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Exhibit 10.19
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STOCK PURCHASE AGREEMENT
BY AND BETWEEN
MEDSCAPE, INC.
AND
EACH OF THE PERSONS LISTED ON SCHEDULE A HERETO
DATED: OCTOBER 31, 1997
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STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
Page
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SECTION 1. Definitions...............................................-1-
SECTION 2. Restated and Amended Certificate of Incorporation.........-5-
SECTION 3. Issuance of Acquired Preferred Shares and Reservation
of Reserved Shares........................................-5-
SECTION 4. Agreement to Sell and Purchase the Acquired Preferred
Shares....................................................-5-
SECTION 5. Delivery of Securities....................................-5-
SECTION 6. Representations and Warranties of the Corporation.........-5-
6.1. Organization..............................................-5-
6.2. Equity Investments........................................-6-
6.3. Capitalization............................................-6-
6.4. Financial Information.....................................-7-
6.5. Absence of Undisclosed Liabilities........................-8-
6.6. Absence of Changes........................................-8-
6.7. Encumbrances; Burdensome Restrictions.....................-8-
6.8. Intellectual Property Rights..............................-9-
6.9. Litigation................................................-9-
6.10. No Defaults..............................................-10-
6.11. Labor Agreements and Actions.............................-10-
6.12. Compliance...............................................-10-
6.13. Authorization of this Agreement and the Stockholders'
Agreement, Etc. ........................................-10-
6.14. Authorization of Acquired Preferred Shares and
Reserved Shares..........................................-11-
6.15. Offerees.................................................-11-
6.16. Offering Exemption.......................................-12-
6.17. No Governmental Consent or Approval Required.............-12-
6.18. Agreements...............................................-12-
6.19. Offering of the Acquired Preferred Shares................-13-
6.20. Brokers..................................................-13-
6.21. Registration Rights......................................-13-
6.22. Compliance with ERISA; Benefit Plans.....................-13-
6.23. Investment Company Act...................................-14-
6.24. Qualified Small Business Stock...........................-14-
6.25. Environmental Matters....................................-14-
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6.26. Descriptive Memorandum...................................-14-
6.27. Employees................................................-14-
6.28. Proprietary Information and Inventions Agreements........-15-
6.29. Tax Returns and Payments.................................-15-
6.30. Full Disclosure..........................................-15-
SECTION 7. Representations, Warranties and Covenants
of each of the Investors.................................-15-
SECTION 8. Conditions to and Deliveries at Closing..................-17-
8.1. Acquired Preferred Shares; Purchase Price................-17-
8.2. Corporate Proceedings; Consents, Etc.....................-17-
8.3. Restated and Amended Certificate of Incorporation........-17-
8.4. Stockholders' Agreement..................................-17-
8.5. Opinion of Counsel. ....................................-17-
8.6. Certificate of Secretary.................................-18-
8.7. Adverse Proceedings......................................-18-
8.8. Board of Directors.......................................-18-
SECTION 9. Covenants of the Corporation.............................-18-
9.1. Access to Records........................................-18-
9.2. Financial Reports........................................-19-
9.3. Use of Proceeds..........................................-20-
9.4. Reserve for Reserved Shares. ...........................-20-
9.5. Qualified Small Business Stock...........................-20-
9.6. Directors' Expenses and Grant of Stock Options...........-21-
9.7. Key Man Life Insurance...................................-21-
SECTION 10. Additional Investors.....................................-21-
SECTION 11. Exchanges; Lost, Stolen or Mutilated Stock Certificates..-21-
SECTION 12. Survival of Representations, Warranties and
Agreements, Etc..........................................-22-
SECTION 13. Remedies.................................................-22-
SECTION 14. Expenses.................................................-22-
SECTION 15. Successors and Assigns; Parties in Interest..............-22-
SECTION 16. Entire Agreement.........................................-22-
SECTION 17. Notices..................................................-23-
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SECTION 18. Changes..................................................-23-
SECTION 19. Counterparts.............................................-23-
SECTION 20. Headings.................................................-23-
SECTION 21. Nouns and Pronouns.......................................-24-
SECTION 22. Governing Law............................................-24-
SECTION 23. Severability.............................................-24-
SECTION 24. Jurisdiction.............................................-24-
SECTION 25. Broker's Fees............................................-24-
SECTION 26. Exculpation Among Investors..............................-24-
EXHIBITS
EXHIBIT A Restated Certificate of Incorporation....................-25-
EXHIBIT B Bylaws...................................................-27-
EXHIBIT C Stockholders' Agreement..................................-27-
SCHEDULES
SCHEDULE 6.3 Shares Owned and Options Granted.........................-28-
SCHEDULE 6.5 Liabilities ............................................-30-
SCHEDULE 6.7 Encumbrances; Burdensome Restrictions....................-32-
SCHEDULE 6.8 Exceptions to Intellectual Property Rights...............-33-
SCHEDULE 6.9 Litigation...............................................-34-
SCHEDULE 6.12 Compliance with Laws.....................................-35-
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SCHEDULE 6.18 Agreements...............................................-36-
SCHEDULE 6.20 Brokers..................................................-38-
SCHEDULE 6.21 Registration Rights......................................-39-
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") made as of this 31st
day of October, 1997, by and between MEDSCAPE, INC., a New York corporation (the
"Corporation"), having its principal office at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx,
XX 00000-0000, each of the persons listed on Schedule A hereto (each, an
"Investor" and collectively, the "Investors"), and any person who becomes a
stockholder of the Corporation pursuant to the terms and conditions hereof (the
"Additional Investors").
WITNESSETH:
WHEREAS, the Corporation is engaged in the business of
operating a medical Internet site on the Worldwide Web;
WHEREAS, on January 17, 1997, the Corporation entered into
three stock purchase agreements, in substantially identical form and substance
(collectively, the "January Agreements"), with CSK Venture Capital Co., Ltd., as
investment manager for CSK-1(A), CSK-1(B) and CSK-2 (collectively, "CSK"),
pursuant to which the Corporation issued and sold, and CSK acquired and
purchased, 123,974 shares of the Corporation's Series B Preferred Stock;
WHEREAS, the Corporation now intends to issue the Acquired
Preferred Shares on the terms contemplated herein (the "Financing");
WHEREAS, each Investor desires to purchase that number of
Acquired Preferred Shares as set forth opposite its name on Schedule A hereto,
subject to the terms and conditions contained herein;
NOW, THEREFORE, in consideration of the premises contained
herein and other good and valuable consideration, receipt of which is mutually
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms used in this Agreement
shall have the meanings assigned to them elsewhere in this Agreement or as
specified below:
"Acquired Preferred Shares" shall mean, collectively, the shares of
Series C Preferred Stock purchased by the Investors, and the 123,974 shares of
Exchanged Preferred Stock to be issued to CSK as a result of the Series B
Exchange hereunder.
"Action" shall have the meaning set forth in Section 6.9 hereof.
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"Board of Directors" shall have the meaning set forth in Section 8.3
hereof.
"Bylaws" shall mean the Corporation's Restated and Amended Bylaws, a
copy of which are attached hereto as Exhibit B.
"Class A Common Stock" shall mean the Common Stock of the
Corporation designated as Class A Common Stock in the Restated Certificate of
Incorporation.
"Class B Common Stock" shall mean the Common Stock of the
Corporation designated as Class B Common Stock in the Restated Certificate of
Incorporation.
"Closing" shall mean the closing of the transactions contemplated
under this Agreement, which shall take place at the offices of Dechert Price &
Xxxxxx, 00 Xxxxxxxxxxx Xxxxx, Xxx Xxxx, XX 00000, on or before October 31, 1997,
or such other place or time as shall be mutually agreed upon by the parties
hereto in writing.
"Commission" shall mean the United States Securities and Exchange
Commission.
"Common Stock" shall mean (a) the Corporation's Class A Common
Stock, par value $.01 per share, as authorized on the date of this Agreement,
(b) the Corporation's Class B Common Stock, par value $.01 per value, as
authorized on the date of this Agreement, (C) any other capital stock of any
class or classes (however designated) of the Corporation, authorized on or after
the date hereof, the holders of which shall have the right, without limitation
as to amount, either to all or to a share of the balance of current dividends
and liquidating distributions after the payment of dividends and distributions
on any shares entitled to preference under the Restated Certificate of
Incorporation (as the same may be further amended from time to time after the
Closing), and (d) any other securities into which or for which any of the
securities described in clauses (a), (b) or (C) of this definition may be
converted or exchanged pursuant to a plan of recapitalization, reorganization,
merger, sale of assets or otherwise.
"Descriptive Memorandum" shall have the meaning set forth in Section
6.26 hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as the same may from time to time be amended.
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"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder,
all as the same shall be in effect at the time.
"Exchanged Preferred Stock" shall mean 123,974 shares of Series C
Preferred Stock to be issued to CSK as a result of the Series B Exchange.
"Intellectual Property Rights" shall mean all industrial and
intellectual property rights, including without limitation, Proprietary
Information, patents, patent applications, patent rights, mask works, mask work
applications, trademarks, trademark applications, trade names, service marks,
service xxxx applications, copyrights, copyright applications, know-how,
certificates of public convenience and necessity, franchises, licenses, trade
secrets, proprietary processes and formulae.
"Interim Balance Sheet" and "Interim Financial Statements" shall
have the meanings set forth in Section 6.4(a) hereof.
"Person" shall mean and include an individual, a corporation, a
partnership, a trust, an unincorporated organization and a government or any
department, agency or political subdivision thereof.
"Proprietary Information" shall mean all customer lists, source and
object code, algorithms, architecture, structure, display screens, layouts,
processes, inventions, trade secrets, know-how, development tools and other
proprietary rights owned by the Corporation pertaining to any product or service
manufactured, marketed or sold, or proposed to be manufactured, marketed or sold
(as the case may be), by the Corporation or used, employed or exploited in the
development, license, sale, marketing or distribution or maintenance thereof,
and all documentation and media constituting, describing or relating to the
above, including without limitation, manuals, memoranda, know-how, notebooks,
records and disclosures.
"Purchase Price" shall have the meaning set forth in Section 4
hereof.
"Qualified Public Offering" means the consummation of an offering of
equity securities of the Corporation pursuant to an effective registration
statement under the Securities Act under which the public offering price per
share is not less than $15 per share (as adjusted for any stock split, stock
dividend or recapitalization after October 31, 1997) and the aggregate gross
proceeds received by the Corporation equals or exceeds $20 million.
"Register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the
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Securities Act, and the declaration or ordering of effectiveness of such
registration statement.
"Reserved Shares" shall mean the shares of Class A Common Stock
reserved for issuance upon conversion of the Acquired Preferred Shares.
"Restated Certificate of Incorporation" shall mean the Corporation's
Restated and Amended Certificate of Incorporation setting forth the
designations, rights, preferences and privileges and qualifications, limitations
and restrictions of the Series C Preferred Stock, filed in the Office of the
Secretary of State of New York on October 27, 1997, a copy of which is attached
hereto as Exhibit A.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations of the Commission promulgated thereunder, all as
the same shall be in effect at the time.
"Series A Preferred Stock" shall mean the Corporation's authorized
and outstanding shares of Series A Convertible Preferred Stock, par value $.01
per share, having the designations, rights, preferences and privileges and
qualifications, limitations and restrictions of preferred stock set forth in the
Restated Certificate of Incorporation, of which 788,200 shares are outstanding
as of the date hereof.
"Series B Exchange" shall mean the issuance to CSK by the
Corporation of the shares of Exchanged Preferred Stock in exchange for the
delivery to the Corporation by CSK of 123,974 shares of the Series B Preferred
Stock as contemplated hereunder.
"Series B Preferred Stock" shall mean the Corporation's authorized
and outstanding shares of Series B Convertible Preferred Stock, par value $.01
per share, having the designations, rights, preferences and privileges and
qualifications, limitations and restrictions set forth in the Restated
Certificate of Incorporation, of which 123,974 shares are outstanding as of the
date hereof, and all of which shall be exchanged, as of the Closing Date, into
shares of Exchanged Preferred Stock as a result of the Series B Exchange.
"Series C Preferred Stock" shall mean the Corporation's authorized
and outstanding shares of Series C Convertible Preferred Stock, par value $.01
per share, having the designations, rights, preferences and privileges and
qualifications, limitations and restrictions set forth in the Restated
Certificate of Incorporation.
"Stockholders' Agreement" shall mean the Stockholders' Agreement
among the Corporation, the Investors and the stockholders named therein,
substantially in the form attached hereto as Exhibit C.
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SECTION 2. Restated and Amended Certificate of Incorporation. The
Corporation has filed with the Secretary of State of New York the Restated
Certificate of Incorporation setting forth the designations, rights, preferences
and privileges and the qualifications, limitations and restrictions of the
Series C Preferred Stock.
SECTION 3. Issuance of Acquired Preferred Shares and Reservation of
Reserved Shares. Subject to the terms and conditions hereof, the Corporation has
authorized the issuance of the Acquired Preferred Shares, and the Corporation
has also authorized the reservation of the Reserved Shares, for issuance upon
conversion of the Acquired Preferred Shares.
SECTION 4. Agreement to Sell and Purchase the Acquired Preferred
Shares. The Corporation hereby sells to each of the Investors, severally and not
jointly, and, subject to and in reliance upon the representations, warranties,
terms and conditions of this Agreement, each of the Investors, severally and not
jointly, hereby purchases from the Corporation, that number of Acquired
Preferred Shares set forth opposite its name on Schedule A hereto, at a purchase
price of $4.60 per share (the "Purchase Price").
SECTION 5. Delivery of Securities. At the Closing, the Corporation
shall issue and deliver to each Investor a stock certificate representing the
Acquired Preferred Shares registered in the name of the Investor. Delivery is
being made to each Investor against receipt, hereby acknowledged, by the
Corporation, of a certified check or checks payable to the order of the
Corporation or by wire transfer funds to the account of the Corporation in the
amount of the Purchase Price.
SECTION 6. Representations and Warranties of the Corporation. The
Corporation hereby represents and warrants to each of the Investors as follows:
6.1. Organization. The Corporation (a) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York, (b) has all requisite corporate power and authority to own, lease and
operate its properties and assets to carry on its business as presently
conducted and to execute, deliver and perform this Agreement and the
Stockholders' Agreement, to issue and deliver the Acquired Preferred Shares, to
issue and deliver the shares of Exchanged Preferred Stock, to reserve the
Reserved Shares for issuance, and to issue and deliver the Reserved Shares upon
conversion of the Acquired Preferred Shares, and (c) is duly qualified as a
foreign corporation and in good standing to do business in all such
jurisdictions, if any, in which the conduct of its business or its ownership,
leasing or operation of property or assets requires such qualification, except
for those jurisdictions in which failure to so qualify would not have a material
adverse effect on the business or assets of the Corporation. Copies of the
Corporation's Restated Certificate of
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Incorporation and Bylaws as in effect on the date hereof are respectively
attached hereto as Exhibits A and B.
6.2. Equity Investments. The Corporation has never had, nor does it
presently have, any subsidiaries, nor has it owned, nor does it presently own,
any capital stock or other proprietary interest or other voting control,
directly or indirectly, in any corporation, association, trust, partnership,
joint venture or other entity.
6.3. Capitalization. The authorized capital stock of the Corporation
immediately upon the consummation at the Closing of the transactions
contemplated hereby, and giving effect thereto, shall consist of:
(a) 1,000,000 shares of Series A Preferred Stock, of which
788,200 shares are validly issued and outstanding and fully paid and
nonassessable, except as may otherwise be provided in Section 630 of the
New York Business Corporation Law (the "BCL");
(b) 1,000,000 shares of Series B Preferred Stock, of which
123,974 shares are validly issued and outstanding and fully paid and
nonassessable, except as may otherwise be provided in Section 630 of the
BCL, and of which 123,974 shares shall be exchanged for a like number of
shares of Exchanged Preferred Stock as of the Closing;
(c) 4,000,000 shares of Series C Preferred Stock, of which an
aggregate of which 1,478,360 shares have been validly issued to the
Investors at the Closing and are outstanding, fully paid upon receipt from
each of the Investors of each Purchase Price due therefrom pursuant to
Section 4 hereof and nonassessable, except as may otherwise be provided in
Section 630 of the BCL;
(d) 6,000,000 shares of Class A Common Stock of which 431,600
shares are validly issued and outstanding and fully paid and nonassessable
except as otherwise may be provided in Section 630 of the BCL; and
1,478,360 shares are duly reserved for issuance in connection with the
conversion of the Acquired Preferred Shares;
(e) 6,000,000 shares of Class B Common Stock, of which (i)
668,991 shares are validly issued and outstanding, and fully paid and
nonassessable, except as may otherwise be provided in Section 630 of the
BCL; and (ii) 1,372,809 shares are duly reserved for issuance under
outstanding and future options.
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Schedule 6.3 attached hereto contains a list of (i) all holders of capital stock
of the Corporation, including the number of shares of capital stock of the
Corporation held by each such holder, and (ii) all outstanding warrants,
options, agreements, convertible securities or other commitments pursuant to
which the Corporation is or may become obligated to issue any shares of its
Common Stock or other capital stock or other securities of the Corporation,
which names all persons entitled to receive such shares or other securities and
the shares of Common Stock or other capital stock or other securities required
to be issued thereunder. Except as set forth on Schedule 6.3 attached hereto,
(a) there are no preemptive or similar rights to purchase or otherwise acquire
shares of Common Stock or other capital stock of the Corporation pursuant to any
provision of law, the Restated and Amended Certificate of Incorporation or
Bylaws or any agreement to which the Corporation is a party, or otherwise,
except as contemplated by this Agreement or the Stockholders' Agreement, and (b)
there is no agreement, restriction or encumbrance (such as a right of first
refusal, right of first offer, proxy, voting agreement, etc.) with respect to
the sale or voting of any shares of Common Stock or other capital stock of the
Corporation (whether outstanding or issuable upon conversion or exercise of
outstanding securities) except as contemplated by this Agreement and the
Stockholders' Agreement.
6.4. Financial Information.
(a) The Corporation has previously delivered to each of the
Investors the unaudited balance sheet of the Corporation as of June 30,
1997 (the "Interim Balance Sheet") and the related unaudited statements of
operations and statements of income and cash flows for the six months then
ended, prepared by the Corporation (collectively with the Interim Balance
Sheet, the "Interim Financial Statements") and the audited balance sheet
of the Corporation as of December 31, 1996 and the related statement of
operations for the nine months then ended as reported on by Deloitte and
Touche, LLP (the "1996 Audited Financial Statements").
(b) The Interim Financial Statements and the 1996 Audited
Financial Statements (together with any notes thereto) referred to in the
foregoing clause (a) of this Section 6.4 (i) are correct and complete in
all material respects and (ii) are in accordance with the books and
records of the Corporation; provided, however, that the Interim Financial
Statements are subject to changes resulting from year-end audit
adjustments which the Corporation believes will not be material.
6.5. Absence of Undisclosed Liabilities. Except as listed on
Schedule 6.5 hereof, as of the date of this Agreement, (a) the Corporation had
no liability in excess of $25,000 of any nature (matured or unmatured, fixed or
contingent) which was not provided for or disclosed on the Interim Balance
Sheet, and (b) all
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liability reserves established by the Corporation were adequate in all material
respects. There were no material loss contingencies (as such term is used in the
Statement of Financial Accounting Standards No. 5 issued by the Financial
Accounting Standards Board in March 1975) which were not adequately provided for
in the 1996 Audited Financial Statements or the Interim Balance Sheet.
6.6. Absence of Changes. Except as listed on Schedule 6.6 and, with
respect to the capitalization, as listed on Schedule 6.3, since June 30, 1997
there has not been (a) any adverse change in the financial condition, results of
operations, assets, liabilities or business of the Corporation, taken as a
whole, (b) any borrowing or agreement to borrow any funds or any liability or
obligation of any nature whatsoever (contingent or otherwise) incurred by the
Corporation, other than current liabilities or obligations incurred in the
ordinary course of business, (C) any asset or property of the Corporation made
subject to a lien of any kind, (d) any waiver of any valuable right of the
Corporation, or the cancellation of any debt or claim held by the Corporation,
(e) any payment of dividends on, or other distributions with respect to, or any
direct or indirect redemption or acquisition of, any shares of the Common Stock
or other capital stock of the Corporation, or any agreement or commitment
therefor, (f) any issuance of any stocks, bonds or other securities of the
Corporation or options, warrants or rights or agreements or commitments to
purchase or issue such securities or grant such options, warrants or rights, (g)
any mortgage, pledge, sale, assignment or transfer of any tangible or intangible
assets of the Corporation, except with respect to tangible assets in the
ordinary course of business, (h) any damage, destruction or loss (whether or not
covered by insurance) adversely affecting the assets, property or business of
the Corporation, (i) any change in the accounting methods or practices followed
by the Corporation or (j) any commitment (contingent or otherwise) to do any of
the foregoing.
6.7. Encumbrances; Burdensome Restrictions. Except as set forth on
Schedule 6.7 attached hereto, the Corporation owns outright all of its property
and assets, real, personal or fixed, tangible or intangible, reflected as assets
on the Interim Balance Sheet or not so reflected because not required to be
reflected, but which are used or useful in the business of the Corporation, or
acquired by the Corporation since the date of the Interim Balance Sheet (other
than assets disposed of in the ordinary course of business since that date),
subject to no mortgages, liens, security interests, pledges, charges or other
encumbrances of any kind. The Corporation is not obligated under any contract or
agreement or subject to any charter or other corporate restriction which
materially adversely affects the Corporation's business, properties, assets,
prospects or condition (financial or otherwise).
6.8. Intellectual Property Rights. Except as set forth on Schedule
6.8 attached hereto:
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6.8.1. Intellectual Property. To the best of the Corporation's
knowledge, there are no material Intellectual Property Rights necessary or
required to enable the Corporation to carry on its business as now conducted
which are not owned by the Corporation or which the Corporation does not have
the legal right to use.
6.8.2. Proprietary Information of Third Parties. To the best
of its knowledge, the Corporation has not violated or infringed, and is not
currently violating or infringing, the material Intellectual Property Rights of
any other person or entity. The Corporation has not received any communications
alleging that the Corporation (or any of its employees or consultants) has
violated or infringed or, by conducting its businesses as presently proposed to
be conducted, would violate or infringe, the material Intellectual Property
Rights of any other person or entity. The Corporation is not aware that any of
its employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
their duties to the Corporation or that would conflict with the Corporation's
business as proposed to be conducted. Neither the execution nor delivery of this
Agreement, nor the carrying on of the Corporation's business by the employees of
the Corporation, nor the conduct of the Corporation's business as proposed,
will, to the Corporation's knowledge, conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any employee is now obligated. The
Corporation does not believe it is or will be necessary to utilize any
inventions, trade secrets or proprietary information of any of its employees
made prior to their employment by the Corporation, except for inventions, trade
secrets or proprietary information that have been assigned to the Corporation.
6.9. Litigation. Except as set forth on Schedule 6.9 hereof, there
is no action, suit, proceeding, claim, arbitration or investigation ("Action")
pending (or, to the best of the Corporation's knowledge, currently threatened)
against the Corporation, its activities, properties or assets. To the best of
the Corporation's knowledge, there is no factual or legal basis for any such
Action that might result, individually or in the aggregate, in any material
adverse change in the business, properties or financial condition of the
Corporation. The Corporation is not a party to or subject to the provisions of
any order, writ, injunction, judgment or decree of any court or government
agency or instrumentality and there is no Action by the Corporation currently
pending or which the Corporation intends to initiate.
6.10. No Defaults. The Corporation is not in default (a) under its
Restated Certificate of Incorporation or Bylaws, or under any note, indenture,
mortgage, lease, purchase or sales order, or any other material contract,
agreement or instrument to which it is a party or by which it or any of its
property or assets is bound or affected or (b) with respect to any order, writ,
injunction, judgment or decree of any court or any
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xxxxxxx, xxxxx, xxxxxxxxx or other domestic or foreign governmental department,
commission, board, bureau, agency or instrumentality. To the best of the
Corporation's knowledge, there exists no condition, event or act which
constitutes, or which after notice, lapse of time or both, would constitute, a
default under any of the foregoing.
6.11. Labor Agreements and Actions. The Corporation is not bound by
or subject to any contract, commitment or arrangement with any labor union, and
to the Corporation's best knowledge, no labor union has requested, sought or
attempted to represent any employees, representatives or agents of the
Corporation. There is no strike or other labor dispute involving the Corporation
pending nor, to the Corporation's best knowledge, threatened, nor is the
Corporation aware of any labor organization activity involving its employees.
6.12. Compliance. To the best of its knowledge, except as set forth
on Schedule 6.12 hereof, the Corporation (a) has complied in all respects with
all federal, state, local and foreign laws, ordinances, regulations and orders
applicable to its business or the ownership of its property or assets which
would have a material adverse effect on the Corporation in the event of a
failure so to comply, and the Corporation has not received notice of any claimed
default with respect to such laws, ordinances, rules and regulations; and (b)
has or has applied for all federal, state, local and foreign governmental
licenses and permits necessary or required to enable it to carry on its business
as now conducted and as presently proposed to be conducted in any material
respect. Such licenses and permits, if issued, are in full force and effect, no
violations have been recorded in respect of any such licenses or permits, and no
proceeding is pending or, to the best of the Corporation's knowledge, threatened
to revoke or limit any thereof. None of the aforesaid licenses and permits shall
be affected in any material adverse respect by this Agreement or the
Stockholders' Agreement.
6.13. Authorization of this Agreement and the Stockholders'
Agreement, Etc. The execution, delivery and performance by the Corporation of
this Agreement and the Stockholders' Agreement have been duly authorized by all
requisite corporate action by the Corporation, and each constitutes the valid
and binding obligation of the Corporation, enforceable in accordance with its
terms, subject to applicable bankruptcy, reorganization, insolvency, moratorium
and similar laws affecting creditors' rights generally and to general principles
of equity. The execution and delivery of this Agreement and the Stockholders'
Agreement by the Corporation, the consummation of the transactions contemplated
hereby and thereby and compliance with the provisions hereof and thereof by the
Corporation, and the issuance, sale and delivery of the Acquired Preferred
Shares and the Reserved Shares by the Corporation will not (a) violate any
provision of law, statute, rule or regulation, or any ruling, writ, injunction,
order, judgment or decree of any court, administrative agency or other
governmental body applicable to the Corporation or (b) conflict with or result
in any
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breach of any of the terms, conditions or provisions of, or constitute (with due
notice or lapse of time, or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, the Restated Certificate of
Incorporation or Bylaws, or under any note, indenture, mortgage, lease, purchase
or sales order or other material contract, agreement or instrument to which the
Corporation is a party or by which it or any of its property or assets is bound
or affected, or (c) result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of the Corporation.
6.14. Authorization of Acquired Preferred Shares and Reserved
Shares. The designation, issuance, sale and delivery of the Acquired Preferred
Shares, and the reservation, issuance, sale and delivery of the Reserved Shares,
have been duly authorized by all requisite corporate action of the Corporation,
and when issued, sold and delivered in accordance with this Agreement, the
Acquired Preferred Shares and Reserved Shares will be validly issued and
outstanding, fully paid and nonassessable (except as may be otherwise provided
in Section 630 of the BCL), and are not subject to preemptive or any other
similar rights of the stockholders of the Corporation or others except as
otherwise provided herein or in the Stockholders' Agreement. The designations,
powers, preferences and rights and the qualifications, limitations and
restrictions of the Acquired Preferred Shares are as stated in the Restated
Certificate of Incorporation.
6.15. Offerees. The Corporation has not offered any Common Stock, or
any security or securities similar to the Series C Preferred Stock or the Common
Stock, for sale to, or solicited any offers to buy any of the foregoing from, or
otherwise approached or negotiated in respect thereof, with any Person or
Persons other than a limited number of institutional or other sophisticated
investors deemed to be "accredited investors," as such term is defined in Rule
501(a) of Regulation D adopted under the Securities Act, and other than certain
employees and directors who were granted stock options and, in any event, all
such offerings were exempt from registration under, and in accordance with, the
Securities Act and applicable state securities and "blue sky" laws.
6.16. Offering Exemption. The offering and sale of the Acquired
Preferred Shares and the sale of the Reserved Shares upon conversion of the
Acquired Preferred Shares are exempt from registration under the Securities Act.
The aforesaid offering and sale are also exempt from registration under
applicable state securities and "blue sky" laws or will be exempt upon the
timely filing of notices with the appropriate states.
6.17. No Governmental Consent or Approval Required. Except for the
filing of any notice subsequent to the Closing that may be required under
applicable federal and/or state securities laws (which, if required, shall be
filed on a timely basis as may be so required) or consents or approvals which
have been obtained, no consent,
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approval or authorization of, or declaration to, or filing with, any Person
(governmental or private) is required for the valid authorization, execution,
delivery and performance by the Corporation of this Agreement or the
Stockholders' Agreement or for the valid authorization, designation, issuance,
sale and delivery of the Acquired Preferred Shares or the Reserved Shares.
6.18. Agreements. Except as listed on Schedule 6.18, the Corporation
is not a party to any written or oral contract not made in the ordinary course
of business and, whether or not made in the ordinary course of business, the
Corporation is not a party to any written or oral (a) contract with any labor
union, (b) contract for the future purchase of fixed assets or for the future
purchase of materials, supplies or equipment in excess of normal operating
requirements, (c) contract for the employment of any officer, individual
employee or other person on a full-time basis or any contract with any person on
a consulting basis, (d) bonus, pension, profit-sharing, retirement, stock
purchase, stock option, hospitalization, medical insurance or similar plan,
contract or understanding in effect with respect to employees or any of them or
the employees of others, (e) agreement or indenture relating to the borrowing of
money or to the mortgaging, pledging or otherwise placing of a lien on any
property or assets of the Corporation, (f) guaranty of any obligation for
borrowed money or otherwise, (g) lease or agreement under which the Corporation
is lessee of or holds or operates any property, real or personal, owned by any
other party, (h) lease or agreement under which the Corporation is lessor of or
permits any third party to hold or operate any property, real or personal, owned
or controlled by the Corporation, (i) agreement or other commitment for capital
expenditures in excess of $100,000, (j) 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 Corporation
(except for agreements which, in the aggregate, are not material to the business
of the Corporation); (k) contract, agreement or commitment under which the
Corporation is obligated to pay any broker's fees, finder's fees or any such
similar fees, to any third party, (l) contract, agreement or commitment under
which the Corporation has issued, or may become obligated to issue, any shares
of Common Stock or other capital stock of the Corporation, or any warrants,
options, convertible securities or other commitments pursuant to which the
Corporation is or may become obligated to issue any shares of its Common Stock
or other capital stock, (m) contract, agreement or commitment under which the
Corporation is obligated to repurchase or otherwise acquire or retire any shares
of its Common Stock or other capital stock, or (n) any other contract,
agreement, arrangement or understanding which is material to the operation of
the business of the Corporation.
6.19. Offering of the Acquired Preferred Shares. Neither the
Corporation nor any person authorized or employed by the Corporation as agent,
broker, dealer or otherwise in connection with the offering or sale of the
Acquired Preferred Shares or any security of the Corporation similar to the
Acquired Preferred
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Shares has offered the Acquired Preferred Shares or any such similar security
for sale to, or solicited any offer to buy the Acquired Preferred Shares or any
such similar security from, or otherwise approached or negotiated with respect
thereto with, any person or persons (other than the issuance of shares of Class
A and Class B Common Stock and Preferred Stock in connection with the formation
of the Corporation, the Financing and the grant of stock options to employees
and others and the exercise of such stock options), and neither the Corporation
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 Corporation under circumstances which might require the integration of such
security with the Acquired 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 Acquired Preferred Shares to the
registration provisions of the Securities Act.
6.20. Brokers. Except as provided in Schedule 6.20, neither the
Corporation nor any of the Corporation's officers, directors, employees or
stockholders has employed any broker or finder in connection with the
transactions contemplated by this Agreement.
6.21. Registration Rights. Except as contemplated by this Agreement
and the Stockholders' Agreement, or as set forth on Schedule 6.21, no Person has
any right to cause the Corporation to effect the registration under the
Securities Act of any shares of Common Stock or any other securities (including
without limitation, debt securities) of the Corporation.
6.22. Compliance with ERISA; Benefit Plans. The Corporation does not
(a) maintain, and it has never maintained, any employee benefit plan subject to
ERISA or (b) contribute to, and has never contributed to, any such employee
benefit plan maintained by any other person or entity.
6.23. Investment Company Act. The Corporation is not an "investment
company" as that term is defined in, and is not otherwise subject to regulation
under, the Investment Company Act of 1940.
6.24. Qualified Small Business Stock. The Acquired Preferred Shares
constitute "qualified small business stock" as defined in Section 1202 (c) of
the Code.
6.25. Environmental Matters. No Hazardous Substances have been used,
handled, generated, processed, treated, stored, transported to or from,
released, discharged or disposed of by the Corporation or any third party on,
about or beneath any real property owned or leased by the Corporation, the
result of which would have a material adverse effect on the Corporation. For
purposes of this Agreement, the term
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"Hazardous Substances" shall mean any substance regulated under any federal,
state or local environmental law or regulation.
6.26. Descriptive Memorandum. The information provided by the
Corporation in the Descriptive Memorandum dated June 1997 and the Supplement
thereto (collectively, the "Descriptive Memorandum") furnished to each of the
Investors has been prepared in good faith by the Corporation and to the best of
the knowledge of the Corporation does not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained therein not misleading; provided that the Descriptive
Memorandum includes certain statements, estimates and projections and other
forward looking information which reflects various assumptions made by the
Corporation concerning anticipated results which may or may not prove to be
correct. No representations or warranties are made as to the accuracy of such
statements, estimates and projections and other forward looking information.
6.27. Employees. To the Corporation's knowledge, no employee of the
Corporation, nor any consultant with whom the Corporation has contracted, is in
violation of any term of any employment contract, proprietary information
agreement or any other agreement relating to the right of any such individual to
be employed by, or to contract with, the Corporation because of the nature of
the business to be conducted by the Corporation, and to the Corporation's
knowledge the continued employment by the Corporation of its present employees,
and the performance of the Corporation's contracts with its independent
contractors, will not result in any such violation. The Corporation has not
received any notice alleging that any such violation has occurred. No employee
of the Corporation has been granted the right to continued employment by the
Corporation or to any material compensation following termination of employment
with the Corporation. The Corporation is not aware that any officer or key
employee, or that any group of key employees, intends to terminate their
employment with the Corporation, nor does the Corporation have a present
intention to terminate the employment of any officer, key employee or group of
key employees.
6.28. Proprietary Information and Inventions Agreements. Each former
and current employee, officer and consultant of the Corporation has executed a
Proprietary Information and Inventions Agreement in the form delivered to the
Investors or to their counsel. No current employee, officer or consultant of the
Corporation has excluded works or inventions made prior to his or employment
with the Corporation from his or her assignment of inventions pursuant to such
employee, officer or consultant's Proprietary Information and Inventions
Agreement.
6.29. Tax Returns and Payments. The Corporation has timely filed all
tax returns (federal, state and local) required to be filed by it. All taxes
shown to be due and payable on such returns, any assessments imposed, and to the
Corporation's knowledge all other taxes due and payable by the Corporation on or
before the Closing
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have been paid or will be paid prior to the time they become delinquent. The
Corporation has not been advised (a) that any of its returns, federal, state or
other, have been or are being audited as of the date hereof, or (b) of any
deficiency in assessment or proposed adjustment to its federal, state or other
taxes. The Corporation has no knowledge of any liability of any tax to be
imposed upon its properties or assets as of the date of this Agreement that is
not adequately provided for.
6.30. Full Disclosure. This Agreement, the Exhibits hereto, the
Stockholders' Agreement, the Descriptive Memorandum and all other documents
delivered by the Corporation to Investors or their attorneys or agents in
connection herewith or therewith or with the transactions contemplated hereby or
thereby taken together, to the Corporation's knowledge, do not contain any
untrue statement of a material fact nor omit to state a material fact necessary
in order to make the statements contained herein or therein not misleading. To
the Corporation's knowledge, there are no facts (other than economic, political
or other factors of general application) which (individually or in the
aggregate) materially adversely affect the business, assets, liabilities,
financial condition, prospects or operations of the Corporation that have not
been set forth in the Agreement, the Exhibits hereto, the Stockholders'
Agreement or in other documents delivered to Investors or their attorneys or
agents in connection herewith.
SECTION 7. Representations, Warranties and Covenants of each of the
Investors. Each of the Investors represents, warrants and covenants, severally
and not jointly, to the Corporation that:
(a) it has received and reviewed a copy of the Descriptive
Memorandum prior to the Closing Date;
(b) the execution, delivery and performance of this Agreement
and the Stockholders' Agreement have been duly authorized by all requisite
action by the Investor and each constitutes the valid and binding
obligation of the Investor, enforceable in accordance with its terms;
subject to applicable bankruptcy, reorganization, insolvency, moratorium
and similar laws affecting creditors' rights generally and to general
principles of equity.
(c) it is acquiring the Acquired Preferred Shares and, in the
event that it should acquire Reserved Shares upon conversion of the
Acquired Preferred Shares, it will be acquiring the Reserved Shares, for
its own account, for investment and not with a view to the distribution
thereof within the meaning of the Securities Act;
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(d) it understands that the Acquired Preferred Shares have not
been and, except as provided in this Agreement or in the Stockholders'
Agreement, the Reserved Shares will not be, registered under the
Securities Act, by reason of their issuance by the Corporation in a
transaction exempt from the registration requirements of the Securities
Act; and that except as provided in this Agreement or in the Stockholders'
Agreement, the Acquired Preferred Shares and the Reserved Shares must be
held by it indefinitely unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from registration;
(e) it understands that the exemption from registration
afforded by Rule 144 (the provisions of which are known to it) promulgated
under the Securities Act depends on the satisfaction of various
conditions, and that, if and when applicable, Rule 144 may only afford the
basis for sales in limited amounts;
(f) it will not transfer any of the Acquired Preferred Shares
or the Reserved Shares except in compliance with the Stockholders'
Agreement and applicable law;
(g) it has not employed any broker or finder in connection
with the transactions contemplated by this Agreement;
(h) it has had an opportunity to ask questions of the officers
of the Corporation regarding the Corporation's business, management and
financial affairs and has received all information as it has deemed
necessary or appropriate as a prudent and knowledgeable investor in
evaluating the purchase of the Acquired Preferred Shares;
(i) it is an "accredited investor" as defined in Rule 501(a)
promulgated under the Securities Act; and
(j) to the best of its knowledge, its purchase of the Acquired
Preferred Shares will not constitute a violation by the Investor of any
rule, law or regulation applicable to it.
SECTION 8. Conditions to and Deliveries at Closing. At or before the
Closing:
8.1. Acquired Preferred Shares; Purchase Price. Each Investor shall
have received a stock certificate evidencing its ownership of the Acquired
Preferred Shares, which Acquired Preferred Shares shall have been duly
authorized and issued by the Corporation, and the Corporation shall have
received the Purchase Price due from each Investor.
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8.2. Corporate Proceedings; Consents, Etc. All corporate and other
proceedings to be taken and all waivers and consents to be obtained in
connection with the transactions contemplated by this Agreement and the
Stockholders' Agreement shall have been taken or obtained and all documents
incident thereto shall be satisfactory in form and substance to the Investor and
to its counsel and each of the Investors shall have received all such originals
or certified or other copies of such documents it may reasonably have requested.
8.3. Restated and Amended Certificate of Incorporation. The Board of
Directors of the Corporation (the "Board of Directors") shall have duly adopted
resolutions in form acceptable to each of the Investors setting forth, among
other things, (a) the designations, rights, preferences and privileges and
qualifications, limitations and restrictions of the Series C Preferred Stock,
and (b) a limitation on the liability of its directors to the fullest extent
permitted under New York law, substantially in the form of the Restated
Certificate of Incorporation, and such Restated Certificate of Incorporation
shall have been filed with and accepted by the Secretary of State of New York
and shall have become effective and evidence of the foregoing in form
satisfactory to each of the Investors shall have been delivered thereto.
8.4. Stockholders' Agreement. The Stockholders' Agreement shall have
been executed and delivered by the Corporation and such other parties named
therein. In addition, the Corporation and such parties shall have complied with
all of the terms and conditions of the Stockholders' Agreement, including
without limitation, the placement of the legends required to be placed on
securities owned by such parties.
8.5. Opinion of Counsel. An opinion of counsel to the Corporation,
in form and substance reasonably satisfactory to the Investors, shall have been
executed and delivered to each of the Investors by such counsel.
8.6. Certificate of Secretary. Each of the Investors shall have
received a certificate of the Secretary of the Corporation, dated the date of
the Closing, to the effect that (a) attached thereto is a true and complete copy
of the Restated Certificate of Incorporation and the Bylaws of the Corporation
(as amended through such date) as in effect on the date thereof, (b) attached
thereto is a true and complete copy of resolutions adopted by the Board of
Directors authorizing the execution, delivery and performance of this Agreement
and the Stockholders' Agreement, the issuance of the Acquired Preferred Shares,
the reserving of the Reserved Shares for issuance upon conversion of the
Acquired Preferred Shares, and certifying that such resolutions are the only
resolutions of the Board of Directors with respect to such matters, (c) the
Corporation is in good standing in reliance on a good standing certificates from
the Secretary of State of New York as of a recent date, and (d) such other
matters as may be reasonably requested by each of the Investors.
8.7. Adverse Proceedings. No suit, action, or other proceeding
seeking to restrain, prevent or change the transactions contemplated hereby or
in the
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Stockholders' Agreement or otherwise questioning the validity or legality of
such transactions shall have been threatened or instituted and be pending.
8.8. Board of Directors. Upon the Closing, the authorized size of
the Board of Directors of the Corporation shall be five members and the Board of
Directors shall initially consist of Mr. Xxxx Xxxxxxxx, Xx. Xxxxx Xxxxxxxx, one
designee of Media Technology Ventures, L.P. and Media Technology Ventures
Entrepreneurs Fund, L.P. (collectively, "MTV"), one designee of the Investors
(excluding MTV) and one designee to be nominated by a majority of Mr. Xxxx
Xxxxxxxx, Xx. Xxxxx Xxxxxxxx and the designee of MTV.
SECTION 9. Covenants of the Corporation.
So long as the Series C Preferred Stock is outstanding:
9.1. Access to Records.
9.1.1. General. The Corporation shall afford to a designated
representative of each of the Investors free and full access, at all reasonable
times, and with reasonable prior notice, to all of the books, records and
properties of the Corporation and to all officers, employees and accountants or
auditors of the Corporation for any reasonable purpose whatsoever. Each of the
Investors shall maintain the confidentiality of any confidential and Proprietary
Information so obtained by it which is not otherwise available from other
sources that are free from similar restrictions; provided, however, that the
foregoing, shall in no way limit or otherwise restrict the ability of each of
the Investors or such authorized representatives to disclose any such
information concerning the Corporation which it may be required to disclose (a)
to its partners, board members or stockholders, to the extent required to
satisfy its fiduciary obligations to such persons, or (b) otherwise pursuant to
or as required by law.
9.1.2. Rights of MTV. So long as it is the beneficial owner of at
least 50,000 shares of the Acquired Preferred Shares (as adjusted for any stock
splits, dividends, or recapitalizations), a representative from MTV shall have
the right, after providing the Corporation with reasonable prior notice, to
visit the Corporation's principal offices for meetings with the Corporation's
management four (4) times per year, for a period of one (1) day per visit. The
Corporation agrees to reimburse MTV for reasonable expenses incurred by it in
connection with these visits up to a maximum amount of $10,000 per year.
9.2. Financial Reports. The Corporation covenants and agrees that so
long as an Investor beneficially owns at least five percent (5%) of the Acquired
Preferred Shares issued in the Financing (or at least five percent (5%) of the
Reserved Shares issuable upon conversion of the Acquired Preferred Shares) it
shall furnish to each such Investor the following:
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9.2.1. Monthly Reports. As soon as practicable, and in any case
within thirty (30) days after the end of each monthly accounting period, monthly
unaudited financial statements (all prepared in accordance with generally
accepted accounting principles consistently applied), including (a) an unaudited
balance sheet of the Corporation as of the last day of such monthly accounting
period, (b) an unaudited statement of income of the Corporation for such monthly
accounting period, (c) an unaudited cash flow statement of the Corporation for
such monthly accounting period, and (d) unaudited comparisons of the information
specified in sub-sections (a), (b) and (c) hereof with (i) the comparable
monthly accounting period from the Corporation's prior fiscal year and, to the
extent practical, (ii) the annual budget of the Corporation.
9.2.2. Quarterly Reports. As soon as practicable and in any event
within thirty (30) days after the end of each fiscal quarter, an unaudited
report on financial and operational highlights of the Corporation regarding the
most recent fiscal quarter.
9.2.3. Annual Reports. As soon as practicable and in any event
within 120 days after the end of each fiscal year, a balance sheet as of the end
of such fiscal year, a statement of income and a statement of cash flows of the
Corporation for such year, setting forth in each case in comparative form the
figures from the Corporation's previous fiscal year, all prepared in accordance
with generally accepted accounting principles consistently applied and audited
by independent auditors engaged by the Corporation.
9.2.4. Annual Budgets. As soon as practicable and in any event prior
to the commencement of each fiscal year, an annual budget of the Corporation for
the next succeeding fiscal year.
9.2.5. Other Information. Promptly, from time to time, until the
consummation of a Qualified Public Offering, such other information regarding
the business, prospects, financial condition, operations, property or affairs of
the Corporation as the Investor reasonably may request.
9.2.6. Subsidiaries. If for any period the Corporation shall have
any subsidiary or subsidiaries whose accounts are consolidated with those of the
Corporation, then in respect of such period, the financial statements and other
information delivered pursuant to the foregoing Sections 9.2.1, 9.2.2, 9.2.3 and
9.2.4 shall be the consolidated financial statements of the Corporation and all
such consolidated subsidiaries. If the accounts of such subsidiary or
subsidiaries are not consolidated, the financial statements and other
information contemplated by the foregoing Sections 9.2.1, 9.2.2, 9.2.3 and 9.2.4
shall be furnished with respect to such unconsolidated subsidiary or
subsidiaries.
9.3. Use of Proceeds. The net proceeds received by the Corporation
from the sale of the Acquired Preferred Shares shall be used by the Corporation
for the purchase of equipment, to retire $800,000 of debt currently due and
payable by the
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Corporation to SCP Communications, Inc. ("SCP"), and for other general and
working capital purposes.
9.4. Reserve for Reserved Shares. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Class A
Common Stock, for the purpose of effecting the conversion of the Acquired
Preferred Shares and otherwise complying with the terms of this Agreement, such
number of its duly authorized shares of Class A Common Stock as shall be
sufficient to effect the conversion of the Acquired 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 Class A Common Stock
shall not be sufficient to effect the conversion of the Series C Preferred
Shares or otherwise to comply with the terms of this Agreement, the Corporation
will forthwith take such corporate action as may be necessary to increase its
authorized but unissued shares of Class A Common Stock to such number of shares
as shall be sufficient for such purposes. The Corporation 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 Class A Common
Stock upon conversion of the Acquired Preferred Shares.
9.5. Qualified Small Business Stock. The Corporation shall submit to
its stockholders (including each of the Investors) and to the Internal Revenue
Service any reports that may be required under Section 1202(d)(1)(C) of the Code
and any related Treasury Regulations.
9.6. Directors' Expenses and Grant of Stock Options. Each of the
directors shall be entitled to be reimbursed by the Corporation for his
reasonable expenses incurred in attending meetings of the Board and in
representing the Corporation, and shall be entitled to receive $500 for each
Board meeting attended in person. In addition, each director who was not a
director of the Corporation prior to the Closing Date shall receive within 90
days following the Closing Date stock options exercisable for 18,000 shares of
Class B Common Stock, at an exercise price of not less than $.36 per share,
which shall vest on an annual basis over three years from the date of issuance
thereof.
9.7. Key Man Life Insurance. Within ninety (90) days after the
Closing Date, the Corporation shall have purchased and obtained a renewable term
life insurance policy on the life of the chief executive officer of the
Corporation, which such policy shall be in the amount of at least $1,000,000 and
shall designate the Corporation as the sole beneficiary thereof.
SECTION 10. Additional Investors. Notwithstanding any provision to
the contrary contained herein or in the Stockholders' Agreement, the Corporation
may, in its sole discretion, within ninety (90) days after the date of the
Closing, effect the placement of up to 1,100,000 additional shares of Series C
Preferred Stock or Common Stock, or warrants to purchase such Series C Preferred
Stock or Common
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Stock, to Additional Investors. As a condition to any such transaction(s), each
Additional Investor shall agree to execute this Agreement and become bound by
the terms, conditions and obligations hereof.
SECTION 11. Exchanges; Lost, Stolen or Mutilated Stock Certificates.
Upon surrender by each of the Investors to the Corporation of any certificate
representing Acquired Preferred Shares or Reserved Shares purchased or acquired
hereunder, the Corporation at its expense shall issue in exchange therefor, and
deliver to each such Investor, a new certificate or certificates representing
such shares, in such denominations as may be requested by such Investor. Upon
receipt of evidence satisfactory to the Corporation of the loss, theft,
destruction or mutilation of any certificate representing any Acquired Preferred
Shares or Reserved Shares purchased or acquired by each of the Investors
hereunder, and in case of any such loss, theft or destruction, upon delivery of
any indemnity agreement satisfactory to the Corporation, or in case of any such
mutilation, upon surrender and cancellation of such certificate, the Corporation
at its expense shall issue and deliver to each such Investor a new certificate
for such Acquired Preferred Shares or Reserved Shares of like tenor, in lieu of
such lost, stolen or mutilated certificate.
SECTION 12. Survival of Representations, Warranties and Agreements,
Etc. All representations and warranties hereunder shall survive the Closing for
a period of eighteen (18) months. All agreements contained herein shall survive
indefinitely until, by their respective terms, they are no longer operative. No
action or claim for damages resulting from breaches of representations and
warranties of the Corporation shall be brought or made after the expiration of
an eighteen (18) month period from the date hereof, except with respect to any
breaches of the representations and warranties of the Corporation made pursuant
to Sections 6.8.2 and 6.29 hereof, for which no action or claim for damages
shall be brought or made after the expiration of three (3) years from the date
hereof.
SECTION 13. Remedies. In case any one or more of the
representations, warranties, covenants and/or agreements set forth in this
Agreement shall have been breached by the Corporation, each Investor may proceed
to protect and enforce its rights either by suit in equity and/or by action at
law, including, but not limited to, an action for damages as a result of any
such untruth, inaccuracy or breach and/or an action for specific performance of
any such covenant or agreement contained in this Agreement.
SECTION 14. Expenses. The Corporation and each of the Investors
agree that each party hereto shall bear their own legal and other expenses with
respect to the transactions contemplated hereby, including, without limitation,
the preparation of this Agreement and the Stockholders' Agreement; provided,
however, that upon the successful completion of the Financing, the Corporation
agrees to pay up to $10,000 of legal fees and related costs incurred by Xxxxxx
Godward LLP, counsel to certain of the Investors, within sixty (60) days after
delivery to the Corporation by such Investors of a written invoice therefor.
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SECTION 15. Successors and Assigns; Parties in Interest. This
Agreement shall bind and inure to the benefit of (a) the Corporation, each of
the Investors and each other Person who shall become a registered holder of any
certificate representing the Acquired Preferred Shares or the Reserved Shares,
and (b) the respective successors and assigns of the Corporation, each of the
Investors and each such other Person. The rights of each of the Investors in
this Agreement are assignable to any registered holder of the Series C Preferred
Stock or the Reserved Shares except to the extent such assignees received such
stock or shares in a transaction involving a public offering or purchase on a
securities exchange.
SECTION 16. Entire Agreement. This Agreement (as amended from time
to time) and the other writings referred to herein or delivered pursuant hereto
which form a part hereof (including the Schedules and Exhibits hereto) contain
the entire agreement among the parties with respect to the subject matter hereof
and supersede all prior and contemporaneous arrangement or understanding with
respect thereto.
SECTION 17. Notices. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or duly sent by air mail
first class registered or certified, return receipt requested, postage prepaid,
or by facsimile in any case addressed to the Corporation at the address set
forth below, and to each Investor at the address set forth opposite its name on
Schedule A hereto or such other address as may hereafter be designated in
writing by the addressee to the addressor listing all parties:
If to the Corporation, to:
Medscape, Inc.
000 X. 00xx Xxxxxx
Xxx Xxxx, XX 00000-0000
Fax (000) 000-0000
Attention: President & CEO
with a copy to:
Dechert Price & Xxxxxx
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxxxxx
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All such notices, advises and communications shall be deemed to have been
received (a) in the case of personal delivery, on the date of such delivery and
(b) in the case of mailing, on the third day after the posting thereof.
SECTION 18. Changes. The terms and provisions of this Agreement may
not be modified or amended, or any of the provisions hereof waived, temporarily
or permanently, except pursuant to the written consent of the Corporation and
each of the Investors.
SECTION 19. Counterparts. This Agreement may be executed in any
number of counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all such counterparts together shall constitute but
one agreement.
SECTION 20. Headings. The headings of the sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be a part of this Agreement.
SECTION 21. Nouns and Pronouns. Whenever the context may require,
any pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice-versa.
SECTION 22. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to conflict of laws.
SECTION 23. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 24. Jurisdiction. The parties hereto agree that any suit,
action or proceeding instituted against one or more of them with respect to this
Agreement (including any exhibits hereto) shall be brought in any federal or
state court located in the State of New York. The parties hereto, by the
execution and delivery of this Agreement, irrevocably waive any objection or
defense to the institution of any action in New York based on improper venue,
the convenience of the forum or the jurisdiction of such courts, or from the
execution of judgments resulting therefrom, and the parties hereto irrevocably
accept and submit to the jurisdiction of the aforesaid courts in any suit,
action or proceeding and consent to the service of process by certified mail at
the address set forth in Section 17 hereof.
-23-
29
SECTION 25. Broker's Fees. Except as disclosed by the Corporation on
Schedule 6.20 attached hereto, each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fees or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 25 being untrue.
SECTION 26. Exculpation Among Investors. Each Investor acknowledges
that it is not relying upon any person, firm, or corporation, other than the
Corporation and its officers and directors, in making its investment or decision
to invest in the Corporation. Each Investor agrees that no Investor nor the
respective controlling persons, officers, directors, partners, agents, or
employees of any Investor shall be liable for any action heretofore or hereafter
taken or omitted to be taken by any of them in connection with the Acquired
Preferred Shares or the Reserve Shares.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed on their behalf.
MEDSCAPE, INC.
By:/s/ Xxxxx Xxxxxxxx
---------------------------
Name: Xxxxx Xxxxxxxx
Title: President
INVESTORS:
CSK VENTURE CAPITAL CO., LTD.
as Investment Manager for
CSK-1(A) Investment Fund
By: /s/ Max Kuroishi
-------------------------
Name: Max Kuroishi
Title: Director
CSK VENTURE CAPITAL CO., LTD.
as Investment Manager for
CSK-1(B) Investment Fund
By: /s/ Max Kuroishi
-------------------------
Name: Max Kuroishi
Title: Director
CSK VENTURE CAPITAL CO., LTD.
as Investment Manager for
CSK-2 Investment Fund
By: /s/ Max Kuroishi
-------------------------
Name: Max Kuroishi
Title: Director
MEDIA TECHNOLOGY VENTURE, L.P.
By: /s/ Xxxxx Xxxxxxx
-------------------------
Name: Xxxxx Xxxxxxx
Title: General Partner
MEDIA TECHNOLOGY VENTURE
ENTREPRENEURS FUND, L.P.
By: /s/ Xxxxx Xxxxxxx
-------------------------
Name: Xxxxx Xxxxxxx
Title: General Partner
-24-
30
XXXXXX XXXXXXXX, XXXXXXX X. XXXXXXXX,
XXXXX X. XXXX, AND XXXXXXXX X.
XXXXXXXXXXXX TRUSTEES U/A DATED
9/3/64 F/B/O XXXXXX X. XXXXXXXX FAMILY
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Trustee
XXXXXX XXXXXXXX, XXXXXXX X. XXXXXXXX,
XXXX X. XXXX, AND XXXXXXXX X.
XXXXXXXXXXXX TRUSTEES U/W/D
XXXXXXX X. XXXXXXXX F/B/O XXXXXX X.
XXXXXXXX ARTICLE 9TH
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Trustee
THE EXCELSIOR FUND IV
By:
-------------------------
Name:
Title:
XXXXXXX FRERES
By: /s/ Xxxxxx Xxxxxxx
-------------------------
Name: Xxxxxx Xxxxxxx
Title: Principal
TOLEDOT INVESTMENTS
By:
-------------------------
Name:
Title:
XXXXXXX FRERES
By:
-------------------------
Name:
Title:
TOLEDOT INVESTMENTS
By:
-------------------------
Name:
Title:
-25-
31
BE PARTNERS
By: /s/ Xxxxxxx Xxxxxx
-------------------------
Name: Xxxxxxx Xxxxxx
Title: Managing Partner
By: /s/ Xxxxxx Xxxxxx
-------------------------
Name: Xxxxxx Xxxxxx
RHL VENTURES LLC
By:
-------------------------
Name:
Title:
XXXXXXXXXXX & CO., INC.
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Managing Director
/s/ Xxxxxxx Xxxxxxx
-------------------------
Xxxxxxx Xxxxxxx
/s/ Xxxxxx Xxxxx
-------------------------
Xxxxxx Xxxxx
INVESTORS:
APA EXCELSIOR IV, L.P.
By: AP EXCELSIOR IV PARTNERS, L.P.,
its General Partner
By: PATRICOF & CO. MANGERS, INC.,
its General Partner
By: /s/ Xxxxxxxx X. Xxxxxxxx
-------------------------
Name: Xxxxxxxx X. Xxxxxxxx
Title: President
APA EXCELSIOR IV/OFFSHORE, L.P.
By: PATRICOF & CO. VENTURES, INC.
Its Investment Advisor
By: /s/ Xxxxxxxx X. Xxxxxxxx
--------------------------------
Name: Xxxxxxxx X. Xxxxxxxx
Title: President
PATRICOF PRIVATE INVESTMENT CLUB, L.P.
By: AP EXCELSIOR IV PARTNERS, L.P.,
its General Partner
By: PATRICOF & CO. MANAGERS, INC.,
its General Partner
By: /s/ Xxxxxxxx X. Xxxxxxxx
--------------------------------
Name: Xxxxxxxx X. Xxxxxxxx
Title: President
-26-
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/s/ Xxxxx Xxxxxxxxx
-----------------------
Xxxxx Xxxxxxxxx
/s/ Xxxx Xxxxxxxxx
-----------------------
Xxxx Xxxxxxxxx
/s/ Xxxx Xxxxxxxxxx
-----------------------
Xxxx Xxxxxxxxxx, M.D.
/s/ Xxxxxx Xxxxxxxxxx
-----------------------
Xxxxxx Xxxxxxxxxx
-27-
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SCHEDULE A
================================================================================
Number of
Acquired Purchase
Investor Address Shares Price
-------- ------- ------ -----
--------------------------------------------------------------------------------
CSK Venture Capital Co., 7th Floor, Kenchiku-kaikan, 434,783(1) $2,000,000
Ltd. 0-00-00 Xxxxx, Xxxxxx-xx,
Xxxxx, 000, Xxxxx
--------------------------------------------------------------------------------
Media Technology One First Street, 385,150 $1,771,690
Ventures, L.P. Xxxxx 00
Xxx Xxxxx, XX 00000
--------------------------------------------------------------------------------
Media Technology One First Street, 49,730 $ 228,758
Ventures Entrepreneurs Suite 12
Fund, L.P. Xxx Xxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxxx Xxxxxxxx, Xxxxxxx c/x Xxxxxxxx 32,609 $ 150,000
X. Xxxxxxxx, Xxxxx X. Management
Weil, and Xxxxxxxx X. 0 Xxxx 00xx Xxxxxx
Buttenweiser, Trustees 28th Floor
U/A Dated 9/3/64 F/B/O Xxx Xxxx, XX 00000
Xxxxxx X. Xxxxxxxx
Family
--------------------------------------------------------------------------------
Xxxxxx Xxxxxxxx, Xxxxxxx c/x Xxxxxxxx 32,608 $ 150,000
X. Xxxxxxxx, Xxxx X. Management
Loeb, and Xxxxxxxx X. 0 Xxxx 00xx Xxxxxx
Buttenweiser, Trustees 00xx Xxxxx
X/X/X Xxxxxxx X. Xxx Xxxx, XX 00000
Bernhard F/B/O Xxxxxx X.
Xxxxxxxx Article 9th
--------------------------------------------------------------------------------
Xxxxxxx Freres Banque D'Escompte 108,696 $ 500,000
00 Xxxx. Xxxxxxxxx
00000 Xxxxx, Xxxxxx
--------------------------------------------------------------------------------
Xxxxxxxxxxx & Co., Inc. World Financial Center 65,217 $ 000,000
00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx Xxxxxxxx
--------------------------------------------------------------------------------
RHL Ventures LLC c/o Xxxxxx Xxxxxx 54,348 $ 250,000
000 Xxxxx Xxxxxxxx Xx.
Xxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
--------
(1) Includes 123,974 shares of Series C Preferred Stock to be issued to CSK as
a result of the Series B Exchange.
34
--------------------------------------------------------------------------------
Xxxxxx Xxxxxxxxxx c/o Mole Constructors 21,739 $ 100,000
00000 Xxxx Xxxxxx
Xxxxx, XX 00000-0000
--------------------------------------------------------------------------------
Xxxxxxx Xxxxxxx c/o Opus Capital Partners 10,870 $ 50,000
0000 Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxx Xxxxxxxxx c/o Dechert, Price & Xxxxxx 3,261 $ 15,000
00 Xxxxxxxxxxx Xxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
--------------------------------------------------------------------------------
Xxxx Xxxxxxxxx c/o Dechert, Price & Xxxxxx 7,609 $ 35,000
00 Xxxxxxxxxxx Xxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
--------------------------------------------------------------------------------
BE Partners 000 Xx. XxXxxxx Xxxxxx 21,739 $ 100,000
Xxxxx 0000
Xxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxxx Xxxxx c/o EDventure Holdings, Inc. 10,870 $ 50,000
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000-0000
--------------------------------------------------------------------------------
Xxxx Xxxxxxxxxx, M.D. c/o Patient Care Technologies 10,870 $ 50,000
0 Xxxxxxxxx Xxxx Xxxx XX
Xxxxxxx, XX 00000
--------------------------------------------------------------------------------
APA Excelsior IV, L.P. c/o Patricof & Co. 181,826 $ 836,400
Ventures, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
--------------------------------------------------------------------------------
APA Excelsior IV c/o Patricof & Co. 32,087 $ 147,600
Offshore, L.P. Ventures, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
--------------------------------------------------------------------------------
The Patricof Private c/o Patricof & Co. 3,478 $ 15,999
Investment Club Ventures, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
================================================================================
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