1
EXHIBIT 10.10
EXECUTION COPY
CLASS E CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
between
CAREERBUILDER, INC.
and
THE SEVERAL PURCHASERS NAMED IN SCHEDULE I
----------
Dated as of July 6, 1998
2
EXECUTION COPY
TABLE OF CONTENTS
PAGE
----
ARTICLE I THE PREFERRED SHARES................................................................................... 2
1.1 ISSUANCE, SALE AND DELIVERY OF THE PREFERRED SHARES...................................................... 2
--- ---------------------------------------------------
1.2 CLOSING.................................................................................................. 2
--- -------
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................................................... 3
2.1 ORGANIZATION, QUALIFICATIONS AND CORPORATE POWER......................................................... 3
--- ------------------------------------------------
2.2 AUTHORIZATION OF AGREEMENTS, ETC......................................................................... 3
--- --------------------------------
2.3 VALIDI................................................................................................... 4
--- ------
2.4 AUTHORIZED CAPITAL STOCK................................................................................. 4
--- ------------------------
2.5 FINANCIAL STATEMENTS..................................................................................... 5
--- --------------------
2.6 EVENTS SUBSEQUENT TO THE DATE OF THE BALANCE SHEET....................................................... 5
--- --------------------------------------------------
2.7 LITIGATION; COMPLIANCE WITH LAW.......................................................................... 6
--- -------------------------------
2.8 PROPRIETARY INFORMATION OF THIRD PARTIES................................................................. 6
--- ----------------------------------------
2.9 PATENTS, TRADEMARKS, ETC................................................................................. 7
--- ------------------------
2.10 TITLE TO PROPERTIES...................................................................................... 7
---- -------------------
2.11 LEASEHOLD INTERESTS...................................................................................... 8
---- -------------------
2.12 INSURANCE................................................................................................ 8
---- ---------
2.13 TAXES.................................................................................................... 8
---- -----
2.14 OTHER AGREEMENTS......................................................................................... 8
---- ----------------
2.15 LOANS AND ADVANCES....................................................................................... 10
---- ------------------
2.16 ASSUMPTIONS, GUARANTIES, ETC. OF INDEBTEDNESS OF OTHER PERSONS........................................... 10
---- --------------------------------------------------------------
2.17 SIGNIFICANT CUSTOMERS AND SUPPLIERS...................................................................... 11
---- -----------------------------------
2.18 GOVERNMENTAL APPROVALS................................................................................... 11
---- ----------------------
2.19 DISCLOSURE............................................................................................... 11
---- ----------
2.20 OFFERING OF THE PREFERRED SHARES......................................................................... 11
---- --------------------------------
2.21 BROKERS.................................................................................................. 12
---- -------
2.22 OFFICERS................................................................................................. 12
---- --------
2.23 TRANSACTIONS WITH AFFILIATES............................................................................. 12
---- ----------------------------
2.24 EMPLOYEES................................................................................................ 12
---- ---------
2.25 U.S. REAL PROPERTY HOLDING CORPORATION................................................................... 12
---- --------------------------------------
2.26 ERISA.................................................................................................... 13
---- -----
2.27 DISQUALIFIED PERSONS..................................................................................... 14
---- -------------------
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS..................................................... 14
ARTICLE IV CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS....................................................... 15
ARTICLE V COVENANTS OF THE COMPANY............................................................................... 20
5.1 FINANCIAL STATEMENTS, REPORTS, ETC....................................................................... 20
--- ----------------------------------
5.2 RIGHT OF FIRST OFFER..................................................................................... 21
--- --------------------
i
3
EXECUTION COPY
5.3 RESERVE FOR CONVERSION SHARES............................................................................ 23
--- -----------------------------
5.4 CORPORATE EXISTENCE...................................................................................... 23
--- -------------------
5.5 PROPERTIES, BUSINESS, INSURANCE.......................................................................... 23
--- -------------------------------
5.6 INSPECTION, CONSULTATION AND ADVICE...................................................................... 23
--- -----------------------------------
5.7 RESTRICTIVE AGREEMENTS PROHIBITED........................................................................ 24
--- ---------------------------------
5.8 TRANSACTIONS WITH AFFILIATES............................................................................. 24
--- ----------------------------
5.9 PROCEEDS................................................................................................. 24
--- --------
5.10 BOARD OF DIRECTORS MEETINGS. THE COMPANY SHALL USE ITS BEST EFFORTS TO ENSURE THAT MEETINGS OF ITS
---- ---------------------------
BOARD OF DIRECTORS............................................................................................. 24
5.11 COMPENSATION............................................................................................. 24
---- ------------
5.12 BY-LAWS.................................................................................................. 25
---- -------
5.13 PERFORMANCE OF CONTRACTS................................................................................. 25
---- ------------------------
5.14 VESTING OF RESERVED EMPLOYEE SHARES...................................................................... 25
---- -----------------------------------
5.15 EMPLOYEE NONDISCLOSURE AND DEVELOPMENTS AGREEMENTS....................................................... 25
---- --------------------------------------------------
5.16 ACTIVITIES OF SUBSIDIARIES............................................................................... 25
---- --------------------------
5.17 COMPLIANCE WITH LAWS..................................................................................... 25
---- --------------------
5.18 KEEPING OF RECORDS AND BOOKS OF ACCOUNT.................................................................. 25
---- ---------------------------------------
5.19 CHANGE IN NATURE OF BUSINESS............................................................................. 26
---- ----------------------------
5.20 U.S. REAL PROPERTY INTEREST STATEMENT.................................................................... 26
---- -------------------------------------
ARTICLE VI MISCELLANEOUS......................................................................................... 28
6.1 EXPENSES................................................................................................. 28
--- --------
6.2 SURVIVAL OF AGREEMENTS................................................................................... 28
--- ----------------------
6.3 BROKERAGE................................................................................................ 28
--- ---------
6.4 PARTIES IN INTEREST...................................................................................... 28
--- -------------------
6.5 NOTICES.................................................................................................. 28
--- -------
6.6 GOVERNING LAW............................................................................................ 29
--- -------------
6.7 ENTIRE AGREEMENT......................................................................................... 29
--- ----------------
6.8 COUNTERPARTS............................................................................................. 29
--- ------------
6.9 AMENDMENTS............................................................................................... 29
--- ----------
6.10 SEVERABILITY............................................................................................. 29
---- -----------
6.11 TITLES AND SUBTITLES..................................................................................... 29
---- --------------------
6.12 ASSIGNMENT............................................................................................... 29
---- ----------
6.13 CERTAIN DEFINED TERMS.................................................................................... 29
---- ---------------------
INDEX TO SCHEDULES
SCHEDULE I Purchasers
SCHEDULE II Disclosure Schedule
SCHEDULE III Security Holders
SCHEDULE IV Agreements
SCHEDULE V Disqualified Persons
ii
4
EXECUTION COPY
THIS CLASS E CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (the
"Agreement") is made as of July 6, 1998 between CareerBuilder, Inc., a Delaware
corporation (the "Company"), and the several purchasers named in the attached
Schedule I (individually a "Purchaser" and collectively the "Purchasers").
WHEREAS, the Company wishes to issue and sell to the Purchasers an
aggregate of up to 1,024,351 shares (the "Preferred Shares") of the authorized
but unissued Class E Convertible Preferred Stock, $.001 par value, of the
Company (the "Class E Convertible Preferred Stock"); and
WHEREAS, the Purchasers, severally, wish to purchase the Preferred
Shares on the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
THE PREFERRED SHARES
1.1 Issuance, Sale and Delivery of the Preferred Shares. The Company
agrees to issue and sell to each Purchaser, and each Purchaser hereby agrees to
purchase from the Company, the number of Preferred Shares set forth opposite the
name of such Purchaser under the heading "Number of Preferred Shares to be
Purchased" on Schedule I, at the aggregate purchase price set forth opposite the
name of such Purchaser under the heading "Aggregate Purchase Price for Preferred
Shares" on Schedule I.
1.2 Closing. The closing shall take place at the offices of Xxxx and
Xxxx LLP, 0000 Xxxxxxxxxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000, at 10 a.m., on
July 6, 1998, or at such other location, date and time as may be agreed upon
between the Purchasers and the Company (such closing being called the "Closing"
and such date and time being called the "Closing Date"). At the Closing, the
Company shall issue and deliver to each Purchaser a stock certificate or
certificates in definitive form, registered in the name of such Purchaser,
representing the Preferred Shares being purchased by it at the Closing. As
payment in full for the Preferred Shares being purchased by it under this
Agreement, and against delivery of the stock certificate or certificates
therefor as aforesaid, on the Closing Date each Purchaser shall (i) deliver to
the Company a check payable to the order of the Company, in the amount set forth
opposite the name of such Purchaser under the heading "Aggregate Purchase Price
for Preferred Shares" on Schedule I, (ii) transfer such sum to the account of
the Company by wire transfer, (iii) deliver to the Company for cancellation
promissory notes issued by the Company in the amount of such sum, or (iv)
deliver or transfer such sum to the Company by any combination of such methods
of payments.
1
5
EXECUTION COPY
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchasers that, except as
set forth in the Disclosure Schedule attached as Schedule II:
2.1 Organization, Qualifications and Corporate Power.
(a) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware
and is duly licensed or qualified to transact business as a foreign corporation
and is in good standing in each jurisdiction in which the nature of the business
transacted by it or the character of the properties owned or leased by it
requires such licensing or qualification. The Company has the corporate power
and authority to own and hold its properties and to carry on its business as now
conducted and as proposed to be conducted, to execute, deliver and perform this
Agreement and the Second Amended and Restated Registration Rights Agreement with
the Purchasers in the form attached as Exhibit A (the "Second Amended and
Restated Registration Rights Agreement"), to issue, sell and deliver the
Preferred Shares and to issue and deliver the shares of Common Stock, $.001 par
value, of the Company ("Common Stock") issuable upon conversion of the Preferred
Shares (the "Conversion Shares").
(b) The Company has no subsidiaries. The Company does not
(i) own of record or beneficially, directly or indirectly, (A) any shares of
capital stock or securities convertible into capital stock of any other
corporation or (B) any participating interest in any partnership, joint venture
or other non-corporate business enterprise or (ii) control, directly or
indirectly, any other entity.
2.2 Authorization of Agreements, Etc.
(a) The execution and delivery by the Company of this
Agreement and the Second Amended and Restated Registration Rights Agreement, the
performance by the Company of its obligations hereunder and thereunder, the
issuance, sale and delivery of the Preferred Shares, and the issuance and
delivery of the Conversion Shares have been duly authorized by all requisite
corporate action and will not violate any provision of law, any order of any
court or other agency of government, the Charter or the By-laws of the Company,
as amended, or any provision of any indenture, agreement or other instrument to
which the Company or any of its properties or assets is bound, or conflict with,
result in a breach of or constitute (with due notice or lapse of time or both) a
default under any such indenture, agreement or other instrument, or result in
the creation or imposition of any lien, charge, restriction, claim or
encumbrance of any nature whatsoever upon any of the properties or assets of the
Company. To the best of the Company's knowledge, no provision of any of the
Stock Restriction Agreements dated July 12, 1996 (the "Stock Restriction
Agreements") violates, conflicts with, results in a breach of or constitutes
(with due notice or lapse of time or both ) a default by any other party under
any other indenture, agreement or instrument. The Purchasers shall not become,
by virtue of this
2
6
EXECUTION COPY
Agreement or any documents related hereto, parties to or third party
beneficiaries of such Stock Restriction Agreements.
(b) The Preferred Shares have been duly authorized and, when
issued in accordance with this Agreement, will be validly issued, fully paid and
nonassessable shares of Class E Convertible Preferred Stock with no personal
liability attaching to the ownership thereof and will be free and clear of all
liens, charges, restrictions, claims and encumbrances imposed by or through the
Company except as set forth in the Amended Registration Rights Agreement and the
Charter. The Conversion Shares have been duly reserved for issuance upon
conversion of the Preferred Shares and, when so issued, will be duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock with no
personal liability attaching to the ownership thereof and will be free and clear
of all liens, charges, restrictions, claims and encumbrances imposed by or
through the Company except as set forth in the Second Amended and Restated
Registration Rights Agreement. Neither the issuance, sale or delivery of the
Preferred Shares nor the issuance or delivery of the Conversion Shares is
subject to any preemptive right of stockholders of the Company, or to any right
of first refusal or other right in favor of any person, which have not been duly
and validly waived.
2.3 Validity. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable in accordance with its terms. The Second Amended and
Restated Registration Rights Agreement, when executed and delivered in
accordance with this Agreement, will constitute the legal, valid and binding
obligations of the Company, enforceable in accordance with their respective
terms.
2.4 Authorized Capital Stock. The authorized capital stock of
the Company consists of (i) 1,562,500 shares of Class A Convertible Preferred
Stock, $.001 par value (the "Class A Preferred Stock"), (ii) 2,151,420 shares of
Class B Convertible Preferred Stock, $.001 par value (the "Class B Preferred
Stock"), (iii) 3,188,889 shares of Class C Convertible Preferred Stock, $.001
par value (the "Class C Preferred Stock"), (iv) 2,045,785 shares of Class D
Convertible Preferred Stock, $.001 par value (the "Class D Preferred Stock"),
(v) 1,024,351 shares of Class E Convertible Preferred Stock, $.001 par value
(the "Class E Preferred Stock") and (vi) 17,500,000 shares of Common Stock.
Immediately prior to the Closing, 4,434,583 shares of Common Stock, 1,537,500
shares of Class A Preferred Stock, 2,151,420 shares of Class B Preferred Stock,
3,188,889 shares of Class C Preferred Stock and 2,045,785 shares of Class D
Preferred Stock will be validly issued and outstanding, fully paid and
nonassessable with no personal liability attaching to the ownership thereof and
no shares of Class E Preferred Stock will have been issued. The stockholders of
record and holders of subscriptions, warrants, options, convertible securities,
and other rights (contingent or other) to purchase or otherwise acquire equity
securities of the Company, and the number of shares of Common Stock and the
number of such subscriptions, warrants, options, convertible securities, and
other such rights held by each, are as set forth in the attached Schedule III.
The Company has attached a copy of the post-closing capitalization schedule as a
part of Schedule III. The designations, powers, preferences, rights,
qualifications, limitations and restrictions in respect of each class and series
of authorized capital stock of the Company are as set forth in the Charter, a
copy of which is attached as Exhibit B, and all such designations, powers,
preferences, rights, qualifications, limitations and restrictions are valid,
binding and enforceable and in accordance with all applicable laws. Except as
set forth in the attached Schedule III, (i) no person owns of record or is known
to the
3
7
EXECUTION COPY
Company to own beneficially any share of Common Stock, Class A Preferred
Stock, Class B Preferred Stock, Class C Preferred Stock or Class D Preferred
Stock, (ii) no subscription, warrant, option, convertible security, or other
right (contingent or other) to purchase or otherwise acquire equity securities
of the Company is authorized or outstanding, and (iii) there is no commitment by
the Company to issue shares, subscriptions, warrants, options, convertible
securities or other such rights or to distribute to holders of any of its equity
securities any evidence of indebtedness or asset. Except as provided for in the
Charter or as set forth in the attached Schedule II, the Company has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interest therein or to pay any dividend or
make any other distribution in respect thereof. Except as set forth in Schedule
II, to the best of the Company's knowledge there are no voting trusts or
agreements, stockholders' agreements, pledge agreements, buy-sell agreements,
rights of first refusal, preemptive rights or proxies relating to any securities
of the Company (whether or not the Company is a party thereto). All of the
outstanding securities of the Company were issued in compliance with all
applicable Federal and state securities laws.
2.5 Financial Statements.
(a) The Company has furnished to the Purchasers the audited
balance sheet of the Company as of September 30, 1996 and September 30, 1997 and
the related audited statements of income, stockholders' equity and cash flows of
the Company for the fiscal years ended September 30, 1996 and September 30,
1997. All such financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied and fairly present
the financial position of the Company as of September 30, 1996 and September 30,
1997 and the results of its operations and cash flows for the fiscal year ended
September 30, 1996 and September 30, 1997.
(b) The Company has furnished to the Purchasers the
unaudited balance sheet of the Company as of March 30, 1998 (the "Balance
Sheet") and the related unaudited statements of income, stockholders' equity,
and cash flows of the Company for the six months ended March 30, 1998. All such
financial statements have been prepared in accordance with generally accepted
accounting principles consistently applied (except that such unaudited financial
statements do not contain all of the required footnotes and are subject to
normal year-end adjustment) and fairly present the financial position of the
Company as of March 30, 1998 and the results of its operations and cash flows
for the six months ended March 30, 1998. Since the date of the Balance Sheet,
(i) there has been no change in the assets, liabilities or financial condition
of the Company from that reflected in the Balance Sheet except for changes in
the ordinary course of business which in the aggregate have not been materially
adverse and (ii) none of the business, prospects, financial condition,
operations, property or affairs of the Company have been materially adversely
affected by any subsequent occurrence or development, individually or in the
aggregate, whether or not insured against.
2.6 Events Subsequent to the Date of the Balance Sheet. Since
the date of the Balance Sheet, the Company has not (i) issued any stock, bond or
other corporate security, (ii) borrowed any amount or incurred or become subject
to any liability (absolute, accrued or contingent), except current liabilities
incurred and liabilities under contracts entered into in the ordinary course of
business, (iii) discharged or satisfied any lien or encumbrance or incurred or
4
8
EXECUTION COPY
paid any obligation or liability (absolute, accrued or contingent) other than
current liabilities shown on the Balance Sheet and current liabilities incurred
since the date of the Balance Sheet in the ordinary course of business, (iv)
declared or made any payment or distribution to stockholders or purchased or
redeemed any shares of its capital stock or other security, (v) mortgaged,
pledged, encumbered or subjected to lien any of its assets, tangible or
intangible, other than liens of current real property taxes not yet due and
payable, (vi) sold, assigned or transferred any of its tangible assets except in
the ordinary course of business, or canceled any debt or claim, (vii) sold,
assigned, transferred or granted any exclusive license with respect to any
patent, trademark, trade name, service xxxx, copyright, trade secret or other
intangible asset, (viii) suffered any loss of property or waived any right of
substantial value whether or not in the ordinary course of business, (ix) made
any change in officer compensation except in the ordinary course of business and
consistent with past practice, (x) made any material change in the manner of
business or operations of the Company, (xi) entered into any transaction except
in the ordinary course of business or as otherwise contemplated hereby or (xii)
entered into any commitment (contingent or otherwise) to do any of the
foregoing.
2.7 Litigation; Compliance with Law. There is no (i) action,
suit, claim, proceeding or investigation pending or, to the best of the
Company's knowledge, threatened against or specifically affecting the Company,
at law or in equity, or before or by any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, (ii) arbitration proceeding relating to the Company pending
under collective bargaining agreements or otherwise or (iii) governmental
inquiry pending or, to the best of the Company's knowledge, threatened against
or specifically affecting the Company (including without limitation any inquiry
as to the qualification of the Company to hold or receive any license or
permit), nor is the Company aware that there is any basis for the foregoing. The
Company has not received any opinion or memorandum or legal advice from legal
counsel to the effect that it is exposed, from a legal standpoint, to any
liability or disadvantage which may be material to its business, prospects,
financial condition, operations, property or affairs. The Company is not in
default with respect to any order, writ, injunction or decree known to or served
upon the Company of any court or of any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign. There is no action or suit by the Company pending or
threatened against others. To the best of the Company's knowledge, the Company
has complied with all laws, rules, regulations and orders applicable to its
business, operations, properties, assets, products and services, the Company has
all necessary permits, licenses and other authorizations required to conduct its
business as conducted and as proposed to be conducted, and the Company has been
operating its business pursuant to and in compliance with the terms of all such
permits, licenses and other authorizations. There is no existing law, rule,
regulation or order, and the Company after due inquiry is not aware of any
proposed law, rule, regulation or order, whether Federal, state, county or
local, which would prohibit or restrict the Company from, or otherwise
materially adversely affect the Company in, conducting its business in any
jurisdiction in which it is now conducting business or in which it proposes to
conduct business.
2.8 Proprietary Information of Third Parties. To the best of the
Company's knowledge, no third party has claimed or has reason to claim that any
person employed by or affiliated with the Company has (a) violated or may be
violating any of the terms or conditions
5
9
EXECUTION COPY
of his employment, non-competition or non-disclosure agreement with such third
party, (b) disclosed or may be disclosing or utilized or may be utilizing any
trade secret or proprietary information or documentation of such third party or
(c) interfered or may be interfering in the employment relationship between such
third party and any of its present or former employees. No third party has
requested information from the Company which suggests that such a claim might be
contemplated. To the best of the Company's knowledge, no person employed by or
affiliated with the Company has employed or proposes to employ any trade secret
or any information or documentation proprietary to any former employer, and to
the best of the Company's knowledge, no person employed by or affiliated with
the Company has violated any confidential relationship which such person may
have had with any third party, in connection with the development, manufacture
or sale of any product or proposed product or the development or sale of any
service or proposed service of the Company, and the Company has no reason to
believe there will be any such employment or violation. To the best of the
Company's knowledge, none of the execution or delivery of this Agreement, or the
carrying on of the business of the Company as officers, employees or agents by
any officer, director or key employee of the Company, or the conduct or proposed
conduct of the business of the Company, will conflict with or result in a breach
of the terms, conditions or provisions of or constitute a default under any
contract, covenant or instrument under which any such person is obligated.
2.9 Patents, Trademarks, Etc. Set forth in Schedule II is a list
and brief description of all domestic and foreign patents, patent rights, patent
applications, trademarks, trademark applications, service marks, service xxxx
applications, trade names and copyrights, and all applications for such which
are in the process of being prepared, owned by or registered in the name of the
Company, or of which the Company is a licensor or licensee or in which the
Company has any right, and in each case a brief description of the nature of
such right. The Company owns or possesses adequate licenses or other rights to
use all patents, patent applications, trademarks, trademark applications,
service marks, service xxxx applications, trade names, copyrights, manufacturing
processes, formulae, trade secrets, customer lists and know how (collectively,
"Intellectual Property") necessary or desirable to the conduct of its business
as conducted and as proposed to be conducted, and no claim is pending or, to the
best of the Company's knowledge, threatened to the effect that the operations of
the Company infringe upon or conflict with the asserted rights of any other
person under any Intellectual Property, and there is no basis for any such claim
(whether or not pending or threatened). No claim is pending or threatened to the
effect that any such Intellectual Property owned or licensed by the Company, or
which the Company otherwise has the right to use, is invalid or unenforceable by
the Company, and there is no basis for any such claim (whether or not pending or
threatened). All prior art known to the Company which may be or may have been
pertinent to the examination of any United States patent or patent application
listed in Schedule II has been cited to the United States Patent and Trademark
Office. To the best of the Company's knowledge, all technical information
developed by and belonging to the Company which has not been patented has been
kept confidential. The Company has not granted or assigned to any other person
or entity any right to manufacture, have manufactured, assemble or sell the
products or proposed products or to provide the services or proposed services of
the Company.
2.10 Title to Properties. The Company has good, clear and
marketable title to its properties and assets reflected on the Balance Sheet or
acquired by it since the date of the
6
10
EXECUTION COPY
Balance Sheet (other than properties and assets disposed of in the ordinary
course of business since the date of the Balance Sheet), and all such properties
and assets are free and clear of mortgages, pledges, security interests, liens,
charges, claims, restrictions and other encumbrances (including without
limitation, easements and licenses), except liens for or current taxes not yet
due and payable and minor imperfections of title, if any, not material in nature
or amount and not materially detracting from the value or impairing the use of
the property subject thereto or impairing the operations or proposed operations
of the Company, including without limitation, the ability of the Company to
secure financing using such properties and assets as collateral. To the best of
the Company's knowledge after due inquiry, there are no condemnation,
environmental, zoning or other land use regulation proceedings, either
instituted or planned to be instituted, which would adversely affect the use or
operation of the Company's properties and assets for their respective intended
uses and purposes, or the value of such properties, and the Company has received
no notice of any special assessment proceedings which would affect such
properties and assets.
2.11 Leasehold Interests. Each lease or agreement to which the
Company is a party under which it is a lessee of any property, real or personal,
is a valid and subsisting agreement, duly authorized and entered into, without
any default of the Company thereunder and, to the best of the Company's
knowledge, without any default thereunder of any other party thereto. No event
has occurred and is continuing which, with due notice or lapse of time or both,
would constitute a default or event of default by the Company under any such
lease or agreement or, to the best of the Company's knowledge, by any other
party thereto. The Company's possession of such property has not been disturbed
and, to the best of the Company's knowledge after due inquiry, no claim has been
asserted against the Company adverse to its rights in such leasehold interests.
2.12 Insurance. The Company holds valid policies covering all of
the insurance required to be maintained by it under Section 5.5.
2.13 Taxes. The Company has filed all tax returns, Federal,
state, county and local, required to be filed by it, and the Company has paid
all taxes shown to be due by such returns as well as all other taxes,
assessments and governmental charges which have become due or payable, including
without limitation all taxes which the Company is obligated to withhold from
amounts owing to employees, creditors and third parties. The Company has
established adequate reserves for all taxes accrued but not yet payable. All tax
elections have been made by the Company in accordance with generally accepted
practice. The Federal income tax returns of the Company have never been audited
by the Internal Revenue Service. No deficiency assessment with respect to or
proposed adjustment of the Company's Federal, state, county or local taxes is
pending or, to the best of the Company's knowledge, threatened. There is no tax
lien, whether imposed by any Federal, state, county or local taxing authority,
outstanding against the assets, properties or business of the Company. Neither
the Company nor any of its present or former stockholders has ever filed an
election pursuant to Section 1362 of the Internal Revenue Code of 1986, as
amended (the "Code"), that the Company be taxed as an S corporation.
2.14 Other Agreements. Except as set forth in the attached
Schedule IV, the Company is not a party to or otherwise bound by any written or
oral agreement, instrument,
7
11
EXECUTION COPY
commitment or restriction which individually or in the aggregate could
materially adversely affect the business, prospects, financial condition,
operations, property or affairs of the Company. Except as set forth in the
attached Schedule IV, the Company is not a party to or otherwise bound by any
written or oral:
(a) distributor, dealer, manufacturer's representative or
sales agency agreement which is not terminable on less than ninety (90) days'
notice without cost or other liability to the Company (except for agreements
which, in the aggregate, are not material to the business of the Company);
(b) sales agreement which entitles any customer to a rebate
or right of set-off, to return any product to the Company after acceptance
thereof or to delay the acceptance thereof, or which varies in any material
respect from the Company's standard form agreements;
(c) agreement with any labor union (and, to the knowledge of
the Company, no organizational effort is being made with respect to any of its
employees);
(d) agreement with any supplier containing any provision
permitting any party other than the Company to renegotiate the price or other
terms, or containing any payback or other similar provision, upon the occurrence
of a failure by the Company to meet its obligations under the agreement when due
or the occurrence of any other event;
(e) agreement for the future purchase of fixed assets or for
the future purchase of materials, supplies or equipment in excess of its normal
operating requirements;
(f) agreement for the employment of any officer, employee or
other person (whether of a legally binding nature or in the nature of an
informal understanding) on a full-time or consulting basis which is not
terminable on notice without cost or other liability to the Company, except
normal severance arrangements and accrued vacation pay;
(g) bonus, pension, profit-sharing, retirement,
hospitalization, insurance, stock purchase, stock option or other plan,
agreement or understanding pursuant to which benefits are provided to any
employee of the Company (other than group insurance plans applicable to
employees generally);
(h) agreement relating to the borrowing of money or to the
mortgaging or pledging of, or otherwise placing a lien or security interest on,
any asset of the Company;
(i) guaranty of any obligation for borrowed money or
otherwise;
(j) voting trust or agreement, stockholders' agreement,
pledge agreement, buy-sell agreement or first refusal or preemptive rights
agreement relating to any securities of the Company;
(k) agreement, or group of related agreements with the same
party or any group of affiliated parties, under which the Company has advanced
or agreed to advance money or has agreed to lease any property as lessee or
lessor;
8
12
EXECUTION COPY
(l) agreement or obligation (contingent or otherwise) to
issue, sell or otherwise distribute or to repurchase or otherwise acquire or
retire any share of its capital stock or any of its other equity securities;
(m) assignment, license or other agreement with respect to
any form of intangible property;
(n) agreement under which it has granted any person any
registration rights, other than the Second Amended and Restated Registration
Rights Agreement;
(o) agreement under which it has limited or restricted its
right to compete with any person in any respect;
(p) other agreement or group of related agreements with the
same party involving more than $50,000 or continuing over a period of more than
six months from the date or dates thereof (including renewals or extensions
optional with another party), which agreement or group of agreements is not
terminable by the Company without penalty upon notice of thirty (30) days or
less, but excluding any agreement or group of agreements with a customer of the
Company for the sale, lease or rental of the Company's products or services if
such agreement or group of agreements was entered into by the Company in the
ordinary course of business; or
(q) other agreement, instrument, commitment, plan or
arrangement, a copy of which would be required to be filed with the Securities
and Exchange Commission (the "Commission") as an exhibit to a registration
statement on Form S-1 if the Company were registering securities under the
Securities Act of 1933, as amended (the "Securities Act").
The Company, and to the best of the Company's knowledge after due
inquiry, each other party thereto have in all material respects performed all
the obligations required to be performed by them to date (or each non-performing
party has received a valid, enforceable and irrevocable written waiver with
respect to its non-performance), have received no notice of default and are not
in default (with due notice or lapse of time or both) under any agreement,
instrument, commitment, plan or arrangement to which the Company is a party or
by which it or its property may be bound. The Company has no present expectation
or intention of not fully performing all its obligations under each such
agreement, instrument, commitment, plan or arrangement, and the Company has no
knowledge of any breach or anticipated breach by the other party to any
agreement, instrument, commitment, plan or arrangement to which the Company is a
party. The Company is in full compliance with all of the terms and provisions of
its Charter and By-laws, as amended.
2.15 Loans and Advances. The Company does not have any
outstanding loans or advances to any person and is not obligated to make any
such loans or advances, except, in each case, for advances to employees of the
Company in respect to reimbursable business expenses anticipated to be incurred
by them in connection with their performance of services for the Company.
2.16 Assumptions, Guaranties, Etc. of Indebtedness of Other
Persons. The Company has not assumed, guaranteed, endorsed or otherwise become
directly or contingently
9
13
liable on any indebtedness of any other person (including, without limitation,
liability by way of agreement, contingent or otherwise, to purchase, to provide
funds for payment, to supply funds to or otherwise invest in the debtor, or
otherwise to assure the creditor against loss), except for guaranties by
endorsement of negotiable instruments for deposit or collection in the ordinary
course of business.
2.17 Significant Customers and Suppliers. No customer or supplier
which was significant to the Company during the period covered by the financial
statements referred to in Section 2.5 or which has been significant to the
Company thereafter, has terminated, materially reduced or threatened to
terminate or materially reduce its purchases from or provision of products or
services to the Company, as the case may be.
2.18 Governmental Approvals. Subject to the accuracy of the
representations and warranties of the Purchasers set forth in Article III, no
registration or filing with, or consent or approval of or other action by, any
Federal, state or other governmental agency or instrumentality is or will be
necessary for the valid execution, delivery and performance by the Company of
this Agreement or the Second Amended and Restated Registration Rights Agreement,
the issuance, sale and delivery of the Preferred Shares or, upon conversion
thereof, the issuance and delivery of the Conversion Shares, other than (i)
filings pursuant to state securities laws (all of which filings have been made
by the Company, other than those which are required to be made after the Closing
and which will be duly made on a timely basis) in connection with the sale of
the Preferred Shares and (ii) with respect to the Second Amended and Restated
Registration Rights Agreement, the registration of the shares covered thereby
with the Commission and filings pursuant to state securities laws.
2.19 Disclosure. Neither this Agreement, nor any Schedule or
Exhibit to this Agreement, nor the Business Plan of the Company dated June 4,
1997 (the "Business Plan"), contains an untrue statement of a material fact or
omits a material fact necessary to make the statements contained herein or
therein not misleading. None of the statements, documents, certificates or other
items prepared or supplied by the Company with respect to the transactions
contemplated hereby contains an untrue statement of a material fact or omits a
material fact necessary to make the statements contained therein not misleading.
There is no fact which the Company has not disclosed to the Purchasers and their
counsel in writing and of which the Company is aware which materially and
adversely affects or could materially and adversely affect the business,
prospects, financial condition, operations, property or affairs of the Company.
The financial projections and other estimates contained in the Business Plan
were prepared by the Company based on the Company's experience in the industry
and on assumptions of fact and opinion as to future events which the Company, at
the date of the issuance of the Business Plan, believed to be reasonable, but
which the Company cannot and does not assure or guarantee the attainment of in
any manner. As of the date hereof no facts have come to the attention of the
Company which would, in its opinion, require the Company to revise or amplify
the assumptions underlying such projections and other estimates or the
conclusions derived therefrom.
2.20 Offering of the Preferred Shares. Neither the Company nor
any person authorized or employed by the Company as agent, broker, dealer or
otherwise in connection with the offering or sale of the Preferred Shares or any
security of the Company similar to the Preferred Shares has offered the
Preferred Shares or any such similar security for sale to, or
10
14
EXECUTION COPY
solicited any offer to buy the Preferred Shares or any such similar security
from, or otherwise approached or negotiated with respect thereto with, any
person or persons, and neither the Company nor any person acting on its behalf
has taken or will take any other action (including, without limitation, any
offer, issuance or sale of any security of the Company under circumstances which
might require the integration of such security with Preferred Shares under the
Securities Act or the rules and regulations of the Commission thereunder), in
either case so as to subject the offering, issuance or sale of the Preferred
Shares to the registration provisions of the Securities Act.
2.21 Brokers. The Company has no contract, arrangement or
understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement.
2.22 Officers. Set forth in Schedule II is a list of the names of
the officers of the Company, together with the title or job classification of
each such person and the total compensation anticipated to be paid to each such
person by the Company in 1998. None of such persons has an employment agreement
or understanding, whether oral or written, with the Company, which is not
terminable on notice by the Company without cost or other liability to the
Company.
2.23 Transactions With Affiliates. No director, officer, employee
or stockholder of the Company, or member of the family of any such person, or
any corporation, partnership, trust or other entity in which any such person, or
any member of the family of any such person, has a substantial interest or is an
officer, director, trustee, partner or holder of more than 5% of the outstanding
capital stock thereof, is a party to any transaction with the Company, including
any contract, agreement or other arrangement providing for the employment of,
furnishing of services by, rental of real or personal property from or otherwise
requiring payments to any such person or firm, other than employment at will
arrangements in the ordinary course of business.
2.24 Employees. Each of the officers of the Company, each key
employee and each other employee now employed by the Company who has access to
confidential information of the Company has executed an Employee Nondisclosure
and Developments Agreement (collectively, the "Employee Nondisclosure and
Developments Agreements"), and such agreements are in full force and effect. No
officer or key employee of the Company has advised the Company (orally or in
writing) that he intends to terminate employment with the Company. The Company
has complied in all material respects with all applicable laws relating to the
employment of labor, including provisions relating to wages, hours, equal
opportunity, collective bargaining and the payment of Social Security and other
taxes, and with the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
2.25 U.S. Real Property Holding Corporation. The Company is not
now and has never been a "United States real property holding corporation," as
defined in Section 897(c)(2) of the Code and Section 1.897-2(b) of the
Regulations promulgated by the Internal Revenue Service, and the Company has
filed with the Internal Revenue Service all statements, if any, with its United
States income tax returns that are required under Section 1.897-2(h) of such
Regulations.
11
15
EXECUTION COPY
2.26 ERISA.
(a) Schedule II lists each Employee Plan that covers any
employee of the Company, copies or descriptions of all of which have previously
been made available or furnished to the Purchasers. With respect to each
Employee Plan, the Company has provided the most recently filed Form 5500 and an
accurate summary description of such plan. The Company has provided the
Purchasers with complete age, salary, service and related data as of the most
recent practicable date for employees of the Company.
(b) Schedule II also includes a list of each Benefit
Arrangement of the Company, copies or descriptions of all of which have been
made available or furnished previously to the Purchasers.
(c) No Employee Plan is a Multiemployer Plan and no Employee
Plan is subject to Title IV of ERISA. The Company and its Affiliates have not
incurred any liability under Title IV of ERISA arising in connection with the
termination of any plan covered or previously covered by Title IV of ERISA.
(d) None of the Employee Plans or other arrangements listed
on Schedule II covers any non-United States employee or former employee of the
Company.
(e) No "prohibited transaction," as defined in Section 406
of ERISA or Section 4975 of the Code, has occurred with respect to any Employee
Plan.
(f) No Employee Plan is an "employee pension benefit plan"
as defined in Section 3(2) of ERISA.
(g) Each Employee Plan and each Benefit Arrangement has been
maintained in substantial compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations which are
applicable to such Employee Plan or Benefit Arrangement.
(h) All contributions and payments accrued under each
Employee Plan and Benefit Arrangement, determined in accordance with prior
funding and accrual practices, as adjusted to include proportional accruals for
the period ending on the Closing Date, will be discharged and paid on or prior
to the Closing Date except to the extent reflected on the Balance Sheet. Except
as disclosed in writing to the Purchasers prior to the date hereof, there has
been no amendment to, written interpretation of or announcement (whether or not
written) by the Company or any of its ERISA Affiliates relating to, or change in
employee participation or coverage under, any Employee Plan or Benefit
Arrangement that would increase materially the expense of maintaining such
Employee Plan or Benefit Arrangement above the level of the expense incurred in
respect thereof for the fiscal year ended prior to the date hereof.
(i) There is no contract, agreement, plan or arrangement
covering any employee or former employee of the Company that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to the terms of Section 280G of the Code.
12
16
EXECUTION COPY
(j) No tax under Section 4980B of the Code has been incurred
in respect of any Employee Plan that is a group health plan, as defined in
Section 5000(b)(1) of the Code.
(k) With respect to the employees and former employees of
the Company, there are no employee post-retirement medical or health plans in
effect, except as required by Section 4980B of the Code.
(l) No employee of the Company will become entitled to any
bonus, retirement, severance or similar benefit or enhanced benefit solely as a
result of the transactions contemplated hereby.
(m) The Company does not have, nor is it reasonably expected
to have, any liability under Title IV of ERISA.
2.27 Disqualified Persons. To the Company's knowledge, none of
the persons listed on Schedule V hereto holds, directly or indirectly, any
securities of the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser severally represents and warrants to the Company that:
(a) it is an "accredited investor" within the meaning of
Rule 501 under the Securities Act and was not organized for the specific purpose
of acquiring the Preferred Shares;
(b) it received any materials in connection with the
offering of the Preferred Shares and first learned of such offering in the state
listed as its address set forth on Schedule I hereto, and intends that the state
securities laws of that state alone shall govern its purchase of Preferred
Shares;
(c) it has sufficient knowledge and experience in investing
in companies similar to the Company in terms of the Company's stage of
development so as to be able to evaluate the risks and merits of its investment
in the Company and it is able financially to bear the risks thereof;
(d) it has had an opportunity to discuss the Company's
business, management and financial affairs with the Company's management;
(e) the Preferred Shares being purchased by it are being
acquired for its own account for the purpose of investment and not with a view
to or for sale in connection with any distribution thereof;
(f) it understands that (i) the Preferred Shares and the
Conversion Shares have not been registered under the Securities Act by reason of
their issuance in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof or Rule 505 or 506 promulgated
under the Securities Act, (ii) the Preferred Shares and, upon
13
17
EXECUTION COPY
conversion thereof, the Conversion Shares must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities Act or is
exempt from such registration, (iii) the Preferred Shares and the Conversion
Shares will bear a legend to such effect and (iv) the Company will make a
notation on its transfer books to such effect; and
(g) if it sells any Conversion Shares pursuant to Rule 144A
promulgated under the Securities Act, it will take all necessary steps in order
to perfect the exemption from registration provided thereby, including (i)
obtaining on behalf of the Company information to enable the Company to
establish a reasonable belief that the purchaser is a qualified institutional
buyer and (ii) advising such purchaser that Rule 144A is being relied upon with
respect to such resale.
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS
The obligation of each Purchaser to purchase and pay for the Preferred
Shares being purchased by it on the Closing Date is, at its option, subject to
the satisfaction, on or before the Closing Date, of the following conditions:
(a) Opinion of Company's Counsel. The Purchasers shall have
received from Xxxx and Xxxx LLP, counsel for the Company, an opinion dated as of
the Closing Date, in form and scope satisfactory to the Purchasers and their
counsel, to the effect that:
(i) The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation. To the knowledge of such counsel, the Company has
no subsidiaries. The Company is duly licensed or qualified to transact business
as a foreign corporation and is in good standing in Virginia. The Company has
the corporate power and authority to own and hold its properties and to carry on
its business as currently conducted and as proposed to be conducted. The Company
has the corporate power and authority to execute, deliver and perform this
Agreement and the Second Amended and Restated Registration Rights Agreement, to
issue, sell and deliver the Preferred Shares and, upon conversion thereof, to
issue and deliver the Conversion Shares.
(ii) This Agreement and the Second Amended and
Restated Registration Rights Agreement have been duly authorized, executed and
delivered by the Company and constitute the legal, valid and binding obligations
of the Company, enforceable in accordance with their respective terms (subject,
as to enforcement of remedies, to the discretion of courts in awarding equitable
relief and to applicable bankruptcy, reorganization, insolvency, moratorium and
similar laws affecting the rights of creditors generally), except that such
counsel need not express any opinion as to the validity or enforceability of the
indemnification and contribution provisions of the Second Amended and Restated
Registration Rights Agreement.
(iii) The execution and delivery by the Company of
this Agreement and the Second Amended and Restated Registration Rights
Agreement, the performance by the Company of its obligations hereunder and
thereunder, the issuance, sale and
14
18
EXECUTION COPY
delivery of the Preferred Shares and, upon conversion thereof, the issuance and
delivery of the Conversion Shares, will not violate any provision of law
applicable to the Company, the Charter or By-laws, as amended, of the Company,
any order of any court or other agency of government specifically applicable to
the Company or its property or any agreement of the Company listed on Schedule
II hereto, or conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such indenture, agreement
or other instrument, or result in the creation or imposition of any lien,
charge, restriction, claim or encumbrance of any nature whatsoever upon any of
the properties or assets of the Company. In rendering the foregoing opinion,
such counsel may assume full disclosure to the Purchasers of all material facts
and, with respect to performance by the Company of its obligations under the
Second Amended and Restated Registration Rights Agreement, may assume compliance
by the Company at such time with the registration requirements of the Securities
Act and with applicable state securities laws and may disclaim any opinion as to
the validity or enforceability of the indemnification and contribution
provisions of the Second Amended and Restated Registration Rights Agreement.
(iv) The authorized capital stock of the Company
as of the date hereof consists of (i) 1,562,500 shares of Class A Convertible
Preferred Stock, $.001 par value (the "Class A Preferred Stock"), (ii) 2,151,420
shares of Class B Convertible Preferred Stock, $.001 par value (the "Class B
Preferred Stock"), (iii) 3,188,889 shares of Class C Convertible Preferred
Stock, $.001 par value (the "Class C Preferred Stock"), (iv) 2,045,785 shares of
Class D Convertible Preferred Stock, $.001 par value (the "Class D Convertible
Preferred Stock"), (v) 1,024,351 shares of Class E Convertible Preferred Stock,
$.001 par value (the "Class E Preferred Stock") and (vi) 17,500,000 shares of
Common Stock. Immediately prior to the Closing, 4,434,583 shares of Common
Stock, 1,537,500 shares of Class A Preferred Stock, 2,151,420 shares of Class B
Preferred Stock, 3,188,889 shares of Class C Preferred Stock and 2,045,785
shares of Class D Preferred Stock will be validly issued and outstanding, fully
paid and nonassessable with no personal liability attaching to the ownership
thereof and no shares of Class E Preferred Stock will have been issued.
Immediately prior to the Closing, based on a review by such counsel of the stock
record and minute books of the Company, the stockholders of record and holders
of record of subscriptions, warrants, options, convertible securities, and other
rights (contingent or other) to purchase or otherwise acquire equity securities
of the Company, and the number of shares of Common Stock and the number of such
subscriptions, warrants, options, convertible securities, and other such rights
held by each, will be as set forth in Schedule II and Schedule III. The
designations, powers, preferences, rights, qualifications, limitations and
restrictions in respect of each class or series of authorized capital stock of
the Company are as set forth in the Charter, and all such designations, powers,
preferences, rights, qualifications, limitations and restrictions are valid,
binding and enforceable against the Company and in accordance with all
applicable laws (subject, as to enforcement, to the discretion of courts in
awarding equitable relief and to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting the rights of creditors
generally). Except as set forth in Schedule II, to the knowledge of such
counsel, immediately prior to the Closing no subscription, warrant, option,
convertible security, or other right (contingent or otherwise) to purchase or
acquire equity securities of the Company will be authorized or outstanding and
there will be no commitment by the Company to issue shares, subscriptions,
warrants, options, convertible securities, or other such rights or to distribute
to holders of any of its equity securities any evidence of indebtedness or
asset. Except as set forth in Schedule II or as provided for in the Charter, to
the knowledge
15
19
EXECUTION COPY
of such counsel, the Company has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interest therein or to pay any dividend or make any other distribution in
respect thereof.
(v) The Preferred Shares and the Conversion Shares
have been duly authorized. The issuance, sale and delivery of the Preferred
Shares and the issuance and delivery of the Conversion Shares upon conversion of
the Preferred Shares have been duly authorized by all required corporate action;
the Preferred Shares have been validly issued, are fully paid and nonassessable
with no personal liability attaching to the ownership thereof and, to the
knowledge of such counsel, are free and clear of all liens, charges,
restrictions, claims and encumbrances imposed by or through the Company except
as set forth in the Second Amended and Restated Registration Rights Agreement;
and the Conversion Shares have been duly reserved for issuance upon conversion
of the Preferred Shares and, when so issued, will be validly issued, fully paid
and nonassessable with no personal liability attaching to the ownership thereof
and, to the knowledge of such counsel, will be free and clear of all liens,
charges, restrictions, claims and encumbrances imposed by or through the Company
except as set forth in the Second Amended and Restated Registration Rights
Agreement. Neither the issuance, sale or delivery of the Preferred Shares nor
the issuance or delivery of the Conversion Shares is subject to any preemptive
right of stockholders of the Company arising under law or the Charter or By-laws
of the Company, each as amended, or, to the knowledge of such counsel, to any
contractual right of first refusal or other right in favor of any person, except
as set forth on Schedule II.
(vi) Except as described in Schedule II, to the
knowledge of such counsel there is no (A) action, suit, claim, proceeding or
investigation pending or threatened against or affecting the Company, at law or
in equity, or before or by any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (B) arbitration proceeding relating to the Company pending under
collective bargaining agreements or (C) governmental inquiry pending or
threatened against or affecting the Company (including, without limitation, any
inquiry as to the qualification of the Company to hold or receive any license or
permit). To the knowledge of such counsel, the Company is not in default with
respect to any order, writ, injunction or decree known to such counsel of any
court or of any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign.
(vii) To the knowledge of such counsel, no third
party has claimed that any person employed by or affiliated with the Company has
violated or may be violating any of the terms or conditions of his employment,
non-competition or non-disclosure agreement with such third party, or disclosed
or may be disclosing or utilized or may be utilizing any trade secret or
proprietary information or documentation of such third party or interfered or
may be interfering in the employment relationship between such third party and
any of its present or former employees.
(viii) Assuming the accuracy of the
representations and warranties of the Purchasers set forth in Article III, the
offer and sale of the Series E Preferred Stock pursuant to the terms of this
Agreement and the Second Amended and Restated Registration Rights Agreement are
exempt from the registration requirements of Section 5 of the Securities Act of
1933, as amended, and, under such securities laws as they presently exist, the
issuance
16
20
EXECUTION COPY
of Common Stock upon conversion of the Series E Preferred Stock will
also be exempt from such registration and qualification requirements.
(b) Representations and Warranties to be True and Correct.
The representations and warranties contained in Article II shall be true,
complete and correct on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of such date,
and the President and Treasurer of the Company shall have certified to such
effect to the Purchasers in writing.
(c) Performance. The Company shall have performed and
complied with all agreements contained herein required to be performed or
complied with by it prior to or at the Closing Date, and the President and
Treasurer of the Company shall have certified to the Purchasers in writing to
such effect and to the further effect that all of the conditions set forth in
this Article IV have been satisfied.
(d) All Proceedings to be Satisfactory. All corporate and
other proceedings to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be satisfactory in
form and substance to the Purchasers and their counsel, and the Purchasers and
their counsel shall have received all such counterpart originals or certified or
other copies of such documents as they reasonably may request.
(e) Supporting Documents. The Purchasers and their counsel
shall have received copies of the following documents:
(i) (A) the Charter, certified as of a recent date
by the Secretary of State of the State of Delaware and (B) a certificate of said
Secretary dated as of a recent date as to the due incorporation and good
standing of the Company, the payment of all excise taxes by the Company and
listing all documents of the Company on file with said Secretary;
(ii) a certificate of the Secretary or an
Assistant Secretary of the Company dated the Closing Date and certifying: (A)
that attached thereto is a true and complete copy of the By-laws of the Company
as in effect on the date of such certification; (B) that attached thereto is a
true and complete copy of all resolutions adopted by the Board of Directors or
the stockholders of the Company authorizing the execution, delivery and
performance of this Agreement and the Second Amended and Restated Registration
Rights Agreement, the issuance, sale and delivery of the Preferred Shares and
the reservation, issuance and delivery of the Conversion Shares, and that all
such resolutions are in full force and effect and are all the resolutions
adopted in connection with the transactions contemplated by this Agreement and
the Second Amended and Restated Registration Rights Agreement; (C) that the
Charter has not been amended since the date of the last amendment referred to in
the certificate delivered pursuant to clause (i)(B) above; and (D) to the
incumbency and specimen signature of each officer of the Company executing this
Agreement and the Second Amended and Restated Registration Rights Agreement, the
stock certificates representing the Preferred Shares and any certificate or
instrument furnished pursuant hereto, and a certification by another officer of
the Company as to the incumbency and signature of the officer signing the
certificate referred to in this clause (ii); and
17
21
EXECUTION COPY
(iii) such additional supporting documents and
other information with respect to the operations and affairs of the Company as
the Purchasers or their counsel reasonably may request.
(f) Second Amended and Restated Registration Rights
Agreement. The Company and each Prior Investor (as such term is defined therein)
shall have executed and delivered the Second Amended and Restated Registration
Rights Agreement.
(g) Non-Competition Agreements. Copies of the
Non-Competition Agreements with the Company signed by each of Xxxxxx XxXxxxxx,
Xxxxx Xxxxxxxxxx and Xxxx Xxxxxx (collectively, the "Non-Competition
Agreements") shall have been delivered to counsel for the Purchasers.
(h) Charter. The Charter shall read in its
entirety as set forth in Exhibit B. The Charter shall have been duly amended, if
necessary, to provide that: (i) all directors of the Company shall be
indemnified against, and absolved of, liability to the Company and its
stockholders to the maximum extent permitted under the laws of the State of
Delaware, and (ii) the number of shares of authorized Common Stock of the
Company may be increased or decreased (but not below the number then
outstanding) by the affirmative vote of the holders of a majority of the
outstanding shares of capital stock of the Company entitled to vote thereon,
voting together as a single class notwithstanding the provisions of Section
242(b)(2) of the General Corporation Law of the State of Delaware.
(i) By-Laws. The Company's By-laws shall have been amended,
if necessary, to provide that (i) unless otherwise required by the laws of the
State of Delaware, any two directors, TTC Ventures, New Enterprise Associates
VI, Limited Partnership, 21st Century Internet Venture Partners, LLC, ADP shall
have the right to call a meeting of the Board of Directors and (ii) the number
of directors fixed in accordance therewith shall in no event conflict with any
of the terms or provisions of the Class E Convertible Preferred Stock as set
forth in the Charter.
(j) Employee Agreements. Copies of the Employee
Nondisclosure and Developments Agreements shall have been delivered to counsel
for the Purchasers.
(k) Election of Directors. The number of directors
constituting the entire Board of Directors shall have been fixed at seven and
the following persons shall have been elected as the directors and shall each
hold such position as of the Closing Date: Xxxxxx XxXxxxxx and Xxxxx Xxxxxx as
the directors elected solely by the holders of the Common Stock, Xxxxx Xxxxxxx
as the director elected solely by the holders of the Class A Preferred Stock,
Xxxxx Xxxxxx as the director elected solely by the holders of the Class B
Preferred Stock (the "Class B Director"), J. Xxxx Xxxxxxxxx as the director
elected solely by the holders of the Class C Preferred Stock (the "Class C
Director"), and D. Xxxxxxx Xxxxxxx as the director appointed by TTC Ventures and
Xxxx Xxxxxx as the director appointed by ADP on behalf of the holders of the
Class D Convertible Preferred Stock (the "Class D Directors"). The director to
be elected solely by the holders of the Common Stock, acting as a separate
class, and approved by the holders of the Class B Preferred Stock, the Class C
Preferred Stock and the Class D Convertible Preferred Stock, each acting as a
separate class, shall be nominated and elected at a later date.
18
22
EXECUTION COPY
(l) Board Observer. FBR shall have the right to assign an
observer to the Board of Directors of the Company to attend each meeting of the
Board of Directors of the Company and each meeting of any Committee thereof.
(m) Preemptive Rights. All stockholders of the Company
having any preemptive, first refusal or other rights with respect to the
issuance of the Preferred Shares or the Conversion Shares shall have irrevocably
exercised or waived the same in writing.
(n) Fees of Purchasers' Counsel. The Company shall have paid
in accordance with Section 6.1 the fees and disbursements of Purchasers' counsel
invoiced at the Closing.
(o) Blue Sky. The Preferred Shares shall have been qualified
under applicable state securities laws.
(p) The XxXxxxxx Transaction. Simultaneous with the Closing,
the Purchasers shall purchase an aggregate of $250,000.00 of Xx. XxXxxxxx'x
Series A Convertible Preferred Stock.
All such documents shall be satisfactory in form and substance to the
Purchasers and each of their counsels.
ARTICLE V
COVENANTS OF THE COMPANY
The Company covenants and agrees with each of the Purchasers that:
5.1 Financial Statements, Reports, Etc. The Company shall
furnish to each Purchaser holding at least 100,000 Preferred Shares, and to each
stockholder listed on Schedule III hereto (individually, an "Existing
Stockholder" and collectively, the "Existing Stockholders"), so long as such
Existing Stockholder holds at least 50% of the outstanding stock of the Company
held by such Existing Stockholder as of the date hereof (calculated on a
fully-diluted basis and adjusting for stock splits, stock dividends and the
like):
(a) within ninety (90) days after the end of each fiscal
year of the Company a consolidated balance sheet of the Company and its
subsidiaries as of the end of such fiscal year and the related consolidated
statements of income, stockholders' equity and cash flows for the fiscal year
then ended, prepared in accordance with generally accepted accounting
principles and certified by a firm of independent public accountants of
recognized national standing selected by the Board of Directors of the Company;
19
23
EXECUTION COPY
(b) within thirty (30) days after the end of each quarter in
each fiscal year (other than the last quarter in each fiscal year) a
consolidated balance sheet of the Company and its subsidiaries and the related
consolidated statements of income, stockholders' equity and cash flows,
unaudited but prepared in accordance with generally accepted accounting
principles and certified by the Chief Executive Officer or Chief Financial
Officer of the Company, such consolidated balance sheet to be as of the end of
such quarter and such consolidated statements of income, stockholders' equity
and cash flows to be for such quarter and for the period from the beginning of
the fiscal year to the end of such quarter, in each case with comparative
statements for the prior fiscal year, provided that the Company's obligations
under this Section 5.1(b) shall terminate upon the completion of a firm
commitment underwritten public offering of the Company's securities;
(c) at the time of delivery of each quarterly statement
pursuant to Section 5.1(b), a management narrative report explaining all
significant variances from forecasts and all significant current developments in
staffing, marketing, sales and operations;
(d) no later than fifteen (15) days prior to the start of
each fiscal year, consolidated capital and operating expense budgets, cash flow
projections and income and loss projections for the Company and its subsidiaries
in respect of such fiscal year, all itemized in reasonable detail and prepared
on a monthly basis, and, promptly after preparation, any revisions to any of the
foregoing;
(e) promptly following receipt by the Company, each audit
response letter, accountant's management letter and other written report
submitted to the Company by its independent public accountants in connection
with an annual or interim audit of the books of the Company or any of its
subsidiaries;
(f) promptly upon sending, making available or filing the
same, all press releases, reports and financial statements that the Company
sends or makes available to its stockholders or directors or files with the
Commission; and
(g) promptly, from time to time, such other information
regarding the business, prospects, financial condition, operations, property or
affairs of the Company and its subsidiaries as such Purchaser reasonably may
request.
5.2 Right of First Offer. So long as any shares of Class A
Preferred Stock, Class B Preferred Stock, Class C Preferred Stock, Class D
Preferred Stock or Class E Convertible Preferred Stock are outstanding, the
Company shall, prior to any issuance by the Company of any of its securities
(other than debt securities with no equity feature), offer to each Purchaser and
to each then existing holder of such Preferred Stock (an "Existing Stockholder")
by written notice the right, for a period of thirty (30) days, to purchase all
of such securities for cash at an amount equal to the price or other
consideration for which such securities are to be issued; provided, however,
that the first refusal rights of the Purchasers and Existing Stockholders
pursuant to this Section 5.2 shall not apply to securities issued (A) upon
conversion of any of the Preferred Shares, (B) as a stock dividend or upon any
subdivision of shares of Common Stock, provided that the securities issued
pursuant to such stock dividend or subdivision are limited to additional shares
of Common Stock, (C) pursuant to subscriptions, warrants, options, convertible
securities,
20
24
EXECUTION COPY
or other rights which are listed in Schedule III as being outstanding on the
date of this Agreement, (D) solely in consideration for the acquisition (whether
by merger or otherwise) by the Company or any of its subsidiaries of all or
substantially all of the stock or assets of any other entity, (E) pursuant to a
firm commitment underwritten public offering, (F) pursuant to the exercise of
the warrants issued to APD, Inc. ("ADP") in connection with its purchase of
Class D Preferred Stock and (G) pursuant to the exercise of options to purchase
Common Stock granted to directors, officers, employees or consultants of the
Company in connection with their service to the Company, not to exceed in the
aggregate 1,950,000 shares (appropriately adjusted to reflect stock splits,
stock dividends, combinations of shares and the like with respect to the Common
Stock) less the number of shares (as so adjusted) issued pursuant to
subscriptions, warrants, options, convertible securities, or other rights
outstanding on the date of this Agreement and listed in Schedule III pursuant to
clause (C) above (the shares exempted by this clause (G) being hereinafter
referred to as the "Reserved Employee Shares") provided that the number of
Reserved Employee Shares may be increased prior to December 31, 1998, with the
approval of a majority of the Board of Directors including the Class B Director,
the Class C Director and the two Class D Directors and at any time after
December 31, 1998, with the approval of either (i) a majority of the Board of
Directors including the Class B Director, the Class C Director and the two Class
D Directors or (ii) all directors other than the Class B Director, the Class C
Director or the two Class D Directors. The Company's written notice to the
Purchasers and Existing Stockholders shall describe the securities proposed to
be issued by the Company and specify the number, price and payment terms. Each
Purchaser and Existing Stockholder may accept the Company's offer as to the full
number of securities offered to it or any lesser number, by written notice
thereof given by it to the Company prior to the expiration of the aforesaid
thirty (30) day period, in which event the Company shall promptly sell and such
Purchaser or Existing Stockholder shall buy, upon the terms specified, the
number of securities agreed to be purchased by such Purchaser or Existing
Stockholder. Notwithstanding the foregoing, if the Purchasers and Existing
Stockholders agree, in the aggregate, to purchase more than the full number of
securities offered by the Company, then each Purchaser and Existing Stockholder
accepting the Company's offer shall first be allocated the lesser of (i) the
number of securities which such Purchaser or Existing Stockholder agreed to
purchase and (ii) the number of securities as is equal to the full number of
securities offered by the Company multiplied by a fraction, the numerator of
which shall be the number of shares of Common Stock held by such Purchaser or
Existing Stockholder as of the date of the Company's notice of offer (treating
such Purchaser or Existing Stockholder, for the purpose of such calculation, as
the holder of the number of shares of Common Stock which would be issuable to
such Purchaser or Existing Stockholder upon conversion, exercise or exchange of
all securities (including but not limited to the Preferred Shares) held by such
Purchaser or Existing Stockholder on the date such offer is made, that are then
convertible, exercisable or exchangeable into or for (whether directly or
indirectly) shares of Common Stock) and the denominator of which shall be the
aggregate number of shares of Common Stock (calculated as aforesaid) held on
such date by all Purchasers and Existing Stockholders who accepted the Company's
offer, and the balance of the securities (if any) offered by the Company shall
be allocated among the Purchasers and Existing Stockholders accepting the
Company's offer in proportion to their relative equity ownership interests in
the Company (calculated as aforesaid), provided that no Purchaser or Existing
Stockholder shall be allocated more than the number of securities which such
Purchaser or Existing Stockholder agreed to purchase and provided further that
in cases covered by this sentence all Purchasers and Existing Stockholders
shall be allocated
21
25
EXECUTION COPY
among them the full number of securities offered by the Company. The Company
shall be free at any time prior to ninety (90) days after the date of its
notice of offer to the Purchasers and Existing Stockholders, to offer and sell
to any third party or parties the number of such securities not agreed by the
Purchasers and Existing Stockholders to be purchased by them, at a price and on
payment terms no less favorable to the Company than those specified in such
notice of offer to the Purchasers and Existing Stockholders. However, if such
third party sale or sales are not consummated within such ninety (90) day
period, the Company shall not sell such securities as shall not have been
purchased within such period without again complying with this Section 5.2.
5.3 Reserve for Conversion Shares. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, for the purpose of effecting the conversion of the Preferred
Shares and otherwise complying with the terms of this Agreement, such number of
its duly authorized shares of Common Stock as shall be sufficient to effect the
conversion of the Preferred Shares from time to time outstanding or otherwise to
comply with the terms of this Agreement. If at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of the Preferred Shares or otherwise to comply with the terms of this
Agreement, the Company will forthwith take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes. The Company will
obtain any authorization, consent, approval or other action by or make any
filing with any court or administrative body that may be required under
applicable state securities laws in connection with the issuance of shares of
Common Stock upon conversion of the Preferred Shares.
5.4 Corporate Existence. The Company shall maintain and, except
as otherwise permitted by Section 5.16, cause each of its subsidiaries to
maintain, their respective corporate existence, rights and franchises in full
force and effect.
5.5 Properties, Business, Insurance. The Company shall maintain
and cause each of its subsidiaries to maintain as to their respective properties
and business, with financially sound and reputable insurers, insurance against
such casualties and contingencies and of such types and in such amounts as is
customary for companies similarly situated, which insurance shall be deemed by
the Company to be sufficient. The Company shall also maintain in effect "key
person" life insurance policies, payable to the Company, on the life of Xxxxxx
XxXxxxxx (so long as he remains an employee of the Company), in the amount of
$2,000,000. The Company shall not cause or permit any assignment or change in
beneficiary and shall not borrow against such policy. If requested by Purchasers
holding at least a majority of the outstanding Preferred Shares, the Company
will add one designee of such Purchasers as a notice party for such policy and
shall request that the issuer of such policy provide such designee with ten (10)
days' notice before such policy is terminated (for failure to pay premiums or
otherwise) or assigned or before any change is made in the beneficiary thereof.
5.6 Inspection, Consultation and Advice. The Company shall
permit and cause each of its subsidiaries to permit each Purchaser and such
persons as it may designate, at such Purchaser's expense, to visit and inspect
any of the properties of the Company and its subsidiaries, examine their books
and take copies and extracts therefrom, discuss the affairs, finances and
accounts of the Company and its subsidiaries with their officers, employees and
22
26
EXECUTION COPY
public accountants (and the Company hereby authorizes said accountants to
discuss with such Purchaser and such designees such affairs, finances and
accounts), and consult with and advise the management of the Company and its
subsidiaries as to their affairs, finances and accounts, all at reasonable times
and upon reasonable notice.
5.7 Restrictive Agreements Prohibited. Neither the Company nor
any of its subsidiaries shall become a party to any agreement which by its terms
restricts the Company's performance of this Agreement, the Second Amended
Registration Rights Agreement or the Charter.
5.8 Transactions with Affiliates. Except for transactions
contemplated by this Agreement or as otherwise approved by the Board of
Directors, neither the Company nor any of its subsidiaries shall enter into any
transaction with any director, officer, employee or holder of more than 5% of
the outstanding capital stock of any class or series of capital stock of the
Company or any of its subsidiaries, affiliates, member of the family of any such
person, or any corporation, partnership, trust or other entity in which any such
person, or member of the family of any such person, is a director, officer,
trustee, partner or holder of more than 5% of the outstanding capital stock
thereof, except for transactions on customary terms related to such person's
employment.
5.9 Use of Proceeds. The Company shall use the proceeds from the
sale of the Preferred Shares solely for working capital.
5.10 Board of Directors Meetings. The Company shall use its best
efforts to ensure that meetings of its Board of Directors are held at least four
times each year and at least once each quarter. The Company shall permit TTC
Ventures, 21st Century Internet Venture Partners, LLC ("21st Century Internet
Venture Partners") and ADP, so long as they, individually, (i) hold of record or
beneficially at least 500,000 Preferred Shares and/or Conversion Shares and (ii)
are not represented on the Board of Directors, directly or by one of its
affiliates ("Unrepresented"), to have one representative attend each meeting of
the Board of Directors of the Company and each meeting of any Committee thereof.
While any or all of TTC Ventures, 21st Century Internet Venture Partners and ADP
is Unrepresented, the Company shall send to such Unrepresented party a notice
containing the time and place of all Board meetings in the same manner and at
the same time as it shall send such notice to its directors or committee
members, as the case may be, and shall provide to such Unrepresented party
copies of all notices, reports, minutes and consents at the time and in the
manner as they are provided to the Board of Directors or committee, except for
information reasonably designated as proprietary information by the Board of
Directors. The Company shall permit FBR to have an observer attend each meeting
of the Board of Directors of the Company and each meeting of any Committee
thereof for as long as FBR shall continue to hold at least 250,000 shares of the
Company Series E Convertible Preferred Stock or Common Stock into which such
shares are convertible.
5.11 Compensation. The Company shall not pay to its management
compensation in excess of that compensation customarily paid to management in
companies of similar size, of similar maturity, and in similar businesses
without the written consent of a majority of the members of the Board of
Directors of the Company.
23
27
EXECUTION COPY
5.12 By-laws. The Company shall at all times cause its By-laws to
provide that, (a) unless otherwise required by the laws of the State of
Delaware, any two directors, TTC Ventures, New Enterprise Associates VI, Limited
Partnership, 21st Century Internet Venture Partners, or ADP shall have the right
to call a meeting of the Board of Directors or stockholders and (b) the number
of directors fixed in accordance therewith shall in no event conflict with any
of the terms or provisions of the Class E Convertible Preferred Stock as set
forth in the Charter. The Company shall at all times maintain provisions in its
By-laws and/or Charter indemnifying all directors against liability and
absolving all directors from liability to the Company and its stockholders to
the maximum extent permitted under the laws of the State of Delaware.
5.13 Performance of Contracts. The Company shall not amend,
modify, terminate, waive or otherwise alter, in whole or in part, any of the
Employee Nondisclosure and Developments Agreements or the Non-Competition
Agreements without the written consent of a majority of the members of the Board
of Directors of the Company.
5.14 Vesting of Reserved Employee Shares. The Company shall not
grant to any of its employees options to purchase Reserved Employee Shares which
will become exercisable at a rate in excess of 25% per annum from the date of
such grant (except as set forth on Schedule II) without the consent of the Board
of Directors.
5.15 Employee Nondisclosure and Developments Agreements. The
Company shall use its best efforts to obtain, and shall cause its subsidiaries
to use their best efforts to obtain, an Employee Nondisclosure and Developments
Agreement from all future officers, key employees and other employees who will
have access to confidential information of the Company or any of its
subsidiaries, upon their employment by the Company or any of its subsidiaries.
5.16 Activities of Subsidiaries. The Company shall not permit any
subsidiary to consolidate or merge into or with or sell or transfer all or
substantially all its assets, except that any subsidiary may (i) consolidate or
merge into or with or sell or transfer assets to any other subsidiary, or (ii)
merge into or sell or transfer assets to the Company. The Company shall not sell
or otherwise transfer any shares of capital stock of any subsidiary, except to
the Company or another subsidiary, or permit any subsidiary to issue, sell or
otherwise transfer any shares of its capital stock or the capital stock of any
subsidiary, except to the Company or another subsidiary. The Company shall not
permit any subsidiary to purchase or set aside any sums for the purchase of, or
pay any dividend or make any distribution on, any shares of its stock, except
for dividends or other distributions payable to the Company or another
subsidiary.
5.17 Compliance with Laws. The Company shall comply, and cause
each subsidiary to comply, with all applicable laws, rules, regulations and
orders, noncompliance with which could materially adversely affect its business
or condition, financial or otherwise.
5.18 Keeping of Records and Books of Account. The Company shall
keep, and cause each subsidiary to keep, adequate records and books of account,
in which complete entries will be made in accordance with generally accepted
accounting principles consistently applied, reflecting all financial
transactions of the Company and such subsidiary, and in which, for each fiscal
year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business shall be made.
24
28
EXECUTION COPY
5.19 Change in Nature of Business. The Company shall not make, or
permit any subsidiary to make, any material change in the nature of its business
as set forth in the Business Plan.
5.20 U.S. Real Property Interest Statement. The Company shall
provide prompt written notice to each Purchaser following any "determination
date" (as defined in Treasury Regulation Section 1.897-2(c)(i)) on which the
Company becomes a United States real property holding corporation. In addition,
upon a written request by any Purchaser, the Company shall provide such
Purchaser with a written statement informing the Purchaser whether such
Purchaser's interest in the Company constitutes a U.S. real property interest.
The Company's determination shall comply with the requirements of Treasury
Regulation Section 1.897-2(h)(1) or any successor regulation, and the Company
shall provide timely notice to the Internal Revenue Service, in accordance with
and to the extent required by Treasury Regulation Section 1.897-2(h)(2) or any
successor regulation, that such statement has been made. The Company's written
statement to any Purchaser shall be delivered to such Purchaser within ten (10)
days of such Purchaser's written request therefor. The Company's obligation to
furnish a written statement pursuant to this Section 5.20 shall continue
notwithstanding the fact that a class of the Company's stock may be regularly
traded on an established securities market.
5.21 Rule 144A Information. The Company shall, at all times
during which it is neither subject to the reporting requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), nor exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange
Act, provide in writing, upon the written request of any Purchaser or a
prospective buyer of Preferred Shares or Conversion Shares from any Purchaser,
all information required by Rule 144A(d)(4)(i) of the General Regulations
promulgated by the Commission under the Securities Act ("Rule 144A
Information"). The Company also shall, upon the written request of any Purchaser
or any stockholder listed on Schedule III, cooperate with and assist such
Purchaser or any member of the National Association of Securities Dealers, Inc.
PORTAL system in applying to designate and thereafter maintain the eligibility
of the Preferred Shares or Conversion Shares, as the case may be, for trading
through PORTAL. The Company's obligations under this Section 5.21 shall at all
times be contingent upon the relevant Purchaser's obtaining from the prospective
buyer of Preferred Shares or Conversion Shares a written agreement to take all
reasonable precautions to safeguard the Rule 144A Information from disclosure to
anyone other than a person who will assist such buyer in evaluating the purchase
of any Preferred Shares or Conversion Shares.
5.22 Termination of Covenants. The covenants set forth in
Sections 5.20 and 5.21 shall terminate and be of no further force or effect as
to each of the Purchasers when such Purchaser no longer holds any shares of
capital stock of the Company. Except as otherwise provided above, all of the
other covenants set forth in this Article V shall terminate and be of no further
force or effect as to each of the Purchasers when such Purchaser owns less than
50% of the Preferred Shares purchased by it on the date hereof (appropriately
adjusted to reflect stock splits, stock dividends, combinations of shares and
the like with respect to the Class E Convertible Preferred Stock).
25
29
EXECUTION COPY
ARTICLE VI
MISCELLANEOUS
6.1 Expenses. Each party hereto will pay its own expenses in
connection with the transactions contemplated hereby, whether or not such
transactions shall be consummated, provided, however, that the Company shall pay
the fees and disbursements, up to $15,000, of the Purchasers' counsel in
connection with such transactions and any subsequent amendment, waiver, consent
or enforcement thereof.
6.2 Survival of Agreements. All covenants, agreements,
representations and warranties made herein or in the Second Amended Registration
Rights Agreement, or any certificate or instrument delivered to the Purchasers
pursuant to or in connection with this Agreement or the Second Amended
Registration Rights Agreement, shall survive the execution and delivery of this
Agreement and the Second Amended Registration Rights Agreement, the issuance,
sale and delivery of the Preferred Shares, and the issuance and delivery of the
Conversion Shares, and all statements contained in any certificate or other
instrument delivered by the Company hereunder or thereunder or in connection
herewith or therewith shall be deemed to constitute representations and
warranties made by the Company.
6.3 Brokerage. Each party hereto will indemnify and hold
harmless the others against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.
6.4 Parties in Interest. All representations, covenants and
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not. Without limiting the
generality of the foregoing, all representations, covenants and agreements
benefiting the Purchasers shall inure to the benefit of any and all subsequent
holders from time to time of Preferred Shares or Conversion Shares.
6.5 Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be delivered in person,
mailed by certified or registered mail, return receipt requested, or sent by
telecopier or telex, addressed as follows:
(a) if to the Company, at 00000 Xxxxxx Xxxxx Xxxx, Xxxxxx,
XX 00000, Attention: President, with a copy to Xxxxx Xxxxxxxxx, Xxxx and Xxxx
LLP, 0000 Xxxxxxxxxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000; and
(b) if to any Purchaser, at the address of such Purchaser
set forth in Schedule I, with a copy to Xxxxxxxxx X. Lynch, Brobeck, Phleger &
Xxxxxxxx LLP, 0000 Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000;
(c) or, in any such case, at such other address or addresses
as shall have been furnished in writing by such party to the others.
26
30
EXECUTION COPY
6.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
6.7 Entire Agreement. This Agreement, including the Schedules
and Exhibits hereto, constitutes the sole and entire agreement of the parties
with respect to the subject matter hereof. All Schedules and Exhibits hereto
are hereby incorporated herein by reference.
6.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.9 Amendments. This Agreement may not be amended or modified,
and no provisions hereof may be waived, without the written consent of the
Company and the holders of at least two-thirds of the outstanding shares of
Common Stock issued or issuable upon conversion of the Preferred Shares.
6.10 Severability. If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
6.11 Titles and Subtitles. The titles and subtitles used in this
Agreement are for convenience only and are not to be considered in construing or
interpreting any term or provision of this Agreement.
6.12 Assignment. The rights granted pursuant to this Agreement
may be assigned or otherwise conveyed by any Purchaser or by any subsequent
transferee of any such rights to any transferee, other than a competitor of the
Company, only if such transferee (i) acquires at least 100,000 Preferred Shares
and/or Common Stock issuable upon conversion of the Preferred Shares and (ii) is
an affiliate or constituent partner of any Purchaser or a direct or indirect
subsidiary of The Thomson Corporation. Such assignment, transfer or conveyance
may not be made without the prior written consent of the Company, such consent
not to be unreasonably withheld.
6.13 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
(a) "Benefit Arrangement" means each employment, severance
or other similar contract, arrangement or policy (written or oral) and each plan
or arrangement (written or oral) providing for severance benefits, insurance
coverage (including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits or for deferred compensation, profit-sharing, bonuses, stock
options, stock appreciation rights or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (i) is not an Employee
Plan and (ii) covers any employee or former employee of the Company.
27
31
EXECUTION COPY
(b) "Employee Plan" means each "employee benefit plan," as
such term is defined in Section 3(3) of ERISA, that (A)(i) is subject to any
provision of ERISA and (ii) is maintained or contributed to by the Company, or
(B)(i) is subject to any provision of Title IV of ERISA and (ii) is maintained
or contributed to by any of the Company's ERISA Affiliates.
(c) "ERISA" means the Employment Retirement Income Security
Act of 1974, as amended.
(d) "ERISA Affiliate" of any entity means any other entity
that, together with such entity, would be treated as a single employer under
Section 414 of the Code.
(e) "Multiemployer Plan" means each Employee Plan that is a
multiemployer plan, as defined in Section 3(37) of ERISA.
(f) "person" shall mean an individual, corporation, trust,
partnership, joint venture, unincorporated organization, government agency or
any agency or political subdivision thereof, or other entity.
(g) "subsidiary" shall mean, as to the Company, any
corporation of which more than 50% of the outstanding stock having ordinary
voting power to elect a majority of the Board of Directors of such corporation
(irrespective of whether or not at the time stock of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned by the
Company, or by one or more of its subsidiaries, or by the Company and one or
more of its subsidiaries.
28
32
EXECUTION COPY
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Class D Convertible Preferred Stock Purchase Agreement as of the day and year
first above written.
CAREEBUILDERS, INC.
By: /s/ Xxxxxx XxXxxxxx
-----------------------------------------------
Title: CEO
--------------------------------------------
[Corporate Seal]
Attest:
/s/ Xxxxxx X. Xxxxxx
----------------------------
Secretary
PURCHASERS:
Thomson U.S. Inc.
By:
-----------------------------------------------
By: /s/ Xxxxx X. Xxxxxx
-----------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President
21st Century Internet Venture Partners, LLC
By: 21st Century Internet Partners, LLC
By: /s/ J. Xxxx Xxxxxxxxx
----------------------------------------------
Name: J. Xxxx Xxxxxxxxx
Title: Member
New Enterprise Associates VI, Limited Partnership
By: NEA Partners VI, Limited Partnership
By: /s/ Xxxxx Xxxxxx
-----------------------------------------------
29
33
EXECUTION COPY
Title:
FBR Technology Venture Partners, L.P.
By: FBR Venture Capital Managers, Inc.
By: /s/ Xxxx Xxxxxxxx
-----------------------------------------------
Name: Xxxx Xxxxxxxx
Title: Managing Director
FBR eComm, L.P.
By: Friedman, Billings, Xxxxxx Inv. Mgmt. Inc.
General Partner
By: /s/ Xxxxxx Xxxxxxx
-----------------------------------------------
Name: Xxxxxx Xxxxxxx
Title: Managing Director
30
34
EXECUTION COPY
SCHEDULE I
Purchasers
Number of Aggregate
Name and Preferred Shares to be Purchase Price
Address of Purchaser Purchased For Preferred Shares
--------------------------- ---------------------- --------------------------
Thomson U.S. Inc.
x/x XXX Xxxxxxxx
Xxx Xxxx Xxxxxx
Xxxxxxxxx, XX 00000 37,672 $185,722.96
21st Century Internet Venture
Partners, LLC
Xxx Xxxxx Xxxx
Xxxxxx Xxxxx
Xxx Xxxxxxxxx, XX 00000 143,068 705,325.24
New Enterprise Associates VI,
Limited Partnership
0000 Xx. Xxxx Xxxxxx
Xxxxxxxxx, XX 00000 235,091 1,158,998.63
FBR Technology Venture
Partners, L.P.
Potomac Tower
0000 Xxxxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx, XX 00000 405,680 2,000,002.40
FBR eComm, L.P.
Potomac Tower
0000 Xxxxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx, XX 00000 202,840 1,000,001.20
TOTAL 1,024,351 $5,050,050.43
31
35
