EXHIBIT 10.9
SERIES B CONVERTIBLE NON-VOTING
PREFERRED STOCK PURCHASE AGREEMENT
by and among
DEJA NEWS, INC.
and
THE PURCHASERS NAMED IN SCHEDULE I
Dated as of November , 1997
TABLE OF CONTENTS
TABLE OF CONTENTS i
INDEX TO SCHEDULES iii
INDEX TO EXHIBITS iii
INDEX OF DEFINED TERMS iv
1. Authorization and Sale of Shares and Series B Warrants 1
1A. Authorization 1
1B. Sale of Shares 1
1C. Series B Warrants 2
1D. Separate Sales 2
1E. Use of Proceeds 2
2. The Closing 2
2A. Closing 2
2B. Delivery of Shares, Series B Warrants and Purchase Price 2
2C. Conditions to the Obligations of the Purchasers 3
2D. Condition to the Obligations of the Company 4
3. Representations and Warranties of the Company 5
3A. Organization 5
3B. Capitalization and Ownership; Power and Authority 5
3C. No Subsidiaries 7
3D. Authorization and Enforceability 7
3E. Valid Issuance 7
3F. No Violation of Laws or Agreement 7
3G. No Undisclosed Liabilities 8
3H. No Pending Litigation or Proceedings 8
3I. Consents 8
3J. Transactions with Related Parties 8
3K. Compensation Arrangements; Bank Accounts; Officers and Directors 9
3L. Employee Benefit Plans 9
3M. Brokerage 9
3N. Financial Statements 9
3O. Business Carried on in Ordinary Course 10
3P. Absence of Unusual Transactions 10
3Q. Minute Books and Corporate Records 11
3R. Accuracy of Books and Records 11
3S. No Guarantees, etc. 11
3T. Employment Matters 11
3U. Title to Property 12
3V. Material Contracts 12
3W. Tax and Government Returns 12
3X. Compliance with Applicable Laws, etc. 13
3Y. Intellectual Property Rights 13
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3Z. Obligations of Management 15
3AA. Registration Rights; Rights of First Refusal; Preemptive Rights 15
3AB. Offering Valid 15
3AC. Disclosure 15
3AD. Users; Page Views 16
4. Representations and Warranties of the Purchasers 16
4A. Investment 16
4B. Authority 16
4C. Accredited Investor 16
4D. Access to Data 16
4E. Brokerage 16
5. [Intentionally Omitted.] 16
6. [Intentionally Omitted.] 17
7. [Intentionally Omitted.] 17
8. Transfer of Shares 17
8A. Restrictions 17
8B. Requirements for Transfer 17
8C. Legends 17
8D. Rule 144A Information 18
9. Certain Definitions 18
10. Miscellaneous 19
10A. Successors and Assigns 19
10B. Confidentiality 19
10C. Survival of Representations and Warranties 20
10D. Expenses 21
10E. Notices 21
10F. Entire Agreement 23
10G. Amendments and Waivers 23
10H. Counterparts 23
10I. Headings 23
10J. Severability 23
10K. Governing Law 24
10L. Further Assurances 24
10M. Indemnification 24
10N. Understanding Among Xxxxxxxxxx 00
00X. Series A Waivers 25
10P. Aggregation of Stock Ownership 25
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INDEX TO SCHEDULES
Schedule I Schedule of Purchasers
Schedule II Series B Warrants
Schedule III Deja News, Inc. Disclosure Schedule
INDEX TO EXHIBITS
Exhibit A Form of Second Amended and Restated Articles of Incorporation
Exhibit B Form of Series B Warrant
Exhibit C Form of Opinion of Counsel to Company
Exhibit D Form of Amended and Restated Shareholders and Voting Agreement
Exhibit E Form of Investors' Rights Agreement
INDEX OF DEFINED TERMS
The following index is provided for convenience of reference only
and is intended to have no binding effect.
Term Location
1997 Plan Section 3B(A)
Affiliate Part 9
Agreement Introduction
Ancillary Agreements Section 2C(iv)(B)
Austin Ventures Part 9
Austin Ventures/Prime Options Section 3B(iii)
Balance Sheet Date Section 3N(ii)
Benefit Plans Section 3L
Business Section 3O
Business Day Part 9
Closing Section 2A
Code Section 3W
Common Stock Part 9
Company Introduction
XXXXX Xxxxxxx 0X
Xxxxxxxx Xxx Part 9
Financial Statements Section 3N(ii)
Imperial Bank Bridge Financing Section 3P(vi)
Imperial Bank Warrant Section 3B(iii)
Intellectual Property Section 3Y(i)
Investors' Rights Agreement Section 2C(iv)(B)
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Lien Part 9
Xxxxxx Employment Agreement Section 2C(viii)
MedVen Warrant Section 3B(iii)
Open Text Section 2C(iv)(B)
Open Text Agreement Section 3I
Person Part 9
Prior Articles Section 3I
Prior Shareholders Agreement Section 3Q
Purchaser/Purchasers Introduction
Prime News Ventures Part 9
Restated Articles Section 1A
Rule 144A Information Section 8D
Securities Act Section 3AB
Series A Holder Section 10O(i)
Series A Preferred Stock Section 3B
Series B Preferred Stock Recitals
Series B Warrants Section 1C
Shareholders Agreement Section 2C(iv)(A)
Shares Section 1B
Voting Trust Section 3Q
Warrant Shares Section 3D
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SERIES B CONVERTIBLE NON-VOTING
PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES B CONVERTIBLE NON-VOTING PREFERRED STOCK PURCHASE
AGREEMENT (the "Agreement") dated as of November ____, 1997 is entered into by
and among Deja News, Inc., a Texas corporation (the "Company"), and the persons
listed on Schedule I hereto (each, a "Purchaser" and collectively, the
"Purchasers").
R E C I T A L S:
WHEREAS, the Company desires to sell, and the Purchasers desire to
purchase, shares of the Company's Series B Convertible Non-Voting Preferred
Stock, par value $0.001 per share (the "Series B Preferred Stock"); and
WHEREAS, the Company and the Purchasers desire to set forth certain
agreements and certain terms and conditions regarding the sale and purchase of
the Series B Preferred Stock and the relationship between the Company and the
Purchasers;
A G R E M E N T:
NOW, THEREFORE, in consideration of the foregoing premises, the
respective representations, warranties and covenants contained herein, and
certain other good and valuable consideration, the receipt and sufficiency of
are hereby acknowledged, the parties agree as follows:
1. Authorization and Sale of Shares and Series B Warrants.
1A. Authorization. The Company has, or before the Closing (as
defined in part 2) will have, duly authorized the issuance and sale, pursuant to
the terms of this Agreement, of 16,666,671 shares of its Series B Preferred
Stock having the rights, restrictions, privileges and preferences set forth in
the Company's Second Amended and Restated Articles of Incorporation, the form of
which is attached as Exhibit A (the "Restated Articles"). The Company has, or
before the Closing will have, adopted and filed the Restated Articles with the
Secretary of State of Texas.
1B. Sale of Shares. Subject to the terms and conditions of this
Agreement, at the Closing the Company will issue and sell to the Purchasers, and
the Purchasers will purchase from the Company, an aggregate of up to 16,666,671
shares of Series B Preferred Stock at a purchase price of $0.60 per share, with
each Purchaser purchasing the number of shares of Series B Preferred Stock set
forth opposite such Purchaser's name on Schedule I. The shares of Series B
Preferred Stock being sold under this Agreement and, unless the context
otherwise requires, the shares of Common Stock issued or issuable upon the
conversion of such shares of Series B Preferred Stock are referred to as the
"Shares."
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1C. Series B Warrants. At the Closing, the Company shall issue and
deliver to the Purchasers warrants, substantially in the form attached as
Exhibit B (the "Series B Warrants"), to purchase an aggregate of 4,166,668
shares of Common Stock at a purchase price of $0.90 per share. Each Purchaser
shall receive a Series B Warrant for the number of shares set forth opposite
such Purchaser's name on Schedule II, which number shall be in proportion to the
percentage which the number of Shares purchased at the Closing represents of the
total number of Shares sold hereunder.
1D. Separate Sales. The Company's agreement with each Purchaser is a
separate agreement, and the sale of Shares and Series B Warrants to each
Purchaser is a separate sale.
1E. Use of Proceeds. The Company may use the proceeds from the sale
of the Shares and Series B Warrants for the repayment of all principal and
interest owed to Imperial Bank under that certain Note executed in favor of
Imperial Bank in April 1997 and that certain Note executed in favor of Imperial
Bank in October 1997; otherwise, the Company shall use such proceeds for working
capital and general corporate purposes, in addition to such other purposes as
the Company's Board of Directors may hereafter approve.
2. The Closing.
2A. Closing. Subject to the satisfaction of the conditions set forth
herein, the closing (the "Closing") of the issuance, sale and purchase of the
Shares and Series B Warrants under this Agreement shall take place on
November14, 1997 at 10:00 a.m., Austin, Texas time, at the offices of Xxxxxxx,
Phleger & Xxxxxxxx LLP, 000 Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx, or at
such other place and time as the Company and the Purchasers purchasing Shares
and Series B Warrants at such Closing may specify in writing.
2B. Delivery of Shares, Series B Warrants and Purchase Price. At the
Closing, the Company will deliver to each of the Purchasers (i) a certificate
for the number of Shares being purchased by such Purchaser at the Closing and
(ii) a Series B Warrant as provided in paragraph 1C above, each registered in
the name of such Purchaser, against payment to the Company of the purchase price
for such Shares and Series B Warrants, by wire transfer, check, cancellation of
indebtedness, any combination of the foregoing, or other method acceptable to
the Company and the Purchasers who will purchase Shares at the Closing. In the
event that payment by a Purchaser is made, in whole or in part, by cancellation
of indebtedness, then such Purchaser shall surrender to the Company for
cancellation at the Closing any evidence of such indebtedness or shall execute
instruments evidencing such cancellation in form and substance reasonably
acceptable to the Company; and the Company shall deliver to any Purchaser
choosing to pay any part of the purchase price of the Shares by cancellation of
indebtedness, a check in the amount of any interest accrued on such indebtedness
through the Closing (unless such interest is applied to the payment of the
purchase price for the Shares purchased).
2C. Conditions to the Obligations of the Purchasers. The obligation
of each of the Purchasers to purchase Shares and Series B Warrants at the
Closing is subject to the
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fulfillment or the waiver by such Purchaser of each of the following conditions
on or before the Closing:
(i) Accuracy of Representations and Warranties. Each
representation and warranty of the Company contained in part 3 shall be true on
and as of the Closing with the same effect as though such representation and
warranty had been made on and as of the date of the Closing.
(ii) Performance. The Company shall have performed and
complied with all agreements and conditions contained in this Agreement and the
Ancillary Agreements required to be performed or complied with by the Company
prior to or at the Closing.
(iii) Opinion of Counsel. Each Purchaser shall have received
an opinion from Xxxxxxx, Phleger & Xxxxxxxx LLP, counsel for the Company, dated
the date of the Closing addressed to the Purchasers purchasing Shares and Series
B Warrants at the Closing, and satisfactory in form and substance to the
Purchasers and their special counsel, substantially in the form attached as
Exhibit C hereto.
(iv) Ancillary Agreements.
(A) The Amended and Restated Shareholders and
Voting Agreement attached hereto as Exhibit D (the "Shareholders Agreement")
shall have been executed and delivered by the Company, each of the Purchasers,
Xxxxxx X. Xxxxxx and MonicaM. Xxxxxx. All such actions shall have been taken by
the Company and the Common Shareholders (as defined in the Shareholders
Agreement) as may be necessary to elect a Board of Directors of the Company (as
defined in the Shareholders Agreement), effective immediately following the
Closing, in accordance with the Shareholders Agreement.
(B) The Investors' Rights Agreement attached hereto
as ExhibitE (the "Investors' Rights Agreement," and together with the
Shareholders Agreement, the "Ancillary Agreements") shall have been executed and
delivered by the Company, each of the Purchasers, Xxxxxx X. Xxxxxx and Xxxxxx X.
Xxxxxx, and Open Text Corporation ("Open Text").
(v) Certificates and Documents. The Company shall have
delivered to special counsel to the Purchasers:
(A) the Restated Articles, as in effect as of the
date of the Closing, certified by the Secretary of State of Texas;
(B) certificates, as of the most recent practicable
dates, as to the corporate existence and good standing of the Company issued by
the Secretary of State of Texas and the Comptroller of Public Accounts of Texas,
respectively;
(C) Bylaws, as amended, of the Company, certified
by its Secretary as of the date of the Closing;
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(D) resolutions of the Board of Directors of the
Company, authorizing and approving all matters in connection with this
Agreement, the Ancillary Agreements and the transactions contemplated hereby and
thereby, certified by the Secretary of the Company as of the date of the
Closing; and
(E) such other documents relating to the
transactions contemplated in this Agreement and the Ancillary Agreements as
any Purchaser may reasonably request.
(vi) Compliance Certificate. The Company shall have delivered
to the Purchasers a certificate, executed by the chief executive officer of the
Company, dated the date of the Closing, certifying to the fulfillment of the
conditions specified in paragraphs 2(i), (ii), (iv) and (v).
(vii) Other Matters. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and the
Ancillary Agreements and all documents and instruments incident to such
transactions shall be reasonably satisfactory in substance and form to the
Purchasers and their special counsel, and the Purchasers and their special
counsel shall have received all such counterpart originals or certified or other
copies of such documents as they may reasonably request.
(viii) Employment Agreement. Xxxxxx X. Xxxxxx shall have
entered into an Employment Agreement in form and substance reasonably
satisfactory to the Purchasers (the "Xxxxxx Employment Agreement").
2D. Condition to the Obligations of the Company. The obligations of
the Company to issue and sell the Shares and Series B Warrants to the Purchasers
at the Closing are subject to fulfillment, or the waiver by the Company, of each
of the following conditions on or before the Closing:
(i) Accuracy of Representations and Warranties. The
representations and warranties of the Purchasers contained in part 4 shall be
true on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the Closing.
(ii) Purchase Price. Each Purchaser shall have tendered at the
Closing full consideration for the purchase price of the Shares and Series B
Warrants to be purchased by such Purchaser.
(iii) Other Matters. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and the
Ancillary Agreements and all documents, and instruments incident to such
transactions shall be reasonably satisfactory in substance and form to the
Company and its counsel, and the Company and its counsel shall have received all
such counterpart originals or certified or other copies of such documents as
they may reasonably request.
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3. Representations and Warranties of the Company. As a material inducement
to each Purchaser to enter into this Agreement and to purchase Shares and Series
B Warrants, the Company represents and warrants to each Purchaser as of the date
of such Closing that, except as set forth on the Disclosure Schedule attached as
Schedule III and delivered concurrently herewith (except as otherwise indicated,
references to the Company in the this part 3 refer to the Company and each of
its Subsidiaries):
3A. Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas, and
is duly qualified and in good standing as a foreign corporation in each other
jurisdiction in which the location or nature of its property or the character of
its business makes such qualification necessary, except where the failure to be
so qualified would not materially adversely affect the business, financial
condition, prospects, properties or results of operations of the Company. The
Company has all requisite power and authority to own or lease its properties and
assets as now owned or leased and to carry on its business as and where now
being conducted and to consummate the transactions contemplated hereby. The
copies of the company's articles of incorporation and bylaws, as amended to
date, which have been delivered to Purchasers are correct and complete and are
in full force and effect. There are no proceedings pending or contemplated for
the dissolution of the Company.
3B. Capitalization and Ownership; Power and Authority.
(i) Capital Stock. The Company's authorized capital stock
consists solely of the following:
(A) Common Stock. 100,000,000 shares of Common Stock,
par value $0.001 per share, 12,752,500 shares of which are currently outstanding
and none of which are held in its treasury. The Company has reserved
(1)5,820,490 shares of Common Stock for issuance pursuant to the exercise of
options under the Company's 1997 Stock Option/Stock Issuance Plan (the "1997
Plan"); (2)5,182,667 shares of Common Stock for issuance upon conversion of
Series A Preferred Stock; (3)16,822,921 shares of Common Stock for issuance upon
conversion of the Series B Preferred Stock; (4)244,350 shares of Common Stock
for issuance upon the exercise of the MedVen Warrant (as defined below); (5)
1,000,000 shares of Common Stock for issuance upon exercise of the Austin
Ventures/Prime Options (as defined below); and (6)4,166,668 shares of Common
Stock for issuance upon the exercise of the SeriesB Warrants.
(B) Preferred Stock. 20,709,921 Shares of Preferred
Stock, par value $0.001 per share, of which (1) 3,887,000 have been designated
as "Series A Convertible Non-Voting Preferred Stock" (the "Series A Preferred
Stock") and all are outstanding and (2) 16,822,921 have been designated as
Series B Preferred Stock, none of which are issued or outstanding, but 156,250
shares of which have been reserved for issuance upon the exercise of the
Imperial Bank Warrant (as defined below).
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(ii) Prior Issuances. All of such outstanding shares have been
duly authorized, validly issued and are fully paid and nonassessable, were not
issued in violation of the terms of any agreement or other understanding binding
upon the Company, and were issued in compliance with all applicable federal and
state securities, or "blue-sky," laws and regulations.
(iii) Options; Warrants. There are no outstanding options,
warrants, rights, agreements, calls, commitments or demands of any character
relating to the capital stock of the Company and no securities convertible into
or exchangeable for any of such capital stock other than (A) options to purchase
up to 5,820,490 shares of Common Stock which have been granted or are available
for grant pursuant to the 1997 Plan; (B) that certain Warrant dated as August28,
1996 granted to MedVen Development Corporation, as amended (the "MedVen
Warrant"), to purchase up to 194,350 shares of Common Stock at a price of $0.60
per share and up to 50,000 shares of Common Stock at a purchase price of
$1.03125 per share; (C) a warrant to purchase up to 156,250 shares of Series B
Preferred Stock at a price of $0.60 per share granted to Imperial Bank (the
"Imperial Bank Warrant"); (D) options to purchase up to an aggregate of
1,000,000 shares of Common Stock at a purchase price of $1.03125 granted to
Austin Ventures IV-A, L.P., Austin Ventures IV-B, L.P., Prime Enterprises II,
L.P., and Enterprises & Transcommunications, L.P. under that certain Stock
Purchase Agreement dated as of August 30, 1996, as amended (the "Austin
Ventures/Prime Options"); and (E) 4,166,668 shares of Common Stock for issuance
upon exercise of the Series B Warrants.
(iv) No Redemptions. The Company has no obligation (contingent
or otherwise) to purchase, redeem or otherwise acquire any shares of its capital
stock or any interest therein.
(v) Shareholders. The current registered and beneficial
shareholders of the Company are as set forth in Schedule 3B of Schedule III.
3C. No Subsidiaries. The Company does not directly or indirectly own
any stock of, or any other interest in, any other corporation or business
entity.
3D. Authorization and Enforceability. The execution, delivery and
performance of this Agreement and the Ancillary Agreements have been duly
authorized by all necessary corporate action on the part of the Company. This
Agreement and the Ancillary Agreements have been duly executed and delivered by
the Company and constitute the legal, valid and binding obligations of the
Company enforceable in accordance with their respective terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency or other laws
relating to or affecting creditors' rights generally and by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding or action in equity or at law). The issuance, sale and delivery of
the Shares and the Series B Warrants in accordance with this Agreement, the
issuance and delivery of the shares of Common Stock issuable upon conversion of
the Shares and the issuance and delivery of the shares of Common Stock issuable
upon exercise of the Series B Warrants (the "Warrant Shares"), have been, or
will be on or prior to the Closing, duly authorized by all necessary corporate
action on the part of the Company, and all such Shares and Warrant Shares have
been duly reserved for issuance.
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3E. Valid Issuance. The Shares and Series B Warrants when so issued,
sold and delivered against payment therefor in accordance with the provisions of
this Agreement, the shares of Common Stock issuable upon conversion of the
Shares, when issued upon such conversion in accordance with the Restated
Articles, and the Warrant Shares, when issued upon exercise of the Series B
Warrants in accordance with the provisions of the Series B Warrants, will be
duly and validly issued, fully paid and non-assessable. Upon delivery to the
Purchasers at the Closing of certificates representing the Shares and the Series
B Warrants in accordance herewith the Purchasers will acquire good and valid
title to such Shares and the Series B Warrants, in each case, free and clear of
all liens, claims, security interests, pledges, charges, preemptive rights,
rights of first refusal and options.
3F. No Violation of Laws or Agreement. The execution and delivery of
this Agreement and the Ancillary Agreements do not, and the consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements and the
compliance with the terms, conditions and provisions of this Agreement and the
Ancillary Agreements by the Company will not (i) contravene any provision of the
Company's articles of incorporation or bylaws, (ii) conflict with or result in a
breach of or constitute a default (or an event which might, with the passage of
time or the giving of notice or both, constitute a default) under any of the
terms, conditions or provisions of any indenture, mortgage, loan or credit
agreement or any other agreement or instrument to which the Company is a party
or by which it or any of its assets may be bound or affected, or any judgment or
order of any court or governmental department, commission, board, agency or
instrumentality, domestic or foreign, or any applicable law, rule or regulation,
(iii) result in the creation or imposition of any lien, charge or encumbrance of
any nature whatsoever upon any of the Company's assets or give to others any
interests or rights therein, (iv) result in the maturation or acceleration of
any liability or obligation of the Company or give others the right to cause
such a maturation or acceleration, or (v) result in the termination of or loss
of any material right (or give others the right to cause such a termination or
loss) under any agreement or contract to which the Company is a party or by
which it may be bound.
3G. No Undisclosed Liabilities. The Company has no material
liability or obligation of any nature, whether due or to become due, absolute,
contingent or otherwise, including liabilities for or in respect of federal,
state and local taxes and any interest or penalties relating thereto, except
liabilities incurred in the ordinary course of business and fully reflected as
liabilities on the Financial Statements (as defined below).
3H. No Pending Litigation or Proceedings. There are no actions,
suits or proceedings pending or, to the best of the Company's knowledge,
threatened against or affecting the Company or any of its assets or affecting
its issued capital or the Shares at law or in equity, by or before any court or
governmental department, agency or instrumentality. There are no outstanding
judgments or decrees or orders of any court or any governmental or
administrative agency against or affecting the Company, or any of its assets or
businesses or affecting the Shares. The Company has not initiated and does not
currently intend to initiate any actions, suits or proceedings.
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3I. Consents. Except (i) the filing of the Restated Articles with
the Texas Secretary of State, (ii)filings required or permitted pursuant to
federal or state securities laws which have been filed prior to Closing or will
be filed in due course after the Closing, (iii)consents or approvals of the
holders of the Series A Preferred Stock which are contained in this Agreement
and the Ancillary Agreement, and (iv)consents from Open Text required to be
sought pursuant to the Company's Restated Articles of Incorporation as filed
August 30, 1996, as corrected and amended (the "Prior Articles"), and that
certain Stock Purchase Agreement dated as of December18, 1995 by and among the
Company, Open Text and Xxxxxx X. Xxxxxx (the "Open Text Agreement"), which will
have been received prior to Closing, no consent, approval or authorization of,
or registration or filing with, any persons including any governmental authority
or other regulatory agency, is required in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
3J. Transactions with Related Parties. No Affiliate of the Company
or any person related to the Company, including any director, officer and/or
shareholder or any, immediate family member of or corporation affiliated with
(excluding corporations affiliated with Austin Ventures and Prime New Ventures,
as each are defined in part9 below) the foregoing:
(i) has borrowed money or loaned money to the Company which
has not been repaid;
(ii) has any contractual or other claim, express or implied,
of any kind whatsoever against the Company;
(iii) other than the payment of compensation and the provision
of employee benefits,the reimbursement of expenses, the grant of options under
the 1997 Plan, has been engaged, since August 31, 1996, in any other transaction
with the Company.
3K. Compensation Arrangements; Bank Accounts; Officers and
Directors. Schedule 3J to Schedule III sets forth the following information:
(i) the names and current annual compensation, including any
bonus, if applicable, of all present officers and employees of the Company whose
current annual salary, including any promised, expected or customary bonus,
equals or exceeds $100,000, together with a statement of the full amount of all
remuneration paid by the Company to each such person and to any director of the
Company as of September 30, 1997;
(ii) a complete list of all holders of issued and outstanding
options under the 1997 Plan; and
(iii) the names and titles of all directors and officers of
the Company and of each trustee, fiduciary or plan administrator or each
employee benefit plan of the Company.
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3L. Employee Benefit Plans. The only employee pension benefit plans
(as defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), welfare benefit plans (as defined in Section 3(l)
of ERISA), bonus, stock purchase, stock ownership, stock option, deferred
compensation, incentive or other compensation plan or arrangements and other
material employee fringe benefit plans presently maintained by, or contributed
to by the Company, other than a multi-employer plan as defined in Section 3(37)
of ERISA, are those listed in Schedule 3L to Schedule III (the "Benefit Plans"),
a true and complete copy of each of which has been furnished to Purchasers.
3M. Brokerage. The Company has not made any agreement or taken any
other action which might cause anyone to become entitled to a broker's fee or
commission as a result of the transactions contemplated hereunder.
3N. Financial Statements. The Company's Financial Statements (as
defined below) have been prepared in accordance with generally accepted
accounting principles, consistently applied during the respective periods
indicated thereon, except that the Financial Statements for the nine months
ended September 30, 1997 do not contain all of the footnotes which may be
required by generally accepted accounting principles. The Financial Statements
are complete and correct in all material respects, are in accordance with the
books and records of the Company and present fairly the financial condition of
the Company and:
(i) all the assets, liabilities (whether accrued, absolute,
contingent or otherwise) and the financial condition of the Company as of the
periods covered thereby; and
(ii) the sales, earnings and results of operations of the
Company for the periods covered thereby.
"Financial Statements" as used in this Agreement means the audited
financial statements of the Company for the year ended December 31, 1996 and the
unaudited financial statements of the Company for the nine months ended
September 30, 1997 (the "Balance Sheet Date"), consisting in each case of the
balance sheet of the Company and the accompanying statements of operations, for
the periods indicated thereon, true copies of which are attached to Schedule 3N
to Schedule III.
3O. Business Carried on in Ordinary Course. The Business has been
carried on in the ordinary course since the Balance Sheet Date and the Company
has not, since the Balance Sheet Date, sold or otherwise disposed of any of its
assets except in the ordinary course of business. Since the Balance Sheet Date
there has been no change in the Business, operations, affairs or condition of
the Company, financial or otherwise, or arising as a result of any legislative
or regulatory change, revocation of any license or right to do business, fire,
explosion, accident, casualty, labor problem, flood, drought, riot, storm, act
of God or otherwise, except changes occurring in the ordinary course of business
and which, in the aggregate, have not materially adversely affected and will not
materially adversely affect the Business, operations, affairs or financial
condition of the company. "Business" of the Company as used in this Agreement
means the business of electronic communications, including research or retrieval
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services pertaining thereto, and the development of computer software in
connection with the foregoing.
3P. Absence of Unusual Transactions. Since the Balance Sheet Date,
the Company has not:
(i) transferred, assigned, sold or otherwise disposed of any
of the assets shown in the balance sheet contained in the Financial Statements
except in the ordinary and usual course of business;
(ii) except as disclosed in the Financial Statements suffered
an operating loss or any extraordinary loss, or waived any rights of substantial
value, or entered into any commitment or transaction not in the ordinary and
usual course of business where such loss, rights, commitment or transaction is
or would be material in relation to the Company or the Business, as the case may
be;
(iii) mortgaged, pledged, subjected to lien, granted a
security interest in or otherwise encumbered any of the Company's assets; or
(iv) authorized or agreed or otherwise become committed to do
any of the foregoing;
(v) declared or paid any dividends; or
(vi) except in the ordinary course of business or pursuant to
an interim financing of $1,250,000 provided to the Company in October 1997 by
Imperial Bank (the "Imperial Bank Bridge Financing"), incurred any indebtedness.
3Q. Minute Books and Corporate Records. The corporate records and
minute books of the Company contain complete and accurate minutes of all
meetings of and copies of all bylaws and resolutions passed by the directors and
shareholders of the Company since its incorporation; all such meetings were duly
called and held, all such bylaws and resolutions were duly passed and the share
certificate books, registers of shareholders, registers of transfers, and other
corporate registers of the Company are complete and accurate in all material
respects. There is in existence neither a shareholders' agreement nor a
unanimous shareholders' agreement governing the affairs of the Company or the
relationships, rights and duties of its shareholders save and except for (i)the
1995 Voting Trust Agreement (the "Voting Trust"), a complete and correct copy of
which has been provided to the Purchasers, which grants to StevenG. Xxxxxx the
right to vote the Common Stock subject thereto in accordance with the terms of
such agreement; (ii)the Shareholders Agreement dated as of August 30, 1996, as
amended, (the "Prior Shareholders Agreement"), which will be superseded by the
Ancillary Agreements; and (iii)the Open Text Agreement, which will be superseded
by the Ancillary Agreements.
3R. Accuracy of Books and Records. The books and records, financial
and otherwise, of the Company fairly and correctly set out and disclose in all
material respects the
15
financial position of the Company as of the date hereof and all material
financial transactions of the Company have been accurately recorded in such
books and records.
3S. No Guarantees, etc. The Company is not a party to or bound by
any agreement of guarantee, indemnification, assumption or endorsement or any
like commitment of the obligations, liabilities (contingent or otherwise) or
indebtedness of any other person, corporation or other entity, except in the
ordinary course of business.
3T. Employment Matters.
(i) The Company is not a party to any written or oral
employment, service, union, pension, deferred profit sharing, benefit, bonus or
other similar agreement or arrangement and none of such agreements contains any
specific agreement as to notice of termination or severance pay in lieu thereof;
the Company is not in arrears in the payment of any contribution or assessment
required to be made to any such plan as in effect, whether such payment is
deferred, contingent or otherwise; the Company does not have any employees who
cannot be dismissed on reasonable notice. To its knowledge, the Company is not
aware of the impending resignation or termination of employment of any officer.
(ii) The Company has not made any agreements with any labor
union or employee association or made commitments to or conducted negotiations
with any labor union or employee association with respect to any future
agreements; nor is the Company required to recognize any union or employee
association representing the employees or any agent having bargaining rights for
the employees.
(iii) To the best of its knowledge, the Company is not liable
for any damages to any employee or former employee resulting from the violation
of any applicable employment law or employment agreement, nor to the Company's
knowledge is any employee in violation of any of its past employment agreements.
The Company is not presently intending to hire or is not otherwise in
negotiation with any potential employee, consultant or other service provider
who may be subject to restrictive covenants resulting from any previous
employment or engagement nor are any existing employees, consultants or service
providers of the Company subject to restrictive covenants resulting from prior
employment or engagements with other persons.
3U. Title to Property. The Company is the owner of all of its
property with good and marketable title thereto free and clear of any mortgage,
lien, charge, security interest, adverse claim or other encumbrance whatsoever.
The Company does not own or have any interest in nor is the Company party to any
agreement to purchase any real property. All facilities, equipment, fixtures,
vehicles and other properties owned, leased or used by the Company are in normal
operating condition and repair and are reasonably fit and able for the purposes
for which they are being used.
3V. Material Contracts. A list of the Company's outstanding
agreements, leases, contracts, insurance agreements or commitments, whether
written or oral, of any nature or
16
kind whatsoever, which involve the payments or obligations in excess of $25,000,
is set forth in Schedule 3V to Schedule III.
3W. Tax and Government Returns. The Company has duly filed in a
timely manner all tax returns required to be filed by it (including any and all
tax elections available to the Company in relation to such tax returns) and all
information returns as to which the nonfiling or late filing could result in
interest or penalties, has made complete and accurate disclosure in such returns
and has paid all taxes shown on such returns as being due and payable and has
also paid all assessments and reassessments and all other taxes, governmental
charges, penalties, interest and fines due and payable by the Company up to the
date hereof. The Company has made adequate reserve for the taxes which are
payable during the current fiscal period for which tax returns are not yet
required to be filed. There are no agreements, waivers or other arrangements
providing for an extension of time with respect to the assessment or
reassessment of income tax or the filing of any tax return by, or payment of any
tax by, or levying of any governmental charge against, the Company. There are no
actions, audits, assessments, reassessments, suits, proceedings, investigations
or claims now threatened or pending against the Company in respect of taxes or
governmental charges or any matters under discussion with any governmental
authority relating to taxes or governmental charges asserted by any such
authority nor has the Company ever been the subject of an audit. The Company has
withheld from each payment made by it the amount of all taxes and other
deductions required to be withheld therefrom and has paid the same to the proper
taxing or other authority within the time prescribed under any applicable
legislation or regulation. The Company has not filed a consent pursuant to
Section 341(f) of the Internal Revenue Code of 1986, as amended (the "Code"),
relating to collapsible corporations.
3X. Compliance with Applicable Laws, etc. The Company has conducted
and is conducting its Business in compliance with all applicable laws, rules and
regulations of each jurisdiction in which its Business is carried on and is not
in breach of any such laws, rules or regulations and is duly licensed,
registered or qualified in each jurisdiction in which the Company owns or leases
its assets or carries on the Business, except as would not have a material
adverse effect, to enable the Business to be carried on as now conducted and its
property and assets to be owned, leased and operated, and all such licenses,
registrations and qualifications are valid and subsisting and in good standing
an none of the same contains any burdensome term, provision, condition or
limitation which has or may have a material adverse effect on the operation of
the Business.
3Y. Intellectual Property Rights.
(i) Schedule 3Y to Schedule III lists and contains a
description of all patents, patent applications and registrations, trademarks,
trademark applications and registrations, copyrights, copyright applications and
regulations, trade names and industrial designs, domestic or foreign, owned or
used by the Company or relating to the operation of the Business, and all other
intellectual property owned or used by the Company or relating to the Business
other than copies of standard commercial programs available to the general
public and properly licensed to the Company by the producer thereof (all of the
foregoing being collectively called the "Intellectual Property").
17
(ii) The Company has good and valid title to all of the
Intellectual Property, free and clear of any and all Encumbrances, except in the
case of any Intellectual Property licensed to the Company. Complete and correct
copies of all agreements whereby any rights in any of the Intellectual Property
have been granted or licensed to the Company have been provided to the
Purchasers. No royalty or other fee is required to be paid by the Company to any
other person in respect of the use of any of the Intellectual Property except
disclosed in Schedule 3Y to Schedule III. The Company has used commercially
reasonable efforts to protect its rights in the Intellectual Property. The
Company has the exclusive right to use all of the Intellectual Property and has
not granted any license or other rights to any other person in respect of the
Intellectual Property. Complete and correct copies of all agreements whereby any
rights in any of the Intellectual Property have been granted or licensed by the
Corporation to any other person have been provided to the Purchasers.
(iii) Other than the right of a non-assigning party to consent
to an assignment of an agreement as provided in such agreement, to the best of
the Company's knowledge, there are no restrictions on the ability of the Company
or any successor to or assignee from the Company to use and exploit all rights
in the Intellectual Property. All statements contained in all applications for
registration of the Intellectual Property were true and correct as of the date
of such applications. Each of the trademarks and trade names in the Intellectual
Property is in use. None of the rights of the Company in the Intellectual
Property will be impaired or affected adversely in any material respect by the
transactions contemplated by this Agreement.
(iv) To the best of the Company's knowledge, the conduct of
the Business and the use of the Intellectual Property does not infringe, and the
Company has not received any material notice, complaint, threat or claim
alleging infringement of, any patent, trademark, trade name, copyright,
industrial design, trade secret or other Intellectual Property or proprietary
right of any other person, and the conduct of the Business does not include any
activity which may constitute "passing-off."
(v) The Intellectual Property of the Company is, in the
opinion of management, sufficient for the Company to carry on its Business and
the Company does not require any additional Intellectual Property in order to
carry on such Business.
(vi) To the best of the Company's knowledge no third party
licensor is subject to any order under the United States Bankruptcy Code.
(vii) Each current and, to the knowledge of the Company,
former employee of the Company has executed the Company's standard form of
Proprietary Information and Non-Disclosure Agreement.
(viii) The Company is not aware that any of its employees is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with their duties to
the Company or that would conflict with the Company's
18
business as proposed to be conducted. Neither the execution nor delivery of this
Agreement, nor the carrying on of the Company's business by the employees of the
Company, nor the conduct of the Company's business as proposed, will, to the
Company's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any employee is now obligated. The Company
does not believe it is or will be necessary to utilize any inventions, trade
secrets or proprietary information of any of its employees made prior to their
employment by the Company, except for inventions, trade secrets or proprietary
information that have been assigned to the Company.
3Z. Obligations of Management. Each officer of the Company other
than the Chairman of the Board is currently devoting one hundred percent (100%)
of such officer's business time to the conduct of the business of the Company.
The Company is not aware of any officer or key employee of the Company other
than the Chairman of the Board planning to work less than full time at the
Company in the future.
3AA. Registration Rights; Rights of First Refusal; Preemptive
Rights. Except as required pursuant to the Registration Rights Agreement to be
superseded by the Investors' Rights Agreement and Exhibit A of the Imperial Bank
Warrant, the Company is presently not under any obligation, and has not granted
any rights, to register any of the Company's presently outstanding securities or
any of its securities that may hereafter be issued. Except as required pursuant
to (i) part 3 of the Prior Shareholders Agreement which will be superseded by
the Investors' Rights Agreement, (ii) Sections B and C of Article Eight of the
Prior Articles which will be amended and restated in their entirety by the
Restated Articles, and (iii) the Open Text Agreement which will be superseded by
the Investors' Rights Agreement, no other person has any right of first offer or
preemptive right with respect to issuances by the Company of its equity
securities.
3AB. Offering Valid. Assuming the accuracy of the representations
and warranties of the Purchasers contained in part 4 hereof, the offer, sale and
issuance of the Shares, the Series B Warrants and the Warrant Shares will be
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"), and will have been registered or qualified (or
are exempt from registration and qualification) under the registration, permit
or qualification requirements of all applicable state securities laws. Neither
the Company nor any agent on its behalf has solicited or will solicit any offers
to sell or has offered to sell or will offer to sell all or any part of the
Shares, the Series B Warrants or the Warrant Shares to any person or persons so
as to bring the sale of such Shares, Series B Warrants or Warrant Shares by the
Company within the registration provisions of the Securities Act.
3AC. Disclosure. The representations and warranties of the Company
included in this Agreement, the Disclosure Schedule and the Ancillary Agreements
are true and correct and do not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements contained in
such representations and warranties not misleading. The Company shall not be
deemed to have made to any Purchaser any representation or warranty other than
as expressly made by the Company in part 3 hereof. Without limiting the
generality of the foregoing, and notwithstanding any otherwise express
representations and warranties made by the Company in part 3 hereof, the Company
makes no representation or warranty to any Purchaser with respect to:
19
(i) any projections, estimates or budgets heretofore delivered
to or made available to a Purchaser of future revenues, expenses or expenditures
or future results of operations; or
(ii) except as expressly covered by a representation and
warranty contained in part 3 hereof, any other information or documents
(financial or otherwise) made available to a Purchaser or its counsel,
accountants or advisers with respect to the Company.
3AD. Users; Page Views. As of October 1, 1997, the Company's Deja
News service had at least 3.5 million unique users and 70 million page views per
month.
4. Representations and Warranties of the Purchasers. Each of the
Purchasers severally represents and warrants to the Company as of the Closing,
as follows:
4A. Investment. Such Purchaser is acquiring the Shares, Series B
Warrants and, upon exercise thereof, Warrant Shares for its own account for
investment and not with a view to, or for sale in connection with, any
distribution thereof, nor with any present intention of distributing or selling
the same and, except as contemplated by this Agreement and the Exhibits hereto,
such Purchaser has no present or contemplated agreement, undertaking,
arrangement, obligation, indebtedness, or commitment providing for the
disposition thereof. Such Purchaser acknowledges the restrictions on transfer of
Shares, Series B Warrants and, upon exercise thereof, Warrant Shares of the
Company set forth in part 8 of this Agreement.
4B. Authority. Such Purchaser has full power and authority to enter
into and to perform this Agreement in accordance with its terms. Any Purchaser
which is a corporation, limited liability company, partnership, trust or other
entity represents that it has not been organized, reorganized or recapitalized
specifically for the purpose of investing in the Company.
4C. Accredited Investor. Such Purchaser has substantial experience
in evaluating the merits and risks of its investment in the Company. Such
Purchaser is an "accredited investor" as such term is defined in Rule 501
promulgated under the Securities Act.
4D. Access to Data. During the course of this transaction and prior
to the Closing, Purchasers have had the opportunity to ask questions of and
receive answers from the Company concerning this investment, and the opportunity
to obtain any information necessary to verify the financial data and business of
the Company.
4E. Brokerage. No broker, finder, agent or similar intermediary has
acted on behalf of such Purchaser in connection with the transactions
contemplated by this Agreement and there are no brokerage commissions, finder's
fees or similar compensation in connection therewith based on any arrangement or
agreement made by or on behalf of such Purchaser.
5. [Intentionally Omitted.]
20
6. [Intentionally Omitted.]
7. [Intentionally Omitted.]
8. Transfer of Shares.
8A. Restrictions. The restrictions on the sale or transfer of
Shares, Series B Warrants or Warrant Shares set forth in this part 8 shall cease
to apply to such Shares, Series B Warrants or Warrant Shares (i) upon any sale
of such Shares, Series B Warrants or Warrant Shares pursuant to the Investors'
Rights Agreement, Section 4(1) of the Securities Act or Rule 144 under the
Securities Act or (ii) at such time as such Shares, Series B Warrants or Warrant
Shares become eligible for sale under Rule 144(k) under the Securities Act.
8B. Requirements for Transfer.
(i) The Shares, Series B Warrants or Warrant Shares shall not
be sold or transferred unless either (a) such sale or transfer first shall have
been registered under the Securities Act, or (b) the Company first shall have
been furnished with an opinion of legal counsel, reasonably satisfactory to the
Company, to the effect that such sale or transfer is exempt from the
registration requirements of the Securities Act.
(ii) Notwithstanding the foregoing, no registration or opinion
of counsel shall be required for (a) a transfer by a Purchaser which is a
partnership to a partner of such partnership, or to the estate of any such
partner, if the transferee agrees in writing to be subject to the terms of this
part 8 and the Shareholders Agreement to the same extent as if such partner were
an original Purchaser hereunder, or (b) a transfer made in accordance with Rule
144 under the Securities Act.
8C. Legends. In addition to any other legends which may be required
by law or any Ancillary Agreement, each certificate representing Shares and
Warrant Shares shall bear legends substantially in the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL SUCH SHARES ARE REGISTERED
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY IS OBTAINED
TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED."
Series B Warrants shall bear a substantially similar legend with appropriate
modifications. The foregoing legend shall be removed from the certificates
representing any Shares or Warrant Shares, at the request of the holder thereof,
at such time as they become eligible for resale pursuant to Rule 144(k) under
the Securities Act.
8D. 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 Exchange Act, nor
21
exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act, upon
the written request of any Purchaser, provide in writing to such Purchaser and
to any prospective transferee of any Shares of such Purchaser the information
concerning the Company described in Rule 144A(d)(4) under the Securities Act
("Rule 144A Information"). Upon the written request of any Purchaser, the
Company shall 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 Shares for trading
through PORTAL. The Company's obligations under this paragraph 8D shall at all
times be contingent upon receipt from the prospective transferee of Shares of a
written agreement to take all reasonable precautions to safeguard the Rule 144A
Information from disclosure to anyone other than persons who will assist such
transferee in evaluating the purchase of any Shares.
9. Certain Definitions.
"Affiliate" means with respect to any Person, a Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person, and, in the case of
an individual, includes any relative or spouse of such person, or any relative
of such spouse, who has the same home as such Person. The term "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person, whether through the
ownership of voting securities, by contract or otherwise.
"Austin Ventures" means Austin Ventures IV-A, L.P., Austin Ventures
IV-B, L.P., and each of their respective Affiliates.
"Business Day" means any day other than a Saturday, Sunday or any
day that national banks in Texas are required or authorized to close.
"Common Stock" means, collectively, the Company's Common Stock, par
value $.001 per share, and any capital stock of any class of the Company
hereafter authorized which is not limited to a fixed sum or percentage of par or
stated value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal law then in force.
"Lien" means any security interest, pledge, bailment, mortgage, deed
of trust, the grant of a power to confess judgment, conditional sales and title
retention agreement (including any lease in the nature thereof), encumbrance or
other similar arrangement or interest in real, personal or mixed property
(tangible or intangible, and wherever located), other than (i) mechanic's,
materialmen's, and similar liens; (ii) liens for taxes not yet due and payable
or for taxes that the taxpayer is contesting in good faith through appropriate
proceedings; (iii) purchase money liens and liens securing rental payments under
capital lease arrangements; and (iv) liens arising in the ordinary course of
business and not incurred in connection with the borrowing of money.
22
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a governmental entity or any department, agency or political
subdivision thereof.
"Subsidiary" means any corporation more than 50% of the outstanding
voting securities of which are owned by the Company or any Subsidiary, directly
or indirectly, or a partnership or limited liability company in which the
Company or any Subsidiary is a general partner or manager or holds interests
entitling it to receive more than 50% of the profits or losses of the
partnership or limited liability company.
"Prime New Ventures" means Prime Enterprises II, L.P. and
Enterprises & Transcommunications, L.P., and each of their respective
Affiliates.
10. Miscellaneous.
10A. Successors and Assigns. The rights and obligations of each
Purchaser under this Agreement may be assigned by such Purchaser to any Person
to which Shares, Series B Warrants or Warrant Shares are properly transferred by
such Purchaser, and such transferee shall be deemed a Purchaser for purposes of
this Agreement, provided that the transferee provides written notice of such
assignment to the Company and otherwise complies with all restrictions on
transfers.
10B. Confidentiality. Each Purchaser agrees that it will keep
confidential and will not disclose or divulge any confidential, proprietary or
secret information which such Purchaser may obtain from the Company pursuant to
financial statements, reports and other materials submitted by the Company to
such Purchaser pursuant to this Agreement, the Ancillary Agreements or
otherwise, or pursuant to visitation or inspection rights granted under the
Ancillary Agreements, unless such information is known or until such information
becomes known, to the public; provided, however, that a Purchaser may disclose
such information (i) to its attorneys, accountants, consultants and other
professionals to the extent necessary to obtain their services in connection
with its investment in the Company, (ii) to any prospective purchaser of any
Shares, Series B Warrants or Warrant Shares from such Purchaser as long as such
prospective purchaser agrees in writing to be bound by the provisions of this
paragraph 10B or (iii) to any Affiliate of such Purchaser or to a partner or
shareholder of such Purchaser.
10C. Survival of Representations and Warranties.
(i) Company. All representations and warranties of the Company
contained in this Agreement or contained in any Ancillary Agreement, certificate
or other document delivered or given pursuant to this Agreement shall survive
the Closing and, notwithstanding such Closing or any investigation made by or on
behalf of the Purchasers with respect thereto, shall continue in full force and
effect for the benefit of the Purchasers:
(a) for a period of 12 months from the date of the
Closing in respect of matters other than tax matters and other than matters
relating to title and due and
23
proper issuance of the Shares, Series B Warrants or the Warrant Shares, and for
fraud and intentional misrepresentation;
(b) in respect of tax matters, unless resulting
from any misrepresentation made or fraud committed in filing a return or
supplying information for the purposes of any legislation imposing tax on the
Company, for the period commencing on the Closing date and ending on the date on
which the last applicable limitation period under any applicable income tax
legislation expires with respect to any taxation year which is relevant in
determining any liability under this Agreement with respect to tax matters; and
(c) there shall be no limit on the representations
and warranties relating to title and due and proper issuance of the Shares,
Series B Warrants or Warrant Shares to the Purchasers or relating to tax
liabilities of the Company based on any misrepresentation made or fraud
committed in filing a return or supplying information for purposes of any
legislation imposing tax on the Company;
and any claim in respect of the foregoing shall be made within such period and
upon the expiration of such period the Company shall have no further liability
to the Purchasers hereunder with respect to any such representations or
warranties.
(ii) Purchasers. The representations and warranties of the
Purchasers contained in this Agreement or in any Ancillary Agreement,
certificate or other document delivered or given pursuant to this Agreement
shall survive the Closing and, notwithstanding such Closing or any investigation
made by or on behalf of the Company, shall continue in full force and effect for
the benefit of the Company for a period of 12 months from the date of the
Closing and any claim in respect thereof shall be made within such period and
upon the expiration of such period the Purchasers shall have no further
liability to the Company with respect to any such representations or warranties.
10D. Expenses. (a) The Company agrees to pay and hold the Purchasers
and holders of the Shares, Series B Warrants or Warrant Shares harmless from
liability for the payment of:
(i) the fees and expenses of Xxxxxx Godward LLP, special
counsel to the Internet Capital Group, LLC, reasonable consulting fees and
out-of-pocket expenses incurred by Internet Capital Group, LLC arising in
connection with the negotiation and execution of this Agreement, the Ancillary
Agreements and the Restated Articles and consummation of the transactions
contemplated hereby, not to exceed in the aggregate $40,000;
(ii) the fees and expenses of Xxxxxx & Xxxx, L.L.P., special
counsel to Austin Ventures, and Xxxxx Xxxxxxxxx Xxxxxxx & Xxxxxxxx, P.C.,
special counsel to Prime New Ventures, not to exceed in the aggregate $25,000;
(iii) the reasonable fees and expenses incurred with respect
to the interpretation of, or any amendments or waivers to this Agreement, the
Ancillary Agreements or the Restated Articles requested by the Company (whether
or not the same become effective);
24
(iv) if a Purchaser or other holder of Shares, Series B
Warrants or Warrant Shares desires to sell or otherwise transfer any or all of
the Shares, Series B Warrants or Warrant Shares held by it and counsel for the
Company declines to render a legal opinion to such Purchaser or holder, without
cost or expense to such Purchaser or holder, whether or not registration under
the Securities Act will be required for such sale or transfer, the reasonable
fees and expenses of counsel for such Purchaser or holder in obtaining such an
opinion;
(v) stamp and transfer taxes, excluding income taxes, which
may be payable with respect to the execution and delivery of this Agreement or
the issuance, delivery or acquisition of Shares or Series B Warrants or upon the
conversion of the Shares or upon exercise of the Series B Warrants; and
(vi) all costs of the Company's performance of and compliance
with this Agreement, the Ancillary Agreements and the Restated Articles.
(b) In any legal proceeding brought to enforce the
provisions of this Agreement, the Ancillary Agreements or the Restated Articles,
a party which substantially prevails in such proceeding shall be entitled to
recover reasonable attorneys fees and expenses from the party or parties which
do not substantially prevail.
10E. Notices. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be delivered
personally or by facsimile transmission or by overnight delivery service or
shall be deemed delivered 72 hours after having been mailed by first class
certified or registered mail, return receipt requested, postage prepaid:
(i) if to the Purchasers:
At the address set forth below such Purchasers' names on
Schedule I hereto.
with copies to:
in the case of Internet Capital Group, LLC:
Cooley Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxxxxxxx, Esq.
Fax: (000) 000-0000
in the case of Austin Ventures:
Xxxxxx & Xxxx, L.L.P.
000 Xxxxxxxx Xxxxxx, Xxxxx 000
00
Xxxxxx, XX 00000
Attn: Xxxxxxx Xxxx, Esq.
Fax: (000) 000-0000
in the case of Prime New Ventures:
Xxxxx Xxxxxxxxx Xxxxxxx & Xxxxxxxx, P.C.
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attn: Xxxx Xxxxxxx, Esq.
Fax: (000) 000-0000
(ii) if to the Company:
Deja News, Inc.
0000 Xxxxxxxx Xxxxxxxxx
Xxxxxxx XX, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Mr. Xxx Xxxxxxx
Chief Executive Officer
Fax: (000) 000-0000
with a copy to:
Xxxxxxx, Phleger & Xxxxxxxx LLP
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, P.C.
Fax: (000) 000-0000
Any party may, by not less than ten days notice given in accordance
with this Section to the other parties, designate another address or person for
receipt of notices hereunder. Notice given by personal delivery, courier service
or mail shall be effective upon actual receipt. Notice given by telecopier shall
be confirmed by appropriate answer back and shall be effective upon actual
receipt if received during the recipient's normal business hours, or at the
beginning of the recipient's next business day after receipt if not received
during the recipient's normal business hours. Any party may change any address
to which notice is to be given to it by giving notice as provided above of such
change of address.
10F. Entire Agreement. This Agreement, together with the Schedules
hereto, the Restated Articles and the Ancillary Agreements, embodies the entire
agreement and understanding among the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings relating to
such subject matter.
10G. Amendments and Waivers. Except as otherwise expressly set forth
in this Agreement, any term of this Agreement may be amended and the observance
of any term of this
26
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), with the written consent of the Company and the
holders of 75% of the Shares and any Warrant Shares issued upon exercise of the
Series B Warrants. Any amendment or waiver effected in accordance with this
paragraph 10G shall be binding upon each holder of any Shares, Series B Warrants
or Warrant Shares, each future holder of all such Shares, Series B Warrants or
Warrant Shares and the Company. No waivers of or exceptions to any term,
condition or provision of this Agreement, in any one or more instances, shall be
deemed to be, or construed as, a further or continuing waiver of any such term,
condition or provision.
10H. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall be one and the same document.
10I. Headings. The headings of this Agreement are for convenience
only and do not constitute a part of this Agreement.
10J. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
10K. Governing Law. The construction, validity and interpretation of
this Agreement will be governed by the internal laws of the State of Texas
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Texas or any other jurisdiction) that would cause the
application of the laws of ally jurisdiction other than the State of Texas.
10L. Further Assurances. Each party to this Agreement hereby
covenants and agrees, without the necessity of any further consideration, to
execute and deliver any and all such further documents and take any and all such
other actions as may be necessary to appropriate to carry out the intent and
purposes of this Agreement and to consummate the transactions contemplated
hereby.
10M. Indemnification. The Company will indemnify each Purchaser and
its agents and representatives against, and hold each Purchaser and its agents
and representatives harmless from any and all, loss, claim, damage, action,
suit, proceeding, deficiency or expense, including any and all out-of-pocket
costs, including, without limitation, all reasonable legal and accounting fees
relating to, arising from or in connection with any misrepresentation or breach
of a warranty, agreement, covenant or obligation of the Company contained in
this Agreement, the Ancillary Agreements or the Restated Articles. The
obligations of the Company to indemnify the Purchasers set forth in this
paragraph 10M shall survive forever, subject only to the provisions of paragraph
10C.
10N. Understanding Among Purchasers. Each Purchaser acknowledges
that it is not relying upon any other Purchaser, or any officer, director,
employee, agent, partner or Affiliate of any such other Purchaser, in making its
investment or decision to invest in the Company or in monitoring such
investment. Each Purchaser agrees that no Purchaser nor any
27
controlling person, officer, director, stockholder, partner, agent or employee
of any Purchaser shall be liable for any action heretofore or hereafter taken or
omitted to be taken by any of them relating to or in connection with the Company
or the Shares, Series B Warrants or Warrant Shares. Without limiting the
foregoing, no Purchaser (nor any of its Affiliates, officers, directors,
stockholders, partners, agents or employees) or other holder of any Shares,
Series B Warrants or Warrant Shares shall have any obligation, liability or
responsibility whatsoever for the accuracy, completeness or fairness of any or
all information about the Company or any Subsidiary or their respective
properties, business or financial and other affairs, acquired by such Purchaser
or holder from the Company or any Subsidiary or the respective officers,
directors, employees, agents, representatives, counsel or auditors of either,
and in turn provided to another Purchaser or holder, nor shall any such
Purchaser (or such other Person) have any obligation or responsibility
whatsoever to provide any such information to any other Purchaser (or such other
Person) or holder or to continue to provide any such information if any
information is provided.
10O. Series A Waivers.
(i) Preemptive Rights. By its execution hereof, each Purchaser
who, individually or through any Affiliate, holds shares of the Company's Series
A Preferred Stock (a "Series A Holder") acknowledges, on behalf of itself and on
behalf of any such Affiliate, that the Company has complied with the preemptive
rights provisions contained in Section 3 of the Shareholders' Agreement dated as
of August30, 1996, as amended, entered into in connection with the Company's
Series A Preferred Stock financing and hereby waives any additional preemptive
rights and any and all notice and waiting periods thereunder with respect to the
sale and issuance of the Shares, and the Series B Warrants hereunder and, upon
exercise of the Series B Warrants, the Warrant Shares.
(ii) Anti-Dilution Adjustment. Each Series A Holder further
agrees to waive and forever release any rights to have any adjustment made to
the "Series A Conversion Price" (as defined in the Prior Articles) which it may
have or may be deemed to have as a result of the sale of the Shares and the
Series B Warrants hereunder for a combined purchase price of $0.60, the "Series
A Conversion Price" under the Prior Articles.
10P. Aggregation of Stock Ownership. For purposes of determining the
number of shares held by a Purchaser hereunder, each of Austin Ventures, Prime
New Ventures and Internet Capital Group, LLC and its Affiliates shall be
considered to be a single holder.
[Signature page follows.] IN WITNESS WHEREOF, this Series B Convertible
Non-Voting Preferred Stock Purchase Agreement has been executed by the parties
hereto as of the date first written above.
COMPANY:
DEJA NEWS, INC.
28
By:
Xxx Xxxxxxx
Chief Executive Officer
PURCHASERS:
INTERNET CAPITAL GROUP, LLC
By:
Xxxxxxx X. Xxx
Managing Director
AUSTIN VENTURES IV-A, L.P.
By: AV Partners IV, L.P., Its General Partner
By:
Xxxxxx X. Xxxxxxx
General Partner
AUSTIN VENTURES IV-B, L.P.
By: AV Partners IV, L.P., Its General Partner
By:
Xxxxxx X. Xxxxxxx
General Partner
ENTERPRISES & TRANSCOMMUNICATIONS, L.P.
By: Prime Enterprises, L.P.,
Its General Partner
By: Prime New Ventures Management, L.P.
Its General Partner
By: Prime II Management, L.P.,
29
Its General Partner
By: Prime II Management, Inc.
Its General Partner
By:
Name:
Title:
PRIME ENTERPRISES II, L.P.
By: Prime New Ventures Management, L.P.,
Its General Partner
By: Prime II Management, L.P.,
Its General Partner
By: Prime II Management, Inc.
Its General Partner
By:
Name:
Title:
SCHEDULE I
SCHEDULE OF PURCHASERS
Purchaser Number of Shares Purchase Price
Internet Capital Group, LLC 11,666,668 $7,000,000.80
00 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxx
Managing Director
Austin Ventures IV-A, L.P. 1,167,800 $700,680.00
1300 Xxxxxxx Tower
000 X. Xxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx
General Partner
30
Austin Ventures IV-B, L.P. 2,450,030 $1,470,018.00
1300 Xxxxxxx Tower
000 X. Xxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx
General Partner
Enterprises & Trans- 1,067,038 $640,222.80
communications, L.P.
1700 One American Center
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxxxxx
Prime Enterprises II, L.P. 315,135 $189,081.00
1700 One American Center
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxxxxx
TOTAL 16,666,671
$10,000,002.60
SCHEDULE II
SERIES B WARRANTS
Purchaser Series B Warrants
Internet Capital Group 2,916,667
Austin Ventures IV-A, L.P. 291,950
Austin Ventures IV-B, L.P. 612,507
Enterprises & Trans-
communications, L.P. 266,760
Prime Enterprises II, L.P. 78,784
TOTAL 4,166,668
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