CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.17
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT (this "Agreement") is made and entered into as of
the 24th day of August, 1998, by and between WEBMD, INC., a Georgia corporation
f/k/a Endeavor Technologies, Inc. (the "Company"), and HBO & COMPANY OF GEORGIA,
a Delaware corporation (the "Purchaser").
1. SALE AND ISSUANCE OF SECURITIES.
1.1 Authorization of Shares. The Board of Directors of the Company shall,
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prior to the Closing (as defined in Section 2.1), adopt and file with the
Secretary of State of the State of Georgia an Amendment to its Articles of
Incorporation containing the preferences, limitations and relative rights of the
Series A Preferred Stock, in the form attached hereto as Exhibit 1.1 (the
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"Charter Amendment").
1.2 Sale of Shares. Subject to the terms and conditions hereof, at the
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Closing (defined in Section 2.1) the Company shall issue and sell to Purchaser,
and Purchaser shall purchase from the Company, six hundred sixty-seven thousand
(667,000) shares of Series A Preferred Stock, no par value per share (the
"Purchased Shares"), for the purchase price provided in Section 1.3 below.
1.3 Purchase Price. The purchase price for the Purchased Shares shall be
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fifteen dollars ($15.00) per share, or an aggregate of ten million five thousand
dollars ($10,005,000) (the "Purchase Price"). The Purchase Price shall be paid
at the Closing in cash.
1.4 Issuance of Warrant. On the Closing Date, the Company shall issue to
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Purchaser, for no additional consideration, a warrant in the form of Exhibit 1.4
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attached hereto (hereinafter, the "Warrant") dated the Closing Date initially
providing for the purchase of shares of Series A Preferred Stock, no par value
per share (the "Preferred Stock"). The Warrant shall be immediately vested and
exercisable for three (3) years following the issue date thereof and shall
entitle the holder to purchase 300,000 shares of the Preferred Stock (or Common
Stock as provided therein) at an exercise price of $18.00 per share, subject to
adjustment as set forth therein.
The Company shall reserve and keep available for issuance at all times,
free from preemptive rights, such number of its authorized but unissued shares
of the Preferred Stock and its voting Common Stock, no par value and without
series designation ("Common Stock"), as is sufficient to permit exercise in full
of the Warrant in accordance with the terms thereof and the conversion of such
Preferred Stock into Common Stock. All shares of Preferred Stock and Common
Stock that are so issuable shall, when issued upon exercise, be duly and validly
issued and fully paid and non-assessable.
1.5 Use of Cash Proceeds. The Company, as determined by the Board of
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Directors thereof, shall use the cash proceeds from the sale of the Purchased
Shares for general
working capital and to pay expenses associated with the transactions
contemplated by this Agreement in accordance with Section 12.8 hereof. Such cash
proceeds shall not be used to retire loans made by shareholders to the Company
or for the redemption of any capital stock of the Company.
1.6 Agreements. Each of the parties hereto agrees at the Closing to enter
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into the respective agreements described in Articles 5 and 6 to which they are
indicated as a party.
2. CLOSING; DELIVERIES.
2.1 Closing. The closing of the purchase and sale of the Purchased Shares
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(the "Closing") shall be held at the offices of Xxxxx, Day, Xxxxxx & Xxxxx,
Atlanta, Georgia, on August 24, 1998, or at such other place or on such other
date as the parties may agree (the date of the Closing is hereinafter referred
to as the "Closing Date").
2.2 Deliveries at Closing. At the Closing, the Company shall deliver to
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Purchaser a certificate, registered in Purchaser's name, representing the
Purchased Shares, against payment by Purchaser of the Purchase Price by wire
transfer. The Company shall also deliver such other instruments and documents as
are described in Article 5.
2.3 Issuance of Additional Shares. The parties acknowledge that the
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Company intends to make an initial offering to the public of its Common Stock
pursuant to a registration statement effective under the federal Securities Act
of 1933, as amended (the "Securities Act"), following the Closing Date (the
closing of such offering being referred to hereinafter as the "Initial Public
Offering"). If the Company does not close the Initial Public Offering at an
offering price of $18.00 per share (as adjusted for any stock splits, stock
dividends, combinations or the like) on or before the date that is one hundred
eighty (180) days following the Closing Date, the Company shall issue for no
additional consideration to Purchaser 150,000 additional shares of Preferred
Stock without need for any further action by Purchaser; provided that if the
Company closes the Initial Public Offering within such 180-day period, but does
so at an offering price less than $18.00 per share (as adjusted for any stock
splits, stock dividends, combinations or the like), such shares shall consist of
Common Stock rather than Preferred Stock. Furthermore, in the event the Company
fails to close the Initial Public Offering on or before the first anniversary of
the Closing Date, the Company shall issue promptly to Purchaser, for no
additional consideration, an additional 50,000 shares of Preferred Stock without
need for any further action by Purchaser. The numbers of shares of stock
specified in this Section 2.3 shall be adjusted for any stock splits, stock
dividends, recapitalizations or similar events occurring prior to the dates
indicated.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to Purchaser as follows:
3.1 Organization and Standing; Charter and Bylaws. Each of the Company
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and its wholly owned subsidiaries Endeavor Technologies, Inc. (formerly known as
Quality
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Diagnostic Services, Inc.) and Telemedics, Inc. (each, a "Subsidiary" and,
collectively, the "Subsidiaries") is a corporation duly organized and validly
existing under, and by virtue of, the laws of the State of Georgia and in good
standing under such laws. The Company has previously delivered to Purchaser true
and accurate copies of the Articles of Incorporation and Bylaws, as presently in
effect, of the Company.
3.2 Corporate Power. The Company has all requisite legal and corporate
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power and authority to enter into this Agreement and, when the Charter Amendment
has been adopted and filed, to sell the Purchased Shares and to carry out and
perform its other obligations under the terms of this Agreement.
3.3 Subsidiaries and Affiliates. Except as set forth in Exhibit 3.3
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attached hereto, the Company does not own or control, directly or indirectly,
any interest or investment in any corporation, partnership, association or other
form of business entity.
3.4 Capitalization. Immediately prior to the Closing Date, the authorized
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capital stock of the Company shall consist of 107,000,000 shares of capital
stock, of which (a) 75,000,000 shares are designated as Common Stock, voting and
without par value per share, of which 3,000,000 are issued and outstanding; (b)
3,000,000 have been designated as Common Stock Series B, nonvoting and without
par value per share, of which 1,400,000 are issued and outstanding; (c)
1,500,000 shares of which have been designated as Common Stock Series C,
nonvoting and without par value per share, of which 1,500,000 are issued and
outstanding; (d) 15,000,000 shares of which have been designated as Common Stock
Series D, nonvoting and without par value per share, of which 4,406,805 are
issued and outstanding; (e) 2,500,000 shares of which have been designated as
Common Stock Series E, nonvoting and without par value per share, of which
2,100,000 are issued and outstanding; and (f) 10,000,000 shares of preferred
stock, of which no shares are issued and outstanding. All such issued and
outstanding shares have been duly authorized and validly issued, are fully paid
and nonassessable, are owned beneficially and of record by the shareholders and
in the amounts set forth in Exhibit 3.4 ("Schedule of Shareholders, Option
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Holders and Warrant Holders") attached hereto, and, except as set forth in
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Exhibit 3.4, have been offered, issued, sold and delivered by the Company in
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compliance with applicable federal and state securities laws. Except as shown
in Exhibit 3.4, there are no outstanding rights, options, warrants, conversion
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rights or agreements for the purchase or acquisition from the Company or any
Subsidiary of any shares of its respective capital stock other than the rights
created by this Agreement.
3.5 Authorization. All corporate action on the part of the Company and
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its directors, officers and shareholders necessary for the authorization,
execution, delivery and performance of all its obligations under this Agreement
and any document contemplated hereby; for the authorization, issuance and
delivery by the Company of the Purchased Shares, the Warrant, the shares of
Preferred Stock or Common Stock, as the case may be, issuable upon exercise of
the Warrant (the "Warrant Shares"), and the additional shares of Preferred Stock
or Common Stock, as the case may be, pursuant to the terms of Section 2.3 hereof
(the "Additional Shares"); for the authorization and reservation of the shares
of Preferred Stock or Common Stock, as the case may be, issuable pursuant to the
Performance-Based Warrant, if any, issued pursuant to the terms of Section 10
hereof (the "Performance-Based Warrant Shares"); and for
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the authorization and reservation of the shares of the Common Stock issuable
upon conversion of all such Preferred Stock pursuant to the terms of the
Company's Articles of Incorporation (the "Conversion Shares"), has been (or will
be) taken prior to the Closing. This Agreement constitutes the valid and binding
obligation of the Company and is enforceable against it in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency or
other laws affecting the enforcement of creditors' rights generally, and except
that the availability of the remedy of specific performance or other equitable
relief is subject to the discretion of the court before which any proceeding
therefor may be brought.
3.6 Validity of Stock. The Purchased Shares, the Warrant Shares, the
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Additional Shares, and the Performance-Based Warrant Shares, when issued, sold
and delivered in compliance with the provisions of this Agreement, will be
validly issued, fully paid and nonassessable, will be free of any liens or
encumbrances, and will not be subject to any preemptive rights, rights of first
refusal or redemption rights, other than as provided herein and in the Charter
Amendment. The Conversion Shares have been duly and validly reserved, and
neither they nor the issuance thereof are subject to any preemptive rights or
rights of first refusal or redemption rights, and, upon issuance, they will be
validly issued, fully paid and nonassessable.
3.7 Disclosure. No representation or warranty by the Company in this
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Agreement or in any written statement or certificate (excluding any draft
registration statement) furnished to Purchaser in connection with the
transactions contemplated by this Agreement contains, or will contain, any
untrue statement of a material fact or omits, or will omit, to state a material
fact necessary to make the statements made not misleading in light of the
circumstances under which they were made.
3.8 Financial Statements. The Company has furnished Purchaser with (a)
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audited consolidated balance sheets of the Company and its subsidiaries as of
December 31, 1996 and 1997, together with audited consolidated statements of
income and cash flows for the three-year period ended December 31, 1997, and (b)
an unaudited consolidated balance sheet of the Company as of June 30, 1998,
together with unaudited consolidated statements of income and cash flow for the
six-month period then ended (the "Interim Financial Statements"; all the
foregoing financial statements being collectively referred to hereafter as the
"Financial Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied and fairly present the financial position of the Company and the results
of its operations as of the dates and for the periods indicated, subject, in the
case of the Interim Financial Statements, to normal year-end adjustments (which
will not deviate materially from the other financial statements) and the absence
of footnotes.
3.9 Changes. Except as disclosed in Exhibit 3.9 attached hereto and
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except for any changes resulting from the sale of substantially all of the
assets of the Subsidiaries to Matria Healthcare, Inc., on July 21, 1998,
effective as of July 1, 1998, and as disclosed in the Interim Financial
Statements, since the date of the Interim Financial Statements, there has not
been:
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3.9.1 any change in the assets, liabilities, financial condition, or
operations of the Company considered in the aggregate from that reflected in the
Interim Financial Statements, except changes in the ordinary course of business
that have not been, either individually or in the aggregate, materially adverse;
3.9.2 any materially adverse change (individually or in the
aggregate), except in the ordinary course of business, in the contingent
obligations of the Company by way of guaranty, endorsement, indemnity, warranty,
or otherwise;
3.9.3 any damage, destruction, or loss that had a material adverse
effect on the properties or business of the Company, whether or not covered by
insurance;
3.9.4 any loans made by the Company to its employees, officers, or
directors or members of their immediate families other than travel and other
commercially reasonable advances made in the ordinary course of business;
3.9.5 any increases in the compensation of any of the Company's
officers or directors;
3.9.6 any declaration or payment of any dividend or other
distribution of the assets of the Company;
3.9.7 any other event or condition of any character that has had a
material adverse effect on the business of the Company; or
3.9.8 any agreement or commitment by the Company to do any of the
things described in this Section 3.9.
3.10 Material Liabilities. Except (a) as disclosed in Exhibit 3.10
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attached hereto or as reflected in the Interim Financial Statements, (b) for the
obligations and liabilities incurred in the ordinary course of business since
the date of the Interim Financial Statements, and (c) for obligations under
contracts made in the ordinary course of business that would not be required by
GAAP to be reflected in the Interim Financial Statements, neither the Company
nor any Subsidiary has any material liabilities or obligations, absolute or
contingent.
3.11 Contracts and Commitments. Other than this Agreement or as set forth
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in Exhibit 3.11 attached hereto, neither the Company nor any Subsidiary has any
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contracts, agreements or instruments to which it is a party and that involve
either (a) a commitment by, or revenue to, the Company or any Subsidiary in
excess of $25,000 annually, or (b) provisions restricting or affecting the
development, manufacture or distribution of the Company's or any Subsidiary's
products or services. Except as set forth in Exhibit 3.11, all contracts,
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agreements or instruments to which the Company or any Subsidiary is a party are
valid and binding upon the Company or the respective Subsidiary, as the case may
be, and the other parties thereto and are in full force and effect and
enforceable in accordance with their terms,
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subject to bankruptcy, insolvency, reorganization, moratorium and similar laws
of general application relating to or affecting creditors' rights and to general
equitable principles, and none of the Company, any Subsidiary or, to the
Knowledge of the Company (as defined in Section 12.9 hereof), any other party to
any such contract, agreement or instrument has breached any provision of, or is
in default under, the terms thereof, and there are no claims or allegations of
offset, defense, or counterclaims that would prevent the work in process of any
of the Company and the Subsidiaries or its contracts and agreements from
maturing in due course into fully collectible accounts receivable. Except as set
forth on Exhibit 3.11, each of the Company and the Subsidiaries has complied
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with all applicable statutes, ordinances, rules, regulations and orders relating
to seeking, bidding, obtaining, performing under or otherwise complying with,
contracts with governmental and quasi-governmental authorities, agencies or
other entities.
3.12 Computer Software.
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3.12.1 Exhibit 3.12.1 contains a complete and accurate list of the
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computer software that is owned by each of the Company and the Subsidiaries and
used in their respective businesses (the "Owned Software"), except for
commercially available business software applications and other commercially
available over-the-counter "shrink-wrap" software that is generally used by any
of the Company and the Subsidiaries in the ordinary course of its business (the
"Business Software"). To the Company's Knowledge, except for the Licensed
Software (as such term is defined below) incorporated within the Owned Software,
and except as otherwise set forth in Exhibit 3.12.1, each of the Company and the
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Subsidiaries has exclusive rights and title to the Owned Software, free and
clear of all claims, including claims or rights of joint owners and employees,
agents, consultants, customers, licensees or any other parties who may have been
involved in the development, creation, marketing, maintenance, enhancement or
licensing of such Owned Software. Each contract programmer, independent
contractor, nonemployee agent and person or other entity (other than employees)
who has performed development or computer programming services for any of the
Company and the Subsidiaries in connection with the Owned Software has executed
a confidentiality agreement in favor of the Company or any Subsidiary, and each
of the Company and the Subsidiaries has obtained an assignment or license of, or
otherwise owns, the intellectual property resulting therefrom. No Owned
Software has been published or disclosed to any other parties except pursuant to
contracts requiring such other parties to keep the Owned Software confidential.
(For purposes of the preceding sentence, marketing materials that describe the
Owned Software and its functions in general shall not be deemed a publication or
disclosure of the Owned Software.) To the best of the Company's Knowledge, no
such other party has breached any such obligation of confidentiality.
3.12.2 Each of the Company and the Subsidiaries has the right and
license to use, sublicense, modify and copy all software (other than the
Business Software) of which each of the Company and the Subsidiaries is a
licensee or lessee or that each of the Company and the Subsidiaries otherwise
has obtained the right to use (collectively, the "Licensed Software") to the
extent necessary to operate each of the Company's and any Subsidiary's business,
free and clear of any limitations or encumbrances, including Licensed Software
that
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has been incorporated into or made a part of any Owned Software. Each of the
Company and the Subsidiaries is in full compliance with all material provisions
of each license, lease or other agreement relating to the Licensed Software.
Neither the Company nor any Subsidiary has published or disclosed any Licensed
Software to any other party except, in the case of Licensed Software, if any,
that any of the Company and the Subsidiaries leases or markets to others,
pursuant to contracts requiring such other parties to keep the Licensed Software
confidential. To the best of the Company's Knowledge, no party to whom any of
the Company and the Subsidiaries has disclosed Licensed Software has breached
such obligation of confidentiality.
3.12.3 The Owned Software, the Licensed Software, and the Business
Software constitute all software used in any of the Company's and any
Subsidiary's business (the "Company Software"). The transactions contemplated
herein will not cause a breach or default under any licenses, leases or similar
agreements relating to the Company Software or impair any of the Company's and
any Subsidiary's ability to use the Company Software in the same manner as the
Company Software is currently used or is contemplated to be used by the Company.
Neither the Company nor any Subsidiary has infringed or is infringing any
intellectual property rights of any third party with respect to the Owned
Software, and, to the best of the Company's Knowledge, no other person or entity
is infringing any intellectual property rights of any of the Company and the
Subsidiaries with respect to the Owned Software.
3.12.4 Except as disclosed in Exhibit 3.12.4, neither the Company nor
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any Subsidiary has granted any licenses or other rights, and neither the Company
nor any Subsidiary has any obligation to grant licenses or other rights, with
respect to the Company Software. Each of the Company and the Subsidiaries has
complied in all material respects with the obligations to its customers,
licensees and lessees in respect of the Company Software, if any, listed in
Exhibit 3.12.4.
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3.12.5 Neither the Company nor any Subsidiary has granted marketing
or brokering rights in the Company Software to any third party.
3.12.6 The Business Software that is material to the operation of the
Company's or any Subsidiary's business, the Owned Software and any Licensed
Software that has been incorporated into any Owned Software is capable of
correctly processing, providing and/or receiving date data within and between
the Twentieth and Twenty-First Centuries, provided that all hardware, software
and firmware used with the Company Software and computer equipment properly
exchanges accurate date data with it. To the Company's Knowledge after
reasonable inquiry, the business of neither the Company nor any Subsidiary
depends to any extent on embedded computer technology or computer information
systems of its current vendors or suppliers that would, in the event that the
embedded chips or vendor/supplier computer systems fail to be Year 2000
compliant, have a material adverse effect on the Company's or any Subsidiary's
business or properties.
3.13 Protection of Intellectual Property Generally. Exhibit 3.13 hereto
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sets forth a complete and correct list and summary description of all registered
and material unregistered
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trademarks, trade or company names, service marks, service names, brand names
and registrations, if any, therefor; all registered copyrights; all patents and
all patent applications, if any, in each case applicable to or used or intended
to be used in the business of any of the Company and the Subsidiaries, together
with a complete list of all licenses granted by or to each of the Company and
the Subsidiaries with respect to any of the above. The Company has filed an
application in the United States Patent and Trademark Office for registration of
WebMD as a service xxxx (which application has been initially denied), but
otherwise neither the Company nor any Subsidiary has not sought governmental
protection by way of patent, trademark or copyright registration or application
for the property listed in Exhibit 3.13 hereto. Each of the Company and the
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Subsidiaries validly owns or is validly licensed to use all inventions,
processes, know-how, formulas, patterns, designs, and trade secrets that are
used in the conduct of its business as now conducted. All such rights and all
rights listed in Exhibit 3.13 hereto are valid and enforceable and are free from
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any security interest, lien or encumbrance or any default on the part of any of
the Company and the Subsidiaries, and are not now involved in any pending or, to
the knowledge of the Company, threatened interference proceeding. No option,
license, sublicense or other agreement has been granted in respect of any
patent, trademark, brand name, trade secret, copyright or pending application
therefor listed in Exhibit 3.13 hereto, except as noted in Exhibit 3.13. Except
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as set forth on Exhibit 3.13, neither the Owned Software nor any of the
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Company's or any Subsidiary's other owned intellectual property infringes any
patent, trademark, service xxxx, trade or company name or application therefor
or any other related technological right of any other person. None of the rights
of any of the Company and the Subsidiaries described in this Section 3.13 will
be impaired in any way by the transactions provided for herein, and all of such
rights will be fully enforceable by each of the Company and the Subsidiaries
after the Closing Date without the consent or agreement of any other party.
Neither the Company nor any Subsidiary believes it is or will be necessary to
utilize any inventions of any of its employees (or individuals it currently
intends to hire) made prior to their employment by any of the Company and the
Subsidiaries.
3.14 Compliance with Other Instruments. The execution, delivery and
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performance of and compliance with this Agreement, the issuance of the Purchased
Shares and the issuance of the Conversion Shares will not result in any
violation or be in conflict with or constitute a default under any of the terms
or provisions of the Company's or any Subsidiary's Articles of Incorporation or
bylaws, or any mortgage, indenture, contract, agreement or instrument to which
the Company or any Subsidiary is a party, or result in the creation of any
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of any of the Company and the Subsidiaries pursuant to any such term or
provision.
3.15 Litigation and Other Proceedings. Except as disclosed in Exhibit
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3.15 attached hereto, there are no actions, proceedings or investigations
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pending against any of the Company or the Subsidiaries or their respective
properties or shareholders (or, to the Knowledge of the Company, any basis
therefor or threat thereof) that, either in any case or in the aggregate, could
reasonably be expected to result in any material adverse change in the business
or financial condition of any of the Company or the Subsidiaries or any of their
respective properties or assets or in any material impairment of the right or
ability of any of the Company
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or the Subsidiaries to carry on their respective businesses as now conducted or
as proposed to be conducted, or in any material liability on the part of any of
the Company or the Subsidiaries, and none that challenges the validity of this
Agreement or any action taken or to be taken in connection herewith. The
foregoing includes, without limiting its generality, actions pending or, to the
Knowledge of the Company, threatened (or any threat thereof) involving the prior
employment of any of the Company's or any Subsidiary's employees or their use in
connection with the Company's or any Subsidiary's business of any information or
techniques allegedly proprietary to any of their former employers.
3.16 Employees. Except as disclosed in Exhibit 3.16 attached hereto, each
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of the Company and the Subsidiaries has no employment contracts with any of its
employees not expressly terminable at will and no collective bargaining
agreements covering any of its employees. Further, neither the Company nor any
Subsidiary has any policies, procedures or handbooks providing for other than
at-will employment. Neither the Company nor any Subsidiary is aware of any
proposed, threatened or actual union organization activity affecting the
Company's or any Subsidiary's current or prospective operations.
3.17 Registration Rights. Except as provided for in Article 11 hereof,
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and in Exhibit 3.17 attached hereto, neither the Company nor any Subsidiary is
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under any obligation to register any of its presently outstanding securities or
any of its securities that may hereafter be issued pursuant to this or any other
existing agreement.
3.18 Governmental Consents. Except for the filing of the Charter
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Amendment as contemplated by Section 1.1 hereof and the filing of a Form D with
the Securities and Exchange Commission (the "Commission") and the State of
Georgia, no consent, approval or authorization of, or registration, declaration,
designation, qualification or filing with, any governmental authority on the
part of any of the Company and the Subsidiaries is required in connection with
the valid execution and delivery of this Agreement, the offer, sale or issuance
of the Purchased Shares by the Company, the issuance by the Company of the
Conversion Shares, or the consummation of any other transaction contemplated
hereby other than as provided by applicable securities laws.
3.19 Other Consents. All consents of any third party and any shareholders
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of any of the Company and the Subsidiaries necessary for the execution, delivery
and performance by each of the Company and the Subsidiaries of this Agreement or
the consummation of the transactions contemplated hereby, including, without
limitation, any consents necessary from Sirrom Investments, Inc., have been
received prior to the Closing.
3.20 Title to Property and Assets. Except as disclosed in Exhibit 3.20
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attached hereto, each of the Company and the Subsidiaries has good and
marketable title to its material properties and assets and has good title to all
its leasehold interests, in each case subject to no mortgage, pledge, lien,
encumbrance or charge.
3.21 Customers and Suppliers. Except as disclosed in Exhibit 3.21
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attached hereto, no customer or supplier has taken, and neither the Company nor
any Subsidiary has received
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any notice or has any Knowledge that any customer or supplier of any of the
Company and the Subsidiaries contemplates taking, any steps that could disrupt
the business relationship of any of the Company and the Subsidiaries with such
customer or supplier or could result in a diminution in the value of any of the
Company and the Subsidiaries in a manner that would have a material adverse
effect on the business or financial condition of any of the Company and the
Subsidiaries.
3.22 Insurance. Each of the Company and the Subsidiaries has fire and
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casualty insurance policies in an amount sufficient to allow it to replace with
proceeds from such insurance any of its material, tangible properties that might
be damaged or destroyed.
3.23 Licenses and Permits; Compliance with Law. Except as disclosed in
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Exhibit 3.23 attached hereto, each of the Company and the Subsidiaries holds all
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licenses, certificates, permits, franchises and rights from all appropriate
federal, state or other public authorities necessary for the conduct of its
business and the use of its assets. Except as disclosed in Exhibit 3.23
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attached hereto, each of the Company and the Subsidiaries has conducted, and is
presently conducting, its business so as to comply in all material respects with
all applicable statutes, ordinances, rules, regulations and orders of any
governmental authority. Further, neither the Company nor any Subsidiary is
presently charged with or, to the knowledge of the Company, under governmental
investigation with respect to, any actual or alleged violation of any statute,
ordinance, rule or regulation. To the knowledge of the Company, neither the
Company nor any Subsidiary is presently the subject of any pending or, to the
knowledge of the Company, threatened adverse proceeding by any regulatory
authority having jurisdiction over its business, properties or operations.
Neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will result in the termination of any such
license, certificate, permit, franchise or right held by any of the Company and
the Subsidiaries.
3.24 Tax Matters. Except as disclosed in Exhibit 3.24 attached hereto,
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each of the Company and the Subsidiaries has accurately prepared and timely
filed all income and other tax returns, if any, that are required to be filed,
and has paid, or made provision for the payment of, all taxes that have or may
have become due pursuant to said returns or pursuant to any assessment that has
or may be received from any taxing authority for the period through the date of
the Interim Financial Statements, and there are no outstanding agreements by any
of the Company and the Subsidiaries for the extension of time for the assessment
of any tax. The United States income tax returns of each of the Company and the
Subsidiaries (if any) have not been audited by the Internal Revenue Service.
Except as disclosed in Exhibit 3.24, no deficiency assessment or proposed
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adjustment of the Company's or any Subsidiary's United States income tax or
state or municipal taxes (if any) is pending, and the Company has no Knowledge
of any proposed liability for any tax to be imposed upon the Company's or any
Subsidiary's properties or assets for which there is not an adequate reserve
reflected in the Interim Financial Statements.
3.25 Employment; No Conflicting Agreements. Except as disclosed in
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Exhibit 3.25 attached hereto, none of the officers, directors, and key employees
------------
of any of the Company and
10
the Subsidiaries 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 conflict with
his or her obligation to use his or her best efforts to promote the interests of
any of the Company and the Subsidiaries or that would conflict with the business
of any of the Company and the Subsidiaries as any of the Company and the
Subsidiaries presently conducts, or presently proposes to conduct, the same.
3.26 Indebtedness to Directors and Officers; Interested Party
--------------------------------------------------------
Transactions. Except as disclosed in Exhibit 3.26 attached hereto, neither the
------------ ------------
Company nor any Subsidiary is indebted to any of its directors or officers or
party to any contract with any affiliate of its directors or officers, and, to
the Knowledge of the Company, none of such directors or officers has a claim of
any nature against any of the Company and the Subsidiaries except for
compensation due for past or current pay periods. To the Knowledge of the
Company and except as disclosed in Exhibit 3.26, no officer, director or holder
------------
of more than five percent (5%) of the capital stock of any of the Company, the
Subsidiaries or any "affiliate" or "associate" (as these terms are defined in
Rule 405 promulgated under the Securities Act) of any such person or entity or
any of the Company and the Subsidiaries has or has had, either directly or
indirectly, (a) an interest in any person or entity that (i) furnishes or sells
services or products that are furnished or sold or are proposed to be furnished
or sold by any of the Company and the Subsidiaries , or (ii) purchases from or
sells or furnishes to any of the Company and the Subsidiaries any goods or
services, or (b) a beneficial interest in any contract or agreement to which any
of the Company and the Subsidiaries is a party or by which it may be bound or
affected. Except as set forth in Exhibit 3.26 hereto, there are no existing
------------
material arrangements or proposed material transactions between any of the
Company and the Subsidiaries and any officer, director, or holder or any
affiliate or associate of any such person, of more than five percent (5%) of the
capital stock of any of the Company and the Subsidiaries.
3.27 Employee Plans. Exhibit 3.27 attached hereto lists all employee
-------------- ------------
benefit plans as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974 ("ERISA") and all severance, bonus, retirement, pension,
profit-sharing, deferred compensation plans and other similar fringe or employee
benefit plans, programs or arrangements, and all employee or compensation
agreements, written or otherwise, for the benefit of or relating to any employee
of any of the Company and the Subsidiaries (collectively, "Employee Plans").
None of the Company, the Subsidiaries, and any of their respective officers or
directors has taken any action, directly or indirectly, to obligate any of the
Company and the Subsidiaries to adopt any additional Employee Plans. Each of
the Company and the Subsidiaries has complied with all terms and conditions of
the Employee Plans the violation of which would have a material adverse effect
on the business, as currently conducted or as any of the Company and the
Subsidiaries presently proposes to conduct it, and assets of any of the Company
and the Subsidiaries.
3.28 No Integration with Other Offerings. The acquisition by Purchaser of
-----------------------------------
the Purchased Shares, the Warrant and the Additional Shares will not be
"integrated" with any
11
other offering or sale of securities of the Company required to be registered
under the Securities Act, or the rules and regulations promulgated thereunder.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser represents and warrants to the Company as follows:
4.1 Access to Information. Purchaser acknowledges that all documents,
---------------------
records, and books pertaining to the Company have been made available for
inspection by Purchaser. Purchaser has a pre-existing business or personal
relationship with the Company or with one or more of the Company's officers,
directors or controlling persons. Purchaser and its advisor or advisors, or a
person or persons acting on their behalf, have had a reasonable opportunity to
ask questions of and receive answers from the officers of the Company,
concerning the terms and conditions of the offering of the Purchased Shares and
the Warrant, and to obtain additional information, to the extent possessed or
obtainable without unreasonable effort or expense by the officers of the
Company. All such questions have been answered to the full satisfaction of
Purchaser.
4.2 Experience; Investment. Purchaser has such knowledge and experience
----------------------
in financial and business matters as to enable Purchaser (a) to utilize the
information made available to it in connection with the offering of the
Purchased Shares and the Warrant, (b) to evaluate the merits and risks
associated with a purchase of the Purchased Shares and the Warrant, and (c) to
make an informed decision with respect thereto. Purchaser's business and
financial experience is such that the Company could reasonably assume Purchaser
has the capacity to protect its own interests in connection with the offer, sale
and issuance of the Purchased Shares and the Warrant. Purchaser is acquiring
the Purchased Shares and the Warrant solely for its own account, not as a
nominee or agent, and not with a view to, or for sale in connection with, any
distribution thereof. Purchaser is an "accredited investor" within the meaning
of Regulation D promulgated by the Commission under the Securities Act by reason
of being a corporation with assets in excess of $5,000,000.
4.3 Registration Under the Securities Act. Purchaser understands that (a)
-------------------------------------
neither the offering nor the sale of the Purchased Shares and the issuance of
the Warrant has been registered under the Securities Act or applicable state
securities laws, in reliance upon exemptions from the registration provisions of
the Securities Act and applicable state securities laws, (b) the Purchased
Shares purchased by Purchaser and the Warrant issued to the Purchaser must be
held by it indefinitely unless the sale or transfer thereof is subsequently
registered under the Securities Act and applicable state securities laws or an
exemption from such registration is available, and the certificates or documents
representing all Purchased Shares and the Warrant will be legended to reflect
such restrictions, (c) except as provided in Article 11 hereof, the Company is
under no obligation to register any Purchased Shares, Additional Shares,
Conversion Shares, Performance-Based Warrant Shares or the Warrant Shares on
Purchaser's behalf or to assist it in complying with any exemption from
registration, and (d) the officers of the Company will rely upon the
representations and warranties made by
12
Purchaser in this Agreement in order to establish such exemption from the
registration provisions of the Securities Act and applicable state securities
laws.
4.4 Transfer. Purchaser will not transfer the Warrant or any Purchased
--------
Shares, Additional Shares, Warrant Shares or Conversion Shares without
registration under the Securities Act and applicable state securities laws
unless the transfer is exempt from registration under the Securities Act and
such laws and is made in compliance with the legends contemplated by Section
12.11 herein.
4.5 Authorization. All action on the part of Purchaser necessary for the
-------------
authorization, execution, delivery and performance of all obligations of
Purchaser under this Agreement has been (or will be) taken prior to the Closing.
This Agreement, when executed and delivered by Purchaser, will constitute the
valid and binding obligation of Purchaser and is enforceable against it in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency or other laws affecting the enforcement of creditors'
rights generally, and except that the availability of the remedy of specific
performance or other equitable relief is subject to the discretion of the court
before which any proceeding therefor may be brought.
5. CONDITIONS TO CLOSING OF PURCHASER.
The obligation of Purchaser to purchase and pay for the Purchased Shares at
the Closing is subject to the fulfillment to its satisfaction on or prior to the
Closing Date of the following conditions:
5.1 Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by the Company in Article 3 hereof shall be true and correct in
all respects when made and shall be true and correct on such Closing Date with
the same force and effect as if they had been made on and as of said date.
5.2 Performance. All covenants, agreements and conditions contained in
-----------
this Agreement to be performed or complied with by the Company on or prior to
the Closing Date shall have been performed or complied with in all respects.
5.3 Filing of Charter Amendment. The Charter Amendment shall have been
---------------------------
properly filed with the Secretary of State of the State of Georgia prior to the
Closing.
5.4 Compliance Certificate. Unless the Closing Date is the same as the
----------------------
date of this Agreement, Purchaser shall have received a certificate executed by
the President of the Company, dated as of the Closing Date, certifying that the
conditions specified in Sections 5.1 through 5.3 hereof have been fulfilled.
5.5 Opinion of Company's Counsel. Purchaser shall have received from
----------------------------
Xxxxxx Xxxxxxx Xxxxx & Xxxxxxxxxxx, L.L.P., counsel to the Company, in form and
substance satisfactory to Purchaser and its counsel, a favorable opinion
addressed to Purchaser, dated as of the Closing Date, substantially in the form
set forth in Exhibit 5.5 attached hereto.
-----------
13
5.6 Shareholders' Agreement. The Company and Xxxxxxx X. Xxxxxx, X. Xxxxx
-----------------------
Whitney, K. Xxxxxx Xxxxxxxx, W. Xxxxxxx Xxxxxx, Xxxxx X. Xxxxxxxx (the
"Managers") shall have entered into a certain Shareholders' Agreement (the
"Shareholders' Agreement"), substantially in the form as set forth in Exhibit
-------
5.6 attached hereto, which will grant Purchaser a right of co-sale against the
---
Common Stock owned by the Managers.
5.7 Evidence of Consents. The Company shall have given Purchaser
--------------------
evidence satisfactory to Purchaser that it has received all necessary consents
of third parties and shareholders of the Company pursuant to Section 3.19
hereof.
5.8 Second Amendment to Restated Shareholders Agreement. The Company and
---------------------------------------------------
certain shareholders of the Company who are party to that certain Restated
Shareholders Agreement dated October 18, 1996, shall have entered into the
Second Amendment to Restated Shareholders Agreement substantially in the form of
Exhibit 5.8 attached hereto (the "Restated Shareholders Agreement Amendment").
-----------
6. CONDITIONS TO CLOSING OF THE COMPANY.
The obligation of the Company to sell the Purchased Shares at the Closing
is subject to the fulfillment on or prior to the Closing Date of the following
conditions:
6.1 Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by Purchaser in Article 4 hereof shall be true and correct in
all respects when made and shall be true and correct on such Closing Date with
the same force and effect as if they had been made on and as of said date.
6.2 Performance. All covenants, agreements and conditions contained in
-----------
this Agreement to be performed by or complied with by Purchaser on or prior to
such Closing Date shall have been performed or complied with in all respects.
6.3 Shareholders' Agreement. Purchaser shall have executed the
-----------------------
Shareholders' Agreement referred to in Section 5.6.
6.4 Restated Shareholders' Agreement Amendment. Purchaser shall have
------------------------------------------
entered into the Restated Shareholders Agreement Amendment referred to in
Section 5.8.
7. COVENANTS OF THE COMPANY.
7.1 Basic Information and Access.
----------------------------
Subject to Section 7.2:
7.1.1 As soon as practicable after the end of each fiscal year, and
in any event within ninety (90) days after each fiscal year beginning with the
year ending December
14
31, 1998, the Company shall furnish to Purchaser audited consolidated balance
sheets of the Company and its subsidiaries, if any, as of the end of such fiscal
year and audited consolidated statements of income and cash flow of the Company
and its subsidiaries, if any, for such fiscal year, prepared in accordance with
GAAP consistently applied and setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail and certified by
Ernst & Young, LLP or another independent public accounting firm, which shall
also be one of the six largest firms of nationally recognized standing in the
United States, a recognized regional firm or a firm acceptable to Purchaser.
7.1.2 As soon as practicable after the end of each fiscal quarter,
and in any event within forty-five (45) days thereafter, the Company shall
furnish to Purchaser consolidated balance sheets of the Company and its
subsidiaries, if any, as of the end of such fiscal quarter, and consolidated
statements of income and cash flow of the Company and its subsidiaries, if any,
for such fiscal quarter and for the current fiscal year to date, prepared in
accordance with GAAP consistently applied, with such statements certified by the
chief financial officer of the Company as having been prepared in accordance
with GAAP consistently applied, and accompanied by a brief narrative description
of the Company's business activities during said quarter.
7.1.3 No later than thirty (30) days prior to the end of each fiscal
year, the Company shall furnish to Purchaser a business plan and budget for the
Company and its subsidiaries for the next fiscal year (commencing with the
Company's 1999 fiscal year), containing information, data and other materials
typically included in a business plan and budget of a company similar in size
and nature to the Company, which budget shall include budget data for each month
of such fiscal year, and which budget and business plan shall be approved by a
majority of the Board of Directors of the Company; provided that the
presentation of the business plan and budget to the member of the Board of
Directors to be elected by Purchaser shall satisfy such requirement.
7.1.4 The Company shall permit at least one (1) representative of
Purchaser, (a) to visit and inspect any of the properties of the Company or any
of its subsidiaries and to discuss its and their affairs, finances and accounts
with the officers of the Company and its subsidiaries, all at such reasonable
times during regular business hours and as often as may be reasonably requested;
(b) to attend all meetings of the Board of Directors of the Company, with
respect to which reasonable notice shall be provided to Purchaser; and (c) to
discuss the affairs, finances and accounts of the Company with its officers and
consult with and advise the officers of the Company as to the management of the
Company at all reasonable times and as often as reasonably requested; provided
that Purchaser shall cause all its inspections to be conducted in a manner that
is not disruptive to the employees or operations of the Company; and, provided
further, that the member of the Board of Directors to be elected by Purchaser or
the holders of the Preferred Stock shall satisfy the requirements of this
Section 7.1.4.
7.2 Suspension of Certain Covenants. The covenants set forth in Article
-------------------------------
7, except those in Section 7.1.3, shall be suspended and be of no force or
effect if the Company becomes
15
subject to the reporting requirements of the federal Securities Exchange Act of
1934, as amended (the "Securities Exchange Act"); provided that such covenants
shall once again apply in the event the Company ceases to remain subject to such
requirements and if at such time the Purchaser owns Purchased Shares, Warrant
Shares, Conversion Shares or Performance-Based Warrant Shares.
7.3 Confidentiality. Purchaser agrees that it will keep confidential and
---------------
will not disclose, divulge or use any confidential, proprietary or secret
information that Purchaser may obtain from the Company, and that the Company has
marked "confidential," "proprietary" or "secret" or has otherwise identified as
being such, pursuant to financial statements, reports and other materials
submitted by the Company pursuant hereto, pursuant to visitation or inspection
rights granted hereunder or pursuant to the participation of the person elected
by Purchaser on the Company's Board of Directors (the "Confidential
Information"); provided that the term Confidential Information shall not include
any information supplied by the Company that (a) on the date hereof or
thereafter becomes generally available to the public other than as a result of a
disclosure, directly or indirectly, by Purchaser; (b) is disclosed by Purchaser
with the prior written consent of the Company; (c) was available to Purchaser on
a non-confidential basis from a source other than the Company prior to its
disclosure to Purchaser by the Company; or (d) becomes available to Purchaser on
a non-confidential basis from a source other than the Company; provided further,
that, with regard to clauses (c) and (d), the source was not himself or itself
known by Purchaser to be bound by a confidentiality agreement, fiduciary duty or
other obligation of confidentiality with the Company and did not receive such
information, directly or indirectly, from a person or entity so bound.
7.4 Additional Affirmative Covenants. In addition, for so long as any
--------------------------------
Purchased Shares remain outstanding, and until the occurrence of an "Initial
Public Offering" (as such term is defined in the Company's Articles of
Incorporation), the Company shall, or shall cause any Subsidiary, as applicable,
to:
7.4.1 promptly pay and discharge, or cause to be paid and discharged,
when due and payable, all lawful taxes, assessments and governmental charges or
levies imposed upon the income, profits, property or business of the Company or
any Subsidiary; provided, however, that any such tax, assessment, charge or levy
need not be paid if the validity thereof shall currently be contested in good
faith by appropriate proceedings and if the Company shall have set aside on its
books adequate reserves with respect thereto; and provided, further, that the
Company shall pay all such taxes, assessments, charges or levies forthwith upon
the commencement of proceedings to foreclose any lien that may have attached as
security therefor;
7.4.2 promptly pay, or cause to be paid, when due, in conformance
with customary trade terms, all other material indebtedness incident to the
operations of the Company and its subsidiaries, if any, which is not subject to
a good faith dispute;
7.4.3 keep its properties and those of its subsidiaries, if any, used
in or valuable to the Company's and its subsidiaries' business operations in
good repair, working
16
order and condition, reasonable wear and tear excepted, and from time to time
make all necessary and proper repairs, renewals, replacements, additions and
improvements thereto;
7.4.4 comply, and cause its subsidiaries, if any, to comply, in all
material respects, at all times with the provisions of all leases to which any
of the Company and its subsidiaries is a party or under which any of them
occupies real property;
7.4.5 keep its material assets and those of its subsidiaries that are
of an insurable character insured by reputable insurers against loss or damage
by fire and explosion in amounts customary for companies in similar businesses
similarly situated; and maintain, with financially sound and reputable insurers,
insurance against other hazards and risks and liability to persons and property
to the extent and in the manner customary for companies in similar businesses
similarly situated;
7.4.6 keep true records and books of account in which full, true and
correct entries will be made of all dealings or transactions in relation to its
and its subsidiaries' business and affairs in accordance with GAAP applied on a
consistent basis;
7.4.7 duly observe and conform to, and cause its subsidiaries, if
any, to so observe and conform to, in all material respects, all valid
requirements of governmental authorities relating to the conduct of their
businesses or to their property or assets;
7.4.8 maintain in full force and effect its corporate existence,
rights and franchises and use its commercially reasonable efforts to maintain in
full force and effect all licenses and other rights to use patents, processes,
licenses, trademarks, service marks, trade names or copyrights owned or
possessed by it or any subsidiary and necessary to the conduct of its business;
and
7.4.9 obtain a confidentiality and non-disclosure agreement as
described in Section 7.7 from each new employee of the Company or a subsidiary.
7.5 Board Member. The Company agrees that, upon the request of Purchaser
------------
at any time after the closing of the Initial Public Offering, until the third
(3rd) anniversary of the Closing Date, the Company shall include an individual
designated by Purchaser among the nominees to the Company's Board of Directors
submitted for approval to the shareholders of the Company at the next and each
regularly scheduled shareholders' meeting following such request, until such
request is withdrawn. At all times as such designee is a member of the
Company's Board of Directors, the Company shall obtain and maintain director and
officer liability insurance in the amount of at least $5,000,000 per occurrence
prior to the Initial Public Offering and $7,500,000 thereafter (which coverage
shall include issues regarding the Initial Public Offering process), and shall
furnish Purchaser with evidence reasonably satisfactory to it of such insurance
coverage as Purchaser may request from time to time.
7.6 No Integrated Offerings. Prior to the Initial Public Offering, the
-----------------------
Company shall not make any offering or sale of securities of the Company that
are required to be registered under the Securities Act, or the rules or
regulations promulgated thereunder.
17
7.7 Employee Confidentiality Agreements. Following the Closing Date, each
-----------------------------------
of the Company and the Subsidiaries shall use reasonable efforts to obtain non-
disclosure and confidentiality agreements with respect to its trade secrets and
other proprietary information from each of its employees on terms customary for
companies in similar businesses similarly situated.
8. RIGHT OF FIRST REFUSAL -- ANSWERING SERVICE BUSINESS.
8.1 Grant of Right. During the period commencing on the Closing Date and
--------------
ending on the third (3rd) anniversary of the Closing Date, in the event that the
Company proposes to sell all or substantially all the Company's physician-only
answering service business (hereinafter referred to as the "Answering Service
Business") to a third party other than an Affiliate (as such term is defined
below) of the Company (the "Offeror"), whether such sale involves the assets of
the Answering Service Business or the stock of an Affiliate of the Company that
owns the assets associated with the Answering Service Business, Purchaser shall
have the right to purchase all, but not less than all, such assets or stock (the
"Answering Service Right of First Refusal"); provided, however, that such
Answering Service Right of First Refusal shall be subject to the exclusive
option of Matria Healthcare, Inc. to provide after-hours call support services
as a subcontractor to the Company in respect of the Answering Service Business
in the specialty areas of obstetrics and gynecology and cardiology; provided,
further, that such Answering Service Right of First Refusal shall not apply to a
proposal to sell substantially all of the assets of the Company or the stock of
such subsidiary, unless the business of the Company or such subsidiary consists
exclusively or nearly exclusively of the Answering Service Business. For
purposes of this Section 8.1, the term "Affiliate" shall mean any corporation,
partnership, limited liability company, or other entity that controls, is
controlled by, or is under common control with the Company, with "control" being
defined for this purpose as ownership of a majority of the voting interest of
the entity so controlled.
8.2 Notice of Proposed Transfer. Before effecting any proposed transfer
---------------------------
of all or substantially all of the Answering Service Business, the Company shall
give written notice to Purchaser describing fully the proposed transfer,
including the particular assets to be transferred, the name and address of the
proposed transferee(s) and the proposed transfer price, and the fair market
value of any proposed non-cash consideration (as provided in Section 8.4 below)
(the "Transfer Notice"). The Transfer Notice shall contain an accurate summary
of the offer of the Offeror, which must be a binding and bona fide offer.
8.3 Exercise of Right. At any time within the ten (10)-business day
-----------------
period immediately following receipt of the Transfer Notice, Purchaser may elect
to purchase all, but not less than all, of the assets subject to the Transfer
Notice at the price and upon the terms set forth therein by written notice to
the Company (the "Election Notice"); provided, however, that the Company and
Purchaser shall enter into a definitive agreement within the thirty (30)-day
period immediately following receipt of the Transfer Notice.
8.4 Closing of Purchase. The closing of any sale and purchase of the
-------------------
assets subject to the Transfer Notice shall be held at the offices of the
Company, on a date and time
18
agreed upon by the Company and Purchaser, provided that such closing shall in no
event be held more than forty-five (45) days after delivery of the Election
Notice or within ten (10) business days following the receipt of all required
governmental approvals, whichever is later. If Purchaser fails to exercise the
Answering Service Right of First Refusal in a timely manner as to all the assets
subject to the Transfer Notice, or if it elects to purchase such assets, but
fails to close the purchase thereof within the period specified in the preceding
sentence, then the Company may, within one hundred twenty (120) days following
delivery of the Transfer Notice, transfer such assets to the Offeror on the
terms and conditions contained in the Transfer Notice. Any proposed transfer on
terms and conditions materially more favorable to the Offeror than those
described in the Transfer Notice, as well as any proposed transfer by the
Company after the expiration of such 120-day period, shall again be subject to
the Answering Service Right of First Refusal and shall require compliance by the
Company with the procedure described in this Article 8.
8.5 Non-Cash Consideration. In the event the consideration proposed to be
----------------------
paid by the Offeror as described in the Transfer Notice includes non-cash
consideration, the Transfer Notice shall state the fair market value thereof.
Purchaser may, within ten (10) business days after delivery of the Transfer
Notice to it, by written notice to the Company, challenge such valuation by
specifying Purchaser's valuation of such non-cash consideration. In the event
of such a challenge, the Company and Purchaser shall agree upon one independent
appraiser, who shall determine the fair market value of the non-cash
consideration for these purposes. In the even that such parties are unable to
agree upon such an appraiser, the parties agree that the American Arbitration
Association ("AAA") shall be employed to choose an independent appraiser and
shall use their best efforts to cause AAA to designate an independent appraiser
within a maximum of fourteen (14) days, and such person shall promptly determine
the fair market value of the non-cash consideration for these purposes. In the
event the appraisal process is utilized, (a) the party whose valuation of the
shares less closely approximates the value determined by the appraiser, measured
by dollar amounts and not by percentages, shall pay all costs of the independent
appraiser and (b) the relevant time periods for the exercise of the Right of
First Refusal and for the consummation of any transfer pursuant to Section 8.3
or 8.4 shall be tolled from the time Purchaser challenges the Company's
valuation of the non-cash consideration until the independent appraiser
determines the fair market value thereof. In the event that the Answering
Service Right of First Refusal is exercised, Purchaser shall pay cash to the
Company in lieu of said non-cash consideration equal to the fair market value of
such non-cash consideration as determined in accordance with this Section 8.5.
9. RIGHT OF FIRST REFUSAL -- NEW SECURITIES.
9.1 New Securities Defined. "New Securities" shall mean any common stock
----------------------
or preferred stock of the Company, whether now authorized or not, and rights,
options or warrants to purchase said common stock or preferred stock, and
securities of any type whatsoever that are, or may become, convertible into said
common stock or preferred stock; provided, however, that "New Securities" does
not include:
19
9.1.1 securities offered to the public pursuant to a registration
statement under the Securities Act;
9.1.2 securities issued pursuant to the acquisition by the Company of
any product, technology, know-how or another corporation by merger, purchase of
all or substantially all of the assets, or any other reorganization whereby the
Company owns over fifty percent (50%) of the voting power of such corporation;
9.1.3 shares of the Company's capital stock issued in connection with
any stock split, stock dividend or recapitalization by the Company;
9.1.4 any shares of common stock of the Company pursuant to options,
warrants or rights granted either before or after the Closing Date to purchase
shares of such common stock, in favor of employees, directors, officers or
consultants of the Company or any subsidiary thereof pursuant to a stock option
plan or agreement approved by the Company's Board of Directors; provided, that
such stock options thereunder, if granted after the Closing Date, are granted at
a price that the Company's Board of Directors determines in good faith is not
less than the fair market value of the securities into which they are
exercisable as of the date of grant;
9.1.5 any conversion into Common Stock pursuant to the Company's
Articles of Incorporation (as amended by the Charter Amendment);
9.1.6 the purchase by Matria Healthcare, Inc. of up to 134,000 shares
of Preferred Stock at a purchase price of no less than $15.00 per share and, for
no additional consideration, a warrant for the purchase of up to 60,000 shares
of Preferred Stock; or
9.1.7 up to 300,000 shares of Common Stock Series D of the Company
issued at any time following the Closing Date pursuant to options to purchase
shares of such stock in favor of officers, employees or consultants of the
Company or any subsidiary thereof pursuant to bona fide commitments made by the
Company prior to July 1, 1998.
9.2 Exercise of Right. In the event the Company proposes to undertake an
-----------------
issuance of New Securities prior to the occurrence of an Initial Public
Offering, it shall give Purchaser written notice of its intention, describing
the type of New Securities, the price, the closing date of the offering thereof,
and the general terms upon which the Company proposes to issue the same.
Purchaser shall be entitled at any time during the offering of the New
Securities to purchase some or all of its pro rata portion of such New
Securities for the price and upon the general terms specified in the notice (and
in any case at a price and upon general terms no more favorable to any of the
other purchasers in such offering), by giving, within ten (10) business days
after receiving such notice from the Company, written notice to the Company of
such election stating therein the time and place of the closing of such
purchase, which must be a date no later than ten (10) days following the closing
date of the offering specified in the notice given by the Company or any
extended closing date thereof. For
20
purposes of this Section 9.2, Purchaser's pro rata portion of New Securities
shall be equal to a fraction, the numerator of which is the sum of
(i) the number of shares of Common Stock into which shares of
Preferred Stock held by Purchaser immediately prior to such issuance have
been converted since the Preferred Stock was issued to Purchaser, and
(ii) the number of shares of Common Stock into which Purchaser's
shares of Preferred Stock could be converted if fully converted immediately
prior to such issuance,
and the denominator of which is the sum of
(y) the number of shares of Common Stock of all series actually
outstanding immediately prior to such issuance and
(z) the number of shares of Common Stock of all series into which
the then outstanding shares of Preferred Stock could be converted or
exercised if fully converted or exercised immediately prior to such
issuance.
9.3 Non-Conforming Offers. Any offer by the Company of securities in
---------------------
addition to those specified in the notice described in Section 9.1 above,
whether on the same or different terms as are specified therein, shall again
require compliance by the Company with the terms of this Article 9.
10. PROVISION FOR PERFORMANCE-BASED WARRANT.
Following the Closing Date, the Company and Purchaser shall continue to
negotiate in good faith to enter into a joint product marketing or strategic
alliance agreement with respect to the Company's Internet-based information and
communications services operations and certain of Purchaser's own Internet-based
products and services (the "Strategic Alliance Agreement"). If, and only if,
Purchaser and the Company enter into the Strategic Alliance Agreement within
ninety (90) days following the Closing Date, the Company shall issue to
Purchaser, for no additional consideration, within five (5) days following the
execution by the parties of the Strategic Alliance Agreement, a performance-
based warrant to purchase an aggregate of *** shares of Preferred Stock or, in
the event that the Initial Public Offering has been closed by such date, Common
Stock (the "Performance-Based Warrant"). The Performance-Based Warrant would be
granted with respect to ***, *** and *** shares on December 31 of each of the
calendar years 1998, 1999 and 2000, respectively, with the exercise price per
share equal to the fair market value of the underlying capital stock on the
respective dates of grant (as adjusted for stock splits, stock dividends,
combinations and the like occurring after the date thereof) provided that the
joint marketing efforts of Purchaser and the Company yielded the Company gross
revenues of $***, $*** and $***, respectively, during such years. Such
Performance-Based Warrant shall otherwise contain terms substantially similar to
those of the
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
21
Warrant. Nothing set forth in this Agreement shall obligate either Purchaser or
the Company to enter into the Strategic Alliance Agreement, whether on the
foregoing terms or otherwise.
11. REGISTRATION RIGHTS.
11.1 Certain Definitions. As used in this Agreement, in addition to the
-------------------
terms defined above, the following terms shall have the following respective
meanings:
"Commission" shall have the meaning set forth in Section 3.18 hereof.
------------
"Holders" shall mean Purchaser and any other person holding Registrable
---------
Securities to whom these registration rights have been transferred pursuant to
Section 11.10 hereof.
"Initial Public Offering" shall have the meaning set forth in Section 2.3
-------------------------
hereof.
"Initiating Holders" shall mean a Holder or Holders who in the aggregate
--------------------
own at least fifty percent (50%) of the Registrable Securities then issued and
outstanding (including shares that are issuable upon exercise of the Warrant).
"Other Shareholders" shall mean persons other than Holders who, by virtue
--------------------
of agreements with the Company, are entitled to include their securities in a
registration effected pursuant to this Agreement.
The terms "register," "registered" and "registration" refer to the
-------- ---------- --------------
effectiveness of a registration statement prepared and filed in compliance with
the Securities Act.
"Registrable Securities" as of any particular time shall mean (a) all
------------------------
Conversion Shares, (b) all Warrant Shares to the extent they consist of Common
Stock, and (c) any additional shares of Common Stock issued with respect to the
Conversion Shares described in (a) and (b) pursuant to any stock split, stock
dividend, recapitalization or similar event, or automatic conversion thereof
into another series of Common Stock pursuant to the provisions of the Company's
Articles of Incorporation (as amended by the Charter Amendment).
"Registration Expenses" shall mean all expenses incurred by the Company in
-----------------------
complying with Sections 11.2 and 11.3 hereof, including, without limitation, all
registration and filing fees; printing expenses; fees and disbursements of
counsel for the Company; reasonable fees and expenses of a single counsel for
the selling Holders; state "blue sky" fees and expenses; and accountants'
expenses, including without limitation any special audits required by the
Commission with respect to any such registration; but excluding the compensation
of regular employees of the Company, which shall be paid in any event by the
Company.
"Securities Act" shall have the meaning set forth in Section 2.3 hereof.
----------------
"Securities Exchange Act" shall have the meaning set forth in Section 7.2
-------------------------
hereof.
22
"Selling Expenses" shall mean all underwriting discounts, selling
------------------
commissions and stock transfer taxes applicable to the sale of Registrable
Securities and any other securities of the Company being sold in the same
registration as the Registrable Securities by Other Shareholders.
"Warrant Shares" shall have the meaning set forth in Section 3.5 hereof.
----------------
11.2 Requested Registration.
----------------------
11.2.1 Demand Registration Rights. Subject to the conditions of
--------------------------
Subsection 11.2.2 below, the Initiating Holders may make up to two (2) demands
on the Company to register all or a portion consisting of at least 200,000
shares of the Registrable Securities on Form S-1 or such other form that may be
available to the Company to effect such demand registration and up to four (4)
demands on the Company to register all or a portion consisting of at least
200,000 shares of the Registrable Securities on Form S-3, if available (each
being referred to hereinafter as a "Demand Registration"); provided, however,
that, the Initiating Holders may not initiate a demand on the Company to
register any Registrable Securities until (i) the first anniversary of the
Closing Date, if a registration statement filed with the Commission with respect
to the Initial Public Offering is not declared effective prior to such
anniversary; or (ii) after the date that is six (6) months following the
effective date of the registration statement relating to the Initial Public
Offering if such effective date occurs prior to the first anniversary of the
Closing Date. Notwithstanding the foregoing, if an offering required pursuant
to this Section 11.2 would constitute the initial offering to the public of the
securities of the Company, then such offering may only be made by means of an
underwritten public offering (either firm or best efforts), provided that in the
event that neither the Company nor the Initiating Holders have secured an
underwriter reasonably acceptable to the other entity or group for such purpose
during the one hundred eighty (180)-day period after the Company's receipt of
the request for registration from the Initiating Holders, then the Company shall
promptly file a registration statement pursuant to Rule 415 under Regulation C
promulgated under the Securities Act covering the Registrable Securities
described in the Initiating Holder's request.
11.2.2 Request for Registration. In the event the Company shall
------------------------
receive from the Initiating Holders a written request that the Company effect a
Demand Registration with respect to all or a portion consisting of at least
200,000 shares of the Registrable Securities, other than a registration pursuant
to Rule 415 under Regulation C promulgated under the Securities Act, the Company
shall:
(i) promptly give written notice of the proposed
registration to all other Holders; and
(ii) as soon as practicable, use its diligent best efforts to
effect such registration (including, without limitation, the
execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable "blue sky" or other state
securities laws, and appropriate
23
compliance with applicable regulations issued under the Securities
Act) as may be so requested and as would permit or facilitate the
sale and distribution of such portion of such Registrable Securities
as is specified in such request, together with such portion of the
Registrable Securities of any Holder or Holders joining in such
request as is specified in a written request given within twenty (20)
days after receipt of such written notice from the Company; provided
that the Company shall not be obligated to take any action to effect
any such registration pursuant to this Section 11.2 in any particular
jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to
service in such jurisdiction and except as may be required by the
Securities Act.
In the event the Company is not obligated to effect any requested
registration by virtue of the foregoing, such request shall not be deemed to be
a Demand Registration for purposes of Subsection 11.2.1. Subject to the
foregoing, the Company shall file a registration statement covering the
Registrable Securities so requested to be registered as soon as practicable
after receipt of the request of the Initiating Holders. Notwithstanding the
foregoing provisions of this Section 11.2.2, the Company's obligation to file a
registration statement hereunder shall be suspended for a period not to exceed
ninety (90) days and no more than once during any period of twelve (12)
consecutive months if there exists at the time material non-public information
relating to the Company that, in the reasonable opinion of the Company, should
not be disclosed or if the filing of such registration statement would, in the
opinion of the Board of Directors of the Company, arrived at in good faith,
adversely affect the Company, a material financing project or a material
proposal or pending acquisition, merger or other corporate reorganization to
which the Company is then, or is then expected to become a party.
The registration statement filed pursuant to the request of the Initiating
Holders may, subject to the provisions of Subsection 11.2.3 below, include
securities offered by the Company for its own account and/or other securities of
the Company that are held by Other Shareholders.
11.2.3 Underwriting. If the Initiating Holders intend or are
------------
required to distribute the Registrable Securities covered by their request by
means of an underwriting, they shall so advise the Company as a part of their
request made pursuant to Subsection 11.2.1 and the Company shall include such
information in the written notice referred to in Subsection 11.2.2(i) hereof.
The right of any Holder to registration pursuant to this Section 11.2 shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein.
If the Company shall request inclusion in any registration pursuant to
Section 11.2 of securities being sold for its own account, or if Other
Shareholders shall request inclusion in any registration pursuant hereto, then,
subject to the last sentence of this Subsection 11.2.3 with respect to the
Company's request, the Initiating Holders shall, on behalf of all Holders,
include such securities in the underwriting and may condition such offer on
their acceptance of
24
the further applicable provisions of this Article 11. The Company shall
(together with all Holders and Other Shareholders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form and containing customary terms reasonably acceptable to the
Initiating Holders, with the representative of the underwriter or underwriters
selected for such underwriting by the Company and reasonably acceptable to the
Initiating Holders; provided, however, that if the Company has not selected an
underwriter reasonably acceptable to the Initiating Holders within thirty (30)
days after the Company's receipt of the request for registration from the
Initiating Holders, then the Initiating Holders may select an underwriter
reasonably acceptable to the Company in connection with such registration.
Notwithstanding any other provision of this Section 11.2, if the underwriter
representative advises the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, the securities
of the Company held by Other Shareholders shall first be excluded from such
registration to the extent so required by such limitation, and, to the extent
additional shares need to be excluded in order to conform to such limitation,
the securities requested by the Company to be included, if any, shall next be
excluded. The Company shall advise all holders of securities requesting
registration as to the number of shares of securities that may be included in
the registration and underwriting as allocated in the foregoing manner. If any
Other Shareholder or Holder who has requested inclusion in such registration as
provided above disapproves of the terms of the underwriting, such person may
elect to withdraw therefrom by written notice to the Company, the underwriter
and the Initiating Holders. The securities so withdrawn shall also be withdrawn
from registration. If the underwriter has not limited the number of shares to be
underwritten, the Company may include its securities for its own account in such
registration if the underwriter so agrees and if the number of Registrable
Securities and other securities of the Holders that would otherwise have been
included in such registration and underwriting will not be limited thereby.
11.3 Company Registration.
--------------------
11.3.1 If the Company shall determine to register any of its
securities in connection with the public offering of such securities solely for
cash on a form that would permit the registration of the Registrable Securities
other than on Form X-0, Xxxx X-0 or another form not available for registering
the Registrable Securities for sale to the public, the Company shall promptly
give to each Holder written notice of such registration (a "Piggyback
Registration"), and shall include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made by any Holder or Holders within fifteen (15) days after
receipt of such written notice from the Company, subject to the underwriter
limitations, if any, described in Subsection 11.3.4 hereof; provided, however,
that no Holder shall have the right to participate in an Initial Public Offering
pursuant to a registration statement declared effective within the twelve (12)-
month period following the Closing Date. The Company shall have the right to
withdraw or cease to prepare or file any registration statement for any offering
referred to in this Subsection 11.3.1 without any obligation or liability to any
Holder.
25
11.3.2 Number of Piggyback Registrations. Subject to the underwriter
---------------------------------
limitations, if any, described in Subsection 11.3.4 below, each Holder shall be
entitled to have its Registrable Securities included in an unlimited number of
Piggyback Registrations pursuant to this Section 11.3 until such time as the
number of Registrable Securities held by any such Holder does not exceed one
percent (1%) of the shares outstanding of the Company as shown by the most
recent report or statement published by the Company and filed with the
Commission.
11.3.3 Holdback by the Company. If the Company has previously filed
-----------------------
a registration statement with respect to Registerable Securities pursuant to
Section 11.2 or pursuant to this Section 11.3, and if such previous registration
has not been withdrawn or abandoned, the Company will not file or cause to be
effected any other registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form X-0, Xxxx X-0 or any successor forms),
whether on its own behalf or at the request of any Holder or Holders, until a
period of ninety (90) days has elapsed from the effective date of such a
previous registration.
11.3.4 Underwriting. If the registration of which the Company gives
------------
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Subsection 11.3.1 hereof. In such event the right of any Holder to
registration pursuant to Subsection 11.3.1 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and Other Shareholders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for underwriting by the
Company. Notwithstanding any other provision of this Section 11.3, if the
underwriter reasonably determines that marketing factors require a limitation on
the number of shares to be underwritten, such reduction in the number of shares
that may be included in the registration shall be made (a) first, to the shares
of the Holders and Other Shareholders requesting registration of securities
pursuant to piggyback registration rights; (b) second, to the shares of the
Company, and (c) third, to the shares of any person other than the Holders
requesting registration of securities pursuant to demand registration rights;
all in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities and other securities that such person, Holders and Other
Shareholders had requested to be included in such registration; provided,
however, that in no event shall the total amount of Purchaser's shares of
securities included in the offering pursuant to a Piggyback Registration be less
than the number of securities included in the offering by any other single
selling shareholder pursuant to piggyback registration rights unless all of
Purchaser's shares of securities are included in the offering. The Company
shall advise all holders of securities requesting registration as to the number
of shares or securities that may be included in the registration and
underwriting as allocated in the foregoing manner. No such reduction shall be
made with respect to securities offered by the Company for its own account. If
any Holder or Other Shareholder disapproves of the terms of any such
underwriting, such person may elect to withdraw therefrom by written
26
notice to the Company and the underwriter. Any Registrable Securities or other
securities excluded or withdrawn from such underwriting shall also be withdrawn
from such registration.
11.4 Expenses of Registration. All Registration Expenses incurred in
------------------------
connection with any registration, qualification or compliance pursuant to this
Agreement shall be borne by the Company; and all Selling Expenses shall be borne
by the Holders, the Other Shareholders of the securities so registered and the
Company, to the extent of securities registered on its behalf, pro rata on the
basis of the number of their shares so registered; provided, however, that the
Company shall not be required to pay any Registration Expenses if, as a result
of the withdrawal of a request for registration by the Initiating Holders
pursuant to Section 11.2 hereof, the registration statement does not become
effective, in which case the Holders and Other Shareholders requesting
registration shall bear such Registration Expenses pro rata on the basis of the
number of their shares so included in the registration request (except for the
fees of any counsel for the Holders, which shall be borne only by the persons
whom such counsel represented, pro rata on the basis of the number of their
shares so included in the registration request); provided, further, that such
registration shall not be counted as a Demand Registration pursuant to
Subsection 11.2.1 hereof; and provided, further, that if any jurisdiction in
which the securities shall be qualified shall require that expenses incurred in
connection with the qualification of the securities in that jurisdiction be
borne by the selling shareholders, then such expenses shall be payable by the
selling shareholders pro rata to the extent required by such jurisdiction.
11.5 Registration Procedures. In the case of each registration effected
-----------------------
by the Company pursuant to this Agreement, the Company shall keep each Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. At its expense the Company shall use its best efforts to:
11.5.1 keep such registration effective for a period of one hundred
eighty (180) days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs; and
11.5.2 furnish such number of prospectuses and other documents
incident thereto as a Holder from time to time may reasonably request.
11.6 Indemnification.
---------------
11.6.1 With respect to each Holder whose securities have been
registered pursuant to this Agreement, the Company shall indemnify such Holder,
each of such Holder's officers, directors and partners, and each person
controlling (as defined in Subsection 11.6.4 below) such Holder and each of such
controlling person's officers, directors and partners, and shall also indemnify
each underwriter, if any, and each person who controls any underwriter, against
all claims, losses, damages and liabilities (or actions in respect thereof)
arising out of or based on (a) any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering circular or
other document (including any related registration statement, notification or
the like) incident to any such registration, qualification or
27
compliance, (b) any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or (c) any violation by the Company of any rule or regulation
promulgated under the Securities Act applicable to the Company and relating to
action or inaction required of the Company in connection with any such
registration, qualification or compliance, and shall reimburse each such Holder
and each person controlling such Holder, and each of such controlling person's
officers, directors and partners, each of its officers, directors and partners,
each such underwriter, and each person who controls such underwriter, for any
legal and other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action; provided, however,
that the Company shall not be liable in any such case to the extent that any
such claim, loss, damage, liability or expense arises out of or is based upon
written information furnished to the Company by such Holder or on behalf of such
Holder by the officers, directors or partners of such Holder seeking to be
indemnified, where such information is stated to be specifically for use in such
prospectus, offering circular or related document.
11.6.2 Each Holder and Other Shareholder shall, if securities held by
him or it are included among the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
(as defined in Subsection 11.6.4 below) the Company or such underwriter, and
each other such Holder and Other Shareholder and each of such controlling
person's officers, directors and partners, and each person controlling such
other Holder or Other Shareholder and each of such controlling person's
officers, directors and partners, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and shall reimburse the Company, such other Holders, Other
Shareholders, directors, officers, partners, persons, each underwriter and each
person who controls such underwriter for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder or
Other Shareholder specifically for use therein; provided, however, that the
obligations of such Holder or Other Shareholder hereunder shall be limited to an
amount equal to the proceeds to such Holder or Other Shareholder of securities
sold as contemplated herein.
11.6.3 Each party entitled to indemnification under this Section 11.6
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for
28
the Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be withheld unreasonably). The Indemnified Party may
participate in such defense with counsel of its own choosing, but the fees and
expenses of such counsel shall be at such Indemnified Party's expense unless (i)
the Indemnifying Party and the Indemnified Party shall have agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the Indemnifying Party and the
Indemnified Party and representation of both parties by the same counsel would
be inappropriate due to actual or potential conflicting interests between them.
The failure of any Indemnified Party to give notice as provided herein shall
relieve the Indemnifying Party of its obligations under this Section 11.6 only
if such failure is prejudicial to the ability of the Indemnifying Party to
defend such action, and such failure shall in no event relieve the Indemnifying
Party of any liability that he or it may have to any Indemnified Party otherwise
than under this Section 11.6. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability with respect to such
claim or litigation.
11.6.4 For purposes of this Section 11.6, the term "control" shall
have the meaning assigned thereto under the Securities Act.
11.7 Information by Holders and Other Shareholders. Each Holder or Other
---------------------------------------------
Shareholder of securities included in any registration shall furnish to the
Company such information regarding such Holder or Other Shareholder and the
distribution proposed by such Holder or Other Shareholder as the Company may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Agreement.
11.8 Limitations on Registration of Issues of Securities. From and after
---------------------------------------------------
the date of this Agreement, without the consent of the holders of a majority of
the Registrable Securities then issued and outstanding and that are issuable
upon the exercise of the Warrant, the Company shall not enter into any
agreements with any holder or prospective holder of any securities of the
Company that, upon any registration of any of its securities, the Company will
include among the securities that it then registers securities owned by such
holder or prospective holder except to the extent such agreement could give such
holder or prospective holder rights no greater than those of an Other
Shareholder under this Article 11. In any event, any registration rights given
by the Company to any holder or prospective holder of its securities shall not
conflict with the registration and other rights provided in this Agreement.
11.9 Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission that may permit the sale of the
Common Stock to the public without registration, the Company shall, for so long
as Registrable Securities are outstanding:
29
11.9.1 make and keep public information available, as those terms
are understood and defined in Rule 144 promulgated by the Commission under the
Securities Act ("Rule 144"), at all times after ninety (90) days following the
Initial Public Offering;
11.9.2 file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Securities Exchange Act at any time after it has become subject to the reporting
requirements thereunder; and
11.9.3 so long as any Holder owns any securities constituting or
representing Registrable Securities, furnish to such Holder forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 (at any time after ninety (90) days following
the Initial Public Offering), and of the Securities Act and the Securities
Exchange Act (at any time after it has become subject to the reporting
requirements thereunder), a copy of the most recent annual or quarterly report
of the Company, and such other reports and documents so filed by the Company as
such Holder may reasonably request in availing itself of any rule or regulation
of the Commission allowing such Holder to sell any such securities without
registration.
11.10 Transfer of Registration Rights. The rights to cause the Company to
-------------------------------
register securities of the Company under Sections 11.2 and 11.3 hereof may be
assigned by any Holder to any transferee of Registrable Securities together with
the securities being transferred, provided that in each case the Company is
given written notice, at the time or within a reasonable time after said
transfer, stating the name and address of said transferee and identifying the
securities with respect to which such registration rights are being assigned;
provided, however, that such transfer right shall be subject to the provisions
of Section 12.3 hereof. No such assignment shall be effective unless the
transferee shall be required, as a condition to such transfer, to agree in
writing that he or it will receive and hold such securities subject to the
provisions of this Article 11.
11.11 "Market Stand-Off" Agreement. If requested by the Company upon the
----------------------------
recommendation of the Board of Directors of the Company and an underwriter of
Common Stock (or other securities) of the Company, the Holders shall not sell
or otherwise transfer or dispose of any Common Stock (or other securities) of
the Company held by them during the one hundred eighty (180)-day period
following the effective date of a registration statement of the Company filed
under the Securities Act, provided that:
(a) such agreement shall apply only with respect to an underwritten
Initial Public Offering; and
(b) Other Shareholders selling securities pursuant to such
registration statement and all officers and directors of the Company enter into
similar agreements.
Such agreement shall be in writing in form satisfactory to the Company and
such underwriter. The Company may impose stop-transfer instructions with
respect to the shares
30
(or securities) subject to the foregoing restriction until the end of said one
hundred eighty (180)-day period.
12. MISCELLANEOUS.
12.1 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of Georgia, without regard to its principles of
conflicts of laws.
12.2 Survival. The representations, warranties, covenants and agreements
--------
made herein shall survive any investigation made by Purchaser and the closings
of the transactions contemplated hereby.
12.3 Successors and Assigns.
----------------------
(a) Except as otherwise expressly provided in this Section 12.3, the
provisions of this Agreement shall inure to the benefit of, and be binding upon,
the successors, assigns, heirs, executors and administrators of the respective
Purchaser, and the rights, remedies and entitlements of the respective Purchaser
under this Agreement may be assigned in full or in part at any time after the
date of this Agreement together with the entire Warrant or no fewer than 200,000
shares of Preferred Stock or Conversion Shares constituting or derived from the
Purchased Shares, the Warrant Shares, or the Additional Shares. No such
assignment shall be effective unless (i) the transferee shall be required, as a
condition to such transfer, to agree in writing that he or it will receive and
hold the Purchased Shares subject to the applicable provisions of this Agreement
and the Shareholders' Agreement referred to in Sections 5.6 and 6.3 hereof, (ii)
the Company is given written notice at the time of the assignment or within a
reasonable time after such assignment, stating the name and address of said
transferee and identifying the Purchased Shares that are being assigned, or
(iii) the Company has received the written opinion of counsel to the Company
that such transfer is permitted under the federal securities laws, rules and
regulations.
(b) Purchaser covenants and agrees that it shall not transfer the
Warrant, the Warrant Shares, the Purchased Shares, the Additional Shares or the
Conversion Shares (collectively, the "Purchased Securities") to any of the
entities listed in Exhibit 12.3 attached hereto, or to any entity or person that
------------
controls or is controlled by an entity listed in Exhibit 12.3 ("control" being
------------
defined for such purpose as ownership of at least a majority of the voting
interests of the entity), unless the proposed transfer has been approved by the
Company's Board of Directors.
(c) In the event Purchaser proposes to sell, transfer or otherwise
dispose of any of the Purchased Securities (the "Subject Securities") to any
entity that is under common control (as the term "control" is defined in Section
12.3(b) above) with an entity listed in Exhibit 12.3 hereto (a "Sister Entity"),
------------
the Company shall have a right of first refusal to purchase all, but not less
than all, the Subject Securities that Purchaser proposes to transfer to such
Sister Entity (the "Subject Securities Right of First Refusal"). Before
effecting any proposed transfer of any Subject Securities, Purchaser shall give
written notice to the Company
31
describing fully the proposed transfer, including the type and number of Subject
Securities, the name and address of the proposed transferee(s) and the proposed
transfer price, and the fair market value of any proposed non-cash consideration
as provided in Section 12.3(d) hereof (the "Transfer Notice"). The Transfer
Notice shall contain an accurate summary of the offer of the proposed
transferee(s), which must be a bona fide offer. At any time within the ten (10)-
day period immediately following the receipt of the Transfer Notice, the Company
may elect to purchase all, but no fewer than all, of the Subject Securities at
the price per share set forth in the Transfer Notice. The closing of any sale
and purchase of the Subject Securities pursuant to exercise of the Subject
Securities Right of First Refusal shall be held at the offices of the Company on
a date and at a time designated by the Company in its notice of exercise of the
Subject Securities Right of First Refusal; but in no event shall such closing be
held more than thirty (30) days after delivery of the Transfer Notice. If the
Company fails to exercise the Subject Securities Right of First Refusal in a
timely manner as to all the Subject Securities upon the terms set forth in the
Transfer Notice, or if it elects to purchase all such Subject Securities, but
fails to close the purchase thereof within such 30-day period, then Purchaser
may transfer all the Subject Securities on the terms and conditions described in
the Transfer Notice. Any proposed transfer on terms and conditions materially
different from those described in the Transfer Notice shall again be subject to
the Subject Securities Right of First Refusal and shall require compliance by
Purchaser with the procedure described in this Section 12.3(c).
(d) In the event the consideration proposed to be paid to Purchaser
as described in the Transfer Notice referred to in Section 12.3(c) hereof
includes non-cash consideration, the Transfer Notice shall state the fair market
value thereof, which valuation shall be conclusive and binding on the Company in
the absence of a timely challenge made in accordance with this Section 12. The
Company, may, within ten (10) days after delivery of the Transfer Notice to the
Company, by written notice to Purchaser, challenge such valuation, such notice
to specify the Company's valuation of such non-cash consideration. In the case
of such a challenge, Purchaser and the Company shall agree upon one independent
appraiser, who shall determine the fair market value of the non-cash
consideration for these purposes. In the event that such parties are unable to
agree upon such an appraiser, the parties agree that the American Arbitration
Association ("AAA") shall be employed to choose an independent appraiser and
shall use their best efforts to cause AAA to designate an independent appraiser
within a maximum of fourteen (14) days, and such person shall promptly determine
the fair market value of the non-cash consideration for these purposes. In the
event the appraisal process is utilized, (i) the party whose valuation of the
shares less closely approximates the value determined by the appraiser, measured
by dollar amounts and not by percentages, shall pay all costs of the independent
appraiser and (ii) the relevant time periods for the exercise of the Subject
Securities Right of First Refusal and for the closing of exercising such right
shall be tolled from the time a challenge is made to Purchaser's valuation of
the non-cash consideration until the independent appraiser determines the fair
market value thereof. In the event the Company exercises the Subject Securities
Right of First Refusal, it shall pay cash to Purchaser in lieu of said non-cash
consideration equal to the fair market value as determined in accordance with
this Section 12.3(d).
32
12.4 Entire Agreement; Amendment. This Agreement and the other documents
---------------------------
delivered pursuant hereto constitute the full and entire understanding and
agreement among the parties with regard to the subjects hereof and thereof.
Neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated orally, but only by a written instrument signed by the holders of at
least a majority of the Purchased Shares then issued and outstanding (as well as
any shares issued with respect to the same upon any stock split, stock dividend,
recapitalization or similar event) and a representative of the Company so
authorized by its Board of Directors.
12.5 Notices. All notices and other communications required or permitted
-------
hereunder shall be given in writing and shall be deemed effectively given upon
personal delivery or three (3) business days following deposit with the United
States Postal Service, by certified mail, return receipt requested, postage
prepaid, or otherwise delivered by hand or by messenger, addressed;
(a) if to Purchaser, at:
HBO & Company of Georgia
000 Xxxxxxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xx. Xxxxxxx X. Xxxxxxx
Senior Vice President
Corporate Planning and Business Development
with a copy to:
Xx. Xxx X. Xxxxxx
Senior Vice President and General Counsel
(same address)
with a copy to:
Xxxxx, Day, Xxxxxx & Xxxxx
0000 XxxXxxxx Xxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxx, Esq.
or
(b) if to any other holder of any shares of Preferred Stock, the
Warrant, any Warrant Shares, or Conversion Shares, at such address as such
holder shall have furnished the Company in writing, or, until any such holder so
furnishes an address to the Company, then to and at the address of the last
holder of such shares of Preferred Stock or Conversion Shares who has so
furnished an address to the Company, or
33
(c) if to the Company, at:
WebMD, Inc.
400 The Lenox Building
0000 Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xx. Xxxxxxx X. Xxxxxx, Chief Executive Officer
with a copy to:
L. Xxxxx Xxxxxx, Esq.
Vice President and Corporate Counsel
(same address)
with a copy to:
Xxxxxx Xxxxxxx Xxxxx & Xxxxxxxxxxx, L.L.P.
000 Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxx Xxxxxx IV, Esq.
or at such other address as the Company shall have furnished to Purchaser and
each such other holder in writing.
12.6 Delays or Omissions; Remedies Cumulative. No delay or omission to
----------------------------------------
exercise any right, power or remedy accruing to any party, upon any breach or
default under this Agreement, shall impair any such right, power or remedy of
such party or be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. All
of a party's remedies, either under this Agreement, or by law or otherwise
afforded to such party, shall be cumulative and not alternative.
12.7 Agent's Fees. Each party (a) represents and warrants that it has
------------
retained no finder or broker in connection with the transactions contemplated by
this Agreement (except as disclosed to the other parties hereto as of the date
hereof) and (b) hereby agrees to indemnify and to hold the other parties
harmless of and from any liability for commissions or compensation in the nature
of an agent's, finder's or broker's fee to any broker or other person or firm
(and the cost and expenses of defending against such liability or asserted
liability) for which said party is responsible.
12.8 Expenses. The Company shall bear its own expenses and legal fees
--------
(and expenses and disbursements of its legal counsel) incurred on its behalf
with respect to this
34
Agreement and the transactions contemplated hereby. The Company shall also pay
all out-of-pocket expenses of Purchaser, including the legal fees (and
reasonable expenses and disbursements) of Xxxxx, Day, Xxxxxx & Xxxxx, counsel to
Purchaser, not to exceed twenty thousand dollars ($20,000). If the Closing does
not occur for any reason, each party shall pay its own expenses and legal fees.
12.9 Construction of Certain Terms. The titles of the articles, sections,
-----------------------------
and subsections of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement. For purposes of this
Agreement, the terms "Company's Knowledge," "Knowledge of the Company" and
"Knowledge" as applied to the Company means, as to a particular matter, the
actual knowledge of the Company's executive officers (including its two Vice
Presidents of Sales), in-house corporate counsel, and controller. Wherever the
words "including," "include" or "includes" are used in this Agreement, they
shall be deemed followed by the words "without limitation." References to any
gender shall be deemed to mean any gender. All references herein to the
Company's knowledge or awareness shall mean the knowledge of managers and key
employees of the Company.
12.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
12.11 Legends. In addition to any legends required by the Securities Act
-------
or any applicable state securities laws, the Company shall place the following
legend on the front or back of each certificate evidencing ownership of shares
of Preferred Stock:
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH
SHAREHOLDER WHO SO REQUESTS A STATEMENT OF THE
DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS
APPLICABLE TO EACH CLASS, AND SERIES WITHIN A CLASS, OF
CAPITAL STOCK OF THE CORPORATION AND THE VARIATIONS IN
RIGHTS, PREFERENCES AND LIMITATIONS APPLICABLE TO EACH
SERIES (AND THE AUTHORITY OF THE CORPORATION'S BOARD OF
DIRECTORS TO DETERMINE VARIATIONS FOR FUTURE SERIES).
The Company shall place legends on each certificate evidencing ownership of
shares of Common Stock identical to those initially placed on the certificates
for Preferred Stock relating to the Securities Act and all applicable state
securities laws.
12.12 Enforcement.
-----------
(a) Remedies at Law or in Equity. If the Company shall default in
----------------------------
any of its obligations under this Agreement or if any representation or warranty
made by or on behalf of the Company or Purchaser in this Agreement or in any
certificate, report or other instrument delivered under or pursuant to any term
hereof shall be untrue or misleading in any material respect as of the date of
this Agreement or as of the Closing Date or as of the date it
35
was made, furnished or delivered, the other parties may proceed to protect and
enforce their respective rights by suit in equity or action at law, whether for
the specific performance of any term contained in this Agreement, injunction
against the breach of any such term or in furtherance of the exercise of any
power granted in this Agreement, or to enforce any other legal or equitable
right of such party or to take any one of more of such actions. In the event any
party brings such an action against any other party, the prevailing party in
such dispute shall be entitled to recover from the losing party all reasonable
fees, costs and expenses enforcing any right of such prevailing party under or
with respect to this Agreement, including such reasonable fees and expenses of
attorneys and accountants, which shall include all fees, costs and expenses of
appeals.
(b) Remedies Cumulative; Waiver. No remedy referred to herein or in
----------------------------
any exhibit hereto is intended to be exclusive, but each shall be cumulative and
in addition to any other remedy referred to above or otherwise available to a
party at law or in equity. No express or implied waiver by any party of any
default shall be a waiver of any future or subsequent default. The failure or
delay of any party in exercising any rights granted him or it hereunder shall
not constitute a waiver of any such right and any single or partial exercise of
any particular right by such party shall not exhaust the same or constitute a
waiver of any other right provided herein.
12.13 Timely Performance. Time is of the essence as to the performance of
------------------
the obligations required of the respective parties under this Agreement.
12.14 No Joint Venture. Nothing in this Agreement shall be deemed to
----------------
constitute the Company and Purchaser as partners, agents or joint venturers.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
36
[SIGNATURES TO INVESTMENT AGREEMENT]
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the day and year first above written.
THE COMPANY:
WEBMD, INC.,
f/k/a Endeavor Technologies, Inc.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------------
Xxxxxxx X. Xxxxxx
Chief Executive Officer
PURCHASER:
HBO & COMPANY OF GEORGIA
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------------------
Xxxxxxx X. Xxxxxxx
Senior Vice President
Corporate Planning and Business
Development
List of Exhibits
---------------
1.1 Form of Charter Amendment
1.4 Form of Warrant
3.3 Subsidiaries and Affiliates
3.4 Outstanding Rights, etc. in Respect of Authorized Capital Stock
3.9 Changes Since Date of Interim Financial Statements
3.10 Material Liabilities
3.11 Contracts
3.12.1 Owned Software
3.12.4 Licenses With Respect to Company Software
3.13 Intellectual Property
3.15 Litigation
3.16 Employment Agreements
3.20 Title Exceptions
3.21 Customers and Suppliers
3.23 Compliance with Laws Exceptions
3.24 Tax Exceptions
3.25 Conflicts of Officers, Directors and Key Employees
3.26 Indebtedness to Directors and Officers; Interested Party Transactions
3.27 Employee Benefit Plans
5.5 Form of Opinion of Xxxxxx Xxxxxxx Xxxxx & Xxxxxxxxxxx, L.L.P.
5.6 Form of Shareholders' Agreement
5.8 Form of Second Amendment to Shareholders Agreement
12.3 List of Company's Competitors
