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EXHIBIT 10.2
HEALTHSTREAM, INC.
SERIES B CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
THIS SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this
"Agreement") is made as of the 21st day of April, 1999, by and between
HealthStream, Inc., a Tennessee corporation (the "Company"), and the persons and
entities designated as an investor on Schedule A hereto (each an "Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1 SALE AND ISSUANCE OF SERIES B CONVERTIBLE PREFERRED STOCK.
(a) The Company shall adopt and file with the Secretary of State of the
State of Tennessee on or before the First Closing (as hereinafter defined) an
Amended and Restated Charter in the form attached hereto as Exhibit A (the
"Restated Charter").
(b) On or prior to the First Closing, the Company shall have authorized
(i) the sale and issuance to the Investors of the shares of Series B Convertible
Preferred Stock and (ii) the issuance of such shares of Common Stock to be
issued upon conversion of such shares (the "Conversion Shares"). The shares of
Series B Convertible Preferred Stock and the Conversion Shares shall have the
rights, preferences, privileges and restrictions set forth in the Restated
Charter.
(c) Subject to the terms and conditions of this Agreement, each
Investor agrees, severally and not jointly, to purchase and the Company agrees
to sell and issue to each Investor, severally and not jointly, the number of
shares of the Company's Series B Convertible Preferred Stock set forth opposite
each Investor's name on Schedule A hereto at a purchase price of $10.00 per
share. The Series B Convertible Preferred Stock will be sold at three closings
as set forth in paragraph 1.2 herein.
(d) In addition to the shares referred to on Schedule A hereto, each
Investor shall be entitled to subscribe for and purchase from the Company at the
price of $10.00 per share ("Option Exercise Price") a number of shares of the
Company's Series B Convertible Preferred Stock equal to up to twenty percent
(20%) of the number of shares set forth opposite each Investor's name on
Schedule A hereto ("Option") at any time prior to the earlier of April 21st,
2000 or upon the date of a subsequent equity financing by the Company with
aggregate gross proceeds of not less than $5,000,000. In the event of a
subsequent equity financing, the Company shall give written notice to the
Investors that a subsequent financing has occurred and each Investor shall then
have thirty (30) days to exercise any or all of its Option in accordance with
paragraph 1.1(d)(i) herein, but in no case shall that date be later than May
21st, 2000. The Options shall vest and become exercisable at the time and in the
same percentage that the funds are delivered to the Company under the closing
schedule outlined in paragraph 1.2 herein.
(i) Method of exercise. Subject to the last sentence of paragraph
1.1(d) above, the rights represented by the Options may be exercised by the
holder in whole at any time or from time to time in part, but not as to a
fractional share of Series B Convertible Preferred Stock by written notice
delivered to the Company, which notice shall state the number of shares with
respect to which the Option is being exercised and shall specify a date not less
than five (5) nor more than ten (10) days after the date
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of such notice as the date on which the shares will be taken up and payment made
as provided in paragraph 1.1(d)(ii) hereof.
(ii) The holder may make payment in respect of the exercise of
the Option as follows:
1) Cash Exercise. By payment to the Company of the Option
Exercise Price in cash or by certified or official bank
check for each share purchased;
2) Notes Exercise. By surrender to the Company of any notes or
other obligations issued by the Company with all such notes
or other obligations of the Company so surrendered being
credited against the Option Exercise Price in an amount
equal to the principal amount thereof plus the amount of
any interest accrued thereon to the date of such surrender;
3) Securities Exercise. By delivery to the Company of Series B
Convertible Preferred Stock issued by the Company with such
securities being credited against the Option Exercise Price
in an amount equal to the fair market value thereof;
4) Net Issue Exercise. By an election to receive shares the
aggregate fair market value of which as of the date of
exercise is equal to the fair market value of the Option
(or the portion thereof being exercised) on such date, in
which event the Company, upon receipt of notice of such
election, shall issue to the holder a number of shares of
Series B Convertible Preferred Stock equal to (A) the
number of shares of Series B Convertible Preferred Stock
acquirable upon exercise of all or any portion of the
Option being exercised, as at such date, multiplied by (B)
the balance remaining after deducting (x) the Option
Exercise Price from (y) the fair market value of one share
of Series B Convertible Preferred Stock as at such date and
dividing the result by (C) such fair market value; or
5) Combined Payment Method. By satisfaction of the Option
Exercise Price for each share being acquired in any
combination of the methods described in clauses (1) through
(4) above.
(iii) Definition of Fair Market Value. For the purposes of
paragraph (ii) above, the fair market value of the Series B Convertible
Preferred Stock shall be determined by the Board of Directors of the Company
exclusive of any member of such Board of Directors that directly or indirectly
controls any holder of Options.
1.2 CLOSING.
(a) The purchase and sale of at least one half (1/2) of the number of
shares of Series B Convertible Preferred Stock set forth opposite each
Investor's name on Schedule A hereto shall take place at the offices of the
Company at 10:00 a.m., on April 21st, 1999, or at such other time and place as
the Company and Investors acquiring in the aggregate more than half the shares
of Series B Convertible
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Preferred Stock being sold pursuant hereto shall mutually agree, either orally
or in writing (the "First Closing").
(b) The purchase and sale of at least one half (1/2) of the number of
those shares of Series B Convertible Preferred Stock exempted from the Minimum
Investment set forth in paragraphs 5.3 and 4.6 herein shall take place at the
offices of the Company within ten (10) business days of the First Closing (the
"Second Closing"). If the parties mentioned in paragraphs 5.3 and 4.6 herein do
not purchase at least one half (1/2) of the number of shares of Series B
Convertible Preferred Stock set forth opposite each Investor's name on Schedule
A hereto at the First Closing or Second Closing, then the Company may increase
the number of shares subscribed by other Investors listed on Schedule A hereto.
Under no circumstance will the total number of shares of Series B Convertible
Preferred Stock issued at the closings exceed the total number set forth on
Schedule A hereto.
(c) The purchase and sale of the remaining number of shares of Series B
Convertible Preferred Stock set forth opposite each Investor's name on Schedule
A hereto shall take place at the offices of the Company within twenty (20)
business days of the Investors receiving a written demand therefor from the
Board of Directors of the Company after the Board of Directors shall have
adopted a resolution approving such purchase and sale provided no such demand be
sent by the Board of Directors after April 30, 2000. The Company covenants not
to raise any additional equity financing prior to April 30, 2000 without calling
pursuant to paragraph 1.2 (c) herein the remaining number of shares of Series B
Convertible Preferred Stock referred to herein.
(d) At each closing, the Company shall deliver to each Investor a
certificate representing the shares of Series B Convertible Preferred Stock that
such Investor is purchasing against payment of the purchase price therefor by
check, wire transfer, or such other form of payment as shall be mutually agreed
upon by such Investor and the Company.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to each Investor that as of
the date of this Agreement, except as set forth on a Schedule of Exceptions
furnished to each Investor and special counsel for the Investors, specifically
identifying the relevant subparagraph(s) hereof, which exceptions shall be
deemed to be representations and warranties as if made hereunder:
2.1 ORGANIZATION; GOOD STANDING, QUALIFICATION.
The Company is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Tennessee, has all requisite
corporate power and authority to own and operate its properties and assets and
to carry on its business as now conducted and as presently proposed to be
conducted, to execute and deliver this Agreement and any other agreement to
which the Company is a party the execution and delivery of which is contemplated
hereby (the "Ancillary Agreements"), to issue and sell the Series B Convertible
Preferred Stock and the Common Stock issuable upon conversion thereof, and to
carry out the provisions of this Agreement, the Restated Charter and any
Ancillary Agreement. The Company is duly qualified and is authorized to transact
business and is in good standing as a foreign corporation in each jurisdiction
in which the failure so to qualify would have material adverse effect on its
business, properties, prospects, or financial condition.
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2.2 AUTHORIZATION.
All corporate action on the part of the Company, its officers,
directors and stockholders necessary for the authorization, execution and
delivery of this Agreement and any Ancillary Agreement, the performance of all
obligations of the Company hereunder and thereunder at the First Closing and the
authorization, issuance (or reservation for issuance), sale, and delivery of the
Series B Convertible Preferred Stock being sold hereunder and the Common Stock
issuable upon conversion thereof has been taken or will be taken prior to the
First Closing, and this Agreement, and any Ancillary Agreement, when executed
and delivered, will constitute valid and legally binding obligations of the
Company, enforceable in accordance with their respective terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors' rights
generally, and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies.
2.3 VALID ISSUANCE OF PREFERRED AND COMMON STOCK.
The Series B Convertible Preferred Stock that is being purchased by the
Investors hereunder, when issued, sold, and delivered in accordance with the
terms of this agreement for the consideration expressed herein, will be duly and
validly issued, fully paid, and nonassessable, and will be free of restrictions
on transfer other than restrictions on transfer under this Agreement, any
Ancillary Agreement and under applicable state and federal securities laws. The
Common Stock issuable upon conversion of the Series B Convertible Preferred
Stock being purchased under this Agreement has been duly and validly reserved
for issuance and, upon issuance in accordance with the terms of the Restated
Charter, will be duly and validly issued, fully paid, and nonassessable and will
be free of restrictions on transfer other than restrictions on transfer under
this Agreement, any Ancillary Agreement and under applicable state and federal
securities laws.
2.4 GOVERNMENTAL CONSENTS.
No consent, approval, qualification, order or authorization of, or
filing with, any local, state, or federal governmental authority is required on
the part of the Company in connection with the Company's valid execution,
delivery, or performance of this Agreement, the offer, sale or issuance of the
Series B Convertible Preferred Stock by the Company or the issuance of Common
Stock upon conversion of the Series B Convertible Preferred Stock, except (i)
the filing of the Restated Charter with the Secretary of State of the State of
Tennessee, and (ii) such filings as have been made prior to the First Closing,
except any notices of sale required to be filed with the Securities and Exchange
Commission under Regulation D of the Securities Act of 1933, as amended (the
"Securities Act"), or such post-closing filings as may be required under
applicable state securities laws, which will be timely filed within the
applicable periods therefor.
2.5 CAPITALIZATION AND VOTING RIGHTS.
The authorized capital of the Company consists, or will consist
immediately prior to the Closing, of:
(a) Preferred Stock. 5,000,000 shares of Preferred Stock, no par value,
of which 76,000 shares have been designated as Series A Convertible Preferred
Stock, all of which are outstanding, and 1,376,360 shares have been designated
as Series B Convertible Preferred Stock, none of which are outstanding. The
rights, privileges and preferences of the Series B Convertible Preferred Stock
are as stated in the Restated Charter.
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(b) Common Stock. 20,000,000 shares of common stock, no par value
("Common Stock"), of which 1,991,647 shares are issued and outstanding. On April
21, 1999, ▇▇▇▇▇▇ ▇ ▇▇▇▇▇, ▇▇. purchased 231,481 shares of Common Stock at a
purchase price of $4.32 per share. An additional 4,000,000 shares of Common
Stock are reserved for issuance pursuant to the Employee Stock Option Plan,
dated April 15, 1994 (the "Option Plan"). The Company has granted options under
the Option Plan to acquire a total of 902,466 shares of Common Stock.
(c) The outstanding shares of Common Stock and options granted under
the Option Plan are owned by the stockholders and option holders in the numbers
specified in Exhibit B hereto.
(d) The outstanding shares of Common Stock have been duly authorized
and validly issued, are fully paid and nonassessable, and were issued in
accordance with the registration or qualification provisions of the Securities
Act and any relevant state securities laws or pursuant to valid exemptions
therefrom.
(e) Except as contemplated herein and in the Ancillary Agreements and
for (i) the conversion privileges of the Series B Convertible Preferred Stock,
and (ii) currently outstanding options under the Option Plan, there are no
outstanding options, rights (including conversion or preemptive rights and
rights of first refusal), proxy or stockholder agreements or agreements of any
kind for the purchase or acquisition from the Company of any of its securities.
Other than the Stockholder's Agreement, dated April 15, 1994 (the "Stockholder's
Agreement"), the Company is not a party or subject to any agreement or
understanding, and, to the best of the Company's knowledge, there is no
agreement or understanding between any persons that affects or relates to the
Common Stock or the voting or giving of written consents with respect to any
security or the voting by a director of the Company.
2.6 SUBSIDIARIES.
The Company does not own or control, directly or indirectly, any
interest in any other corporation, partnership, limited liability company,
association, or other business entity. The Company is not a participant in any
joint venture, partnership, or similar arrangement.
2.7 CONTRACTS AND OTHER COMMITMENTS.
The Company does not have and is not bound by any contract, agreement,
lease, commitment, or proposed transaction, judgment, order, writ or decree,
written or oral, absolute or contingent, other than (i) contracts for the
purchase of supplies and services that were entered into in the ordinary course
of business and that do not involve more than $50,000, and do not extend for
more than one (1) year beyond the date hereof, (ii) sales contracts entered into
in the ordinary course of business, and (iii) contracts terminable at will by
the Company on no more than thirty (30) days' notice without cost or liability
to the Company and that do not involve any employment or consulting arrangement
and are not material to the conduct of the Company's business. For the purpose
of this paragraph, employment and consulting contracts and contracts with labor
unions, and license agreements and any other agreements relating to the
Company's acquisition or disposition of patent, copyright, trade secret or other
proprietary rights or technology (other than standard end-user license
agreements) shall not be considered to be contracts entered into in the ordinary
course of business.
2.8 RELATED-PARTY TRANSACTIONS.
No employee, officer, stockholder or director of the Company or member
of his or her immediate family is indebted to the Company, nor is the Company
indebted (or committed to make loans or extend
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or guarantee credit) to any of them, other than (i) for payment of salary for
services rendered, (ii) reimbursement for reasonable expenses incurred on behalf
of the Company, and (iii) for other standard employee benefits made generally
available to all employees (including stock option agreements outstanding under
any stock option plan approved by the Board of Directors of the Company). To the
best of the Company's knowledge, none of such persons has any direct or indirect
ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation that competes with the Company, except that employees, stockholders,
officers, or directors of the Company and members of their immediate families
may own stock in publicly traded companies that may compete or conduct business
with the Company. To the best of the Company's knowledge, no officer, director,
or stockholder or any member of their immediate families is, directly or
indirectly, interested in any material contract with the Company (other than
such contracts as relate to any such person's employment, ownership of capital
stock or other securities of the Company).
2.9 REGISTRATION RIGHTS.
The Company is presently not under any obligation and has not granted
any rights to register under the Securities Act any of its presently outstanding
securities or any of its securities that may subsequently be issued.
2.10 PERMITS.
The Company has all franchises, permits, licenses, and any similar
authority necessary for the conduct of its business as now being conducted by
it, the lack of which could materially and adversely affect the business,
properties, prospects, or financial condition of the Company, and believes it
can obtain, without undue burden or expense, any similar authority for the
conduct of its business as presently planned to be conducted. The Company is not
in default in any material respect under any of such franchises, permits,
licenses or other similar authority.
2.11 COMPLIANCE WITH OTHER INSTRUMENTS.
The Company is not in violation or default in any material respect of
any provision of its Restated Charter or Bylaws or in any material respect of
any provision of any mortgage, indenture, agreement, instrument, or contract to
which it is a party or by which it is bound or, to the best of its knowledge, of
any federal or state judgment, order, writ, decree, statute, rule, regulation or
restriction applicable to the Company. The execution, delivery, and performance
by the Company of this Agreement, and any Ancillary Agreement, and the
consummation of the transactions contemplated hereby and thereby, will not
result in any such violation or be in material conflict with or constitute, with
or without the passage of time or giving of notice, either a material default
under any such provision or an event that results in the creation of any
material lien, charge, or encumbrance upon any assets of the Company or the
suspension, revocation, impairment, forfeiture, or non-renewal of any material
permit, license, authorization, or approval applicable to the Company, its
business or operations, or any of its assets or properties.
2.12 LITIGATION.
There is no action, suit, proceeding, or investigation pending or, to
the Company's knowledge, currently threatened against the Company that questions
the validity of this Agreement or any Ancillary Agreement or the right of the
Company to enter into such agreements, or to consummate the transactions
contemplated hereby or thereby, or that might result, either individually or in
the aggregate, in any
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material adverse change in the assets, business, properties, prospects, or
financial condition of the Company, or in any material change in the current
equity ownership of the Company. The foregoing includes, without limitation, any
action, suit, proceeding, or investigation pending or currently threatened
involving the prior employment of any of the Company's employees, their use in
connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers, their obligations under
any agreements with prior employers, or negotiations by the Company with
potential backers of, or investors in, the Company or its proposed business. The
Company is not a party to or, to the best of its knowledge, named in or subject
to any order, writ, injunction, judgment, or decree of any court, government
agency, or instrumentality. There is no action, suit, proceeding or
investigation by the Company currently pending or that the Company currently
intends to initiate.
2.13 OFFERING MEMORANDUM.
The Offering Memorandum previously delivered to each Investor (the
"Offering Memorandum") was prepared in good faith by the Company and does not,
to the best of the Company's knowledge after reasonable investigation, contain
any untrue statement of a material fact nor does it omit to state a material
fact necessary to make the statements therein not misleading, except that with
respect to assumptions, projections and expressions of opinion or predictions
contained in the Offering Memorandum, the Company represents only that such
assumptions, projections, expressions of opinion and predictions were made in
good faith and that the Company believes there is a reasonable basis therefor.
2.14 OFFERING.
Subject in part to the truth and accuracy of each Investor's
representations set forth in this Agreement, the offer, sale and issuance of the
Series B Convertible Preferred Stock as contemplated by this Agreement are
exempt from the registration requirements of the Securities Act, and neither the
Company nor any authorized agent acting on its behalf will take any action
hereafter that would cause the loss of such exemption.
2.15 FINANCIAL STATEMENTS.
The Company has delivered to each Investor its financial statements
(balance sheet and profit and loss statement, statement of stockholders' equity
and statement of cash flows including notes thereto) at December 31, 1998 and
for the year then ended (the "Financial Statements"). The Financial Statements
have been consistently prepared and derived from the books and records of the
Company. The Financial Statements fairly present in all material respects the
financial condition and operating results of the Company as of the dates, and
for the periods, indicated therein. Except as set forth in the Financial
Statements and to the best of the Company's knowledge, the Company has no
material liabilities, contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business subsequent to December 31, 1998 and
(ii) obligations under contracts and commitments incurred in the ordinary course
of business and not required under generally accepted accounting principles to
be reflected in the Financial Statements, which, in both cases, individually or
in the aggregate, are not material to the financial condition or operating
results of the Company. Except as disclosed in the Financial Statements, the
Company is not a guarantor or indemnitor of any indebtedness of any other
person, firm, or corporation. The Company maintains and will continue to
maintain a standard system of accounting established and administered in
accordance with generally accepted accounting principles.
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2.16 CHANGES.
To the best of the Company's knowledge, since December 31, 1998, there
has not been:
(a) any change in the assets, liabilities, financial condition, or
operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business that have not
been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the business, properties,
prospects, or financial condition of the Company (as such business is presently
conducted and as it is presently proposed to be conducted);
(c) any waiver or compromise by the Company of a valuable right or of
a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim, or encumbrance or
payment of any obligation by the Company, except in the ordinary course of
business and that is not material to the business, properties, prospects, or
financial condition of the Company (as such business is presently conducted and
as it is presently proposed to be conducted);
(e) any material change to a material contract or arrangement by which
the Company or any of its assets is bound or subject;
(f) any material change in any compensation arrangement or agreement
with any employee, officer, director or stockholder other than in the ordinary
course of business;
(g) any sale, assignment, or transfer of any patents, trademarks,
copyrights, trade secrets, or other intangible assets;
(h) any resignation or termination of employment of any key officer of
the Company; and the Company, does not know of the impending resignation or
termination of employment of any such officer;
(i) receipt of notice that there has been a loss of, or material order
cancellation by, any major customer of the Company;
(j) any mortgage, pledge, transfer of a security interest in, or lien,
created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable or contested by the
Company in good faith;
(k) any loans or guarantees made by the Company to or for the benefit
of its employees, stockholders, officers, or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(l) any declaration, setting aside, or payment of any dividend or other
distribution of the Company's assets in respect of any of the Company's capital
stock, or any direct or indirect redemption, purchase, or other acquisition of
any of such stock by the Company;
(m) any other event or condition of any character that might materially
and adversely affect the business, properties, prospects, or financial condition
of the Company (as such business is presently conducted and as it is presently
proposed to be conducted); or
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(n) any agreement or commitment by the Company to do any of the things
described in this paragraph 2.16.
2.17 INTELLECTUAL PROPERTY.
To the best of its knowledge (but without having conducted any special
investigation or patent search), the Company owns or possesses sufficient legal
rights to all patents, trademarks, service marks, trade names, copyrights, trade
secrets, licenses, information, and proprietary rights and processes necessary
for its business as now conducted without any conflict with, or infringement of
the rights of, others which would have a material adverse effect on the
business, properties, prospects or financial condition of the Company. The
Schedule of Exceptions contains a complete list of patents and pending patent
applications of the Company. Except for agreements with its own employees or
consultants, substantially in the form referenced in paragraph 2.18 below, and
standard end-user license agreements, there are no outstanding options,
licenses, or agreements of any kind relating to the foregoing, nor is the
Company bound by or a party to any options, licenses, or agreements of any kind
with respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information, and proprietary rights and processes of
any other person or entity. The Company has not received any communications
alleging that the Company has violated or, by conducting its business as
proposed, would violate any of the patents, trademarks, service marks, trade
names, copyrights, trade secrets, or other proprietary rights or processes of
any other person or entity. The Company is not aware that any of its employees
is obligated under any contract (including licenses, covenants, or commitments
of any nature) or other agreement, or subject to any judgment, decree, or order
of any court or administrative agency, that would interfere with the use of such
employee's best efforts to promote the interests of the Company or that would
conflict with the Company's business as proposed to be conducted. Neither the
execution nor delivery of this Agreement, nor the carrying on of the Company's
business by the employees of the Company, nor the conduct of the Company's
business as proposed, will, to the best of the Company's knowledge, conflict
with or result in a breach of the terms, conditions, or provisions of, or
constitute a default under, any contract, covenant, or instrument under which
any of such employees is now obligated. The Company does not believe it is or
will be necessary to use any inventions of any of its employees (or persons it
currently intends to hire) made prior to their employment by the Company. The
Company has taken reasonable efforts to identify any possible liabilities,
losses, costs, expenses, or other adverse effects it may experience as a result
of the potential inability of computer systems to recognize the "Year 2000"and
has determined that it will have no material loss, cost, liability, or expense.
2.18 EMPLOYEES; EMPLOYEE COMPENSATION.
To the best of the Company's knowledge, there is no strike, labor
dispute or union organization activities pending or threatened between it and
its employees. None of the Company's employees belongs to any union or
collective bargaining unit. To the best of its knowledge, the Company has
complied in all material respects with all applicable state and federal equal
opportunity and other laws related to employment. The Company has a proprietary
information agreement with each of its employees protecting the Company's
confidential information substantially in the form submitted to the counsel
mentioned in paragraph 6.9 herein. To the best of the Company's knowledge, no
employee of the Company is or will be in violation of any judgment, decree, or
order, or any term of any employment contract, patent disclosure agreement, or
other contract or agreement relating to the relationship of any such employee
with the Company, or any other party because of the nature of the business
conducted or presently proposed to be conducted by the Company or to the use by
the employee of his or her best efforts with respect to such business. Other
than the Option Plan, the Company is not a party to or bound by any currently
effective employment contract, deferred compensation agreement, bonus plan,
incentive
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plan, profit sharing plan, retirement agreement, or other employee compensation
agreement. The Company is not aware that any officer or key employee, or that
any group of key employees, intends to terminate their employment with the
Company, nor does the Company have a present intention to terminate the
employment of any of the foregoing. Subject to general principles related to
wrongful termination of employees, the employment of each officer and employee
of the Company is terminable at the will of the Company.
2.19 TAX RETURNS, PAYMENTS, AND ELECTIONS.
The Company has timely filed all tax returns and reports (federal,
state and local) as required by law. These returns and reports are true and
correct in all material respects. The Company has paid all taxes and other
assessments due and payable, except those contested by it in good faith. The
provision for taxes of the Company as shown in the Financial Statements is
adequate for taxes due or accrued as of the date thereof. The Company has not
elected pursuant to the Internal Revenue Code of 1986, as amended ("Code"), to
be treated as a collapsible corporation pursuant to the Code, nor has it made
any other elections pursuant to the Code (other than its "S corporation"
election, which election has been revoked effective October 13, 1998, or that
relate solely to methods of accounting, depreciation, or amortization) that
would have a material effect on the business, properties, prospects, or
financial condition of the Company. The Company has never had any tax deficiency
proposed or assessed against it and has not executed any waiver of any statute
of limitations on the assessment or collection of any tax or governmental
charge. None of the Company's federal income tax returns and none of its state
income or franchise tax or sales or use tax returns has ever been audited by
governmental authorities. Since the date of the Financial Statements, the
Company has made adequate provisions on its books of account for all taxes,
assessments, and governmental charges with respect to its business, properties,
and operations for such period. The Company has withheld or collected from each
payment made to each of its employees, the amount of all taxes, including, but
not limited to, federal income taxes, Federal Insurance Contribution Act taxes
and Federal Unemployment Tax Act taxes required to be withheld or collected
therefrom, and has paid the same to the proper tax receiving officers or
authorized depositaries.
2.20 ENVIRONMENTAL AND SAFETY LAWS.
To the best of its knowledge, the Company is not in violation of any
applicable statute, law, or regulation relating to the environment or
occupational health and safety which would have a material adverse effect on the
business, properties, prospects or financial condition of the Company, and to
the best of its knowledge, no material expenditures are or will be required in
order to comply with any such existing statute, law, or regulation.
2.21 MINUTE BOOKS.
The copy of the minute books of the Company provided to the special
counsel referred to in paragraph 6.9 herein contains minutes of all meetings of
directors and stockholders and all actions by written consent without a meeting
by the directors and stockholders since the date of incorporation and accurately
reflects all actions by the directors (and any committee of directors) and
stockholders with respect to all transactions referred to in such minutes in all
material respects.
2.22 REAL PROPERTY HOLDING CORPORATION.
The Company is not a real property holding corporation within the
meaning of Internal Revenue Code Section 897(c)(2) and any regulations
promulgated thereunder.
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2.23 QUALIFIED SMALL BUSINESS.
The Company represents that the shares of Series B Convertible Preferred Stock
are eligible to qualify as "qualified small business stock" as defined in
Section 1202(c) of the Code.
3. ACKNOWLEDGMENTS OF REPRESENTATIONS AND WARRANTIES OF THE INVESTORS.
The Investors hereby represent and warrant to the Company that as of
the date of this Agreement:
3.1 AUTHORIZATION.
Such Investor has full power and authority to enter into this
Agreement, and that this Agreement, when executed and delivered, will constitute
a valid and legally binding obligation of such Investor enforceable in
accordance with its terms.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT.
This Agreement is made with each Investor in reliance upon such
Investor's representation to the Company, which by such Investor's execution of
his Agreement such Investor hereby confirms, that the Series B Convertible
Preferred Stock to be purchased by such Investor and the Common Stock issuable
upon conversion thereof (collectively, the "Securities") will be acquired for
investment for such Investor's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and that such
Investor has no present intention of selling, granting any participation in, or
otherwise distributing the same. By executing this Agreement, each Investor
further represents that such Investor does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities.
3.3 RELIANCE UPON INVESTORS' REPRESENTATIONS.
Each Investor understands that the Series B Convertible Preferred Stock
is not, and any Common Stock acquired on conversion thereof at the time of
issuance may not be, registered under the Securities Act on the ground that the
sale provided for in this Agreement and the issuance of securities hereunder is
exempt from registration under the Securities Act pursuant to Section 4(2)
thereof, and that the Company's reliance on such exemption is predicated on the
Investors' representations set forth herein.
3.4 RECEIPT OF INFORMATION.
Each Investor believes such Investor has received all the information
such Investor considers necessary or appropriate for deciding whether to
purchase the Series B Convertible Preferred Stock. Each Investor further
represents that such Investor has had an opportunity to ask questions and
receive answers from the Company regarding the terms and conditions of the
offering of the Series B Convertible Preferred Stock and the business,
properties, prospects, and financial condition of the Company and to obtain
additional information (to the extent the Company possessed such information or
could acquire it without unreasonable effort or expense) necessary to verify the
accuracy of any information furnished to such Investor or to which such Investor
had access. The foregoing, however, does not limit or modify the representations
and warranties of the Company in Section 2 of this Agreement or the right of the
Investors to rely thereon.
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3.5 INVESTMENT EXPERIENCE.
Each Investor represents that such Investor is experienced in
evaluating and investing in private placement transactions of securities of
companies in a similar stage of development and acknowledges that such Investor
is able to fend for himself, herself or itself, can bear the economic risk of
such Investor's investment, and has such knowledge and experience in financial
and business matters that such Investor is capable of evaluating the merits and
risks of the investment in the Series B Convertible Preferred Stock. If other
than an individual, Investor also represents that each record or beneficial
owner of any equity interest in Investor (each an "Investor Owner") meets the
requirements of the preceding sentence.
3.6 ACCREDITED INVESTOR.
(a) The term "Accredited Investor" as used herein refers to:
(i) A person or entity who is a director or executive officer
of the Company;
(ii) Any bank as defined in Section 3(a)(2) of the Securities
Act, or any savings and loan association or other institution as defined in
Section 3(a)(5)(A) of the Securities Act whether acting in its individual or
fiduciary capacity; any broker or dealer registered pursuant to Section 15 of
the Securities Exchange Act of 1934; any insurance company as defined in Section
2(13) of the Securities Act; any investment company registered under the
Investment Company Act of 1940 or a business development company as defined in
Section 2(a)(48) of that Act; any Small Business Investment Company licensed by
the U.S. Small Business Administration under Section 301(c) or (d) of the Small
Business Investment Act of 1958; any plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; any employee benefit plan within the meaning of
Title I of the Employee Retirement Income Security Act of 1974, if the
investment decision is made by a plan fiduciary, as defined in Section 3(21) of
such Act, which is either a bank, savings and loan association, insurance
company, or registered investment adviser, or if the employee benefit plan has
total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited investors;
(iii) Any private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;
(iv) Any organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000;
(v) Any natural person whose individual net worth, or joint
net worth with that person's spouse, at the time of the purchase exceeds
$1,000,000;
(vi) Any natural person who had an individual income in excess
of $200,000 in each of the two most recent years or joint income with that
person's spouse in excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income level in the current year;
(vii) Any trust, with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring the securities offered, whose
purchase is directed by a person who has such
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knowledge and experience in financial and business matters that he or she is
capable of evaluating the merits and risks of the prospective investment; or
(viii) Any entity in which all of the equity owners are
accredited investors.
As used in this Paragraph 3.6(a), the term "net worth" means the excess
of total assets over total liabilities. For the purpose of determining a
person's net worth, the principal residence owned by an individual should be
valued at fair market value, including the cost of improvements, net of current
encumbrances. As used in this Paragraph 3.6(a), "income" means actual economic
income, which may differ from adjusted gross income for income tax purposes.
Accordingly, each Investor should consider whether such Investor should add any
or all of the following items to such Investor's adjusted gross income for
income tax purposes in order to reflect more accurately such Investor's actual
economic income: any amounts attributable to tax-exempt income received, losses
claimed as a limited partner in any limited partnership, deductions claimed for
depletion, contributions to an ▇▇▇ or ▇▇▇▇▇ retirement plan, and alimony
payments.
(b) Each Investor as to such Investor severally and not jointly further
represents to the Company that except as otherwise disclosed to the Company, in
writing, prior to such Investor's execution hereof, such Investor (and each
Investor Owner) is an Accredited Investor.
3.7 RESTRICTED SECURITIES.
Each Investor understands that the Series B Convertible Preferred Stock
(and any Common Stock issued on conversion thereof) may not be sold,
transferred, or otherwise disposed of without registration under the Securities
Act or an exemption therefrom, and that in the absence of an effective
registration statement covering the Series B Convertible Preferred Stock (or the
Common Stock issued on conversion thereof) or an available exemption from
registration under the Securities Act, the Series B Convertible Preferred Stock
(and any Common Stock issued on conversion thereof) must be held indefinitely.
In particular, each Investor is aware that the Series B Convertible Preferred
Stock (and any Common Stock issued on conversion thereof) may not be sold
pursuant to Rule 144 promulgated under the Securities Act unless all of the
conditions of that Rule are met. Among the conditions for use of Rule 144 may be
the availability of current information to the public about the Company. Such
information is not now available and the Company has no present plans to make
such information available.
3.8 LEGENDS.
To the extent applicable, each certificate or other document evidencing
any of the Series B Convertible Preferred Stock or any Common Stock issued upon
conversion thereof shall be endorsed with the legends substantially in the form
set forth below: (a) The following legend under the Securities Act:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND
ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED."
(b) Any legend imposed or required by applicable state securities
laws.
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4. CONDITIONS OF INVESTORS' OBLIGATIONS AT CLOSINGS.
The obligations of each Investor under subparagraphs 1.1(b) and (c) of
this Agreement are subject to the fulfillment on or before each closing of each
of the following conditions, the waiver of which shall not be effective against
any Investor who does not consent in writing thereto:
4.1 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company contained in Section
2 shall be true on and as of the First Closing and the Second Closing with the
same effect as though such representations and warranties had been made on and
as of the date of the First Closing and the Second Closing.
4.2 PERFORMANCE.
The Company shall have performed and complied with all agreements,
obligations, and conditions contained in this Agreement that are required to be
performed or complied with by it on or before the First Closing and the Second
Closing.
4.3 COMPLIANCE CERTIFICATE.
The President of the Company shall deliver to each Investor at the
First Closing and the Second Closing a certificate certifying that the
conditions specified in paragraphs 4.1, 4.2, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9 and
4.10 have been fulfilled.
4.4 QUALIFICATIONS.
All authorizations, approvals, or permits, if any, of any governmental
authority or regulatory body of the United States or of any state that are
required in connection with the lawful issuance and sale of the Series B
Convertible Preferred Stock pursuant to this Agreement shall be duly obtained
and effective as of the First Closing and the Second Closing.
4.5 PROCEEDINGS AND DOCUMENTS.
All corporate and other proceedings in connection with the transactions
contemplated at the First Closing and the Second Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Investors and their counsel, which shall have received all such counterpart
original and certified or other copies of such documents as it may reasonably
request.
4.6 MINIMUM INVESTMENT.
The Company shall sell an aggregate of at least ninety percent (90%) of
the shares of Series B Convertible Preferred Stock listed on Schedule A which
are scheduled to be purchased at each of the closings other than those that are
scheduled to be purchased by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and GE Capital.
4.7 BOARD AND COMPENSATION COMMITTEE COMPOSITION.
The Company's Board of Directors shall consist of (i) ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, (ii) a representative of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Venture Partners III, L.P.,
(iii) ▇▇▇▇▇▇ ▇ ▇▇▇▇▇, ▇▇., (iv) a senior member of management to be designated
by ▇▇▇▇▇▇ ▇ ▇▇▇▇▇, ▇▇., (v) ▇▇▇▇▇▇▇▇ ▇▇▇▇, (vi) Dr. ▇▇▇▇▇▇▇ ▇▇▇▇▇, (vii) Dr,
▇▇▇▇▇ ▇▇▇▇▇▇▇ and (viii) ▇▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇. and the Compensation Committee
shall be made up of the
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following three non-employee members: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇▇ ▇▇▇▇ and
▇▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
4.8 OBLIGATIONAL AUTHORITY OF MANAGEMENT.
The Company's Board of Directors shall have passed a resolution
requiring all issuances of Company equity and any loan or advance in excess of
an aggregate of $500,000 to any person or entity not wholly-owned by the Company
and any individual matter (or group of related matters) in which the Company
shall be obligated to expend its funds (or the funds of its controlled
subsidiaries or other affiliates) in excess of an aggregate of $500,000 to have
received the prior approval of the Company's Board of Directors and such
resolution shall not have been rescinded or revoked.
4.9 JURISDICTION OF COMPENSATION COMMITTEE.
The Company's Board of Directors shall have passed a resolution
delegating all issuances of options in respect of the Common Stock to the
Company's officers, directors, employees or consultants and all matters related
to the cash and non-cash compensation of the Company's officers to the
Compensation Committee referred to in paragraph 4.7 above and such resolution
shall not have been rescinded or revoked.
4.10 NO MATERIAL ADVERSE CHANGE.
No Material Adverse Change shall have occurred in respect of the
Company since December 31, 1998. For the purposes of this paragraph 4.10, the
term "Material Adverse Change" shall mean a material adverse change in the
assets, results of operations, financial condition or prospects for future
operations of the Company it being understood that (i) the Company anticipates
significant losses (in excess of $4,200,000) for the year ending December 31,
1999 and (ii) a general downturn in the economy or in the part of the economy in
which the Company operates or in the public equity markets generally or in the
part of the public equity markets in which the Company could participate shall
not constitute a Material Adverse Change.
4.11 NOTES.
The Company and the lender shall have cancelled the promissory notes
dated January 18, 1994, February 23, 1994, March 30, 1994, July 11, 1997 and
December 31, 1997 between ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. ("▇▇▇▇▇"), as lender, and the
Company, as borrower, in the aggregate principal amount of $1,735,000. On April
21, ▇▇▇▇ ▇▇▇▇▇ invested $1,000,000 in the Common Stock of the Company. In
addition, ▇▇▇▇▇ shall invest $500,000 in the Series B Convertible Preferred
Stock of the Company according to the funding schedule in section 1.2 herein.
The Company and ▇▇▇▇▇ shall have executed the Promissory Note dated April 21st,
1999 in the principal amount of $1,543,000 in the form of Exhibit C hereto.
4.12 EXECUTIVE EMPLOYMENT AGREEMENT.
The Company and ▇▇▇▇▇ shall have executed the Executive Employment
Agreement in the form of Exhibit D hereto.
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4.13 LEGAL OPINION.
The Investors shall have received from legal counsel to the Company
(which may be in house counsel) an opinion addressed to each of them, dated as
of each date of closing, in substantially the form attached hereto as Exhibit E.
4.14 STOCKHOLDER AGREEMENT.
The Company, the Investors and the other Company shareholders shall
have executed the Amended and Restated Stockholders' Agreement in the form
attached hereto as Exhibit F.
4.15 FILING OF RESTATED CHARTER.
The Amended and Restated Charter in the form attached hereto as Exhibit
A shall have been filed with the Secretary of State of Tennessee.
4.16 RESERVATION OF CONVERSION SHARES.
The Conversion Shares issuable upon conversion of the shares of Series
B Convertible Preferred Stock shall have been duly authorized and reserved for
issuance upon such conversion.
4.17 INVESTORS' RIGHTS AGREEMENT.
An Investors' Rights Agreement substantially in the form attached
hereto as Exhibit G shall have been executed and delivered by the parties
thereto.
4.18 CO-SALE AGREEMENT.
A Co-Sale Agreement substantially in the form attached hereto as
Exhibit H shall have been executed and delivered by the parties thereto. The
stock certificates representing the shares subject to the Co-Sale Agreement
shall have been delivered to the Secretary of the Company and shall have had
appropriate legends placed upon them to reflect the restrictions on transfer set
forth on the Co-Sale Agreement.
4.19 VOTING AGREEMENT.
A Voting Agreement substantially in the form attached hereto as Exhibit
I shall have been executed and delivered by the parties thereto.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSINGS.
The obligations of the Company to each Investor under this Agreement
are subject to the fulfillment on or before the First Closing and the Second
Closing of each of the following conditions by that Investor.
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5.1 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of each Investor contained in
Section 3 shall be true on and as of the First Closing and the Second Closing
with the same effect as though such representations and warranties had been made
on and as of the date of the First Closing and the Second Closing.
5.2 QUALIFICATIONS.
All authorizations, approvals, or permits, if any, of any governmental
authority or regulatory body of the United States or of any state that are
required in connection with the lawful issuance and sale of the Stock pursuant
to this Agreement shall be duly obtained and effective as of the First Closing
and the Second Closing.
5.3 MINIMUM INVESTMENT.
The Investors shall purchase an aggregate of at least ninety percent
(90%) of the shares of Series B Convertible Preferred Stock listed on Schedule A
which are scheduled to be purchased at each of the closings other than those
that are scheduled to be purchased by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and GE Capital.
5.4 STOCKHOLDER AGREEMENT.
The Company, the Investors and the other Company shareholders shall
have executed the Amended and Restated Stockholders' Agreement in the form
attached hereto as Exhibit F.
6. GENERAL PROVISIONS.
6.1 ENTIRE AGREEMENT.
This Agreement and the documents referred to herein constitute the
entire agreement among the parties and no party shall be liable or bound to any
other party in any manner by any warranties, representations, or covenants
except as specifically set forth herein or therein.
6.2 SURVIVAL OF WARRANTIES.
The warranties, representations, and covenants of the Company and the
Investors contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and each closing.
6.3 SUCCESSORS AND ASSIGNS.
Except as otherwise provided herein, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties (including permitted transferees of any
shares of Series B Convertible Preferred Stock sold hereunder or any Common
Stock issued upon conversion thereof). Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
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6.4 GOVERNING LAW.
This Agreement shall be governed by and construed under the laws of the
State of Tennessee as applied to agreements among Tennessee residents entered
into and to be performed entirely within Tennessee.
6.5 COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
6.6 TITLES AND SUBTITLES.
The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
6.7 NOTICES.
Unless otherwise provided, all notices and other communications
required or permitted under this Agreement shall be in writing and shall be
mailed by United States first class mail, postage prepaid, sent by facsimile or
delivered personally by hand or by a nationally recognized courier addressed to
the party to be notified at the address or facsimile number indicated for such
person on the signature page hereof, or at such other address or facsimile
number as such party may designate by ten (10) days' advance written notice to
the other parties hereto. All such notices and other written communications
shall be effective on the date of mailing, confirmed facsimile transfer or
delivery.
6.8 FINDER'S FEES.
Each party represents that it neither is nor will be obligated for any
finder's fee or commission in connection with the purchase by the Investors of
the Series B Convertible Preferred Stock.
Each Investor agrees to indemnify and to hold harmless the Company from
any liability for any commission or compensation in the nature of a finder's fee
(and the cost and expenses of defending against such liability or asserted
liability) for which the Investor or any of its officers, partners, employees,
or representatives is responsible.
The Company agrees to indemnify and hold harmless each Investor from
any liability for any commission or compensation in the nature of a finder's fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its officers, employees, or
representatives is responsible.
6.9 EXPENSES.
Irrespective of whether the closings are effected, the Company shall
pay all costs and expenses that it incurs with respect to the negotiation,
execution, delivery, and performance of this Agreement. If the First Closing is
effected, the Company shall, at the First Closing, reimburse the fees of one
special counsel for ▇▇▇▇▇▇ Investment Partnership III not to exceed $7,500 and
shall in addition, upon receipt of a ▇▇▇▇ therefor, reimburse the out-of-pocket
expenses of such counsel.
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6.10 ATTORNEYS' FEES.
If any action at law or in equity is necessary to enforce or interpret
the terms of this Agreement, any Ancillary Agreement or the Restated Charter,
the prevailing party shall be entitled to reasonable attorneys' fees, costs, and
disbursements in addition to any other relief to which such party may be
entitled.
6.11 AMENDMENTS AND WAIVERS.
Any term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the Investors (or their transferees) holding more
than 66 2/3% of the Common Stock not previously sold to the public that is
issued or issuable upon conversion of the Series B Convertible Preferred Stock.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any securities purchased under this Agreement at the
time outstanding (including securities into which such securities have been
converted), each future holder of all such securities, and the Company.
6.12 SEVERABILITY.
If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
6.13 TENNESSEE SECURITIES LAW.
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS
NOT BEEN QUALIFIED WITH THE SECURITIES DIVISION OF THE TENNESSEE DEPARTMENT OF
COMMERCE AND INSURANCE OF THE STATE OF TENNESSEE AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH
SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES
IS EXEMPT FROM QUALIFICATION BY TENNESSEE LAW. THE RIGHTS OF ALL PARTIES TO THIS
AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED,
UNLESS THE SALE IS SO EXEMPT.
6.14 EFFECT OF AMENDMENT OR WAIVER.
Each Investor acknowledges that by the operation of paragraph 6.11
hereof the Investors (or their transferees) holding more than sixty six and two
thirds percent (66 2/3%) of the Common Stock not previously sold to the public
that is issued or issuable upon conversion of the Series B Convertible Preferred
Stock will have the right and power to diminish or eliminate all rights of such
Investor under this Agreement.
6.15 RIGHTS OF INVESTORS.
Each holder of Series B Convertible Preferred Stock (and Common Stock
issued upon conversion thereof) shall have the absolute right to exercise or
refrain from exercising any right or rights that such holder may have by reason
of this Agreement or any Series B Convertible Preferred Stock, including without
limitation the right to consent to the waiver of any obligation of the Company
under this Agreement and to enter into an agreement with the Company for the
purpose of modifying this Agreement or any agreement effecting any such
modification, and such holder shall not incur any liability to any other holder
or holders of Series B Convertible Preferred Stock (or Common Stock issued upon
exercise thereof) with respect to exercising or refraining from exercising any
such right or rights.
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6.16 QUALIFIED SMALL BUSINESS STOCK.
The Company shall submit to its stockholders (including the Investors)
and to the Internal Revenue Service any reports that may be required in Section
1202(d)(1)(C) of the Code and any related Treasury Regulations. In addition,
within ten (10) days after any Investor has delivered to the Company a written
request therefor, the Company shall deliver to such Investor a written statement
informing the Investor whether such Investor's interest in the Company
constitutes "qualified small business stock" as defined in Section 1202(c) of
the Code. The Company's obligation to furnish a written statement pursuant to
this paragraph 6.16 shall continue notwithstanding the fact that a class of the
Company's stock may be traded on an established securities market.
6.17 EXCULPATION AMONG INVESTORS.
Each Investor acknowledges that such Investor is not relying upon any
person, firm, or corporation, other than the Company and its officers and
directors, in making its investment or decision to invest in the Company. Each
Investor agrees that no Investor nor the respective controlling persons,
officers, directors, partners, agents, or employees of any Investor shall be
liable for any action heretofore or hereafter taken or omitted to be taken by
any of them in connection with the Series B Convertible Preferred Stock (and
Common Stock issued upon conversion thereof).
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
HEALTHSTREAM, INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
----------------------------------
Chief Executive Officer
▇▇▇ ▇▇▇▇ ▇▇▇. ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
INVESTORS:
▇▇▇▇▇▇ INVESTMENT PARTNERSHIP III
By: THE ▇▇▇▇▇▇ COMPANIES, INC.
Managing Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ IV L.P.
By Its General Partner
CSHB Ventures IV L.P.
By Its General Partner
/s/ ▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇. ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
DAUPHIN CAPITAL PARTNERS I, L.P.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, Principal
▇▇▇ ▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
JCB HEALTHSTREAM INVESTORS, L.L.C
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, Chief Manager
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ CAPITAL PARTNERS III, L.P.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇▇▇▇▇▇ & CO., L.L.C
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, Managing Director
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
21
22
FCA VENTURE PARTNERS II, L.P.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇. ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
THE ▇▇▇▇ COMPANY
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
CUMBERLAND EQUITY PARTNERS
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇. ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SAVVY INVESTMENT PARTNERS
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
---------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
22
▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇ INVESTMENTS, L.P.
By: /s/ H. ▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------
H. ▇▇▇ ▇▇▇▇▇▇▇▇, General Partner
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, General Partner
c/o H. ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
THE SEVEN PARTNERSHIP
By: /s/ ▇▇▇▇▇▇▇▇ Dent
----------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
JCB VENTURE PARTNERSHIP IV
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Chief Manager
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ PARTNERS, LTD.
By: /s/ ▇▇▇ ▇▇▇▇▇▇
----------------------------------
▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇ ▇▇▇▇▇, ▇▇.
-------------------------------------
▇▇▇▇▇▇ ▇ ▇▇▇▇▇, ▇▇.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇. ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
23
24
/s/ ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇. ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇.▇. ▇▇▇▇▇▇▇▇ & Co.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ S. ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
S. ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
24
25
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ VENTURE PARTNERS III, L.P.
by: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Venture Partners III, L.L.C
its General Partner
by: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Venture Capital III, Inc.
its Institutional Managing Member
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ VENTURE INVESTORS III, L.P.
by: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Venture Partners III, L.L.C
its General Partner
by: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Venture Capital III, Inc.
its Institutional Managing Member
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
----------------------------------------
THE ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ VENTURE PARTNERS ENTREPRENUER FUND, L.P.
by: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Venture Partners, L.L.C
its General Partner
by: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Venture Capital Fund III, Inc.
its Institutional Managing Member
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
----------------------------------------
25
26
PART TWO
SCHEDULE A
INVESTORS
NAME NUMBER OF SHARES
---- ----------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Venture Partners III, L.P. 175,477
▇▇▇▇▇▇ Investment Partnership III 150,000
GE Capital Partners 100,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ IV, L.P. 50,000
Dauphin Capital Partners I, L.P. 50,000
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 50,000
JCB HealthStream Investors, L.L.C. 16,500
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. 50,000
▇▇▇▇▇▇ Capital Partners III, L.P. 50,000
▇▇▇▇▇▇ Partners, Ltd. 25,000
▇▇▇▇▇▇ ▇▇▇▇ 25,000
FCA Venture Partners II, L.P. 25,000
The ▇▇▇▇ Company 25,000
▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ 20,000
▇▇▇▇▇ ▇▇▇▇▇ 20,000
Cumberland Equity Partners 20,000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Venture Investors III, L.P. 16,848
▇.▇. ▇▇▇▇▇▇▇▇ & Co., L.L.C. 15,000
Savvy Investment Partners 14,000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 10,000
JCB Venture Partnership IV 10,000
▇▇▇▇▇ ▇▇▇▇▇ 10,000
Chancery Lane Investments, L.P. 10,000
▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇ 10,000
The Seven Partnership 9,500
The ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Venture Partners Entrepreneur Fund, L.P. 7,675
S. ▇▇▇▇▇▇▇ ▇▇▇▇▇ 5,000
▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇ 5,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 5,000
--------------------------------------------------------------------------------
SERIES B TOTAL 980,000
26
27
SCHEDULE OF EXCEPTIONS
2.7 CONTRACTS AND OTHER COMMITMENTS.
The Company has obligations under a lease executed with Cummins Station, LLC
totaling $551,315.00. This lease expires on April 30, 2005. The Company has
options under this lease until April 30, 2015.
2.8 RELATED-PARTY TRANSACTIONS.
Indebtedness to Company by Shareholders
MacDonald ▇▇▇▇▇▇▇▇▇▇ owes the Company $1,248.03 due to an outstanding balance of
a loan from the Company to purchase shares.
Indebtedness to Shareholders by Company
The Company owes ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇. $2,773,947.02 for loans made to the Company.
The Company owes ▇▇▇▇▇ ▇▇▇▇▇▇ $60,000.00 for loans made to the Company.
▇▇▇▇▇▇ ▇ ▇▇▇▇▇, ▇▇. has converted $1,000,000 worth of the above indebtedness to
shares of the Company's Common Stock. He shall convert an additional $500,000
worth of the above indebtedness to shares of the Company's Series B Convertible
Preferred Stock at the closings. The remainder of the above indebtedness will be
represented by a new Promissory Note dated April 21st, 1999 which shall be
executed at the First Closing, shall carry an interest rate of the lesser of the
then existing ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ margin rate and 10.5% per annum. Principal shall
only be paid by the Company according to the terms of the Promissory Note dated
April 21, 1999.
In addition, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇. serves on the Board of Directors of Passport
Health Communications. This firm does not directly compete with the Company, but
it does do business in the Internet healthcare information industry.
2.15 FINANCIAL STATEMENTS.
The Company has retained the services of Ernst & Young to conduct an audit of
its financial statements ending December 31, 1997 and December 31, 1998. This
audit is in process and should be completed by June 30, 1999.
2.18 EMPLOYEES; EMPLOYEE COMPENSATION.
At the First Closing, the Company and ▇▇▇▇▇▇ ▇ ▇▇▇▇▇, ▇▇. shall execute the
Executive Employment Agreement in the form of Exhibit D hereto.
6.8 FINDERS FEES
The Company will pay commissions to ▇.▇. ▇▇▇▇▇▇▇▇ in the form of Series B
Convertible Preferred Stock not to exceed $150,000.
27
28
HEALTHSTREAM, INC.
AMENDMENT TO
SERIES B CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
This Amendment executed as of the 10th day of May,1999 amends the
Series B Convertible Preferred Stock Purchase Agreement (the "Agreement")
executed as of the 21st day of April, 1999, by and between HealthStream, Inc., a
Tennessee corporation (the "Company"), and the persons and entities designated
as an investor on Schedule A hereto (each an "Investor").
1. The first sentence of subsection (b) of Section 1.2 entitled "Closing"
shall be amended to read as follows:
The purchase and sale of at least one half (1/2) of the number of those
shares of Series B Convertible Preferred Stock exempted from the Minimum
Investment set forth in paragraphs 5.3 and 4.6 herein shall take place at the
offices of the Company within fourteen (14) business days of the First Closing
(the "Second Closing").
2. Subsection (a) and the last sentence of subsection (b) of Section 2.5
entitled "Capitalization and Voting Rights" shall be amended to read as follows:
(a) Preferred Stock. 5,000,000 shares of Preferred Stock, no par value,
of which 76,000 shares have been designated as Series A Convertible Preferred
Stock, all of which are outstanding, and 1,436,961 shares have been designated
as Series B Convertible Preferred Stock, 452,501 of which are outstanding. The
rights, privileges and preferences of the Series B Convertible Preferred Stock
are as stated in the Restated Charter.
(b) Common Stock.... The Company has granted options under the Option
Plan to acquire a total of 915,616 shares of Common Stock.
3. Section 4.7 entitled "Board and Compensation Committee Composition"
shall be amended as follows:
The Company's Board of Directors shall consist of (i) ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, (ii) a representative of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Venture Partners III, L.P.,
(iii) a representative of the General Electric Company or one of its
subsidiaries, (iv) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., (v) a senior member of management to be
designated by ▇▇▇▇▇▇ ▇ ▇▇▇▇▇, ▇▇., (vi) ▇▇▇▇▇▇▇▇ ▇▇▇▇, (vii) Dr. ▇▇▇▇▇▇▇ ▇▇▇▇▇,
(viii) Dr, ▇▇▇▇▇ ▇▇▇▇▇▇▇ and (ix) ▇▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇. and the Compensation
Committee shall be made up of the following three non-employee members: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
4. A new Section 4.20 shall be added entitled "Filing of Amended and
Restated Charter" and read as follows:
The Amended and Restated Charter in the form attached hereto as Exhibit
J shall have been approved by the board of directors and the shareholders and
filed with the Secretary of State of Tennessee prior to the Second Closing.
29
5. A new Section 4.21 shall be added entitled "Amendment to Voting
Agreement" and read as follows:
The Amendment to Voting Agreement in the form attached hereto as
Exhibit K shall have been executed by the shareholders at or prior to the Second
Closing.
6. Schedule A entitled "Investors" shall be amended and restated as
follows:
NAME NUMBER OF SHARES
---- ----------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Venture Partners III, L.P. 175,477
▇▇▇▇▇▇ Investment Partnership III 150,000
GE Capital Equity Investments, Inc. 100,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ IV, L.P. 50,000
Dauphin Capital Partners I, L.P. 50,000
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 50,000
JCB HealthStream Investors, L.L.C. 16,500
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. 50,000
▇▇▇▇▇▇ Capital Partners III, L.P. 50,000
▇▇▇▇▇▇/▇▇▇▇ Associates LLC 45,000
▇▇▇▇▇▇ Partners, Ltd. 25,000
▇▇▇▇▇▇ ▇▇▇▇ 25,000
FCA Venture Partners II, L.P. 25,000
The ▇▇▇▇ Company 25,000
▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ 20,000
▇▇▇▇▇ ▇▇▇▇▇ 20,000
Cumberland Equity Partners 20,000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Venture Investors III, L.P. 16,848
▇.▇. ▇▇▇▇▇▇▇▇ & Co., L.L.C. 15,000
Savvy Investment Partners 14,000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 10,000
JCB Venture Partnership IV 10,000
▇▇▇▇▇ ▇▇▇▇▇ 10,000
Chancery Lane Investments, L.P. 10,000
▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇ 15,000
The Seven Partnership 10,000
The ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Venture Partners Entrepreneur Fund, L.P. 7,675
S. ▇▇▇▇▇▇▇ ▇▇▇▇▇ 5,000
▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇ 5,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 5,000
-------------------------------------------------------------------------------
SERIES B TOTAL 1,030,500
7. Exhibit B entitled "Common Stock and Options Plan" shall be amended and
restated as follows:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. 1,741,307
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 103,400
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 130,654
▇▇▇▇▇▇ ▇. Makes 2,926
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 1,360
MacDonald ▇. ▇▇▇▇▇▇▇▇▇▇ 12,000
-------------------------------------------------------------------------------
TOTAL CURRENT 1,991,647
2
30
OPTION HOLDER NUMBER OF OPTIONS
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. 420,900
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 108,000
▇▇▇▇ ▇▇▇▇ 27,900
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 82,788
▇▇▇▇▇ ▇▇▇▇▇▇ 32,500
▇▇▇▇▇▇ ▇▇▇▇▇ 19,425
▇▇▇▇▇ ▇▇▇▇▇▇▇ 19,425
▇▇▇▇▇▇ ▇▇▇▇ 12,950
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 6,475
▇▇▇▇▇▇ ▇. Makes 10,725
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 47,915
MacDonald ▇. ▇▇▇▇▇▇▇▇▇▇ 41,100
▇▇▇ ▇▇▇▇▇▇ 6,475
▇▇▇▇ ▇▇▇▇▇▇ 6,475
▇▇▇▇▇▇▇ ▇▇▇▇ 6,475
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 3,238
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 3,238
▇▇▇▇▇▇▇ ▇▇▇▇▇ 3,238
▇▇▇ ▇▇▇▇ 1,325
▇▇▇▇▇▇ ▇▇▇▇▇ 1,325
▇▇▇▇▇▇ ▇▇▇▇▇ 1,325
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 1,325
▇▇▇▇▇ ▇▇▇▇▇▇▇ 1,325
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 950
▇▇▇▇▇▇▇ ▇▇▇▇ 950
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 950
▇▇▇▇▇▇ ▇▇▇▇▇▇ 950
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 950
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 950
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 950
▇▇▇▇ ▇▇▇▇▇ 950
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 950
▇▇▇▇▇▇ ▇▇▇▇ 950
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 950
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 800
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ 800
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 800
▇▇▇▇ ▇▇▇▇▇▇ 800
▇▇▇▇▇▇ ▇▇▇▇▇▇ 800
▇▇▇▇ ▇▇▇▇▇▇ 800
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 800
▇▇▇ ▇▇▇▇ 4,000
▇▇▇▇ ▇▇▇▇▇▇ 4,000
▇▇▇▇▇ ▇▇▇▇▇▇▇ 5,500
▇▇▇▇ ▇▇▇▇▇▇, ▇▇. 2,000
▇▇▇▇▇ ▇▇▇▇ 2,000
▇▇▇▇ ▇▇▇▇ 4,000
▇▇▇▇ ▇▇▇▇▇ 2,000
Page Davidson 2,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ 1,000
▇▇▇ ▇▇▇▇▇▇▇▇, M.D. 1,000
▇▇▇▇▇▇▇ ▇▇▇▇▇, M.D. 1,000
3
31
▇▇▇▇ ▇▇▇▇▇▇▇, M.D. 1,000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, M.D. 1,000
▇▇▇▇ ▇▇▇▇▇, M.D. 1,000
▇▇▇ ▇▇▇▇▇▇▇, M.D. 1,000
▇▇▇ ▇▇▇▇▇▇▇, M.D. 1,000
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, M.D. 1,000
-------------------------------------------------------------------------------
TOTAL OPTIONS 915,616
TOTAL CURRENT SHARES & OPTIONS 2,907,263
8. This Amendment shall only be effective only with the written consent of
the Company and the Investors (or their transferees) holding more than 66 2/3%
of the Common Stock not previously sold to the public that is issued or issuable
upon conversion of the Series B Convertible Preferred Stock.
9. This Amendment may be executed in whole or in counterparts, each of
which when so executed shall be deemed to be an original and all of which when
taken together shall constitute one and the same instrument.
10. This Amendment shall be construed and governed by the laws of the State
of Tennessee.
11. All provisions governing the Agreement as referenced herein not
contradicted by this Amendment shall likewise govern the terms of this
Amendment. All rights and obligations under the Agreement shall likewise apply
to this Amendment.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
HEALTHSTREAM, INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
----------------------------------
Chief Executive Officer
▇▇▇ ▇▇▇▇ ▇▇▇. ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
4
32
INVESTORS:
▇▇▇▇▇▇ INVESTMENT PARTNERSHIP III
By: THE ▇▇▇▇▇▇ COMPANIES, INC.
Managing Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ BOOTH IV L.P.
By Its General Partner
CSHB Ventures IV L.P.
By Its General Partner
/s/ ▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇. ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
DAUPHIN CAPITAL PARTNERS I, L.P.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, Principal
▇▇▇ ▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
JCB HEALTHSTREAM INVESTORS, L.L.C
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, Chief Manager
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ CAPITAL PARTNERS III, L.P.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
5
33
▇.▇. ▇▇▇▇▇▇▇▇ & CO., L.L.C
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Managing Director
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FCA VENTURE PARTNERS II, L.P.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇. ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
THE ▇▇▇▇ COMPANY
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
CUMBERLAND EQUITY PARTNERS
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇. ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SAVVY INVESTMENT PARTNERS
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
-----------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
CHANCERY LANE INVESTMENTS, L.P.
By: /s/ H. ▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------------
H. ▇▇▇ ▇▇▇▇▇▇▇▇, General Partner
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, General Partner
c/o H. ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
6
34
THE SEVEN PARTNERSHIP
By: /s/ ▇▇▇▇▇▇▇▇ Dent
------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
JCB VENTURE PARTNERSHIP IV
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chief Manager
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ PARTNERS, LTD.
By: /s/ ▇▇▇ ▇▇▇▇▇▇
------------------------------------
▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇ ▇▇▇▇▇, ▇▇.
---------------------------------------
▇▇▇▇▇▇ ▇ ▇▇▇▇▇, ▇▇.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇. ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
7
35
/s/ ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇. ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇.▇. ▇▇▇▇▇▇▇▇ & Co.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ S. ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
S. ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
8
36
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ VENTURE PARTNERS III, L.P.
by: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Venture Partners III, L.L.C
its General Partner
by: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Venture Capital III, Inc.
its Institutional Managing Member
By: /s/ M. ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ VENTURE INVESTORS III, L.P.
by: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Venture Partners III, L.L.C
its General Partner
by: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Venture Capital III, Inc.
its Institutional Managing Member
By: /s/ M. ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------------
THE ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ VENTURE PARTNERS ENTREPRENUER
FUND, L.P.
by: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Venture Partners, L.L.C
its General Partner
by: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Venture Capital Fund III, Inc.
its Institutional Managing Member
By: /s/ M. ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------------
GE CAPITAL EQUITY INVESTMENTS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇/▇▇▇▇ ASSOCIATES LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Welsh, Carson, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇.
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
9