxxxxxx (6,250.0) 6,250
127
$10.000 Xxx Xxxxxxxxx (8,000.0) 8,000
$10.000 Xxxxxxx Xxxxxxx (625.0) 625
$10.000 Xxx Xxxxxx (500.0) 500
$5.626 Credit Suisse/First Boston (14,887.5) 14,888
$10.000 Xxx Xxxxxx (17,500.0) 17,500
Remaining Pool after latest 1,677,350.0 5,802,953
Grant ----------- ---------
SUMMARY OF OPTIONS EXERCISED
Weighted Average
Shares Date Exercised of Options
OPTIONS EXERCISED:
1 Xxxxx Xxxxxxxx 7,500.0 9/30/92 81.00
2 Art Buskin 7,500.0 9/30/92 81.00
3 Xxxxxx Xxxxx 7,500.0 11/30/92 81.00
4 Xxxx Xxxxxxxx 15,000.0 1/31/93 162.00
Art Buskhkin 7,500.0 4/30/93 81.00
5 Xxxxx Xxxxxxxx 15,000.0 5/31/93 162.00
6 Xxxxxx Xxxxxxxx 255.0 7/31/93 2.75
7 Xxxxxxx Xxxxxxxxx 7,722.5 7/31/93 83.40
Xxxxx Xxxxxxxx 16,667.5 9/30/93 180.01
Xxxxx Xxxxxxxx 15,000.0 9/30/93 162.00
Xxxxx Xxxxxxxx 22,500.0 9/30/93 3,240.00
8 Xxxxx Xxxxxxx 19,050.0 1/29/94 204.67
9 Xxx Xxxxxxx cxl Treasury Stock 19,050.0 3/24/94 204.67
10 Xxxxxx Xxxxxxx 4,672.5 3/24/94 50.20
Art Bushkin 22,500.0 7/12/94 3,240.00
Art Bushkin 7,500.0 7/12/94 81.00
11 Xxxxxxxxx Xxxx 120,000.0 8/17/94 1,289.28
Xxxxxxxxx Xxxx 43,097.5 8/17/94 463.04
Xxxxx Xxxxxxxx 8,125.0 8/17/94 1,170.00
128
Xxxxx Xxxxxxxx 153,000.0 8/17/94 1,643.83
12 Xxxx Xxxxxx 152.5 12/14/94 1.64
13 Xxxxxxx Xxxxxx 305.0 12/14/94 3.28
14 Xxxx Xxxxxx 5,690.0 12/14/94 61.13
15 Xxx Xxxxxxx 7,315.0 12/14/94 78.59
16 Xxxxxxxx Xxxxxxx 1,220.0 12/14/94 13.11
17 Xxxxx Xxxxxx 3,125.0 12/14/94 450.00
TOTAL OPTIONS EXERCISED 536,947.5
---------
1998 options exercised 414,802.5
Pr P/Sh Q2 1999 Options Exercised # of Shares Exercise Date Total Price
18 Xxxxxxx Xxxxxxx 9,752.5 4/14/95 104.78
19 Xxxxxx Xxxxxxxxx 305.0 4/14/95 3.28
20 Xxxxxx Xxxxxxxxx 152.5 4/14/95 1.64
21 Xxxx Xxxxxx 48,612.5 4/14/95 7,000.20
22 Xxxxxxx Xxxxxxx 3,750.0 4/14/95 540.00
23 Xxxx Xxxxx 5,690.0 4/14/95 61.13
24 Xxxxxx Xxxxxxx 7,112.5 4/14/95 76.42
25 Xxxxx Xxxxxxxx 7,315.0 4/14/95 78.59
Xxxxxxx Xxxxxx 4/14/95 -
26 Xxxxx Xxxxxxx 6,097.5 4/14/95 65.51
27 Xxxxxx Xxxxxx 16,660.0 4/14/95 2,399.04
28 Xxxxx Xxxxxxx 1,367.5 4/14/95 628.92
SUBTOTAL-EXERCISED 4/15/99 109,815.0 -
---------
29 Xxxxxx Xxxxx 6,097.5 4/23/95 65.51
30 Xxxxxxx Xxxxxxxx 63,097.5 4/23/95 677.92
31 Xxxxxx Xxxxxxxx 27,315.0 4/23/95 293.47
32 Xxxxxx Xxxxxxx 12,192.5 4/23/95 131.00
33 Xxxxxxx Xxxxxx 4,877.5 4/23/95 54.40
Xxxxx Xxxxxxxx 7,500.0 4/23/95 80.58
Xxxxx Xxxxxxxx 5,000.0 4/23/95 720.00
000
00 Xxxxxxxx Xxxxx 5,000.0 4/23/95 53.72
35 Xxxx Xxxx 1,220.0 4/23/95 13.11
36 Xxxxxx Xxxxxx 12,192.5 4/23/95 131.00
Xxxxx Xxxxxxxx 152,617.5 4/23/95 52,500.42
Subtotal - exercised 4/24/99 297,110.0
---------
Xxxxx Xxxxx 13,125.0 5/13/95 1,890.00
Xxxxx Xxxxx 15,000.0 5/13/95 162.00
Xxxxxxxxx Xxxxxxx 7,315.0 5/13/95 78.59
Xxxxx Xxxxxxx 5,690.0 5/13/95 61.13
Xxxxx Xxxxxxx 525.0 5/13/95 90.30
Xxxx Xxxxx 15,282.5 5/13/95 2,200.68
Xxxx Xxxxx 30,680.0 5/13/95 331.34
Xxxx Hannissian 18,325.0 5/13/95 2,638.80
Subtotal - exercised 5/14/99 105,942.5
---------
Xxx Xxxxx 9,752.5 105.33
Xxxx Shells 312,500.0 53,750.00
Xxxxxxx X. Xxxxx 22,925.0 3,301.20
Xxxxxxx X. Xxxxx 51,000.0 550.80
Subtotal - exercised 5/26/99 396,177.5 690,417.50
---------
Xxx Xxxxx 4,877.5 52.68
Xxxxxxx Xxxxxxx 610.0 6.59
Xxx Xxxxxxx 3,657.5 39.50
Xxxxxx Xxxxxxxx 4,267.5 45.83
Xxxxxxx Xxxxxx 152.5 1.65
Xxxxx Xxxxxxx 3,047.5 32.91
Xxxx Xxxx 12,497.5 134.97
Xxxx Xxxx 23,967.5 3,451.32
Xxxxxxx Xxxxx 38,405.0 414.77
Xxxxxxxx Xxxxxx 7,925.0 85.59
130
Xxxx Hannissian 832.5 119.88
Xxxxxxx X. Xxxxx 26,602.5 275.43
Subtotal -- exercised 6/6/99 125,742.5
------------
Xxxxxxxx Xxxxxxx 610.0 6.59
Xxxx Xxxxxx 2,845.0 30.73
Xxxxxxxx Xxxxxx 7,990.0 1,150.56
Xxxxx Xxxxxxxx 3,657.5 39.50
Xxxxx Xxxxxxxx 76,500.0 826.20
Xxxxxxxxx Xxxx 14,050.0 151.74
Xxxxxxxxx Xxxx 60,000.0 648.00
Xxxx Xxxxx 2,845.0 30.73
Subtotal -- exercised 6/14/99 168,497.5
------------
Total Options Exercised 1999 1,203,285.0 78,949.25
Total Options Exercised 1,740,232.5
------------
Summary of Options
Terminated
Xxxx Xxxx 9,447.5
Xxxxx Xxxxxx 2,590.0
Xxxxx Xxxxxxxx 762.5
Honor Xxxxxx 610.0
Xxxxx Xxxxxxx 14,020.0
Xxxxx Xxxxxxx 30,785.0
Xxxx Xxxxxxxxx 610.0
Xxxx Xxx 30,785.0
Xxxxxx Xxxxxxxx 507.5
Xxxxxxx Xxxxxxxxx 15,442.5
Xxxxxx Xxxxxxx 9,347.5
Xxxxx Xxxxxxx 7,500.0
Xxxxxx Xxxxxxx 7,500.0
Xxxxxxx Xxxxx 7,500.0
SCP 1997 Terminations 6,017.5
Xxxxx Love 10,000.0
Xxxxx Xxxxxxxx 7,500.0
Xxxxx Xxx River 7,500.0
Xxxxxx Xxxxxxx 7,500.0
Xxxxxx Xxxxxxxx 7,500.0
Xxxxx Xxxxxx 4,375.0
Xxxxxxx Xxxxxxx 3,750.0
SCP 1998 Terminations 89,677.5
131
Total Terminations to 12/98 281,227.5
Q1 1999 Terms
SCP Terms 16,050.0
Xxxxxxx Xxxxxxx 8,750.0
Xxxxx Xxxxxx 1,250.0
Xxxxx Xxxxxxx 2,600.0
Q1 1999 Terms 28,650.0
Total Terminations to 3/31/99
132
Schedule 3.5
Subsidiaries
- Healthcare Communications Group, LLC
Maryland
- SoftWatch Ltd.
Israel
133
Schedule 3.9
Agreements
Certain registration rights have been granted in connection with the transaction
contemplated by the CBS Documents.
Pursuant to the Existing Stockholders Agreement, registration rights have been
granted in accordance with the terms thereof.
134
Schedule 3.12
Intellectual Property
- The Company has the domain name "Xxxxxxxx.xxx". All of the written
materials that appear on the website of the Company are copyrighted.
Pursuant to the Publishers' Circle Agreements listed on Schedule 3.18,
the Company is given the right to publish certain copyrighted materials
not owned by the Company.
- The Company licenses certain third party software pursuant to
off-the-shelf and other licenses.
Refer to table (attached).
135
MEDSCAPE, INC.
SCHEDULE 3.12
INTELLECTUAL PROPERTY
Medscape, Inc. Hold the following registered and unregistered trademarks,
trademark registrations, service marks and service xxxx registration.
XXXX APPLICATION REGISTRATION FILING ISSUE MRK FRISHAUF COUNTRY
NUMBER NUMBER DATE DATE DOCKET #
MEDSCAPE 74694062 1978357 6/26/95 6/4/96 (R) 9650223 US
MEDSCAPE 112296/96 4177836 10/7/96 8/14/98 0000000 Xxxxx
MEDSCAPE 4/16/96 EU
MEDSCAPE 4/29/98 950223 Mex,
Brazil
& Australia
MEDSCAPE 588,090 7/22/98 7/22/98 000000 Xxxxxx
MEDSCAPE 873996 TMA506,890 4/1/98 1/20/99 000000 Xxxxxx
MEDSCAPE 761340 2/23/99 Australia
MEDSCAPE THE ONLINE
RESOURCE FOR BETTER
PATIENT CARE 74693130 1978350 6/26/95 6/4/96 (R) 950224 US
BANNERLINK 75048453 2113141 1/25/96 11/11/97 (R) 950687 US
PICTOURS 75048454 2083213 1/25/96 7/29/97 (R) 950688 US
136
INTERNET MEDICAL MARKETING 75048463 2093810 1/25/96 9/2/97 (R) 950689 US
PUBLISHERS' CIRCLE 75048452 2075218 1/25/96 7/1/97 (R) 950690 US
MEDPULSE 75105531 2069424 3/26/96 6/10/97 (R) 960147 US
XXXXXXXX 0/00/00 000000 Xxx,
Xxxxxx
& Australia
MEDPULSE 588091 7/22/98 9/28/98 000000 Xxxxxx
MEDPULSE 761341 2/23/99 960147 Australia
-------------------------------------
Domain names: Xxxxxxxx.xxx
137
Schedule 3.13
Financial Statements
The unaudited financial statements of the Company referred to in Section 3.13 of
the Agreement do not contain the appropriate financial footnote disclosure
required by generally accepted accounting principles.
138
Schedule 3.14
Material Adverse Changes
Changes which have occurred in connection with the transactions contemplated by
(i) the CBS Documents, (ii) the Preferred Share Purchase Agreement, by and among
SoftWatch Ltd., the Company, and the persons named therein (together with the
other agreements executed therewith, the "Softwatch Documents") and (iii) the
Initial Public Offering of the Common Stock of the Company.
139
Schedule 3.18
Contracts
- Employment Agreement between the Company and Xxxx X. Xxxxxx, dated
January 26, 1998.
- Employment Agreement between the Company and Xxxxxx Xxxxx, dated
September 30, 1998.
- Employment and Restricted Stock Purchase Agreement between the Company
and Xxxxxxx X. Xxxxxxx, M.D., Ph.D., dated October 27, 1998.
- Promissory Note dated October 27, 1998, in the principal amount of
$627,949.64 made by Xxxxxxx X. Xxxxxxx, M.D., Ph.D. in favor of the
Company.
- Employment Agreement between the Company and Xxxxx X. Xxxxxxxx, dated
February 16, 1998.
- Employment Agreement between the Company and Xxxxxx X. Xxxxxxxx, M.D.,
dated February 15, 1999.
- Employment Agreement between the Company and Xxxxx Xxxxxxxxxxx, dated
March 15, 1999.
- Employment Agreement between the Company and Xxx Xxxxx, dated March 4,
1999.
- Employment Agreement between the Company and Xxxx Xxxxxxxx, dated June
28, 1999.
- Consulting Agreement between the Company and MSI New York (April 15,
1998).
- Independent Contractor Agreements for the HIV Medical Advisory Board
Members between the Healthcare Communications Group, L.L.C. and
members.
- Engagement letter between the Company and Credit Suisse First Boston
(January 4, 1999).
- Publishers' Circle Agreements:
Adis International, a Wolters Kluwer Company
Clinical Drug Investigations
140
Drug & Therapy Perspectives
American Board of Family Practice
JABFP
Association of Community Cancer Centers
Oncology Issues
Clinicians Publishing Group/Xxxxxxxx & Xxxxxxx
Clinician News
Clinician Reviews
The duPont Hospital for Children
Pediatric Orthopedic Education Module
First DataBank -- A wholly owned subsidiary of the Hearst
Corporation National Drug Data File
Healthcare Media International
Medical Practice Communicator
- Agreement of Lease between the Company and R.A.A. Realty Company LP
dated February 1999.
- Lease Assignment made by SCP Communications, Inc. made in favor of the
Company.
- Agreement of Lease between Surgical Care Publishing, Inc. and
Satyanman, Inc., dated October 7, 1996.
- Agreement of Lease between Surgical Care Publishing, Inc. and
Satyanman, Inc., dated August 29, 1995.
- Agreement of Lease between Surgical Care Publishing, Inc. and
Satyanman, Inc., dated March 17, 1994.
- Agreement of Lease between Surgical Care Publishing, Inc. and
Satyanman, Inc., dated August 18, 1993.
- Clinical Care Options Annual Meeting Hotel Commitments Commitment
----------
2000 Conference at Hyatt Regency Scottsdale AZ $ 282,240
0000 Xxxx Xxxxxxx Xxxxxx XX $ 303,525
- Architect
Stonehill & Xxxxxx Architects and Planners -- for 2nd and 3rd floors
(not signed) $80,000
- Office Relocation Independent Contractor XX Xxxxxx (not signed) $56,800
141
- Stock Purchase Agreement, between the Company and investors dated
October 31, 1997 in respect of the Series C Preferred Stock.
- First Amendment to Stock Purchase Agreement between the Company and
investors, dated February 19, 1998.
- Supplemental Agreement to Amendment to Stock Purchase Agreement and
First Amendment to, and Waiver of Certain Terms of, Stockholders'
Agreement between the Company and investors, dated March 9, 1998 in
respect of the Series C Preferred Stock.
- Series D Preferred Stock Purchase Agreement between the Company and
investors, dated March 5, 1999.
- Content Distribution Agreement, by and between the Company and Dow
Xxxxx & Company, Inc., dated January 22, 1999,
- CBS Documents.
- Softwatch Documents.
- Agreement, by and between the Company and Xxxxxxxxx, Xxxxxx and
Xxxxxxxx.
142
Schedule 3.23
Negotiations
None except for those negotiations which have been entered into in connection
with the transaction contemplated by the CBS Documents.
