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EXHIBIT 10.11
CLASS F CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
between
CAREERBUILDER, INC.
and
THE SEVERAL PURCHASERS NAMED IN SCHEDULE I
Dated as of January 26, 1999
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THIS CLASS F CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (together
with the schedules and exhibits attached hereto, the "Agreement") is made as of
January 26, 1999 between CareerBuilder, Inc., a Delaware corporation (the
"Company"), and the several purchasers named in the attached Schedule I
(individually a "Purchaser" and collectively the "Purchasers").
WHEREAS, the Company wishes to issue and sell to the Purchasers an
aggregate of up to 2,018,350 shares (the "Preferred Shares") of the authorized
but unissued Class F Convertible Preferred Stock, par value $.001 per share, of
the Company (the "Class F Convertible Preferred Stock"); and
WHEREAS, the Purchasers, severally, wish to purchase the Preferred Shares
on the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
THE PREFERRED SHARES
1.1 Issuance, Sale and Delivery of the Preferred Shares. The Company
agrees to issue and sell to each Purchaser, and each Purchaser hereby agrees to
purchase from the Company, the number of Preferred Shares set forth opposite the
name of such Purchaser under the heading "Number of Preferred Shares to be
Purchased" on Schedule I, at the aggregate purchase price set forth opposite the
name of such Purchaser under the heading "Aggregate Purchase Price for Preferred
Shares" on Schedule I.
1.2 Closing. The closing shall take place at the offices of ▇▇▇▇ and
▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇, at 10 a.m., on
January 26, 1999, or at such other location, date and time as may be agreed upon
between the Purchasers and the Company or via facsimile at such date and time as
may be agreed upon between the Purchasers and the Company (such closing being
called the "Closing" and such date and time being called the "Closing Date"). At
the Closing, the Company shall issue and deliver to each Purchaser a stock
certificate or certificates in definitive form, registered in the name of such
Purchaser, representing the Preferred Shares being purchased by it at the
Closing. As payment in full for the Preferred Shares being purchased by it under
this Agreement, and against delivery of the stock certificate or certificates
therefor as aforesaid, on the Closing Date each Purchaser shall (i) deliver to
the Company a check payable to the order of the Company, in the amount set forth
opposite the name of such Purchaser under the heading "Aggregate Purchase Price
for Preferred Shares" on Schedule I, (ii) transfer such sum to the account of
the Company by wire transfer, or (iii) deliver or transfer such sum to the
Company by any combination of such methods of payments.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchasers that, except as set
forth in the Disclosure Schedule attached as Schedule II (with such
representations and warranties not being affected by any due diligence
investigation undertaken by the Purchasers):
2.1 Organization, Qualifications and Corporate Power.
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and is
duly licensed or qualified to transact business as a foreign corporation and is
in good standing in each jurisdiction in which the nature of the business
transacted by it or the character of the properties owned or leased by it
requires such licensing or qualification. The Company has the corporate power
and authority to own and hold its properties and to carry on its business as now
conducted and as proposed to be conducted, to execute, deliver and perform this
Agreement, the Third Amended and Restated Registration Rights Agreement with the
Purchasers in the form attached as Exhibit A (the "Third Amended and Restated
Registration Rights Agreement") and the Amended and Restated Stock Restriction
Agreement of even date herewith by and among the Company, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ and the persons listed on Schedules I and II thereto (the "Amended
and Restated Stock Restriction Agreement"), to issue, sell and deliver the
Preferred Shares and to issue and deliver the shares of Common Stock, par value
$.001 per share, of the Company ("Common Stock") issuable upon conversion of the
Preferred Shares (the "Conversion Shares").
(b) The Company has no subsidiaries. The Company does not (i)
own of record or beneficially, directly or indirectly, (A) any shares of capital
stock or securities convertible into capital stock of any other corporation or
(B) any participating interest in any partnership, joint venture or other
non-corporate business enterprise or (ii) control, directly or indirectly, any
other entity.
2.2 Authorization of Agreements, Etc.
(a) The execution and delivery by the Company of this
Agreement, the Third Amended and Restated Registration Rights Agreement and the
Amended and Restated Stock Restriction Agreement, the performance by the Company
of its obligations hereunder and thereunder, the issuance, sale and delivery of
the Preferred Shares, and the issuance and delivery of the Conversion Shares (i)
have been duly authorized by all requisite corporate action, (ii) will not
violate any provision of law, any order of any court or other agency of
government, the Charter or the By-laws of the Company, as amended, or any
provision of any indenture, agreement or other instrument to which the Company
or any of its properties or assets is bound, or conflict with, result in a
breach of, constitute (with due notice or lapse of time or both) a default
under, accelerate or terminate any such indenture, agreement or other
instrument, or result in the creation or imposition of any lien, charge,
restriction, claim or encumbrance of any nature whatsoever upon any of the
properties or
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assets of the Company and (iii) will not require any notice, consent or waiver
under any material indenture, agreement or other instrument to which the Company
is a party or by which any of its properties or assets are bound.
(b) The Preferred Shares have been duly authorized and, when
issued in accordance with this Agreement, will be validly issued, fully paid and
nonassessable shares of Class F Convertible Preferred Stock with no personal
liability attaching to the ownership thereof and will be free and clear of all
liens, charges, restrictions, claims and encumbrances imposed by or through the
Company except as set forth in the Third Amended and Restated Registration
Rights Agreement and the Charter. The Conversion Shares have been duly reserved
for issuance upon conversion of the Preferred Shares and, when so issued, will
be duly authorized, validly issued, fully paid and nonassessable shares of
Common Stock with no personal liability attaching to the ownership thereof and
will be free and clear of all liens, charges, restrictions, claims and
encumbrances imposed by or through the Company except as set forth in the Third
Amended and Restated Registration Rights Agreement or the Amended and Restated
Stock Restriction Agreement. Neither the issuance, sale or delivery of the
Preferred Shares nor the issuance or delivery of the Conversion Shares is
subject to any preemptive right of stockholders of the Company, or to any right
of first refusal or other right in favor of any person, which have not been duly
and validly waived.
2.3 Validity. This Agreement has been duly executed and delivered by
the Company and constitutes the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms. The Third Amended and
Restated Registration Rights Agreement and the Amended and Restated Stock
Restriction Agreement, when executed and delivered in accordance with this
Agreement, will constitute the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms.
2.4 Authorized Capital Stock. The authorized capital stock of the
Company consists of (i) 1,562,500 shares of Class A Convertible Preferred Stock,
par value $.001 per share (the "Class A Preferred Stock"), (ii) 2,151,420 shares
of Class B Convertible Preferred Stock, par value $.001 per share (the "Class B
Preferred Stock"), (iii) 3,188,889 shares of Class C Convertible Preferred
Stock, par value $.001 per share (the "Class C Preferred Stock"), (iv) 2,045,785
shares of Class D Convertible Preferred Stock, par value $.001 per share (the
"Class D Preferred Stock"), (v) 1,024,351 shares of Class E Convertible
Preferred Stock, par value $.001 per share (the "Class E Preferred Stock"), (vi)
2,018,350 shares of Class F Convertible Preferred Stock, par value $.001 per
share (the "Class F Preferred Stock") and (vii) 21,000,000 shares of Common
Stock. Immediately prior to the Closing, 4,855,333 shares of Common Stock,
1,507,500 shares of Class A Preferred Stock, 2,151,420 shares of Class B
Preferred Stock, 3,188,889 shares of Class C Preferred Stock, 2,045,785 shares
of Class D Preferred Stock and 1,024,351 shares of Class E Preferred Stock will
be validly issued and outstanding, fully paid and nonassessable with no personal
liability attaching to the ownership thereof and no shares of Class F Preferred
Stock will have been issued. The Class F Preferred Stock, when issued to the
Purchasers pursuant to the terms of this Agreement and for the consideration set
forth herein, will be validly issued and outstanding, fully paid and
nonassessable with no personal liability attaching to the ownership thereof. The
stockholders of record and holders of subscriptions, warrants, options,
convertible securities, and other rights (contingent or other) to
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purchase or otherwise acquire equity securities of the Company, and the number
of shares of Common Stock and the number of such subscriptions, warrants,
options, convertible securities, and other such rights held by each, are as set
forth in the attached Schedule III. The Company has attached a copy of the
post-closing capitalization schedule as a part of Schedule III. The
designations, powers, preferences, rights, qualifications, limitations and
restrictions in respect of each class and series of authorized capital stock of
the Company are as set forth in the Charter, a copy of which is attached as
Exhibit B, and all such designations, powers, preferences, rights,
qualifications, limitations and restrictions are valid, binding and enforceable
and in accordance with all applicable laws. Except as set forth in the attached
Schedule III, (i) no person owns of record or is known to the Company to own
beneficially any share of Common Stock, Class A Preferred Stock, Class B
Preferred Stock, Class C Preferred Stock or Class D Preferred Stock, (ii) no
subscription, warrant, option, convertible security, or other right (contingent
or other) to purchase or otherwise acquire equity securities of the Company is
authorized or outstanding, and (iii) there is no commitment by the Company to
issue shares, subscriptions, warrants, options, convertible securities or other
such rights or to distribute to holders of any of its equity securities any
evidence of indebtedness or asset. Except as provided for in the Charter or as
set forth in the attached Schedule II, the Company has no obligation (contingent
or otherwise) to purchase, redeem or otherwise acquire any of its equity
securities or any interest therein or to pay any dividend or make any other
distribution in respect thereof. Except as set forth in Schedule II, the Company
is not a party to any voting trusts or agreement, stockholders' agreement,
pledge agreement, buy-sell agreement, or any agreement giving rights of first
refusal, preemptive rights or proxies relating to any securities of the Company,
and to the best of the Company's knowledge there are no voting trusts or
agreements, stockholders' agreements, pledge agreements, buy-sell agreements,
rights of first refusal, preemptive rights or proxies relating to any securities
of the Company. All of the outstanding securities of the Company were issued in
compliance with all applicable Federal and state securities laws.
2.5 Financial Statements.
(a) The Company has furnished to the Purchasers the audited
balance sheet of the Company as of September 30, 1997 and the related audited
statements of income, stockholders' equity and cash flows of the Company for the
fiscal year ended September 30, 1997 (the "1997 Audited Financial Statements")
and the audited balance sheet of the Company as of September 30, 1998 (the
"Balance Sheet") and the related audited statements of income, stockholders'
equity and cash flows of the Company as of September 30, 1998 (together with the
Balance Sheet, the "1998 Audited Financial Statements"). The 1997 Audited
Financial Statements and the 1998 Audited Financial Statements and the
respective notes thereto have been prepared in accordance with generally
accepted accounting principles consistently applied and fairly present the
financial position of the Company as of their respective dates.
(b) The Company has furnished to the Purchasers the unaudited
balance sheet of the Company as of November 30, 1998 and the related unaudited
statements of income, stockholders' equity, and cash flows of the Company for
the two months ended November 30, 1998 (together, the "Unaudited Financial
Statements"). The Unaudited Financial Statements and the notes thereto have been
prepared in accordance with generally accepted accounting principles
consistently
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applied (except that such Unaudited Financial Statements do not contain all of
the required footnotes and are subject to normal year-end adjustment) and fairly
present the financial position of the Company as of November 30, 1998 and the
results of its operations, stockholders' equity and cash flows for the two
months ended November 30, 1998. Since the date of the Audited and Unaudited
Financial Statements, (i) there has been no change in the assets, liabilities
(whether accrued, fixed, contingent or other) or financial condition of the
Company from that reflected in the Unaudited Financial Statements except for
changes in the ordinary course of business which in the aggregate have not had a
Material Adverse Effect (as defined below) and (ii) no subsequent occurrence or
development, individually or in the aggregate, whether or not insured against,
has had a Material Adverse Effect (as defined below) on the business, financial
condition, operations, property, prospects or affairs of the Company. As used
herein, a "Material Adverse Effect" means any effect that is, or would
reasonably be expected to be, individually or in the aggregate, materially
adverse to the business, financial condition or operations of the Company.
2.6 Events Subsequent to the Date of the Audited Financial Statements.
Since the date of the Audited Financial Statements, the Company has not (i)
issued any stock, bond or other corporate security, (ii) borrowed any amount or
incurred or become subject to any liability (absolute, accrued or contingent),
except current liabilities incurred and liabilities under contracts entered into
in the ordinary course of business, (iii) discharged or satisfied any lien or
encumbrance or incurred or paid any obligation or liability (absolute, accrued
or contingent) other than current liabilities shown on the Audited Financial
Statements and current liabilities incurred since the date of the Unaudited
Financial Statements in the ordinary course of business, (iv) declared or made
any payment of dividends or distribution to stockholders or purchased or
redeemed any shares of its capital stock or other security, (v) mortgaged,
pledged, encumbered or subjected to lien any of its assets, tangible or
intangible, other than liens of current real property taxes not yet due and
payable, (vi) sold, assigned or transferred any of its tangible assets except in
the ordinary course of business, or canceled any debt or claim, (vii) sold,
assigned, transferred or granted any exclusive license with respect to any
patent, trademark, trade name, service ▇▇▇▇, copyright, trade secret or other
intangible asset, (viii) suffered any material damage, destruction or loss of
property (whether or not covered by insurance) or waived any right of
substantial value whether or not in the ordinary course of business, (ix) made
any change in officer compensation except in the ordinary course of business and
consistent with past practice, (x) made any material change in the manner of
business or operations of the Company, (xi) entered into any transaction except
in the ordinary course of business or as otherwise contemplated hereby or (xii)
entered into any commitment (contingent or otherwise) to do any of the
foregoing.
2.7 Litigation; Compliance with Law. There is no (i) action, suit,
claim, proceeding or investigation pending or, to the best of the Company's
knowledge, threatened against or specifically affecting the Company or any of
its assets or its properties, at law or in equity, or before or by any Federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, (ii) arbitration proceeding
relating to the Company pending under collective bargaining agreements or
otherwise or (iii) governmental inquiry pending or, to the best of the Company's
knowledge, threatened against or specifically affecting the Company (including
without limitation any inquiry as to the qualification of the Company to hold or
receive any license or permit), nor is the Company aware that there is any basis
for the foregoing.
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The Company has not received any opinion or memorandum or legal advice from
legal counsel to the effect that it is exposed, from a legal standpoint, to any
liability or disadvantage which may be material to its business, prospects,
financial condition, operations, property or affairs. The Company is not in
default with respect to any order, writ, injunction or decree known to or served
upon the Company of any court or of any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign. There is no action or suit by the Company pending or
threatened against others. The Company has complied with all laws, rules,
regulations and orders applicable to its business, operations, properties,
assets, products and services except where failure to comply with such laws,
rules, regulations and orders would not result in a Material Adverse Effect, the
Company has all necessary permits, licenses and other authorizations required to
conduct its business as conducted and as proposed to be conducted, and the
Company has been operating its business pursuant to and in compliance with the
terms of all such permits, licenses and other authorizations. There is no
existing law, rule, regulation or order, and the Company, after due inquiry, is
not aware of any proposed law, rule, regulation or order, whether Federal,
state, county or local, which would prohibit or restrict the Company from, or
otherwise materially adversely affect the Company in, conducting its business in
any jurisdiction in which it is now conducting business or in which it proposes
to conduct business.
2.8 Proprietary Information of Third Parties. The Company has received
no notification that any third party has claimed and, to the best of the
Company's knowledge, no third party has reason to claim that, any person
employed by or affiliated with the Company has (a) violated or may be violating
any of the terms or conditions of his employment, non-competition,
non-solicitation or non-disclosure agreement with such third party, (b)
disclosed or may be disclosing or utilized or may be utilizing, without the
consent of such employer or has otherwise provided such materials to others, any
trade secret or confidential proprietary information or documentation of such
third party without the consent of such third party or (c) interfered or may be
interfering in the employment relationship between such third party and any of
its present or former employees. No third party has requested information from
the Company which suggests that such a claim might be contemplated. To the best
of the Company's knowledge, no person employed by or affiliated with the Company
has employed or proposes to employ, has used, disclosed or provided to others
any trade secret or any information or documentation confidential and
proprietary to any former employer or has otherwise provided such materials to
others, and to the best of the Company's knowledge, no person employed by or
affiliated with the Company has violated any confidential relationship which
such person may have had with any third party, in connection with the
development, manufacture or sale of any product or proposed product or the
development or sale of any service or proposed service of the Company, and the
Company has no reason to believe there will be any such employment or violation.
To the best of the Company's knowledge, the Company, in the conduct of its
business as now conducted, does not infringe upon or conflict with the rights of
any third party under any contract, covenant or instrument to which the Company
is a party.
2.9 Patents, Trademarks, Etc. Set forth in Schedule II is a list and
brief description of all domestic and foreign patents, patent rights, patent
applications, trademarks, trademark applications, service marks, service ▇▇▇▇
applications, trade names and copyrights, and all applications for such which
are in the process of being prepared, owned by or registered in the name
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of the Company, or of which the Company is a licensor or licensee or in which
the Company has any right, and in each case a brief description of the nature of
such right. The Company owns or possesses adequate licenses or other rights to
use all patents, patent applications, trademarks, trademark applications,
service marks, service ▇▇▇▇ applications, trade names, copyrights, manufacturing
processes, formulae, trade secrets, customer lists and know how (collectively,
"Intellectual Property") necessary or desirable to the conduct of its business
as conducted and as proposed to be conducted, and no claim is pending or, to the
best of the Company's knowledge, threatened to the effect that the operations of
the Company infringe upon or conflict with the asserted rights of any other
person under any Intellectual Property, and there is no basis for any such claim
(whether or not pending or threatened). No claim is pending or threatened to the
effect that any such Intellectual Property owned or licensed by the Company, or
which the Company otherwise has the right to use, is invalid or unenforceable by
the Company, and there is no basis for any such claim (whether or not pending or
threatened). The Company has performed all acts necessary and has paid all fees
and taxes required to maintain all registrations and applications of all such
Intellectual Property in full force and effect. The Company is not, nor will it
be, as a result of the performance of any obligations hereunder, in breach of
any license or any other agreement to which it is a party relating to any
Intellectual Property. All prior art known to the Company which may be or may
have been pertinent to the examination of any United States patent or patent
application listed in Schedule II has been cited to the United States Patent and
Trademark Office. To the best of the Company's knowledge, all technical
information developed by and belonging to the Company which has not been
patented has been kept confidential. The Company has not granted or assigned to
any other person or entity any right to manufacture, have manufactured, assemble
or sell the products or proposed products or to provide the services or proposed
services of the Company. To the Company's best knowledge, no third party is
infringing or has infringed upon any Intellectual Property of the Company nor is
the Company infringing upon the Intellectual Property of any third party.
2.10 Title to Properties. The Company has good, clear and marketable
title to its properties and assets reflected on the Unaudited Financial
Statements or acquired by it since the date of the Unaudited Financial
Statements (other than properties and assets disposed of in the ordinary course
of business since the date of the Unaudited Financial Statements), and all such
properties and assets are free and clear of mortgages, pledges, security
interests, liens, charges, claims, restrictions and other encumbrances
(including without limitation, easements and licenses), except liens for or
current taxes not yet due and payable and minor imperfections of title, if any,
not material in nature or amount and not materially detracting from the value or
impairing the use of the property subject thereto or impairing the operations or
proposed operations of the Company, including without limitation, the ability of
the Company to secure financing using such properties and assets as collateral.
The Company has not received any notice of condemnation, environmental, zoning
or other land use regulation proceedings, either instituted or planned to be
instituted, which would adversely affect the use or operation of the Company's
properties and assets for their respective intended uses and purposes, or the
value of such properties, and the Company has received no notice of any special
assessment proceedings which would affect such properties and assets. The
Company's properties and assets are in a good state of repair (normal wear and
tear excepted) and are suitable to conduct the business of the Company as it is
currently being conducted.
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2.11 Leasehold Interests. Each lease or agreement to which the Company
is a party under which it is a lessee of any property, real or personal, is a
valid and subsisting agreement, duly authorized and entered into, without any
default of the Company thereunder and, to the best of the Company's knowledge,
without any default thereunder of any other party thereto. No event has occurred
and is continuing which, with due notice or lapse of time or both, would
constitute a default or event of default by the Company under any such lease or
agreement or, to the best of the Company's knowledge, by any other party
thereto. The Company has not received any notice of termination under any such
lease. The Company's possession of such property has not been disturbed and, to
the best of the Company's knowledge after due inquiry, no claim has been
asserted against the Company adverse to its rights in such leasehold interests.
2.12 Insurance. The insurance policies set forth on Schedule II
constitute all of the policies of insurance required to be maintained by the
Company. Such policies are in full force and effect. All premiums with respect
to such policies that have become due and payable have been paid, and no notice
of cancellation or termination has been received with respect to any such
policy.
2.13 Taxes. The Company has filed, or will timely file, all tax
returns, Federal, state, county and local, required to be filed by it, and the
Company has paid, or will timely pay, all taxes shown to be due by such returns
as well as all other taxes, assessments and governmental charges which have
become due or payable, including without limitation all taxes which the Company
is obligated to withhold from amounts owing to employees, creditors and third
parties. All tax returns and amendments thereto filed by the Company are true,
complete and correct in all material respects. The Company has established
adequate reserves for all taxes accrued but not yet payable. All tax elections
have been made by the Company in accordance with generally accepted practice.
The Federal income tax returns of the Company have never been audited by the
Internal Revenue Service, no audit is currently pending, and to the best
knowledge of the Company, no audit is threatened with respect to any tax returns
filed by it. No deficiency assessment with respect to or proposed adjustment of
the Company's Federal, state, county or local taxes is pending or, to the best
of the Company's knowledge, threatened. There is no tax lien, whether imposed by
any Federal, state, county or local taxing authority, outstanding against the
assets, properties or business of the Company. Neither the Company nor any of
its present or former stockholders has ever filed an election pursuant to
Section 1362 of the Internal Revenue Code of 1986, as amended (the "Code"), that
the Company be taxed as an S corporation. The Company is not a party to any tax
sharing, cost sharing or similar agreement. The Company has not entered into any
agreement that would result in the disallowance of any tax deduction under
Section 280G of the Code. The Company has not given or been requested to give
any waiver of any statutes of limitation relating to payment of taxes or
executed powers of attorney with respect to tax matters which will be
outstanding as of the Closing Date. The Company is not currently the beneficiary
of any extension of time within which to file any tax return. The Company has
not filed a "contract" within the meaning of Section 341(f) of the Code, nor, to
the Company's knowledge, has any such contract been filed with respect to the
Company.
2.14 Other Agreements. Except as set forth in the attached Schedule IV,
the Company is not a party to or otherwise bound by any written or oral
agreement, instrument, commitment or restriction which individually or in the
aggregate could materially adversely affect the
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business, prospects, financial condition, operations, property or affairs of the
Company. Copies of all agreements, instruments and documents set forth under
Section 2.14 of Schedule IV have previously been made available or furnished to
the Purchasers and their representatives. Except as set forth in the attached
Schedule IV, the Company is not a party to or otherwise bound by any written or
oral:
(a) distributor, dealer, manufacturer's representative or sales
agency agreement which is not terminable on less than ninety (90) days' notice
without cost or other liability to the Company (except for agreements which, in
the aggregate, are not material to the business of the Company);
(b) sales agreement which entitles any customer to a rebate or
right of set-off, to return any product to the Company after acceptance thereof
or to delay the acceptance thereof, or which varies in any material respect from
the Company's standard form agreements;
(c) agreement with any labor union (and, to the knowledge of
the Company, no organizational effort is being made with respect to any of its
employees);
(d) agreement with any supplier containing any provision
permitting any party other than the Company to renegotiate the price or other
terms, or containing any payback or other similar provision, upon the occurrence
of a failure by the Company to meet its obligations under the agreement when due
or the occurrence of any other event;
(e) agreement for the future purchase of fixed assets or for
the future purchase of materials, supplies or equipment in excess of its normal
operating requirements;
(f) agreement for the employment of any officer, employee or
other person (whether of a legally binding nature or in the nature of an
informal understanding) on a full-time or consulting basis which is not
terminable on notice without cost or other liability to the Company, except
normal severance arrangements and accrued vacation pay;
(g) bonus, pension, profit-sharing, retirement,
hospitalization, insurance, stock purchase, stock option or other plan,
agreement or understanding pursuant to which benefits are provided to any
employee of the Company (other than group insurance plans applicable to
employees generally);
(h) agreement relating to the borrowing of money or to the
mortgaging or pledging of, or otherwise placing a lien or security interest on,
any asset of the Company;
(i) guaranty of any obligation for borrowed money or otherwise;
(j) voting trust or agreement, stockholders' agreement, pledge
agreement, buy-sell agreement or first refusal or preemptive rights agreement
relating to any securities of the Company;
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(k) agreement, or group of related agreements with the same
party or any group of affiliated parties, under which the Company has advanced
or agreed to advance money or has agreed to lease any property as lessee or
lessor;
(l) agreement or obligation (contingent or otherwise) to issue,
sell or otherwise distribute or to repurchase or otherwise acquire or retire any
share of its capital stock or any of its other equity securities;
(m) assignment, license or other agreement with respect to any
form of intangible property;
(n) agreement under which it has granted any person any
registration rights, other than the Third Amended and Restated Registration
Rights Agreement;
(o) agreement under which it has limited or restricted its
right to compete with any person in any respect;
(p) other agreement or group of related agreements with the
same party involving more than $50,000 or continuing over a period of more than
six months from the date or dates thereof (including renewals or extensions
optional with another party), which agreement or group of agreements is not
terminable by the Company without penalty upon notice of thirty (30) days or
less, but excluding any agreement or group of agreements with a customer of the
Company for the sale, lease or rental of the Company's products or services if
such agreement or group of agreements was entered into by the Company in the
ordinary course of business;
(q) agreement or commitment for capital expenditures in excess
of $50,000; or
(r) other agreement, instrument, commitment, plan or
arrangement, a copy of which would be required to be filed with the Securities
and Exchange Commission (the "Commission") as an exhibit to a registration
statement on Form S-1 if the Company were registering securities under the
Securities Act of 1933, as amended (the "Securities Act").
The Company, and to the best of the Company's knowledge, each other party
thereto have in all material respects performed all the obligations required to
be performed by them to date (or each non-performing party has received a valid,
enforceable and irrevocable written waiver with respect to its non-performance),
have received no notice of default and are not in default (with due notice or
lapse of time or both) under any agreement, instrument, commitment, plan or
arrangement to which the Company is a party or by which it or its property may
be bound. All such agreements, instruments, commitments, plans or arrangements
constitute valid and binding obligations of the Company, and to the best
knowledge of the Company, the other parties thereto, enforceable in accordance
with their terms, except as enforcement may be limited by general principles of
equity, insolvency and similar laws affecting creditors rights generally. The
Company has no present expectation or intention of not fully performing all its
obligations under each such agreement, instrument, commitment, plan or
arrangement, and the Company has no knowledge of any breach or
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anticipated breach by the other party to, and has not received any written
notice of intention not to renew under, any agreement, instrument, commitment,
plan or arrangement to which the Company is a party. The Company is in full
compliance with all of the terms and provisions of its Charter and By-laws, as
amended.
2.15 Loans and Advances. The Company does not have any outstanding
loans or advances to any person and is not obligated to make any such loans or
advances, except, in each case, for advances to employees of the Company in
respect to reimbursable business expenses anticipated to be incurred by them in
connection with their performance of services for the Company.
2.16 Assumptions, Guaranties, Etc. of Indebtedness of Other Persons.
The Company has not assumed, guaranteed, endorsed or otherwise become directly
or contingently liable on any indebtedness of any other person (including,
without limitation, liability by way of agreement, contingent or otherwise, to
purchase, to provide funds for payment, to supply funds to or otherwise invest
in the debtor, or otherwise to assure the creditor against loss), except for
guaranties by endorsement of negotiable instruments for deposit or collection in
the ordinary course of business.
2.17 Significant Customers and Suppliers. No customer or supplier which
was significant to the Company during the period covered by the financial
statements referred to in Section 2.5 or which has been significant to the
Company thereafter, has terminated, materially reduced or threatened to
terminate or materially reduce its purchases from or provision of products or
services to the Company, as the case may be.
2.18 Governmental Approvals. Subject to the accuracy of the
representations and warranties of the Purchasers set forth in Article III, no
registration or filing with, or consent or approval of or other action by, any
Federal, state or other governmental agency or instrumentality is or will be
necessary for the valid execution, delivery and performance by the Company of
this Agreement, the Third Amended and Restated Registration Rights Agreement or
the Amended and Restated Stock Restriction Agreement, the issuance, sale and
delivery of the Preferred Shares or, upon conversion thereof, the issuance and
delivery of the Conversion Shares, other than (i) filings pursuant to state
securities laws (all of which filings have been made by the Company, other than
those which are required to be made after the Closing and which will be duly
made on a timely basis) in connection with the sale of the Preferred Shares and
(ii) with respect to the Third Amended and Restated Registration Rights
Agreement, the registration of the shares covered thereby with the Commission
and filings pursuant to state securities laws.
2.19 Disclosure. Neither this Agreement, nor any Schedule or Exhibit to
this Agreement, nor the Company's proposed plan for the 1998-1999 fiscal year
(the "1999 Plan"), nor the Audited Financial Statements or Unaudited Financial
Statements, contains an untrue statement of a material fact or omits a material
fact necessary to make the statements contained herein or therein not
misleading. None of the statements, documents, certificates or other items
prepared or supplied by the Company with respect to the transactions
contemplated hereby contains an untrue statement of a material fact or omits a
material fact necessary to make the statements contained therein not misleading.
There is no fact which the Company has not disclosed to the Purchasers and their
counsel
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in writing and of which the Company is aware which has or could have a Material
Adverse Effect on the Company. The financial projections and other estimates
contained in the 1999 Plan were prepared by the Company based on the Company's
experience in the industry and on assumptions of fact and opinion as to future
events which the Company, at the date of the preparation of the 1999 Plan,
believed to be reasonable, but which the Company cannot and does not assure or
guarantee the attainment of in any manner. As of the date hereof no facts have
come to the attention of the Company which would, in its opinion, require the
Company to revise or amplify the assumptions underlying such projections and
other estimates or the conclusions derived therefrom. The Company has furnished,
made available to, or has caused to be furnished or made available to,
Purchasers or their representatives for review complete and correct copies of
all agreements and documents set forth on the Disclosure Schedule or any other
schedule attached hereto.
2.20 Offering of the Preferred Shares. Neither the Company nor any
person authorized or employed by the Company as agent, broker, dealer or
otherwise in connection with the offering or sale of the Preferred Shares or any
security of the Company similar to the Preferred Shares has offered the
Preferred Shares or any such similar security for sale to, or solicited any
offer to buy the Preferred Shares or any such similar security from, or
otherwise approached or negotiated with respect thereto with, any person or
persons, and neither the Company nor any person acting on its behalf has taken
or will take any other action (including, without limitation, any offer,
issuance or sale of any security of the Company under circumstances which might
require the integration of such security with Preferred Shares under the
Securities Act or the rules and regulations of the Commission thereunder), in
either case so as to subject the offering, issuance or sale of the Preferred
Shares to the registration provisions of the Securities Act.
2.21 Brokers. The Company has no contract, arrangement or understanding
with any broker, finder or similar agent with respect to the transactions
contemplated by this Agreement.
2.22 Officers. Set forth in Schedule II is a list of the names of the
officers of the Company, together with the title or job classification of each
such person and the total compensation anticipated to be paid to each such
person by the Company in 1998. None of such persons has an employment agreement
or understanding, whether oral or written, with the Company, which is not
terminable on notice by the Company without cost or other liability to the
Company.
2.23 Transactions With Affiliates. No director, officer, employee or
stockholder of the Company, or member of the family of any such person, or any
corporation, partnership, trust or other entity in which any such person, or any
member of the family of any such person, has a substantial interest or is an
officer, director, trustee, partner or holder of more than 5% of the outstanding
capital stock thereof, is a party to any transaction with the Company, including
any contract, agreement or other arrangement providing for the employment of,
furnishing of services by, rental of real or personal property from or otherwise
requiring payments to any such person or firm, other than employment at will
arrangements in the ordinary course of business.
2.24 Employees. Each of the officers of the Company, each key employee
and each other employee now employed by the Company who has access to
confidential information of the
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Company has executed an Employee Nondisclosure and Developments Agreement
(collectively, the "Employee Nondisclosure and Developments Agreements"), and
such agreements are in full force and effect. No officer or key employee of the
Company has advised the Company (orally or in writing) that he intends to
terminate employment with the Company.
2.25 U.S. Real Property Holding Corporation. The Company is not now and
has never been a "United States real property holding corporation," as defined
in Section 897(c)(2) of the Code and Section 1.897-2(b) of the Regulations
promulgated by the Internal Revenue Service, and the Company has filed with the
Internal Revenue Service all statements, if any, with its United States income
tax returns that are required under Section 1.897-2(h) of such Regulations.
2.26 ERISA.
(a) Schedule II lists each Employee Plan that covers any
employee of the Company, copies or descriptions of which have previously been
made available or furnished to the Purchasers. With respect to each Employee
Plan, the Company has provided the most recently filed Form 5500 and an accurate
summary description of such plan. The Company has provided the Purchasers with
complete age, salary, service and related data as of the most recent practicable
date for employees of the Company.
(b) Schedule II also includes a list of each Benefit
Arrangement of the Company, copies or descriptions of all of which have been
made available or furnished previously to the Purchasers.
(c) No Employee Plan is a Multiemployer Plan and no Employee
Plan is subject to Title IV of ERISA. The Company and its Affiliates have not
incurred any liability under Title IV of ERISA arising in connection with the
termination of any plan covered or previously covered by Title IV of ERISA.
(d) None of the Employee Plans or other arrangements listed on
Schedule II covers any non-United States employee or former employee of the
Company.
(e) No "prohibited transaction," as defined in Section 406 of
ERISA or Section 4975 of the Code, has occurred with respect to any Employee
Plan.
(f) No Employee Plan is an "employee pension benefit plan" as
defined in Section 3(2) of ERISA.
(g) Each Employee Plan and each Benefit Arrangement has been
maintained in substantial compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations which are
applicable to such Employee Plan or Benefit Arrangement.
(h) All contributions and payments accrued under each Employee
Plan and Benefit Arrangement, determined in accordance with prior funding and
accrual practices, as adjusted
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to include proportional accruals for the period ending on the Closing Date, will
be discharged and paid on or prior to the Closing Date except to the extent
reflected on the Audited Financial Statements. Except as disclosed in writing to
the Purchasers prior to the date hereof, there has been no amendment to, written
interpretation of or announcement (whether or not written) by the Company or any
of its ERISA Affiliates relating to, or change in employee participation or
coverage under, any Employee Plan or Benefit Arrangement that would increase
materially the expense of maintaining such Employee Plan or Benefit Arrangement
above the level of the expense incurred in respect thereof for the fiscal year
ended prior to the date hereof.
(i) There is no contract, agreement, plan or arrangement
covering any employee or former employee of the Company that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to the terms of Section 280G of the Code.
(j) No tax under Section 4980B of the Code has been incurred
in respect of any Employee Plan that is a group health plan, as defined in
Section 5000(b)(1) of the Code.
(k) With respect to the employees and former employees of the
Company, there are no employee post-retirement medical or health plans in
effect, except as required by Section 4980B of the Code.
(l) No employee of the Company will become entitled to any
bonus, retirement, severance or similar benefit or enhanced benefit solely as a
result of the transactions contemplated hereby.
(m) The Company does not have, nor is it reasonably expected to
have, any liability under Title IV of ERISA.
2.27 Absence of Undisclosed Liabilities. Except for (a) liabilities as
and to the extent reflected or reserved against on the Audited Financial
Statements, (b) immaterial liabilities incurred since November 30, 1998, in the
ordinary course of business, consistent with past practice, of the Company, and
(c) ordinary course liabilities incurred under any contract not required to be
disclosed on any Schedule to this Agreement because of any applicable
materiality threshold contained in this Agreement, the Company has no
liabilities or obligations of any nature, whether known or unknown, fixed,
accrued, contingent or otherwise and whether due or to become due.
2.28 Year 2000. The computer systems and software owned, and to the
best knowledge of the Company after due inquiry, as set forth on Schedule II,
licensed, by the Company are able to accurately process, provide and/or receive
date data, including but not limited to, calculating, comparing and sequencing
from, into and between the twentieth century (through year 1999), the year 2000
and the twenty-first century, including leap year calculations. The Company has
instituted a program of questioning its material vendors and suppliers to assess
their Year 2000 readiness. Set forth under Section 2.28 of Schedule II is a
timetable showing the Company's anticipated schedule for the completion of such
interviews. In addition, attached as
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an annex to Section 2.28 of Schedule II is the questionnaire that the Company
has sent to each of its material vendors and suppliers regarding Year 2000
compliance issues, a copy of which has previously been provided to the
Purchasers. Of the vendors and suppliers that have responded to the Company's
questionnaire and inquiries to date, none have informed the Company of any
material Year 2000 compliance issues and, to the Company's knowledge, the
Company has no reason to believe otherwise.
2.29 Labor Relations. The Company is not engaged in any unfair labor
practice (under any applicable Federal or state law) that would reasonably be
expected to have a Material Adverse Effect on the Company, nor is there any
charge or complaint current or pending, nor to the Company's best knowledge,
threatened against the Company relating to such practice. The Company's
employees are not represented by a labor union and no union organizing activity
has commenced. The Company is not a party to any collective bargaining
agreement.
2.30 Environmental Matters. (a) The Company has (i) complied in all
material respects with the Environmental Laws applicable to it, (ii) provided to
the Purchasers a copy of any order, notice, permit, application, or any other
written communication or report received by the Company from any governmental
authority or any other person or sent by or for the Company to a
governmental authority in connection with any matter relating to environmental
laws applicable to the Company and (iii) has provided the Purchasers with copies
of any environmental assessment reports, certificates, engineering studies or
other written material or data the Company may have relating to environmental
laws applicable to the Company. There is no Environmental Claim pending or, to
the knowledge of the Company, threatened against the Company with respect to the
operations or business of the Company, or, to the Company's knowledge, against
any person or entity whose liability for any Environmental Claim the Company has
retained or assumed either contractually or by operation of law. To the
Company's knowledge, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without limitation,
the release, emission, discharge, presence or disposal of any Material of
Environmental Concern, that could form the basis of any Environmental Claim
against the Company, or, to the Company's knowledge, against any person or
entity whose liability for any Environmental Claim the Company has retained or
assumed either contractually or by operation of law, which would reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.
Schedule II sets forth (i) all on-site and to the knowledge of the Company
off-site locations where the Company has stored, disposed or arranged for the
disposal of Materials of Environmental Concern, (ii) to the knowledge of the
Company, all underground storage tanks, and the capacity and contents of such
tanks, located on property owned, leased or controlled by the Company, (iii) to
the knowledge of the Company, the location and condition of any asbestos or lead
(including furnishings or lead-based paints) contained in or forming part of any
building, building component, structure or office space owned, leased or
controlled by the Company; and (v) to the knowledge of the Company, all PCBs or
PCB-containing items that are used or stored at any property owned, leased or
controlled by the Company.
(b) For purposes of this Section 2.30 (i) "Environmental Claim"
means any claim, action, cause of action, investigation of which the Company,
including any of its management employees, are aware, or written notice by any
person alleging potential liability (including, without
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limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or resulting from (a)
the presence, or release into the environment, of any Material of Environmental
Concern at any location owned, leased, used or operated by the Company, or (b)
circumstances forming the basis of any violation, or alleged violation, of any
Environmental Law; (ii) "Environmental Laws" means all Federal, state and local
laws and regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata and natural resources), including,
without limitation, laws and regulations relating to emissions, discharges,
releases or threatened releases of Materials of Environmental Concern, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Materials of Environmental Concern;
and (iii) "Materials of Environmental Concern" means chemicals, pollutants,
contaminants, industrial, toxic or hazardous wastes, substances or constituents,
petroleum and petroleum products (or any by-product or constituent thereof),
asbestos or asbestos-containing materials, or PCBs.
2.31 Investment Company Act. The Company is not a "registered
investment company" within the meaning of the Investment Act of 1940, as
amended.
2.32 Relationship with General Electric Company. The Company does not
have any equity, creditor or similar relationship (including without limitation
any investment in, or any debtor, revolving credit, leasing or creditor
relationship, but excluding any vendor or vendee relationship) with General
Electric Company or any subsidiary thereof.
2.33 Private Offering. Assuming the correctness of the representations
and warranties set forth in Article III hereof, the offer and sale of the
Preferred Stock to Purchasers hereunder is exempt from the registration and
prospectus delivery requirements of the Securities Act.
2.34 Holding Company. The Company is not a "holding company" or a
"subsidiary company" as such terms are defined in the Public Utility Holding
Company Act of 1934, as amended.
2.35 Disqualified Persons. To the Company's knowledge, none of the
persons listed on Schedule V hereto holds, directly or indirectly, any
securities of the Company.
2.36 Absence of Questionable Payments. To the Company's knowledge,
neither the Company nor any director, officer or employee acting on behalf of
the Company has used any corporate or other funds for unlawful contributions,
payments, gifts, or entertainment, or made any unlawful expenditures relating to
foreign political activity or government officials. Neither the Company nor any
current director, officer or employee acting on behalf of the Company has
accepted or received any unlawful contributions, payments, gifts or
expenditures.
2.37 Solvency. The Company is not (a) "insolvent" (as defined in
Section 101(32) of the Bankruptcy Code of 1978, as amended (the "Bankruptcy
Code")), (b) engaged in business with unreasonably small capital or assets (as
contemplated by the Bankruptcy Code, the Uniform Fraudulent Conveyance Act, as
amended, the Uniform Fraudulent Transfer Act, as amended, or other
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similar laws) or (c) unable to pay or provide for the payment of such
liabilities and obligations as and when due.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser severally represents and warrants to the Company that:
(a) it is an "accredited investor" within the meaning of Rule
501 under the Securities Act and was not organized for the specific purpose of
acquiring the Preferred Shares;
(b) it received any materials in connection with the offering
of the Preferred Shares and first learned of such offering in the state listed
as its address set forth on Schedule I hereto, and intends that the state
securities laws of that state alone shall govern its purchase of Preferred
Shares;
(c) it has sufficient knowledge and experience in investing in
companies similar to the Company in terms of the Company's stage of development
so as to be able to evaluate the risks and merits of its investment in the
Company and it is able financially to bear the risks thereof;
(d) it has had an opportunity to discuss the Company's
business, management and financial affairs with the Company's management;
(e) the Preferred Shares being purchased by it are being
acquired for its own account for the purpose of investment and not with a view
to or for sale in connection with any distribution thereof without prejudice,
however, to its rights at all times to sell or otherwise dispose of all or part
of such Preferred Shares, subject to the provisions of Section 6.12 of this
Agreement, or pursuant to a registration statement under the Securities Act or
pursuant to an exemption from the registration requirements under the Securities
Act;
(f) it understands that (i) the Preferred Shares and the
Conversion Shares have not been registered under the Securities Act by reason of
their issuance in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof promulgated under the Securities
Act, (ii) the Preferred Shares and, upon conversion thereof, the Conversion
Shares must be held indefinitely unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from such registration, (iii)
the Preferred Shares and the Conversion Shares will bear a legend to such effect
and (iv) the Company will make a notation on its transfer books to such effect;
and
(g) if it sells any Conversion Shares pursuant to Rule 144A
promulgated under the Securities Act, it will take all necessary steps in order
to perfect the exemption from registration provided thereby, including (i)
obtaining on behalf of the Company information to enable
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the Company to establish a reasonable belief that the purchaser is a qualified
institutional buyer and (ii) advising such purchaser that Rule 144A is being
relied upon with respect to such resale.
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS
The obligation of each Purchaser to purchase and pay for the Preferred
Shares being purchased by it on the Closing Date is, at its option, subject to
the satisfaction, on or before the Closing Date, of the following conditions:
(a) Opinion of Company's Counsel. The Purchasers shall have
received from ▇▇▇▇ and ▇▇▇▇ LLP, counsel for the Company, an opinion dated as of
the Closing Date, in form and scope satisfactory to the Purchasers and their
counsel, to the effect that:
(i) The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, its jurisdiction of incorporation. To the knowledge of such
counsel, the Company has no subsidiaries. The Company is duly licensed or
qualified to transact business as a foreign corporation and is in good standing
in Virginia. The Company has the corporate power and authority to own and hold
its properties and to carry on its business as currently conducted and as
proposed to be conducted. The Company has the corporate power and authority to
execute, deliver and perform this Agreement, the Third Amended and Restated
Registration Rights Agreement and the Amended and Restated Stock Restriction
Agreement, to issue, sell and deliver the Preferred Shares and, upon conversion
thereof, to issue and deliver the Conversion Shares.
(ii) This Agreement, the Third Amended and
Restated Registration Rights Agreement and the Amended and Restated Stock
Restriction Agreement have been duly authorized, executed and delivered by the
Company and constitute the legal, valid and binding obligations of the Company,
enforceable in accordance with their respective terms (subject, as to
enforcement of remedies, to the discretion of courts in awarding equitable
relief and to applicable bankruptcy, reorganization, insolvency, moratorium and
similar laws affecting the rights of creditors generally), except that such
counsel need not express any opinion as to the validity or enforceability of the
indemnification and contribution provisions of the Third Amended and Restated
Registration Rights Agreement.
(iii) The execution and delivery by the Company of
this Agreement, the Third Amended and Restated Registration Rights Agreement and
the Amended and Restated Stock Restriction Agreement, the performance by the
Company of its obligations hereunder and thereunder, the issuance, sale and
delivery of the Preferred Shares and, upon conversion thereof, the issuance and
delivery of the Conversion Shares, will not violate any provision of law
applicable to the Company, the Charter or By-laws, as amended, of the Company,
any order of any court or other agency of government specifically applicable to
the Company or its property or any agreement
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of the Company listed on Schedule II hereto, or conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under, accelerate or terminate or require the consent of any party under any
material indenture, agreement or other instrument as listed on Schedule II
hereto, or result in the creation or imposition of any lien, charge,
restriction, claim or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company. In rendering the foregoing opinion, such
counsel may assume, with respect to performance by the Company of its
obligations under the Third Amended and Restated Registration Rights Agreement,
compliance by the Company at such time with the registration requirements of the
Securities Act and with applicable state securities laws and may disclaim any
opinion as to the validity or enforceability of the indemnification and
contribution provisions of the Third Amended and Restated Registration Rights
Agreement.
(iv) The authorized capital stock of the Company
as of the date hereof consists of (i) 1,562,500 shares of Class A Convertible
Preferred Stock, par value $.001 per share (the "Class A Preferred Stock"), (ii)
2,151,420 shares of Class B Convertible Preferred Stock, par value $.001 per
share (the "Class B Preferred Stock"), (iii) 3,188,889 shares of Class C
Convertible Preferred Stock, par value $.001 per share (the "Class C Preferred
Stock"), (iv) 2,045,785 shares of Class D Convertible Preferred Stock, par value
$.001 per share (the "Class D Convertible Preferred Stock"), (v) 1,024,351
shares of Class E Convertible Preferred Stock, par value $.001 per share (the
"Class E Preferred Stock"), (vi) 2,018,350 shares of Class F Convertible
Preferred Stock, par value $.001 per share (the "Class F Preferred Stock") and
(vii) 21,000,000 shares of Common Stock. Immediately prior to the Closing,
4,855,333 shares of Common Stock, 1,507,500 shares of Class A Preferred Stock,
2,151,420 shares of Class B Preferred Stock, 3,188,889 shares of Class C
Preferred Stock, 2,045,785 shares of Class D Preferred Stock and 1,024,351
shares of Class E Preferred Stock will be validly issued and outstanding, fully
paid and nonassessable with no personal liability attaching to the ownership
thereof and no shares of Class F Preferred Stock will have been issued. The
Class F Preferred Stock, when issued to the Purchasers pursuant to the terms of
this Agreement and for the consideration set forth herein, will be validly
issued and outstanding, fully paid and nonassessable with no personal liability
attaching to the ownership thereof. Immediately prior to the Closing, based on a
review by such counsel of the stock record and minute books of the Company, the
amount of Common Stock issuable pursuant to warrants, options, convertible
securities, and other rights (contingent or other) to purchase or otherwise
acquire equity securities of the Company, and the number of shares of Common
Stock and the number of such subscriptions, warrants, options, convertible
securities, and other such rights held by each, will be as set forth in Schedule
II and Schedule III. The designations, powers, preferences, rights,
qualifications, limitations and restrictions in respect of each class or series
of authorized capital stock of the Company are as set forth in the Charter, and
all such designations, powers, preferences, rights, qualifications, limitations
and restrictions are valid, binding and enforceable against the Company and in
accordance with all applicable laws (subject, as to enforcement, to the
discretion of courts in awarding equitable relief and to applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting the rights of
creditors generally). Except as set forth in Schedule II and Schedule III, to
the knowledge of such counsel, immediately prior to the Closing no Common Stock
has been issued pursuant to any subscription, warrant, option, convertible
security, or other right (contingent or otherwise) to purchase or acquire equity
securities of the Company will
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be authorized or outstanding and there will be no commitment by the Company to
issue shares, subscriptions, warrants, options, convertible securities, or other
such rights or to distribute to holders of any of its equity securities any
evidence of indebtedness or asset. Except as set forth in Schedule II or as
provided for in the Charter, to the knowledge of such counsel, the Company has
no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interest therein or to pay any dividend or
make any other distribution in respect thereof.
(v) The Preferred Shares and the Conversion
Shares have been duly authorized. The issuance, sale and delivery of the
Preferred Shares and the issuance and delivery of the Conversion Shares upon
conversion of the Preferred Shares have been duly authorized by all required
corporate action; the Preferred Shares have been validly issued, are fully paid
and nonassessable with no personal liability attaching to the ownership thereof
and, to the best knowledge of such counsel, are free and clear of all liens,
charges, restrictions, claims and encumbrances imposed by or through the Company
except as set forth in the Third Amended and Restated Registration Rights
Agreement and the Amended and Restated Stock Restriction Agreement, and the
Conversion Shares have been duly reserved for issuance upon conversion of the
Preferred Shares and, when issued in accordance with the terms of this Agreement
and the Company's Charter, as amended, will be validly issued, fully paid and
nonassessable with no personal liability attaching to the ownership thereof and,
to the knowledge of such counsel, will be free and clear of all liens, charges,
restrictions, claims and encumbrances imposed by or through the Company except
as set forth in the Third Amended and Restated Registration Rights Agreement.
Neither the issuance, sale or delivery of the Preferred Shares nor the issuance
or delivery of the Conversion Shares is subject to any preemptive right of
stockholders of the Company arising under law or the Charter or By-laws of the
Company, each as amended, or, to the knowledge of such counsel, to any
contractual right of first refusal or other right in favor of any person, except
as set forth on Schedule II.
(vi) Except as described in Schedule II, to the
knowledge of such counsel there is no (A) action, suit, claim, proceeding or
investigation pending or threatened against or affecting the Company, at law or
in equity, or before or by any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (B) arbitration proceeding relating to the Company pending under
collective bargaining agreements or (C) governmental inquiry pending or
threatened against or affecting the Company (including, without limitation, any
inquiry as to the qualification of the Company to hold or receive any license or
permit). To the knowledge of such counsel, the Company is not in default with
respect to any order, writ, injunction or decree known to such counsel of any
court or of any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign.
(vii) To the knowledge of such counsel, no third
party has claimed that any person employed by or affiliated with the Company has
violated or may be violating any of the terms or conditions of his employment,
non-competition or non-disclosure agreement with such third party, or disclosed
or may be disclosing or utilized or may be utilizing any trade secret or
proprietary information or documentation of such third party or interfered or
may be interfering in the employment relationship between such third party and
any of its present or former employees.
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(viii) Assuming the accuracy of the representations
and warranties of the Purchasers set forth in Article III, the offer and sale of
the Series F Preferred Stock pursuant to the terms of this Agreement and the
Third Amended and Restated Registration Rights Agreement are exempt from the
registration requirements of Section 5 of the Securities Act of 1933, as
amended, and, under such securities laws as they presently exist, the issuance
of Common Stock upon conversion of the Series F Preferred Stock will also be
exempt from such registration and qualification requirements.
(b) Representations and Warranties to be True and Correct. The
representations and warranties contained in Article II shall be true, complete
and correct 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, and the
President and Treasurer of the Company shall have certified to such effect to
the Purchasers in writing.
(c) Performance. The Company shall have performed and complied
with all agreements contained herein required to be performed or complied with
by it prior to or at the Closing Date, and the President and Treasurer of the
Company shall have certified to the Purchasers in writing to such effect and to
the further effect that all of the conditions set forth in this Article IV have
been satisfied.
(d) All Proceedings to be Satisfactory. All corporate and other
proceedings to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be satisfactory in
form and substance to the Purchasers and their counsel, and the Purchasers and
their counsel shall have received all such counterpart originals or certified or
other copies of such documents as they reasonably may request.
(e) Supporting Documents. The Purchasers and their counsel
shall have received copies of the following documents:
(i) (A) the Charter, certified as of a recent
date by the Secretary of State of the State of Delaware, (B) a certificate of
said Secretary dated as of a recent date as to the due incorporation and good
standing of the Company, the payment of all excise taxes by the Company and
listing all documents of the Company on file with said Secretary, and (C)
certificates of good standing or authority to conduct business from each state
in which the absence of such good standing or authority to conduct business
would have a Material Adverse Effect on the Company;
(ii) a certificate of the Secretary or an
Assistant Secretary of the Company dated the Closing Date and certifying: (A)
that attached thereto is a true and complete copy of the By-laws of the Company
as in effect on the date of such certification; (B) that attached thereto is a
true and complete copy of all resolutions adopted by the Board of Directors or
the stockholders of the Company authorizing the execution, delivery and
performance of this Agreement, the Third Amended and Restated Registration
Rights Agreement and the Amended and Restated Stock Restriction Agreement, the
issuance, sale and delivery of the Preferred Shares and
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the reservation, issuance and delivery of the Conversion Shares, and that all
such resolutions are in full force and effect and are all the resolutions
adopted in connection with the transactions contemplated by this Agreement, the
Third Amended and Restated Registration Rights Agreement and the Amended and
Restated Stock Restriction Agreement; (C) that the Charter has not been amended
since the date of the last amendment referred to in the certificate delivered
pursuant to clause (i)(B) above; and (D) to the incumbency and specimen
signature of each officer of the Company executing this Agreement, the Third
Amended and Restated Registration Rights Agreement and the Amended and Restated
Stock Restriction Agreement, the stock certificates representing the Preferred
Shares and any certificate or instrument furnished pursuant hereto, and a
certification by another officer of the Company as to the incumbency and
signature of the officer signing the certificate referred to in this clause
(ii); and
(iii) such additional supporting documents and
other information with respect to the operations and affairs of the Company as
the Purchasers or their counsel reasonably may request.
(f) Other Agreements. The Company and each Prior Investor (as
such term is defined therein) shall have executed and delivered the Third
Amended and Restated Registration Rights Agreement. The Company and each party
to (i) the Stock Restriction Agreement, dated July 12, 1996, by and among the
Company, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and persons listed as purchasers in the signature pages
thereto and (ii) the Stock Restriction Agreement, dated July 12, 1996, by and
among the Company, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and persons listed as purchasers in the
signature pages thereto shall have executed and delivered the Amended and
Restated Stock Restriction Agreement.
(g) Non-Competition Agreements. Copies of the Non-Competition
Agreements with the Company signed by each of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
and ▇▇▇▇ ▇▇▇▇▇▇ (collectively, the "Non-Competition Agreements") shall have been
delivered to counsel for the Purchasers.
(h) Charter. The Charter shall read in its entirety as set
forth in Exhibit B.
(i) Employee Agreements. Copies of the Employee Nondisclosure
and Developments Agreements shall have been delivered to counsel for the
Purchasers.
(j) Board Observer. GE Capital Equity Investments, Inc.
("GECE") and General Electric Pension Trust ("GEPT") each shall have the right
to assign an observer to the Board of Directors of the Company to attend each
meeting of the Board of Directors of the Company and each meeting of any
Committee thereof.
(k) Preemptive Rights. All stockholders of the Company having
any preemptive, first refusal or other rights with respect to the issuance of
the Preferred Shares or the Conversion Shares shall have irrevocably exercised
or waived the same in writing.
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(l) Fees of Purchasers' Counsel. The Company shall have paid in
accordance with Section 6.1 the fees and disbursements of Purchasers' counsel
invoiced at the Closing.
(m) Blue Sky. The Preferred Shares shall have been qualified
under applicable state securities laws.
All such documents shall be satisfactory in form and substance to the
Purchasers and each of their counsels.
ARTICLE V
COVENANTS OF THE COMPANY
The Company covenants and agrees with each of the Purchasers that:
5.1 Financial Statements, Reports, Etc. The Company shall furnish to
each Purchaser holding any Preferred Shares, and to each stockholder listed on
Schedule III hereto (individually, an "Existing Stockholder" and collectively,
the "Existing Stockholders"), until the earlier of such time as the Existing
Stockholder holds at least 50% of the outstanding stock of the Company held by
such Existing Stockholder as of the date hereof (calculated on a fully-diluted
basis and adjusting for stock splits, stock dividends and the like) or the
completion of an initial public offering of the Company's stock:
(a) within ninety (90) days after the end of each fiscal year
of the Company a consolidated balance sheet of the Company and its subsidiaries
as of the end of such fiscal year and the related consolidated statements of
income, stockholders' equity and cash flows for the fiscal year then ended,
prepared in accordance with generally accepted accounting principles and
certified by a firm of independent public accountants of recognized national
standing selected by the Board of Directors of the Company;
(b) within thirty (30) days after the end of each quarter in
each fiscal year (other than the last quarter in each fiscal year) a
consolidated balance sheet of the Company and its subsidiaries and the related
consolidated statements of income, stockholders' equity and cash flows,
unaudited but prepared in accordance with generally accepted accounting
principles and certified by the Chief Executive Officer or Chief Financial
Officer of the Company, such consolidated balance sheet to be as of the end of
such quarter and such consolidated statements of income, stockholders' equity
and cash flows to be for such quarter and for the period from the beginning of
the fiscal year to the end of such quarter, in each case with comparative
statements for the prior fiscal year, provided that the Company's obligations
under this Section 5.1(b) shall terminate upon the completion of a firm
commitment underwritten public offering of the Company's securities; provided
further that such certificate by the Chief Executive Officer or Chief Financial
Officer shall also state that during the period covered by the most recent
statement of income delivered to the Purchasers no event of default or default
has occurred under any material agreement to which the Company is a party or
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violation of any law, rule or regulation to which the Company is subject, or, if
such has occurred, specifying the nature and status thereof, the period of
existence thereof and what action the Company has taken or proposes to take with
respect thereto;
(c) at the time of delivery of each quarterly statement
pursuant to Section 5.1(b), a management narrative report explaining all
significant variances from forecasts and all significant current developments in
staffing, marketing, sales and operations;
(d) no later than fifteen (15) days prior to the start of each
fiscal year, consolidated capital and operating expense budgets, cash flow
projections and income and loss projections for the Company and its subsidiaries
in respect of such fiscal year, all itemized in reasonable detail and prepared
on a monthly basis, and, promptly after preparation, any revisions to any of the
foregoing;
(e) promptly following receipt by the Company, each audit
response letter, accountant's management letter and other written report
submitted to the Company by its independent public accountants in connection
with an annual or interim audit of the books of the Company or any of its
subsidiaries;
(f) promptly upon sending, making available or filing the same,
all press releases, reports and financial statements that the Company sends or
makes available to its stockholders or directors or files with the Commission;
and
(g) promptly, from time to time, such other information
regarding the business, prospects, financial condition, operations, property or
affairs of the Company and its subsidiaries as such Purchaser reasonably may
request.
5.2 Right of First Offer. So long as any shares of Class A Preferred
Stock, Class B Preferred Stock, Class C Preferred Stock, Class D Preferred
Stock, Class E Convertible Preferred Stock or Class F Preferred Stock are
outstanding, the Company shall, prior to any issuance by the Company of any of
its securities (other than debt securities with no equity feature), offer to
each Purchaser and to each then existing holder of such Preferred Stock (an
"Existing Stockholder") by written notice the right, for a period of thirty (30)
days, to purchase, on a pro rata basis, all of such securities for cash at an
amount equal to the price or other consideration for which such securities are
to be issued; provided, however, that the first refusal rights of the Purchasers
and Existing Stockholders pursuant to this Section 5.2 shall not apply to
securities issued (A) upon conversion of any of the Preferred Shares, (B) as a
stock dividend or upon any subdivision of shares of Common Stock, provided that
the securities issued pursuant to such stock dividend or subdivision are limited
to additional shares of Common Stock, (C) pursuant to subscriptions, warrants,
options, convertible securities, or other rights which are listed in Schedule
III as being outstanding on the date of this Agreement, (D) solely in
consideration for the acquisition (whether by merger or otherwise) by the
Company or any subsidiaries of all or substantially all of the stock or assets
of any other entity, (E) pursuant to a firm commitment underwritten public
offering, (F) pursuant to the exercise of the warrants issued to ADP, Inc.
("ADP") in connection with its purchase of Class D Preferred Stock
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and (G) pursuant to the exercise of options to purchase Common Stock granted to
directors, officers, employees or consultants of the Company in connection with
their service to the Company, not to exceed in the aggregate 2,100,000 shares
(appropriately adjusted to reflect stock splits, stock dividends, combinations
of shares and the like with respect to the Common Stock) less the number of
shares (as so adjusted) issued pursuant to subscriptions, warrants, options,
convertible securities, or other rights outstanding on the date of this
Agreement and listed in Schedule III pursuant to clause (C) above (the shares
exempted by this clause (G) being hereinafter referred to as the "Reserved
Employee Shares") provided that the number of Reserved Employee Shares may be
increased with the approval of a majority of the Board of Directors. The
Company's written notice to the Purchasers and Existing Stockholders shall
describe the securities proposed to be issued by the Company and specify the
number, price and payment terms. Each Purchaser and Existing Stockholder may
accept the Company's offer as to the full number of securities offered to it or
any lesser number, by written notice thereof given by it to the Company prior to
the expiration of the aforesaid thirty (30) day period, in which event the
Company shall promptly sell and such Purchaser or Existing Stockholder shall
buy, upon the terms specified, the number of securities agreed to be purchased
by such Purchaser or Existing Stockholder. Notwithstanding the foregoing, if the
Purchasers and Existing Stockholders agree, in the aggregate, to purchase more
than the full number of securities offered by the Company, then each Purchaser
and Existing Stockholder accepting the Company's offer shall first be allocated
the lesser of (i) the number of securities which such Purchaser or Existing
Stockholder agreed to purchase and (ii) the number of securities as is equal to
the full number of securities offered by the Company multiplied by a fraction,
the numerator of which shall be the number of shares of Common Stock held by
such Purchaser or Existing Stockholder as of the date of the Company's notice of
offer (treating such Purchaser or Eisting Stockholder, for the purpose of such
calculation, as the holder of the number of shares of Common Stock which would
be issuable to such Purchaser or Existing Stockholder upon conversion, exercise
or exchange of all securities (including but not limited to the Preferred
Shares) held by such Purchaser or Existing Stockholder on the date such offer is
made, that are then convertible, exercisable or exchangeable into or for
(whether directly or indirectly) shares of Common Stock) and the denominator of
which shall be the aggregate number of shares of Common Stock (calculated as
aforesaid) held on such date by all Purchasers and Existing Stockholders who
accepted the Company's offer, and the balance of the securities (if any) offered
by the Company shall be allocated among the Purchasers and Existing Stockholders
accepting the Company's offer in proportion to their relative equity ownership
interests in the Company (calculated as aforesaid), provided that no Purchaser
or Existing Stockholder shall be allocated more than the number of securities
which such Purchaser or Existing Stockholder agreed to purchase and provided
further that in cases covered by this sentence all Purchasers and Existing
Stockholders shall be allocated among them the full number of securities offered
by the Company. The Company shall be free at any time prior to ninety (90) days
after the date of its notice of offer to the Purchasers and Existing
Stockholders, to offer and sell to any third party or parties the number of such
securities not agreed by the Purchasers and Existing Stockholders to be
purchased by them, at a price and on payment terms no less favorable to the
Company than those specified in such notice of offer to the Purchasers and
Existing Stockholders. However, if such third party sale or sales are not
consummated within such ninety (90) day period, the Company shall not sell such
securities as shall not have been purchased within such period without again
complying with this Section 5.2.
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5.3 Reserve for Conversion Shares. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, for the purpose of effecting the conversion of the Preferred Shares and
otherwise complying with the terms of this Agreement, such number of its duly
authorized shares of Common Stock as shall be sufficient to effect the
conversion of the Preferred Shares from time to time outstanding or otherwise to
comply with the terms of this Agreement. If at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of the Preferred Shares or otherwise to comply with the terms of this
Agreement, the Company will forthwith take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes. The Company will
obtain any authorization, consent, approval or other action by or make any
filing with any court or administrative body that may be required under
applicable state securities laws in connection with the issuance of shares of
Common Stock upon conversion of the Preferred Shares.
5.4 Corporate Existence. The Company shall maintain and, except as
otherwise permitted by Section 5.16, cause any subsidiaries to maintain, their
respective corporate existence, rights and franchises in full force and effect.
5.5 Properties, Business, Insurance. The Company shall maintain and
cause any subsidiaries to maintain as to their respective properties and
business, with financially sound and reputable insurers, insurance against such
casualties and contingencies and of such types and in such amounts as is
customary for companies similarly situated, which insurance shall be deemed by
the Company to be sufficient. The Company shall also maintain in effect "key
person" life insurance policies, payable to the Company, on the life of ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ (so long as he remains an employee of the Company), in the amount of
$2,000,000. The Company shall not cause or permit any assignment or change in
beneficiary and shall not borrow against such policy. If requested by Purchasers
holding at least a majority of the outstanding Preferred Shares, the Company
will add one designee of such Purchasers as a notice party for such policy and
shall request that the issuer of such policy provide such designee with ten (10)
days' notice before such policy is terminated (for failure to pay premiums or
otherwise) or assigned or before any change is made in the beneficiary thereof.
5.6 Inspection, Consultation and Advice. Until the closing of an
initial public offering of the Company's stock, the Company shall permit and
cause each of its subsidiaries to permit each Purchaser and such persons as it
may designate, at such Purchaser's expense, to visit and inspect any of the
properties of the Company and its subsidiaries, examine their books and take
copies and extracts therefrom, discuss the affairs, finances and accounts of the
Company and its subsidiaries with their officers, employees and public
accountants (and the Company hereby authorizes said accountants to discuss with
such Purchaser and such designees such affairs, finances and accounts), and
consult with and advise the management of the Company and its subsidiaries as to
their affairs, finances and accounts, all at reasonable times and upon
reasonable notice.
5.7 Restrictive Agreements Prohibited. Neither the Company nor any of
its subsidiaries shall become a party to any agreement which by its terms
restricts the Company's
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performance of this Agreement, the Third Amended and Restated Registration
Rights Agreement the Amended and Restated Stock Restriction Agreement or the
Charter.
5.8 Transactions with Affiliates. Except for transactions contemplated
by this Agreement or as otherwise approved by the Board of Directors, neither
the Company nor any of its subsidiaries shall enter into any transaction with
any director, officer, employee or holder of more than 5% of the outstanding
capital stock of any class or series of capital stock of the Company or any of
its subsidiaries, affiliates, member of the family of any such person, or any
corporation, partnership, trust or other entity in which any such person, or
member of the family of any such person, is a director, officer, trustee,
partner or holder of more than 5% of the outstanding capital stock thereof,
except for transactions related to such person's employment on terms consistent
with then current industry practice and in the ordinary course of business for
the Company as it is then conducted.
5.9 Use of Proceeds. The Company shall use the proceeds from the sale
of the Preferred Shares solely for working capital.
5.10 Board of Directors Meetings. The Company shall use its best
efforts to ensure that meetings of its Board of Directors are held at least four
times each year and at least once each quarter. The Company shall permit each of
GECE and GEPT to have an observer attend each meeting of the Board of Directors
of the Company and each meeting of any Committee thereof for as long as GECE
and/or GEPT together, or individually, shall continue to hold an aggregated
total of at least 250,000 shares of the Company Series F Convertible Preferred
Stock or Common Stock into which such shares are convertible. Each person so
designated by GECE and GEPT as an observer on its respective behalf shall be
sent all materials provided to members of the Company's Board of Directors at
the same time and in the same manner as the Company's Board of Directors.
5.11 Compensation. The Company shall not pay to its management
compensation in excess of that compensation customarily paid to management in
companies of similar size, of similar maturity, and in similar businesses
without the written consent of a majority of the members of the Board of
Directors of the Company.
5.12 Performance of Contracts. The Company shall not amend, modify,
terminate, waive or otherwise alter, in whole or in part, any of the Employee
Nondisclosure and Developments Agreements or the Non-Competition Agreements
without the written consent of a majority of the members of the Board of
Directors of the Company.
5.13 Vesting of Reserved Employee Shares. The Company shall not grant
to any of its employees options to purchase Reserved Employee Shares which will
become exercisable at a rate in excess of 25% per annum from the date of such
grant (except as set forth on Schedule II) without the consent of the Board of
Directors.
5.14 Employee Nondisclosure and Developments Agreements. The Company
shall use its best efforts to obtain, and shall cause its subsidiaries to use
their best efforts to obtain, an Employee Nondisclosure and Developments
Agreement from all future officers, key employees and
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other employees who will have access to confidential information of the Company
or any of its subsidiaries, upon their employment by the Company or any of its
subsidiaries.
5.15 Activities of Subsidiaries. The Company shall not permit any
subsidiary to consolidate or merge into or with or sell or transfer all or
substantially all its assets, except that any subsidiary may (i) consolidate or
merge into or with or sell or transfer assets to any other subsidiary, or (ii)
merge into or sell or transfer assets to the Company. The Company shall not sell
or otherwise transfer any shares of capital stock of any subsidiary, except to
the Company or another subsidiary, or permit any subsidiary to issue, sell or
otherwise transfer any shares of its capital stock or the capital stock of any
subsidiary, except to the Company or another subsidiary. The Company shall not
permit any subsidiary to purchase or set aside any sums for the purchase of, or
pay any dividend or make any distribution on, any shares of its stock, except
for dividends or other distributions payable to the Company or another
subsidiary.
5.16 Compliance with Laws. The Company shall comply, and cause each
subsidiary to comply, with all applicable laws, rules, regulations and orders
including, without limitation, the Foreign Corrupt Practices Act of 1977, as
amended, noncompliance with which could have a Material Adverse Effect on the
Company.
5.17 Keeping of Records and Books of Account. The Company shall keep,
and cause each subsidiary to keep, adequate records and books of account, in
which complete entries will be made in accordance with generally accepted
accounting principles consistently applied, reflecting all financial
transactions of the Company and such subsidiary, and in which, for each fiscal
year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business shall be made.
5.18 Change in Nature of Business. The Company shall not make, or
permit any subsidiary to make, any material change in the nature of its business
as currently conducted.
5.19 U.S. Real Property Interest Statement. The Company shall provide
prompt written notice to each Purchaser following any "determination date" (as
defined in Treasury Regulation Section 1.897-2(c)(i)) on which the Company
becomes a United States real property holding corporation. In addition, upon a
written request by any Purchaser, the Company shall provide such Purchaser with
a written statement informing the Purchaser whether such Purchaser's interest in
the Company constitutes a U.S. real property interest. The Company's
determination shall comply with the requirements of Treasury Regulation Section
1.897-2(h)(1) or any successor regulation, and the Company shall provide timely
notice to the Internal Revenue Service, in accordance with and to the extent
required by Treasury Regulation Section 1.897- 2(h)(2) or any successor
regulation, that such statement has been made. The Company's written statement
to any Purchaser shall be delivered to such Purchaser within ten (10) days of
such Purchaser's written request therefor. The Company's obligation to furnish a
written statement pursuant to this Section 5.19 shall continue notwithstanding
the fact that a class of the Company's stock may be regularly traded on an
established securities market.
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5.20 Rule 144A Information. The Company shall, at all times during
which it is neither subject to the reporting requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), nor
exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act, provide
in writing, upon the written request of any Purchaser or a prospective buyer of
Preferred Shares or Conversion Shares from any Purchaser, all information
required by Rule 144A(d)(4)(i) of the General Regulations promulgated by the
Commission under the Securities Act ("Rule 144A Information"). The Company also
shall, upon the written request of any Purchaser or any stockholder listed on
Schedule III, cooperate with and assist such Purchaser or any member of the
National Association of Securities Dealers, Inc. PORTAL system in applying to
designate and thereafter maintain the eligibility of the Preferred Shares or
Conversion Shares, as the case may be, for trading through PORTAL. The Company's
obligations under this Section 5.20 shall at all times be contingent upon the
relevant Purchaser's obtaining from the prospective buyer of Preferred Shares or
Conversion Shares a written agreement to take all reasonable precautions to
safeguard the Rule 144A Information from disclosure to anyone other than a
person who will assist such buyer in evaluating the purchase of any Preferred
Shares or Conversion Shares.
5.21 Termination of Covenants. Subject to Section 6.12, the covenants
set forth in Sections 5.19 and 5.20 shall terminate and be of no further force
or effect as to each of the Purchasers when such Purchaser no longer holds any
shares of capital stock of the Company. Except as otherwise provided above, all
of the other covenants set forth in this Article V (other than Section 5.23)
shall terminate and be of no further force or effect as to each of the
Purchasers when such Purchaser owns less than 20% of the Preferred Shares
purchased by it on the date hereof (appropriately adjusted to reflect stock
splits, stock dividends, combinations of shares and the like with respect to the
Class F Convertible Preferred Stock).
5.22 Taxes. The Company shall pay and discharge, before the same shall
become delinquent, (i) all amounts of taxes, assessments and governmental
charges or levies imposed upon it or upon its property and (ii) all lawful
claims that, if unpaid, could reasonably be expected by law to become a lien on
its property; provided, however, that neither the Company nor its subsidiaries
will be required to pay or discharge any such tax, assessment, charge or claim
(y) that is being contested in good faith and by proper proceedings and as to
which appropriate reserves are being maintained or (z) the non-payment or
non-discharge of which could not reasonably be expected to be materially adverse
to the business, properties, prospects or condition (financial or otherwise) of
the Company.
5.23 Underwriters. Notwithstanding any provision herein or in the Third
Amended and Restated Registration Rights Agreement to the contrary, so long as
GEPT shall be holder of equity of the Company, in the case of any such public
offering of equity of the Company in which existing stockholders of the Company
are permitted to sell such equity, GEPT shall have the right, in its sole
discretion, to approve or disapprove of any underwriter in which General
Electric Company owns a direct or indirect interest of five percent (5%) or
more; provided that GEPT shall notify the Company, promptly after the Board's
decision to begin interviewing underwriters, as to all
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underwriters in which General Electric Company owns a direct or indirect
interest of five percent (5%) or more.
5.24 Lost Certificate Evidencing Shares; Exchange. Upon receipt of
written notice or other evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of any certificate evidencing validly
issued and outstanding shares of the Company's stock and, in the case of any
such loss, theft, or destruction, upon receipt of GEPT's or GECE's unsecured
indemnity agreement, or, in the case of any other holder of the Company's
shares, other indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such certificates, the
Company, at the Company's expense, will issue and deliver in its customary
manner a new certificate in lieu of the lost, stolen, destroyed or mutilated
certificate carrying the same rights and obligations as the original
certificate.
ARTICLE VI
MISCELLANEOUS
6.1 Expenses. Each party hereto will pay its own expenses in
connection with the transactions contemplated hereby, whether or not such
transactions shall be consummated, provided, however, that the Company shall pay
the fees and disbursements of the Purchasers' counsel in connection with such
transactions and any subsequent amendment, waiver, consent or enforcement
thereof.
6.2 Survival of Agreements. All covenants, agreements, representations
and warranties made herein or in the Third Amended and Restated Registration
Rights Agreement or Amended and Restated Stock Restriction Agreement, or any
certificate or instrument delivered to the Purchasers pursuant to or in
connection with this Agreement, the Third Amended and Restated Registration
Rights Agreement or the Amended and Restated Stock Restriction Agreement, shall
survive the execution and delivery of this Agreement, the Third Amended and
Restated Registration Rights Agreement and the Amended and Restated Stock
Restriction Agreement, the issuance, sale and delivery of the Preferred Shares,
and the issuance and delivery of the Conversion Shares, and all statements
contained in any certificate or other instrument delivered by the Company
hereunder or thereunder or in connection herewith or therewith shall be deemed
to constitute representations and warranties made by the Company.
6.3 Brokerage. Each party hereto will indemnify and hold harmless the
others against and in respect of any claim for brokerage or other commissions
relative to this Agreement or to the transactions contemplated hereby, based in
any way on agreements, arrangements or understandings made or claimed to have
been made by such party with any third party.
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6.4 Parties in Interest. All representations, covenants and agreements
contained in this Agreement by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto whether so expressed or not. Without limiting the generality of
the foregoing, all representations, covenants and agreements benefiting the
Purchasers shall inure to the benefit of any and all subsequent holders from
time to time of Preferred Shares or Conversion Shares.
6.5 Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be delivered in person, mailed by
certified or registered mail, return receipt requested, or sent by telecopier or
telex, addressed as follows:
(a) if to the Company, at ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇, Attention: President, with a copy to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ and ▇▇▇▇ LLP,
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇; and
(b) if to GECE, at the address of GECE set forth in Schedule I,
with a copy to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq., Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇;
(c) if to GEPT, at the address of GEPT set forth in Schedule I,
with a copy to E. ▇▇▇ ▇▇▇▇, Esq., ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇;
(d) or, in any such case, at such other address or addresses as
shall have been furnished in writing by such party to the others.
6.6 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without regard to
principles or rules of conflicts of laws to the extent such principles or rules
would require or permit the application of the laws of another jurisdiction.
6.7 Entire Agreement. This Agreement, including the Schedules and
Exhibits hereto, constitutes the sole and entire agreement of the parties with
respect to the subject matter hereof. All Schedules and Exhibits hereto are
hereby incorporated herein by reference.
6.8 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.
6.9 Amendments. This Agreement may not be amended or modified, and no
provisions hereof may be waived, without the written consent of the Company and
the holders of at least two-thirds of the outstanding shares of Common Stock
issued or issuable upon conversion of the Preferred Shares, provided however,
that Section 5.23 cannot be amended without the consent of GEPT.
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33
6.10 Severability. If any provision of this Agreement shall be declared
void or unenforceable by any judicial or administrative authority, the validity
of any other provision and of the entire Agreement shall not be affected
thereby.
6.11 Titles and Subtitles. The titles and subtitles used in this
Agreement are for convenience only and are not to be considered in construing or
interpreting any term or provision of this Agreement.
6.12 Assignment. The rights granted pursuant to this Agreement may be
assigned or otherwise conveyed by a Purchaser to an affiliate or successor
trustee of such Purchaser provided that (i) such assignee is not a direct
competitor of the Company and (ii) the Purchaser shall notify the Company of
such transfer prior to its occurrence.
6.13 Certain Defined Terms. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
(a) "Benefit Arrangement" means each employment, severance or
other similar contract, arrangement or policy (written or oral) and each plan or
arrangement (written or oral) providing for severance benefits, insurance
coverage (including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits or for deferred compensation, profit-sharing, bonuses, stock
options, stock appreciation rights or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (i) is not an Employee
Plan and (ii) covers any employee or former employee of the Company.
(b) "Employee Plan" means each "employee benefit plan," as such
term is defined in Section 3(3) of ERISA, that (A)(i) is subject to any
provision of ERISA and (ii) is maintained or contributed to by the Company, or
(B)(i) is subject to any provision of Title IV of ERISA and (ii) is maintained
or contributed to by any of the Company's ERISA Affiliates.
(c) "ERISA" means the Employment Retirement Income Security Act
of 1974, as amended.
(d) "ERISA Affiliate" of any entity means any other entity
that, together with such entity, would be treated as a single employer under
Section 414 of the Code.
(e) "Multiemployer Plan" means each Employee Plan that is a
multiemployer plan, as defined in Section 3(37) of ERISA.
(f) "person" shall mean an individual, corporation, trust,
partnership, joint venture, unincorporated organization, government agency or
any agency or political subdivision thereof, or other entity.
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(g) "subsidiary" shall mean, as to the Company, any corporation
of which more than 50% of the outstanding stock having ordinary voting power to
elect a majority of the Board of Directors of such corporation (irrespective of
whether or not at the time stock of any other class or classes of such
corporation shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned by the Company, or
by one or more of its subsidiaries, or by the Company and one or more of its
subsidiaries.
6.14 Further Assurances. The Company shall, upon request of a
Purchaser, duly execute and deliver, or cause to be duly executed and delivered,
such further instruments as reasonably requested by such Purchaser or do, or
cause to be done, such further acts as may reasonably be necessary or proper to
carry out the provisions and purposes of this Agreement.
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IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Class F Convertible Preferred Stock Purchase Agreement as of the day and year
first above written.
CAREERBUILDER, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: CEO
PURCHASERS:
GE CAPITAL EQUITY INVESTMENTS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Dept Ops Manager
GENERAL ELECTRIC PENSION TRUST
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
THOMSON U.S. INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
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21st CENTURY INTERNET VENTURE
PARTNERS, LLC
By: /s/ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------------
Name:
Title:
NEW ENTERPRISE ASSOCIATES VI, LIMITED
PARTNERSHIP
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------
Name:
Title:
FBR eCOMM, L.P.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------
Name:
Title:
FBR TECHNOLOGY VENTURE PARTNERS, L.P.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Managing Director
ADP, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Name:
Title:
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37
/s/ ▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇, individually
/s/ ▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇, individually
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
----------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ King, individually
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SCHEDULE I
Purchasers
--------------------------------------------------------------------------------------------
Number of Purchase Price For
Name and Address of Purchaser Aggregate Preferred Preferred Shares
Shares to be
Purchased
--------------------------------------------------------------------------------------------
GE Capital Equity Investments, Inc. 917,431 $4,999,998.95
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------
General Electric Pension Trust 458,716 $2,500,002.20
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------
Thomson U.S. Inc. 45,130 $245,958.50
▇/▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------
21st Century Internet Venture 171,389 $934,070.05
Partners, LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------
New Enterprise Associates VI, 279,792 $1,524,866.40
Limited Partnership
▇▇▇▇ ▇▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------
FBR eComm, L.P. 8,009 $43,649.05
Potomac Tower
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------
FBR Technology Venture 40,047 $218,256.15
Partners, L.P.
Potomac Tower
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------
39
--------------------------------------------------------------------------------------------
ADP, Inc. 63,232 $344,614.40
▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇ 28,066 $152,959.70
▇▇▇▇ ▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇ 4,703 $25,631.35
▇ ▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ 1,835 $10,000.75
--------------------------------------------------------------------------------------------
TOTAL 2,018,350 $11,000,007.50