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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): June 29, 1999
CMGI, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-22846 04-2921333
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
100 Brickstone Square, Andover, Massachusetts 01810
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (978) 684-3600
N/A
(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events.
On June 29, 1999, CMGI, Inc., a Delaware corporation (the "Company") issued
and sold pursuant to a Securities Purchase Agreement, dated as of June 29, 1999,
by and among the Company and the Investors (as defined herein), an aggregate of
375,000 shares of its newly designated Series C Convertible Preferred Stock (the
"Series C Preferred Stock") to funds managed by four institutional investment
managers (the "Investors"). The shares were sold in a private placement pursuant
to Regulation D under the Securities Act of 1933, as amended (the "Securities
Act").
The rights and preferences of the Series C Preferred Stock are as set forth
in a Certificate of Designations, Preferences, and Rights, in respect of the
Series C Preferred Stock (the "Certificate of Designation"), which was filed
with the Secretary of State of the State of Delaware on June 29, 1999, and a
Certificate of Correction to the Certificate of Designation, which was filed
with the Secretary of State of the State of Delaware on June 30, 1999. The
Certificate of Designation segregates the shares of Series C Preferred Stock
into three separate tranches of 125,000 shares each to be designated as "Tranche
1," "Tranche 2," and "Tranche 3" (individually, a "Tranche" and collectively,
the "Tranches"). The shares in each Tranche have identical rights and
preferences to shares in the other Tranches, except as to conversion price as
set forth below. The Company will pay a semiannual dividend on the Series C
Preferred Stock of 2% per annum, in arrears, on June 30 and December 30 of each
year, at the Company's option, in cash or through an adjustment to the
liquidation preference of the Series C Preferred Stock. Such adjustments, if
any, will also increase the number of shares into which the Series C Preferred
Stock is convertible.
Each Tranche may be converted, at the holder's option, into shares of
common stock, $0.01 par value per share (the "Common Stock"), of the Company at
an initial conversion price per share equal to 150% of the average of the
closing bid prices of the Common Stock on the Nasdaq National Market over the
ten consecutive trading days immediately preceding the date of original issuance
of the Series C Preferred Stock. The initial conversion price remains in effect
until the conclusion of the pricing period in respect of a particular Tranche.
Thereafter, shares of the Series C Preferred Stock for a particular Tranche are
convertible into Common Stock at the conversion price set for that Tranche. The
conversion price for each Tranche equals the ten day average of the closing bid
prices of the Common Stock beginning on the initial trading day for the
particular Tranche's pricing period multiplied by 90.75%. The pricing period for
Tranche 1, Tranche 2, and Tranche 3 begins on the 15th, 45th and 75th calendar
day after the date of original issuance of the Series C Preferred Stock,
respectively. The initial conversion price and the conversion price calculated
for each Tranche are subject to adjustment for certain actions taken by the
Company. In addition, in no event will the conversion price calculated for each
Tranche exceed the initial conversion price.
The Series C Preferred Stock may be converted into Common Stock by the
holders at any time and automatically converts into Common Stock on June 30,
2002. The Series C Preferred Stock is redeemable at the option of the holders
upon the occurrence of certain events.
Pursuant to the terms of a Registration Rights Agreement, dated as of June
29, 1999, by and among the Company and the Investors, the Company is obligated
to file with the Securities and Exchange Commission, on or prior to October 27,
1999, a registration statement on Form S-3 under the Securities Act to register
for resale the shares of Common Stock which are issuable upon conversion of the
Series C Preferred Stock.
The Company's press release announcing this private placement is filed as
an exhibit hereto along with the Securities Purchase Agreement, the Certificate
of Designation, the Certificate of
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Correction and the Registration Rights Agreement. This summary description of
the private placement is qualified in its entirety by reference to the documents
filed as exhibits hereto.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
Exhibit 99.1 Securities Purchase Agreement, dated as of June 29, 1999,
by and among the Company and the Investors named therein.
Exhibit 99.2 Registration Rights Agreement, dated as of June 29, 1999,
by and among the Company and the Investors named therein
Exhibit 99.3 Certificate of Designations, Preferences, and Rights of
the Series C Preferred Stock
Exhibit 99.4 Certificate of Correction of the Series C Preferred Stock
Exhibit 99.5 Press Release issued by the Company on June 30, 1999
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: July 7, 1999 CMGI, INC.
By: /s/ Andrew J. Hajducky III
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Name: Andrew J. Hajducky III
Title: Executive Vice President,
Chief Financial Officer
and Treasurer
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EXHIBIT INDEX
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Exhibit 99.1 Securities Purchase Agreement, dated as of June 29, 1999, by
and among the Company and the Investors named therein
Exhibit 99.2 Registration Rights Agreement, dated as of June 29, 1999, by
and among the Company and the Investors named therein
Exhibit 99.3 Certificate of Designations, Preferences, and Rights of the
Series C Preferred Stock
Exhibit 99.4 Certificate of Correction of the Series C Preferred Stock
Exhibit 99.5 Press Release issued by the Company on June 30, 1999
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EXHIBIT 99.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of June 29,
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1999, by and among CMGI, Inc., a Delaware corporation, with headquarters located
at 100 Brickstone Square, Andover, MA 01810 ("Company"), and each of the
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purchasers set forth on the signature pages hereto (the "Buyers").
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WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Rule 506
under Regulation D ("Regulation D") as promulgated by the United States
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Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
---
as amended and the rules and regulations promulgated thereunder (the "1933
----
Act");
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B. The Company has authorized a new series of preferred stock, designated
as Series C Convertible Preferred Stock (together with any Series C Preferred
Stock issued in replacement thereof or otherwise with respect thereto in
accordance with the terms thereof, the "Preferred Shares"), having the rights,
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preferences and privileges set forth in the Certificate of Designation, Rights
and Preferences attached hereto as Exhibit A (the "Certificate of Designation");
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C. The Preferred Shares are convertible into shares of common stock,
$0.01 par value per share, of the Company (the "Common Stock"), upon the terms
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and subject to the limitations and conditions set forth in the Certificate of
Designation;
D. The Buyers desire to purchase and the Company desires to issue and
sell, upon the terms and conditions set forth in this Agreement, an aggregate of
375,000 Preferred Shares for an aggregate purchase price of Three Hundred
Seventy Five Million Dollars ($375,000,000);
E. Each Buyer wishes to purchase, upon the terms and conditions stated in
this Agreement, the number of Preferred Shares as is set forth immediately below
its name on the signature pages hereto;
F. Contemporaneous with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement, in
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the form attached hereto as Exhibit B (the "Registration Rights Agreement"),
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pursuant to which the Company has agreed to provide certain registration rights
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws.
NOW THEREFORE, the Company and each of the Buyers severally (and not jointly)
hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES
A. PURCHASE OF PREFERRED SHARES. On the Closing Date (as defined below),
the Company shall issue and sell to each Buyer and each Buyer severally agrees
to purchase from the Company such number of Preferred Shares of the respective
Tranches (as defined in the Certificate of Designation) as is set forth
immediately below such Buyer's name on the signature pages hereto.
B. FORM OF PAYMENT. On the Closing Date, (i) each Buyer shall pay the
purchase price, which shall be $1,000 for each Preferred Share, for the
Preferred Shares to be issued and sold to it at the Closing (as defined below)
(the "Purchase Price") by wire transfer of immediately available funds to the
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account designated pursuant to the Escrow Agreement by and among the Company,
the Buyers and the Escrow Agent ("Escrow Agent") designated therein in the form
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attached hereto as Exhibit C (the "Escrow Agreement"), against delivery of duly
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executed certificates representing the number of Preferred Shares which such
Buyer is purchasing and (ii) the Escrow Agent shall deliver such certificates
duly executed on behalf of the Company, to such Buyer, against delivery of such
Purchase Price.
C. CLOSING DATE. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 5 and Section 6 below, the date and time
of the issuance and sale of the Preferred Shares pursuant to this Agreement (the
"Closing Date") shall be 5:00 p.m. Eastern Standard Time on June 29, 1999, or
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such other mutually agreed upon time (the "Closing").
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2. BUYERS' REPRESENTATIONS AND WARRANTIES. Each Buyer severally (and not
jointly) represents and warrants to the Company that:
A. INVESTMENT PURPOSE. As of the date hereof, the Buyer is purchasing
the Preferred Shares and the shares of Common Stock issuable upon
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conversion or otherwise pursuant to the Preferred Shares (such shares of Common
Stock sometimes referred to herein as the "Conversion Shares" and, collectively
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with the Preferred Shares, the "Securities") for its own account and not with a
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present view towards the public sale or distribution thereof, except pursuant to
sales registered or exempted from registration under the 1933 Act; provided,
however, that by making the representation herein, the Buyer does not agree to
hold any of the Securities for any minimum or other specific term and reserves
the right to dispose of the Securities at any time in accordance with or
pursuant to a registration statement or an exemption under the 1933 Act.
Notwithstanding the foregoing or anything else contained herein to the contrary,
the Securities may be pledged as collateral in connection with a bona fide
margin account or other lending arrangement.
B. ACCREDITED INVESTOR STATUS. The Buyer is an "accredited investor" as
that term is defined in Rule 501(a) of Regulation D (an "Accredited Investor"),
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and was not organized for the specific purpose of acquiring the Securities.
C. RELIANCE ON EXEMPTIONS. The Buyer understands that the Securities are
being offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Securities. The Buyer acknowledges that it has reviewed the provisions of Rule
144 (as defined below) and in connection with the sale of the Securities other
than pursuant to an effective registration statement under the 1933 Act will
comply with terms of such rule or another available exemption from registration.
D. INFORMATION. The Buyer and its advisors, if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Securities which
have been requested by the Buyer or its advisors. The Buyer and its advisors, if
any, have been afforded the opportunity to ask questions of the Company. Neither
such inquiries nor any other due diligence investigation conducted by Buyer or
any of its advisors or representatives shall modify, amend or affect Buyer's
right to rely on the Company's representations and warranties contained in
Section 3 below. The Buyer understands that its investment in the Securities
involves a significant degree of risk.
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E. GOVERNMENTAL REVIEW. The Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities.
F. TRANSFER OR RE-SALE. The Buyer understands that: (i) except as
provided in the Registration Rights Agreement, the sale or re-sale of the
Securities has not been and is not being registered under the 1933 Act or any
applicable state securities laws, and the Securities may not be transferred
unless (a) the Securities are sold pursuant to an effective registration
statement under the 1933 Act, (b) the Buyer shall have delivered to the Company
an opinion of counsel (which opinion shall be in form, substance and scope
reasonably satisfactory to the Company) to the effect that the Securities to be
sold or transferred may be sold or transferred pursuant to a valid exemption
from such registration, (c) the Securities are sold or transferred to an
"affiliate" (as defined in Rule 144 promulgated under the 1933 Act (or a
successor rule) ("Rule 144") of the Buyer who agrees to sell or otherwise
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transfer the Securities only in accordance with this Section 2(F) and who is an
Accredited Investor or (d) the Securities are sold pursuant to Rule 144 if
available; (ii) any sale of such Securities made in reliance on Rule 144 may be
made only in accordance with the terms of said Rule 144 and further, if said
Rule 144 is not applicable, any re-sale of such Securities under circumstances
in which the seller (or the person through whom the sale is made) may be deemed
to be an underwriter (as that term is defined in the 1933 Act) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC promulgated thereunder; and (iii) neither the Company nor
any other person is under any obligation to register such Securities under the
1933 Act or any state securities laws or to comply with the terms and conditions
of any exemption thereunder (in each case, other than pursuant to the
Registration Rights Agreement). Notwithstanding the foregoing or anything else
contained herein to the contrary, the Securities may be pledged as collateral in
connection with a bona fide margin account or other lending arrangement.
G. LEGENDS. The Buyer understands that the Preferred Shares and, until such
time as the Conversion Shares have been registered under the 1933 Act as
contemplated by the Registration Rights Agreement or otherwise may be sold
pursuant to Rule 144 without any restriction as to the number of securities as
of a particular date that can then be immediately sold, the Conversion Shares,
shall bear a restrictive legend in substantially the following form (and a stop-
transfer order may be placed against transfer of the certificates for such
Securities):
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"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE
OFFERED, SOLD, OR OTHERWISE TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE APPLICABLE
SECURITIES LAWS OR AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE
REASONABLY SATISFACTORY TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
UNDER THE APPLICABLE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144
UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
PLEDGED AS COLLATERAL IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LENDING ARRANGEMENT."
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by applicable state securities laws, (a)
such Security is registered for sale under an effective registration statement
filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 without
any restriction as to the number of securities as of a particular date that can
then be immediately sold, or (b) such holder provides the Company with an
opinion of counsel, in form, substance and scope reasonably satisfactory to the
Company, to the effect that a public sale or transfer of such Security may be
made without registration under the 1933 Act and such sale or transfer is
effected or (c) such holder provides the Company with reasonable assurances and
counsel to the Company provides an opinion (which opinion must be provided if
such reasonable assurances are provided by such holder and the Company is in
compliance with the conditions set forth in Rule 144(c)) that such Security can
be sold pursuant to Rule 144. The Buyer agrees to sell all Securities,
including those represented by a certificate(s) from which the legend has been
removed, in compliance with applicable prospectus delivery requirements, if any.
H. AUTHORIZATION; ENFORCEMENT. This Agreement and the Registration Rights
Agreement have been duly and validly authorized by such Buyer. This Agreement
has been duly executed and delivered on behalf of the Buyer, and this Agreement
constitutes, and upon execution and delivery by the Buyer of the Registration
Rights Agreement, such agreement will constitute, valid and binding agreements
of the Buyer enforceable in accordance with their terms, subject, in each case,
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to applicable bankruptcy, insolvency, reorganization or similar laws affecting
generally the enforcement of creditors' rights and subject to a court's
discretionary authority with respect to the granting of specific performance or
other equitable remedies.
I. The execution and performance of this Agreement and the Registration
Rights Agreement do not conflict with any agreement to which the Buyer is a
party or is bound thereby, any court order or judgment addressed to the Buyer,
or the constituent documents of the Buyer.
J. RESIDENCY. The Buyer is a resident of the jurisdiction set forth
immediately below such Buyer's name on the signature pages hereto.
K. USE OF ASSETS. The assets being used by the Buyer to purchase the
Securities do not constitute assets of any employee benefit plan (within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended), or any plan (within the meaning of Section 4975 of the Internal
Revenue Code of 1986, as amended).
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to each Buyer that:
A. ORGANIZATION AND QUALIFICATION. The Company and each of its
Subsidiaries (as defined below) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated, with full power and authority (corporate and other) to own, lease,
use and operate its properties and to carry on its business as and where now
owned, leased, used, operated and conducted. Schedule 3(A) sets forth a list of
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all of the Subsidiaries of the Company and the jurisdiction in which each is
incorporated. The Company and each of its Subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which its ownership or use of property or the nature of the business
conducted by it makes such qualification necessary except where the failure to
be so qualified or in good standing would not, individually or in the aggregate,
have a Material Adverse Effect. "Material Adverse Effect" means any material
adverse effect on (i) the Securities, (ii) the business, operations, assets or
financial condition of the Company and its Subsidiaries taken as a whole, or
(iii) on the transactions contemplated hereby or by the agreements or
instruments to be entered into in connection herewith. "Subsidiaries" means any
corporation or other organization, whether incorporated or unincorporated, in
which
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the Company owns, directly or indirectly, any equity or other ownership interest
and in which such ownership interest entitles the Company to elect a majority of
the board of directors or similar governing body.
B. AUTHORIZATION; ENFORCEMENT. (i) The Company has all requisite
corporate power and authority to file and perform its obligations under the
Certificate of Designation and to enter into and perform this Agreement and the
Registration Rights Agreement and to consummate the transactions contemplated
hereby and thereby and to issue the Securities, in accordance with the terms
hereof and thereof, (ii) the execution and delivery of this Agreement and the
Registration Rights Agreement by the Company, the filing of the Certificate of
Designation and the consummation by it of the transactions contemplated hereby
and thereby (including without limitation, the issuance of the Preferred Shares
and the issuance and reservation for issuance of the Conversion Shares issuable
upon conversion of or otherwise pursuant to the Preferred Shares) have been duly
authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or its stockholders is
required, (iii) this Agreement has been duly executed and delivered by the
Company, and (iv) this Agreement constitutes, and upon execution and delivery by
the Company of the Registration Rights Agreement and the execution and filing of
the Certificate of Designation, each of, such agreements and instruments will
constitute, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization or similar laws affecting generally the
enforcement of creditors' rights and subject to a court's discretionary
authority with respect to the granting of specific performance or other
equitable remedies.
C. CAPITALIZATION. As of June 17, 1999, the authorized capital stock of
the Company consists of: (i) 400,000,000 shares of Common Stock of which
95,301,250 shares are issued and outstanding, 21,518,841 shares are reserved for
issuance pursuant to the Company's stock option plans, 1,346,154 shares are
reserved for issuance upon conversion of the Series B Convertible Preferred
Stock (the "Series B Stock") (in addition to any shares of Common Stock issuable
pursuant to the anti-dilution provisions of such security), and less than
10,000,000 shares are reserved for issuance pursuant to securities (other than
the Preferred Shares and the Series B Stock) exercisable for, or convertible
into or exchangeable for shares of Common Stock except as set forth in Item 16
of Schedule 3(C)(i); and (ii) 5,000,000 shares of preferred stock, 250 of which
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are designated as Series A Preferred Stock, none of which are issued and
outstanding and 50,000 of which are designated as
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Series B Preferred Stock, 35,000 of which are issued and outstanding. All of
such outstanding shares of capital stock are, or upon issuance will be, duly
authorized, validly issued, fully paid and nonassessable. No shares of capital
stock of the Company are subject to preemptive rights or any other similar
rights of the stockholders of the Company or any liens or encumbrances imposed
through the actions or failure to act of the Company. Except as disclosed in
Schedule 3(C), as of the effective date of this Agreement, (i) there are no
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outstanding options, warrants, scrips, rights to subscribe for, puts, calls,
rights of first refusal, agreements, understandings, claims or other commitments
or rights of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for any shares of capital stock of the Company
or any of its Subsidiaries, or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries, (ii) there are no agreements or
arrangements under which the Company or any of its Subsidiaries is obligated to
register the sale of any of its or their securities under the 1933 Act (except
the Registration Rights Agreement) and (iii) there are no anti-dilution or price
adjustment provisions contained in any security issued by the Company (or in any
agreement providing rights to security holders) that will be triggered by the
issuance of the Preferred Shares or the Conversion Shares. The Company has made
available to the Buyer a certified copy of the Company's Amended and Restated
Certificate of Incorporation as in effect on the date hereof ("Certificate of
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Incorporation"), the Company's Restated By-laws, as in effect on the date hereof
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(the "By-Laws"), and the agreements containing the terms of all securities
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convertible into or exercisable for Common Stock. The Company shall provide the
Buyer with a written update of this representation signed by the Company's Chief
Executive Officer or Chief Financial Officer on behalf of the Company as of the
Closing Date.
D. ISSUANCE OF SHARES. The Preferred Shares are duly authorized and,
upon issuance in accordance with the terms of this Agreement and payment in
respect thereof, will be validly issued, fully paid and non-assessable, and free
from all taxes, liens, claims and encumbrances with respect to the issue thereof
and shall not be subject to preemptive rights or other similar rights of
stockholders of the Company. The Conversion Shares are duly authorized and
reserved for issuance, and, upon conversion of the Preferred Shares in
accordance with the terms thereof, will be validly issued, fully paid and non-
assessable, and free from all taxes, liens, claims and encumbrances and will not
be subject to preemptive rights or other similar rights of stockholders of the
Company.
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E. ACKNOWLEDGMENT OF DILUTION. The Company understands and acknowledges
the potentially dilutive effect to the Common Stock upon the issuance of the
Conversion Shares upon conversion of the Preferred Shares. The Company further
acknowledges that its obligation to issue Conversion Shares upon conversion of
the Preferred Shares in accordance with the Agreement and the Certificate of
Designation is absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other stockholders of the
Company. The Company further acknowledges that its obligations to issue
Conversion Shares upon conversion of the Preferred Shares is independent of, and
notwithstanding, the fulfillment, breach or waiver of any covenant,
representation, warranty or obligation of any Buyer, other than the obligation
of a Buyer to tender the Preferred Shares in accordance with the terms of the
Certificate of Designation.
F. SERIES OF PREFERRED STOCK. The terms, designations, powers,
preferences and relative, participating and optional or other rights, and the
qualifications, limitations and restrictions of each series of preferred stock
of the Company currently outstanding (other than the Preferred Shares) are as
stated in the Series B Stock Certificate of Designations, Preferences and Rights
(the "Series B Stock Certificate of Designation"), filed on or prior to the date
hereof, and the By-laws. The terms, designations, powers, preferences and
relative, participating and optional or other rights, and the qualifications,
limitations and restrictions of the Preferred Shares are as stated in the
Certificate of Designation.
G. NO CONFLICTS. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the filing of the Certificate of Designation and
the issuance and reservation for issuance of the Conversion Shares) will not (i)
conflict with or result in a violation of any provision of the Certificate of
Incorporation, Series B Stock Certificate of Designation or By-laws or (ii)
violate or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which with notice or lapse of time or both
could become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement or indenture to which
the Company or, to the Company's knowledge, any of its Subsidiaries, is a party,
or (iii) result in a violation of any law, rule, regulation, order, judgment or
decree (including Federal and state securities laws and regulations and
regulations of any self-regulatory organizations to which the Company or its
securities or, to the Company's knowledge, any of its Subsidiaries or their
securities, are subject) applicable to the Company or, to the Company's
knowledge, any of its
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Subsidiaries, or by which any property or asset of the Company or, to the
Company's knowledge, any of its Subsidiaries, is bound or affected (except for
such conflicts, defaults, terminations, amendments, accelerations, cancellations
and violations as would not, individually or in the aggregate, have a Material
Adverse Effect). Neither the Company nor, to the Company's knowledge, any of its
Subsidiaries, is in violation of its Certificate of Incorporation, By-laws or
other organizational documents. The Company is not in default (and no event has
occurred which with notice or lapse of time or both could put the Company in
default) under, and the Company has not taken any action or failed to take any
action that would give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company is a party or by which any property or assets of the Company is
bound or affected, except for possible defaults as would not, individually or in
the aggregate, have a Material Adverse Effect. The business of the Company is
not being conducted, and shall not be conducted so long as a Buyer owns any of
the Securities, in violation of any law, ordinance or regulation of any
governmental entity, except for any such violations as would not, individually
or in the aggregate, have a Material Adverse Effect. Except as specifically
contemplated by this Agreement and as required under the 1933 Act, any
applicable state securities laws and the rules of the NASDAQ National Market
("NASDAQ"), the Company is not required to obtain any consent, authorization
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or order of, or make any filing or registration with, any court, governmental
agency, regulatory agency, self regulatory organization or stock market or any
third party in order for it to execute, deliver or perform any of its
obligations under this Agreement, the Registration Rights Agreement or the
Certificate of Designation in accordance with the terms hereof or thereof or to
issue and sell the Preferred Shares in accordance with the terms hereof and to
issue the Conversion Shares upon conversion of the Preferred Shares. Except as
disclosed in Schedule 3(G), all consents, authorizations, orders, filings and
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registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof. The
Company is not currently in violation of the listing requirements of NASDAQ. To
the Company's knowledge, there are no facts or circumstances which might give
rise to any of the foregoing.
H. SEC DOCUMENTS; FINANCIAL STATEMENTS. Since July 31, 1997, the Company
has timely filed all reports, schedules, forms, statements and other documents
and any amendments in respect of the foregoing required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "1934 Act") (all of the foregoing filed prior to the date
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hereof and all exhibits included therein and financial statements and schedules
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thereto and documents (other than exhibits to such documents) incorporated by
reference therein, being hereinafter referred to herein as the "SEC Documents").
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Attached hereto as Schedule 3(H) is a complete listing of the SEC Documents. At
-------------
the time of their respective filing dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. To the Company's knowledge, none of the statements made in any such
SEC Documents is, or has been, required to be amended or updated under
applicable law (except for such statements as have been amended or updated in
subsequent filings prior to the date hereof). As of their respective dates, the
financial statements of the Company included in the SEC Documents complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with United States generally
accepted accounting principles, consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto, or (ii) in the case of unaudited interim statements, to
the extent they may not include footnotes or may be condensed or summary
statements) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). Except as set forth in the financial
statements of the Company included in the SEC Documents, the Company has no
liabilities, contingent or otherwise, other than (i) liabilities incurred in the
ordinary course of business subsequent to July 31, 1998 and (ii) obligations
under contracts and commitments incurred in the ordinary course of business and
not required under United States generally accepted accounting principles to be
reflected in such financial statements, which, individually or in the aggregate,
are not material to the financial condition or operating results of the Company.
Neither the Company nor any of its Subsidiaries or any of their officers,
directors, employees or agents have provided the Buyers with any material,
nonpublic information.
I. ABSENCE OF CERTAIN CHANGES. Since July 31, 1998, there has been no
material adverse change and no material adverse development in the assets,
liabilities, business, properties, operations, financial condition or results of
operations of the Company or any of its Subsidiaries, taken as a whole.
11
<PAGE>
J. ABSENCE OF LITIGATION. There is no action, suit, claim, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened against or affecting the Company
or any of its Subsidiaries, or their officers or directors in their capacity as
such, that could have a Material Adverse Effect, and the Company is unaware of
any facts or circumstances which might give rise to any of the foregoing.
Schedule 3(J) contains a complete list and summary description of any pending or
- -------------
threatened proceeding against or affecting the Company or the Company's officers
and directors in their capacity as such or any of its Subsidiaries, without
regard to whether it would have a Material Adverse Effect. To the Company's
knowledge, there are no facts or circumstances which might give rise to any of
the foregoing.
K. PATENTS, COPYRIGHTS, ETC. The Company and each of its Subsidiaries
owns or possesses the requisite licenses or rights to use all patents, patent
applications, patent rights, inventions, know-how, trade secrets, trademarks,
trademark applications, service marks, service names, trade names and copyrights
("Intellectual Property") necessary to enable it to conduct its business as now
---------------------
operated (and, except as set forth in Schedule 3(K) hereof, to the best of the
-------------
Company's knowledge, as presently contemplated to be operated in the future);
there is no material claim or action by any person pertaining to, or proceeding
pending, or to the Company's knowledge threatened, which challenges the right of
the Company or of a Subsidiary with respect to any material Intellectual
Property necessary to enable it to conduct its business as now operated (and,
except as set forth in Schedule 3(K) hereof, to the Company's knowledge, as
-------------
presently contemplated to be operated in the future); to the Company's
knowledge, the Company's or its Subsidiaries' current products, services and
processes do not infringe on any Intellectual Property or other rights held by
any person; and the Company is currently unaware of any facts or circumstances
which might give rise to any of the foregoing. The Company and each of its
Subsidiaries have in their reasonable judgment taken reasonable security
measures to protect the secrecy, confidentiality and value of their Intellectual
Property.
L. TAX STATUS. Except as set forth on Schedule 3(L), the Company and
-------------
each of its Subsidiaries has made or filed all federal, state and foreign income
and all other tax returns, reports and declarations required by any jurisdiction
to which it is subject or filed extensions therefor (unless and only to the
extent that the Company and each of its Subsidiaries has set aside on its books
provisions reason-
12
<PAGE>
ably adequate for the payment of all unpaid and unreported taxes) and has paid
all taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and has set aside on its books
provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim. Except as set forth on Schedule 3(L), the Company has not
-------------
executed a waiver with respect to the statute of limitations relating to the
assessment or collection of any foreign, federal, state or local tax. Except as
set forth on Schedule 3(L), none of the Company's tax returns is presently being
-------------
audited by any taxing authority.
M. CERTAIN TRANSACTIONS. Except as set forth on Schedule 3(M) and
-------------
except for arm's length transactions pursuant to which the Company or any of its
Subsidiaries makes payments in the ordinary course of business upon terms no
less favorable than the Company or any of its Subsidiaries could obtain from
third parties and other than the grant of stock options disclosed on Schedule
--------
3(C), none of the officers, directors, or employees of the Company is presently
- ----
a party to any transaction with the Company or any of its Subsidiaries (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or by
or providing for rental of real or personal property to or from, or otherwise
requiring payment to or from, any officer, director or such employee of the
Company or, to the knowledge of the Company, any corporation, partnership, trust
or other entity in which any officer, director or any such employee has a
substantial interest or is an officer, director, trustee or partner.
N. DISCLOSURE. All information relating to or concerning the Company or
any of its Subsidiaries set forth in this Agreement and provided to the Buyers
pursuant to Section 2(D) hereof and otherwise in connection with the
transactions contemplated hereby is true and correct in all material respects
and the Company has not omitted to state any material fact necessary in order to
make the statements made herein or therein, in light of the circumstances under
which they were made, not misleading. No event or circumstance has occurred or
exists with respect to the Company or any of its Subsidiaries or its or their
business, properties, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed
(assuming for this purpose that the Company's
13
<PAGE>
reports filed under the 1934 Act are being incorporated into an effective
registration statement filed by the Company under the 1933 Act).
O. ACKNOWLEDGMENT REGARDING BUYERS' PURCHASE OF SECURITIES. The Company
acknowledges and agrees that the Buyers are acting solely in the capacity of
arm's length purchasers with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that no Buyer is acting
as a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement and the transactions contemplated hereby and any
statement made by any Buyer or any of their respective representatives or agents
in connection with this Agreement and the transactions contemplated hereby is
not advice or a recommendation and is merely incidental to the Buyers' purchase
of the Securities. The Company further represents to each Buyer that the
Company's decision to enter into this Agreement has been based solely on the
independent evaluation by the Company and its representatives.
P. NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would require registration under the
1933 Act of the issuance of the Securities to the Buyers. The issuance of the
Securities to the Buyers will not be integrated with any other prior issuance of
the Company's securities for purposes of any stockholder approval provisions
applicable to the Company or its securities.
Q. NO BROKERS. Except as set forth in Schedule 3(Q), the Company has
-------------
taken no action which would give rise to any claim by any person for brokerage
commissions, finder's fees or similar payments relating to this Agreement or the
transactions contemplated hereby.
R. PERMITS; COMPLIANCE. The Company and each of its Subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted except those, the absence of which, would not,
individually or in the aggregate, have a Material Adverse Effect (collectively,
the "Company Permits"), and there is no action pending or, to the knowledge of
---------------
the Company, threatened regarding suspension or cancellation of any of the
Company Permits. Neither the Company nor any of its Subsidiaries is in conflict
with, or in default or
14
<PAGE>
violation of, any of the Company Permits, except for any such conflicts,
defaults or violations which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. Since July 31, 1998,
neither the Company nor any of its Subsidiaries has received any written
notification with respect to possible conflicts, defaults or violations of
applicable laws, except for notices relating to possible conflicts, defaults or
violations, which conflicts, defaults or violations would not have a Material
Adverse Effect.
S. ENVIRONMENTAL MATTERS (i) Except as set forth in Schedule 3(S),
-------------
there are, to the Company's knowledge, with respect to the Company or any of its
Subsidiaries or any predecessor of the Company, no past or present violations of
Environmental Laws (as defined below), releases of any Hazardous Materials (as
defined below) into the environment, actions, activities, circumstances,
conditions, events, incidents, or contractual obligations which may give rise to
any common law environmental liability or any liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 or similar
federal, state, local or foreign laws and neither the Company nor any of its
Subsidiaries has received any notice with respect to any of the foregoing, nor
is any action pending or, to the Company's knowledge, threatened in connection
with any of the foregoing. The term "Environmental Laws" means all federal,
state, local or foreign laws relating to pollution or protection of human health
or the environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, "Hazardous Materials") into the environment, or otherwise
-------------------
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder. (ii) Except as
set forth in Schedule 3(S) and other than those that are or were stored, used or
-------------
disposed of in compliance with applicable law, no Hazardous Materials are
contained on or about any real property currently owned, leased or used by the
Company or any of its Subsidiaries, and no Hazardous Materials were released on
or about any real property previously owned, leased or used by the Company or
any of its Subsidiaries during the period the property was owned, leased or used
by the Company or any of its Subsidiaries, except, in each case, in the ordinary
course of the Company's or any of its Subsidiaries' business. (iii) Except as
set forth in Schedule 3(S), there are no underground
-------------
15
<PAGE>
storage tanks on or under any real property owned, leased or used by the Company
or any of its Subsidiaries that are not in compliance with applicable law.
T. INTERNAL ACCOUNTING CONTROLS. The Company maintains a system of
internal accounting controls sufficient, in the judgment of the Company's Board
of Directors, to provide reasonable assurance that (i) transactions are executed
in accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with United States generally accepted accounting
principles and to maintain asset accountability, (iii) access to assets is
permitted only in accordance with management's general or specific authorization
and (iv) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect to
any differences.
U. FOREIGN CORRUPT PRACTICES. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any Subsidiary has, in the course of his actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977;
or made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.
V. EMPLOYEE RELATIONS. Neither the Company nor any of its Subsidiaries is
involved in any labor dispute nor, to the knowledge of the Company, is any such
dispute threatened. None of the Company's or its Subsidiaries' employees is a
member of a union, neither the Company nor any of its Subsidiaries is a party to
a collective bargaining agreement, and the Company and its Subsidiaries believe
that their relations with their employees are good. No executive officer of the
Company (as defined in Rule 501(f) of the 1933 Act) has notified the Company
that such officer intends to leave the Company or otherwise terminate such
officer's employment with the Company. No executive officer of the Company, to
the knowledge of the Company, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant, and, to the Company's
knowledge, the continued employ-
16
<PAGE>
ment of each such executive officer does not subject the Company or any of its
Subsidiaries to any liability with respect to any of the foregoing matters.
W. APPLICATION OF TAKEOVER PROTECTIONS. The Company has taken all
necessary action, if any, in order to render inapplicable any control share
acquisition, business combination or other similar anti-takeover provision under
the Certificate of Incorporation or the laws of the state of its incorporation
which is or could become applicable to the Buyers as a result of the
transactions contemplated by this Agreement, including, without limitation, the
Company's issuance of the Securities and the Buyer's ownership of the
Securities.
X. RIGHTS AGREEMENT. The Company has not adopted a shareholder rights
plan or similar arrangement relating to accumulations of beneficial ownership of
Common Stock or a change in control of the Company.
Y. YEAR 2000 COMPLIANCE. The Company has initiated a review and
assessment of all areas within its and each Subsidiaries' business and
operations that could be adversely affected by the "Year 2000 Problem" (that is,
the risk that computer applications used by the Company or any of the
Subsidiaries may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31,
1999). Based on the foregoing, the Company believes that the computer
applications that are currently material to its or any Subsidiaries' business
and operations are reasonably expected to be able to perform properly date-
sensitive functions for all dates before and after January 1, 2000, except to
the extent that a failure to do so would not reasonably be expected to have a
Material Adverse Effect.
Z. NO OTHER AGREEMENTS. The Company has not, directly or indirectly,
made any agreements with any Buyers relating to the terms or conditions of the
transactions contemplated by this Agreement, the Registration Rights Agreement
and the Certificate of Designation except as set forth in this Agreement, the
Registration Rights Agreement or the Certificate of Designation.
AA. INVESTMENT COMPANY. As of the date hereof, the Company has not
received any correspondence from the Securities and Exchange Commission that
would indicate that the exception under Rule 3(a)(2) of the Investment Company
Act of 1940, as amended, would expire prior to October 31, 1999.
4. COVENANTS.
17
<PAGE>
A. BEST EFFORTS. The parties shall use their best efforts to satisfy
timely each of the conditions described in Section 5 and 6 of this Agreement.
B. FORM D; BLUE SKY LAWS. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D of the Securities Act
and to provide a copy thereof to each Buyer promptly after such filing. The
Company shall take such action as the Company shall reasonably determine is
necessary to qualify the Securities for sale to the Buyers at the applicable
closing pursuant to this Agreement under applicable securities or "blue sky"
laws of the states of the United States (or to obtain an exemption from such
qualification).
C. REPORTING STATUS; ELIGIBILITY TO USE FORM S-3. The Common Stock is
registered under Section 12(g) of the 1934 Act. So long as any Buyer
beneficially owns any of the Securities, the Company shall timely file all
reports required to be filed with the SEC pursuant to the 1934 Act, and the
Company shall not, so long as any Buyer beneficially owns any of the Securities,
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such
termination. The Company currently meets, and, so long as any Buyer
beneficially owns any of the Securities, will take reasonable action to continue
to meet, the "registrant eligibility" requirements set forth in the general
instructions to Form S-3 under the Securities Act.
D. USE OF PROCEEDS. The Company shall use the proceeds from the sale of
the Preferred Shares to fund working capital and for general corporate purposes
including acquisitions and investments and to repay indebtedness.
E. FINANCIAL INFORMATION. The Company agrees to send the following
reports to each Buyer until such Buyer transfers, assigns, or sells all of the
Securities: (i) within ten (10) days after the filing with the SEC, a copy of
its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and any
Current Reports on Form 8-K; and (ii) contemporaneously with the making
available or giving to the stockholders of the Company, copies of any notices or
other information the Company makes available or gives to such stockholders.
F. RESERVATION OF SHARES. The Company shall at all times have
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the full conversion of the outstanding
Preferred Shares and issuance of the Conversion Shares in connection therewith.
Without limiting the
18
<PAGE>
generality of the foregoing, the Company has irrevocably authorized and
instructed its transfer agent to reserve approximately 5,000,000 shares of
Common Stock for initial issuance upon conversion of the Preferred Shares. The
Company shall not reduce the number of shares of Common Stock reserved for
issuance upon conversion of Preferred Shares without the consent of the Buyers
holding at least a majority of the Preferred Shares then outstanding, which
consent shall not be unreasonably withheld. The Company shall use its best
efforts at all times to maintain the number of shares of Common Stock so
reserved for issuance at no less than the number that is then actually issuable
upon full conversion of the Preferred Shares as set forth in the Certificate of
Designation. If at any time the number of shares of Common Stock authorized and
reserved for issuance is below the number of Conversion Shares issued and
issuable upon conversion of the Preferred Shares, the Company will promptly take
all corporate action necessary to authorize and reserve a sufficient number of
shares, including, without limitation, calling a special meeting of stockholders
to authorize additional shares to meet the Company's obligations under this
Section 4(F), in the case of an insufficient number of authorized shares, and
using its best efforts to obtain stockholder approval of an increase in such
authorized number of shares.
G. LISTING. The Company shall promptly secure the listing of the
Conversion Shares upon each national securities exchange or automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to
official notice of issuance) and, so long as any Buyer or its assigns owns any
of the Securities, shall maintain, so long as any other shares of Common Stock
shall be so listed, such listing of the Conversion Shares. The Company will
obtain and, so long as any Buyer owns any of the Securities, maintain the
listing and trading of its Common Stock on NASDAQ, the NASDAQ Small Cap Market
("NASDAQ Scalecap"), the New York Stock Exchange ("NYSE"), or the American
--------------- ----
Stock Exchange ("AMEX") and will comply in all material respects with the
----
Company's reporting, filing and other obligations under the bylaws or rules of
the National Association of Securities Dealers, Inc. ("NASD") and such
----
exchanges, as applicable. The Company shall promptly provide to each Buyer
copies of any notices it receives from NASDAQ and any other exchanges or
quotation systems on which the Common Stock is then listed regarding the
continued eligibility of the Common Stock for listing on such exchanges and
quotation systems; provided, however, that to the extent the Company discloses
to a Buyer that the Company has material non-public information and a Buyer
requests that such information not be disclosed to such Buyer, if such
information is of the type required to be delivered pursuant to this
19
<PAGE>
Section 4(G), the Company shall not be obligated to disclose such information
pursuant to this Section 4(G).
H. NO INTEGRATION. The Company shall not make any offers or sales of any
security (other than the Securities) under circumstances that would require
registration of the Securities being offered or sold hereunder under the 1933
Act or cause the offering of Securities to be integrated with any other offering
of securities by the Company for the purpose of any stockholder approval
provision applicable to the Company or its securities.
I. TRADING GUIDELINES. So long as a Buyer holds Preferred Shares, such
Buyer covenants and agrees that it will conduct all transactions in the Common
Stock in compliance with applicable Federal and State securities laws. So long
as a Buyer holds Preferred Shares, such Buyer will not on any given date have a
net short position in the Common Stock which exceeds the number of shares of
Common Stock which such Buyer reasonably expects to receive upon conversion of
the Preferred Shares then held by such Buyer and upon conversion or exercise of
other securities issued by the Company then held by such Buyer. Subject to the
Buyer's compliance with the second sentence of this Section 4(I), and
notwithstanding any other provision of this Agreement, the Buyer shall not be in
breach of this Agreement (including without limitation the first sentence of
this Section 4(I)) to the extent that (i) such Buyer does not effect purchases
or sales of securities knowingly or with the intent of violating Federal or
state securities laws or (ii) such Buyer's purchases or sales of securities are
effected in a manner consistent with the transactions described in Exhibit 3 to
---------
the Registration Rights Agreement (whether or not the Registration Statement is
then effective) or do not involve securities acquired directly from the Company.
J. TRANSFER AGENT INSTRUCTIONS. The Company shall issue irrevocable
instructions to its transfer agent to issue certificates, registered in the name
of each Buyer or its nominee, for the Conversion Shares in such amounts as
specified from time to time by each Buyer to the Company upon conversion of the
Preferred Shares in accordance with the terms thereof (the "Irrevocable
-----------
Transfer Agent Instructions"). Prior to registration of the Conversion Shares
- ---------------------------
under the 1933 Act or the date on which the Conversion Shares may be sold
pursuant to Rule 144 without any restriction as to the number of securities as
of a particular date that can then be immediately sold, all such certificates
shall bear the restrictive legend specified in Section 2(G) of this Agreement.
The Company warrants that no instruction other than the Irrevocable Transfer
Agent Instructions referred to in this Section
20
<PAGE>
4(J), and stop transfer instructions to give effect to Section 2(F) hereof (in
the case of the Conversion Shares, prior to registration of the Conversion
Shares under the 1933 Act or the date on which the Conversion Shares may be sold
pursuant to Rule 144 without any restriction as to the number of securities as
of a particular date that can then be immediately sold), will be given by the
Company to its transfer agent and that the Securities shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Registration Rights Agreement. Nothing in
this Section shall affect in any way the Buyer's obligations and agreement set
forth in Section 2(G) hereof to comply with all applicable prospectus delivery
requirements, if any, upon re-sale of the Securities. If a Buyer provides the
Company with (i) an opinion of counsel, reasonably satisfactory to the Company,
to the effect that a public sale or transfer of such Securities may be made
without registration under the 1933 Act and such sale or transfer is effected or
(ii) the Buyer provides reasonable assurances and counsel to the Company
provides an opinion (which opinion must be provided if such reasonable
assurances are provided by such holder and the Company is in compliance with the
conditions set forth in Rule 144(c)) that the Securities can be sold pursuant to
Rule 144, the Company shall permit the transfer, and, in the case of the
Conversion Shares, promptly instruct its transfer agent to issue one or more
certificates, free from any restrictive legend, in such name and in such
denominations as specified by such Buyer.
5. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation of the
Company hereunder to issue and sell the Preferred Shares to a Buyer at the
Closing is subject to the satisfaction, on or before the Closing Date of each of
the following conditions thereto, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion by prior delivery of written notice of such waiver to each Buyer:
A. The applicable Buyer shall have executed this Agreement, the Escrow
Agreement, dated June 29, 1999, by and between the Company and the signatories
thereto (the "Escrow Agreement"), and the Registration Rights Agreement, and
delivered the same to Shoreline Pacific Institutional Finance, The Institutional
Division of Financial West Group ("Shoreline").
B. The applicable Buyer shall have delivered the Purchase Price in
accordance with Section 1(B) above.
21
<PAGE>
C. The Certificate of Designation shall have been accepted for filing
with the Secretary of State of the State of Delaware.
D. The representations and warranties of the applicable Buyer shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a particular date and in such case shall be true and
correct as of that particular date), and the applicable Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the applicable Buyer at or prior to the Closing Date.
E. No litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by or in any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
F. The Company shall have received an acknowledgment letter dated June
29, 1999 in the form attached hereto as Exhibit D from each Buyer regarding
---------
certain transactions the Company may be contemplating.
6. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE. The obligation of each
Buyer hereunder to purchase the Preferred Shares at the Closing is subject to
the satisfaction, on or before the Closing Date of each of the following
conditions, provided that these conditions are for such Buyer's sole benefit and
may be waived by such Buyer at any time in its sole discretion by prior delivery
of written notice by each Buyer to the Company:
A. The Company shall have executed this Agreement, the Escrow Agreement
and the Registration Rights Agreement, and delivered the same to Shoreline.
B. The Company shall have delivered to the Escrow Agent duly executed
certificates (in such denominations as the Buyer shall request) representing the
Preferred Shares in accordance with Section 1(B) above.
22
<PAGE>
C. The Certificate of Designation shall have been accepted for filing
with the Secretary of State of the State of Delaware, and a copy thereof
certified by such Secretary of State shall have been made available to such
Buyer.
D. The Irrevocable Transfer Agent Instruction, in form and substance
satisfactory to a majority in interest of the Buyers, shall have been delivered
to and acknowledged in writing by the Company's Transfer Agent.
E. The representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at such time (except for representations and warranties that
speak as of a particular date and in such case shall be true and correct as of
that particular date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing Date. The Buyer shall have received a
certificate, executed by the Chief Financial Officer of the Company, dated as of
the Closing Date, to the foregoing effect.
F. No litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by or in any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
G. The Buyer shall have received an opinion of the Company's counsel,
dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Buyer and in substantially the same form as Exhibit E
---------
attached hereto.
H. The Buyer shall have received an officer's certificate described in
Section 3(C) above, dated as of the Closing Date.
I. The Company shall have delivered to such Buyer an assistant
secretary's certificate, dated as of the Closing Date, as to (i) the resolutions
adopted by the Company's Board of Directors consistent with Section 3(B)(ii),
(ii) the Certificate of Incorporation and (iii) the By-laws, each as in effect
at the Closing.
J. Trading in the Common Stock on the NASDAQ National Market shall not
have been suspended by the SEC or the NASDAQ National Market.
23
<PAGE>
7. STANDSTILL AGREEMENT. A. Each Buyer agrees that, for a period beginning
on the date hereof and ending on the date on which it no longer owns any
Preferred Shares or Conversion Shares, it will not, directly or indirectly
(unless in any such cases specifically invited in writing to do so by the Board
of Directors of the Company), do any of the following except as required
pursuant to or otherwise contemplated by this Agreement and the Certificate of
Designation or as a result of any stock split, stock dividend, stock repurchase
or similar recapitalization by the Company or otherwise to enforce such Buyer's
rights under this Agreement and the Certificate of Designation or the
Registration Rights Agreement:
(i) acquire, offer to acquire, or agree to acquire by purchase or
otherwise, individually or by joining a partnership, limited partnership,
syndicate or other "group" (as such term is used in Section 13(d)(3) of the 1934
Act) (any such act, to "acquire"), any securities of the Company entitled to
vote, or securities convertible into or exercisable or exchangeable or
redeemable for such securities (collectively, "Voting Securities") if, after
-----------------
such acquisition, the Buyer would beneficially own (as such term is defined in
Rule 13d-3 of the 1934 Act) 10% or more of the total combined voting power of
the Voting Securities then outstanding;
(ii) form, join, participate in or encourage the formation of a
partnership, limited partnership, syndicate or other group for the purpose of
acquiring, holding or disposing of Voting Securities; provided, however, for
purposes of this Section 7(ii), each Buyer and its affiliates shall not be
considered to be a syndicate or other group;
(iii) make, or in any way participate in, directly or indirectly, any
"solicitation" of "proxies" (as such terms are defined or used in Regulation 14A
under the 1934 Act) or become a "participant" in any "election contest" (as such
terms are defined or used in Rule 14a-11 under the Exchange Act) with respect to
the Company (other than by way of such Buyer exercising its right to vote its
Voting Securities), or initiate, propose or otherwise solicit stockholders of
the Company for the approval of one or more stockholder proposals with respect
to the Company or induce or attempt to induce any other person to initiate any
stockholder proposal;
(iv) deposit any Voting Securities into a voting trust or subject them to
any voting agreement or other agreement or arrangement with respect to the
voting of such Voting Securities;
(v) otherwise act, directly or indirectly, alone or in concert with
others, to seek to control the management, Board of Directors, policies or
affairs of the
24
<PAGE>
Company or any of its Subsidiaries, or solicit, propose, seek to effect or
negotiate with any other person with respect to any form of business combination
transaction involving, directly or indirectly, the Company or any of its
Subsidiaries, or any restructuring, recapitalization or similar transaction with
respect to the Company or any of its Subsidiaries, or announce or disclose an
intent, purpose, plan or proposal with respect to the Company or any of its
Subsidiaries or any Voting Securities inconsistent with the provisions of this
Agreement, including an intent, purpose, plan or proposal that is conditioned on
or would require the Company to waive the benefit of or amend any provision of
this Agreement, or assist, participate in, facilitate or encourage or solicit
any effort or attempt by any person to do or seek to do any of the foregoing;
and
(vi) encourage or render advice to or make any recommendation or proposal
to any person, or directly or indirectly participate, aid and abet or otherwise
induce any person or engage in any of the actions prohibited by this Section 7
or to engage in any actions consistent with such prohibitions.
B. The Company and each of the Buyers agree that the initial purchase of
the Preferred Shares by the Buyers hereunder and the conversion of the Preferred
Shares into Conversion Shares in accordance with the provisions of the
Certificate of Designation shall not constitute the formation of a group (as
such term is used in Section 13d-3 of the 1934 Act) with respect to Voting
Securities.
8. GOVERNING LAW; MISCELLANEOUS.
A. GOVERNING LAW. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Delaware without regard to the
principles of conflict of laws. The parties hereto hereby submit to the
exclusive jurisdiction of the United States Federal Courts and the state courts
located in Delaware with respect to any dispute arising under this Agreement,
the agreements entered into in connection herewith or the transactions
contemplated hereby or thereby and irrevocably agree that all claims in respect
of such suit or proceeding may be determined in such courts. The Company and
each Buyer irrevocably waive any defense of an inconvenient forum to the
maintenance of such suit or proceeding. The Company and each Buyer further
agree that service of process upon a party mailed by first class mail shall be
deemed in every respect effective service of process upon the party in any such
suit or proceeding. Nothing herein shall affect any party's right to serve
process in any other manner permitted by law. The Company and each Buyer agree
a final non-appealable judgment in any such suit or
25
<PAGE>
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
B. COUNTERPARTS; SIGNATURES BY FACSIMILE. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. This Agreement, once executed by a
party, may be delivered to the other party hereto by facsimile transmission of a
copy of this Agreement bearing the signature of the party so delivering this
Agreement.
C. HEADINGS. The headings of this Agreement are for convenience of
reference only and shall not form part of, or affect the interpretation of, this
Agreement.
D. SEVERABILITY. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
E. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Schedules,
Exhibits and instruments referenced herein contain the entire understanding of
the parties with respect to the matters covered herein and therein and, except
as specifically set forth herein or therein, neither the Company nor the Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived other than by an
instrument in writing signed by the party to be charged with enforcement and no
provision of this Agreement may be amended other than by an instrument in
writing signed by the Company and the holders of at least a majority of the
Preferred Shares then outstanding. No such amendment shall be effective to the
extent that it applies to less than all of the holders of the Preferred Shares
then outstanding. No consideration shall be offered or paid to any person to
amend or consent to a waiver or modification of any provision of this Agreement,
the Registration Rights Agreement or the Certificate of Designation unless the
same consideration also is offered to all the parties to this Agreement or the
Registration Rights Agreement or holders of the Preferred Shares, as the case
may be.
F. NOTICES. Any notices required or permitted to be given under the
terms of this Agreement shall be sent overnight by express mail or delivered
person-
26
<PAGE>
ally or by courier (including an overnight delivery service) or by facsimile and
shall be effective upon receipt, if delivered by overnight express mail,
personally or by courier (including an overnight delivery service) or by
facsimile, in each case addressed to a party. The addresses for such
communications shall be:
If to the Company:
CMGI, Inc.
100 Brickstone Square
Andover, MA 01810
Attention: Chief Executive Officer
Facsimile: 978-684-3618
With copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Attention: Morris J. Kramer, Esq.
David J. Goldschmidt, Esq.
Facsimile: 212-735-2000
If to a Buyer: To the contact information set forth immediately below such
Buyer's name on the signature pages hereto.
Each party shall provide written notice to the other party of any change in
address.
G. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Neither
the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other; provided,
that, subject to Section 2(F), any Buyer may assign its rights and obligations
hereunder to any person that purchases Securities in a private transaction from
a Buyer or to any of its "affiliates," as that term is defined under the 1934
Act, without the consent of the Company; provided, further, however, that the
transferee has agreed in writing to be bound by the provisions of this Agreement
and acknowledges the assignment provisions of the Registration Rights Agreement
with such transferee becoming a "Buyer" under this Agreement with all of the
rights and obligations a Buyer has
27
<PAGE>
hereunder and the Company shall have been notified of the name and address of
the transferee.
H. THIRD PARTY BENEFICIARIES. This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns, and
is not for the benefit of, nor may any provision hereof be enforced by, any
other person.
I. INDEMNIFICATION. The Company agrees to indemnify and hold harmless
each of the Buyers and their respective officers, directors, employees and
agents for loss, cost or damage (including reasonable attorney's fees) arising
as a result of or related to any breach or alleged breach by the Company of any
of its representations, warranties, obligations and covenants set forth in this
Agreement or in the Certificate of Designation or in connection with the
enforcement by such Buyer of any of the Company's obligations hereunder or
thereunder, including the enforcement of this indemnity.
J. PUBLICITY. The Company shall file either a press release or a Form 8-
K under the 1934 Act with respect to the transactions contemplated hereby within
five (5) business days of the Closing Date and Citadel Investment Group, L.L.C.
on behalf of Wingate Capital Ltd. and Fisher Capital Ltd. shall be given a
reasonable opportunity to review and comment on such disclosure document before
it is released or filed, as the case may be.
K. FURTHER ASSURANCES. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
L. NO STRICT CONSTRUCTION. The language used in this Agreement shall be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
M. EXPENSES. Each of the parties hereto shall pay its own costs and
expenses in connection with the transactions contemplated hereby, whether or not
such transactions shall be consummated, except as shall be explicitly provided
otherwise in the Registration Rights Agreement.
28
<PAGE>
N. SURVIVAL. The representations and warranties of the Company and the
agreements and covenants set forth in Sections 3, 4, 5 and 8 shall survive the
closing hereunder notwithstanding any due diligence investigation conducted by
or on behalf of the Buyers, except that the representations and warranties
contained in Section 3 shall terminate on the earlier to occur of December 31,
2002 or the expiration of the applicable statute of limitations period (other
than with respect to any claim by a third party who is not an affiliate of such
Buyer against the party to this Agreement who seeks to assert a claim based on
such representations and warranties).
O. KNOWLEDGE CLAUSES. As used in this Agreement, the phrases "to the
Company's knowledge," "to the knowledge of the Company" and phrases of similar
import means the knowledge of the Chief Executive Officer, President, any Vice
President and the Chief Financial Officer of the Company, after reasonable
investigation and inquiry commensurate with that of a reasonable person holding
such position with a public company in the ordinary course of business.
P. REMEDIES. The Company acknowledges that a breach by it of its
obligations under this Agreement, the Registration Rights Agreement or the
Certificate of Designation will cause irreparable harm to each Buyer by
vitiating the intent and purpose of the transactions contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Agreement, the Registration Rights Agreement or the
Certificate of Designation will be inadequate and agrees, in the event of a
breach or threatened breach by the Company of any of the provisions of this
Agreement, the Registration Rights Agreement or the Certificate of Designation,
that each Buyer shall be entitled, in addition to all other available remedies
in law or in equity, to an injunction or injunctions to prevent or cure any
breaches of the provisions of this Agreement, the Registration Rights Agreement
or the Certificate of Designation and to enforce specifically the terms and
provisions of the Agreement, the Registration Rights Agreement or the
Certificate of Designation, without the necessity of showing economic loss and
without any bond or other security being required.
IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused this
Agreement to be duly executed as of the date first above written.
29
<PAGE>
CMGI, INC.
By: /s/ Andrew J. Hajducky III
Andrew J. Hajducky III
Executive Vice President, Chief Financial Officer & Treasurer
Wingate Capital Ltd.
By: /s/ Kenneth A. Simpler
Name: Kenneth A. Simpler
Title: Vice President
RESIDENCE: Cayman Islands
ADDRESS: c/o Citadel Investment Group, L.L.C.
225 W. Washington Street
Chicago, IL 60606
AGGREGATE SUBSCRIPTION AMOUNT: $54,322,000
Number of Tranche 1 Preferred Shares: 18,108
Number of Tranche 2 Preferred Shares: 18,107
Number of Tranche 3 Preferred Shares: 18,107
Aggregate Number of Preferred Shares: 54,322
30
<PAGE>
Fisher Capital Ltd.
By: /s/ Kenneth A. Simpler
Name: Kenneth A. Simpler
Title: Vice President
RESIDENCE: Cayman Islands
ADDRESS: c/o Citadel Investment Group, L.L.C.
225 W. Washington Street
Chicago, IL 60606
AGGREGATE SUBSCRIPTION AMOUNT: $84,964,000
Number of Tranche 1 Preferred Shares: 28,322
Number of Tranche 2 Preferred Shares: 28,321
Number of Tranche 3 Preferred Shares: 28,321
Aggregate Number of Preferred Shares: 84,964
Westgate International, L.P
By: Martley International, Inc. - Attorney in Fact
By: /s/ Elliot Greenberg
Name: Elliot Greenberg
Title: Vice-President
RESIDENCE: Cayman Islands
ADDRESS: Westgate International, L.P.
c/o Midland Bank Trust Corporation (Cayman) Limited
P.O. Box 1109
Grand Cayman, Cayman Islands
AGGREGATE SUBSCRIPTION AMOUNT: $46,429,000
Number of Tranche 1 Preferred Shares: 15,477
Number of Tranche 2 Preferred Shares: 15,476
Number of Tranche 3 Preferred Shares: 15,476
Aggregate Number of Preferred Shares: 46,429
31
<PAGE>
The Liverpool Limited Partnership
By: Liverpool Associates, Ltd. - its General Partner
By: /s/ Elliot Greenberg
Name: Elliot Greenberg
Title: Vice-President
RESIDENCE: Bermuda
ADDRESS: The Liverpool Limited Partnership
Cedar House
41 Cedar Avenue
Hamilton, HM12, Bermuda
AGGREGATE SUBSCRIPTION AMOUNT: $46,428,000
Number of Tranche 1 Preferred Shares: 15,476
Number of Tranche 2 Preferred Shares: 15,476
Number of Tranche 3 Preferred Shares: 15,476
Aggregate Number of Preferred Shares: 46,428
Silver Oak Capital, L.L.C.
As agent for and on behalf of the entities listed on Schedule 1
By: /s/ Michael L. Gordon
----------------------
Name: Michael L. Gordon
Title: Managing Member
RESIDENCE:
ADDRESS: Angelo, Gordon & Company
245 Park Avenue
New York, NY 10167
Attn: Ari Storch
AGGREGATE SUBSCRIPTION AMOUNT: $92,857,000
Number of Tranche 1 Preferred Shares: 30,953
Number of Tranche 2 Preferred Shares: 30,952
Number of Tranche 3 Preferred Shares: 30,952
Aggregate Number of Preferred Shares: 92,857
32
<PAGE>
RGC International Investors, LDC
Rose Glen Capital Management, L.P.
By: RGC General Partner Corp.
By: /s/ Wayne Bloch
------------------------
Name: Wayne Bloch
Title: Managing Director
RESIDENCE: Cayman Islands
ADDRESS: c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 200
251 St. Asaphs Road
Bala Cynwyd, PA 19004
AGGREGATE SUBSCRIPTION AMOUNT: $50,000,000
Number of Tranche 1 Preferred Shares: 16,667
Number of Tranche 2 Preferred Shares: 16,667
Number of Tranche 3 Preferred Shares: 16,666
Aggregate Number of Preferred Shares: 50,000
33
<PAGE>
EXHIBIT A
---------
Certificate of Designation
--------------------------
See Exhibits 99.3 and 99.4
34
<PAGE>
EXHIBIT B
---------
Registration Rights Agreement
-----------------------------
See Exhibit 99.2
35
<PAGE>
Exhibit C
---------
Escrow Agreement
----------------
(Omitted)
36
<PAGE>
Exhibit D
---------
Acknowledgment Letter
---------------------
(Omitted)
37
<PAGE>
Exhibit E
---------
Opinion of Counsel
------------------
(Omitted)
38
<PAGE>
EXHIBIT 99.2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of June 29,
---------
1999, by and among CMGI, Inc., a Delaware corporation, with its headquarters
located at 100 Brickstone Square, Andover, MA 01810 (the "Company"), and each of
-------
the undersigned (together with any assignee or transferee of all of their
respective rights hereunder, the "Initial Investors").
-----------------
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among the
parties hereto of even date herewith (the "Securities Purchase Agreement"), the
-----------------------------
Company has agreed, upon the terms and subject to the conditions contained
therein, to issue and sell to the Initial Investors (i) shares of its Series C
Convertible Preferred Stock (the "Preferred Stock") that are convertible into
---------------
shares (as converted, the "Conversion Shares") of the Company's common stock,
-----------------
par value $0.01 per share (the "Common Stock"), upon the terms and subject to
------------
the limitations and conditions set forth in the Certificate of Designations,
Preferences, and Rights with respect to the Preferred Stock (the "Certificate of
--------------
Designation"); and
- -----------
B. To induce the Initial Investors to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder, or any similar successor statute
(collectively, the "1933 Act"), and applicable state securities laws.
--------
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each of the
Initial Investors hereby agree as follows:
1. DEFINITIONS.
A. As used in this Agreement, the following terms shall have the
following meanings:
<PAGE>
(i) "Investors" means the Initial Investors and any transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
(ii) "Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act or any
successor rule providing for offering securities on a continuous basis ("Rule
----
415"), and the declaration or ordering of effectiveness of such Registration
- ----
Statement by the United States Securities and Exchange Commission (the "SEC").
---
(iii) "Registrable Securities" means the Conversion Shares issued or
issuable upon conversion of or otherwise pursuant to the Preferred Shares and
any securities issued or issuable as a dividend on or in exchange for or
otherwise in respect to any of the foregoing.
(iv) "Registration Period" means the earliest to occur of (i) the sale of
all the Registrable Securities under an effective Registration Statement or (ii)
the expiration of the holding period that would be applicable thereto under Rule
144(k) under the 1933 Act were the Registrable Securities not held by an
affiliate (as such term is defined in Rule 144 under the 1933 Act) (an
"Affiliate") of the Company.
---------
(v) "Registration Statement(s)" means a registration statement(s) of the
Company under the 1933 Act covering the resale of the Registrable Securities.
B. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreement.
2. REGISTRATION.
A. MANDATORY REGISTRATION. The Company shall prepare, and, on or prior
to the date which is one hundred twenty (120) days after the date of the Closing
under the Securities Purchase Agreement (the "Closing Date"), file with the SEC
------------
a Registration Statement on Form S-3 (or, if Form S-3 is not then available, on
such form of Registration Statement as is then available to effect a
registration of the Registrable Securities), covering the resale of the
Registrable Securities. The number of shares of Common Stock initially included
in such Registration Statement shall equal the number of Conversion Shares that
are then issuable upon conversion of the Preferred Stock, plus the maximum
number of Common Shares which may be
2
<PAGE>
issuable as a dividend on the Preferred Stock. The Registration Statement, to
the extent allowable under the 1933 Act and the rules and regulations
promulgated thereunder (including Rule 416), shall state that such Registration
Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon conversion of the Preferred Stock to prevent
dilution resulting from stock splits, stock dividends or similar transactions.
B. UNDERWRITTEN OFFERING. If any offering pursuant to a Registration
Statement pursuant to Section 2(A) hereof involves an underwritten offering, the
Company shall have the right to select one legal counsel and an investment
banker or bankers and manager or managers to administer the offering, which
investment banker or bankers or manager or managers and legal counsel shall be
reasonably satisfactory to the Investors.
C. ILLIQUIDITY PAYMENTS BY THE COMPANY. The Company shall use its best
efforts to obtain effectiveness of the Registration Statement as soon as
practicable. The Company agrees to make payments to the Investors ("Illiquidity
-----------
Payments") for each Illiquidity Day (as defined below) in such amounts and at
- --------
such times as provided in this Section 2(C) as partial relief for any damages
incurred by the Investors by reason of any delay in or reduction of their
ability to sell the Registrable Securities (which remedy shall not be exclusive
of any other remedies available at law or in equity). An Illiquidity Day shall
be deemed to have occurred for each trading day that: (i) the Registration
Statement covering the Registrable Securities required to be filed by the
Company pursuant to Section 2(A) hereof is not declared effective by the SEC
after the date that is one hundred eighty (180) days after the Closing Date
(provided that such 180-day period shall be extended for any delays beyond the
periods provided herein which are solely attributable to changes required by the
Investors in the Registration Statement with respect to information relating to
the Investors, including, without limitation, changes to the plan of
distribution, the failure to supply information to be included in the selling
securityholder table of the prospectus or the failure of the Investors to
conduct their review of the Registration Statement pursuant to Section 3(H)
below in a reasonably prompt manner); (ii) sales of all of the Registrable
Securities cannot be made pursuant to the Registration Statement after the
initial date that the Registration Statement has been declared effective by the
SEC (including, without limitation, trading days when sales cannot be made by
reason of the Company's failure to properly supplement or amend the prospectus
included therein in accordance with the terms of this Agreement, but excluding
any trading days during an Allowed Delay (as defined herein)) and prior to the
expiration of the Registration Period; or (iii) the
3
<PAGE>
Common Stock is not listed or included for quotation on the Nasdaq National
Market ("Nasdaq"), the Nasdaq SmallCap Market ("Nasdaq Smallcap"), the New York
------ ---------------
Stock Exchange (the "NYSE") or the American Stock Exchange (the "AMEX") or that
---- ----
trading thereon is halted, in each case after the initial date that the
Registration Statement has been declared effective by the SEC; provided that the
occurrence of more than one of the events described in clauses (i), (ii) and
(iii) on the same trading day shall constitute only one Illiquidity Day. Within
five (5) business days following the end of any calendar month in which an
Illiquidity Day has occurred, the Company shall pay to each holder of
Registrable Securities (other than holders of Registrable Securities which are
not entitled to such Illiquidity Payment due to such holders' Registrable
Securities not being included in a Registration Statement as a result of such
holders' failure to deliver information requested by the Company in a timely
manner pursuant to Section 4(A)) an amount in cash for each Illiquidity Day
occurring in such month equal to the product of (x) the sum of the purchase
price of the Preferred Stock outstanding as of the last day of such month and
the market price (based on the average of the closing bid prices of the Common
Stock on Nasdaq, or the securities market or exchange where the Common Stock is
then traded, for the last three trading days of such month) of the Conversion
Shares outstanding as of the last day of such month (other than Conversion
Shares held by holders of Registrable Securities which are not entitled to such
Illiquidity Payment due to such holders' Registrable Securities not being
included in a Registration Statement as a result of such holders' failure to
deliver information requested by the Company in a timely manner pursuant to
Section 4(A)) and (y) in the case of each of the initial sixty (60) Illiquidity
Days (calculated on a cumulative basis), 1/360th of the 12-month London
Interbank Offered Rate (as reported by Bloomberg) prevailing as of the last day
of such month (the "Prevailing Rate") and, in the case of any Illiquidity Days
---------------
in excess of the sixtieth (60th) Illiquidity Day (calculated on a cumulative
basis), 1/360th of the sum of the Prevailing Rate plus 2% per annum.
D. PIGGY-BACK REGISTRATIONS. Subject to the last sentence of this Section
2(D), if at any time prior to the expiration of the Registration Period, the
Company shall determine to file with the SEC a Registration Statement relating
to an offering for its own account or the account of others under the 1933 Act
of any of its equity securities (other than on Form S-4 or Form S-8 or their
then equivalents relating to equity securities to be issued solely in connection
with any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans), the Company shall
send to each Investor who is entitled to registration rights under this Section
2(D) written notice of such determination and, if within ten (10) days after the
date of such written notice, such Investor
4
<PAGE>
shall so request in writing, the Company shall include in such Registration
Statement all or any part of the Registrable Securities such Investor requests
to be registered, except that if, in connection with any underwritten public
offering for the account of the Company the managing underwriter(s) thereof
shall impose a limitation on the number of shares of Common Stock which may be
included in the Registration Statement because, in such underwriter(s)'
judgment, marketing or other factors dictate that such limitation is necessary
to facilitate public distribution, then the Company shall be obligated to
include in such Registration Statement only such limited number of the
Registrable Securities with respect to which such Investor has requested
inclusion hereunder as the underwriter shall advise. Any exclusion of
Registrable Securities shall be made pro rata among the Investors seeking to
include Registrable Securities in proportion to the number of Registrable
Securities sought to be included by such Investors; provided, however, that the
Company shall not exclude any Registrable Securities unless the Company has
first excluded all outstanding securities, the holders of which are not entitled
to demand registration rights in such Registration Statement or are not entitled
to pro rata inclusion with the Registrable Securities; and provided, further,
however, that any exclusion of Registrable Securities shall be made pro rata
with holders of other securities having the right to include such securities in
the Registration Statement other than (x) holders of securities entitled to
inclusion of their securities in such Registration Statement by reason of demand
registration rights or (y) Microsoft Corp. pursuant to that certain CMG Stock
Purchase Agreement dated December 10, 1996. No right to registration of
Registrable Securities under this Section 2(D) shall be construed to limit any
registration required under Section 2(A) hereof. If an offering in connection
with which an Investor is entitled to registration under this Section 2(D) is an
underwritten offering, then each Investor whose Registrable Securities are
included in such Registration Statement shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an underwritten offering
using the same underwriter or underwriters and, subject to the provisions of
this Agreement, on the same terms and conditions as other shares of Common Stock
included in such underwritten offering. Notwithstanding anything to the contrary
set forth herein, the registration rights of the Investors pursuant to this
Section 2(D) shall only be available in the event and at such times as the
Company fails to timely file, obtain effectiveness or maintain effectiveness of
any Registration Statement to be filed pursuant to Section 2(A) in accordance
with the terms of this Agreement; provided, however, that if the Company files a
Registration Statement pursuant to this Section 2(D), the Company shall take the
steps necessary to obtain the effectiveness of or shall take no steps to cause
the lapse in effectiveness of, as the case may be, of any such Registration
Statement even if a Registration Statement filed pursuant to
5
<PAGE>
Section 2(A) or this Section 2(D) becomes effective; provided, further, however,
that nothing contained in the preceding two provisos shall (i) be construed as
requiring the Company to register or maintain the registration of any of the
Registrable Securities pursuant to more than one Registration Statement; or (ii)
diminish the Company's obligation to register all of the Registrable Securities.
E. ELIGIBILITY FOR FORM S-3. The Company represents and warrants that it
currently complies with the registrant eligibility and transaction requirements
for the use of Form S-3 for registration of the sale by the Initial Investors
and any other Investors of the Registrable Securities and the Company shall use
its best efforts to file all reports required to be filed by the Company with
the SEC in a timely manner so as to maintain such eligibility for the use of
Form S-3 until the expiration of the Registration Period.
F. ALLOCATION OF REGISTRABLE SECURITIES. The initial number of
Registrable Securities included in any Registration Statement and each increase
in the number of Registrable Securities included therein shall be allocated pro
rata among the Investors based on the number of Registable Securities held by
each Investor at the time the Registration Statement covering such initial
number of Registrable Securities or increase thereof is declared effective by
the SEC. In the event that an Investor sells or otherwise transfers any of such
Person's Registrable Securities, each transferee shall be allocated a pro rata
portion of the then remaining number of Registrable Securities included in such
Registration Statement for such transferor. Any shares of Common Stock included
in the Registration Statement and which remain allocated to any Person which
ceases to hold any Registrable Securities shall be allocated to the remaining
Investors, pro rata based on the number of Registrable Securities then held by
such Investors.
3. OBLIGATIONS OF THE COMPANY. In connection with the registration of the
Registrable Securities, the Company shall have the following obligations:
A. The Company shall prepare and file with the SEC on or prior to one
hundred twenty (120) days after the Closing Date, a Registration Statement with
respect to the number of Registrable Securities provided in Section 2(A), and
thereafter use its best efforts to cause such Registration Statement relating to
the Registrable Securities to become effective as soon as practicable after such
filing (but in no event later than one hundred eighty (180) days after the
Closing Date), and keep the Registration Statement effective pursuant to Rule
415 at all times until the expiration of the Registration Period and as a result
of the event or circumstance
6
<PAGE>
described in the foregoing clause, the legend with respect to transfer
restrictions required under the Agreement is removed. The Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein not misleading (except for an untrue statement or alleged
untrue statement of a material fact or omission or alleged omission of a
material fact made in reliance on and in conformity with written information
furnished to the Company by or on behalf of Investors specifically for use
therein).
B. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statements and the prospectuses used in connection with the Registration
Statements as may be necessary to keep the Registration Statement effective at
all times during the Registration Period except for Allowed Delays, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by the
Registration Statements until such time as all of such Registrable Securities
have been disposed of in accordance with the intended methods of disposition by
the seller or sellers thereof as set forth in the Registration Statement. In the
event the number of shares available under a Registration Statement filed
pursuant to this Agreement is insufficient to cover all of the Registrable
Securities issued or issuable upon conversion of the Preferred Stock, the
Company shall amend the Registration Statement, or file a new Registration
Statement (on the short form available therefor, if applicable), or both, so as
to cover all of the Registrable Securities, in each case, as soon as
practicable, but in any event within twenty (20) business days after the
necessity therefor arises. The Company shall use its best efforts to cause such
amendment and/or new Registration Statement to become effective as soon as
practicable following the filing thereof.
C. The Company shall furnish to each Investor whose Registrable
Securities are included in a Registration Statement and its legal counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of each Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and, in the case of the Registration Statement referred
to in Section 2(A), each letter written by or on behalf of the Company to the
SEC or the staff of the SEC, and each item of correspondence from the SEC or the
staff of the SEC, in each case relating to such Registration Statement (other
than any portion thereof which contains information for which the Company has
sought confidential treatment), and
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<PAGE>
(ii) such number of copies of a prospectus, including a preliminary prospectus,
and all amendments and supplements thereto and such other documents as such
Investor may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Investor. The Company will promptly notify
each Investor by facsimile of the effectiveness of each Registration Statement
or any post-effective amendment. The Company will promptly respond to any and
all comments received from the SEC, with a view towards causing each
Registration Statement or any amendment thereto to be declared effective by the
SEC as soon as practicable and shall file an acceleration request as soon as
practicable following the resolution or clearance of all SEC comments or, if
applicable, following notification by the SEC that any such Registration
Statement or any amendment thereto will not be subject to review.
D. The Company shall use its best efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statements under all other
securities or "blue sky" laws of all jurisdictions in the United States as the
Investors who hold a majority-in-interest of the Registrable Securities being
offered reasonably request, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (a) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(D), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause the Company undue expense
or burden, or (e) make any change in its charter or bylaws, which in each case
the Board of Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders. The Company shall promptly
notify each Investor who holds Registrable Securities of the receipt by the
Company of any notification with respect to the suspension of the registration
or qualification of any of the Registrable Securities for sale under the
securities or "blue sky" laws of any jurisdiction in the United States or its
receipt of actual notice of the initiation or threatening of any proceeding for
such purpose.
8
<PAGE>
E. In the event of an underwritten offering of the Registrable Securities
being offered in the offering, the Company shall select underwriters for the
offering and shall enter into and perform its obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the underwriters of such
offering.
F. As promptly as practicable after becoming aware of such event, the
Company shall notify each Investor of the happening of any event, of which the
Company has knowledge, as a result of which the prospectus included in any
Registration Statement, as then in effect, includes an untrue statement or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and use its best efforts promptly to prepare
a supplement or amendment to any Registration Statement to correct such untrue
statement or omission, and deliver such number of copies of such supplement or
amendment to each Investor as such Investor may reasonably request; provided
that, at any time after the date which is 30 days after the Registration
Statement is declared effective by the SEC for not more than thirty (30)
consecutive calendar days (or a total of not more than ninety (90) calendar days
in any twelve (12) month period), the Company may delay the disclosure of
material non-public information concerning the Company (as well as prospectus or
Registration Statement updating) the disclosure of which at the time is not, in
the good faith opinion of the Company, in the best interests of the Company (an
"Allowed Delay"); provided, further, that the Company shall promptly (i) notify
-------------
the Investors in writing of the existence of (but in no event, without the prior
written consent of an Investor, shall the Company disclose to such investor any
of the facts or circumstances regarding) material non-public information giving
rise to an Allowed Delay and (ii) advise the Investors in writing to cease all
sales under such Registration Statement until the end of the Allowed Delay. Upon
expiration of the Allowed Delay, the Company shall again be bound by the first
sentence of this Section 3(F) with respect to the information giving rise
thereto.
G. The Company shall use its best efforts to prevent the issuance of any
stop order or other suspension of effectiveness of any Registration Statement,
and, if such an order is issued, to obtain the withdrawal of such order at the
earliest possible moment and to notify each Investor who holds Registrable
Securities being sold (or, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof.
9
<PAGE>
H. The Company shall permit a single firm of counsel designated by the
holders whose shares make up at least a majority of the Registrable Securities
included in such Registration Statement to review such Registration Statement
and all amendments and supplements thereto (as well as all requests for
acceleration or effectiveness thereof) a reasonable period of time (but not less
than five (5) business days prior to the filing of such Registration Statement
or supplement or amendment thereto) prior to their filing with the SEC, and not
file any document in a form to which such counsel reasonably objects and will
not request acceleration of such Registration Statement without prior notice to
such counsel. The sections of such Registration Statement covering information
with respect to the Investors, the Investor's beneficial ownership of securities
of the Company or the Investors intended method of disposition of Registrable
Securities shall conform in all material respects to the information provided to
the Company by each of the Investors.
I. The Company shall make generally available to its security holders as
soon as practicable, but not later than ninety (90) days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the 1933 Act) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.
J. At the request of a majority of the Investors, the Company shall
furnish, on the date that Registrable Securities are delivered to an underwriter
identified in the Registration Statement, if any, for sale in connection with
any Registration Statement or, if such securities are not being sold by an
underwriter identified in the Registration Statement, on the date of
effectiveness thereof (i) an opinion, dated as of such date, from counsel
representing the Company for purposes of such Registration Statement, in form,
scope and substance as is customarily given in an underwritten public offering,
addressed to the underwriters identified in the Registration Statement, if any,
and the Investors and (ii) a letter, dated such date, from the Company's
independent certified public accountants in form and substance as is customarily
given by independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters identified in the
Registration Statement, if any, and the Investors.
K. The Company shall make available for inspection by (i) any Investor,
(ii) any underwriter participating in any disposition pursuant to a Registration
Statement, (iii) one firm of attorneys and one firm of accountants or other
agents retained by the Initial Investors, and (iv) one firm of attorneys
retained by all such
10
<PAGE>
underwriters (collectively, the "Inspectors") all pertinent financial and other
----------
records, and pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably deemed necessary by each
-------
Inspector to enable each Inspector to exercise its due diligence responsibility,
and cause the Company's officers, directors and employees to supply all
information which any Inspector may reasonably request for purposes of such due
diligence; provided, however, that each Inspector shall hold in confidence and
shall not make any disclosure (except to an Investor) of any Record or other
information which the Company determines in good faith to be confidential, and
of which determination the Inspectors are so notified, unless (a) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in
any Registration Statement, (b) the release of such Records is ordered pursuant
to a subpoena or other order from a court or government body of competent
jurisdiction, or (c) the information in such Records has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company shall not be required to disclose any confidential
information in such Records to any Inspector until and unless such Inspector
shall have entered into confidentiality agreements (in form and substance
satisfactory to the Company) with the Company with respect thereto,
substantially in the form of this Section 3(K). Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential. Nothing herein (or in any other
confidentiality agreement between the Company and any Investor) shall be deemed
to limit the Investor's ability to sell Registrable Securities in a manner which
is otherwise consistent with applicable laws and regulations.
L. The Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless (i) disclosure
of such information is necessary to comply with federal or state securities
laws, (ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other order from a court
or governmental body of competent jurisdiction, or (iv) such information has
been made generally available to the public other than by disclosure in
violation of this or any other agreement. The Company agrees that it shall,
upon learning that disclosure of such information concerning an Investor is
sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to such Investor prior to making such
disclosure, and allow the Investor, at its expense, to undertake appropri-
11
<PAGE>
ate action to prevent disclosure of, or to obtain a protective order for, such
information.
M. The Company shall (i) cause all the Registrable Securities covered by
the Registration Statement to be listed on each national securities exchange on
which securities of the same class or series issued by the Company are then
listed, if any, if the listing of such Registrable Securities is then permitted
under the rules of such exchange, or (ii) to the extent the securities of the
same class or series are not then listed on a national securities exchange,
secure the designation and quotation of all the Registrable Securities covered
by the Registration Statement on Nasdaq or, if not eligible for Nasdaq on the
Nasdaq SmallCap and, without limiting the generality of the foregoing, to
arrange for at least two market makers to register with the National Association
of Securities Dealers, Inc. as such with respect to such Registrable Securities.
N. The Company shall provide a transfer agent and registrar, which may be
a single entity, for the Registrable Securities not later than the effective
date of the Registration Statement.
O. The Company shall cooperate with the Investors who hold Registrable
Securities being offered and the managing underwriter or underwriters, if any,
to facilitate the timely preparation and delivery of certificates (not bearing
any restrictive legends) representing Registrable Securities to be offered
pursuant to a Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the managing underwriter or
underwriters, if any, or the Investors may reasonably request and registered in
such names as the managing underwriter or underwriters, if any, or the Investors
may request, and, within three (3) business days after a Registration Statement
which includes Registrable Securities is ordered effective by the SEC, the
Company shall deliver to the transfer agent for the Registrable Securities (with
copies to the Investors whose Registrable Securities are included in such
Registration Statement) an instruction in the form attached hereto as Exhibit 1
and an opinion of such counsel in the form attached hereto as Exhibit 2.
P. At the request of any Investor, the Company shall prepare and file
with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and any prospectus used in connection
with the Registration Statement as may be necessary in order to supplement the
plan of distribution set forth in such Registration Statement.
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<PAGE>
Q. Any Registration Statement shall include a section entitled "Plan of
Distribution", which section shall include the description substantially in the
form attached hereto as Exhibit 3, subject to any comments or requirements of
---------
the SEC.
4. OBLIGATIONS OF THE INVESTORS. In connection with the registration of the
Registrable Securities, the Investors shall have the following obligations.
A. Each Investor shall promptly furnish (but in no event later than three
(3) business days prior to the filing of any Registration Statement or
amendment(s) or supplement(s) thereto with respect to the Registrable
Securities) to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least six (6)
business days prior to the anticipated filing date of the Registration Statement
and any amendment(s) or supplement(s) thereto, the Company shall notify each
Investor of the information the Company requires from each Investor and such
investor shall supply or cause its representatives to supply such information
within three (3) business days; provided, however, any Investor which fails to
deliver to the Company the information referred to in the first sentence of this
paragraph prior to the filing of the Registration Statement or amendment(s) or
supplement(s) thereto shall bear the cost of any additional Registration
Statement or amendment(s) or supplement(s) thereto which the Company is required
to file due solely to such failure; provided, further, however, that the failure
of any Investor to provide such information shall not delay or otherwise prevent
the Company from the filing of the Registration Statement or amendment(s) or
supplement(s) thereto.
B. Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
C. In the event all of the Investors determine to engage the services of
an underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the
13
<PAGE>
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
D. Each Investor agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3(F) or 3(G),
such Investor will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(F) or 3(G) or notice from the Company that
such supplement or amendment is not necessary and, if so directed by the
Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
E. No Investor may participate in any underwritten registration hereunder
unless such Investor (i) agrees to sell such Investor's Registrable Securities
on the basis provided in any underwriting arrangements in usual and customary
form entered into by the Company, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions and any expenses in excess of those payable by the
Company pursuant to Section 5 below.
F. At any time after the date which is thirty (30) days after the date
the Registration Statement is declared effective by the SEC, the underwriters in
connection with any firm commitment underwritten public offering of the Common
Stock resulting in gross proceeds to the Company of at least $125,000,000 led by
at least one underwriter of nationally recognized standing (a "Qualified Public
----------------
Offering") shall have the right to require that the Investors enter into an
- --------
agreement (a "Lock-Up Agreement") restricting the Investors from selling
-----------------
Registrable Securities pursuant to the Registration Statement in any public sale
for a period not to exceed ninety (90) days following the consummation of such
Qualified Public Offering (the "Underwriters Lock-Up Period"); provided that
---------------------------
such underwriters deem this to be reasonably necessary to effect such Qualified
Public Offering; and further, provided that all of the Company's directors,
executive officers and affiliates shall have also agreed to
14
<PAGE>
similar restrictions. The Investors shall be subject to no more than one such
restriction in each twelve (12) month period during the Registration Period.
5. EXPENSES OF REGISTRATION. All reasonable expenses, other than underwriting
discounts and commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualification fees, printers and accounting fees, the
fees and disbursements of counsel for the Company, and the reasonable fees and
reasonable disbursements of up to one counsel selected by the Initial Investors
pursuant to Sections 2(B) and 3(H) hereof shall be borne by the Company
(provided that the reasonable fees and reasonable disbursements of the counsel
selected by the Initial Investors pursuant to Section 3(H) to be paid by the
Company in connection with the Registration Statement shall not exceed $15,000),
whether or not the Registration Statement is declared effective by the SEC.
6. INDEMNIFICATION. In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
A. To the extent permitted by law, the Company will indemnify, hold
harmless and defend: (i) each Investor who holds such Registrable Securities,
(ii) the directors, officers, partners, employees, agents and each person who
controls any Investor within the meaning of the 1933 Act or the Securities
Exchange Act of 1934, as amended (the "1934 Act"), if any, (iii) any underwriter
--------
(as defined in the 1933 Act) for the Investors (subject to the Company receiving
customary indemnification from any such underwriter), and (iv) the directors,
officers, partners, employees and each person who controls any such underwriter
within the meaning of the 1933 Act or the 1934 Act, if any (each, an
"Indemnified Person"), against any joint or several losses, claims, damages,
------------------
liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, "Claims") to which any of them may become
------
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading; (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light
15
<PAGE>
of the circumstances under which the statements therein were made, not
misleading; or (iii) any violation or alleged violation by the Company of the
1933 Act, the 1934 Act, any other securities laws including without limitation,
any state securities laws, or any rule or regulation thereunder relating to the
offer or sale of the Registrable Securities (the matters in the foregoing
clauses (i) through (iii) being, collectively, "Violations"). Subject to the
----------
restrictions set forth in Section 6(C) with respect to the number of legal
counsel, the Company shall reimburse the Indemnified Person, promptly as such
expenses are incurred and are due and payable, for any reasonable legal fees or
other reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with such Registration Statement or preliminary
or final prospectus or any such amendment thereof or supplement thereto; (ii)
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld; and (iii) with respect to any preliminary
prospectus, shall not inure to the benefit of any Indemnified Person if the
untrue statement or omission or alleged untrue statement or omission of a
material fact contained in the preliminary prospectus was corrected on a timely
basis in the prospectus, as then amended or supplemented, such corrected
prospectus was timely made available by the Company pursuant to Section 3(C)
hereof, and the Indemnified Person was promptly advised in writing not to use
the incorrect prospectus prior to the use giving rise to a Violation and such
Indemnified Person, notwithstanding such advice, used it. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors.
B. In connection with any Registration Statement in which an Investor is
participating, each such Investor agrees severally and not jointly to indemnify,
hold harmless and defend, to the same extent and in the same manner set forth in
Section 6(A), the Company, each of its directors, each of its officers who signs
the Registration Statement, each person, if any, who controls the Company within
the meaning of the 1933 Act or the 1934 Act, any underwriter and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (an "Indemnified
-----------
Party"), against any Claim to which any
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16
<PAGE>
of them may become subject, under the 1933 Act, the 1934 Act or otherwise,
insofar as such Claim arises out of or is based upon any Violation by such
Investor, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished to the Company by such Investor expressly for use in connection with
such Registration Statement or preliminary or final prospectus or any such
amendment or supplement thereof or thereto; and subject to Section 6(C) such
Investor will reimburse any legal or other expenses promptly as such expenses
are incurred and are due and payable reasonably incurred by them in connection
with investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 6(B) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably
withheld; provided, further, however, that the Investor shall be liable under
this Agreement (including this Section 6(B) and Section 7) for only that amount
as does not exceed the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(B) with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented.
C. Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel reasonably satisfactory to the Indemnified Person
or the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
conflict of
17
<PAGE>
interest under applicable rules of professional conduct. The indemnifying party
shall pay for up to one separate legal counsel for the Indemnified Persons or
the Indemnified Parties, as applicable, and such legal counsel shall be selected
by Investors holding a majority-in-interest of the Registrable Securities
included in the Registration Statement to which the Claim relates (with the
approval of a majority-in-interest of the Initial Investors), if the Investors
are entitled to indemnification hereunder, or the Company, if the Company is
entitled to indemnification hereunder, as applicable. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is actually prejudiced in its
ability to defend such action. The indemnification required by this Section 6
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as such expense, loss, damage or liability is
incurred and is due and payable.
D. The indemnity agreements contained herein shall be in addition to (i)
any cause of action or similar right of the Indemnified Party or Indemnified
Person against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to law.
7. CONTRIBUTION. To the extent any indemnification by an indemnifying party
is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
however, that (i) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6, (ii) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any seller of Registrable Securities
who was not guilty of such fraudulent misrepresentation, and (iii) contribution
(together with any indemnification or other obligations under this Agreement) by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities pursuant to such Registration Statement.
8. REPORTS UNDER THE 1934 ACT. With a view to making available to the
Investors the benefits of Rule 144 promulgated under the 1933 Act or any other
similar rule or regulation of the SEC that may at any time permit the investors
to sell
18
<PAGE>
securities of the Company to the public without registration ("Rule 144"), the
--------
Company agrees to:
A. make and keep public information available, as those terms are
understood and defined in Rule 144;
B. file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long as the
Company remains subject to such requirements (it being understood that nothing
herein shall limit the Company's obligations under Section 4(C) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
C. furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the 1933 Act and
the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the Investors to
sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS. The rights under this Agreement shall be
automatically assignable by the Investors to any transferee of all or any
portion of Registrable Securities if: (i) the Investor agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company within a reasonable time after such assignment, (ii)
the Company is, prior to such transfer or assignment, furnished with written
notice of (a) the name and address of such transferee or assignee, and (b) the
securities with respect to which such registration rights are being transferred
or assigned, (iii) following such transfer or assignment, the further
disposition of such securities by the transferee or assignee is restricted under
the 1933 Act and applicable state securities laws, (iv) at or before the time
the Company receives the written notice contemplated by clause (ii) of this
sentence, the transferee or assignee agrees in writing with the Company to be
bound by all of the provisions contained herein, (v) such transfer shall have
been made in accordance with the applicable requirements of the Securities
Purchase Agreement, (vi) such transfer shall have been conducted in accordance
with all applicable Federal and State securities laws and (vii) such transferee
shall be an "Accredited Investor" as that term defined in Rule 501 of Regulation
D promulgated under the 1933 Act.
19
<PAGE>
10. AMENDMENT OF REGISTRATION RIGHTS. Provisions of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company, each of the Initial Investors (to the extent
such Initial Investor still owns Registrable Securities) and Investors who hold
a majority-in-interest of the Registrable Securities. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each Investor
and the Company.
11. MISCELLANEOUS. A. A person or entity is deemed to be a holder of
Registrable Securities whenever such person or entity owns of record or
beneficially such Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more persons or entities with
respect to the same Registrable Securities, the Company shall act upon the basis
of an instruction, notice or election received from the registered owner of such
Registrable Securities and the Company shall have no liability for following
instructions from the registered owner of the Registrable Securities and the
registered owner by providing such instructions agrees to indemnify the Company
in accordance with the provisions of Section 6(B).
B. Any notices required or permitted to be given under the terms hereof
shall be sent overnight by express mail or delivered personally or by courier
(including an overnight delivery service) or by facsimile and shall be effective
upon receipt, if delivered by overnight express mail, personally or by courier
(including an overnight delivery service) or by facsimile, in each case
addressed to a party. The addresses for such communications shall be:
If to the Company:
CMGI, Inc.
100 Brickstone Square
Andover, MA 01810
Attention: Chief Executive Officer
Facsimile: (978) 684-3618
With copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
20
<PAGE>
919 Third Avenue
New York, NY 10022
Attention: Morris J. Kramer, Esq.
David J. Goldschmidt, Esq.
Facsimile: 212-735-2000
If to an Investor: to the address set forth immediately below such Investor's
name on the signature pages to the Securities Purchase Agreement.
C. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
D. This Agreement shall be enforced, governed by and interpreted in
accordance with the laws of the State of Delaware without regard to the
principles of conflicts of laws. The parties hereto hereby submit to the
exclusive jurisdiction of the United States Federal Courts and the state courts
located in Delaware with respect to any dispute arising under this Agreement or
the transactions contemplated hereby and irrevocably agree that all claims in
respect of such suit or proceeding may be determined in such courts. The Company
and each Investor irrevocably waive any defense of an inconvenient forum to the
maintenance of such suit or proceeding. The Company and each Investor further
agree that service of process upon a party mailed by first class mail shall be
deemed in every respect effective service of process upon the party in any such
suit or proceeding. Nothing herein shall affect any party's right to serve
process in any other manner permitted by law. The Company and each Investor
agree a final non-appealable judgment in any such suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on such judgment
or in any other lawful manner.
E. This Agreement and the Securities Purchase Agreement (including all
schedules and exhibits thereto) constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and thereof. There are
no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement and the Securities
Purchase Agreement supersede all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof and thereof.
F. Subject to the requirements of Section 9 hereof, this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the
21
<PAGE>
parties hereto and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
G. The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
H. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
I. Each party shall do and perform, or cause to be done and performed,
all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
J. Except as otherwise provided herein, all consents and other
determinations to be made by the Investors pursuant to this Agreement shall be
made by Investors holding a majority-in-interest of the Registrable Securities.
K. Each of the parties shall pay its own costs and expenses in connection
with the transactions contemplated hereby, whether such transactions are
consummated, except as otherwise specifically provided herein.
L. This Agreement and the obligations of the parties hereunder shall
terminate on the earlier to occur of subclause (i) or (ii) of Section 3(A),
except for any liabilities or obligations under the following Sections 2(C),
3(C), 3(D), 3(J), 3(K), 3(L), 3(M), 5, 6, 7 and 11.
M. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
N. The Company acknowledges that a breach by it of its obligations under
this Agreement will cause irreparable harm to each Investor by vitiating the
intent and purpose of the transactions contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Agreement will be inadequate and agrees, in the event of a breach or
threatened
22
<PAGE>
breach by the Company of any of the provisions of this Agreement, that each
Investor shall be entitled, in addition to all other available remedies in law
or in equity, to an injunction or injunctions to prevent or cure any breaches of
the provisions of this Agreement and to enforce specifically the terms and
provisions of this Agreement, without the necessity of showing economic loss and
without any bond or other security being required.
O. The Company agrees to indemnify and hold harmless each of the
Investors and their respective officers, directors, employees and agents for
loss, cost or damages (including reasonable attorney's fees) arising as a result
of or related to any breach or alleged breach by the Company of its obligations
under this Agreement or in connection with the enforcement by such Investor of
any of the Company's obligations hereunder, including the enforcement of this
indemnity.
IN WITNESS WHEREOF, the Company and the undersigned Initial Investors have
caused this Agreement to be duly executed as of the date first above written.
CMGI, INC.
By: /s/ Andrew J. Hajducky III
----------------------------
Andrew J. Hajducky III
Executive Vice President, Chief Financial Officer and Treasurer
23
<PAGE>
BUYERS:
Wingate Capital Ltd.
By: /s/ Kenneth A. Simpler
Name: Kenneth A. Simpler
Title: Vice President
Date:
FISHER CAPITAL LTD.
By: /s/ Kenneth A. Simpler
Name: Kenneth A. Simpler
Title: Vice President
Date:
Westgate International, L.P.
By: Martley International, Inc. D Attorney in Fact
By: /s/ Elliot Greenberg
Name: Elliot Greenberg
Title: Vice-President
Date:
The Liverpool Limited Partnership
By: Liverpool Associates, Ltd., its General Partner
By: /s/ Elliot Greenberg
Name: Elliot Greenberg
Title: Vice-President
Date:
24
<PAGE>
Silver Oak Capital, L.L.C.
As agent for and on behalf of the entities listed on Schedule 1
By: /s/ Michael L. Gordon
---------------------------
Name: Michael L. Gordon
Title: Managing Member
Date: 6/29/99
RGC International Investors, LDC
Rose Glen Capital Management, L.P.
By: RGC General Partner Corp.
By: /s/ Wayne Bloch
Name: Wayne Bloch
Title: Managing Director
Date:
25
<PAGE>
EXHIBIT 99.3
CERTIFICATE OF
DESIGNATIONS, PREFERENCES, AND RIGHTS
of
SERIES C CONVERTIBLE PREFERRED STOCK
of
CMGI, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
CMGI, Inc. (the "Corporation"), a corporation organized and existing under
the Delaware General Corporation Law (the "DGCL") hereby certifies that the
following resolution was adopted by the Board of Directors of the Corporation on
June 24, 1999 pursuant to authority of the Board of Directors as required by
Section 151(g) of the DGCL:
RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of this Corporation (the "Board of Directors") in accordance with
the provisions of its Amended and Restated Certificate of Incorporation, the
Board of Directors does hereby create, authorize and provide for the issuance of
a series of the Corporation's previously authorized Preferred Stock, par value
$0.01 per share (the "Preferred Stock"), and hereby states the number of shares
and the powers, designations, preferences and relative, participating, optional
or other rights or the qualifications, limitations or restrictions thereof are
as follows:
<PAGE>
I. DESIGNATION AND AMOUNT
----------------------
The designation of this series is Series C Convertible Preferred Stock (the
"Series C Preferred Stock"). This series consists of three tranches of shares
totaling 375,000 shares as follows: "Tranche 1" consists of 125,000 shares;
"Tranche 2" consists of 125,000 shares; and "Tranche 3" consists of 125,000
shares (collectively, the "Tranches"). The initial stated value is $1,000 per
share of Series C Preferred Stock (the "Initial Stated Value Per Share"). Each
certificate representing Preferred Shares shall bear language designating the
Preferred Shares represented by such certificate as part of Tranche 1, Tranche 2
or Tranche 3.
II. RANK
----
The Series C Preferred Stock shall rank (i) prior to the Corporation's
common stock, par value $0.01 per share (the "Common Stock") and the Series D
Preferred Stock (as defined below); (ii) prior to any class or series of capital
stock of the Corporation hereafter created (unless, with the consent of the
holders of Series C Preferred Stock obtained in accordance with Article VII
hereof, such class or series of capital stock specifically, by its terms, ranks
senior to or pari passu with the Series C Preferred Stock) (collectively, with
---- -----
the Common Stock, "Junior Securities"); (iii) junior to the Corporation's Series
B Convertible Preferred Stock, par value $0.01 per share ("Series B Preferred
Stock"); (iv) pari passu with any class or series of capital stock of the
---- -----
Corporation hereafter created (with the consent of the holders of Series C
Preferred Stock obtained in accordance with Article VII hereof) specifically
ranking, by its terms, on parity with the Series C Preferred Stock ("Pari Passu
---- -----
Securities"); and (v) junior to any class or series of capital stock of the
Corporation hereafter created (with the consent of the holders of Series C
Preferred Stock obtained in accordance with Article VII hereof) specifically
ranking, by its terms, senior to the Series C Preferred Stock (the "Senior
Securities"), in each case as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary.
III. DIVIDENDS
---------
A. The holders of the Series C Preferred Stock shall be entitled to
receive when, as and if declared by the Board of Directors, out of funds legally
available therefor, dividends on the Series C Preferred Stock equal to two
percent (2.00%) of the Initial Stated Value Per Share payable at the
Corporation's option (i) in cash on each
2
<PAGE>
Semiannual Dividend Payment Date (as defined below) or (ii) by an upward
adjustment (each an "Adjustment," collectively, the "Adjustments") (a) to the
Initial Stated Value Per Share on the Initial Semiannual Dividend Payment Date
and (b) to the Adjusted Stated Value Per Share on each Semiannual Dividend
Payment Date occurring after the Initial Semiannual Dividend Payment Date. The
Initial Stated Value per Share as cumulatively adjusted shall be referred to as
the "Adjusted Stated Value Per Share." The Corporation shall provide written
notice on the Semiannual Dividend Record Date (as defined below) as to whether
the Corporation elects to pay the dividend in accordance with subclause (i) or
subclause (ii) on each Semiannual Dividend Payment Date; provided, however, if
the Corporation elects to pay the dividend in accordance with subclause (i) and
such payment has not been credited to the account of the record holder (pursuant
to prior written instructions furnished to the Corporation) within five (5)
business days after the applicable Semiannual Dividend Payment Date or the
Corporation fails to give such notice on the Semiannual Dividend Record Date,
the Corporation shall be deemed to have elected to pay the dividend in
accordance with subclause (ii) and shall take all appropriate action to pay such
dividend in accordance with subclause (ii).
B. Dividends on the Series C Preferred Stock shall be cumulative and
shall accrue daily from the date of original issuance or the date that the
Corportion executes the Securities Purchase Agreement (as defined herein), if
earlier (the "Issue Date"). Dividends on the Series C Preferred Stock shall be
payable on June 30 and December 30 of each year (each such date being referred
to herein as a "Semiannual Dividend Payment Date"), commencing on December 30,
1999 (the "Initial Semiannual Dividend Payment") (and in the case of any accrued
but unpaid dividends, at such additional times and for such interim periods as
may be determined by the Board of Directors) to the holders of record as they
appear on the stock books of the transfer agent for the Corporation (the
"Transfer Agent") on such record dates, which shall be ten (10) business days
preceding each Semiannual Dividend Payment Date (each such date being referred
to herein as a "Semiannual Dividend Record Date"). The amount of dividends
payable per share of Series C Preferred Stock for each semiannual dividend
period shall be computed by multiplying the Initial Stated Value Per Share by
the annual dividend amount of two percent (2.00%) per share of Series C
Preferred Stock divided by two. The amount of dividends payable for the initial
dividend period and dividends payable for any other period that is shorter or
longer than a full semiannual dividend period shall be computed on the basis of
a 360-day year consisting of twelve 30-day months. Holders of shares of Series C
Preferred Stock shall not be entitled to receive any dividends, whether payable
in cash or otherwise, which are in excess of the cumulative dividends provided
for herein. Accrued but unpaid dividends shall not bear interest.
3
<PAGE>
C. The Series C Preferred Stock shall rank, as to payment of dividends,
senior to the Common Stock and any other class or series of stock of the
Corporation which is not by its terms expressly made senior to, or on a parity
with, the Series C Preferred Stock as to dividends, except as provided in
Section (D) below.
D. Except as provided in this section (D), in no event, so long as any
shares of Series C Preferred Stock shall remain outstanding, shall any dividend
whatsoever be declared or paid upon, nor shall any distribution be made upon,
any Junior Securities, nor shall any shares of Junior Securities be purchased or
redeemed by the Corporation nor shall any moneys be paid to or made available
for a sinking fund for the purchase or redemption (collectively a "Junior
Securities Distribution") of any Junior Securities (other than a distribution of
Junior Securities), without the written consent of the holders of a majority of
outstanding shares of Series C Preferred Stock obtained in accordance with
Article VII. Notwithstanding the foregoing, the Corporation may (i) make a
Junior Securities Distribution (other than an extraordinary distribution not
made in the ordinary course of business) on its Series D Preferred Stock (the
"Series D Preferred Stock") issuable in connection with that certain Purchase
and Contribution Agreement, dated as of June 29, 1999, by and among Compaq
Computer Corporation ("Compaq"), a Delaware corporation, Digital Equipment
Corporation ("Digital"), a Massachusetts corporation and a wholly owned
subsidiary of Compaq, AltaVista Company, a Delaware corporation and a wholly
owned subsidiary of Digital, the Corporation and Xoom New Co Inc., a Delaware
corporation and a wholly owned subsidiary of the Corporation pursuant to the
terms and subject to the conditions of a Certificate of Designations,
Preferences and Rights in respect of the Series D Preferred Stock, in each case,
with no right of participation in such dividend or distribution by the holders
of Series C Preferred Stock notwithstanding this Section (D) and Article V.C(ii)
and (iii), (ii) declare or pay upon any Junior Securities any dividend payable
in equity interests of a subsidiary of the Corporation; provided that, the
holders of the Series C Preferred Stock then outstanding shall have first
received, or simultaneously received, a like distribution on each outstanding
share of Series C Preferred Stock, based on the number of shares of Common Stock
into which each share of Series C Preferred Stock is convertible on the record
date for such distribution (without regard to any limitations on conversion and
based upon the then Applicable Conversion Price (as defined below) using the
record date as the Conversion Date (as defined below)) or (iii) redeem shares of
Common Stock which had been issued as restricted stock pursuant to a stock
option plan approved by the stockholders of the Corporation. No dividends shall
be declared, set aside or paid in respect of shares of the Series C Preferred
Stock unless the Corporation complies with Section 170 and Section 173 of the
DGCL.
4
<PAGE>
E. For purposes of the Series C Preferred Stock, the amount of dividends
which "accrue" on any share of Series C Preferred Stock as of any date shall be
calculated as the amount of any unpaid dividends accrued thereon to and
including the next preceding Semiannual Dividend Payment Date, plus an amount
calculated on the basis of the annual dividend rate fixed for the shares of
Series C Preferred Stock for the period after such next preceding Semiannual
Dividend Payment Date to and including the date as of which the calculation is
made.
IV. LIQUIDATION PREFERENCE
----------------------
A. Liquidation Event. If the Corporation shall commence a voluntary case
-----------------
under the Federal bankruptcy laws or any other applicable Federal or state
bankruptcy, insolvency or similar law, or consent to the entry of an order for
relief in an involuntary case under any law or to the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or other similar
official) of the Corporation or of any substantial part of its property, or make
an assignment for the benefit of its creditors, or admit in writing its
inability to pay its debts generally as they become due, or if a decree or order
for relief in respect of the Corporation shall be entered by a court having
jurisdiction in the premises in an involuntary case under the Federal bankruptcy
laws or any other applicable Federal or state bankruptcy, insolvency or similar
law resulting in the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of thirty (30) consecutive days, or if the Corporation shall otherwise
liquidate, dissolve or wind up (each such event being considered a "Liquidation
Event"), no distribution shall be made to the holders of any shares of capital
stock of the Corporation (other than Series B Preferred Stock and Senior
Securities) upon liquidation, dissolution or winding up, unless prior thereto,
the holders of shares of Series C Preferred Stock, subject to Article V, shall
have received the Liquidation Preference (as defined in Article IV.C) with
respect to each share; provided, however, if upon the occurrence of a
Liquidation Event, the assets and funds available for distribution among the
holders of the Series C Preferred Stock and holders of Pari Passu Securities
---- -----
(including any dividends or distribution payable on any shares of Series C
Preferred Stock and Pari Passu Securities after the date of filing of this
---- -----
Certificate of Designation) shall be insufficient to permit the payment to such
holders of the preferential amounts payable thereon, then the entire assets and
funds of the Corporation legally available for distribution to the Series C
Preferred Stock and the Pari Passu Securities shall be distributed ratably among
---- -----
such shares in proportion to the ratio that the Liquida-
5
<PAGE>
tion Preference payable on each such share bears to the aggregate liquidation
preference payable on all such shares.
B. Certain Acts Deemed Liquidation Event. At the option of the holders
-------------------------------------
of at least two-thirds (2/3) of the outstanding shares of Series C Preferred
Stock, (i) the sale, conveyance or disposition of all or substantially all of
the assets of the Corporation, (ii) the effectuation by the Corporation of a
transaction or series of related transactions in which more than 50% of the
voting power of the Corporation is transferred or otherwise disposed of, unless,
as a result of such transaction, the Corporation has become a wholly owned
subsidiary of another corporation and at least fifty percent (50%) of the
beneficial ownership of such corporation immediately thereafter is held by
former stockholders of the Corporation or (iii) the consolidation, merger or
other business combination of the Corporation with or into any other Person (as
defined below) or Persons (other than (a) a consolidation, merger or other
business combination in which holders of the Corporation's voting power
immediately prior to the transaction continue after the transaction to hold,
directly or indirectly, the voting power of the surviving entity or entities
necessary to elect a majority of the members of the board of directors (or their
equivalent if other than a corporation) of such entity or entities, including
pursuant to a holding company merger effected under Section 251(g) of the DGCL
or any successor provision or (b) pursuant to a migratory merger effected solely
for the purpose of changing the jurisdiction of incorporation of the
Corporation) shall either: (x) be deemed to be a liquidation, dissolution or
winding up of the Corporation pursuant to which the Corporation shall be
required to distribute upon consummation of and as a condition to such
transaction an amount equal to the Liquidation Preference or (y) be treated
pursuant to Article V.C(ii) hereof. "Person" shall mean any individual,
corporation, limited liability company, partnership, joint venture, association,
trust or other entity or organization.
C. Liquidation Preference. For purposes hereof, the "Liquidation
----------------------
Preference" with respect to a share of Series C Preferred Stock shall mean an
amount equal to the sum of: (i) the Initial Stated Value Per Share; plus (ii)
all Adjustments plus; (iii) accrued but unpaid dividends with respect to which
no Adjustment has been made. The liquidation preference with respect to any Pari
----
Passu Securities shall be as set forth in the Certificate of Designations filed
- -----
in respect thereof.
V. CONVERSION
----------
A. Optional Conversion. Each holder of shares of Series C Preferred
-------------------
Stock may, at its option at any time and from time to time, upon surrender of
the certificates
6
<PAGE>
therefor, convert any or all of its shares of Series C Preferred Stock into
Common Stock as set forth below (an "Optional Conversion"). Each share of Series
C Preferred Stock shall be convertible into such number of fully paid and
nonassessable shares of Common Stock as such Common Stock exists on the Issue
Date, or any other shares of capital stock or other securities of the
Corporation into which such Common Stock is thereafter changed or reclassified,
as is determined by dividing (i) the Liquidation Preference by (ii) the then
Applicable Conversion Price; provided, however, that in no event (other than
pursuant to the Automatic Conversion as defined in Section (G)) shall a holder
of shares of Series C Preferred Stock be entitled to convert any such shares in
excess of that number of shares upon conversion of which the sum of (a) the
number of shares of Common Stock beneficially owned by the holder and its
affiliates (other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unconverted portion of the shares of Series C
Preferred Stock or the unexercised or unconverted portion of any other
securities of the Corporation subject to a limitation on conversion or exercise
analogous to the limitations contained herein) and (b) the number of shares of
Common Stock issuable upon the conversion of the shares of Series C Preferred
Stock with respect to which the determination of this proviso is being made,
would result in beneficial ownership by a holder and such holder's affiliates of
more than the Ownership Limitation Percentage (as defined below) of the
outstanding shares of Common Stock. For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13D-G thereunder, except as otherwise provided in clause
(a) of such proviso. For purposes of this Article V.A, "Ownership Limitation
Percentage" means (x) with respect to any shares of Series C Preferred Stock
which are held by any Person which holds shares of Series B Preferred Stock,
4.9%, and (y) with respect to any shares of Series C Preferred Stock which are
held by any Person which does not hold any shares of Series B Preferred Stock,
9.9%.
B. Conversion Price. Subject to adjustment pursuant to section (C)
----------------
below, the "Applicable Conversion Price" for each Tranche shall be as follows:
(i) Each Tranche shall be convertible into Common Stock pursuant to
section (A) above at the Initial Conversion Price (as defined below) until the
conclusion of the pricing period in respect of a particular Tranche. Thereafter,
each Tranche shall be convertible into Common Stock at, in the case of Tranche
1, the Tranche 1 Conversion Price (as defined below), in the case of Tranche 2,
the Tranche 2 Conversion Price (as defined below), and, in the case of Tranche
3, the Tranche 3 Conversion Price (as defined below). The "Initial Conversion
Price" shall be one-hundred fifty percent (150%) of the Closing Price, subject
to adjustment as provided in Article V.C.
7
<PAGE>
The "Closing Price" shall be the average of the Closing Bid Prices (as defined
below) over the ten (10) consecutive Trading Days (as defined below) ending on
the Trading Day immediately preceding the Issue Date. "Closing Bid Price" means,
for the Common Stock, the closing bid price on the Nasdaq National Market
("Nasdaq") as reported by Bloomberg Financial Services ("Bloomberg") or, if
Nasdaq is not the principal trading market for the Common Stock, the closing bid
price of the Common Stock on the principal securities exchange or trading market
where the Common Stock is listed or traded as reported by Bloomberg, or if the
foregoing do not apply, the closing bid price of the Common Stock in the over-
the-counter market on the electronic bulletin board for the Common Stock as
reported by Bloomberg, or, if no closing bid price of the Common Stock is
available in the over-the-counter market on the electronic bulletin board for
the Common Stock or in any of the foregoing manners, the average of the bid
prices of any market makers for the Common Stock that are listed in the "pink
sheets" by the National Quotation Bureau, Inc. If the Closing Bid Price cannot
be calculated for such security on such date in the manner provided above, the
Closing Bid Price shall be the fair market value as mutually determined by the
Board of Directors and the holders of a majority of outstanding shares of Series
C Preferred Stock being converted for which the calculation of the Closing Bid
Price is required in order to determine the Applicable Conversion Price of such
Series C Preferred Stock. "Trading Day" shall mean any day on which the Common
Stock is traded for any period on Nasdaq, or on the principal securities
exchange or other securities market on which the Common Stock is then being
traded.
(ii) The pricing period in respect of Tranche 1 (the "Tranche 1
Pricing Period") shall occur over the ten (10) consecutive Trading Days
beginning on the fifteenth (15th) calendar day after the Issue Date; provided,
however if such fifteenth (15th) calendar day is not a Trading Day, the Tranche
1 Pricing Period shall begin on the next calendar day that is a Trading Day. The
"Tranche 1 Conversion Price" shall be equal to the product of (a) the average of
the Closing Bid Prices during the Tranche 1 Pricing Period (subject to
adjustment for stock splits, stock dividends, combinations or other similar
transactions) and (b) 90.75%; provided, however, in the event that the Tranche 1
Conversion Price as calculated pursuant to this subsection exceeds the Initial
Conversion Price, the Tranche 1 Conversion Price shall be reduced so that it
equals the Initial Conversion Price (as defined in Article V.B(i)).
(iii) The pricing period in respect of Tranche 2 (the "Tranche 2
Pricing Period") shall occur over the ten (10) consecutive Trading Days
beginning on the forty-fifth (45th) calendar day after the Issue Date; provided,
however if such forty-fifth (45th) calendar day is not a Trading Day, the
Tranche 2 Pricing Period shall begin on the next calendar day that is a Trading
Day. The "Tranche 2 Conversion Price" shall be equal to
8
<PAGE>
the product of (a) the average of the Closing Bid Prices during the Tranche 2
Pricing Period (subject to adjustment for stock splits, stock dividends,
combinations or other similar transactions) and (b) 90.75%; provided, however,
in the event that the Tranche 2 Conversion Price as calculated pursuant to this
subsection exceeds the Initial Conversion Price, the Tranche 2 Conversion Price
shall be reduced so that it equals the Initial Conversion Price (as defined in
Article V.B(i)).
(iv) The pricing period in respect of Tranche 3 (the "Tranche 3
Pricing Period") shall occur over the ten (10) consecutive Trading Days
beginning on the seventy-fifth (75th) calendar day after the Issue Date;
provided, however if such seventy-fifth (75th) calendar day is not a Trading
Day, the Tranche 3 Pricing Period shall begin on the next calendar day that is
Trading Day. The "Tranche 3 Conversion Price" shall be equal to the product of
(a) the average of the Closing Bid Prices during the Tranche 3 Pricing Period
(subject to adjustment for stock splits, stock dividends, combinations or other
similar transactions) and (b) 90.75%; provided, however, in the event that the
Tranche 3 Conversion Price as calculated pursuant to this subsection exceeds the
Initial Conversion Price, the Tranche 3 Conversion Price shall be reduced so
that it equals the Initial Conversion Price (as defined in Article V.B(i)).
(v) Notwithstanding anything to the contrary in this Article V.B,
(a) each of the Tranche 1 Pricing Period, the Tranche 2 Pricing Period and the
Tranche 3 Pricing Period shall be extended by one (1) Trading Day for each
Trading Day (an "Excluded Trading Day") in such period that the Common Stock is
(1) traded on Nasdaq (or the principal securities exchange or market on which
the Common Stock is then traded) for less than 4 1/2 hours, or (2) suspended
from trading on Nasdaq (or the principal securities exchange or market on which
the Common Stock is then traded) during the final hour of trading, and (b) each
such Excluded Trading Day shall be excluded from the calculation of the
Applicable Conversion Price for such pricing period.
C. Adjustments to Applicable Conversion Price. The Applicable Conversion
------------------------------------------
Price shall be subject to adjustment from time to time as follows:
(i) Adjustment to Applicable Conversion Price Due to Stock Split,
------------------------------------------------------------
Stock Dividend, Etc. If at any time when Series C Preferred Stock is issued and
- -------------------
outstanding, the number of outstanding shares of Common Stock is increased or
decreased by a stock split, stock dividend, combination, reclassification,
rights offering below the Trading Price (as defined below) to all holders of
Common Stock or other similar event, then the Applicable Conversion Price shall
be adjusted to give appropriate effect to the stock split, stock dividend,
combination, reclassification or other similar
9
<PAGE>
event. In such event, the Corporation shall notify the Transfer Agent of such
change on or before the effective date thereof. "Trading Price," which shall be
measured as of the date as of which the purchase price is determined in the
rights offering, means (a) the average of the last reported sale prices for the
shares of Common Stock on Nasdaq as reported by Bloomberg, as applicable, for
the five (5) Trading Days immediately preceding such date, or (b) if Nasdaq is
not the principal trading market for the shares of Common Stock, the average of
the last reported sale prices on the principal trading market for the Common
Stock during the same period as reported by Bloomberg, or (c) if market value
cannot be calculated as of such date on any of the foregoing bases, the Trading
Price shall be the fair market value as reasonably determined in good faith by
(y) the Board of Directors or (z) at the option of a majority-in-interest of the
holders of the outstanding Series C Preferred Stock by an independent investment
bank of nationally recognized standing in the valuation of businesses similar to
the business of the Corporation.
(ii) Adjustment to Applicable Conversion Price Due to Merger,
-------------------------------------------------------
Consolidation, Etc. If at any time when Series C Preferred Stock is issued and
- ------------------
outstanding, there shall be any merger, consolidation, share exchange,
recapitalization, reorganization, or other similar event, as a result of which
shares of Common Stock shall be changed into the same or a different number of
shares of another class or classes of stock or securities of the Corporation or
another Person, or in case of any sale or conveyance of all or substantially all
of the assets of the Corporation other than in connection with a plan of
complete liquidation of the Corporation (each a "Change of Control
Transaction"), then the holders of any Series C Preferred Stock shall thereafter
have the right to receive upon conversion of the Series C Preferred Stock, upon
the basis and upon the terms and conditions specified herein and in lieu of the
shares of Common Stock immediately theretofore issuable upon conversion, such
stock, securities or assets which the holders of Series C Preferred Stock would
have been entitled to receive in such transaction had the Series C Preferred
Stock been converted in full immediately prior to such transaction (without
regard to any limitations on conversion contained herein), and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the holders of Series C Preferred Stock to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Applicable
Conversion Price and of the number of shares of Common Stock issuable upon
conversion of the Series C Preferred Stock) shall thereafter be applicable, as
nearly as may be practicable in relation to any securities or assets thereafter
deliverable upon the conversion of the Series C Preferred Stock. The Corporation
shall not effect any transaction described in this subsection (ii) unless (a) it
first gives, to the extent practical, thirty (30) days' prior written notice
(but in any event at least ten (10) business days prior written notice) of the
10
<PAGE>
record date of the special meeting of stockholders to approve, or if there is no
such record date, the consummation of, such merger, consolidation, share
exchange, recapitalization, reorganization or other similar event or sale of
assets (during which time the holders of Series C Preferred Stock shall be
entitled to convert the Series C Preferred Stock) and (b) the resulting
successor or acquiring Person (if not the Corporation) and, if an entity
different from the successor or acquiring entity, the entity whose capital stock
or assets the holders of the Common Stock are entitled to receive as a result of
such Change of Control Transaction, assumes by written instrument the
obligations of this Certificate of Designation including this subsection (ii).
The above provisions shall similarly apply to successive mergers,
consolidations, share exchanges, recapitalizations, reorganizations or other
similar events or sales of assets.
(iii) Adjustment to Applicable Conversion Price Due to Distribution.
-------------------------------------------------------------
Subject to the limitations of Article III.D, if the Corporation shall declare or
make any distribution of its assets (or rights to acquire its assets) to holders
of Common Stock as a dividend, stock repurchase, by way of return of capital or
otherwise (including any dividend or distribution to the Corporation's
stockholders in cash or shares (or rights to acquire shares) of capital stock of
a subsidiary (i.e., a spin-off)) (a "Distribution"), the holders of outstanding
Series C Preferred Stock shall be entitled to receive, on the date that such
Distribution is made to the Corporation's stockholders, the amount of such
assets which such holder would have been entitled to receive if such holder had
held the number of shares of Common Stock issuable upon complete conversion
(based on a conversion price equal to the Modified Applicable Conversion Price
(as defined in this subsection)) of the Series C Preferred Stock (without regard
to any limitations on conversions contained herein) immediately before the date
on which a record is taken for the determination of stockholders entitled to
such Distribution, or, if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for the Distribution. For
purposes of this Article V.C(ii), "Modified Applicable Conversion Price" shall
mean, with respect to any Tranche, (a) with respect to any Distribution for
which "ex-" trading of the Common Stock with respect to such Distribution begins
on a Trading Day other than a Trading Day during the pricing period for such
Tranche described in Article V.B(ii), (iii) or (iv), as applicable (a "Pricing
Period"), the Applicable Conversion Price then in effect, or (b) with respect to
any Distribution for which "ex-" trading of the Common Stock with respect to
such Distribution begins on a Trading Day during the Pricing Period for such
Tranche, the product of (x) the average of the Closing Bid Prices for each
Trading Day during such Pricing Period which is prior to the date that "ex-"
trading of the Common Stock with respect to such Distribution begins (subject to
adjustment for stock splits, stock dividends, combinations or other similar
transactions), and (y) 90.75%; provided, however, in the event that the Modified
11
<PAGE>
Applicable Conversion Price calculated pursuant to the immediately preceding
subclause (b) exceeds the Initial Conversion Price, then the Modified Applicable
Conversion Price determined pursuant to the immediately preceding subclause (b)
shall be reduced to the Initial Conversion Price.
(iv) Adjustment to Applicable Conversion Price Due to Purchase
---------------------------------------------------------
Rights. Subject to the limitations of Article III.D, if at any time when any
- ------
Series C Preferred Stock is outstanding, the Corporation issues any convertible
securities or rights to purchase stock, warrants, securities or other property
(the "Purchase Rights") pro rata to the record holders of Common Stock, the
holders of Series C Preferred Stock shall be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which such
holder would have been entitled to acquire if such holder had held the number of
shares of Common Stock issuable upon complete conversion (based on a conversion
price equal to the Modified Applicable Conversion Price (as defined in this
subsection)) of the Series C Preferred Stock (without regard to any limitations
on conversions contained herein) immediately before the date on which a record
is taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issuance or sale of such Purchase Rights. For
purposes of this Article V.C(iv), "Modified Applicable Conversion Price" shall
mean, with respect to any Tranche, (a) with respect to any Purchase Rights for
which "ex-" trading of the Common Stock with respect to such Purchase Rights
begins on a Trading Day other than a Trading Day during the Pricing Period for
such Tranche, the Applicable Conversion Price then in effect, or (b) with
respect to any Purchase Rights for which "ex-" trading of the Common Stock with
respect to such Purchase Rights begins on a Trading Day during the Pricing
Period for such Tranche, the product of (x) the average of the Closing Bid
Prices for each day during such Pricing Period which is prior to the date that
"ex-" trading of the Common Stock with respect to such Purchase Rights begins
(subject to adjustment for stock splits, stock dividends, combinations or other
similar transactions), and (y) 90.75%; provided, however, in the event that the
Modified Applicable Conversion Price determined pursuant to the immediately
preceding subclause (b) exceeds the Initial Conversion Price, then the Modified
Applicable Conversion Price calculated pursuant to the immediately preceding
subclause (b) shall be reduced to the Initial Conversion Price.
(v) Notice of Adjustments. Upon the occurrence of each adjustment
---------------------
or readjustment of the Applicable Conversion Price pursuant to this Article V.C,
the Corporation, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to each holder of Series C Preferred Stock
a certificate setting forth (a) such adjustment or readjustment, (b) the
Applicable Conversion Price, as adjusted,
12
<PAGE>
and (c) the number of shares of Common Stock and the amount, if any, of other
securities or property which at the time would be received upon conversion of a
share of Series C Preferred Stock.
D. Mechanics of Conversion. In order to convert Series C Preferred Stock
-----------------------
into full shares of Common Stock, a holder of Series C Preferred Stock shall:
(1) submit a copy of the fully executed notice of conversion in the form
attached hereto as Exhibit A ("Notice of Conversion") by facsimile dispatched on
---------
the Conversion Date (or by other means resulting in, or reasonably expected to
result in, notice to the Corporation on the Conversion Date) at the office of
the Corporation or its Transfer Agent that the holder elects to convert the
same, which notice shall specify the number of shares of each Tranche of Series
C Preferred Stock to be converted, the Applicable Conversion Price and a
calculation of the number of shares of Common Stock issuable upon such
conversion (together with a copy of the first page of each certificate to be
converted) prior to 6:00 p.m., New York City time (the "Conversion Notice
Deadline") on the date of conversion specified on the Notice of Conversion; and
(2) surrender the original certificates representing the shares of each Tranche
of Series C Preferred Stock being converted (the "Preferred Stock
Certificates"), duly endorsed, along with a copy of the Notice of Conversion to
the office of the Corporation or the Transfer Agent as soon as practicable
thereafter. The Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such conversion, unless
either the Preferred Stock Certificates are delivered to the Corporation or its
Transfer Agent as provided above, or the holder notifies the Corporation or its
Transfer Agent that such certificates have been lost, stolen or destroyed
(subject to the requirements of subsection (i) below). In the case of a dispute
as to the calculation of the Applicable Conversion Price, the Corporation shall
promptly issue such number of shares of Common Stock that are not disputed in
accordance with subsection (ii) below. The Corporation shall submit the disputed
calculations to its outside accountant via facsimile within three (3) business
days of receipt of the Notice of Conversion. The accountant shall audit the
calculations and notify the Corporation and the holder of the results no later
than three (3) business days from the time it receives the disputed
calculations. The accountant's calculation shall be deemed conclusive absent
manifest error.
(i) Lost or Stolen Certificates. Upon receipt by the Corporation of
---------------------------
evidence of the loss, theft, destruction or mutilation of any Preferred Stock
Certificates representing shares of Series C Preferred Stock, and (in the case
of loss, theft or destruction) of indemnity reasonably satisfactory to the
Corporation, and upon surrender and cancellation of the Preferred Stock
Certificate(s), if mutilated, the Corporation shall execute and deliver new
Preferred Stock Certificate(s) of like tenor and date.
13
<PAGE>
(ii) Delivery of Common Stock upon Conversion. Upon the surrender
----------------------------------------
of Preferred Stock Certificates as described above together with a Notice of
Conversion, the Corporation shall issue and, within three (3) business days
after such surrender (or, in the case of lost, stolen or destroyed certificates,
after provision of agreement and indemnification pursuant to subsection (i)
above) (the "Delivery Period"), deliver (or cause its Transfer Agent to so issue
and deliver) in accordance with the terms hereof and the Securities Purchase
Agreement, dated June 28, 1999 by and among the Corporation and the buyers named
on the signature pages thereto (the "Buyers") (the "Purchase Agreement")
(including, without limitation, in accordance with the requirements of Section
2(G) of the Purchase Agreement) to or upon the order of the holder (1) that
number of shares of Common Stock for the portion of the shares of Series C
Preferred Stock converted as shall be determined in accordance herewith and (2)
a certificate representing the balance of the shares of Series C Preferred Stock
not converted, if any. In lieu of delivering physical certificates representing
the Common Stock issuable upon conversion, provided the Transfer Agent is
participating in The Depository Trust Company ("DTC") Fast Automated Securities
Transfer program, upon request of the holder and its compliance with the
provisions contained in Article V.A and in this Article V.D, the Corporation
shall use its best efforts to cause its Transfer Agent to electronically
transmit the Common Stock issuable upon conversion to the holder by crediting
the account of the holder's prime broker with DTC through its Deposit Withdrawal
Agent Commission system.
(iii) Cash in Lieu of Fractional Shares. If any conversion of
---------------------------------
Series C Preferred Stock would result in a fractional share of Common Stock or
the right to acquire a fractional share of Common Stock, the Corporation shall
pay to the holder of such fractional share, cash in lieu of such fractional
share in an amount equal to such fraction multiplied by the Closing Bid Price on
the Conversion Date.
(iv) Conversion Date. The "Conversion Date" shall be the date
---------------
specified in the Notice of Conversion, provided that the Notice of Conversion is
submitted by facsimile (or by other means resulting in, or reasonably expected
to result in, notice) to the Corporation or its Transfer Agent before 6:00 p.m.,
New York City time, on the Conversion Date. The person or persons entitled to
receive the shares of Common Stock issuable upon conversion shall be treated for
all purposes as the record holder or holders of such securities as of the
Conversion Date and all rights with respect to the shares of Series C Preferred
Stock surrendered shall forthwith terminate except the right to receive the
shares of Common Stock or other securities or property issuable on such
conversion and except that the holders preferential rights as a holder of Series
C Preferred Stock shall survive to the extent the Corporation fails to deliver
such securities.
14
<PAGE>
E. Reservation of Shares. The requisite number of shares of the
---------------------
authorized but unissued Common Stock sufficient to provide for the conversion of
the Series C Preferred Stock outstanding shall at all times be reserved by the
Corporation, free from preemptive rights. As of the date of issuance of the
Series C Preferred Stock, the requisite number of authorized and unissued shares
of Common Stock have been duly reserved for issuance upon conversion of the
Series C Preferred Stock (the "Reserved Amount"). The Reserved Amount shall be
increased from time to time in accordance with the Corporation's obligations
pursuant to Section 4(F) of the Purchase Agreement. In addition, if the
Corporation shall issue any securities or make any change in its capital
structure which would change the number of shares of Common Stock into which
each share of the Series C Preferred Stock shall be convertible, the Corporation
shall at the same time also make proper provision so that thereafter there shall
be a sufficient number of shares of Common Stock authorized and reserved, free
from preemptive rights, for conversion of the outstanding Series C Preferred
Stock.
F. Status as Stockholders. Upon receipt of a Notice of Conversion by the
----------------------
Corporation from a holder of Series C Preferred Stock in accordance with
subsection (ii) of section (D), (i) the shares covered thereby (other than the
shares, if any, which cannot be issued because their issuance would exceed the
Optional Conversion limitation proviso in section (A)) shall be deemed converted
into shares of Common Stock and (ii) the holder's rights as a holder of such
converted shares of Series C Preferred Stock shall cease and terminate,
excepting only the right to receive certificates for such shares of Common Stock
and to any remedies provided herein or otherwise available at law or in equity
to such holder because of a failure by the Corporation to comply with the terms
of this Certificate of Designation. Notwithstanding the foregoing, if a holder
has not received certificates for all shares of Common Stock prior to the tenth
(10th) business day after the expiration of the Delivery Period with respect to
a conversion of shares of Series C Preferred Stock for any reason, then (unless
the holder otherwise elects to retain its status as a holder of Common Stock by
so notifying the Corporation) the holder shall regain the rights of a holder of
such shares of Series C Preferred Stock with respect to such unconverted shares
of Series C Preferred Stock and the Corporation shall, as soon as practicable,
return such unconverted shares of Series C Preferred Stock to the holder or, if
such shares of Series C Preferred Stock have not been surrendered, adjust its
records to reflect that such shares of Series C Preferred Stock have not been
converted. In all cases, the holder shall retain all of its rights and remedies
at law and in equity.
G. Mandatory Conversion. So long as all of the shares of Common Stock
--------------------
issuable upon conversion of all outstanding shares of Series C Preferred Stock
are then (i) authorized and reserved for issuance, (ii) registered for resale
under the Securities Act
15
<PAGE>
of 1933, as amended (the "Securities Act"), by the holders of the Series C
Preferred Stock (or may otherwise be resold publicly pursuant to Rule 144(k)
under the Securities Act (or any successor provision)), and (iii) eligible to be
traded on Nasdaq, the New York Stock Exchange, Inc. ("NYSE"), the American Stock
Exchange, Inc. ("AMEX"), or The Nasdaq SmallCap Market ("Nasdaq SmallCap"), each
share of Series C Preferred Stock issued and outstanding on June 30, 2002 (the
"Automatic Conversion Date"), automatically shall be converted into shares of
Common Stock on such date at the then Mandatory Applicable Conversion Price (as
defined below) in accordance with, and subject to, the provisions of this
Article V (the "Automatic Conversion"). The Automatic Conversion Date shall be
delayed by one (1) Trading Day for each Trading Day occurring prior thereto and
prior to the full conversion of the Series C Preferred Stock that (x) any
Registration Statement (as defined in the Registration Rights Agreement, dated
June 28, 1999, by and among the Corporation and the Buyers (the "Registration
Rights Agreement") required to be filed and to be effective pursuant to the
Registration Rights Agreement in accordance with its terms is not effective or
sales of all of the Registrable Securities (as defined in the Registration
Rights Agreement) otherwise cannot be made thereunder or pursuant to Rule 144
under the Securities Act (or any successor provision) or (y) at the option of
each holder of Series C Preferred Stock, such holder is subject to a Lock-Up
Agreement (as defined in the Registration Rights Agreement). The Automatic
Conversion Date shall be the effective date from which certificates representing
the Common Stock must be delivered to the holder pursuant to section (D) above.
The "Mandatory Applicable Conversion Price" shall be the average of the Closing
Bid Prices over the ten (10) consecutive Trading Days ending on the Trading Day
immediately preceding the Automatic Conversion Date.
H. No Reissuance of Series C Preferred Stock. Shares of Series C
-----------------------------------------
Preferred Stock which are converted into shares of Common Stock as provided
herein shall not be reissued.
VI. VOTING RIGHTS
-------------
The holders of the Series C Preferred Stock have no voting power
whatsoever, including with respect to the issuance of the Series D Preferred
Stock except as otherwise provided by the DGCL and the limited protective
provisions in Article VII below.
Notwithstanding the above, the Corporation shall provide each holder of
Series C Preferred Stock with prior notification of any meeting of the
stockholders (and copies of proxy materials and other information sent to
stockholders). In the event of any taking
16
<PAGE>
by the Corporation of a record of its stockholders for the purpose of
determining stockholders who are entitled to receive payment of any dividend or
other distribution, any right to subscribe for, purchase or otherwise acquire
(including by way of merger, consolidation or recapitalization) any share of any
class or any other securities or property, or to receive any other right, or for
the purpose of determining stockholders who are entitled to vote in connection
with any proposed sale, lease or conveyance of all or substantially all of the
assets of the Corporation, or any proposed liquidation, dissolution or winding
up of the Corporation, the Corporation shall mail a notice to each holder, at
least ten (10) days prior to the record date specified therein (or thirty (30)
days prior to the transaction or event, whichever is earlier), of the date on
which any such record is to be taken for the purpose of such dividend,
distribution, right or other event.
To the extent that under the DGCL the vote of the holders of the Series C
Preferred Stock, voting separately as a class, is required to authorize a given
action of the Corporation, the affirmative vote or consent of the holders of at
least a majority of outstanding shares of the Series C Preferred Stock
represented at a duly held meeting at which a quorum is present or by written
consent of a majority of outstanding shares of Series C Preferred Stock (except
as otherwise may be required under the DGCL) shall constitute the approval of
such action by the holders. To the extent that under the DGCL the holders of
the Series C Preferred Stock are entitled to vote on a matter with holders of
Common Stock, voting together as one class, each share of Series C Preferred
Stock shall be entitled to a number of votes equal to the number of shares of
Common Stock into which it is then convertible using the record date for the
taking of such vote of stockholders as the date as of which the Applicable
Conversion Price is calculated.
VII. PROTECTIVE PROVISIONS
---------------------
So long as shares of Series C Preferred Stock are outstanding, the
Corporation shall not, without first obtaining the approval (by vote or written
consent, as provided by the DGCL) of the holders of at least a majority of the
outstanding shares of Series C Preferred Stock:
A. alter or change the rights, preferences or privileges (provided that
in the case of a Change of Control Transaction this subsection shall not expand
or otherwise grant additional voting rights to the holders of Series C Preferred
Stock, whether voting separately as a class or together with the Common Stock,
from the rights provided in the DGCL) of (i) the Series C Preferred Stock or
(ii) any capital stock of the Corporation so as to affect adversely the Series C
Preferred Stock;
17
<PAGE>
B. create any new class or series of capital stock having a preference
over the Series C Preferred Stock as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation;
C. create any new class or series of capital stock ranking pari passu
---- -----
with the Series C Preferred Stock as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation (as previously defined in Article
II hereof, "Pari Passu Securities");
---- -----
D. increase the authorized number of shares of Series C Preferred Stock;
E. issue any Senior Securities or Pari Passu Securities; or
---- -----
F. increase the par value of the Common Stock.
In the event holders of at least a majority of outstanding shares of Series
C Preferred Stock agree to allow the Corporation to alter or change the rights,
preferences or privileges of the shares of Series C Preferred Stock, pursuant to
section (A) above, so as to affect adversely the Series C Preferred Stock, the
Corporation shall deliver notice of such approved change to the holders of the
Series C Preferred Stock that did not agree to such alteration or change (the
"Dissenting Holders") and Dissenting Holders shall have the right for a period
of ten (10) days to convert pursuant to the terms of this Certificate of
Designation as they exist prior to such alteration or change or continue to hold
their shares of Series C Preferred Stock; provided that upon expiration of the
above ten (10) day period, each adversely affected holder shall deliver to the
Corporation a certificate signed by an officer or other responsible party of the
holder acknowledging that the Corporation altered or amended the Certificate of
Designation in a manner which affected adversely the rights, preferences and
privileges of the Series C Preferred Stock and that such holder elected not to
exercise their conversion rights as they existed prior to such alteration or
amendment during the ten (10) day period.
VIII. MANDATORY REDEMPTION
--------------------
If any of the following events (each, a "Mandatory Redemption Event") shall
occur: (i) the Corporation fails to issue shares of Common Stock to any holder
of Series C Preferred Stock upon exercise by such holder of its conversion
rights in accordance with the terms of this Certificate of Designation, fails to
transfer (electronically or in certificated form) any certificate for shares of
Common Stock issued to the holders upon
18
<PAGE>
conversion of the Series C Preferred Stock as and when required by this
Certificate of Designation, the Registration Rights Agreement or the Purchase
Agreement, fails to remove any restrictive legend (or to withdraw any stop
transfer instructions in respect thereof) on any certificate in respect of any
shares of Common Stock issued to the holders of Series C Preferred Stock upon
conversion of the Series C Preferred Stock as and when required by this
Certificate of Designation, the Registration Rights Agreement or the Purchase
Agreement (or makes any announcement, statement or threat that it does not
intend to honor the obligations described in this paragraph) and any such
failure shall continue uncured (or any announcement, statement or threat not to
honor its obligations shall not be rescinded in writing) for ten (10) business
days after the Corporation shall have been notified thereof in writing by any
holder of the Series C Preferred Stock; (ii) the Corporation or successor Person
in a Change of Control Transaction ceases to be a publicly traded corporation
whose equity interest is listed for trading on Nasdaq, Nasdaq Smallcap, NYSE or
AMEX (a "Listed Company"); provided, however, a holding company merger pursuant
-------- -------
to Section 251(g) of the DGCL or any successor provision in which a holding
company is a Listed Company and the holders of Series C Preferred Stock have the
right to receive the publicly traded securities of such Listed Company pursuant
to Article V(C)(ii) hereof, shall not trigger this mandatory redemption
provision, or (iii) at any time after June 30, 2000, and through the expiration
of the Registration Period (as defined in the Registration Rights Agreement),
sales of any Registrable Securities cannot be made pursuant to an effective
Registration Statement or pursuant to Rule 144 under the Securities Act, then
(x) upon the occurrence and during the period of any Mandatory Redemption Event
specified in subsection (ii) or subsection (iii) at the option of the holders of
at least two-thirds (2/3) of the then outstanding Series C Preferred Stock by
written notice to the Corporation (in each case, a "2/3 Mandatory Redemption
Notice") of such Mandatory Redemption Event, or (y) upon the occurrence and
during the period of any Mandatory Redemption Event specified in subsection (i),
at the option of any holder of outstanding Series C Preferred Stock by written
notice (an "Individual Mandatory Redemption Notice" and together with the (2/3)
Mandatory Redemption Notice collectively, the "Mandatory Redemption Notice") to
the Corporation of such Mandatory Redemption Event, the Corporation shall
purchase within five (5) business days of receipt of a Mandatory Redemption
Notice by the Corporation, such holder's shares of Series C Preferred Stock
submitted for redemption pursuant to a Mandatory Redemption Notice for an amount
per share equal to the Liquidation Preference on the date the Mandatory
Redemption Notice is received by the Corporation.
19
<PAGE>
IX. REMEDIES
--------
The Corporation acknowledges that a breach by it of its obligations under
this Certificate of Designation will cause irreparable harm to each holder of
Series C Preferred Stock by vitiating the intent and purpose of the transactions
contemplated hereunder. Accordingly, the Corporation acknowledges that the
remedy at law for a breach of its obligations under this Certificate of
Designation will be inadequate and agrees, in the event of a breach or
threatened breach by the Corporation of any of the provisions of this
Certificate of Designation that each holder of Series C Preferred Stock shall be
entitled, in addition to all other available remedies in law or in equity, to an
injunction or injunctions to prevent or cure any breaches of the provisions of
this Certificate of Designation, and to enforce specifically the terms and
provisions of this Certificate of Designation without the necessity of showing
economic loss and without any bond or other security being required.
20
<PAGE>
IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf
of the Corporation this 29th day of June, 1999.
CMGI, INC.
By: /s/ Andrew J. Hajducky III
---------------------------------
Name: Andrew J. Hajducky III
Title: Executive Vice President,
Chief Financial Officer and
Treasurer
21
<PAGE>
Exhibit A
---------
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series C Preferred Stock)
The undersigned (the "Holder") hereby irrevocably elects to convert ______
shares of Series C Preferred Stock, represented by stock certificate No(s).
__________ (the "Preferred Stock Certificates") into shares of common stock, par
value $0.01 per share (the "Common Stock") of CMGI, Inc., a Delaware corporation
(the "Corporation") according to the terms and conditions of the Certificate of
Designation of Series C Preferred Stock, as of the date written below. If
securities are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates. No fee will be charged to the Holder for
any conversion, except for transfer taxes, if any.
The Corporation shall electronically transmit the Common Stock issuable
pursuant to this Notice of Conversion to the account of the undersigned or its
nominee with The Depository Trust Company ("DTC") through its Deposit Withdrawal
Agent Commission system ("DWAC Transfer").
Name of DTC Prime Broker: ____________________________
Account Number: ______________________________________
[ ] In lieu of receiving shares of Common Stock issuable pursuant to this
Notice of Conversion by way of a DWAC Transfer, the undersigned hereby
requests that the Corporation issue a certificate or certificates for the
number of shares of Common Stock set forth above (which numbers are based
on the Holder's calculation attached hereto) in the name(s) specified
immediately below or, if additional space is necessary, on an attachment
hereto:
A-1
<PAGE>
Name: ____________________________
Address: _________________________
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable to the undersigned upon conversion of the
Series C Preferred Stock shall be made pursuant to registration of the
securities under the Securities Act of 1933, as amended (the "Securities Act"),
or pursuant to an exemption from registration under the Securities Act.
Date of Conversion: ______________________________________
Tranche of Preferred Stock: ______________________________
Applicable Conversion Price: ______________________________
Number of Shares of
Common Stock to be Issued: _______________________________
Signature: _______________________________________________
Name: ____________________________________________________
Address: _________________________________________________
* The Corporation is not required to issue shares of Common Stock until the
original Series C Preferred Stock Certificate(s) (or evidence of loss,
theft or destruction thereof) to be converted are received by the
Corporation or its Transfer Agent. The Corporation shall issue and deliver
shares of Common Stock to the Holder or its designee not later than three
(3) business days following receipt of the original Preferred Stock
Certificate(s) to be converted.
A-2
<PAGE>
EXHIBIT 99.4
CERTIFICATE OF CORRECTION
TO THE
CERTIFICATE OF
DESIGNATIONS, PREFERENCES, AND RIGHTS
OF THE
SERIES C CONVERTIBLE PREFERRED STOCK
OF
CMGI, INC.
(Pursuant to Section 103(f) of the
Delaware General Corporation Law)
CMGI, Inc. (the "Corporation"), a corporation organized and existing under
the Delaware General Corporation Law (the "DGCL") hereby certifies as follows:
FIRST: On June 29, 1999 the Corporation filed a Certificate of
Designations, Preferences, and Rights of Series C Convertible Preferred Stock
(the "Certificate") in which certain typographical errors set forth on pages 14
and 16 of the Certificate created an inaccurate record of the corporate action.
SECOND: Specifically, the date set forth in Article V.D(ii) of the
Certificate titled "Delivery of Common Stock upon Conversion" for the Securities
Purchase Agreement on line 7 of page 14 and the date set forth in Article V.G of
the Certificate titled "Mandatory Conversion" for the Registration Rights
Agreement on line 16 of page 16 should read, in each case, as corrected, June
29, 1999. Accordingly, the text of Article V.D(ii) of page 14 and Article V.G
of page 16 of the Certificate, respectively, shall be corrected to read in its
entirety as follows:
(ii) Delivery of Common Stock upon Conversion. Upon the surrender of
----------------------------------------
Preferred Stock Certificates as described above together with a Notice
of Conversion, the Corporation shall issue and, within three (3)
business days after such surrender (or, in the case of lost, stolen or
destroyed certificates, after provision of agreement and
indemnification pursuant to subsection (i) above) (the "Delivery
Period"), deliver (or cause its Transfer Agent to so issue and
deliver) in accordance with the terms hereof and the Securities
Purchase Agreement, dated June 29, 1999 by and among the Corporation
and the buyers named on the signature pages thereto (the "Buyers")
(the
<PAGE>
"Purchase Agreement") (including, without limitation, in accordance
with the requirements of Section 2(G) of the Purchase Agreement) to or
upon the order of the holder (1) that number of shares of Common Stock
for the portion of the shares of Series C Preferred Stock converted as
shall be determined in accordance herewith and (2) a certificate
representing the balance of the shares of Series C Preferred Stock not
converted, if any. In lieu of delivering physical certificates
representing the Common Stock issuable upon conversion, provided the
Transfer Agent is participating in The Depository Trust Company
("DTC") Fast Automated Securities Transfer program, upon request of
the holder and its compliance with the provisions contained in Article
V.A and in this Article V.D, the Corporation shall use its best
efforts to cause its Transfer Agent to electronically transmit the
Common Stock issuable upon conversion to the holder by crediting the
account of the holder's prime broker with DTC through its Deposit
Withdrawal Agent Commission system.
G. Mandatory Conversion. So long as all of the shares of Common
--------------------
Stock issuable upon conversion of all outstanding shares of Series C
Preferred Stock are then (i) authorized and reserved for issuance,
(ii) registered for resale under the Securities Act of 1933, as
amended (the "Securities Act"), by the holders of the Series C
Preferred Stock (or may otherwise be resold publicly pursuant to Rule
144(k) under the Securities Act (or any successor provision)), and
(iii) eligible to be traded on Nasdaq, the New York Stock Exchange,
Inc. ("NYSE"), the American Stock Exchange, Inc. ("AMEX"), or The
Nasdaq SmallCap Market ("Nasdaq SmallCap"), each share of Series C
Preferred Stock issued and outstanding on June 30, 2002 (the
"Automatic Conversion Date"), automatically shall be converted into
shares of Common Stock on such date at the then Mandatory Applicable
Conversion Price (as defined below) in accordance with, and subject
to, the provisions of this Article V (the "Automatic Conversion").
The Automatic Conversion Date shall be delayed by one (1) Trading Day
for each Trading Day occurring prior thereto and prior to the full
conversion of the Series C Preferred Stock that (x) any Registration
Statement (as defined in the Registration Rights Agreement, dated June
29, 1999, by and among the Corporation and the Buyers (the
"Registration Rights Agreement")) required to be filed and to be
effective pursuant to the Registration Rights Agreement in accordance
2
<PAGE>
with its terms is not effective or sales of all of the Registrable
Securities (as defined in the Registration Rights Agreement) otherwise
cannot be made thereunder or pursuant to Rule 144 under the Securities
Act (or any successor provision) or (y) at the option of each holder
of Series C Preferred Stock, such holder is subject to a Lock-Up
Agreement (as defined in the Registration Rights Agreement). The
Automatic Conversion Date shall be the effective date from which
certificates representing the Common Stock must be delivered to the
holder pursuant to section (D) above. The "Mandatory Applicable
Conversion Price" shall be the average of the Closing Bid Prices over
the ten (10) consecutive Trading Days ending on the Trading Day
immediately preceding the Automatic Conversion Date.
THIRD: This Certificate of Correction was prepared and executed
in accordance with Section 103(f) of the DGCL.
IN WITNESS WHEREOF, the Corporation has caused this instrument to be
signed in its corporate name this 30th day of June, 1999.
CMGI, INC.
By: /s/ Andrew J. Hajducky III
--------------------------------
Name: Andrew J. Hajducky III
Title: Executive Vice President, Chief
Financial Officer and Treasurer
3
<PAGE>
EXHIBIT 99.5
P R E S S R E L E A S E
MEDIA CONTACT
Krista Thomas
CMGI
978/684-3141
[email protected]
CMGI Completes Private Placement
Andover, MA, June 30, 1999 - CMGI, Inc., (Nasdaq: CMGI) has completed a $375
million private placement of its Series C Convertible Preferred Stock. The
shares were purchased by funds managed by four institutional investment
managers. Shoreline Pacific Institutional Finance, The Institutional Division of
Financial West Group, arranged for the private placement transaction.
Proceeds of the private placement will be used for acquisitions of controlling
positions in companies and working capital purposes.
About CMGI
A recognized leader in the Internet economy, CMGI (Nasdaq: CMGI) has built a
substantial base of Internet operating companies and, through its @Ventures
affiliates, has invested in a growing portfolio of synergistic Internet
enterprises which enhance the value of its core holdings. This unique method of
generating equity for its shareholders is what CMGI calls "creating net value."
Microsoft, Intel and Sumitomo hold minority positions in CMGI.
CMGI's majority-owned subsidiaries include Activerse, Adsmart, Engage, iCast,
Magnitude Network, NaviSite, NaviNet, Planet Direct and ZineZone. The Company's
@Ventures affiliates have ownership interests in Lycos, Inc. (Nasdaq: LCOS),
Critical Path (Nasdaq: CPTH), Silknet (Nasdaq: SILK), Ancestry.com, Asimba,
blaxxun, BizBuyer.com, CarParts.com, Chemdex, eCircles.com, Furniture.com,
HotLinks, KOZ.com, MotherNature.com, NextMonet.com, NextPlanetOver.com,
OneCore.com, ONElist, Productopia, Promedix.com, Raging Bull, Softway Systems,
Speech Machines, ThingWorld.com, Universal Learning Technology, Vicinity,
Virtual Ink and Visto.
<PAGE>
CMGI is also the majority-owner of SalesLink, InSolutions and On-Demand
Solutions, leaders in direct marketing, fulfillment and turnkey arenas. CMGI
Corporate headquarters is located at 100 Brickstone Square, Andover, MA 01810.
Telephone: 978-684-3600. Fax: 978-684-3814. Additional information is available
on the company's Web site at http://www.CMGI.com.
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