Exhibit 10.24
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CLASS A PREFERRED
STOCK PURCHASE AGREEMENT
between
GLOBECOMM, INC.
and
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇, Trevor Fettor, ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ Low,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ Degiamo
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Dated as of
May 27, 1997
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TABLE OF CONTENTS
Section 1. DEFINITIONS AND TERMS
Section 1.1. Definitions ....................................... 1
Section 1.2. Other Terms ....................................... 5
Section 1.3. Other Definitional Provisions ..................... 5
Section 2. BASIC TRANSACTION
Section 2.1. Sale of Shares .................................... 6
Section 2.2. Closing ........................................... 6
Section 2.3. Actions at the Closing ............................ 7
Section 2.4. Effect of Sale .................................... 7
Section 2.5. Escrow Funds ...................................... 8
Section 2.6. Issuance of Shares ................................ 10
Section 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1. Organization, Qualification and [ILLEGIBLE]
ii
Section 3.19. Schedule of Contracts ............................. 15
Section 3.20. No Other Representations or
Warranties; Accurate at Closing ................. 15
Section 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Section 4.1. Investment Representation ......................... 15
Section 4.2. Restricted Securities ............................. 16
Section 4.3. Legends ........................................... 16
Section 4.4. Due Diligence Investigation ....................... 16
Section 5. CONDITIONS TO THE PURCHASERS' OBLIGATIONS
Section 5.1. Representations and Warranties Correct ............ 17
Section 5.2. Performance ....................................... 17
Section 5.3. Compliance Certificate ............................ 17
Section 5.4. Secretary's Certificate ........................... 17
Section 5.5. Opinion of Counsel ................................ 17
Section 6. CONDITIONS TO THE COMPANY'S OBLIGATIONS
Section 6.1. Representations and Warranties Correct ............ 18
Section 6.2. Performance ....................................... 18
Section 6.3. Investment Representation ......................... 18
Section 7. REGISTRATION RIGHTS
Section 7.1. Registration ...................................... 18
Section 7.2. Obligations of the Company ........................ 21
Section 7.3. Furnish Information ............................... 22
Section 7.4. Registration Expenses ............................. 22
Section 7.5. Selection of Underwriters ......................... 23
Section 7.6. Delay of Registration ............................. 23
Section 7.7. Conversion of Shares .............................. 23
Section 7.8. Indemnification ................................... 24
Section 7.9. No-Action Letter .................................. 26
Section 7.10. Reports Under the 1934 Act ........................ 26
iii
Section 7.11. Lock Up Period .................................... 27
Section 7.12. Transfer of Registration Rights ................... 27
Section 8. OTHER COVENANTS
Section 8.1. Modification of Bylaws ............................ 27
Section 8.2. Financial Statements .............................. 29
Section 8.3. Inspection ........................................ 29
Section 8.4. Covenant Not to Compete ........................... 30
Section 8.5. Arm's Length Transaction .......................... 30
Section 8.6. Termination ....................................... 30
Section 8.7. Voting Agreement .................................. 30
Section 8.8. Indemnification ................................... 31
Section 8.9. Transfer of Class B Common Stock .................. 31
Section 8.10. Authorization of Additional
Class A Preferred Stock ......................... 33
Section 8.11. Reservation of Stock Issuable
Upon Conversion ................................. 34
Section 9. PREEMPTIVE RIGHTS
Section 9.1. Rights of Inclusion ............................... 34
Section 9.2. Rights to Compel .................................. 36
Section 9.3. Right of First Offer .............................. 38
Section 10. POST CLOSING SHARE PRICE ADJUSTMENTS
Section 10.1. Anti-Dissolution .................................. 40
Section 10.2. Performance Ratchet ............................... 41
Section 10.3. Restrictions on Dividends ......................... 41
Section 11. MISCELLANEOUS
Section 11.1. Public Announcements .............................. 42
Section 11.2. No Third Party Beneficiaries ...................... 42
Section 11.3. Default ........................................... 42
Section 11.4. Notices ........................................... 42
iv
Section 11.5. Governing Law ..................................... 42
Section 11.6. Waivers ........................................... 42
Section 11.7. Headings .......................................... 43
Section 11.8. Severability ...................................... 43
Section 11.9. Binding Effects ................................... 43
Section 11.10. Counterparts ...................................... 43
Section 11.11. Execution of Document ............................. 43
Section 11.12. Expenses .......................................... 43
Section 11.13. Construction ...................................... 44
Section 11.14. Incorporation of Exhibits and
Schedules ..................................... 44
Section 11.15. Entire Agreement .................................. 44
Schedules
Schedule A: Purchasers' Shares Stage One ............................ S-1
Schedule B: Purchasers' Shares Stage Two ............................ S-4
Schedule C: Purchasers' Shares Stage Three .......................... S-6
Schedule D: Employees' Stock Rights ................................. S-8
Schedule E: Schedule of Contracts ................................... S-9
Exhibits
Exhibit A: Amendment to Certificate of Incorporation
Exhibit B: Investment Letter
Exhibit C: Opinion Letter
Exhibit D: Proprietary Information Agreement
Exhibit E: Ratchet Example
v
CLASS A PREFERRED
STOCK PURCHASE AGREEMENT
AGREEMENT, dated the 27th day of May, 1997 by and between GLOBECOMM, INC.
(the "Company") doing business at ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ and
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇
Low, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇ Degiamo, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ Lipsuis and ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ (collectively referred to as the "Purchasers" and individually as
"Purchaser"). The Company and the Purchasers are collectively referred to as the
"Parties."
WHEREAS, the Company desires to sell to the Purchasers, and the Purchasers
desire to purchase from the Company, certain shares of Class A Preferred Stock
of the Company upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and mutual agreements
hereinafter contained, the Parties hereto do hereby agree as follows:
SECTION 1. DEFINITIONS AND TERMS
1.1. Definitions. The following terms, as used herein, shall have the
following meanings:
"Act" means the Securities Act of 1933, as amended.
"Additional Shares" has the meaning set forth in Section 9.1.3. of
this Agreement.
"Adjusted Share Price" has the meaning set forth in Section 10.2.1.
of this Agreement.
"Affiliate" means, with respect to any Person, any Person directly
or indirectly controlling, controlled by, or under common control with such
Person.
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"Agreement" means this Agreement, as the same may be amended or
supplemented from time to time in accordance with the terms hereof.
"Books and Records" means all books, ledgers, files, reports,
documents, plans and operating records of, or maintained by, the Company, and
all other data in the possession of the Company relating to or reasonably
required for the operation of the Company's business.
"Class A Common Stock" means the thirteen million (13,000,000)
shares of Class A Common Stock that the Company is authorized to issue by way of
the Company's Certificate of Incorporation, and amendments thereto.
"Class A Preferred Stock" means the three million (3,000,000) shares
of Class A Preferred Stock that the Company is authorized to issue by way of the
Company's Certificate of Incorporation, and amendments thereto.
"Class B Common Stock" means the five million (5,000,000) shares of
Class B Common Stock that the Company is authorized to issue by way of the
Company's Certificate of Incorporation, and amendments thereto.
"Closing" has the meaning set forth in Section 2.2. of this
Agreement.
"Closing Date" has the meaning set forth in Section 2.2. of this
Agreement.
"Company" has the meaning set forth in the preface above.
"Company Sale" means the sale of all or substantially all of the
assets or capital stock of the Company or the merger, consolidation or
combination of the Company with any other Person.
"Company Stock" means any shares of any class of authorized capital
stock in the Company.
2
"Confidential Information" means any information concerning the
businesses and affairs of the Company that is not already generally available to
the public.
"Controlling Stockholder" means ▇▇▇▇▇▇ ▇▇▇▇▇▇, an individual
residing at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇.
"Demand Registration" has the meaning set forth in Section 7.1.3. of
this Agreement.
"Designated Shares" has the meaning set forth in Section 9.2.1. of
this Agreement.
"Disclosure Schedule" has the meaning set forth in Section 3 of this
Agreement.
"Drag-Along Purchaser" has the meaning set forth in Section 9.2.2.
of this Agreement.
"Escrow Agent" has the meaning set forth in Section 2.3. of this
Agreement.
"Escrow Funds" has the meaning set forth in Section 2.5. of this
Agreement.
"Financial Statements" has the meaning set forth in Section 3.9. of
this Agreement.
"Form S-3" means such form under the Act as in effect on the date
hereof or any registration form under the Act subsequently adopted by the SEC
which permits inclusion or incorporation of substantial information by reference
to other documents filed by the Company with the SEC.
"GAAP" means United States generally accepted accounting principles
as in effect from time to time.
"Holder" means any Person owning or having the right to acquire
Registrable Securities.
"Incidental Registration" has the meaning set forth in Section
7.1.1. of this Agreement.
3
"Indemnified", "Indemnifying" has the meaning set forth in Section
7.8. of this Agreement.
"Knowledge" means actual knowledge after reasonable investigation.
"Offering Notice" has the meaning set forth in Section 9.3.2. of
this Agreement.
"Ordinary Course of Business" means the ordinary course of business
of the Company consistent with past custom and practice.
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Proposed Purchaser" has the meaning set forth in Section 9.1.1.
"Purchaser" has the meaning set forth in the preface above.
"Registrable Securities" means (i) the Shares, (ii) the Class A
Common Stock issuable or issued upon conversion of the Shares and (iii) any
capital stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security that is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of
the securities referenced in (i) or (ii) above.
"SEC" means the Securities and Exchange Commission.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (A) liens for taxes not yet due
and payable or for taxes that the taxpayer is contesting in good faith through
appropriate proceedings, (B) purchase money liens securing rental payments under
capital lease arrangements, and (C) liens, charges,
4
encumbrances, easements, rights-of-way, building and use restrictions,
exceptions, reservations and limitations that do not in any material respect
adversely detract from the value of the property subject thereto or materially
impair the operation of the Company.
"Shares" means the shares of Class A Preferred Stock issued or to be
issued to any Purchaser pursuant to this Agreement.
"Share Price" has the meaning set forth in Section 2.1.1. of this
Agreement.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Tag-Along Purchaser" has the meaning set forth in Section 9.1.2. of
this Agreement.
"Transfer Allotment" has the meaning set forth in Section 9.1.2. of
this Agreement.
"Transfer Date" has the meaning set forth in Section 9.1.2. of this
Agreement.
"Transfer Notice" has the meaning set forth in Section 9.1.2. of
this Agreement.
1.2. Other Terms. Other terms may be defined elsewhere in the text of this
Agreement and, unless otherwise indicated, shall have such meaning throughout
this Agreement.
1.3. Other Definitional Provisions. The words "herein", "hereof", "hereto"
and "hereunder" and words of similar import, when used in this Agreement, shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement. The terms defined in the singular shall have a comparable meaning
when used in the plural, and vice versa, and in such gender, as the sense and
circumstances require.
5
SECTION 2. BASIC TRANSACTION
2.1. Sale of Shares.
2.1.1. Stage One Purchase. Subject to the terms and conditions of
this Agreement, the Company shall issue and sell to the Purchasers, and the
Purchasers shall purchase from the Company, the number of the Shares set forth
opposite each Purchaser's name on Schedule A at a cash purchase price of two
dollars ($2.00) per Share (the "Share Price"). The Company's agreements with
each of the Purchasers are separate agreements, and the sales of the Shares to
each Purchaser are separate sales.
2.1.2. Stage Two Purchase. Subject to the occurrence of events set
forth in Section 2.5.2.(A), the Company shall issue and sell to each Purchaser,
and each Purchaser shall purchase from the Company, the number of Shares set
forth opposite each Purchaser's name on Schedule B at the Share Price; provided,
however, in the event of a sale of Common Stock by the Company as set forth in
Sections 10.1. and 10.2. prior to the occurrence of events set forth in Section
2.5.2.(A), the Share Price shall be adjusted in accordance with Sections 10.1.
and 10.2.
2.1.3. Stage Three Purchase. Subject to the occurrence of events set
forth in Section 2.5.2.(B), the Company shall issue and sell to each Purchaser,
and each Purchaser shall purchase from the Company, the number of Shares set
forth opposite each Purchaser's name on Schedule C at the Share Price; provided,
however, in the event of a sale of Common Stock by the Company as set forth in
Section 10.1. and 10.2. prior to the occurrence of events set forth in Section
2.5.2.(B), the Share Price shall be adjusted in accordance with Sections 10.1.
and 10.2.
2.2. Closing. The purchase and sale of the Shares listed on Schedule A
(the "Closing") shall take place at the offices of the Company at 2:00 p.m. on
May 27, 1997, or at such other time, date and place as the Company and the
Purchasers acquiring in the aggregate more than fifty (50%) percent of the
Shares may otherwise agree (the "Closing Date").
6
2.3. Actions at the Closing. On the Closing Date, (A) each Purchaser shall
deliver to the Company by personal check, the purchase price listed opposite
such Purchaser's name on Schedule A hereto, (B) each Purchaser shall deliver to
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (the "Escrow Agent") by personal check, the purchase price
listed opposite such Purchaser's name on Schedules B and C to be held in
accordance with Sections 2.5. and 2.6., and (C) the Company shall issue to each
Purchaser the number of such Shares listed opposite such Purchaser's name on
Schedule A by delivering to such Purchaser the stock certificates for such
Shares duly issued and such other instruments as shall reasonably be required by
the Purchasers to grant to the Purchasers all rights, title and interest in such
Shares.
2.4. Effect of Sale.
2.4.1. Certificate of Incorporation. The Certificate of
Incorporation of the Company, and the amendments thereto, in effect at and as of
the Closing Date, shall remain the Certificate of Incorporation of the Company;
provided, however, that as a condition precedent to the Closing, the Company
shall amend its Certificate of Incorporation as set forth in Section 7.7. of
this Agreement.
2.4.2. Bylaws. The Bylaws of the Company, and the amendments
thereto, in effect at and as of the Closing Date, shall remain the Bylaws of the
Company; provided, however, that, as a condition precedent to the Closing, the
Company shall amend its Bylaws as set forth in Section 8.1. of this Agreement.
2.4.3. Directors and Officers. The directors and officers of the
Company in office at and as of the Closing Date will remain the directors and
officers of the Company retaining their respective positions and terms of
office; provided, however that the holders of shares of Class A Preferred Stock
shall, concurrently with the Closing, elect the directors and be granted the
right to elect members to the Company's board of directors in accordance with
Section 8.1. of this Agreement.
2.4.4. Outstanding Shares. Each share of the Company's Stock which
is outstanding at and as of the Closing Date will remain issued and outstanding.
7
2.5. Escrow Funds. The funds delivered to the Escrow Agent in accordance
with Section 2.3. (B) (the "Escrow Funds") shall be held upon the following
terms and conditions:
2.5.1. Deposit of Proceeds. The Escrow Agent shall deposit the
Escrow Funds in an interest-bearing account at ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ &
▇▇▇▇▇, Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇. The Escrow Agent shall deposit
the Escrow Funds in a money market fund bearing interest at a rate competitive
with other similar money market funds. Upon depositing the Escrow Funds, the
Escrow Agent shall notify the Parties of the bank where the Escrow Funds are
deposited and the account number of the escrow account.
2.5.2. Distribution of the Proceeds. The Escrow Agent shall
distribute (A) one-half of the Escrow Funds to the Company conditioned upon the
Company collecting revenues in the amount of fifty thousand dollars ($50,000)
from customers of the Company, which are not Affiliates of the Company, in
payment for subscriptions for the use of the Company's products and services,
and (B) the balance of the Escrow Funds (including all accumulated interest) to
the Company conditioned upon the Company collecting revenues in the amount of
fifty thousand dollars ($50,000) from customers of the Company which are not
Affiliates of the Company for e-mail and banner advertisements, newsletter
promotions, and other third-party revenues not paid directly by users, but
excluding revenues in payment of subscriptions for the use of the Company's
products and services. In the event that the Company fails to satisfy both the
conditions of this Section 2.5.2. on or by December 31, 1998, the Escrow Funds,
together with all accumulated interest, shall be refunded pro rata to the
purchasers; provided, however, if the Company satisfies one (but not both) of
the conditions of this Section 2.5.2. on or before December 31, 1998, fifty
percent (50%) of the Escrow Funds (including all accumulated interest on the
aggregate amount of the Escrow Funds) shall be returned pro rata to the
Purchasers.
2.5.3. Release and Discharge. Following the Escrow Agent's payment
of the Escrow Funds pursuant to the terms of this Agreement, the Escrow Agent
shall be released and discharged from all obligations and liabilities in
connection with the Escrow Funds.
8
2.5.4. Interpleader of Escrow Funds. In the event of a dispute
between the Company and the Purchasers, as determined in good faith by the
Escrow Agent, the Escrow Agent may, in his sole discretion, deposit the Escrow
Funds with a court of competent jurisdiction selected by him in his capacity as
Escrow Agent, and, in such event, the Escrow Agent shall be fully released and
discharged from all liabilities and responsibilities in connection with holding
the Escrow Funds.
2.5.5. Obligations of the Escrow Agent. The Parties acknowledge that
the Escrow Agent is acting solely as a stakeholder at their request and that the
Escrow Agent shall not be deemed to be an agent of the Parties in any action
that he shall take in his capacity as Escrow Agent. The duties of the Escrow
Agent are only as herein specifically provided and are purely ministerial in
nature. The Escrow Agent shall not be liable for any action or omission on his
part unless such action or omission is as a result of his willful misconduct or
gross negligence. The Escrow Agent shall not incur liability for acting upon any
instruction, notice or receipt of document believed by him to be genuine and to
have been made, signed. sent or presented by a Person authorized to perform such
acts.
2.5.6. Indemnification of the Escrow Agent. The Parties shall
severally but not jointly, in proportion to the relative amount of the purchase
price paid by each of them, indemnify and hold harmless the Escrow Agent from
and against any and all costs, losses, claims, damages, liabilities and
expenses, including, without limitation, costs of investigation, court costs,
attorneys' fees and disbursements, which may be imposed upon or incurred by
Escrow Agent in connection with his acceptance of, or appointment as, Escrow
Agent hereunder, or in connection with the performance of his duties hereunder,
including, without limitation, any litigation arising out of this Agreement or
involving the subject matter hereof; provided, however, that this indemnity
shall not cover costs, losses, claims, damages, disbursements, liabilities and
expenses arising out of the Escrow Agent's willful misconduct or gross
negligence as determined by a final judgment of a court of competent
jurisdiction.
2.5.7. Representation. The Escrow Agent shall have the right to act
as counsel to the Company in any dispute
9
with respect to the Escrow Funds; provided, however, that the Escrow Agent shall
resign and concurrently therewith, the Company shall be required to appoint a
successor escrow agent over the Escrow Funds prior to the commencement of any
such representation.
2.6. Issuance of Shares. Upon the Escrow Agent's release of any Escrow
Funds to the Company in accordance with Section 2.5.2(A) or (B), the Company
shall issue the amount of Shares to each Purchaser listed opposite such
Purchaser's name on Schedules B and C, respectively, by delivering to such
Purchaser the stock certificates for such Shares duly issued, and such other
instruments as shall reasonably be required by the Purchasers to grant to such
Purchaser all rights, title and interest in the Shares listed in Schedules B and
C, respectively.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchasers that the statements
contained in this Section 3 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date, except as set
forth in the disclosure schedule accompanying this Agreement and initialed by
the Parties (the "Disclosure Schedule"). The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
3.1. Organization, Qualification, and Corporate Power. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware. The Company is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction where such
qualification is required. The Company has full corporate power and authority to
carry on the business in which it is engaged and to own and use the properties
owned and used by it.
3.2. Capitalization.
3.2.1. Corporate Formation. The total number of shares of all
classes of stock that the Corporation is authorized to issue is twenty one
million (21,000,000), consisting of thirteen million (13,000,000) shares of
Class A Common Stock
10
with a par value of one cent ($.0l) per share, of which 2,433,750 shares are
issued and outstanding, three million (3,000,000) shares of Class A Preferred
Stock with a par value of one cent ($.01) per share, of which 327,500 shares are
issued and outstanding, and five million (5,000,000) shares of Class B Common
Stock with a par value of one cent ($01) per share, of which 5,000,000 are
issued and outstanding.
3.2.2. Preferences of Classes. The Shares shall have the voting
rights, preferences and qualifications as set forth in the Amendment to the
Certificate of Incorporation, a copy of which is attached as Exhibit A.
Immediately prior to the issuance of the Shares listed in Schedule A, the
outstanding liquidation preference of the outstanding Class A Preferred Stock
and Class B Common Stock is $1,195,500.
3.3. Outstanding Stock. All of the issued and outstanding shares of
Company Stock have been duly authorized and are validly issued, fully paid, and
nonassessable. Except for stock and stock options of employees of the Company
listed on Schedule D, and the 750,000 shares of Class A Common Stock reserved
for issuance of options in the future as described in Section 10.1., there are
(A) no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments that could require the Company to issue, sell, or otherwise cause to
become outstanding any of its capital stock, or (B) no outstanding or authorized
stock appreciation, phantom stock or similar rights with respect to the Company.
The Company is not a party or subject to any agreement or understanding and, to
the best knowledge of the Company, there is no agreement or understanding
between any Persons, which affects or relates to the voting or giving of written
consent with respect to any security of the Company or the voting by any
director of the Company.
3.4. Subsidiaries. The Company does not presently own or control, within
the meaning of Section 15 of the Act, any other corporation, association, or
business entity.
3.5. Registration Rights. Except as provided in this Agreement, the
Company is not obligated to register under the Act any outstanding shares of
Company Stock or any of its securities
11
that may be issued subsequent to the date hereof.
3.6. Authorization of Transaction. The Company has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Company, enforceable
in accordance with its terms and conditions.
3.7. Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(A) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Company or any of its properties or
assets is subject or any provision of the charter or bylaws of the Company, or
(B) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate, or
cancel, or require any notice under any agreement, contract, lease, license,
instrument or other arrangement to which the Company is a party or by which it
is bound or to which any of its properties or assets is subject, or (C) result
in the imposition of any Security Interest upon any of its properties or assets.
3.8. Validity of Securities. The Shares, when issued, sold, and delivered
in accordance with the terms of this Agreement, shall be duly and validly
issued, fully paid, and nonassessable, and shall not be subject to any
preemptive rights or liens, claims, or encumbrances other than restrictions on
transfer under federal or state securities laws. The shares of Class A Common
Stock issuable upon conversion of the Shares have been duly and validly reserved
for issuance and, upon issuance in accordance with the terms of the amended
certificate of incorporation, will be duly and validly issued, fully paid and
nonassessable, and shall not be subject to any preemptive rights or liens,
claims or encumbrances other than restrictions on transfer under federal or
state securities laws.
3.9. Financial Statements. The Company has delivered to the Purchasers an
unaudited balance sheet and income statement of the Company as at and for the
year ended December 31, 1996 and
12
for the quarter ended March 31, 1997 (the "Financial Statements"). The Financial
Statements are complete, true and correct in all material respects, have been
prepared in accordance with GAAP consistently applied throughout the periods
represented thereby, and present fairly the financial position of the Company
and the results of its operations as of the dates and for the periods covered
thereby.
3.10. No Adverse Change. Since March 31, 1997, there has been no change in
the assets, liabilities, financial condition, properties, or operation of the
Company other than changes in the Ordinary Course of Business, none of which
individually or in the aggregate have been materially adverse to the business,
properties, prospects or financial condition of the Company.
3.11. Undisclosed Liabilities. The Company has no liability, whether known
or unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due, including any liability for taxes, except for (A)
liabilities set forth on the face of the Financial Statements and (B)
liabilities which have arisen in the Ordinary Course of Business (none of which
results from, arises out of, relates to, is in the nature of, or was caused by
any breach of contract, breach of warranty, tort, infringement, or violation of
law). No representation or warranty by the Company herein and no statement
contained in any document or other writing furnished by the Company in
connection with the transactions contemplated hereby contains or will contain
any untrue statement of a material fact or omits or will omit to state any
material fact necessary, in light of the circumstances under which it was made,
to make the statements herein or therein not misleading.
3.12. Property and Assets. The Company has good and marketable title to
all of its properties and assets, and good and valid interest as lessee in all
properties held under lease, held in each case subject to no Security Interest.
With respect to the properties and assets it leases, the Company is in
compliance with the terms of such leases.
3.13. Litigation. There is no action, proceeding, or investigation pending
or, to the knowledge of the Company,
13
threatened, or claim that has been made against the Company which seeks to
restrain, enjoin, prevent the consummation of or otherwise challenge this
Agreement, or the transactions contemplated hereby, or which might result,
either individually or in the aggregate, in any material adverse change in the
assets, conditions, affairs, or prospects of the Company.
3.14. Taxes. The Company has filed all federal, state, and local tax
returns and forms that are required to be filed by it, and has paid or made
provision for the payment of all taxes that have become due pursuant to said
returns or pursuant to any assessment received by it, or which, to the best
knowledge of the Company, are expected to become due with respect to the
Company's business, properties and operations.
3.15. Insurance. The Company maintains and keeps in force, with good and
responsible insurance companies adequate amounts of fire, public liability,
property damage, workers' compensation, and such other insurance as is usual and
customary in the type of business conducted by the Company.
3.16. Agreements with Related Parties. Except as attached hereto in
Schedule D, (A) the Company does not have any employees or former employees,
consultants or former consultants; (B) the Company is not a party to or
otherwise obligated under any collective bargaining agreement, and (C) the
Company does not maintain, contribute to, or have liability or obligation with
respect to any employee benefit plan as defined in Section 3 of the Employee
Retirement Income Security Act of 1974, as amended, or other employee program,
including, without limitation, any pension, medical, accident, life, disability,
policy or program.
3.17. Brokers' Fees. The Company has no liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
3.18. Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state or local government authority is required on the part of the
Company in connection with the consummation of the transactions contemplated by
this Agreement.
14
3.19. Schedule of Contracts. Attached as Schedule E are all contracts to
which the Company is currently a party (the "Contracts"). The Company is not in
default or breach under any of the Contracts, nor, to the best knowledge of the
Company, is any other party thereto in default or breach thereunder, nor are
there facts or circumstances which have occurred which, with or without the
giving of notice or the passage of time or both, would constitute a default or
breach under any of the Contracts.
3.20. No Other Representations or Warranties. Except for the
representations and warranties contained in this Section 3, neither the Company
nor any other Person makes any express or implied representation or warranty on
behalf of the Company, and the Company hereby disclaims any such representation
or warranty whether made by Company, its Affiliates, officers, directors,
shareholders, employees, agents or representative or any other Person. The
representations and warranties contained in this Section 3 are true and correct
as of the date hereof and shall be true and correct as of the date of the
Closing.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser represents and warrants as to itself, severally and not
jointly, to the Company that the statements contained in this Section 4 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date, except as set forth in the Disclosure Schedule
accompanying this Agreement and initialed by the Parties. The Disclosure
Schedule will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this Section 4.
4.1. Investment Representation. The Purchaser acknowledges that it is
aware that the Shares have not been registered under the Act. The Purchaser
represents and warrants to the Company that the Purchaser is acquiring the
Shares for investment and not with a view to or for sale in connection with any
distribution thereof or with any present intention of selling the Shares in
connection with a distribution, and Purchaser does not presently have reason to
anticipate any change in circumstances or any particular occasion or event that
would cause Purchaser to distribute the Shares.
15
4.2. Restricted Securities. The Purchaser understands that the Shares are
characterized as "restricted securities" under the federal securities laws
inasmuch as the Shares are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Act only in certain
limited circumstances.
4.3. Legends. The Purchaser understands that the certificates evidencing
the Shares may bear the following legends:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933. The shares have been acquired not with a view to
distribution and may not be offered, sold, transferred, pledged, or hypothecated
in the absence of an effective registration statement for the shares under the
act and under any applicable state securities laws, or an opinion of counsel to
the corporation that such registration is not required as to such sale or offer.
The stock transfer agent has been ordered to effectuate transfers of this
certificate only in accordance with the above instruction."
"The shares of Class A Preferred Stock represented by this certificate are
subject to the terms and conditions provided in a Class A Preferred Stock
Purchase Agreement dated as of May 27, 1997, among the Company and the
Purchasers of Class A Preferred Stock identified therein, a copy of which is on
file with the Secretary of the Corporation. Any transfer in violation of that
agreement is invalid. By its acquisition of the shares represented by this
certificate, the holder hereof agrees to be bound by the terms and conditions of
such agreement."
4.4. Due Diligence Investigation. The Purchaser has completed to its
satisfaction an independent investigation of the Books and Records of the
Company and understands the nature of the potential risks and potential rewards
of its ownership interest in the Company. The Purchaser is a sophisticated
investor with investment experience in the area of venture capital and, in the
event of any liquidation or winding up of the Company, has the ability to bear
complete loss of its investment.
16
SECTION 5. CONDITIONS TO THE PURCHASERS' OBLIGATIONS
The obligations of each Purchaser under Section 2 are subject to the
fulfillment at or before Closing of each of the following conditions:
5.1. Representations and Warranties Correct. The representations and
warranties contained in Section 3 shall be true and correct on the Closing Date
as if such representations and warranties were made on and as of such date.
5.2. Performance. The Company shall have performed and complied with all
agreements, conditions, and covenants contained in the Agreement (including,
without limitation, the approval by the Board of Directors of the resolutions
set forth in Section 8.1.1.) required to be performed or complied with by it on
or before Closing. The Company shall have furnished to the Purchasers a copy of
the written consent of the holders of Class A Preferred Stock set forth in
Section 8.1.2.
5.3. Compliance Certificate. There shall have been delivered to each
Purchaser a certificate, dated as of Closing Date, signed by the Company's
President, certifying that the conditions specified in Section 5.1. and 5.2.
have been fulfilled.
5.4. Secretary's Certificate. The Secretary of the Company shall have
delivered to each Purchaser a certificate attaching the Company's Certificate of
Incorporation, By-Laws and resolutions of the Board of Directors and
shareholders of the Company approving the execution, delivery and performance of
this Agreement, and the transactions contemplated hereby.
5.5. Opinion of Counsel. The Purchasers shall have received from ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, counsel for the Company, an opinion dated as of the Closing Date,
substantially in the form attached as Exhibit B.
SECTION 6. CONDITIONS TO THE COMPANY'S OBLIGATIONS
The obligations of the Company under Section 2 of this Agreement are
subject to the fulfillment at or before Closing of
17
each of the following conditions:
6.1. Representations and Warranties Correct. The representations and
warranties of each Purchaser contained in Section 4 shall be true on and as of
the Closing Date with the same effect as though such representations and
warranties had been made on and as of such date.
6.2. Performance. Each Purchaser shall have performed and complied with
all agreements, conditions, and covenants contained in this Agreement required
to be performed or complied with by it on or before Closing.
6.3. Investment Representation. Each Purchaser shall execute and deliver
to the Company, with regard to the Shares to be issued by the Company to such
Purchaser, an investment letter substantially in the form attached to this
Agreement as Exhibit C.
SECTION 7. REGISTRATION RIGHTS
The Company and each Purchaser covenant and agree as follows:
7.1. Registration
7.1.1. Incidental Registration. If at any time the Company proposes
to register any Company Stock under the Act for its own account or for the
account of any of its security holders, on a form that would also permit
registration of the Registrable Securities, the Company shall, each such time,
give each Holder not less than twenty (20) days written notice of such proposed
registration (the "Incidental Registration"). Upon the written request of a
Holder, given within ten (10) days after receipt of any such notice from the
Company, the Company shall use its best efforts to include in such registration
all of the Registrable Securities any Holder requests be registered in such
registration.
7.1.2. Pro Rata Incidental Registration of Company Stock. If the
managing underwriter of any such offering determines that the number of shares
proposed to be sold by the
18
Company or by other holders of shares of Company Stock is greater than the
number of shares that the underwriter believes feasible to sell at the time, at
the price and upon the terms approved by the Company, then the number of shares
of Company Stock that the underwriter believes may be sold shall be allocated
for inclusion in the registration statement in the following order of priority:
(A) Company Stock sold for the account of the Company; (B) pro rata among the
Holders and other holders whose shares are being registered therein according to
the number of shares requested to be registered by the Holders and such other
holders; provided, however, that (1) at least ten percent (10%) of each Holder's
Registrable Securities requested to be included shall be included in such
underwriting (other than the initial underwriting); and (2) the right of Holders
of Registrable Securities to participate in the offering shall have priority
over the holders of Class A Common Stock and Class B Common Stock, If a Holder
disapproves of the terms of the underwriting, it may elect to withdraw therefrom
by written notice to the Company and the managing underwriter; provided,
however, the election to withdraw occurs within ten (10) days after a Holder
receives notice of the terms of the underwriting.
7.1.3. Demand Registration. On or after the earlier of (A) the
effective date of a registration statement filed by the Company in connection
with an initial public offering of any Company Stock or other securities under
the Act, or (B) eighteen (18) months after the date of this Agreement, then,
upon written request of Holders holding in the aggregate greater than fifty
percent (50%) of the Registrable Securities that the Company effect the
registration under the Act of all or a portion of the Registrable Securities and
specifying the intended method of disposition thereof, the Company shall, within
fifteen (15) days after the Company has received such written notice, promptly
commence and use its best efforts to consummate the registration under the Act
of the Registrable Securities, or such portion thereof, and of all other stock
or securities which the Company has been requested to register by any other
Holder (the "Demand Registration"); provided, however, that (1) the Holders in
the aggregate will be entitled to request three (3) Demand Registrations,
provided that either (a) the Registrable Securities requested to be included in
such Demand Registration constitute at least twenty percent (20%) of the total
number of Registrable Securities issued hereunder or (b) the anticipated
19
gross receipts from the offering exceed ten million dollars ($10,000,000), (2) a
registration will not count as one of such three permitted Demand Registrations
until it has become effective, (3) the Company may delay the filing of a
registration statement under the Act as required by this Section 7.1.3. for a
period of up to sixty (60) days after the request of the Holders if the board of
directors of the Company determines in good faith that such Demand Registration
would be materially adverse to the interests of the Company, and in such event,
the Holders will be entitled to withdraw such request and such Demand
Registration will not be counted as a Demand Registration hereunder, and (4) the
Company will not be required to effect a Demand Registration within six (6)
months after the effective date of a previous Demand Registration or
registration in which the Holder was given registration rights pursuant to
Section 7.1.1.
7.1.4. Pro Rata Demand Registration of Company Stock. If a Demand
Registration is an underwritten offering, and the managing underwriter advises
the Company in writing that in the underwriter's opinion the number of shares
requested to be included exceeds the number that can be sold in such offering,
then the Company shall include in such registration the number of shares
requested to be included by the Holders that in the opinion of such underwriter
can be sold prior to the inclusion of any securities of any other security
holder or the Company. If the managing underwriter advises the Company in
writing that in its opinion the aggregate number of shares requested for
inclusion by Holders exceeds the number of such shares that can be sold in such
offering, then the Company shall include in the registration statement only such
number of shares, pro rata among the Holders, based upon the number of shares
requested to be registered by each of them, which in the opinion of such
underwriter can be sold.
7.1.5. Form S-3 Demand Registration Rights. If at any time the
Holders holding in the aggregate greater than fifty percent (50%) of the
Registrable Securities request that the Company effect a Form S-3 registration
under the Act of all or a portion of the Registrable Securities, the Company
shall, within fifteen (15) days after the Company has received such written
notice, promptly commence and use its best efforts to consummate the Form S-3
registration of the Registrable Securities under the Act; provided, however, (A)
the aggregate fair market value of
20
the Registrable Securities requested to be registered shall be greater than two
million dollars ($2,000,000), (B) the Company shall only be required to file one
Form S-3 registration every twelve (12) months, and (C) the Holders who request
that the Company effect a Form S-3 registration shall not be required to
participate in such Form S-3 registration.
7.1.6. Benefit of More Favorable Rights. If at any time registration
rights are granted with respect to Company Stock or capital stock of any
Affiliate of the Company which are on terms more favorable to the holders of
such securities with respect to any material terms applicable thereto including,
without limitation, the number of times or the circumstances under which such
rights may be exercised, the expenses to be paid by the Company or any Affiliate
of the Company in connection therewith or the duration of the availability of
such rights, the Company agrees that such more favorable terms will be
exercisable by the Holders of Registrable Securities automatically and without
further action by the Company. The Company covenants to give written notice to
the Holders of Registrable Securities not less than ten (10) days in advance of
the granting of registration rights with respect to Company Stock or capital
stock of any Affiliate of the Company.
7.1.7. Termination of Registration Rights. Notwithstanding any
provision to the contrary, no Holder of Registrable Securities shall be entitled
to exercise any right provided for in this Section 7.1. after five (5) years
following the consummation of the sale of Common Stock pursuant to a
registration statement filed by the Company under the Act in connection with the
initial firm commitment underwritten offering of its securities to the general
public.
7.2. Obligations of the Company. Where required under Section 7.1. to use
its best efforts to effect the registration of any of the Shares, the Company
shall, as expeditiously as reasonably possible,
7.2.1. Prepare and file with the SEC a registration statement with
respect to such Shares and use its best efforts to cause such registration
statement to become effective;
7.2.2. Prepare and file with the SEC such amendments
21
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration;
7.2.3. Furnish to the Holders such numbers of copies of such
registration statement and prospectus, including any preliminary prospectus, in
conformity with the requirements of the Act, and such other documents as the
Holders may reasonably request in order to facilitate the disposition of the
Registrable Securities;
7.2.4. Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or blue sky
laws of such jurisdictions as shall be reasonably appropriate for the
distribution of the securities covered by the registration statement; and
7.2.5. Use its best efforts to comply with all applicable rules and
regulations of the SEC.
7.3. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 7 that each
Holder shall furnish to the Company such information regarding such Holder, the
Registrable Securities held by such Holder, and the intended method of
disposition thereof as the Company shall reasonably request and as shall be
required in connection with the action to be taken by the Company.
7.4. Registration Expenses. In the case of any registration effected
pursuant to Section 7, the Company shall bear all registration and qualification
fees and expenses, and all costs and disbursements of counsel for the Company;
provided, however, that (A) each Holder selling Registrable Securities shall
bear the fees and costs of such Holder's own counsel and all underwriting
discounts and commissions with respect to the Registrable Securities sold by
such Holder, (B) the Company shall not be required to pay for any expenses of
any Demand Registration begun if the registration request is subsequently
withdrawn at the request of the Holders of a majority of the Registrable
Securities to be registered (in which case all participating Holders shall bear
such expenses), unless the
22
Holders of a majority of the Registrable Securities agree in writing that the
Demand Registration so withdrawn shall be counted as one of the three permitted
Demand Registrations of the Holders pursuant to Section 7.1.3. and (C) in the
event any audit (other than an audit conducted at the end of the fiscal year of
the Company) is required in connection with a Demand Registration, the cost, in
excess of fifteen thousand dollars ($15,000), shall be borne pro rata by the
Holders participating in the Demand Registration.
7.5. Selection of Underwriters.
7.5.1. Company Selection. If a registration pursuant to Section
7.1.1. of this Agreement involves an underwritten offering, the Company shall
have the right to select the investment bankers and managers to administer the
offering. The Company shall not be required under Section 7.1.1. to register the
Holders' Registrable Securities in such registration unless the Holder accepts
the terms of the underwriting as agreed upon between the Company and the
underwriter.
7.5.2. Holders' Selection. If a registration pursuant to Section
7.1.3. or 7.1.5. involves an underwritten offering, then the Holders shall have
the right to select the investment bankers and managers to administer the
offering; provided, however, that the selection of such investment bankers and
managers shall be subject to the approval of the Company, such approval not to
be unreasonably withheld.
7.6. Delay at Registration. No Holder shall have any right to take any
action to restrain, enjoin, or otherwise delay any registration as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Section 7 or any other provision of this Agreement.
7.7. Conversion of Shares. Each share of Class A Preferred Stock shall
automatically be converted into one share of Class A Common Stock (adjusted to
reflect subsequent stock splits, combinations, stock dividends and
recapitalizations) immediately upon the earlier of (A) an underwritten offering
at or greater than twenty million dollars ($20,000,000) of Company Stock at or
greater than an offering price of ten dollars ($10.00) per share (adjusted to
reflect subsequent stock splits,
23
combinations, stock dividends and recapitalizations), or (B) the affirmative
vote of the holders of the majority of the Class A Preferred Stock; provided,
however, (1) the Purchasers shall retain the rights set forth in Sections 10.1.
and 10.2. of this Agreement and (2) in the event of the liquidation,
dissolution, or winding up of the affairs of the Company, the Class B Common
Stock shall share pari passu in the distribution of the Company's assets.
7.8. Indemnification. If any Registrable Securities are included in a
registration statement pursuant to this Section 7, then,
7.8.1. To the extent permitted by law, the Company shall indemnify
and hold harmless each Holder, agents for each Holder, any underwriter for each
Holder, and each Person, if any, who controls such Person within the meaning of
the Act, against any losses, claims, damages or liabilities, joint or several,
to which they may become subject under the Act or otherwise, insofar as such
losses, claims, damages, or liabilities arise out of any material fact contained
in such registration statement, including any preliminary prospectus or final
prospectus contained in the registration statement, or any amendments or
supplements to the registration statement, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, and
will reimburse the Holder, the agents for the Holder, such underwriter, or
controlling Person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any untrue statement or omission based upon and
in conformity with written information furnished to the Company by an instrument
duly executed by the Holder or underwriter and stated to be specifically for use
therein.
7.8.2. To the extent permitted by law, each Holder, severally and
not jointly, shall indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed such registration statement, and
any underwriter for the Company against any losses, claims, damages, liabilities
or costs
24
(including reasonable attorneys' fees) to which the Company or any such
director, officer, or underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities arise out of
or are based upon any untrue or alleged untrue statement of any material fact
contained in such registration statement, including any preliminary prospectus
or final prospectus contained in the registration statement or any amendments or
supplements to the registration statement, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in such
registration statement, preliminary prospectus, or amendments or supplement
thereto, in reliance upon and in conformity with written information furnished
by the Holder duly executed and stated to be expressly for use therein, and the
Holder will reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, controlling Person, or underwriter in
connection with investigating or defending any such loss, claim, damage,
liability or action.
7.8.3. Each party entitled to indemnification (the unindemnified
Party) shall give notice to the party required to provide indemnification
("Indemnifying Party") promptly after such Indemnified Party has Knowledge of
any claim as to which indemnity may be sought, and shall permit the Indemnifying
Party (at its expense) to assume the defense of any such claim or any litigation
resulting therefrom; provided, however, that counsel for the Indemnifying Party,
who shall conduct the defense of such claim or litigation, shall be reasonably
satisfactory to the Indemnified Party, and the Indemnified Party may participate
in such defense at such party's expense; provided, further, that the failure by
any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 7.8., except to the
extent that the failure results in an omission of actual notice to the
Indemnifying Party and such Indemnifying Party is damaged solely as a result of
the failure to give notice; provided, further, that a refusal to permit the
Indemnifying Party to conduct such defenses by such counsel shall relieve such
Indemnifying Party of its obligations under this Section 7.8. No Indemnifying
Party,
25
in the defense of any such claim or litigation, shall, except with the consent
of each Indemnified Party, consent to the entry of any judgment or enter into
any settlement that does not include as an unconditional term the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
with respect to such claim or litigation.
7.9. No-Action Letter. If the Company shall have obtained from the SEC a
"no-action" letter in which the SEC has indicated that it will take no action
if, without registration under the Act, a Holder disposes of the Registrable
Securities covered by any request made under Section 7.1. in the manner in which
it proposes to dispose of the Registrable Securities included in such request,
or, if in the opinion of counsel for the Company, concurred in by counsel for
the Holder, no registration under the Act is required in connection with such
disposition, the Company need not comply with such request or requests;
provided, however, that the Company shall not be relieved of its obligations
under Section 7 unless the aforementioned "no-action" letter or opinion of
counsel for the Company shall have been mailed by the Company to the Holder
within thirty (30) days after the Company's receipt of the request or requests.
7.10. Reports Under the Securities Exchange Act of 1934. With a view
toward making available to the Holders the benefits of SEC Rule 144 promulgated
under the Act and any other rule or regulation of the SEC that may at any time
permit the Holder to sell its Registrable Securities to the public without
registration, the Company agrees to comply with the filing requirements of
ss.15(d) of the Securities Exchange Act of 1934, as amended, on a timely basis
from the effective date of the first registration statement filed by the Company
and thereafter, even if the Company's duty to file is subsequently suspended
pursuant to the provisions of ss.15(d) and, so long as any Holder owns any of
the Registrable Securities, to furnish the Holder in writing upon its request
the information required to enable to the Holder to dispose of its Registrable
Securities pursuant to SEC Rule 144.
7.11. Lock-Up Period. Each Holder agrees that it shall not, to the extent
requested by the underwriter of the Company, sell or otherwise transfer or
dispose of any Registrable
26
Securities of the same or similar class as the Registrable Securities being
registered by the Company during the one hundred eighty (180) day period
following the effective date of a registration statement; provided, however,
that (A) such agreement shall be applicable only to the first registration
statement of the Company that covers shares to be sold on its behalf to the
public in the underwritten offering, (B) the holders of Class B Common Stock and
the holders of at least ninety percent (90%) of Class A Common Stock are subject
to identical or substantially similar time restrictions, (C) all officers and
directors of the Company and all other persons with registration rights enter
into similar agreements, and (D) nothing contained herein shall prohibit any
Holder from transferring any Registrable Securities to a trust established for
estate planning purposes.
7.12. Transfer of Registration Rights. The registration rights of the
Holders under this Section 7 may be transferred to any transferee who acquires
at least five thousand (5,000) Registrable Securities (adjusted to reflect
subsequent stock splits, combinations, stock dividends and recapitalizations);
provided, however, that the Company is given written notice by the Holder at the
time of such transfer stating the name and address of the transferee and
identifying the securities with respect to which the rights under this Section 7
are being assigned.
SECTION 8. OTHER COVENANTS
8.1. Modification of Bylaws.
8.1.1. Resolutions. At Closing, the board of directors of the
Company shall (A) resolve to increase the size of the Company's board of
directors from two (2) to five (5); (B) resolve to permit the holders of Class A
Preferred Stock to elect two directors; provided, however, that the right of the
holders of Class A Preferred Stock to elect one such director shall terminate in
the event that there are not outstanding at least 500,000 shares of Class A
Preferred Stock (adjusted to reflect subsequent stock splits, combinations,
stock dividends and recapitalizations), and provided further, that the right of
the holders of Class A Preferred Stock to elect one of such directors
27
shall terminate in the event that a third party has (1) invested cash or
consideration greater than or equal to $3,000,000 in the Company, the value of
any non-cash consideration to be determined by the Board of Directors in good
faith evidenced by a board resolution, or (2) acquired an equity interest in the
Company of or in excess of ten percent (10%) of the outstanding shares of
Company Stock, and in either case, such third party requires as a condition to
its investment the right to elect a member of the board of directors, (C)
resolve to establish that in the event the holders of Class A Preferred Stock
shall lose their rights to elect at least one member to the board of directors,
the Company shall invite a representative designated by the holders of Class A
Preferred Stock to attend all meetings of its board of directors in a nonvoting
observer capacity; provided, however, (1) that such representative shall agree
to hold in confidence and trust and to act in a fiduciary manner with respect to
all Confidential Information concerning the Company furnished to such
representative in connection with any such meeting of the board of directors,
and (2) the Company reserves the right to withhold any information and to
exclude such representative from any meeting or portion thereof if access to
such information or attendance at such meeting would reasonably be expected to
adversely affect the attorney-client privilege between the Company and its
counsel, (D) resolve to establish that directors shall be reimbursed by the
Company for their reasonable costs for attending board of director meetings; and
(E) resolve to establish a(n) audit, compensation and management committee for
the Company.
8.1.2. Election of Directors. At Closing, the holders of Class A
Preferred Stock shall, by majority written consent, elect ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and
▇▇▇ ▇▇▇▇▇▇▇ as members to the board of directors of the Company. Commencing on
the Closing Date and for so long as the events set forth in Section 8.1.1. (B)
have not occurred, the holders of Class A Preferred Stock or their duly
authorized representative shall have the right to designate up to two nominees
in accordance with Section 8.1.1. (B) to serve as directors of the Company for
election at the annual meeting of stockholders of the Company. Subject to the
conditions set forth in 8.1.1. (B), ▇▇▇▇▇▇ ▇▇▇▇▇▇ and the Purchasers agree to
use their best efforts to cause the person or persons so named to be nominated
for election to the board of directors of the Company at the time and in the
manner proper for
28
such nominations whereupon ▇▇▇▇▇▇ ▇▇▇▇▇▇ and the Purchasers agree to cast all of
the votes they are entitled to cast in such election, subject to the limitations
set forth below, whether at the next annual meeting or a special meeting of the
stockholders, by written consent in lieu of a meeting or otherwise, for the
election of such nominees to the board of directors of the Company.
8.2. Financial Statements. So long as the Purchaser owns any Shares, the
Company shall deliver to such Purchaser the following financial statements of
the Company:
8.2.1. Within thirty (30) days after the end of each fiscal year of
the Company, a statement of operations, a balance sheet of the Company as of the
end of such fiscal year, and statements of operations, changes in financial
position, and changes in shareholder equity for such fiscal year, which year-end
financial reports shall be certified by independent certified public accountants
selected by the Company and approved by the Purchasers.
8.2.2. Within thirty (30) days after the end of each calendar month,
an unaudited statement of operations for such calendar month and a balance sheet
as of the end of such calendar month.
8.2.3. Within thirty (30) days after the end of each of the first
three quarters of the fiscal year, an unaudited statement of operations for such
fiscal quarter and a balance sheet as of the end of such fiscal quarter.
8.3. Inspection. So long as any Purchaser owns at least fifty thousand
(50,000) Shares (adjusted to reflect subsequent stock splits, combinations,
stock dividends and recapitalizations), the Company shall permit the Purchaser,
at his or her expense, to visit and inspect the Company's properties, to examine
its books of account and records, and to discuss the Company's affairs,
finances, and accounts with the Company's officers and independent public
accountants, all at such reasonable times as may be requested by Purchaser;
provided, however, that the Company shall not be obligated pursuant to this
Section 8.3. to provide any information (A) that the Company considers to be
Confidential Information unless the Purchaser
29
enters into an agreement in a form reasonably satisfactory to the Company to
hold such information confidential, or (B) that the Company is obligated to hold
confidential by the terms of any agreement with a third party, or (C) in the
event the Purchaser owns an equivalent or larger investment in a competitor of
the Company.
8.4. Covenant Not to Compete. Prior to or on the Closing Date, the Company
shall have entered into (A) an agreement with each of ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇, its principal executive officers, substantially in the form attached as
Exhibit D, providing that, upon termination of employment with the Company,
▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇ shall not compete with the Company for a period of
two (2) years from the date of such termination. The Company has entered into a
consulting agreement with each of ▇▇▇▇ ▇▇▇▇▇▇▇▇ and Vanity Mail Services, Inc.,
true and correct copies of which have been provided by the Company to the
Purchasers, providing that upon termination of such engagement with the Company,
▇▇▇▇ ▇▇▇▇▇▇▇▇ and Vanity Mail Services, Inc. shall not compete with the Company
for a period of two (2) years from the date of such termination, subject to the
qualifications set forth therein.
8.5. Arms' Length Transactions. The Company shall not enter into any
transaction, agreement, arrangement, sale, purchase, or lease with any holder of
shares of Company Stock, or any other Person, that provides for receipt by the
Company of less than fair and full consideration in money or money's worth in
exchange for the money, property or services provided by the Company pursuant to
such transaction, agreement, arrangement, sale, purchase, or lease.
8.6. Termination. The Company's obligations and Purchaser's rights under
Sections 8.2. and 8.3. shall terminate upon the effective date of the
registration statement filed by the Company in connection with the initial
public offering of the Company's stock or other securities under the Act as and
to the extent the Company is otherwise subject to the periodic reporting
requirements of the Securities Exchange Act of 1934, as amended.
8.7. Voting Agreement. In any vote to be taken by the Purchasers or the
Holders, as the case may be, in accordance with Sections 7.1.3., 7.1.5.. 7.7.1.,
8.1.1., 8.1.2., 8.8. and 9.2.1.
30
of this Agreement, the Controlling Stockholder agrees and consents to vote, in
equal proportion to the votes cast by the remaining Purchasers or Holders, as
the case may be, his shares of Class A Preferred Stock, any capital stock of the
Company issued upon conversion thereof, any capital stock of the Company issued
as (or issued upon the conversion or exercise of any warrant, right or other
security issued as) a dividend or other distribution with respect thereto, or in
exchange for or in replacement of said securities with respect thereto.
8.8. Indemnification. ▇▇▇▇▇▇ ▇▇▇▇▇▇ shall indemnify, defend and hold
harmless each Purchaser, its Affiliates and their respective officers,
directors, employees, representatives and agents from and against any and all
claims, damages, losses, liabilities, costs and expenses, including, without
limitation, settlement costs and any reasonable legal, accounting or other
expenses incurred in connection with investigating or defending any actual or
threatened claims or actions (all of the foregoing, collectively, "Losses")
arising out of, relating to or in connection with that certain Agreement, dated
as of October 1, 1996, between the Company and InfoSpace. Inc., as the terms
thereof may be or may have been amended or modified, whether orally or in
writing; provided, however, that if and to the extent that any Losses are to be
satisfied by the issuance or delivery of shares of Company Stock in satisfaction
thereof, such obligation shall be satisfied by the delivery by ▇▇▇▇▇▇ ▇▇▇▇▇▇ of
shares of Company Stock owned beneficially or of record by him, and not by the
issuance by the Company of shares of Company Stock without the prior written
consent of the holders of fifty percent (50%) or more of the Shares.
8.9. Transfer of Class B Common Stock.
8.9.1. 10x Exit Condition. Except as provided in this Section 8.9.,
unless all of the Purchasers shall have been provided the opportunity to sell,
transfer or dispose of one hundred percent (100%) of their Shares or the shares
of Class A Common Stock or other Company Stock into which the Shares may be
converted or for which they may be exchanged, for an amount equal to or greater
than each Purchaser's aggregate investment set forth in Schedules A, B and C,
multiplied by ten (10), in cash, or in freely-tradable securities for which a
public market exists, or assets of equivalent fair market value (as determined
31
by the Board of Directors in good faith evidenced by a board resolution adopted
by the affirmative votes of a majority of the directors, excluding ▇▇▇▇▇▇ ▇▇▇▇▇▇
or his Affiliates, even though the remaining directors be less than a quorum),
and such sale, transfer or disposition shall have been consummated with respect
to all Holders electing to participate therein prior to the expiration of thirty
(30) months from the date of this Agreement (the "10x Exit Condition"), the
shares of Class B Common Stock shall not be transferable by ▇▇▇▇▇▇ ▇▇▇▇▇▇ and
any purported transfer thereof shall be void ab initio, and the Company
covenants and agrees that such transfer shall not be reflected on the stock
transfer books of the Company.
8.9.2. Amendment of Charter. In the event that ▇▇▇▇▇▇ ▇▇▇▇▇▇ desires
to sell, transfer or dispose of any shares of Class B Common Stock, and the 10x
Exit Condition has not been satisfied, the Holders and ▇▇▇▇▇▇ ▇▇▇▇▇▇ covenant
and agree that the Holders and ▇▇▇▇▇▇ ▇▇▇▇▇▇ shall use their best efforts to (A)
cause the Company to amend the Company's Certificate of Incorporation, in
accordance with applicable law, to create a new class of stock which (1)
authorizes such class to issue five million (5,000,000) shares, (2) designates
to the holders of such class of stock a liquidation preference in the amount of
$0.20 per share, in the event of the dissolution, liquidation or winding up of
the Company, in the distributable assets of the Company, such class to share pan
passu with the holders of Class A Preferred Stock and Class B Common Stock, (3)
permits such class a right to one vote per share of stock in any meeting of the
stockholders or in any written consent in lieu of a meeting in accordance with
the Bylaws of the Company, and (4) requires the mandatory conversion of such
shares of Class B Common Stock at a conversion rate of one share of Class B
Common Stock to one share of such class upon any transfer of shares of Class B
Common Stock, and (B) causes the Company to convert the shares of Class B Common
Stock into shares of such class and to at all times reserve and keep available
such shares solely for the purpose of effecting the conversion of all
outstanding shares of Class B Common Stock.
8.9.3. Conversion to Class A Common Stock. In the event the Company
is unable to (A) create and issue such class of stock as provided in 8.9.2., or
(B) cause the Class B Common Stock to be converted into such new class of stock,
in either
32
case under applicable law or for any other reason, each share of Class B Common
Stock proposed to be sold, transferred or disposed of shall be exchanged by
▇▇▇▇▇▇ ▇▇▇▇▇▇ for one share of Class A Common Stock, and it shall be a condition
of such proposed sale, transfer or disposition that such shares of Class B
Common Stock shall have been exchanged as set forth in this section; provided,
however, that if such exchange may not be consummated prior to the proposed
sale, transfer or disposition, ▇▇▇▇▇▇ ▇▇▇▇▇▇ covenants and agrees to enter into
an agreement with his proposed purchaser or transferee giving effect to the
exchange contemplated hereunder including, without limitation, the termination
of any special or preferential voting rights applicable to the Class B Common
Stock with regards to such shares being sold, transferred or disposed. The
Company represents, warrants and agrees that sufficient shares of Class A Common
Stock have been and will at all times remain duly and validly reserved for
issuance upon any exchange of Class B Common Stock as set forth herein.
8.9.4. Confirmation of Occurrence. The Company covenants and agrees
that no transfer of Class B Common Stock shall be given effect by the Company or
reflected on the Company's stock transfer ledger unless the Company shall first
have obtained confirmation in writing by the majority of the Purchasers, such
confirmation to be provided by the majority of the Purchasers in good faith,
that the 10x Exit Condition has been satisfied.
8.9.5. Legend Restriction. ▇▇▇▇▇▇ ▇▇▇▇▇▇ covenants and agrees to
deliver promptly upon the execution of this Agreement all of the shares of Class
B Common Stock to the Company in order that the Company may include a legend on
the certificates representing such shares to the effect of the foregoing.
8.10. Authorization of Additional Class A Preferred Stock. If at any time
the number of authorized but unissued shares of Class A Preferred Stock shall
not be sufficient to effect the obligations of the Company to issue additional
shares of Class A Preferred Stock pursuant to Section 10.1. and 10.2., the
Company shall take such corporate action as may be necessary or advisable to
increase the number of authorized but unissued shares of Class A Preferred Stock
to such number of shares as
33
shall be sufficient for such purpose and ▇▇▇▇▇▇ ▇▇▇▇▇▇ and the Purchasers agree
to cast all of the votes they are entitled to cast to approve the same and give
effect thereto (whether at the next annual meeting or a special meeting of
stockholders, by written consent in lieu of a meeting or otherwise)
8.11. Reservation of Stock Issuable Upon Conversion. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Class A Common Stock, solely for the purpose of effecting the conversion of
all outstanding shares of capital stock which are convertible into shares of
Class A Common Stock, such number of shares of Class A Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of capital stock which are convertible into Class A Common Stock.
SECTION 9. PREEMPTIVE RIGHTS
9.1. Rights of Inclusion.
9.1.1. General. Except as provided in Section 9.1.6., if, at any
time, the Controlling Stockholder proposes to transfer shares of Company Stock
to a third party (a "Proposed Purchaser"), the Controlling Stockholder shall
afford each Holder the opportunity to participate in such transfer in accordance
with this Section 9.1.
9.1.2. Right to Participate. Each Holder, with respect to the
proposed transfers set forth in Section 9.1.1. (a "Tag-Along Purchaser"), shall
have the right to transfer, at the same price and upon identical terms and
conditions as such proposed transfer, the number of shares of Company Stock
owned by such Tag-Along Purchaser (the "Transfer Allotment") equal to (A) the
total number of shares of Company Stock proposed to be transferred by the
Controlling Stockholder multiplied by (B) a fraction, the numerator of which is
the total number of shares of Company Stock then owned by such Tag-Along
Purchaser as of the close of business on the second day preceding the mailing
date of the Transfer Notice (as defined below) and the denominator of which is
the total number of shares of Company Stock then owned by (1) all of the
Holders, (2) the Controlling Stockholder, and (3) all other stockholders of the
Company having tag-along or
34
similar rights to participate in the proposed transfer. At the time any transfer
to a Proposed Purchaser is proposed, the Controlling Stockholder shall give
notice to each Tag-Along Purchaser of its right to sell shares of Company Stock
hereunder (the "Transfer Notice"), which notice shall identify the Proposed
Purchaser and state the number of shares of Company Stock proposed to be
transferred, the proposed offering price, the proposed date of any such transfer
(the "Transfer Date") and any other material terms and conditions of the
proposed transfer. The Transfer Notice shall also contain a complete and correct
copy of any offer to the Controlling Stockholder by the Proposed Purchaser to
purchase such shares of Company Stock.
9.1.3. Notice. Each Tag-Along Purchaser that wishes to participate
in the transfer shall provide written notice (the "Tag-Along Notice") to the
Controlling Stockholder no less than seven (7) days prior to the Transfer Date;
provided that the Controlling Stockholder shall use his best efforts to deliver
the Transfer Notice at least thirty (30) days prior to the Transfer Date and in
no event shall the Controlling Stockholder provide such Transfer Notice later
than fifteen (15) days prior to the Transfer Date. The Tag-Along Notice shall
set forth the number of shares of Company Stock that such Tag-Along Purchaser
elects to include in the transfer, which shall not exceed such Tag-Along
Purchaser's Transfer Allotment. The Tag-Along Notice shall also specify the
aggregate number of additional shares of Company Stock owned of record by such
Tag-Along Purchaser as of the date of the Tag-Along Notice, if any, which such
Tag-Along Purchaser desires also to include in the transfer (the "Additional
Shares") in the event there is any under-subscription for the entire amount of
all Tag-Along Purchasers' Transfer Allotments. In the event there is an
under-subscription by a Tag-Along Purchaser for the entire amount of the
Tag-Along Purchaser's Transfer Allotments, the Controlling Stockholder shall
apportion the unsubscribed Tag-Along Purchaser's Transfer Allotments to
Tag-Along Purchasers whose Tag-Along Notices specified an amount of Additional
Shares, which apportionment shall be on a pro rata basis among such Tag-Along
Purchasers in accordance with the number of Additional Shares specified by all
such Tag-Along Purchasers in their Tag-Along Notices. The Tag-Along Notices
given by the Tag-Along Purchasers shall constitute their binding agreements to
sell such shares of Company Stock on the terms and conditions applicable to the
transfer.
35
9.1.4. Non Participation. If a Tag-Along Notice is not received by
the Controlling Stockholder prior to the seven (7) day period specified above,
the Controlling Stockholder shall have the right to sell or otherwise transfer
the number of shares of Company Stock specified in the Transfer Notice to the
Proposed Purchaser without any participation by such Tag-Along Purchaser
(subject to the right of other Tag-Along Purchasers to sell Additional Shares),
but only on terms and conditions with respect to the consideration paid by the
Proposed Purchaser and other material terms a reasonable investor would consider
in making its decision to invest which are no more favorable in any material
respect to the Controlling Stockholder than as stated in the Transfer Notice to
the Tag-Along Purchasers, and only if such Transfer occurs on a date within
sixty (60) days of the Transfer Date.
9.1.5. Representations. Each Tag-Along Purchaser shall only be
obligated to make representations as to (A) good title and the absence of a
Security Interest against the Tag-Along Purchaser's Shares, (B) the validity and
binding effect of any agreements entered into by such Tag-Along Purchaser in
connection with such transfer; provided, however, that each Tag-Along Purchaser
shall make such representations and warranties severally and not jointly.
9.1.6. Exceptions. The provisions of this Section 9.1. shall not
apply to any transfer by the Controlling Stockholder (A) to the spouse or family
members of the Controlling Stockholder, (B) to a Proposed Purchaser of Common
Stock having an aggregate fair market value of one million dollars ($1,000,000)
or less, (C) pursuant to a public offering or any Rule 144 transaction, or (D)
of Shares acquired in connection with customary trading activities at any time
following an initial public offering.
9.2 Rights to Compel.
9.2.1. General. Except as provided in Section 8.8., if, at any time,
(A) the Controlling Stockholder proposes to transfer all or any portion of his
shares of Company Stock constituting more than fifty percent (50%) of the issued
and outstanding shares of Company Stock to a Proposed Purchaser in a bona fide
arms' length transaction, and (B) in connection
36
therewith the Controlling Stockholder obtains an opinion of a
nationally-recognized investment banking firm to the effect that the transfer to
the Proposed Purchaser is fair to the Controlling Shareholder and the Holders
from a financial point of view, then the controlling Stockholder may require the
Holders to transfer all or a portion of their shares of Company Stock (the
"Designated Shares") to the Proposed Purchaser in accordance with this Section
9.2.; provided, however, that the Holders of fifty percent (50%) or more of the
shares of Company Stock may by their written consent waive the obligation to
obtain such fairness opinion in any proposed transfer by the Controlling
Stockholder.
9.2.2. Requirement to Participate. Each Holder, with respect to the
proposed transfers set forth in Section 9.2.1. (the "Drag-Along Purchaser"),
shall be required to transfer the Designated Shares to the Proposed Purchaser at
the same price per share of Company Stock and upon identical terms and
conditions as such proposed transfer upon which the controlling Stockholder is
selling his shares of Company Stock. The Designated Shares shall be determined
by multiplying the shares of Company Stock owned by each Purchaser by a
fraction, the numerator of which shall be the number of shares of Company Stock
to be sold by the Controlling Stockholder and the denominator of which is the
total shares of Company Stock owned by the Controlling Stockholder.
9.2.3. Notice. The Controlling Stockholder shall send written notice
(the "Drag-Along Notice") of the exercise of such rights pursuant to this
Section 9.2. to each Drag-Along Purchaser, setting forth the consideration per
share of Company Stock to be paid by the Proposed Purchaser and the other terms
and conditions of such transaction. Within twenty (20) days following the date
of the Drag-Along Notice, each Drag-Along Purchaser shall deliver to the
Controlling Stockholder certificates representing the Designated Shares held by
them or duly endorsed, together with all other transfer documents reasonably
required to be executed in connection with such transaction; provided, however,
that each Drag-Along Purchaser shall only be obligated to make representations
as to (A) good title and the absence of a Security Interest against the
Drag-Along Purchaser's Shares, (B) the validity and binding effect of any
agreements entered into by such Drag-Along Purchaser in connection with such
transfer and that each Drag-Along Purchaser
37
shall make such representations and warranties severally and not jointly.
9.2.4. Nonparticipation. In the event that a Drag-Along Purchaser
fails to deliver certificates representing the Designated Shares to the
Controlling Stockholder, the Company shall cause the Books and Records of the
Company to show that such shares of Company Stock are bound by the provisions of
this Section 9.2.
9.2.5. Failure to Close. If, within ninety (90) days after the
Controlling Stockholder gives the Drag-Along Notice, the sale of all of
Controlling Stockholder's shares of Common Stock in accordance herewith has not
been completed, the Controlling Stockholder shall return to the Drag-Along
Purchasers all certificates representing the Designated Shares, and all the
restrictions on sale or other disposition contained in the Agreement with
respect to the shares of Company Stock shall again be in effect.
9.2.6. Remittance of Sale Proceeds. Simultaneously with the
consummation of the sale of the Controlling Stockholder's shares of Company
Stock, and each Drag-Along purchaser's shares of Company Stock, the Controlling
Stockholder shall notify each Drag-Along Purchaser of the consummation of the
sale, and shall cause the Proposed Purchaser to remit directly to each
Drag-Along Purchaser that has delivered its shares of Company Stock, the total
sales price of each Drag-Along purchaser's shares of Company Stock sold or
otherwise disposed of pursuant thereto and shall furnish such other evidence of
the completion and time of completion of such sale or other disposition and the
terms thereof as may be reasonably requested by the Drag-Along Purchaser.
9.3. Right of First Offer.
9.3.1. General. Subject to the terms and conditions specified in
this Section 9.3., the Company hereby grants to each Holder a right of first
offer with respect to future sales by the Company of Company Stock. Each time
the Company proposes to offer (A) additional shares of capital stock of any or
all classes or series thereof, (B) rights, options or warrants to purchase
shares of its capital stock, or (C) securities
38
convertible into such capital stock (the "New Offering"), the Company shall
first make an offering of thirty percent (30%) of the New Offering to the
Holders in the aggregates offered pro rata among the Holders, in accordance with
the following provisions. The Holders have no right to participate in the New
Offering of Company Stock in excess of the thirty percent (30%) in the aggregate
of the New Offering granted in this Section 9.3.
9.3.2. Notice. The Company shall provide a written notice (the
"Offering Notice") of the New Offering to each Holder stating (A) the Company's
bona fide intention to offer such shares, (B) the number of such shares to be
offered, and (C) the price and terms upon which it proposes to offer such
shares.
9.3.3. Election to Purchase. Within twenty (20) days following the
date of the Offering Notice (the "Election Period"), each Holder may elect to
purchase or obtain, at the price and on the terms specified in the Offering
Notice, up to that portion of such shares which equals thirty percent (30%)
multiplied by a fraction, the numerator of which is the number of shares of
Company Stock held by the Holder as of the date of the Offering Notice and the
denominator of which is the total Company Stock outstanding on the date of the
Offering Notice. After the expiration of the Election period, the Company shall
notify the Holders which exercise their rights to purchase additional shares
(the "Participating Purchasers") of each other Purchaser's failure to do
likewise (the "Declining Purchasers"). During the ten-day period commencing
after receipt of such information, each Participating Purchaser shall be
entitled to purchase that portion of the shares for which the Declining
Purchasers were entitled to subscribe but which were not subscribed for by the
Declining Purchasers which is equal to the proportion that the number of shares
of Company Stock issued and held by such Participating Purchaser bears to the
total number of shares of Company Stock issued and held by all Participating
Purchasers who wish to purchase unsubscribed shares.
9.3.4. Transfer to Proposed Purchaser. At any time after the
Offering Notice is given, the Company may offer for sale seventy percent (70%)
of the New Offering and, if the shares referred to in the Offering Notice are
not elected to be purchased as provided in Section 9.3.3., the Company may,
during the ninety (90) day period following the expiration of the
39
Election Period, offer for sale the remaining unsubscribed portion of the New
Offering to any Person at a price not less than, and upon terms no more
favorable to the offeree than those specified in the Offering Notice. If the
Company does not consummate the sale of the New Offering within such period, the
right provided hereunder shall be deemed to be revived and such shares shall not
be offered unless first reoffered to each Holder in accordance with this
section.
9.3.5. Exceptions. The right of first offer in this Section 9.3.
shall not be applicable (A) to shares issued as set forth Section 10.1. or
10.2., (B) to or after consummation of a bona fide, firmly underwritten public
offering of shares of Common Stock, registered under the Act, (C) to the
issuance of securities pursuant to the conversion or exercise of convertible or
exercisable securities outstanding as of the date hereof, or (D) to the issuance
of securities in connection with a strategic partnership or bona fide business
acquisition of or by the Company, whether by merger, consolidation, sale of
assets, sale or exchange of stock or otherwise.
SECTION 10. POST CLOSING SHARE PRICE ADJUSTMENTS
10.1. Anti-Dilution Rights. If, after the Closing Date, the Company shall
issue Company Stock to a third party for consideration less than the Share
Price, then each Purchaser shall be issued additional Class A Preferred Stock,
without paying additional consideration, so that the effective price of each
Purchaser's Class A Preferred Stock, after giving effect to such issuance, shall
be equal to the price of the Company Stock purchased by the third party;
provided, however, in no event shall the Purchasers have the right to receive
additional shares of Company Stock where the Company (A) offers for sale up to
seven hundred and fifty thousand (750,000) shares of Class A Common Stock
(adjusted to reflect subsequent stock splits, combinations, stock dividends and
recapitalizations) to officers and employees of, consultants to, or directors
who are not employees of the Company, pursuant to a stock grant, option, or
purchase plan, or other employee stock incentive program approved by the
Company's board of directors, (B) issues stock, stock options, warrants or
rights to the employees and consultants of the Company as set forth in Schedule
D, or (C) issues three
40
hundred twelve thousand five hundred (312,500) shares of Class A Common Stock or
options to purchase Class A Common Stock (adjusted to reflect subsequent stock
splits, combinations, stock dividends and recapitalizations) to ▇▇▇▇ ▇▇▇▇▇▇▇▇ in
accordance with the agreement as in effect on the date hereof between the
Company and ▇▇▇▇ ▇▇▇▇▇▇▇▇. An example of the calculation of the additional
shares to be issued pursuant to this Section 10.1. is attached hereto as Exhibit
E.
10.2. Performance Ratchet Protection.
10.2.1. Timing of Ratchet. At the earlier of (A) thirty (30) months
after Closing or (B) the sale of all or substantially all of the assets or stock
of the Company or the merger, consolidation or combination of the Company with
any other Person (the "Company Sale"), each Purchaser shall be issued additional
Class A Preferred Stock of the Company, without paying additional consideration
therefor, so that, after giving effect to such issuance, the effective price of
all issued Shares held by such Purchaser shall be reduced from the Share Price
to an Adjusted Share Price calculated pursuant to Section 10.2.2. (the "Adjusted
Share Price").
10.2.2. Adjusted Share Price. The Adjusted Share Price shall be the
greater of (A) one dollar ($1.00) per Share, (B) ten percent (10%) of the
highest price per share offered to the Purchasers in any public offering or
private sale to a third party of Company Stock, in which the Purchasers were
provided and declined an opportunity to sell Shares, including but not limited
to any sale of securities in the manner set forth in Sections 7.1., 9.1. and
9.2.; or (C) ten percent (10%) of the price per share in a Company Sale, if such
has occurred; provided, however, that in no event shall the Adjusted Share Price
exceed two dollars ($2.00) per share. An example of the calculation of the
additional shares to be issued pursuant to this Section 10.2. is attached hereto
as Exhibit E.
10.3. Restriction on the Declaration of Dividends. The Company shall not
declare dividends to any class of Company Stock and shall not redeem, repurchase
or otherwise acquire for value any shares of Company Stock without the consent
of the holders of a majority in interest of the Class A Preferred Stock.
41
SECTION 11. MISCELLANEOUS
11.1. Public Announcements. No Purchaser shall make any public
announcement relating to the subject matter of this Agreement without the prior
written approval of the Company.
11.2. No Third Party Beneficiaries. Except as set forth in Section 7.8.,
this Agreement shall not confer any rights or remedies upon any Person other
than the Parties and their respective successors and permitted transferees and
assigns.
11.3. Default. In the event a Party fails to comply with the terms of this
Agreement, any other Party to this Agreement shall be entitled to any relief or
remedy that may be available pursuant to this Agreement or at law or equity.
11.4. Notices. All notices hereunder shall be in writing and be given by
registered or certified mail, postage and registration fees prepaid, or by
overnight delivery, and shall be deemed given when so mailed as follows:
GlobeComm, Inc.
▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇, President
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
To the Purchasers
At the addresses set forth in Schedule A
The foregoing addresses may be changed by notices given in the manner set forth
in this section.
11.5. Governing Law. This Agreement shall be construed and enforced in
accordance with, and governed by, the laws of the State of Delaware without
giving effect to the principles of the conflict of laws thereof.
11.6. Waivers; Amendments. The waiver by the undersigned of any of the
provisions of this Agreement shall not
42
operate or be construed as a waiver of any subsequent breach. This Agreement may
be amended only by a written amendment executed by the Company and the holders
of a majority of the Shares.
11.7. Headings. The section headings contained in this Agreement are for
reference purposes only and shall not affect the construction and interpretation
of this Agreement.
11.8. Severability. The invalidity of all or any part of any section of
this Agreement shall not render invalid the remainder of such section. If any
provision of this Agreement is so broad as to be unenforceable, such provision
shall be interpreted to be only so broad as is enforceable.
11.9. Binding Effect. This Agreement shall not be assigned by any
Purchaser without the prior written consent of the Company. This Agreement shall
be binding upon and inure to the benefit of the Parties, their heirs, personal
representatives, successors, and permitted assignees.
11.10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument. This Agreement may contain more than one
counterpart of the signature page and may be executed by the affixing of the
signatures of each of the Parties to one of these counterpart signature pages.
All of the counterpart signature pages shall be read as though one, and they
shall have the same force and effect as though all of the signers had signed a
single signature page.
11.11. Execution of Document. Each of the Parties hereto agrees to execute
and deliver, without cost or expense to any other Party, any and all such
further instruments or documents and to take any and all such further action
reasonably requested by such other of the Parties hereto as may be necessary or
convenient in order to effectuate this Agreement and the interests and purposes
thereof.
11.12. Expenses. Except to the extent otherwise specifically provided
herein, each of the Parties shall bear its own costs and expenses (including
legal fees and expenses) incurred in connection with this Agreement and the
transactions
43
contemplated hereby.
11.13. Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement.
11.14. Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
11.15. Entire Agreement. This Agreement (including the Disclosure Schedule
and the Exhibits and Schedules hereto), the amendment to the Certificate of
Incorporation, and the letter agreement of the Escrow Agent dated May 23, 1997,
contain the entire agreement of the Parties. The Parties are not bound by any
oral statements that are made outside of this Agreement.
44
WHEREAS, the Parties have executed this Agreement as of the date first
above written:
GlobeComm, Inc. Escrow Agent
/s/ ▇▇▇▇ ▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------- -----------------------------------
By: ▇▇▇▇ ▇▇▇▇▇▇, President ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
As to Section 2.5.
Purchasers
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------- -----------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------- -----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇ ▇▇▇▇▇▇▇
---------------------------------- -----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ /s/ ▇▇▇▇ ▇▇▇▇▇
---------------------------------- -----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ /s/ ▇▇▇▇ ▇▇▇
---------------------------------- -----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
/s/ ▇▇▇ Low
---------------------------------- -----------------------------------
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ Low
/s/ ▇▇▇▇▇▇ ▇▇▇▇
---------------------------------- -----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
45
WHEREAS, the Parties have executed this Agreement as of the date first
above written:
GlobeComm, Inc. Escrow Agent
/s/ ▇▇▇▇ ▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------- -----------------------------------
By: ▇▇▇▇ ▇▇▇▇▇▇, President ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
As to Section 2.5.
Purchasers
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------- -----------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------- -----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇ ▇▇▇▇▇▇▇
---------------------------------- -----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------- -----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ /s/ ▇▇▇▇ ▇▇▇
---------------------------------- -----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
---------------------------------- -----------------------------------
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ Low
---------------------------------- -----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
45
/s/ ▇▇▇ ▇▇▇▇▇▇
---------------------------------- -----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------- -----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------- -----------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
---------------------------------- -----------------------------------
Lens Lipsuis ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------- -----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, Personally
46
SCHEDULE A
Purchaser No. Of Shares Purchase Price
--------- ------------- --------------
1. ▇▇▇▇ ▇▇▇▇▇▇▇▇ 43,750 $87,500
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
2. ▇▇▇▇ ▇▇▇▇▇▇▇▇ 25,000 $50,000
▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
3. ▇▇▇▇▇ ▇▇▇▇▇▇ 43,750 $87,500
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
4. ▇▇▇▇▇ ▇▇▇▇▇▇ 5,000 $10,000
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
5. ▇▇▇▇▇▇ ▇▇▇▇▇▇ 25,000 $50,000
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
6. ▇▇▇ ▇▇▇▇▇▇▇ 75,000 $150,000
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
7. ▇▇▇▇▇▇ ▇▇▇▇▇▇ 100,000 $200,000
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
8. ▇▇▇▇ ▇▇▇▇▇ 25,000 $50,000
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, #▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
9. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 56,250 $112,500
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
S-1
10. ▇▇▇▇ ▇▇▇ 1,250 $2,500
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, #▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
11. ▇▇▇▇▇ ▇▇▇▇▇ 12,500 $25,000
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
12. ▇▇▇ Low 21,250 $42,500
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
13. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 62,500 $125,000
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
14. ▇▇▇▇▇▇ ▇▇▇▇ 10,000 $20,000
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
15. ▇▇▇▇▇▇ ▇▇▇▇▇▇ 12,500 $25,000
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
16. ▇▇▇ ▇▇▇▇▇▇ 12,500 $25,000
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
17. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 18,750 $37,500
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
18. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 25,000 $50,000
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
19. ▇▇▇▇ ▇▇▇▇▇▇▇ 25,000 $50,000
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
20. ▇▇▇▇▇ ▇▇▇▇▇ 12,500 $25,000
▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇
S-2
21. ▇▇▇▇ ▇▇▇▇▇▇▇ 6,250 $12,500
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇
22. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 6,250 $12,500
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
TOTAL: 625,000 $1,250,000
------ ------- ----------
S-3
SCHEDULE B
Purchaser No. Of Shares Purchase Price
--------- ------------- --------------
1. ▇▇▇▇ ▇▇▇▇▇▇▇▇ 21,875 $43,750
2. ▇▇▇▇ ▇▇▇▇▇▇▇▇ 12,500 $25,000
3. ▇▇▇▇▇ ▇▇▇▇▇▇ 21,875 $43,750
4. ▇▇▇▇▇ ▇▇▇▇▇▇ 2,500 $5,000
5. ▇▇▇▇▇▇ ▇▇▇▇▇▇ 12,500 $25,000
6. ▇▇▇ ▇▇▇▇▇▇▇ 37,500 $75,000
7. ▇▇▇▇▇▇ ▇▇▇▇▇▇ 50,000 $100,000
8. ▇▇▇▇ ▇▇▇▇▇ 12,500 $25,000
9. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 28,125 $56,250
10. ▇▇▇▇ ▇▇▇ 625 $1,250
11. ▇▇▇▇▇ ▇▇▇▇▇ 6,250 $12,500
12. ▇▇▇ Low 10,625 $21,250
13. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 31,250 $62,500
14. ▇▇▇▇▇▇ ▇▇▇▇ 5,000 $10,000
15. ▇▇▇▇▇▇ ▇▇▇▇▇▇ 6,250 $12,500
16. ▇▇▇ ▇▇▇▇▇▇ 6,250 $12,500
17. ▇▇▇▇▇▇▇ Degiamo 9,375 $18,750
18. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 12,500 $25,000
19. ▇▇▇▇ ▇▇▇▇▇▇▇ 12,500 $25,000
S-4
20. ▇▇▇▇▇ ▇▇▇▇▇ 6,250 $12,500
21. ▇▇▇▇ ▇▇▇▇▇▇▇ 3,125 $6,250
22. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 3,125 $6,250
TOTAL: 312,500 $625,000
------ ------- --------
S-5
SCHEDULE C
Purchaser No. Of Shares Purchase Price
--------- ------------- --------------
1. ▇▇▇▇ ▇▇▇▇▇▇▇▇ 21,875 $43,750
2. ▇▇▇▇ ▇▇▇▇▇▇▇▇ 12,500 $25,000
3. ▇▇▇▇▇ ▇▇▇▇▇▇ 21,875 $43,750
4. ▇▇▇▇▇ ▇▇▇▇▇▇ 2,500 $5,000
5. ▇▇▇▇▇▇ ▇▇▇▇▇▇ 12,500 $25,000
6. ▇▇▇ ▇▇▇▇▇▇▇ 37,500 $75,000
7. ▇▇▇▇▇▇ ▇▇▇▇▇▇ 50,000 $100,000
8. ▇▇▇▇ ▇▇▇▇▇ 12,500 $25,000
9. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 28,125 $56,250
10. ▇▇▇▇ ▇▇▇ 625 $1,250
11. ▇▇▇▇▇ ▇▇▇▇▇ 6,250 $12,500
12. ▇▇▇ Low 10,625 $21,250
13. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 31,250 $62,500
14. ▇▇▇▇▇▇ ▇▇▇▇ 5,000 $10,000
15. ▇▇▇▇▇▇ ▇▇▇▇▇▇ 6,250 $12,500
16. ▇▇▇ ▇▇▇▇▇▇ 6,250 $12,500
17. ▇▇▇▇▇▇▇ Degiamo 9,375 $18,750
18. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 12,500 $25,000
19. ▇▇▇▇ ▇▇▇▇▇▇▇ 12,500 $25,000
S-6
20. ▇▇▇▇▇ ▇▇▇▇▇ 6,250 $12,500
21. ▇▇▇▇ ▇▇▇▇▇▇▇ 3,125 $6,250
22. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 3,125 $6,250
TOTAL: 312,500 $625,000
------ ------- --------
S-7
SCHEDULE D
Employee Options Vested(1) Options Vesting(2)
-------- ----------------- ------------------
1. ▇▇▇▇▇▇ ▇▇▇▇▇▇ 36,250 210,000
2. ▇▇▇▇ ▇▇▇▇▇▇ 108,500 125,000
3. Vanity Mail -0- 125,000
Services, Inc.(3)
4. ▇▇▇▇ ▇▇▇▇▇▇▇▇(4) 40,665 185,000
5. ▇▇▇ ▇▇▇▇▇▇▇ 5,000 200,000
6. ▇▇▇▇ ▇▇▇▇▇▇▇ 5,000 7,000
7. ▇▇▇▇▇▇▇▇ ▇▇▇▇ 2,500 4,750
8. ▇▇▇ ▇▇▇▇▇▇▇▇ 3,300 17,500
9. ▇▇▇▇▇▇▇ ▇▇▇▇▇ 750 7,750
10. ▇▇▇▇ ▇▇▇▇▇ 20,335 50,000
11. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ -o- 7,000
12. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 4,165 9,750
13. ▇▇▇▇ ▇▇▇▇▇▇▇ 23,835 37,500
14. ▇▇▇▇▇ ▇▇▇▇▇▇ 2,500 47,500
15. Lily Dong(5) 13,835 1,430
16. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 22,500 -0-
17. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ -0- 8,000
18. ▇▇▇▇ ▇▇▇▇▇▇▇ -0- 4,000
19. ▇▇▇▇▇▇▇ ▇▇▇▇ -0- 15,000
Total 289,135 1,062,180
----------
(1) All owned options can be exercised between $0.20 and $2.00 a share.
Options are for Class A Common Stock.
(2) All options vest quarterly over time between 24 and 48 months, except
for ▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇.
(3) The principal shareholder of the company, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, provides
consulting services to GlobeComm.
(4) Under separate agreement, as additional compensation for services
rendered, ▇▇▇▇ ▇▇▇▇▇▇▇▇ is compensated by GlobeComm by the issuance of Class A
Common Stock. He receives blocks of 62,500 on a quarterly basis and is entitled
to receive in whole an additional 312,500.
(5) Employment terminated.
S-8
SCHEDULE E
Party Nature of Contract
----- ------------------
1. ▇▇▇▇▇▇ ▇▇▇▇▇▇ Employment
2. ▇▇▇▇ ▇▇▇▇▇▇ Employment
3. Vanity Mail Services, Inc. Consulting
4. ▇▇▇▇ ▇▇▇▇▇▇▇▇ Consulting
5. ▇▇▇ ▇▇▇▇▇▇▇ Employment
6. ▇▇▇▇ ▇▇▇▇▇▇▇ Employment
7. ▇▇▇▇▇▇▇▇ ▇▇▇▇ Employment
8. ▇▇▇ ▇▇▇▇▇▇▇▇ Employment
9. ▇▇▇▇▇▇▇ ▇▇▇▇▇ Employment
10. ▇▇▇▇ ▇▇▇▇▇ Employment
11. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Employment
12. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Employment
13. ▇▇▇▇ ▇▇▇▇▇▇▇ Employment
14. ▇▇▇▇▇ ▇▇▇▇▇▇ Employment
15. Lily Dong Employment
16. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Employment
17. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Employment
18. ▇▇▇▇ ▇▇▇▇▇▇▇ Employment
19. ▇▇▇▇▇▇▇ ▇▇▇▇ Employment
20. FOUR 1 1 Revenue Sharing
21. Infospace Revenue Sharing
22. Double Click Revenue Sharing
23. Who Where Revenue Sharing
24. Switchboard Revenue Sharing
25. Netscape Referral of Services
26. GNP Lease of Equipment
27. Anixter Lease of Equipment
28. Interactive Futures Lease of Equipment
29. DNA Lease of Equipment
30. Consan/DV Lease of Equipment
31. Sun/Toshiba Lease of Equipment
32. Datavision Lease of Equipment
33. Oracle Lease of Equipment
S-9
Exhibit A
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
GLOBECOMM, INC.
------------------------------------
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
----------------------------------------
GlobeComm, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), does hereby
certify as follows:
FIRST: The name of the corporation is: GLOBECOMM, INC.
SECOND: The certificate of incorporation was filed by the Department of
State on the 1st day of August, 1994.
THIRD: Resolutions setting forth a proposed amendment to the Certificate
of Incorporation of the Corporation, declaring said amendment to be advisable
and directing that said amendment be considered by the stockholders of the
Corporation entitled to vote thereon were duly adopted by unanimous written
consent of the Board of Directors of the Corporation dated as of May 23, 1997.
FOURTH: Thereafter, said amendment was approved in accordance with Section
228 of the General Corporation Law of the State of Delaware by the written
consent, dated May 23, 1997, of a majority of the stockholders of the
Corporation entitled to vote thereon.
FIFTH: The certificate of incorporation is hereby amended to effect the
following changes:
(a) To modify the rights of the capital stock of the Corporation.
ARTICLE 5 of the Certificate of Incorporation of the Corporation
shall be deleted, and substituting in lieu thereof the following new ARTICLE 5:
ARTICLE 5: The total number of shares of all classes of stock that
the Corporation is authorized to issue is twenty one million (21,000,000),
consisting of thirteen million (13,000,000) shares of Class A Common Stock with
a par value of one cent ($.01) per share, three million (3,000,000) shares of
Class A Preferred Stock with a par value of one cent ($.01) per share, and five
million (5,000,000) shares of Class B Common Stock with a par value of one cent
($.01) per share with a par value of one cent ($.01) per share.
1. Each share of Class A Common Stock and Class A Preferred
Stock shall have one (1) vote per share. Each share of Class B Common Stock
shall have ten (10) votes per share.
2. In case of liquidation, dissolution, or winding up of the
affairs of the Corporation, whether voluntary or involuntary, holders of Class A
Preferred Stock shall be preferred, equally with holders of Class B Common Stock
over all holders of Class A Common Stock of the Corporation to the extent set
forth herein. Out of the distributable assets of the Corporation, in an amount
up to the total dollar investment of Class A Preferred Stock and Class B Common
Stock, holders of Class A Preferred Stock shall receive pro rata among all such
shares of Class A Preferred Stock, in the aggregate for all such shares
outstanding, the total dollar investment of Class A Preferred Stock divided by
the sum of the total dollar investment of Class A Preferred Stock plus Class B
Common Stock, expressed as a percentage, and holders of Class B Common Stock
shall receive pro rata among all such shares of Class B Common Stock, in the
aggregate for all such shares outstanding, the total dollar investment of Class
B Common Stock divided by the sum of the total dollar investment of Class A
Preferred Stock plus Class B Common Stock, expressed as a percentage.
Thereafter, the
2
holders of Class A Common Stock shall receive pro rata among all such shares, an
amount in the aggregate for all such shares outstanding, up to the total dollar
investment of Class A Common Stock. Thereafter, the holders of Class A Common
Stock, Class A Preferred Stock and Class B Common Stock, shall share, pari
passu, in the remaining assets of the Corporation. Notwithstanding the
foregoing, in the event of any conversion of the shares of Class A Preferred
Stock, the preference applicable to the Class B Common Stock set forth herein
shall terminate automatically and the Class B Common Stock shall be entitled, in
the event of a liquidation, dissolution or winding up of the affairs of the
Corporation, whether voluntary or involuntary, only to share in the remaining
assets of the Corporation pari passu with the Class A Common Stock.
3. The holders of the Class A Preferred Stock shall have conversion
rights as follows:
(a) Conversion. The holders of the Class A Preferred Stock shall
have the right to convert their shares into Class A Common Stock upon the
affirmative vote of the holders of a majority of the Class A Preferred Stock.
(b) Automatic Conversion. Each share of Class A Preferred Stock
shall automatically be converted into one share of Class A Common Stock
(adjusted to reflect subsequent stock splits, combinations, stock dividends and
recapitalizations) immediately upon an underwritten offering of at or greater
than twenty million dollars ($20,000,000) of Company Stock at or greater than an
offering price of ten dollars ($10.00) per share (adjusted to reflect subsequent
stock splits, combinations, stock dividends, recapitalizations).
(c) Mechanics of Conversion. Before any holder of Class A Preferred
Stock shall be entitled to convert the same into shares of Class A Common Stock,
it shall surrender the certificate therefor, duly endorsed, at the office of the
Corporation, and shall give written notice to the Corporation at its principal
corporate office, of the election to convert the same and shall state the name
in which the certificate for shares of Class A Common Stock are to be issued.
The Corporation shall, as soon as practicable thereafter, issue and deliver at
such office to such holder of Class A Preferred Stock a certificate
3
for the number of shares of Class A Common Stock to which such holder shall be
entitled.
SIXTH: The Board of Directors is granted the authority to fix by
resolution any powers, preferences and rights, qualifications, limitations or
restrictions not fixed by certificate of amendment to the certificate of
incorporation.
SEVENTH: Said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, this certificate has been subscribed by the
undersigned who affirms that the statements made herein are true under the
penalties of perjury.
Dated: May 27, ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
GlobeComm, Inc.
---------------------------
By: ▇▇▇▇ ▇▇▇▇▇▇, President
Corporate Seal
4
Exhibit B
May 27, 1997
GlobeComm, Inc.
▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇, President
Re: Investment Letter
Dear ▇▇. ▇▇▇▇▇▇:
This letter is delivered to you in compliance with Section 6.3. of the
Stock Purchase Agreement dated May 27, 1997 between myself and GlobeComm, Inc.
(the "Agreement"). All capitalized terms used in this opinion without definition
have the respective meaning given to them in the Agreement.
I represent and warrant to you that the Shares that I shall receive are
not being acquired by me with a view to their distribution except to the extent
and in the manner provided for in paragraph (d) of Rule 145 of the Act.
I agree not to dispose of any such Shares in any manner that would violate
the Act or any applicable rule or regulation promulgated thereunder or any state
securities law, and unless and until you shall have received an opinion of
counsel satisfactory to you, to the effect that a proposed disposition of such
shares may be effected without any such violation.
I further agree that the certificate representing the Shares may bear a
legend referring to the restrictions on disposition thereof in accordance with
the provisions of the foregoing paragraph and that stop-transfer instructions
may be filed with respect to such shares with the transfer agent for such
shares.
Very truly yours,
Purchasers
------------------------- -------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------- -------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------- -------------------------
Trevor Fettor ▇▇▇ ▇▇▇▇▇▇▇
------------------------- -------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
------------------------- -------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
------------------------- -------------------------
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ Low
------------------------- -------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
------------------------- -------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
------------------------- -------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------- -------------------------
▇▇▇▇ ▇▇▇▇▇▇▇ Rens Lipsuis
-------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Exhibit C
[LETTERHEAD OF ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ATTORNEY AT LAW]
May 27, 1997
To the Purchasers Named in
Schedule A of the Stock Purchase
Agreement dated May 27, 1997
Re: Opinion Letter
Dear Sirs and Madams:
I have acted as counsel to GlobeComm, Inc., a Delaware Corporation in
connection with the Stock Purchase Agreement dated May 27, 1997 (the
"Agreement") between the Company and ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ Low, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (collectively the "Purchasers"). This
is the opinion contemplated by Section 5.5. of the Agreement. All capitalized
terms used in this opinion without definition have the respective meanings given
to them in the Agreement.
I have examined originals of all of the Company's documents deemed
necessary as a basis for the opinions hereinafter expressed. As to questions of
fact material to such opinions, I have, when relevant facts were not
independently established, relied on representations of the Company from its
respective officers. This Opinion Letter is governed by, and shall be
interpreted in accordance with, the Legal Opinion Accord (the "Accord") of the
ABA Section of Business Law and is subject to a number of qualifications,
exceptions, definitions, limitations on coverage and other limitations,
specifically, ▇▇.▇▇. 11, 12, 13, 14, 15, 16, 17, 18, 19 and 20 in the Accord,
and this Opinion Letter should be read in conjunction therewith. The law covered
by the opinions expressed herein is limited to the Federal Law of the United
States and the Law of the States of New York and Delaware.
Based on the foregoing, my opinion is as follows:
1. The Company is a corporation duly organized, validity existing and
in good standing under the laws of the State of Delaware. The
Company is duly qualified to do business as a foreign corporation
and is in good standing in each other state in which the nature of
its activities or of its properties owned or leased makes such
qualification necessary, except to the extent that failure to so
qualify would not have a material adverse effect on the Company.
Purchasers under Agreement
May 27, 1997
Page two of four
2. The Agreement has been duly authorized by all necessary corporate
action on the part of the Company and has been duly executed and
delivered the Company. The Agreement is legal, valid, binding and
enforceable against the Company in accordance with its terms.
3. The total number of shares of all classes of stock that the
Corporation is authorized to issue is twenty one million
(21,000,000), consisting of thirteen million (13,000,000) shares of
Class A Common Stock with a par value of one cent ($.01) per share
of which 2,433,750 shares are issued and outstanding, three million
(3,000,000) shares of Class A Preferred Stock with a par value of
one cent ($.01) per share of which 327,500 shares are issued and
outstanding, and five million (5,000,000) shares of Class B Common
Stock with a par value of one cent ($.01) per share of which
5,000,000 are issued and outstanding.
4. All of the outstanding shares of Company Stock have been duly
authorized and are validly issued, fully paid, and nonassessable.
Expect for stock options of Employees listed on Schedule D and the
Disclosure Schedule, there are no (A) outstanding or authorized
options, warrants, calls, claims, purchase rights, subscription
rights, conversion rights, convertible securities, exchange rights,
or other contracts or commitments that could require the Company to
issue, sell, or otherwise cause to become outstanding any of its
capital stock; and (B) no preemptive or similar rights to subscribe
for or to purchase Company Stock.
5. The Company has full power and authority (including full corporate
power and authority) to own its properties and assets, to carry on
its business as presently conducted and to execute and deliver the
Agreement and to perform its obligations thereunder.
6. Neither the execution and the delivery of the Agreement, nor the
consummation of the transactions contemplated thereby, will (1)
violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Company is
subject or any provision of the charter or bylaws of the Company or
(2) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right
to accelerate, terminate, or cancel, or require any notice to or
consent of any party under any agreement, contract, lease, license,
instrument or other arrangement to which the Company is a party or
by which it is bound or to which any of its assets is subject (or
result in the imposition of any Security Interest upon any of its
assets).
Purchasers under Agreement
May 27, 1997
Page three of four
7. The Shares have been duly authorized and, when issued, sold, and
delivered in accordance with the terms of this Agreement, shall be
duly and validly issued, fully paid, and nonassessable, and shall
not be subject to any liens, claims, or encumbrances other than
restrictions on transfer under federal or state securities laws. The
shares of Class A Preferred Stock contemplated to be issued pursuant
to Section 10.2. of the Agreement and 172,500 shares of Class A
Preferred Stock contemplated to be issued pursuant to Section 10.1.
of the Agreement have been duly authorized, and the Company has
reserved sufficient shares of Class A Preferred Stock for issuance
pursuant thereto, and, when issued and delivered in accordance with
the terms of the Agreement, such shares of Class A Preferred Stock
shall be duly and validly issued, fully paid and nonassessable, and
shall not be subject to any liens, claims or encumbrances other than
restrictions on transfer under federal or state securities laws. The
Company has reserved sufficient shares of Class A Common Stock for
issuance upon conversion of the Class A Preferred Stock and, when
issued upon conversion of the Class A Preferred Stock, such shares
of Class A Common Stock shall be duly and validly issued, fully paid
and nonassessable.
8. There is no action, proceeding or investigation pending or, to the
best of my knowledge, threatened, or any claim that has been made
against the Company or the Controlling Stockholder, which seeks to
restrain, enjoin, prevent the consummation of otherwise challenge
the Agreement, the execution, delivery and performance thereof by
the Parties thereto or the transactions contemplated thereby, or
which might result, either individually or in the aggregate in any
material adverse change in the assets, conditions, affairs or
prospects of the Company.
9. Based upon the representations of the Purchasers contained in the
Agreement and the investment letter delivered by each Purchaser, the
offer, sale, issuance and delivery of the Shares, the shares of
Class A Preferred Stock contemplated to be issued pursuant to
Section 10.1. and 10.2. and the shares of Class A Common Stock to be
issued upon conversion of the Class A Preferred Stock are all exempt
from the registration requirement of the Securities Act of 1933, as
amended, and applicable state "blue sky" laws.
Purchasers under Agreement
May 27, 1997
Page four of four
10. No consent, approval or authorization of, or designation,
declaration or filing with, any governmental authority is required
in connection with the valid execution, delivery and performance by
the Company of the Agreement, other than such consents, approvals,
authorizations, designations, declarations or filings as have been
made or obtained on or before the date hereof or which are not
required to be made or obtained until after the date hereof.
Very truly yours,
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Exhibit D
PROPRIETARY INFORMATION AGREEMENT
AGREEMENT, dated the 27th day of May, 1997, by and between GLOBECOMM, INC.
(the "Company") doing business at ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ and
▇▇▇▇▇▇ ▇▇▇▇▇▇ residing at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇. The Company
and ▇▇▇▇▇▇ are collectively referred to as the "Parties."
WHEREAS, ▇▇▇▇▇▇ is employed by the Company as Secretary and Treasurer, the
controlling shareholder in the Company and a member of the board of directors of
the Company;
WHEREAS, the Company is entering into a stock purchase agreement (the
"Stock Purchaser Agreement") with various purchasers (the "Purchasers"), which
provides, among other things, that the purchasers shall invest two million five
hundred thousand dollars ($2,500,000) in the Company;
WHEREAS, as a condition to their willingness to enter into the Stock
Purchase Agreement, the purchasers require ▇▇▇▇▇▇ enter into this Proprietary
Information Agreement;
WHEREAS, in order to induce the Purchasers to enter into the Stock
Purchase Agreement, ▇▇▇▇▇▇ is willing to enter into this Proprietary Information
Agreement.
NOW, THEREFORE, in consideration of the promises and mutual agreements
hereinafter contained, the Parties hereto do hereby agree as follows:
1. Noncompetition. During the term of this Agreement and for the period of
two (2) years after his termination of employment with the Company, with or
without cause, ▇▇▇▇▇▇ shall not, (1) own an interest in; or (2) participate (as
an officer, director, or in any other capacity) in the management, operation, or
control of; or (3) perform services as or act in the capacity of an employee,
independent contractor, consultant, or agent of any enterprise engaged, directly
or indirectly, in the business of the Company or otherwise competitive with that
of the Company or engage in competition with any business conducted by the
Company except with the prior written consent of the Company; provided, however,
if the Company ceases to do business the
1
restrictions of this section shall not apply. ▇▇▇▇▇▇ agrees that due to the
unique nature of the business of the Company, the limitations set forth in this
covenant not to compete are reasonable.
2. Confidentiality. ▇▇▇▇▇▇ acknowledges and agrees that all product
specifications, lists of the Company's customers and suppliers, product planning
information, and other Company data related to its business ("Confidential
Information") are valuable assets of the Company. Except for disclosures
reasonably made to advance the business of the Company and information which is
a matter of public record, ▇▇▇▇▇▇ shall not, during the term of this Agreement
or after the termination of employment with the Company, disclose any
Confidential Information to any person or use any Confidential Information for
his benefit or the benefit of any other person, except with prior written
consent of the Company.
3. Return of Documents. ▇▇▇▇▇▇ acknowledges and agrees that all originals
and copies of records, reports, documents, lists, plans, drawings, memoranda,
notes, and other documentation related to the business of the Company or
containing any Confidential Information shall be the sole and exclusive property
of the Company, and shall be returned to the Company upon the termination of
employment with the Company or upon the written request of the Company.
4. Inventions. ▇▇▇▇▇▇ acknowledges and agrees that any idea, invention,
technique, modification, process, or improvement (whether patentable or not),
any industrial design (whether registerable or not), and any work of authorship
(whether or not copyright protection may be obtained for it) created, conceived,
or developed by ▇▇▇▇▇▇ (the "Invention"), either solely or in conjunction with
others, during the term of this Agreement, that relates in any way to, or is
useful in any manner in, the business then being conducted or proposed to be
conducted by the Company, and any such item created by ▇▇▇▇▇▇, either solely or
in conjunction with others, following termination of ▇▇▇▇▇▇'▇ employment with
the Company, shall belong exclusively to the Company.
2
5. Injunction. ▇▇▇▇▇▇ agrees that it would be difficult to measure damage
to the Company from any breach by him of this Agreement and that monetary
damages would be an inadequate remedy for any such breach. Accordingly, ▇▇▇▇▇▇
agrees that if there shall be any breach or threatened breach by him of this
Agreement, the Company shall be entitled, in addition to all other remedies it
may have at law or in equity, to an injunction or other appropriate orders to
restrain any such breach, without showing or proving any actual damage sustained
by the Company.
6. No Release. ▇▇▇▇▇▇ agrees that his termination with the Company or the
expiration of the term of this Agreement shall not release him from any
obligations under this Agreement.
WHEREAS, the Parties have signed their names to this Agreement on the date
as above written:
GlobeComm, Inc.
------------------------- -------------------------
By: ▇▇▇▇ ▇▇▇▇▇▇, President ▇▇▇▇▇▇ ▇▇▇▇▇▇
3
PROPRIETARY INFORMATION AGREEMENT
AGREEMENT, dated the 27th day of May, 1997, by and between GLOBECOMM, INC.
(the "Company") doing business at ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ and
▇▇▇▇ ▇▇▇▇▇▇ residing at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇. The Company
and ▇▇▇▇▇▇ are collectively referred to as the "Parties."
WHEREAS, ▇▇▇▇▇▇ is a shareholder of the Company and is employed as the
President of the Company;
WHEREAS, the Company is entering into a stock purchase agreement (the
"Stock Purchase Agreement") with various purchasers (the "Purchasers"), which
provides, among other things, that the Purchasers shall invest two million five
hundred thousand dollars ($2,500,000) in the Company;
WHEREAS, as a condition to their willingness to enter into the Stock
Purchase Agreement, the Purchasers require that ▇▇▇▇▇▇ enter into this
Proprietary Information Agreement;
WHEREAS, in order to induce the Purchasers to enter into the Stock
Purchase Agreement, ▇▇▇▇▇▇ is willing to enter into this Proprietary Information
Agreement.
NOW, THEREFORE, in consideration of the promises and mutual agreements
hereinafter contained, the Parties hereto do hereby agree as follows:
1. Noncompetition. During the term of this Agreement and for the period of
two (2) years after his termination of employment with the Company, with or
without cause, ▇▇▇▇▇▇ shall not, (1) own any interest in, or (2) participate (as
an officer, director, or in any other capacity) in the management, operation, or
control of, or (3) perform services as, or act in the capacity of, an employee,
independent contractor, consultant, or agent of any enterprise engaged, directly
or indirectly, in the business of the Company or otherwise competitive with the
Company, or engage in competition with any business conducted by the Company,
except with the prior written consent of the Company; provided, however, if the
Company dissolves, liquidates, winds up or ceases to do business, the
restrictions of this section shall not apply.
1
▇▇▇▇▇▇ agrees that due to the unique nature of the business of the Company, the
limitations set forth in this covenant not to compete are reasonable.
2. Confidentiality. ▇▇▇▇▇▇ acknowledges and agrees that all product
specifications, lists of the Company's customers and suppliers, product planning
information, and other Company data related to its business ("Confidential
Information") are valuable assets of the Company. Except for disclosures
reasonably made to advance the business of the Company and information which is
a matter of public record, ▇▇▇▇▇▇ shall not, during the term of this Agreement
or after the termination of employment with the Company, disclose any
Confidential Information to any person or use any Confidential Information for
his benefit or the benefit of any other person, except with prior written
consent of the Company.
3. Return of Documents. ▇▇▇▇▇▇ acknowledges and agrees that all originals
and copies of records, reports, documents, lists, plans, drawings, memoranda,
notes, and other documentation related to the business of the Company or
containing any Confidential Information shall be the sole and exclusive property
of the Company, and shall be returned to the Company upon the termination of
employment with the Company or upon the written request of the Company.
4. Injunction. ▇▇▇▇▇▇ agrees that it would be difficult to measure damage
to the Company from any breach by him of this Agreement and that monetary
damages would be an inadequate remedy for any such breach. Accordingly, ▇▇▇▇▇▇
agrees that if there shall be any breach or threatened breach by him of this
Agreement, the Company shall be entitled, in addition to all other remedies it
may have at law or in equity, to an injunction or other appropriate orders to
restrain any such breach, without showing or proving any actual damage sustained
by the Company.
5. No Release. ▇▇▇▇▇▇ agrees that his termination with the Company or the
expiration of the term of this Agreement shall not release him from any
obligations under this Agreement.
2
WHEREAS, the Parties have signed their names to this Agreement on the date
as above written:
GlobeComm, Inc.
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▇▇▇▇▇▇ ▇▇▇▇▇▇, Secretary ▇▇▇▇ ▇▇▇▇▇▇
3
Exhibit E
Ratchet Protection
I. The following examples are applications of Section 10.1 of the Class A
Stock Purchase Agreement.
Share Price: $2.00
Shares sold: 1,000,000
Total Investment: $2,000,000
The Company sells Common Stock in a secondary private placement at $1.50 /
share.
$2.00/share x 1,000,000 shares = $2,000,000
$1.50/share x 1,333,333 shares = $2,000,000
Purchasers shall be issued pro rata an additional 333,333 shares of Class
A Preferred Stock (1,333,333 shares less 1,000,000 shares).
II. The following are examples of the applications of Section 10.2.1 and
10.2.2 of the Class A Stock Purchase Agreement.
Share Price: $2.00
Shares sold: 1,000,000
Total Investment: $2,000,000
A. No public offering or private offer to sell shares or Company Sale
occurs within 30 months after the Closing Date.
$2/share x 1,000,000 shares = $2,000,000
$1/share x 2,000,000 shares = $2,000,000
Purchasers shall be issued an additional 1,000,000 shares of Class A
Preferred Stock (2,000,000 shares less 1,000,000 shares)
1
B. Public Offering or private offer to sell occurs within 30 months of
the Closing Date; no Company Sale occurs.
Offering price = $16.00/share for Class A Common or Class A Preferred.
$2/share x 1,000,000 shares = $2,000,000
$1.6/share x 1,250,000 shares = $2,000,000
Purchaser will be issued an additional 250,000 shares of Class A Preferred
Stock (1,250,000 shares less 1,000,000).
C. Public Offering or private offer to sell and Company Sale occur
within 30 months of Closing Date.
Offering price = $18.00 / share for Class A Common or Class A Preferred
Company Sale = $16.00 / share for Class A Common or Class A Preferred
$2/share x 1,000,000 shares = $2,000,000
$1.6/share x 1,250,000 shares = $2,000,000
$1.8/share x 1,111,111 shares = $2,000,000
Purchaser will be issued an additional 111,111 shares of Class A Preferred
Stock (1,111,111 shares less 1,000,000) since the $1.80 / shares in the
public offering or private sale is greater than the $1.60 / share of the
Company Sale.
D. Public Offering does not occur, Company Sale occurs within 30 months
of Closing Date.
Company Sale = $8.00 / share for Class A Common or Class A Preferred
$2/share x 1,000,000 shares = $2,000,000
$.80/share x 2,500,000 shares = $2,000,000
Purchaser will be issued an additional 1,000,000 shares of Class A
Preferred Stock, not 1,500,000 shares, since in no event shall the share
price be adjusted to less than $1.00 / share
2
CONSENT OF THE HOLDERS OF
CLASS A COMMON STOCK OF GLOBECOMM, INC.
Pursuant to Section 228 of the
Delaware General Corporation Law
The undersigned, being the holders of the majority of the Class A Common
Stock of GlobeComm, Inc., (the "Corporation"), do hereby consent to the adoption
of the following resolution in lieu of holding a meeting of the holders of the
Class A Common Stockholders.
RESOLVED, that the Certificate of Incorporation be amended and modified,
as advised by the Board of Directors of the Corporation, in the manner set forth
in the minutes of the Board of Directors dated May 27, 1997, a copy of which is
attached hereto.
Dated: New York, New York
May 27, 1997
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ /s/ ▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇ /s/ ▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇
InfoSpace, Inc. Vanity Mail Services, Inc.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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By: ▇▇▇▇▇▇ ▇▇▇▇ By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
PRESIDENT'S COMPLIANCE CERTIFICATE
OF
GLOBECOMM, INC.
I, ▇▇▇▇ ▇▇▇▇▇▇, President of GlobeComm, Inc., do hereby certify that,
except as set forth in the Disclosure Schedule dated May 27, 1997, the
representations and warranties contained in Section 3 of the Stock Purchase
Agreement are true and correct as of this date. I certify that all agreements,
conditions and covenants contained in the Stock Purchase Agreement required to
be performed or complied with by the day of closing have been performed or
complied with as this date.
Dated: May 27, ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
GlobeComm, Inc.
/s/ ▇▇▇▇ ▇▇▇▇▇▇, President
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By: ▇▇▇▇ ▇▇▇▇▇▇, President