EXHIBIT 10.22
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INTER-COMPANY AGREEMENT
THIS INTER-COMPANY AGREEMENT is made and entered into as of April 7, 1999
between CMGI, Inc., a Delaware corporation ("CMGI") and Engage Technologies,
Inc., a Delaware corporation and a majority-owned subsidiary of CMGI ("Engage").
WHEREAS, pursuant to that certain Stock Purchase Agreement, dated as of
April 7, 1999 and attached hereto as Exhibit A (the "Purchase Agreement"), by
and among CMGI, Engage, I/PRO and the certain stockholders (the "Stockholders")
of Internet Profiles Corporation, a California corporation ("I/PRO"), Engage and
CMGI have agreed to acquire at least 90% of the capital stock of I/PRO;
WHEREAS, Engage wishes to merge a corporation formed and incorporated in
Delaware and wholly owned by Engage with I/PRO in accordance with California
law, in which I/PRO will be the surviving company and wholly owned by Engage and
in which the remaining stockholders of I/PRO will receive cash compensation (the
"Merger"); and
WHEREAS, CMGI will hold over 80% of the capital stock of Engage on a fully
diluted, as converted basis after consummation of the transactions contemplated
by this Inter-Company Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth and other good and valuable consideration, the
parties hereto hereby agree as follows:
1. Upon the terms and subject to the conditions of this Inter-Company
Agreement (the "Agreement"), CMGI hereby agrees to contribute to Engage, and
Engage hereby agrees to accept from CMGI, all shares of I/PRO common stock, par
value $0.001 per share, (the "I/PRO Stock") purchased by CMGI on April 7, 1999,
pursuant to Section 1.1(b) of the Purchase Agreement (purchased by CMGI in
return for 180,266 shares of CMGI Common Stock disbursed by CMGI to Stockholders
as part of the Initial Consideration as provided therein). In consideration for
such I/PRO Stock, and for CMGI's cash payments of (a) $1,160,000 distributed
pursuant to Section 7.3 of the Purchase Agreement and (b) $27.13 distributed for
fractional shares; and (c) $612,838.08 distributed to unaccredited shareholders
and as part of the squeezeout merger (less $112,498.50 received back by CMGI as
the exercise price of the Comdisco warrant) and all as set forth in the
Breakdown of the Initial IPRO Price hereby certified by Engage to be true and
correct and attached hereto as Exhibit B, Engage hereby agrees to issue to CMGI
218,460 shares of Series C Preferred Stock of Engage valued at $101.10 per share
with an Applicable Purchase Price of $ 101.10 per share, and initially
convertible into 2,184,600 shares of Engage Common Stock. Such Series C
Preferred Stock shall have the rights and privileges as are set forth in the
form of Certificate of Designations attached hereto as Exhibit C. In the event
CMGI is required to pay any additional amounts in connection with the initial
acquisition of
I/PRO (exclusive of Contingent Consideration or amounts paid in connection with
any claimed breach of Section 4 of the Purchase Agreement) whether in connection
with appraisal rights or additional payments to unaccredited investors or in
connection with the squeezeout merger or otherwise, then Engage shall
immediately reimburse CMGI for any and all such payments by paying CMGI, at
CMGI's sole option, cash in the amount of such payments or by issuing to CMGI
additional shares of Engage Series C Preferred Stock and valued for purposes of
this calculation at $101.10 per share with an Applicable Purchase Price of $
101.10 per share (or following a Qualified Public Offering by issuing to CMGI
shares of Engage Common Stock into which said shares of Series C Preferred Stock
would have been converted upon such Qualified Public offering valued for
purposes of this calculation at $ 10.11 per share). Sums payable out of the
Escrow to the Purchasers shall be paid entirely to Engage.
2. The transactions contemplated by Section 1 of this Inter-Company
Agreement shall for purposes of this Agreement be deemed to have taken place on
April 7, 1999, the closing date of the I/PRO acquisition.
3. Any amounts paid by CMGI pursuant to the Purchase Agreement in
connection with the payment of Contingent Consideration shall be paid by CMGI in
cash or CMGI common stock, as applicable. Engage shall immediately reimburse
CMGI for any and all such payments by paying CMGI, at CMGI's sole option, cash
in the amount of such payments or by issuing to CMGI additional shares of Engage
Series C Preferred Stock valued for purposes of this calculation with reference
to the total enterprise valuation of Engage as of the end of the immediately
preceding fiscal quarter (as determined by the Board of Directors of Engage in
good faith and in a manner consistent with past practice and satisfactory to
CMGI in all respects) (or following a Qualified Public Offering by issuing to
CMGI shares of Engage Common Stock valued at the average closing price of such
stock during the 20 trading days ending on the third trading day prior to the
date of issuance). All CMGI Common Stock shall be valued in accordance with
Section 1.1 (b)(vii) of the Purchase Agreement.
4. Attached hereto as Exhibit D is the capitalization table of Engage as
of the date hereof, after giving effect to the initial acquisition transactions
contemplated by the Purchase Agreement.
5. As between CMGI and Engage, any liability arising from a breach of any
representation in Section 4 of the Purchase Agreement relating to CMGI shall be
the responsibility of CMGI, and any liability arising from a breach of any
representation in Section 4 relating to Engage shall be the responsibility of
Engage.
6. The purpose of this Agreement is to provide for the equitable
adjustment of amounts due Engage and CMGI with respect to the acquisition of
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I/PRO by Engage as set forth above and shall not under any circumstances be
deemed to create any rights in, or confer any benefits upon, any third party or
parties (including, without limitation, the former stockholders of I/PRO) in any
respect. Nothing herein shall be construed as waiving or affecting any
respective rights of the Purchasers with respect to any amounts held in escrow
or with respect to any amounts due from the Stockholders or with respect to any
indemnification obligations or otherwise. Capitalized terms used herein which
are defined in the Purchase Agreement have the same meanings herein as therein,
except to the extent that such meanings are amended hereby.
IN WITNESS WHEREOF, the parties have executed this Inter-Company Agreement
as of the date first above written.
CMGI, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
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Name: Xxxxxx X. Xxxxxxxx III
Title: Chief Financial Officer
ENGAGE TECHNOLOGIES, INC.
By: /s/ Xxxxxxx Royal
-----------------------------------------
Name: Xxxxxxx Royal
Title: Chief Financial Officer
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EXHIBIT A
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This Exhibit A to the Inter-Company Agreement between CMGI and Engage has
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been filed as Exhibit 10.26, Stock Purchase Agreement by and among CMGI, Engage,
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Internet Profiles Corporation and certain stockholders of Internet Profiles
Corporation listed on Schedule 1 attached thereto, dated April 7, 1999.
EXHIBIT B
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ENGAGE TECHNOLOGIES
BREAKDOWN OF INITIAL IPRO PURCHASE PRICE
Amounts disbursed by Engage
Engage shares (505,092 shares at $10.11) 5,106,480.12
Consideration in the form of Engage options 2,807,222.28
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Net paid by Engage 7,913,702.40
Amounts disbursed by CMGI
CMGI shares (180,266 shares at $113.31) 20,425,940.46
Cash
Section 7.3 expenses 1,160,000.00a
Cash for fractional shares 27.13
Cash to unaccredited shareholders and squeezeouts 612,838.08
Comdisco warrant exercise price coming back to CMGI (112,498.50)
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Net cash disbursed/to be disbursed by CMGI 1,660,366.71
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Total deal cost 30,000,009.57
=============
Amount for CMGI to recover through intercompany agreement 22,086,307.17
218,460 Preferred Series C
a Note that actual 7.3 expenses to date paid by CMGI are $1,135,276.95
representing a savings of $24,723.05 (IPRO made a payment on their line
subsequent to providing the estimate of 7.3 expenses to us). Under the terms of
the Stock Purchase Agreement, any difference between actual and assumed
obligations is to be refunded to stockholders. The above assumes that CMGI will
need to refund $24,732 to the IPRO shareholders, presumably into escrow.
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Wires sent by CMGI
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Party Date Sent Amount
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Wire to Xxxxxxxxx 4/7/99 254,000.00
Wire to IPRO for bonuses 4/13/99 230,371.00
SVB payoff 4/7/99 475,905.95
IPRO's legal fees 4/7/99 175,000.00
Shortfall in expenses 24,723.05
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Total 7.3 expenses 1,160,000.00
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Unaccredited shareholders payout 1 4/15/99 236,018.88
Cash for fractional shares 27.13
Unaccredited shareholders payout 2 4/26/99 376,819.20
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Total cash payments to unaccredited investors 612,865.21
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Chech coming back to CMGI (112,498.50)
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EXHIBIT C
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CERTIFICATE OF DESIGNATION OF
SERIES C CONVERTIBLE PREFERRED STOCK
Engage Technologies, Inc., a Delaware corporation (the "Company"), pursuant
to authority conferred on the Board of Directors of the Company by the
Certificate of Incorporation of the Company, as amended to date, and in
accordance with the provisions of Section 151 of the General Corporation Law of
the State of Delaware, certifies that the Board of Directors of the Company, at
a meeting duly held on May 5, 1999, has duly adopted the following resolution
providing for the establishment and issuance of a series of Preferred Stock to
be designated "Series C Convertible Preferred Stock" and to consist of two
million (2,000,000) shares as follows:
RESOLVED: That, pursuant to the authority expressly granted and vested in
the Board of Directors of the Company in accordance with the
provisions of Section 151 of the General Corporation Law of the
State of Delaware and its Amended and Restated Certificate of
Incorporation, a series of Preferred Stock of the Company hereby
is established, consisting of two million (2,000,000) shares to
be designated "Series C Convertible Preferred Stock" (hereinafter
"Series C Preferred Stock"); the Board of Directors be and hereby
is authorized to issue such shares of Series C Preferred Stock
from time to time and for such consideration and on such terms as
the Board of Directors shall determine; and subject to the
limitations provided by law and by the Amended and Restated
Certificate of Incorporation, the powers, designations,
preferences and relative, participating, optional or other
special rights of, and the qualifications, limitations or
restrictions upon, the Series C Preferred Stock shall be as
follows:
1. Designation. This series of Preferred Stock, par value $0.01 per
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share, shall be designated the "Series C Convertible Preferred Stock"
(hereinafter "Series C Preferred Stock").
2. Dividends.
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(a) The holders of shares of Series C Preferred Stock shall be
entitled to receive, out of funds legally available therefor, dividends computed
at a rate of 7% of the Applicable Purchase Price (as defined in Section 3(a)
below) per share per annum (or a proportional part thereof for a portion of a
year and all subject to appropriate adjustment in the event of any stock
dividend, stock split, combination or other similar recapitalization affecting
such shares) commencing as of the date the particular shares of Series C
Preferred Stock are issued (the "Applicable Issue Date"), payable when, as and
if declared by the Board of Directors of the Company. The
right to receive dividends on Series C Preferred Stock shall be non- cumulative,
and no right to receive dividends shall accrue by reason of the fact that no
dividends have been declared on the Series C Preferred Stock in any or every
prior year.
(b) The Company shall not declare or pay any distributions on shares
of Common Stock until the holders of shares of Series C Preferred Stock then
outstanding shall have first received a distribution at the rate specified in
paragraph (a) of this Section 2 calculated on a cumulative basis from the date
of issuance of said stock compounded annually as of any anniversary of the date
of issuance of such shares.
(c) For purposes of this Section 2, unless the context requires
otherwise, "distribution" shall mean the transfer of cash or property without
consideration, whether by way of dividend or otherwise, payable other than in
Common Stock or other securities of the Company, or the purchase or redemption
of shares of the Company (other than repurchases of Common Stock held by
employees or directors of, or consultants to, the Company pursuant to agreements
providing for such repurchase and other than redemptions in liquidation or
dissolution of the Company) for cash or property, including any such transfer,
purchase or redemption by a subsidiary of the Company.
3. Liquidation, Dissolution or Winding Up.
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(a) In the event of any liquidation, dissolution or winding up of the
Company, and provided that the amount available for distribution to each holder
of the Series C Preferred Stock pursuant to this Section 3 is less than the
Applicable Purchase Price (as defined below) per share plus a dividend computed
at a rate of 7% per share per annum, compounded annually beginning as of the
Applicable Issue Date (such amount to be equitably adjusted whenever there shall
occur a stock split, combination, reclassification or other similar event as
provided in Section 5(e)(ii) hereof), whether voluntary or involuntary, the
entire assets of the Company available for such distribution shall, after
satisfaction of all payment obligations under the Company's Series A Preferred
Stock, be distributed ratably among the holders of the Series C Preferred Stock.
The "Applicable Purchase Price" for each share of Series C Preferred Stock shall
be the price paid for such share on the Applicable Issue Date.
It is expressly contemplated that separate tranches of shares of Series C
Preferred Stock issued on different dates will have different Applicable
Purchase Prices.
(b) In the event of any liquidation, dissolution or winding up of the
Company, and provided that the amount available for distribution to each holder
of the Series C Preferred Stock pursuant to this Section 3 is at least equal to
the Applicable Purchase Price per share plus a dividend computed at a rate of 7%
of the Applicable Purchase Price for each such share per annum, compounded
annually as
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of the Applicable Issue Date (such amount to be equitably adjusted whenever
there shall occur a stock split, combination, reclassification or other similar
event as provided in Section 5(e)(ii) hereof), whether voluntary or involuntary,
holders of each share of Series C Preferred Stock shall, after satisfaction of
all payment obligations under the Company's Series A Preferred Stock, be
entitled to be paid first out of the assets of the Company available for
distribution to holders of the Company's capital stock of all classes, whether
such assets are capital, surplus, or earnings, before any sums shall be paid or
any assets distributed among the holders of any other class of capital stock, an
amount equal to the Applicable Purchase Price for each share of Series C
Preferred Stock plus a dividend computed at a rate of 7% per share per annum,
compounded annually as of the Applicable Issue Date. After the payment of the
preferential amount required to be paid to the holders of the Series C Preferred
Stock, upon the liquidation, dissolution or winding up of the Company, the
holders of shares of the Company's Common Stock shall be entitled to receive the
remaining assets and funds of the Company available for distribution to its
stockholders.
(c) A consolidation or merger of the Company or a sale of all or
substantially all of the assets of the Company shall be regarded as a
liquidation, dissolution or winding up of the affairs of the Company within the
meaning of this Section 3; provided, however, that each holder of Series C
Preferred Stock shall have the right to elect the benefits of the provisions of
Section 5(h) hereof in lieu of receiving payment in liquidation, dissolution or
winding up of the Company pursuant to this Section 3. Each holder of Series C
Preferred Stock shall notify the Company in advance of its election to obtain
the benefits of this Section 3(c) or of Section 5(h), which notification shall
be given not later than a date specified in writing to each holder by the
Company to be at least five (5) days prior to the effective date of such
consolidation, merger or sale. If a holder fails to make any election, he shall
be deemed to have elected the benefits of this Section 3(c).
(d) Whenever the distribution provided for herein shall be paid in
property other than cash, the value of such distribution shall be the fair
market value of such property as determined in good faith by the Board of
Directors of the Company.
4. Voting Power. Except as otherwise expressly provided in Section 7
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hereof, or as required by law, each holder of Series C Preferred Stock shall be
entitled to vote on all matters and shall be entitled to that number of votes
equal to the largest number of whole shares of Common Stock into which such
holder's shares of Series C Preferred Stock could be converted, pursuant to the
provisions of Section 5 hereof (taking into account all declared and unpaid
dividends, if any, with respect to such Series C Preferred Stock), at the record
date for the determination of shareholders entitled to vote on such matter or,
if no such record date is established, at the date such vote is taken or any
written consent of shareholders is solicited.
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Except as otherwise expressly provided herein or as required by law, the holders
of shares of Series C Preferred Stock and of Common Stock shall be entitled to
vote together as a class on all matters.
5. Conversion Rights. The holders of the Series C Preferred Stock shall
-----------------
have the following conversion rights:
(a) General. Subject to and in compliance with the provisions of this
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Section 5, any shares of the Series C Preferred Stock, may, at the option of the
holder, be converted at any time or from time to time into fully-paid and non-
assessable shares (calculated as to each conversion to the largest whole share)
of Common Stock. The number of shares of Common Stock to which a holder of
Series C Preferred Stock shall be entitled upon conversion shall be calculated
by adding together each product obtained by multiplying the Applicable
Conversion Rate (determined as provided in Section 5(c)) for each tranche of
Series C Preferred Stock held by such holder by the number of shares of each
tranche of Series C Preferred Stock having such particular Applicable Purchase
Price being converted. Upon conversion of their shares of Series C Preferred
Stock into shares of Common Stock, holders of shares of Series C Preferred Stock
shall also have the option to have all declared but unpaid dividends on such
shares of Series C Preferred Stock converted into shares of Common Stock. The
number of shares of Common Stock to be received upon the conversion of such
declared but unpaid dividends shall, for each tranche of Series C Preferred
Stock, be computed by multiplying the number of shares of Series C Preferred
Stock which could have been purchased with such declared but unpaid dividends,
assuming a Series C Preferred Stock purchase price equal to the Applicable
Purchase Price per share, by the Applicable Conversion Rate in effect for such
tranche at the time of such conversion.
(b) Conversion Following Underwritten Public offering.
(i) All outstanding shares of Series C Preferred Stock shall, upon the
closing of an underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offering
and sale of Common Stock for the account of the Company in which the Common
Stock is sold at a price to the public of not less than an amount per share to
be calculated as follows: (A) the aggregate sum of the Applicable Purchase Price
for each tranche of Series C Preferred Stock multiplied by the number of shares
issued in such tranche plus a dividend computed at a rate of 7% per share per
annum, compounded annually as of the Applicable Issue Date (such amount to be
equitably adjusted whenever there shall occur a stock split, combination,
reclassification or other similar event affecting the Common Stock) divided by
(B) the total number of shares of Series C Preferred Stock issued and
outstanding, and in which the aggregate gross proceeds (before deduction of any
underwriting discounts, commissions or expenses) received by the Company from
such public offering, shall
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equal or exceed Fifteen Million Dollars ($15,000,000), be converted
automatically into the number of shares of Common Stock to which a holder of
Series C Preferred Stock shall be entitled upon conversion pursuant to Section
5(a) hereof without any further action by such holders and whether or not the
certificates representing such shares are surrendered to the Company or its
transfer agent for the Common Stock.
(ii) Upon the occurrence of the conversion specified in Section
5(b)(i), the holders of such Series C Preferred Stock shall surrender the
certificates representing such shares at the office of the Company or of its
transfer agent for the Common Stock. Thereupon, there shall be issued and
delivered to each such holder a certificate or certificates for the number of
shares of Common Stock into which the shares of the Series C Preferred Stock
surrendered were convertible on the date on which such conversion occurred. The
Company shall not be obligated to issue certificates evidencing the shares of
Common Stock issuable upon such conversion unless certificates evidencing such
shares of the Series C Preferred Stock being converted are either delivered to
the Company or any such transfer agent or the holder notifies the Company or any
such transfer agent that such certificates have been lost, stolen or destroyed
and executes an agreement satisfactory to the Company to indemnify the Company
from any loss incurred by it in connection therewith. In addition, the Company
may, if the Board of Directors deems it reasonably necessary, require the holder
to post a bond in connection with such indemnity agreement.
(c) Applicable Conversion Rate. The conversion rate in effect at any
--------------------------
time (the "Applicable Conversion Rate") shall be the quotient obtained by
dividing (i) the Applicable Purchase Price by (ii) the Applicable Conversion
Value, calculated as provided in Section 5(d).
(d) Applicable Conversion Value. The Applicable Conversion Value in
---------------------------
effect from time to time, except as subsequently adjusted in accordance with
Section 5(e) hereof, shall be equal to the quotient obtained by dividing (i) the
Applicable Purchase Price by (ii) ten (10).
(e) Adjustments to Applicable Conversion Value.
(i) Upon Sales of Common Stock. If the Company shall, while there
--------------------------
are any shares of Series C Preferred Stock outstanding, issue or sell shares of
its Common Stock without consideration or at a price per share less than the
Applicable Conversion Value for any tranche of Series C Preferred Stock in
effect immediately prior to such issuance or sale, then in each such case such
Applicable Conversion Value for such tranche of Series C Preferred Stock upon
each such issuance or sale, except as hereinafter provided, shall be adjusted to
an amount determined by multiplying such Applicable Conversion Value by a
fraction:
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(A) the numerator of which shall be (a) the number of shares of
Common Stock outstanding immediately prior to the issuance of
such additional shares of Common Stock, calculated on a fully
diluted basis assuming exercise or conversion of all securities
exercisable for or convertible into Common Stock, whether or not
such exercise or conversion is unvested or otherwise conditional,
plus (b) the number of shares of Common Stock which the net
aggregate consideration received by the Company for the total
number of such additional shares of Common Stock so issued would
purchase at the Applicable Conversion Value for such tranche, and
(B) the denominator of which shall be (a) the number of shares of
Common Stock outstanding immediately prior to the issuance of
such additional shares of Common Stock, calculated on a fully
diluted basis assuming exercise or conversion of all securities
exercisable for or convertible into Common Stock, whether or not
such exercise or conversion is unvested or otherwise conditional,
plus (b) the number of such additional shares of Common Stock so
issued or deemed issued.
The Company's issuance of up to an aggregate of 3,544,737 shares of Common Stock
or such greater number if approved by a majority of the Board of Directors (such
amount to be equitably adjusted whenever there shall occur a stock split,
combination, reclassification or other similar event affecting the Common
Stock), or options exercisable therefor, pursuant to any stock purchase or stock
option plan or other individual or group incentive program of any kind approved
by the Board of Directors to the Company's officers, directors, employees or
consultants shall have no effect on the calculations contemplated by this
Section 5(e).
(C) For the purposes of this Section 5(e), with respect to each
tranche of Series C Preferred Stock, the issuance of any
warrants, options, subscriptions or purchase rights with respect
to shares of Common Stock and the issuance of any securities
convertible into or exchangeable for shares of Common Stock (or
the issuance of any warrants, options or any rights with respect
to such convertible or exchangeable securities) whether or not
such conversion or exchange is conditional, shall be deemed an
issuance at such time of such Common Stock. Any obligation,
agreement or undertaking to issue warrants, options,
subscriptions or purchase rights at any time in the future
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shall be deemed to be an issuance at any time such obligation,
agreement or undertaking is made or arises. No adjustment of the
Applicable Conversion Value for any such tranche shall be made
under this Section 5(e) upon the issuance of any shares of
Common Stock which are issued pursuant to the exercise of any
warrants, options, subscriptions or purchase rights or pursuant
to the exercise of any conversion or exchange rights in any
convertible securities if any adjustment shall previously have
been made upon the issuance of any such warrants, options or
subscriptions or purchase rights or upon the issuance of any
convertible securities (or upon the issuance of any warrants,
options or any rights therefor) as above provided. Any
adjustment of the Applicable Conversion Value with respect to
this paragraph for any tranche of Series C Preferred Stock which
relates to warrants, options, subscriptions or purchase rights
with respect to shares of Common Stock shall be disregarded if,
as, and when all of such warrants, options, subscriptions or
purchase rights expire or are canceled without being exercised,
so that the Applicable Conversion Value for such tranche
effective immediately upon such cancellation or expiration shall
be equal to the Applicable Conversion Value for such tranche in
effect at the time of the issuance of the expired or canceled
warrants, options, subscriptions or purchase rights, with such
additional adjustments as would have been made to that Applicable
Conversion Value had the expired or canceled warrants, options,
subscriptions or purchase rights not been issued.
For purposes of this Section 5(e), if a part or all of the consideration
received by the Company in connection with the issuance of shares of the Common
Stock or the issuance of any of the securities described in this Section 5(e)
consists of property other than cash, the Company at its expense will promptly
cause independent public accountants of recognized standing selected by the
Company to value such property, whereupon such value shall be given to such
consideration and shall be recorded on the books of the Company with respect to
receipt of such property.
This Section 5(e)(i) shall not apply under any of the circumstances which
would constitute an Extraordinary Common Stock Event (as hereinafter defined in
Section 5(e)(ii)).
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(ii) Extraordinary Common Stock Event. Upon the happening of an
--------------------------------
Extraordinary Common Stock Event (as hereinafter defined), the Applicable
Conversion Value for each tranche of Series C Preferred Stock shall,
simultaneously with the happening of such Extraordinary Common Stock Event, be
adjusted by multiplying the then effective Applicable Conversion Value for such
tranche by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such Extraordinary Common Stock
Event and the denominator of which shall be the number of shares of Common Stock
outstanding immediately after such Extraordinary Common Stock event, and the
product so obtained shall thereafter be the Applicable Conversion Value for such
tranche. The Applicable Conversion Value for such tranche, as so adjusted,
shall be readjusted in the same manner upon the happening of any successive
Extraordinary Common Stock Event or Events.
"Extraordinary Common Stock Event" shall mean (i) the issue of additional
shares of Common Stock as a dividend or other distribution on outstanding shares
of Common Stock, (ii) the subdivision of outstanding shares of Common Stock into
a greater number of shares of Common Stock, or (iii) the combination of
outstanding shares of the Common Stock into a smaller number of shares of Common
Stock.
(f) Dividends. In the event the Company shall make or issue, or fix a
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record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities of the Company
other than shares of Common Stock or in assets (excluding cash dividends or
distributions), then and in each such event provisions shall be made so that the
holders of Series C Preferred Stock shall receive upon conversion thereof in
addition to the number of shares of Common Stock receivable thereupon, the
number of securities or such other assets of the Company which they would have
received had their Series C Preferred Stock been converted into Common Stock on
the date of such event and had they thereafter, during the period from the date
of such event to and including the Conversion Date (as that term is hereafter
defined in Section 5(j)), retained such securities or such other assets
receivable by them as aforesaid during such period, giving application to all
adjustments called for during such period under this Section 5 with respect to
the rights of the holders of the Series C Preferred Stock.
(g) Recapitalization or Reclassification. If the Common Stock
------------------------------------
issuable upon the conversion of the Series C Preferred Stock shall be changed
into the same or a different number of shares of any class or classes of stock
of the Company, whether by recapitalization, reclassification or otherwise
(other than a subdivision or combination of shares or stock dividend provided
for elsewhere in this Section 5, or a reorganization, merger, consolidation or
sale of assets provided for elsewhere in this Section 5), then and in each such
event the holder of each share of Series C Preferred Stock shall have the right
thereafter to convert such share into the kind and amount of shares of stock and
other securities and property receivable upon such
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reorganization, reclassification or other change by holders of the number of
shares of Common Stock into which such share of Series C Preferred Stock might
have been converted (taking into account all accrued and unpaid dividends and
interest with respect to such Series C Preferred Stock) immediately prior to
such reorganization, reclassification or change, all subject to further
adjustment as provided herein.
(h) Capital Reorganization Merger or Sale of Assets. If at any time
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or from time to time there shall be a capital reorganization of the Common Stock
(other than a subdivision, combination, reclassification or exchange of shares
provided for elsewhere in this Section 5) or a merger or consolidation of the
Company with or into another corporation or entity, or the sale of all or
substantially all of the Company's properties and assets to any other person or
persons, then, as a part of such reorganization, merger, consolidation or sale,
provision shall be made so that each holder of the Series C Preferred Stock
shall thereafter be entitled to receive upon conversion of such holder's shares
of Series C Preferred Stock, the number of shares of stock or other securities
or property of the Company, or of the successor corporation or entity resulting
from such merger, consolidation or sale, to which a holder of Common Stock
issuable upon conversion would have been entitled on such capital
reorganization, merger, consolidation, or sale. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 5
with respect to the rights of the holders of the Series C Preferred Stock after
the reorganization, merger, consolidation or sale to the end that the provisions
of this Section 5 (including adjustment of the Applicable Conversion Value then
in effect and the number of shares purchasable upon conversion of each tranche
of Series C Preferred Stock) shall be applicable after that event in as nearly
equivalent a manner as may be practicable.
Each holder of Series C Preferred Stock upon the occurrence of a capital
reorganization, merger or consolidation of the Company, or the sale of all or
substantially all its assets and properties as such events are more fully set
forth in the first paragraph of this Section 5(h), shall have the option of
electing treatment of his shares of Series C Preferred Stock under either this
Section 5(h) or Section 3(b) hereof, notice of which election shall be
submitted in writing to the Company at its principal offices no later than five
(5) days before the effective date of such event.
(i) Accountant's Certificate as to Adjustments. In each case of an
------------------------------------------
adjustment or readjustment of the Applicable Conversion Rate, the Company will
furnish each holder of Series C Preferred Stock with a certificate, prepared by
its chief financial officer showing such adjustment or readjustment, and stating
in detail the facts upon which such adjustment or readjustment is based. Upon
the request of any holder, the Company will cause its independent public
accountants to confirm the accuracy of such adjustment or readjustment.
-9-
(j) Exercise of Conversion Privilege. To exercise his conversion
--------------------------------
privilege, a holder of Series C Preferred Stock shall surrender the certificate
or certificates representing the shares being converted to the Company at its
principal office, and shall give written notice to the Company at such office
that such holder elects to convert such shares. Such notice shall also state
the name or names (with address or addresses) in which the certificate or
certificates for shares of Common Stock issuable upon such conversion shall be
issued. The certificate or certificates for shares of Series C Preferred Stock
surrendered for conversion shall be accompanied by proper assignment thereof to
the Company or in blank. The date when such written notice is received by the
Company, together with the certificate or certificates representing the shares
of Series C Preferred Stock being converted, shall be the "Conversion Date". As
promptly as practicable after the Conversion Date, the Company shall issue and
shall deliver to the holder of the shares of Series C Preferred Stock being
converted, or on its written order, such certificate or certificates as it may
request for the number of whole shares of Common Stock issuable upon the
conversion of such shares of Series C Preferred Stock in accordance with the
provisions of this Section 5, cash in the amount of all declared but unpaid
dividends on such shares of Series C Preferred Stock, up to and including the
Conversion Date, unless conversion of such declared but unpaid dividends into
Common Stock has been elected, and cash, as provided in Section 5(k), in
respect of any fraction of a share of Common Stock issuable upon such
conversion. Such conversion shall be deemed to have been effected immediately
prior to the close of business on the Conversion Date, and at such time the
rights of the holder as holder of the converted shares of Series C Preferred
Stock shall cease and the person or persons in whose name or names any
certificate or certificates for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become the holder or holders of record
of the shares of Common Stock represented thereby.
(k) Cash in Lieu of Fractional Shares. No fractional shares of Common
---------------------------------
Stock or scrip representing fractional shares shall be issued upon the
conversion of shares of Series C Preferred Stock. Instead of any fractional
shares of Common Stock which would otherwise be issuable upon conversion of
Series C Preferred Stock, the Company shall pay to the holder of the shares of
Series C Preferred Stock which were converted a cash adjustment in respect of
such fractional shares in an amount equal to the same fraction of the market
price per share of the Common Stock (as determined in a reasonable manner
prescribed by the Board of Directors) at the close of business on the Conversion
Date. The determination as to whether or not any fractional shares are issuable
shall be based upon the total number of shares of Series C Preferred Stock being
converted at any one time by any holder thereof, not upon each share of Series C
Preferred Stock being converted.
(l) Partial Conversion. In the event some but not all of the shares
------------------
of Series C Preferred Stock represented by a certificate or certificates
surrendered by a holder are converted, the Company shall execute and deliver to
or on the order of the
-10-
holder, at the expense of the Company, a new certificate representing the
number of shares of Series C Preferred Stock which were not converted.
(m) Reservation of Common Stock. The Company shall at all times
---------------------------
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the shares of the
Series C Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of the Series C Preferred Stock and all unpaid dividends thereon, and if
at any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the conversion of all then outstanding shares of the
Series C Preferred Stock and all unpaid dividends thereon, the Company shall
take such corporate action as may be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose.
6. No Reissuance of Series C Preferred Stock. No share or shares of
-----------------------------------------
Series C Preferred Stock acquired by the Company by reason of redemption,
purchase, conversion or otherwise shall be reissued, and all such shares shall
be canceled, retired and eliminated from the shares which the Company shall be
authorized to issue. The Company may from time to time take such appropriate
corporate action as may be necessary to reduce the authorized number of shares
of the Series C Preferred Stock accordingly.
7. Restrictions and Limitations.
----------------------------
(a) Except as expressly provided herein or as required by law, neither
the Company nor any subsidiary of the Company (which shall mean any corporation
or trust of which the Company directly or indirectly owns at the time all of the
outstanding shares of every class of such corporation or trust other than
directors' qualifying shares) shall, without the vote or written consent by the
holders of at least a majority of the then outstanding shares of the Series C
Preferred Stock voting together, each share of Series C Preferred Stock to be
entitled to one vote in each instance for each share of Common Stock into which
such Preferred Stock is then convertible:
(i) Redeem, purchase or otherwise acquire for value or (pay in,
to or set aside for a sinking fund for such purpose), any share or shares of
Series C Preferred Stock;
(ii) Authorize or issue, or obligate itself to authorize or issue,
any other equity security senior to or on a parity with the Series C Preferred
Stock as to liquidation preferences, conversion rights, redemption rights,
dividend rights, voting rights or otherwise;
-11-
(iii) Effect any sale, lease, assignment, transfer or other
conveyance of all or substantially all of the assets of the Company or any
subsidiary thereof, or any consolidation or merger involving the Company or any
subsidiary thereof, or any reclassification or other change of stock, or any
recapitalization or any dissolution, liquidation or winding up of the Company;
(iv) Effect any merger by the Company with or into any business
entity or any acquisition by the Company of any assets or business having a fair
market value in excess of One Million Dollars ($1,000,000) U.S.; or
(v) Amend its Amended and Restated Certificate of Incorporation,
if such amendment would change any of the rights, preferences, privileges of or
limitations provided for herein for the benefit of any shares of Series C
Preferred Stock.
8. No Dilution or Impairment. Except as provided in Section 7 above,
-------------------------
the Company will not, by amendment of its Amended and Restated Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of the
Series C Preferred Stock set forth herein, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
holders of the Series C Preferred Stock against dilution or other impairment.
Without limiting the generality of the foregoing, the Company (a) will not
increase the par value of any shares of stock receivable on the conversion of
the Series C Preferred Stock above the amount payable therefor on such
conversion, (b) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and non-
assessable shares of stock on the conversion of all Series C Preferred Stock
from time to time outstanding and all accrued and unpaid dividends thereon, and
(c) will not transfer all or substantially all of its properties and assets to
any other person (corporate or otherwise), or consolidate with or merge into any
other person or permit any such person to consolidate with or merge into the
Company (if the Company is not the surviving person), unless such other person
shall expressly assume in writing and will be bound by all the terms of the
Series C Preferred Stock set forth herein.
9. Notices of Record Date. In the event of
----------------------
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
-12-
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any merger or
consolidation of the Company, or any transfer of all or substantially all of the
assets of the Company to any other corporation, or any other entity or person,
or
(c) any voluntary or involuntary dissolution, liquidation or winding
up of the Company, then and in each such event the Company shall mail or cause
to be mailed to each holder of Series C Preferred Stock a notice specifying (i)
the date on which any such record is to be taken for the purpose of such
dividend, distribution or right and a description of such dividend, distribution
or right, (ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding up is expected to become effective, (iii) the time, if any, that is to
be fixed, as to when the holders of record of Common Stock (or other securities)
shall be entitled to exchange their shares of Common Stock (or other securities)
for securities or other property deliverable upon such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding up. Such notice shall be mailed at least
twenty (20) days prior to the date specified in such notice on which such action
is to be taken.
This Certificate of Designation was duly adopted in accordance with the
applicable provisions of Section 151 of the Delaware General Corporation Law.
-13-
IN WITNESS WHEREOF, Engage Technologies, Inc. has caused this Certificate
of Designation of Series C Convertible Preferred Stock to be signed by Xxxx X.
Xxxxxx, its President, this 5th day of May, 1999.
By:_______________________________
Xxxx X. Xxxxxx, President
-14-
EXHIBIT D
---------
Ipro analysis
Engage Technologies, Inc.
Fully Diluted Common Equivalent Shares
%
# of shares ownership $ ownership
----------- --------- ------------
Fully diluted common equivalent shares
Before IPro Acquisition
Engage Option Pool (total including exercised) 2,894,737 14.6% $ 29,273,707
Preferred Series A 15,000,000 75.8% $151,691,021
Preferred Series B - Sumitomo 238,597 1.2% $ 2,412,868 --------------------
Preferred Shares issued in interco debt conversion 1,643,710 8.3% $ 16,622,403 Ave. share price
----------- --------- ------------ 10.11
Total capitalization 19,777,044 100.0% $200,000,000 --------------------
=========== ========= ============
----------- --------- ------------
CMGI ownership 16,643,710 84.2% $168,313,424
----------- --------- ------------
Fully diluted common equivalent shares ------------
230,000,000
IPro Acquisition - (before additional Option grants) ------------
Engage Option Pool (total including exercised) 2,894,737 12.7% $ 29,273,707
Preferred Series A 15,000,000 66.0% $151,691,021
Preferred Series B - Sumitomo 238,597 1.0% $ 2,412,868
Preferred Shares issued in interco debt conversion 1,643,710 7.2% $ 16,622,403
----------- --------- ------------
Subtotal shares pre-IPro 19,777,044 87.0% $200,000,000
--------------------
Engage Shares issued to CMGI - IPro acquisition 2,184,599 9.6% $ 22,086,300 Purchase
Engage Shares issued to former IPro shareholders 505,092 2.2% $ 5,106,480 Price
Engage Options issued to former IPro optionships 277,668 1.2% $ 2,807,220 30,000,000
--------------------
Ave. share price
----------- --------- ------------ --------------------
Total capitalization 22,744,403 100.0% $230,000,000 10.11
=========== ========= ============ --------------------
----------- --------- ------------
CMGI ownership 18,828,309 82.8% $190,399,725
=========== ========= ============
IPro Acquisition - including additional Options
granted in purchase
Engage Option Pool (total including exercised) 2,894,737 12.5% $ 28,801,191
Preferred Series A 15,000,000 64.9% $149,242,526
Preferred Series B - Sumitomo 238,597 1.0% $ 2,373,921
Preferred Shares issued in interco debt conversion 1,643,710 7.1% $ 16,354,096
Engage Shares issued to CMGI - IPro acquisition 2,184,599 9.5% $ 21,735,676
Engage Shares issued to former IPro shareholders 505,092 2.2% $ 5,025,414
Engage Option issued to former IPro optionholders 277,668 1.2% $ 2,762,655
Additional Engage options reserved for IPro 372,332 1.6% $ 3,704,522
employees ----------- ---------- ------------
Subtotal IPro options 650,000 2.8% $ 6,467,176
--------------------
----------- ---------- ------------ Ave. share price
Total capitalization 23,116,735 100% $230,000,000 9.95
=========== ========== ============ --------------------
----------- ---------- ------------
CMGI ownership 18,828,309 81.4% $187,332,298
----------- ---------- ------------
