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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): July 30, 1998
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Open Market, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
0-28436 04-3214536
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(Commission File Number) (I.R.S. Employer Identification No.)
One Wayside Road, Burlington, Massachusetts 01803
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(Address of Principal Executive Offices) (Zip Code)
(781) 359-3000
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
On July 31, 1998, Open Market, Inc. (the "Company") announced that CMG
Information Services, Inc., an investor and developer of Internet companies
("CMG") and Capital Ventures International, a fund managed by Heights Capital
Management, a leader in equity financing for emerging growth companies ("CVI"),
made a $20 million equity investment in the Company. Pursuant to the terms of
the agreements, the Company issued an aggregate of 1,338,912 shares of common
stock, $.001 par value per share (the "Common Stock"), of the Company to CMG and
CVI at a price of $14.94 per share. In addition, the Company issued to CMG and
CVI warrants to purchase an additional 334,728 shares of Common Stock of the
Company at a price of $16.43 per share. The Company will file a registration
statement covering all such shares of Common Stock. Included in the terms of the
agreement are certain adjustments and other provisions including a repurchase
provision which becomes operative in the event that the registration statement
is not declared effective in a timely manner.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
See Exhibit Index attached hereto.
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SIGNATURE
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 31, 1998 OPEN MARKET, INC.
/s/ Regina O. Sommer
_________________________________
By: Regina O. Sommer
Title: Senior Vice President
and Chief Financial Officer
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INDEX TO EXHIBITS
Exhibit Number Description
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99.1 Securities Purchase Agreement, dated as of July 30, 1998, by and among
Open Market, Inc. and CMG Information Services, Inc.
99.2 Securities Purchase Agreement, dated as of July 30, 1998, by and among
Open Market, Inc. and Capital Ventures International.
99.3 Stock Purchase Warrant, dated July 30, 1998, by and between Open
Market, Inc. and CMG Information Services, Inc.
99.4 Stock Purchase Warrant, dated July 30, 1998, by and between Open
Market, Inc. and Capital Ventures International.
99.5 Registration Rights Agreement, dated as of July 30, 1998, by and among
Open Market, Inc. and CMG Information Services, Inc.
99.6 Registration Rights Agreement, dated as of July 30, 1998, by and among
Open Market, Inc. and Capital Ventures International.
99.7 Press Release dated July 30, 1998.
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EXHIBIT 99.1
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SECURITIES PURCHASE AGREEMENT
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SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of July 30,
1998, by and among OPEN MARKET, INC., a corporation organized under the laws of
the State of Delaware (the "COMPANY"), with executive offices located at One
Wayside Road, Burlington, MA 01803, and the purchaser (the "PURCHASER") set
forth on the execution page hereof (the "EXECUTION PAGE").
WHEREAS:
A. The Company and the Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("REGULATION D"), as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "SECURITIES ACT");
B. The Purchaser desires to purchase, upon the terms and conditions
stated in this Agreement, (i) Five Million United States Dollars ($5,000,000)
of the Company's common stock, par value $.001 per share (the "COMMON STOCK")
and (ii) warrants (the "WARRANTS"), in the form attached hereto as Exhibit A,
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to acquire such number of shares of Common Stock as is equal to twenty-five
percent (25%) of the number of Initial Shares issued on the Closing Date, as
defined in Section 1(f) below. The Initial Shares and the Adjustment Shares, as
defined in Section 1(d) below, if any, are collectively referred to herein as
the "SHARES" and the shares of Common Stock issuable upon exercise of or
otherwise pursuant to the Warrants are referred to herein as the "WARRANT
SHARES." The Shares, the Warrants and the Warrant Shares are collectively
referred to herein as the "SECURITIES."
C. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
in 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 Securities Act and the rules and regulations promulgated thereunder,
and applicable state securities laws, and to repurchase certain Securities under
certain circumstances;
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NOW, THEREFORE, the Company and the Purchaser hereby agree as follows:
1. PURCHASE AND SALE OF SHARES AND WARRANTS.
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a. Certain Definitions. For purposes of Agreement, the following terms
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shall have the meanings ascribed to them as provided below:
"ADJUSTMENT DATE" shall mean the earlier of (i) the date a
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registration statement filed by the Company pursuant to Section 2(a)(i) of the
Registration Rights Agreement and covering at least the Initial Shares is
declared effective by the SEC, as defined below, or (ii) the 360th day after the
Closing Date.
"ADJUSTMENT DATE MARKET PRICE" shall mean the average Closing Price
during the five (5) Trading Days, as defined below, immediately preceding the
Adjustment Date, appropriately adjusted to reflect any pending stock dividend,
stock split or similar transaction.
"BUSINESS DAY" means any day on which the principal United States
securities exchange or trading market where the Common Stock is listed or
traded as reported by Bloomberg, as defined below, is open for trading.
"CLOSING DATE MARKET PRICE" shall mean the average Closing Price
during the twenty (20) Trading Days immediately preceding the Closing Date,
appropriately adjusted to reflect any pending stock dividend, stock split or
similar transaction.
"CLOSING PRICE" means, for the Common Stock as of any date, the
closing bid price of such security on the principal United States securities
exchange or trading market where such security is listed or traded as reported
by Bloomberg Financial Markets (or a comparable reporting service of national
reputation selected by the Purchaser and reasonably acceptable to the Company
if Bloomberg Financial Markets is not then reporting closing bid prices of such
security) (collectively, "BLOOMBERG"), or if the foregoing does not apply, the
last reported sale price of such security in the over-the-counter market on the
electronic bulletin board for such security as reported by Bloomberg, or, if no
sale price is reported for such security by Bloomberg, the average of the bid
prices of any market makers for such security as reported in the "pink sheets"
by the National Quotation Bureau, Inc., in each case for such date or, if such
date was not a Trading Day (as defined below) for such security, on the next
preceding day which was a Trading Day. If the Closing Price cannot be
calculated for a share of Common Stock as of either of such dates on any of the
foregoing bases, the Closing Price of such security on such date shall be the
fair market value as reasonably determined by an investment banking firm
selected by the Purchaser and reasonably acceptable to the Company, with the
costs of such appraisal to be borne by the Company.
"SEC" means the United States Securities and Exchange Commission.
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"TRADING DAY" shall mean a Business Day on which the Common Stock
trades on the principal United States securities exchange or trading market
where such security is listed or traded as reported by Bloomberg.
If the Closing Date is not a Trading Day then for purposes of sublclause
(ii) of the definition Per Share Price set forth in Section 1 (b) below, the
Closing Price on the Closing Date shall be the Closing Price on the immediately
preceding day which was a Trading Day. If the Adjustment Date is not a Trading
Day, then for purposes of subclause (iv) of the definition Per Share Price, the
Closing Price on the Adjustment Date shall be the Closing Price on the
immediately preceding day which was a Trading Day.
b. Generally. Except as otherwise provided in this Section 1 and subject
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to the satisfaction (or waiver) of the conditions set forth in Section 6 and
Section 7 below, the Purchaser shall purchase the Warrants and the number of
Shares determined as provided in this Section 1, and the Company shall issue
and sell such Shares to the Purchaser for a per share purchase price (the "PER
SHARE PRICE") equal to the least of (i) the Closing Date Market Price (ii) the
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Closing Price on the Closing Date, (iii) the Adjustment Date Market Price and
(iv) the Closing Price on the Adjustment Date; provided however that the total
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purchase price to be paid for the Warrant and the Shares shall be not more than
Five Million Dollars ($5,000,000.)
c. Purchase on Closing Date.
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i. Number of Initial Shares. On the Closing Date the Purchaser
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shall acquire the number of whole shares of Common Stock as is equal to the
quotient of (A) Five Million Dollars ($5,000,000) divided by (B) an amount (the
"ESTIMATED PER SHARE PRICE") equal to the lesser of (I) the Closing Date Market
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Price and (II) the Closing Price on the Closing Date. The shares of Common
Stock acquired on the Closing Date are collectively referred to herein as the
"INITIAL SHARES".
ii. Determination of Total Purchase Price. On the Closing Date, the
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Purchaser shall pay the Company an amount (the "TOTAL PURCHASE PRICE") equal to
the product of (i) the number of Initial Shares to be acquired on the Closing
Date determined in accordance with Section 1(c)(i) above and (ii) the Estimated
Per Share Price, which amount shall constitute the total purchase price for the
Warrants, the Initial Shares and the Adjustment Shares, if any, to be acquired
by and issued to the Purchaser pursuant to the terms hereof.
d. Adjustment Shares. If the Estimated Per Share Price paid by the
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Purchaser on the Closing Date exceeds the Per Share Price, then, within three
days of the Adjustment Date, the Company shall cause to be issued to the
Purchaser a number of additional shares of Common Stock (the "ADJUSTMENT
SHARES") as is equal to the lesser of (i) twenty percent (20%) of the number of
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Initial Shares and (ii) the difference between (A) the quotient of (I) the
Total Purchase Price divided by (II) the Per Share Price and (B) the number of
Initial Shares acquired on the Closing Date. ( In calculating the number of
Adjustment Shares to be issued to the Purchaser pursuant to the terms of this
Agreement, appropriate adjustments shall be made to
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reflect any stock dividend, stock split or similar transaction affecting the
Common Stock from the Closing Date through the close of business on the
Adjustment Date.)
e. Form of Payment. On the Closing Date, the Purchaser shall pay the
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Total Purchase Price for the Warrants and Shares hereunder by wire transfer to
the Company, in accordance with the Company's written wiring instructions,
against delivery of certificates representing the Initial Shares and duly
executed Warrants and the Company shall deliver such Initial Shares and
Warrants against delivery of the Total Purchase Price.
f. Closing Date. Subject to the satisfaction (or waiver) of the
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conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the sale of the Shares and the Warrants pursuant to this Agreement (the
"CLOSING") shall be 5:00 p.m. Eastern Time on July 30, 1998 or earlier, if
practicable and if mutually agreed by the parties hereto ("CLOSING DATE"). The
Closing shall occur at the offices of the Company or at such other place as the
parties may otherwise agree.
2. PURCHASER'S REPRESENTATIONS AND WARRANTIES.
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The Purchaser represents and warrants to the Company as follows:
a. Investment Purpose. The Purchaser is purchasing the Securities for
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the Purchaser's own account and not with a present view towards the public sale
or distribution thereof. The Purchaser understands that the Purchaser must bear
the economic risk of this investment indefinitely, unless the Securities are
registered pursuant to the Securities Act and any applicable state securities or
blue sky laws or an exemption from such registration is available, and that the
Company has no present intention of registering any such Securities other than
as contemplated by the Registration Rights Agreement. Notwithstanding anything
in this Section 2(a) to the contrary, by making the representations herein, the
Purchaser does not agree to hold 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 Securities Act, and any applicable state securities law.
b. Accredited Investor Status. The Purchaser is an "ACCREDITED INVESTOR"
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as that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. The Purchaser understands that the Securities
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are being offered and sold to the Purchaser 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
Purchaser's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Purchaser set forth herein in order to
determine the availability of such exemptions and the eligibility of the
Purchaser to acquire the Securities.
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d. Information. The Purchaser and its counsel have been furnished all
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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 Purchaser or its counsel. The Purchaser and its counsel have
been afforded the opportunity to ask questions of the Company and have received
what the Purchaser believes to be satisfactory answers to any such inquiries.
Neither such inquiries nor any other due diligence investigation conducted by
the Purchaser or its counsel or any of its representatives shall modify, amend
or affect the Purchaser's right to rely on the Company's representations and
warranties contained in Section 3 below. The Purchaser understands that
Purchaser's investment in the Securities involves a high degree of risk.
e. Governmental Review. The Purchaser understands that no United States
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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 Resale. The Purchaser understands that (i) except as
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provided in the Registration Rights Agreement, the Securities have not been and
are not being registered under the Securities Act or any state securities laws,
and may not be transferred unless (a) subsequently registered thereunder, or (b)
the Purchaser shall have delivered to the Company an opinion of counsel
reasonably acceptable to the Company (which opinion shall be in form, substance
and scope customary for opinions of counsel in comparable transactions) to the
effect that the Securities to be sold or transferred may be sold or transferred
under an exemption from such registration, or (c) sold under Rule 144
promulgated under the Securities Act (or a successor rule) ("RULE 144"), or (d)
sold or transferred to an affiliate of the Purchaser pursuant to an exemption
under the Securities Act; and (ii) neither the Company nor any other person is
under any obligation to register such Securities under the Securities 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.
g. Legends. The Purchaser understands that the Initial Shares, the
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Adjustment Shares, if any, and the Warrants and, until such time as the Initial
Shares, the Adjustment Shares and Warrant Shares, respectively, have been
registered under the Securities Act (including registration pursuant to Rule 416
thereunder) as contemplated by the Registration Rights Agreement or otherwise
may be sold by the Purchaser under Rule 144 (k), the certificates for the
Initial Shares, the Adjustment Shares and the Warrant Shares, respectively, may
bear a restrictive legend in substantially the following form:
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 or sold in the absence of an effective registration statement for
the securities under applicable securities laws unless offered, sold or
transferred under an available exemption from the registration requirements
of those laws.
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
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required by state securities laws, (a) the sale of such Security is registered
under the Securities Act (including registration pursuant to Rule 416
thereunder), or (b) such holder provides the Company with an opinion of counsel
reasonably acceptable to the Company, in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that a public sale
or transfer of such Security may be made without registration under the
Securities Act or (c) such holder provides the Company with reasonable
assurances that such Security can be sold under Rule 144(k). The Purchaser
agrees to sell all Securities, including those represented by a certificate(s)
from which the legend has been removed, pursuant to an effective registration
statement or under an exemption from the registration requirements of the
Securities Act. Such legend shall be removed when such Security may be sold
pursuant to an effective registration statement or sold under Rule 144(k).
h. Authorization; Enforcement. The Purchaser has the requisite corporate
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power and authority to enter into and perform its obligations under this
Agreement and the Registration Rights Agreement and to purchase the Initial
Shares, the Adjustment Shares and the Warrants in accordance with the terms
thereof. This Agreement and the Registration Rights Agreement have been duly
and validly authorized, executed and delivered on behalf of the Purchaser and
are valid and binding agreements of the Purchaser enforceable in accordance with
their terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other laws affecting creditors' rights and
remedies generally and to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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The Company represents and warrants to the Purchaser as follows:
a. Organization and Qualification. The Company and each of its
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subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction in which it is incorporated, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. 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 the nature of the business conducted by it makes such qualification
necessary and where the failure so to qualify would have a Material Adverse
Effect. "MATERIAL ADVERSE EFFECT" means any material adverse effect on (i) the
Securities, (ii) the ability of the Company to perform its obligations hereunder
(including the issuance of the Initial Shares, the Adjustment Shares and the
Warrants) and under the Warrants (including the issuance of the Warrant Shares)
or the Registration Rights Agreement or (iii) the business, operations,
properties, or financial condition of the Company and its subsidiaries, taken as
a whole.
b. Authorization; Enforcement. (i) The Company has the requisite
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corporate power and authority to enter into and perform its obligations under
this Agreement, the Warrants and the Registration Rights Agreement, to issue
and sell the Initial Shares, the Adjustment Shares and the Warrants in
accordance with the terms hereof and to issue the Warrant Shares upon exercise
of the Warrants in accordance with the terms thereof; (ii) the execution,
delivery and performance
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of this Agreement, the Warrants and the Registration Rights Agreement by the
Company and the consummation by it of the transactions contemplated hereby and
thereby (including, without limitation, the issuance of the Initial Shares, the
Warrants, and the issuance and reservation for issuance of the Adjustment Shares
and the Warrant 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 Warrants, such agreements will constitute, valid and binding obligations
of the Company enforceable against the Company in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other laws affecting creditors' rights and
remedies generally and to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
c. Capitalization. The capitalization of the Company as of the date
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hereof, including the authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant to
the Company's stock option plans, the number of shares issuable and reserved for
issuance pursuant to securities exercisable for, or convertible into or
exchangeable for any shares of capital stock and the number of Adjustment Shares
to be reserved for issuance as required by Section 1(c) hereof and the number
of Warrant Shares to be issued upon the exercise of the Warrants is set forth on
Schedule 3(c). All of such outstanding shares of capital stock have been, or
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upon issuance will be, validly issued, fully paid and nonassessable. Except as
set forth on Schedule 3(c), no shares of capital stock of the Company (including
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the Initial Shares, the Adjustment Shares and the Warrant Shares) are subject to
preemptive rights or any other similar rights of the stockholders of the Company
or any liens or encumbrances. Except for the Securities and as disclosed in
Schedule 3(c), as of the date of this Agreement, (i) there are no outstanding
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options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into or
exercisable 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, and (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 Securities Act
(except the Registration Rights Agreement). Except as set forth on Schedule
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3(c), there are no securities or instruments containing antidilution or similar
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provisions that will be triggered by the issuance of the Securities in
accordance with the terms of this Agreement or the Warrants and the holders of
the securities and instruments listed on such Schedule 3(c) have waived any
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rights they may have under such antidilution or similar provisions in connection
with the issuance of the Securities in accordance with the terms of this
Agreement or the Warrants. The Company has made available to the Purchaser true
and correct copies of the Company's Certificate of Incorporation as in effect on
the date hereof ("CERTIFICATE OF INCORPORATION"), the Company's By-laws as in
effect on the date hereof (the "BY-LAWS"), and all other instruments and
agreements governing securities convertible into or exercisable or exchangeable
for capital stock of the Company, except for stock options granted under any
employee benefit plan or director stock option plan of the Company.
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d. Issuance of Shares. The Initial Shares and the Adjustment Shares are
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duly authorized and when issued and paid for in accordance with the terms
hereof 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 and will not
impose personal liability upon the holder thereof. The Warrant Shares are duly
authorized and reserved for issuance, and, upon exercise of the Warrants 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 and will not impose personal liability upon the holder thereof.
e. No Conflicts. The execution, delivery and performance of this
------------
Agreement, the Registration Rights Agreement and the Warrants by the Company,
and the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the issuance and reservation for
issuance, as applicable, of the Initial Shares, Adjustment Shares, the Warrants
and the Warrant Shares) will not (i) conflict with or result in a violation of
the Certificate of Incorporation or By-laws or (ii) conflict with, or constitute
a default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, or result in a violation of
any law, rule, regulation, order, judgment or decree (including United States
federal and state securities laws and regulations) applicable to the Company or
any of its subsidiaries or by which any property or asset of the Company or any
of its subsidiaries is bound or affected (except, with respect to clause (ii),
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 any of its
subsidiaries is in violation of its Certificate of Incorporation, By-laws or
other organizational documents and neither the Company nor any of its
subsidiaries is in default (and no event has occurred which, with notice or
lapse of time or both, would put the Company or any of its subsidiaries in
default) under, nor has there occurred any event giving others (with notice or
lapse of time or both) any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, except for actual or possible violations,
defaults or rights as would not, individually or in the aggregate, have a
Material Adverse Effect. The businesses of the Company and its subsidiaries are
not being conducted and, so long as the Purchaser owns any of the Securities
the businesses of the Company and its subsidiaries shall not knowingly be
conducted, in violation of any law, ordinance or regulation of any governmental
entity, except for actual or possible violations, if any, the sanctions for
which either singly or in the aggregate would not have a Material Adverse
Effect. Except as specifically contemplated by this Agreement and as required
under the Securities Act and any applicable state securities laws, the Company
is not required to obtain any consent, approval, authorization or order of, or
make any filing or registration with, any court or governmental agency or any
regulatory or self regulatory agency in order for it to execute, deliver or
perform any of its obligations under this Agreement (including, without
limitation the issuance and sale of the Common Stock as provided hereby), the
Registration Rights Agreement or the Warrants, in each case in accordance with
the terms hereof or thereof. The Company is not in violation of the listing
requirements of the
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Nasdaq National Market ("NASDAQ") and does not reasonably anticipate that the
Common Stock will be delisted by NASDAQ in the foreseeable future.
f. SEC Documents, Financial Statements. Since May 28, 1996, the Company
-----------------------------------
has timely filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the Securities Exchange Act
of 1934, as amended (the "EXCHANGE ACT") and has filed all registration
statements and other documents required to be filed by it with the SEC pursuant
to the Securities Act (all of the foregoing filed prior to the date hereof and
after May 28, 1996, and all exhibits included therein and financial statements
and schedules thereto and documents incorporated by reference therein, being
hereinafter referred to herein as the "SEC DOCUMENTS"). The Company has made
available to the Purchaser true and complete copies of the SEC Documents, except
for the exhibits and schedules thereto and the documents incorporated therein.
As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Exchange Act or the Securities Act, as the
case may be, 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. Any statements made in any such SEC Documents
that are or were, required to be updated or amended under applicable law has
been or have been so updated or amended. 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 applicable 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 and recurring year-end audit adjustments). Except as set forth in the
SEC Documents filed prior to the date hereof, the Company has no liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to the date of such SEC Documents and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under generally accepted accounting principles to be
reflected in such SEC Documents, which liabilities and obligations referred to
in clauses (i) and (ii), individually or in the aggregate would not have a
Material Adverse Effect.
g. Absence of Certain Changes. Except as disclosed in the SEC Documents,
--------------------------
since December 31, 1997, there has been no change or development which
individually or in the aggregate has had or would have a Material Adverse
Effect.
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h. Absence of Litigation. There is no action, suit, 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, any of its
subsidiaries, or any of their respective directors or officers in their
capacities as such which would have a Material Adverse Effect or which would
adversely affect the validity, enforceability of, or the authority or ability of
the Company to perform its obligations under this Agreement (including the
issuance of the Initial Shares and the Adjustment Shares and the Warrants), the
Registration Rights Agreement, the Warrant (including the issuance of the
Warrant Shares) or any other agreement or document delivered pursuant hereto or
thereto.
i. Intellectual Property. Each of the Company and its subsidiaries owns
---------------------
or is licensed to use all patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights, copyright applications,
licenses, permits, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures) and
other similar rights and proprietary knowledge (collectively, "INTANGIBLES")
necessary for the conduct of its business as now being conducted and as
described in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 and any Quarterly Report on Form 10-Q or Current Report on
Form 8-K filed after December 31, 1997. To the best knowledge of the Company,
neither the Company nor any subsidiary of the Company is infringing upon third
party Intangibles which, individually or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a Material Adverse Effect.
Neither the Company nor any of its subsidiaries has received written notice that
it is infringing upon third party Intangibles which if determined unfavorably to
the Company, individually or in the aggregate would have a Material Adverse
Effect. Except as disclosed in the SEC Documents or as set forth in Schedule
--------
3(i), neither the Company nor any of its subsidiaries has entered into any
- ----
material consent, indemnification, forbearance to sue or settlement agreements
with respect to the validity of the Company's or its subsidiaries' ownership or
right to use its Intangibles. The Company and its subsidiaries have complied, in
all material respects, with their respective contractual obligations relating to
the protection of the Intangibles used pursuant to licenses. To the best
knowledge of the Company, no person is infringing on or violating the
Intangibles owned or used by the Company or its subsidiaries which infringement
or violation would have a Material Adverse Effect.
j. 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 United States 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.
10
<PAGE>
k. Disclosure. All information relating to or concerning the Company set
----------
forth in this Agreement or provided to the Purchaser 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 its subsidiaries or their respective businesses, properties,
operations or financial conditions, which has not been publicly disclosed but,
under applicable law, rule or regulation, would be required to be disclosed by
the Company in a registration statement filed on the date hereof by the Company
under the Securities Act with respect to a primary issuance of the Company's
securities. The Company has not provided, and without the Purchaser's consent
thereto, will not hereafter provide to the Purchaser, any information which,
according to applicable law, rule or regulation, should have been disclosed
publicly by the Company but which has not been disclosed.
l. Acknowledgment Regarding the Purchaser's Purchase of the Securities.
-------------------------------------------------------------------
The Company acknowledges and agrees that the Purchaser is not acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to this Agreement or the transactions contemplated hereby, and the
relationship between the Company and the Purchaser is "arms length" and that any
statement made by the Purchaser or any of its 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 Purchaser's purchase
of Securities and has not been relied upon by the Company, its officers or
directors in any way. The Company further represents to the Purchaser that the
Company's decision to enter into this Agreement has been based solely on an
independent evaluation by the Company and its representatives.
m. Form S-3 Eligibility. The Company is currently eligible to register
--------------------
the resale of its Common Stock on a registration statement on Form S-3 under the
Securities Act. There exist no facts or circumstances that would prohibit or
delay the preparation and filing of a registration statement on Form S-3 with
respect to the Registrable Securities (as defined in the Registration Rights
Agreement).
n. No General Solicitation. Neither the Company nor any of its
-----------------------
affiliates, nor any person acting on its or their behalf has conducted any
"general solicitation," as such term is defined in Regulation D, with respect to
any of the Securities being offered hereby.
o. 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 offerers to
buy any security under circumstances that would require registration of the
Securities being offered hereby under the Securities Act or cause this offering
of Securities to be integrated with any prior offering of securities of the
Company that would require registration of the offering contemplated hereby
under the Securities Act or for purposes of any applicable stockholder approval
provisions.
p. Intentionally Deleted.
---------------------
11
<PAGE>
q. Acknowledgment of Dilution. Assuming there is no stock dividend,
--------------------------
stock split or other similar transaction affecting the Common Stock, the number
of Initial Shares issuable on the Closing Date in accordance with Section 1(c)
hereof, may increase from the date hereof and the number of Adjustment Shares
issuable in accordance with Section 1(d) hereof, may increase from the date
hereof if the Closing Price of Common Stock declines from the date hereof
until the Adjustment Date. The Company acknowledges that its obligation to
sell the Shares, including its obligation to issue Adjustment Shares, if any,
in accordance with the terms of the hereof is absolute and unconditional,
regardless of the dilution that such issuance may have on the ownership
interests of other stockholders subject to the Purchaser's performance of its
material obligations hereunder and subject to applicable bankruptcy, insolvency,
reorganization, fraudulent transfer and other laws affecting creditor's rights
and remedies generally and to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity).
r. Tax Status. The Company and each of its subsidiaries has made or filed
----------
all federal, state and local income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its subsidiaries has set aside
on its books provisions reasonably 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. The Company has not
executed a waiver with respect to any statute of limitations relating to the
assessment or collection of any federal, state or local tax. Except as set
forth in Schedule 3(r), none of the Company's tax returns has been or is being
-------------
audited by any taxing authority.
s. Title. The Company and its subsidiaries have good title in fee
-----
simple to all real property and good title to all personal property owned by
them which is material to the business of the Company and its subsidiaries, in
each case free and clear of all liens, encumbrances and defects except as set
forth on Schedule 3(s) and such as do not materially affect the value of such
property and do not materially interfere with the use made and proposed to be
made of such property by the Company and its subsidiaries. Any real property
and facilities held under lease by the Company and its subsidiaries are held by
them under valid, subsisting and enforceable leases with such exceptions as are
not material and do not materially interfere with the use made and proposed to
be made of such property and buildings by the Company and its subsidiaries.
4. COVENANTS.
---------
a. Best Efforts. The parties shall use their best efforts timely to
------------
satisfy each of the conditions described in Section 6 and Section 7 of this
Agreement.
12
<PAGE>
b. Form D; Blue Sky Laws. The Company agrees to file a Form D with
---------------------
respect to the Securities as required under Regulation D and to provide a copy
thereof to the Purchaser promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for sale to the Purchaser
pursuant to this Agreement under applicable securities or "blue sky" laws of the
states of the United States or obtain exemption therefrom, and shall provide
evidence of any such action so taken to the Purchaser on or prior to the Closing
Date.
c. Reporting Status. So long as the Purchaser beneficially owns any of
----------------
the Securities, the Company shall timely file all reports required to be filed
with the SEC pursuant to the Exchange Act, and until the Shares have been
subject to an effective registration statement for a period of thirty (30)
consecutive days the Company shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would permit such termination.
d. Use of Proceeds. The Company shall use the net proceeds from the
---------------
sale of the Shares and the Warrant for working capital purposes which may
include acquiring or investing in other related businesses or technologies or
acquiring the rights to use complementary technologies.
e. Lock-up. The Purchaser agrees not to offer to sell, sell, contract to
-------
sell or otherwise dispose of, directly or indirectly, any shares of Common Stock
of the Company, any right to acquire such shares of Common Stock of the Company
or any securities exercisable for or convertible into shares of Common Stock of
the Company, which are beneficially owned (as defined in Rule 13d-3 of the Rules
and Regulations of the SEC under the Exchange Act) by the Purchaser prior to the
date which is 180 days after the Closing Date.
f. Financial Information. For a period of two (2) years following the
---------------------
Closing, the Company agrees to send the following reports to the Purchaser: (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, its proxy and information
statements and any Current Reports on Form 8-K; and (ii) within one (1) day
after release, copies of all press releases issued by the Company or any of its
subsidiaries.
g. Reservation of Shares. The Company has and 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 issuance of the maximum number of
Initial Shares and Adjustment Shares as provided in Section 1 hereof and the
full exercise of the Warrants and the issuance of the Warrant Shares in
connection therewith and as otherwise required hereby and by the Warrants. The
Company shall not reduce the number of shares reserved for issuance hereunder or
upon the full exercise of the Warrants (except as a result of any such
conversion or exercise) without the consent of the Purchaser.
13
<PAGE>
h. Listing. On the Closing Date, the Company shall have secured the
-------
listing of the Initial Shares and promptly following the Closing, the Company
shall secure the listing of the Adjustment Shares, if any, and Warrant Shares,
in each case, upon each national securities exchange or automated quotation
system, if any, upon which shares of Common Stock are then listed or quoted
(subject to official notice of issuance) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all Shares from
time to time issuable hereunder and all Warrant Shares from time to time
issuable upon exercise of the Warrants. The Company will use its best efforts
to continue the listing and trading of its Common Stock on the NASDAQ, the New
York Stock Exchange (the "NYSE") or the American Stock Exchange (the "AMEX ")
and will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities
Dealers ("NASD") and such exchanges, as applicable. In the event the Common
Stock is not eligible to be traded on any of the NASDAQ, NYSE or AMEX and the
Common Stock is not eligible for listing on any such exchange or system, the
Company shall use its best efforts to cause the Common Stock to be eligible for
trading in the over-the-counter market on the electronic bulletin board at the
earliest practicable date and remain eligible for trading while any Shares and
Warrant Shares are outstanding. The Company shall promptly provide to the
holders of the Securities copies of any notices it receives regarding the
continued eligibility of the Common Stock for trading in the over-the-counter
market or, if applicable, any securities exchange (including the NASDAQ) on
which securities of the same class or series issued by the Company are then
listed or quoted, if any.
i. Corporate Existence. Until all Shares have been subject to an
-------------------
effective registration statement for a period of at least thirty (30)
consecutive days, the Company shall maintain its corporate existence, except in
the event of a merger, consolidation or sale of all or substantially all of the
Company's assets, as long as the surviving or successor entity in such
transaction assumes the Company's obligations hereunder and under the Warrants
and the agreements and instruments entered into in connection herewith
regardless of whether or not the Company would have had a sufficient number of
shares of Common Stock authorized and available for issuance in order to effect
the issuance of all Shares and the exercise in full of all Warrants outstanding
as of the date of such transaction.
j. No Integrated Offerings. 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
Securities Act or cause this offering of Securities to be integrated with any
other offering of securities by the Company for purposes of any stockholder
approval provision applicable to the Company or its securities.
k. Redemptions and Dividends. Until all Shares have been issued in
-------------------------
accordance with the terms hereof, the Company shall not, without first obtaining
the written approval of the Purchaser, redeem, or declare or pay any cash
dividend or distribution on, any shares of capital stock of the Company.
14
<PAGE>
5. TRANSFER AGENT INSTRUCTIONS.
---------------------------
a. The Company shall instruct its transfer agent to issue certificates,
registered in the name of the Purchaser or its nominee, for the Adjustment
Shares and the Warrant Shares in such amounts as specified from time to time by
such Purchaser to the Company as provided herein and as required hereby and as
required upon the exercise of the Warrants, as applicable. To the extent and
during the periods provided in Section 2(f) and Section 2(g) of this Agreement,
all such certificates shall bear the restrictive legend specified in Section
2(g) of this Agreement.
b. Except as may be otherwise required by law, the Company warrants that
no instruction other than such instructions referred to in this Section 5, and
stop transfer instructions to give effect to Section 2(f) hereof in the case of
the transfer of the Initial Shares, the Adjustment Shares and the Warrant Shares
prior to registration of the Initial Shares, the Adjustment Shares and the
Warrant Shares under the Securities Act or without an exemption therefrom, 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 Purchaser's obligations and
agreement set forth in Section 2(g) hereof to resell the Securities pursuant to
an effective registration statement or under an exemption from the registration
requirements of applicable securities law.
c. Except as may be otherwise required by law, if the Purchaser provides
the Company with an opinion of counsel reasonably acceptable to the Company,
which opinion shall be in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that the Securities to be sold
or transferred may be sold or transferred pursuant to an exemption from
registration, or the Purchaser provides the Company with reasonable assurances
that such Securities may be sold under Rule 144 and such documentation as the
Company may reasonable require, the Company shall permit the transfer, and, in
the case of the Shares and Warrant Shares, promptly instruct its transfer agent
to issue one or more certificates in such name and in such denominations as
specified by the Purchaser.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
----------------------------------------------
The obligation of the Company hereunder to issue and sell the Shares and
the Warrants to the Purchaser hereunder is subject to the satisfaction, at 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.
a. The Purchaser shall have executed the signature page to this Agreement
and the Registration Rights Agreement, and delivered the same to the Company.
b. The Purchaser shall have delivered the Total Purchase Price in
accordance with Section 1(e) above.
15
<PAGE>
c. The representations and warranties of the Purchaser shall be true and
correct 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 specific
date, which representations and warranties shall be true and correct as of such
date), and the Purchaser 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 Purchaser at or
prior to the Closing Date.
d. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by 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.
7. CONDITIONS TO THE PURCHASER'S OBLIGATION TO PURCHASE THE SHARES AND THE
-----------------------------------------------------------------------
WARRANTS.
- --------
The obligation of the Purchaser hereunder to purchase the Shares and the
Warrants hereunder is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for the Purchaser's sole benefit and may be waived by the Purchaser at any time
in the Purchaser's sole discretion:
a. The Company shall have executed the signature page to this Agreement
and the Registration Rights Agreement, and delivered the same to the Purchaser.
b. The Company shall have delivered to the Purchaser certificates
representing the number of Initial Shares determined as provided in Section 1
above and the duly executed Warrants in accordance with Section 1 above.
c. The Shares shall be authorized for quotation on NASDAQ and trading in
the Common Stock (or NASDAQ generally) shall not have been suspended or be under
threat of suspension by the SEC or NASDAQ.
d. The representations and warranties of the Company shall be true and
correct 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 specific
date, which representations and warranties shall be true and correct as of such
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 Purchaser shall have received a certificate, executed
on behalf of the Company by its Chief Financial Officer, dated as of the Closing
Date, to the foregoing effect.
16
<PAGE>
e. No statute, rule, regulation, executive order, decree, ruling,
injunction, action, proceeding or interpretation shall have been enacted,
entered, promulgated , endorsed or adopted by any court or governmental
authority of competent jurisdiction or any self-regulatory organization, or the
staff of any thereof, having authority over the matters contemplated hereby
which questions the validity of, or challenges or prohibits the consummation of,
any of the transactions contemplated by this Agreement.
f. The Purchaser shall have received an opinion of the Company's counsel,
dated as of the Closing Date, in substantially the form of Exhibit C attached
---------
hereto.
g. The Company shall have delivered evidence reasonably satisfactory to
the Purchaser that the Company's transfer agent has agreed to act in accordance
with irrevocable instructions in the form attached hereto as Exhibit D.
---------
h. Since July 3, 1998, there has occurred no change or development which
would have a Material Adverse Effect.
8. GOVERNING LAW; MISCELLANEOUS.
----------------------------
a. Governing Law; Jurisdiction. This Agreement shall be governed by and
---------------------------
construed in accordance with the laws of the Commonwealth of Massachusetts
applicable to contracts made and to be performed in the Commonwealth of
Massachusetts. The Company irrevocably consents to the jurisdiction of the
United States federal courts and the state courts located in Boston,
Massachusetts in any suit or proceeding based on or arising under this Agreement
and irrevocably agrees that all claims in respect of such suit or proceeding may
be determined in such courts. The Company irrevocably waives the defense of an
inconvenient forum to the maintenance of such suit or proceeding. The Company
further agrees that service of process upon the Company mailed by first class
mail shall be deemed in every respect effective service of process upon the
Company in any such suit or proceeding. Nothing herein shall affect the right of
the Purchaser to serve process in any other manner permitted by law. The Company
agrees that 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.
b. Counterparts. This Agreement may be executed in two 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 parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
In the event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause the manually executed Execution Page(s)
hereof to be physically delivered to the other party within five (5) days of the
execution hereof.
c. Headings. The headings of this Agreement are for convenience of
--------
reference and shall not form part of, or affect the interpretation of, this
Agreement.
17
<PAGE>
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 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 Purchaser make 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 Purchaser.
f. Notices. Any notices required or permitted to be given under the
-------
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier or confirmed telecopy, in each case addressed to a party. The addresses
for such communications shall be:
If to the Company:
OPEN MARKET, INC.
One Wayside Road
Burlington, MA 01803
Telephone No.: (781) 359-3000
Telecopy No.: (781) 359-8118
Attention: Regina O. Sommer
with a copies to:
OPEN MARKET, INC.
One Wayside Road
Burlington, MA 01803
Telephone No.: (781) 359-3000
Telecopy No.: (781) 359-8129
Attention: Legal Counsel
and
HALE & DORR LLP
60 State Street
Boston, MA 02109
Telephone No.: (617) 526-6000
Telecopy No.: (617) 526-5000
Attention: John H. Chory, Esq.
18
<PAGE>
If to the Purchaser, to the address set forth under the Purchaser's name on
the signature page hereto executed by the Purchaser.
Each party shall provide notice to the other parties 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. Except as
provided herein, neither the Company nor the Purchaser shall assign this
Agreement or any rights or obligations hereunder. Notwithstanding the foregoing,
the Purchaser may assign its rights hereunder to any of its "affiliates," as
that term is defined under the Exchange Act, without the consent of the Company
or to any other person or entity with the consent of the Company. This
provision shall not limit the Purchaser's right to transfer the Securities
pursuant to the terms of this Agreement, the Warrants or the Registration Rights
Agreement or to assign the Purchaser's rights hereunder to any such 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. 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 Purchaser so long as the Purchaser or any of its permitted
assigns own Registrable Securities (as defined in the Registration Rights
Agreement). Moreover, none of the representations and warranties made by the
Company herein shall act as a waiver of any rights or remedies the Purchaser may
have under applicable federal or state securities laws. The Company agrees to
indemnify and hold harmless the Purchaser and each of the Purchaser's officers,
directors, employees, partners, members, agents and affiliates for loss or
damage relating to the Securities purchased hereunder arising as a result of or
related to any breach by the Company of any of its representations or covenants
set forth herein, including advancement of expenses as they are incurred.
j. Publicity. The Company and the Purchaser shall have the right to
---------
approve before issuance any press releases, SEC, NASDAQ or NASD filings, or any
other public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of the Purchaser, to make any press release or SEC, NASDAQ or NASD
filings with respect to such transactions as is required by applicable law and
regulations (although the Purchaser shall be entitled to review and comment upon
any such press release prior to its release). In furtherance of the foregoing,
the Company shall prepare and file with the SEC within five (5) calendar days of
the Closing, a Current Report on Form 8-K describing the transactions
contemplated herein, which Current Report shall include as exhibits copies of
this Agreement, the Warrant and the Registration Rights Agreement.
19
<PAGE>
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. Termination. In the event that the Closing Date shall not have
-----------
occurred on or before July 31, 1998, unless the parties agree otherwise, this
Agreement shall terminate at the close of business on such date.
Notwithstanding any termination of this Agreement, any party not in breach of
this Agreement shall preserve all rights and remedies it may have against
another party hereto for a breach of this Agreement prior to or relating to the
termination hereof.
m. Exclusivity. Until the earlier of the Closing Date or the date this
-----------
Agreement is terminated as provided in Section 8(l) hereof, the Company shall
not directly or indirectly, solicit, initiate, consider or encourage any
proposal or offer from any person other than the Purchaser, relating to the
issuance and the sale of any Common Stock or security, warrant or right
convertible into or exercisable for any Common Stock.
n. Joint Participation in Drafting. Each party to this Agreement has
-------------------------------
participated in the negotiation and drafting of this Agreement, the Warrants
and the Registration Rights Agreement. As such, the language used herein and
therein shall be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction will be applied
against any party to this Agreement.
o. Equitable Relief. The Company acknowledges that a breach by it of its
----------------
obligations hereunder will cause irreparable harm to the Purchaser 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
hereunder (including, but not limited to, its obligations pursuant to Section 5
hereof) will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Agreement (including, but not
limited to, its obligations pursuant to Section 5 hereof), that the Purchaser
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
20
<PAGE>
IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused
this Agreement to be duly executed as of the date first above written.
COMPANY:
OPEN MARKET, INC.
By: /s/ Regina O. Sommer
_____________________________________________
Name: Regina O. Sommer
Title: Senior Vice President and Chief Financial Officer
PURCHASER:
CMG INFORMATION SERVICES, INC.
By: /s/ Andrew Hajducky
_____________________________________________
Name: Andrew Hajducky
Title: Treasurer and Chief Financial Officer
Address: 100 Brickstone Square
Andover, MA 10810
Telephone No.: (978) 684-3660
Telecopy No.: (978) 684-3672
Attention: Andrew Hajducky
Treasurer and Chief Financial Officer
with copies of all notices to:
21
<PAGE>
Exhibit 99.2
------------
SECURITIES PURCHASE AGREEMENT
-----------------------------
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of July 30,
1998, by and among OPEN MARKET, INC., a corporation organized under the laws of
the State of Delaware (the "COMPANY"), with executive offices located at One
Wayside Road, Burlington, MA 01803, and the purchaser (the "PURCHASER") set
forth on the execution page hereof (the "EXECUTION PAGE").
WHEREAS:
A. The Company and the Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("REGULATION D"), as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "SECURITIES ACT");
B. The Purchaser desires to purchase, upon the terms and conditions
stated in this Agreement, (i) up to $15,000,014 of the Company's common stock,
par value $.001 per share (the "COMMON STOCK") (of which not more than 1,004,185
shares shall constitute Initial Shares, as defined in Section 1(c)(i) below and
not more than 200,837 shares shall constitute Adjustment Shares, as defined in
Section 1(d) below) and (ii) warrants (the "WARRANTS"), in the form attached
hereto as Exhibit A, to acquire 251,046 shares of Common Stock. The Initial
---------
Shares and the Adjustment Shares, if any, are collectively referred to herein as
the "SHARES" and the shares of Common Stock issuable upon exercise of or
otherwise pursuant to the Warrants are referred to herein as the "WARRANT
SHARES." The Shares, the Warrants and the Warrant Shares are collectively
referred to herein as the "SECURITIES."
C. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
in the form attached hereto as Exhibit B (the "REGISTRATION RIGHTS AGREEMENT"),
---------
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated thereunder,
and applicable state securities laws, and to repurchase certain Securities under
certain circumstances;
NOW, THEREFORE, the Company and the Purchaser hereby agree as follows:
1
<PAGE>
1. PURCHASE AND SALE OF SHARES AND WARRANTS.
-----------------------------------------
a. Certain Definitions. For purposes of Agreement, the following terms
-------------------
shall have the meanings ascribed to them as provided below:
"ADJUSTMENT DATE" shall mean the earlier of (i) the date a
-------
registration statement filed by the Company pursuant to Section 2(a)(i) of the
Registration Rights Agreement and covering at least the Initial Shares is
declared effective by the SEC, as defined below, or (ii) the 360th day after the
Closing Date.
"ADJUSTMENT DATE MARKET PRICE" shall mean the average Closing Price
during the five (5) Trading Days, as defined below, immediately preceding the
Adjustment Date, appropriately adjusted to reflect any pending stock dividend,
stock split or similar transaction.
"BUSINESS DAY" means any day on which the principal United States
securities exchange or trading market where the Common Stock is listed or
traded as reported by Bloomberg, as defined below, is open for trading.
"CLOSING DATE MARKET PRICE" shall mean the average Closing Price
during the twenty (20) Trading Days immediately preceding the Closing Date,
appropriately adjusted to reflect any pending stock dividend, stock split or
similar transaction.
"CLOSING PRICE" means, for the Common Stock as of any date, the
closing bid price of such security on the principal United States securities
exchange or trading market where such security is listed or traded as reported
by Bloomberg Financial Markets (or a comparable reporting service of national
reputation selected by the Purchaser and reasonably acceptable to the Company
if Bloomberg Financial Markets is not then reporting closing bid prices of such
security) (collectively, "BLOOMBERG"), or if the foregoing does not apply, the
last reported sale price of such security in the over-the-counter market on the
electronic bulletin board for such security as reported by Bloomberg, or, if no
sale price is reported for such security by Bloomberg, the average of the bid
prices of any market makers for such security as reported in the "pink sheets"
by the National Quotation Bureau, Inc., in each case for such date or, if such
date was not a Trading Day (as defined below) for such security, on the next
preceding day which was a Trading Day. If the Closing Price cannot be
calculated for a share of Common Stock as of either of such dates on any of the
foregoing bases, the Closing Price of such security on such date shall be the
fair market value as reasonably determined by an investment banking firm
selected by the Purchaser and reasonably acceptable to the Company, with the
costs of such appraisal to be borne by the Company.
"SEC" means the United States Securities and Exchange Commission.
"TRADING DAY" shall mean a Business Day on which the Common Stock
trades on the principal United States securities exchange or trading market
where such security is listed or traded as reported by Bloomberg.
2
<PAGE>
If the Closing Date is not a Trading Day then for purposes of subclause
(ii) of the definition Per Share Price set forth in Section 1 (b) below, the
Closing Price on the Closing Date shall be the Closing Price on the immediately
preceding day which was a Trading Day. If the Adjustment Date is not a Trading
Day, then for purposes of subclause (iv) of the definition Per Share Price, the
Closing Price on the Adjustment Date shall be the Closing Price on the
immediately preceding day which was a Trading Day.
b. Generally. Except as otherwise provided in this Section 1 and subject
---------
to the satisfaction (or waiver) of the conditions set forth in Section 6 and
Section 7 below, the Purchaser shall purchase the Warrants and the maximum
number of Shares (but not more than 1,205,022 Shares) determined as provided in
this Section 1, and the Company shall issue and sell such Shares to the
Purchaser for a per share purchase price (the "PER SHARE PRICE") equal to the
least of (i) the Closing Date Market Price (ii) the Closing Price on the Closing
- -----
Date, (iii) the Adjustment Date Market Price and (iv) the Closing Price on the
Adjustment Date; provided however that the total purchase price to be paid for
-------- -------
the Warrant and the Shares shall be not more than $15,000,014.
c. Purchase on Closing Date.
------------------------
i. Number of Initial Shares. On the Closing Date the Purchaser
------------------------
shall acquire the number of whole shares of Common Stock as is equal to the
quotient of (A) 15,000,014 divided by (B) an amount (the "ESTIMATED PER SHARE
PRICE") equal to the lesser of (I) the Closing Date Market Price and (II) the
------
Closing Price on the Closing Date; provided, however, that the Purchaser shall
-------- -------
not be required to purchase and the Company shall not be required to issue and
sell more than 1,004,185 shares of Common Stock on the Closing Date. The shares
of Common Stock acquired on the Closing Date are collectively referred to herein
as the "INITIAL SHARES".
ii. Determination of Total Purchase Price. On the Closing Date, the
-------------------------------------
Purchaser shall pay the Company an amount (the "TOTAL PURCHASE PRICE") equal to
the product of (i) the number of Initial Shares to be acquired on the Closing
Date determined in accordance with Section 1(c)(i) above and (ii) the Estimated
Per Share Price, which amount shall constitute the total purchase price for the
Warrants, the Initial Shares and the Adjustment Shares, if any, to be acquired
by and issued to the Purchaser pursuant to the terms hereof.
d. Adjustment Shares. If the Estimated Per Share Price paid by the
-----------------
Purchaser on the Closing Date exceeds the Per Share Price, then, within three
days of the Adjustment Date, the Company shall cause to be issued to the
Purchaser a number of additional shares of Common Stock (the "ADJUSTMENT
SHARES") as is equal to the lesser of (i) twenty percent (20%) of the number of
------
Initial Shares and (ii) the difference between (A) the quotient of (I) the
Total Purchase Price divided by (II) the Per Share Price and (B) the number of
Initial Shares acquired on the Closing Date. (In calculating the number of
Adjustment Shares to be issued to the Purchaser pursuant to the terms of this
Agreement, appropriate adjustments shall be made to
3
<PAGE>
reflect any stock dividend, stock split or similar transaction affecting the
Common Stock from the Closing Date through the close of business on the
Adjustment Date.)
e. Form of Payment. On the Closing Date, the Purchaser shall pay the
---------------
Total Purchase Price for the Warrants and Shares hereunder by wire transfer to
the Company, in accordance with the Company's written wiring instructions,
against delivery of certificates representing the Initial Shares and duly
executed Warrants and the Company shall deliver such Initial Shares and
Warrants against delivery of the Total Purchase Price.
f. Closing Date. Subject to the satisfaction (or waiver) of the
------------
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the sale of the Shares and the Warrants pursuant to this Agreement (the
"CLOSING") shall be 5:00 p.m. Eastern Time on July 30, 1998 or earlier, if
practicable and if mutually agreed by the parties hereto ("CLOSING DATE"). The
Closing shall occur at the offices of Wolf, Block, Schorr and Solis-Cohen LLP ,
Packard Building, 111 South 15th Street, Philadelphia, Pennsylvania 19102 or at
such other place as the parties may otherwise agree.
2. PURCHASER'S REPRESENTATIONS AND WARRANTIES.
------------------------------------------
The Purchaser represents and warrants to the Company as follows:
a. Investment Purpose. The Purchaser is purchasing the Securities for
------------------
the Purchaser's own account and not with a present view towards the public sale
or distribution thereof. The Purchaser understands that the Purchaser must bear
the economic risk of this investment indefinitely, unless the Securities are
registered pursuant to the Securities Act and any applicable state securities or
blue sky laws or an exemption from such registration is available, and that the
Company has no present intention of registering any such Securities other than
as contemplated by the Registration Rights Agreement. Notwithstanding anything
in this Section 2(a) to the contrary, by making the representations herein, the
Purchaser does not agree to hold 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 Securities Act, and any applicable state securities law.
b. Accredited Investor Status. The Purchaser is an "ACCREDITED INVESTOR"
--------------------------
as that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. The Purchaser understands that the Securities
----------------------
are being offered and sold to the Purchaser 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
Purchaser's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Purchaser set forth herein in order to
determine the availability of such exemptions and the eligibility of the
Purchaser to acquire the Securities.
4
<PAGE>
d. Information. The Purchaser and its counsel have been furnished 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 Purchaser or its counsel. The Purchaser and its counsel have
been afforded the opportunity to ask questions of the Company and have received
what the Purchaser believes to be satisfactory answers to any such inquiries.
Neither such inquiries nor any other due diligence investigation conducted by
the Purchaser or its counsel or any of its representatives shall modify, amend
or affect the Purchaser's right to rely on the Company's representations and
warranties contained in Section 3 below. The Purchaser understands that
Purchaser's investment in the Securities involves a high degree of risk.
e. Governmental Review. The Purchaser 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 Resale. The Purchaser understands that (i) except as
------------------
provided in the Registration Rights Agreement, the Securities have not been and
are not being registered under the Securities Act or any state securities laws,
and may not be transferred unless (a) subsequently registered thereunder, or (b)
the Purchaser shall have delivered to the Company an opinion of counsel
reasonably acceptable to the Company (which opinion shall be in form, substance
and scope customary for opinions of counsel in comparable transactions) to the
effect that the Securities to be sold or transferred may be sold or transferred
under an exemption from such registration, or (c) sold under Rule 144
promulgated under the Securities Act (or a successor rule) ("RULE 144"), or (d)
sold or transferred to an affiliate of the Purchaser pursuant to an exemption
under the Securities Act; and (ii) neither the Company nor any other person is
under any obligation to register such Securities under the Securities 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.
g. Legends. The Purchaser understands that the Initial Shares, the
-------
Adjustment Shares, if any, and the Warrants and, until such time as the Initial
Shares, the Adjustment Shares and Warrant Shares, respectively, have been
registered under the Securities Act (including registration pursuant to Rule 416
thereunder) as contemplated by the Registration Rights Agreement or otherwise
may be sold by the Purchaser under Rule 144 (k), the certificates for the
Initial Shares, the Adjustment Shares and the Warrant Shares, respectively, may
bear a restrictive legend in substantially the following form:
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 or sold in the absence of an effective registration statement for
the securities under applicable securities laws unless offered, sold or
transferred under an available exemption from the registration requirements
of those laws.
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
5
<PAGE>
required by state securities laws, (a) the sale of such Security is registered
under the Securities Act (including registration pursuant to Rule 416
thereunder), or (b) such holder provides the Company with an opinion of counsel
reasonably acceptable to the Company, in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that a public sale
or transfer of such Security may be made without registration under the
Securities Act or (c) such holder provides the Company with reasonable
assurances that such Security can be sold under Rule 144(k). The Purchaser
agrees to sell all Securities, including those represented by a certificate(s)
from which the legend has been removed, pursuant to an effective registration
statement or under an exemption from the registration requirements of the
Securities Act. Such legend shall be removed when such Security may be sold
pursuant to an effective registration statement or sold under Rule 144(k).
h. Authorization; Enforcement. The Purchaser has the requisite corporate
--------------------------
power and authority to enter into and perform its obligations under this
Agreement and the Registration Rights Agreement and to purchase the Initial
Shares, the Adjustment Shares and the Warrants in accordance with the terms
thereof. This Agreement and the Registration Rights Agreement have been duly
and validly authorized, executed and delivered on behalf of the Purchaser and
are valid and binding agreements of the Purchaser enforceable in accordance with
their terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other laws affecting creditors' rights and
remedies generally and to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
---------------------------------------------
The Company represents and warrants to the Purchaser as follows:
a. Organization and Qualification. The Company and each of its
------------------------------
subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction in which it is incorporated, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. 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 the nature of the business conducted by it makes such qualification
necessary and where the failure so to qualify would have a Material Adverse
Effect. "MATERIAL ADVERSE EFFECT" means any material adverse effect on (i) the
Securities, (ii) the ability of the Company to perform its obligations hereunder
(including the issuance of the Initial Shares, the Adjustment Shares and the
Warrants) and under the Warrants (including the issuance of the Warrant Shares)
or the Registration Rights Agreement or (iii) the business, operations,
properties, or financial condition of the Company and its subsidiaries, taken as
a whole.
b. Authorization; Enforcement. (i) The Company has the requisite
--------------------------
corporate power and authority to enter into and perform its obligations under
this Agreement, the Warrants and the Registration Rights Agreement, to issue
and sell the Initial Shares, the Adjustment Shares and the Warrants in
accordance with the terms hereof and to issue the Warrant Shares upon exercise
of the Warrants in accordance with the terms thereof; (ii) the execution,
delivery and performance
6
<PAGE>
of this Agreement, the Warrants and the Registration Rights Agreement by the
Company and the consummation by it of the transactions contemplated hereby and
thereby (including, without limitation, the issuance of the Initial Shares, the
Warrants, and the issuance and reservation for issuance of the Adjustment Shares
and the Warrant 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 Warrants, such agreements will constitute, valid and binding obligations
of the Company enforceable against the Company in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other laws affecting creditors' rights and
remedies generally and to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
c. Capitalization. The capitalization of the Company as of the date
--------------
hereof, including the authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant to
the Company's stock option plans, the number of shares issuable and reserved for
issuance pursuant to securities exercisable for, or convertible into or
exchangeable for any shares of capital stock and the number of Adjustment Shares
to be reserved for issuance as required by Section 1(c) hereof and the number
of Warrant Shares to be issued upon the exercise of the Warrants is set forth on
Schedule 3(c). All of such outstanding shares of capital stock have been, or
- -------------
upon issuance will be, validly issued, fully paid and nonassessable. Except as
set forth on Schedule 3(c), no shares of capital stock of the Company (including
------------
the Initial Shares, the Adjustment Shares and the Warrant Shares) are subject to
preemptive rights or any other similar rights of the stockholders of the Company
or any liens or encumbrances. Except for the Securities and as disclosed in
Schedule 3(c), as of the date of this Agreement, (i) there are no outstanding
- -------------
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into or
exercisable 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, and (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 Securities Act
(except the Registration Rights Agreement). Except as set forth on Schedule
--------
3(c), there are no securities or instruments containing antidilution or similar
- ----
provisions that will be triggered by the issuance of the Securities in
accordance with the terms of this Agreement or the Warrants and the holders of
the securities and instruments listed on such Schedule 3(c) have waived any
-------------
rights they may have under such antidilution or similar provisions in connection
with the issuance of the Securities in accordance with the terms of this
Agreement or the Warrants. The Company has made available to the Purchaser true
and correct copies of the Company's Certificate of Incorporation as in effect on
the date hereof ("CERTIFICATE OF INCORPORATION"), the Company's By-laws as in
effect on the date hereof (the "BY-LAWS"), and all other instruments and
agreements governing securities convertible into or exercisable or exchangeable
for capital stock of the Company, except for stock options granted under any
employee benefit plan or director stock option plan of the Company.
7
<PAGE>
d. Issuance of Shares. The Initial Shares and the Adjustment Shares are
------------------
duly authorized and when issued and paid for in accordance with the terms
hereof 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 and will not
impose personal liability upon the holder thereof. The Warrant Shares are duly
authorized and reserved for issuance, and, upon exercise of the Warrants 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 and will not impose personal liability upon the holder thereof.
e. No Conflicts. The execution, delivery and performance of this
------------
Agreement, the Registration Rights Agreement and the Warrants by the Company,
and the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the issuance and reservation for
issuance, as applicable, of the Initial Shares, Adjustment Shares, the Warrants
and the Warrant Shares) will not (i) conflict with or result in a violation of
the Certificate of Incorporation or By-laws or (ii) conflict with, or constitute
a default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, or result in a violation of
any law, rule, regulation, order, judgment or decree (including United States
federal and state securities laws and regulations) applicable to the Company or
any of its subsidiaries or by which any property or asset of the Company or any
of its subsidiaries is bound or affected (except, with respect to clause (ii),
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 any of its
subsidiaries is in violation of its Certificate of Incorporation, By-laws or
other organizational documents and neither the Company nor any of its
subsidiaries is in default (and no event has occurred which, with notice or
lapse of time or both, would put the Company or any of its subsidiaries in
default) under, nor has there occurred any event giving others (with notice or
lapse of time or both) any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, except for actual or possible violations,
defaults or rights as would not, individually or in the aggregate, have a
Material Adverse Effect. The businesses of the Company and its subsidiaries are
not being conducted and, so long as the Purchaser owns any of the Securities
the businesses of the Company and its subsidiaries shall not knowingly be
conducted, in violation of any law, ordinance or regulation of any governmental
entity, except for actual or possible violations, if any, the sanctions for
which either singly or in the aggregate would not have a Material Adverse
Effect. Except as specifically contemplated by this Agreement and as required
under the Securities Act and any applicable state securities laws, the Company
is not required to obtain any consent, approval, authorization or order of, or
make any filing or registration with, any court or governmental agency or any
regulatory or self regulatory agency in order for it to execute, deliver or
perform any of its obligations under this Agreement (including, without
limitation the issuance and sale of the Common Stock as provided hereby), the
Registration Rights Agreement or the Warrants, in each case in accordance with
the terms hereof or thereof. The Company is not in violation of the listing
requirements of the
8
<PAGE>
Nasdaq National Market ("NASDAQ") and does not reasonably anticipate that the
Common Stock will be delisted by NASDAQ in the foreseeable future.
f. SEC Documents, Financial Statements. Since May 28, 1996, the Company
-----------------------------------
has timely filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the Securities Exchange Act
of 1934, as amended (the "EXCHANGE ACT") and has filed all registration
statements and other documents required to be filed by it with the SEC pursuant
to the Securities Act (all of the foregoing filed prior to the date hereof and
after May 28, 1996, and all exhibits included therein and financial statements
and schedules thereto and documents incorporated by reference therein, being
hereinafter referred to herein as the "SEC DOCUMENTS"). The Company has made
available to the Purchaser true and complete copies of the SEC Documents, except
for the exhibits and schedules thereto and the documents incorporated therein.
As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Exchange Act or the Securities Act, as the
case may be, 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. Any statements made in any such SEC Documents
that are or were, required to be updated or amended under applicable law has
been or have been so updated or amended. 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 applicable 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 and recurring year-end audit adjustments). Except as set forth in the
SEC Documents filed prior to the date hereof, the Company has no liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to the date of such SEC Documents and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under generally accepted accounting principles to be
reflected in such SEC Documents, which liabilities and obligations referred to
in clauses (i) and (ii), individually or in the aggregate would not have a
Material Adverse Effect.
g. Absence of Certain Changes. Except as disclosed in the SEC Documents,
--------------------------
since December 31, 1997, there has been no change or development which
individually or in the aggregate has had or would have a Material Adverse
Effect.
9
<PAGE>
h. Absence of Litigation. There is no action, suit, 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, any of its
subsidiaries, or any of their respective directors or officers in their
capacities as such which would have a Material Adverse Effect or which would
adversely affect the validity, enforceability of, or the authority or ability of
the Company to perform its obligations under this Agreement (including the
issuance of the Initial Shares and the Adjustment Shares and the Warrants), the
Registration Rights Agreement, the Warrant (including the issuance of the
Warrant Shares) or any other agreement or document delivered pursuant hereto or
thereto.
i. Intellectual Property. Each of the Company and its subsidiaries owns
---------------------
or is licensed to use all patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights, copyright applications,
licenses, permits, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures) and
other similar rights and proprietary knowledge (collectively, "INTANGIBLES")
necessary for the conduct of its business as now being conducted and as
described in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 and any Quarterly Report on Form 10-Q or Current Report on
Form 8-K filed after December 31, 1997. To the best knowledge of the Company,
neither the Company nor any subsidiary of the Company is infringing upon third
party Intangibles which, individually or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a Material Adverse Effect.
Neither the Company nor any of its subsidiaries has received written notice that
it is infringing upon third party Intangibles which if determined unfavorably to
the Company, individually or in the aggregate would have a Material Adverse
Effect. Except as disclosed in the SEC Documents or as set forth in Schedule
--------
3(i), neither the Company nor any of its subsidiaries has entered into any
- ----
material consent, indemnification, forbearance to sue or settlement agreements
with respect to the validity of the Company's or its subsidiaries' ownership or
right to use its Intangibles. The Company and its subsidiaries have complied, in
all material respects, with their respective contractual obligations relating to
the protection of the Intangibles used pursuant to licenses. To the best
knowledge of the Company, no person is infringing on or violating the
Intangibles owned or used by the Company or its subsidiaries which infringement
or violation would have a Material Adverse Effect.
j. 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 United States 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.
10
<PAGE>
k. Disclosure. All information relating to or concerning the Company set
----------
forth in this Agreement or provided to the Purchaser 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 its subsidiaries or their respective businesses, properties,
operations or financial conditions, which has not been publicly disclosed but,
under applicable law, rule or regulation, would be required to be disclosed by
the Company in a registration statement filed on the date hereof by the Company
under the Securities Act with respect to a primary issuance of the Company's
securities. The Company has not provided, and without the Purchaser's consent
thereto, will not hereafter provide to the Purchaser, any information which,
according to applicable law, rule or regulation, should have been disclosed
publicly by the Company but which has not been disclosed.
l. Acknowledgment Regarding the Purchaser's Purchase of the Securities.
-------------------------------------------------------------------
The Company acknowledges and agrees that the Purchaser is not acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to this Agreement or the transactions contemplated hereby, and the
relationship between the Company and the Purchaser is "arms length" and that any
statement made by the Purchaser or any of its 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 Purchaser's purchase
of Securities and has not been relied upon by the Company, its officers or
directors in any way. The Company further represents to the Purchaser that the
Company's decision to enter into this Agreement has been based solely on an
independent evaluation by the Company and its representatives.
m. Form S-3 Eligibility. The Company is currently eligible to register
--------------------
the resale of its Common Stock on a registration statement on Form S-3 under the
Securities Act. There exist no facts or circumstances that would prohibit or
delay the preparation and filing of a registration statement on Form S-3 with
respect to the Registrable Securities (as defined in the Registration Rights
Agreement).
n. No General Solicitation. Neither the Company nor any of its
-----------------------
affiliates, nor any person acting on its or their behalf has conducted any
"general solicitation," as such term is defined in Regulation D, with respect to
any of the Securities being offered hereby.
o. 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 offerers to
buy any security under circumstances that would require registration of the
Securities being offered hereby under the Securities Act or cause this offering
of Securities to be integrated with any prior offering of securities of the
Company that would require registration of the offering contemplated hereby
under the Securities Act or for purposes of any applicable stockholder approval
provisions.
11
<PAGE>
p. No Brokers to be Paid by Purchaser. The Company has not engaged any
----------------------------------
person to which or to whom brokerage commissions, finder's fees or similar
payments are or will become due in connection with this Agreement or the
transactions contemplated hereby other than Paine Webber Inc. and the Company
acknowledges that it is solely responsible for any amounts owing to Paine
Webber, Inc. in connection with this Agreement and the transactions contemplated
hereby.
q. Acknowledgment of Dilution. Assuming there is no stock dividend,
--------------------------
stock split or other similar transaction affecting the Common Stock, the number
of Initial Shares issuable on the Closing Date in accordance with Section 1(c)
hereof, may increase from the date hereof (but not beyond 1,004,185 shares) and
the number of Adjustment Shares issuable in accordance with Section 1(d) hereof,
may increase from the date hereof (but not beyond 200,837 shares) if the Closing
Price of a Common Stock declines from the date hereof until the Adjustment
Date. The Company acknowledges that its obligation to sell the Shares,
including its obligation to issue Adjustment Shares, if any, in accordance with
the terms of the hereof is absolute and unconditional, regardless of the
dilution that such issuance may have on the ownership interests of other
stockholders subject to the Purchaser's performance of its material obligations
hereunder and subject to applicable bankruptcy, insolvency, reorganization,
fraudulent transfer and other laws affecting creditor's rights and remedies
generally and to general principles of equity (regardless of whether enforcement
is sought in a proceeding at law or in equity).
r. Tax Status. The Company and each of its subsidiaries has made or filed
----------
all federal, state and local income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its subsidiaries has set aside
on its books provisions reasonably 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. The Company has not
executed a waiver with respect to any statute of limitations relating to the
assessment or collection of any federal, state or local tax. Except as set
forth in Schedule 3(r), none of the Company's tax returns has been or is being
-------------
audited by any taxing authority.
s. Title. The Company and its subsidiaries have good title in fee
-----
simple to all real property and good title to all personal property owned by
them which is material to the business of the Company and its subsidiaries, in
each case free and clear of all liens, encumbrances and defects except as set
forth on Schedule 3(s) and such as do not materially affect the value of such
property and do not materially interfere with the use made and proposed to be
made of such property by the Company and its subsidiaries. Any real property
and facilities held under lease by the Company and its subsidiaries are held by
them under valid, subsisting and enforceable leases with such exceptions as are
not material and do not materially interfere with the use made and proposed to
be made of such property and buildings by the Company and its subsidiaries.
12
<PAGE>
4. COVENANTS.
---------
a. Best Efforts. The parties shall use their best efforts timely to
------------
satisfy each of the conditions described in Section 6 and Section 7 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 and to provide a copy
thereof to the Purchaser promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for sale to the Purchaser
pursuant to this Agreement under applicable securities or "blue sky" laws of the
states of the United States or obtain exemption therefrom, and shall provide
evidence of any such action so taken to the Purchaser on or prior to the Closing
Date.
c. Reporting Status. So long as the Purchaser beneficially owns any of
----------------
the Securities, the Company shall timely file all reports required to be filed
with the SEC pursuant to the Exchange Act, and until the Shares have been
subject to an effective registration statement for a period of thirty (30)
consecutive days the Company shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would permit such termination.
d. Use of Proceeds. The Company shall use the net proceeds from the
---------------
sale of the Shares and the Warrant for working capital purposes which may
include acquiring or investing in other related businesses or technologies or
acquiring the rights to use complementary technologies.
e. Expenses. The Company shall reimburse the Purchaser at the Closing
--------
for the out-of-pocket expenses reasonably incurred by the Purchaser and its
affiliates and advisors in connection with the negotiation, preparation,
execution and delivery of this Agreement and the other agreements to be executed
in connection herewith, including, without limitation, in conducting such
Purchaser's and its affiliates' and advisors' reasonable due diligence and such
Purchaser's and its affiliates reasonable attorneys' fees and expenses (the
"EXPENSES"). In addition, from time to time, after the Closing, upon the
Purchaser's written request, the Company shall reimburse the Purchaser for such
Expenses, if any, not covered by the payment made to the Purchaser at the
Closing. Notwithstanding the foregoing, the Company shall not be obligated to
reimburse the Purchaser for more than $50,000 pursuant to this Section 4(f).
f. Financial Information. For a period of two (2) years following the
---------------------
Closing, the Company agrees to send the following reports to the Purchaser: (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, its proxy and information
statements and any Current Reports on Form 8-K; and (ii) within one (1) day
after release, copies of all press releases issued by the Company or any of its
subsidiaries.
13
<PAGE>
g. Reservation of Shares. The Company has and 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 issuance of the maximum number of
Initial Shares and Adjustment Shares as provided in Section 1 hereof and the
full exercise of the Warrants and the issuance of the Warrant Shares in
connection therewith and as otherwise required hereby and by the Warrants. The
Company shall not reduce the number of shares reserved for issuance hereunder or
upon the full exercise of the Warrants (except as a result of any such
conversion or exercise) without the consent of the Purchaser.
h. Listing. On the Closing Date, the Company shall have secured the
-------
listing of the Initial Shares and promptly following the Closing, the Company
shall secure the listing of the Adjustment Shares, if any, and Warrant Shares,
in each case, upon each national securities exchange or automated quotation
system, if any, upon which shares of Common Stock are then listed or quoted
(subject to official notice of issuance) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all Shares from
time to time issuable hereunder and all Warrant Shares from time to time
issuable upon exercise of the Warrants. The Company will use its best efforts
to continue the listing and trading of its Common Stock on the NASDAQ, the New
York Stock Exchange (the "NYSE") or the American Stock Exchange (the "AMEX ")
and will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities
Dealers ("NASD") and such exchanges, as applicable. In the event the Common
Stock is not eligible to be traded on any of the NASDAQ, NYSE or AMEX and the
Common Stock is not eligible for listing on any such exchange or system, the
Company shall use its best efforts to cause the Common Stock to be eligible for
trading in the over-the-counter market on the electronic bulletin board at the
earliest practicable date and remain eligible for trading while any Shares and
Warrant Shares are outstanding. The Company shall promptly provide to the
holders of the Securities copies of any notices it receives regarding the
continued eligibility of the Common Stock for trading in the over-the-counter
market or, if applicable, any securities exchange (including the NASDAQ) on
which securities of the same class or series issued by the Company are then
listed or quoted, if any.
i. Corporate Existence. Until all Shares have been subject to an
-------------------
effective registration statement for a period of at least thirty (30)
consecutive days, the Company shall maintain its corporate existence, except in
the event of a merger, consolidation or sale of all or substantially all of the
Company's assets, as long as the surviving or successor entity in such
transaction assumes the Company's obligations hereunder and under the Warrants
and the agreements and instruments entered into in connection herewith
regardless of whether or not the Company would have had a sufficient number of
shares of Common Stock authorized and available for issuance in order to effect
the issuance of all Shares and the exercise in full of all Warrants outstanding
as of the date of such transaction.
j. No Integrated Offerings. 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
Securities Act or cause this offering of
14
<PAGE>
Securities to be integrated with any other offering of securities by the Company
for purposes of any stockholder approval provision applicable to the Company or
its securities.
k. Redemptions and Dividends. Until all Shares have been issued in
-------------------------
accordance with the terms hereof, the Company shall not, without first obtaining
the written approval of the Purchaser, redeem, or declare or pay any cash
dividend or distribution on, any shares of capital stock of the Company.
5. TRANSFER AGENT INSTRUCTIONS.
---------------------------
a. The Company shall instruct its transfer agent to issue certificates,
registered in the name of the Purchaser or its nominee, for the Adjustment
Shares and the Warrant Shares in such amounts as specified from time to time by
such Purchaser to the Company as provided herein and as required hereby and as
required upon the exercise of the Warrants, as applicable. To the extent and
during the periods provided in Section 2(f) and Section 2(g) of this Agreement,
all such certificates shall bear the restrictive legend specified in Section
2(g) of this Agreement.
b. Except as may be otherwise required by law, the Company warrants that
no instruction other than such instructions referred to in this Section 5, and
stop transfer instructions to give effect to Section 2(f) hereof in the case of
the transfer of the Initial Shares, the Adjustment Shares and the Warrant Shares
prior to registration of the Initial Shares, the Adjustment Shares and the
Warrant Shares under the Securities Act or without an exemption therefrom, 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 Purchaser's obligations and
agreement set forth in Section 2(g) hereof to resell the Securities pursuant to
an effective registration statement or under an exemption from the registration
requirements of applicable securities law.
c. Except as may be otherwise required by law, if the Purchaser provides
the Company with an opinion of counsel reasonably acceptable to the Company,
which opinion shall be in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that the Securities to be sold
or transferred may be sold or transferred pursuant to an exemption from
registration, or the Purchaser provides the Company with reasonable assurances
that such Securities may be sold under Rule 144 and such documentation as the
Company may reasonable require, the Company shall permit the transfer, and, in
the case of the Shares and Warrant Shares, promptly instruct its transfer agent
to issue one or more certificates in such name and in such denominations as
specified by the Purchaser.
15
<PAGE>
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
----------------------------------------------
The obligation of the Company hereunder to issue and sell the Shares and
the Warrants to the Purchaser hereunder is subject to the satisfaction, at 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.
a. The Purchaser shall have executed the signature page to this Agreement
and the Registration Rights Agreement, and delivered the same to the Company.
b. The Purchaser shall have delivered the Total Purchase Price in
accordance with Section 1(e) above.
c. The representations and warranties of the Purchaser shall be true and
correct 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 specific
date, which representations and warranties shall be true and correct as of such
date), and the Purchaser 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 Purchaser at or
prior to the Closing Date.
d. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by 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.
7. CONDITIONS TO THE PURCHASER'S OBLIGATION TO PURCHASE THE SHARES AND THE
-----------------------------------------------------------------------
WARRANTS.
- --------
The obligation of the Purchaser hereunder to purchase the Shares and the
Warrants hereunder is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for the Purchaser's sole benefit and may be waived by the Purchaser at any time
in the Purchaser's sole discretion:
a. The Company shall have executed the signature page to this Agreement
and the Registration Rights Agreement, and delivered the same to the Purchaser.
b. The Company shall have delivered to the Purchaser certificates
representing the number of Initial Shares determined as provided in Section 1
above and the duly executed Warrants in accordance with Section 1 above.
16
<PAGE>
c. The Shares shall be authorized for quotation on NASDAQ and trading in
the Common Stock (or NASDAQ generally) shall not have been suspended or be under
threat of suspension by the SEC or NASDAQ.
d. The representations and warranties of the Company shall be true and
correct 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 specific
date, which representations and warranties shall be true and correct as of such
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 Purchaser shall have received a certificate, executed
on behalf of the Company by its Chief Financial Officer, dated as of the Closing
Date, to the foregoing effect.
e. No statute, rule, regulation, executive order, decree, ruling,
injunction, action, proceeding or interpretation shall have been enacted,
entered, promulgated , endorsed or adopted by any court or governmental
authority of competent jurisdiction or any self-regulatory organization, or the
staff of any thereof, having authority over the matters contemplated hereby
which questions the validity of, or challenges or prohibits the consummation of,
any of the transactions contemplated by this Agreement.
f. The Purchaser shall have received an opinion of the Company's counsel,
dated as of the Closing Date, in substantially the form of Exhibit C attached
---------
hereto.
g. The Company shall have delivered evidence reasonably satisfactory to
the Purchaser that the Company's transfer agent has agreed to act in accordance
with irrevocable instructions in the form attached hereto as Exhibit D.
---------
h. Since July 3, 1998, there has occurred no change or development which
would have a Material Adverse Effect.
i. Any transaction for the sale of Common Stock and/or warrants to
purchase Common Stock entered into between the Company and CMG Information
Services, Inc. during the period between July 1, 1998 and the Closing Date shall
be in a form and on terms and conditions reasonably satisfactory to the
Purchaser.
8. GOVERNING LAW; MISCELLANEOUS.
----------------------------
a. Governing Law; Jurisdiction. This Agreement shall be governed by and
---------------------------
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed in the State of New York. The Company
irrevocably consents to the jurisdiction of the United States federal courts and
the state courts located in New York, New York in any suit or proceeding based
on or arising under this Agreement and irrevocably agrees that all claims in
respect of such suit or proceeding may be determined in such courts. The Company
17
<PAGE>
irrevocably waives the defense of an inconvenient forum to the maintenance of
such suit or proceeding. The Company further agrees that service of process upon
the Company mailed by first class mail shall be deemed in every respect
effective service of process upon the Company in any such suit or proceeding.
Nothing herein shall affect the right of the Purchaser to serve process in any
other manner permitted by law. The Company agrees that 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.
b. Counterparts. This Agreement may be executed in two 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 parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
In the event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause the manually executed Execution Page(s)
hereof to be physically delivered to the other party within five (5) days of the
execution hereof.
c. Headings. The headings of this Agreement are for convenience of
--------
reference 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 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 Purchaser make 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 Purchaser.
f. Notices. Any notices required or permitted to be given under the
-------
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier or confirmed telecopy, in each case addressed to a party. The addresses
for such communications shall be:
18
<PAGE>
If to the Company:
OPEN MARKET, INC.
One Wayside Road
Burlington, MA 01803
Telephone No.: (781) 359-3000
Telecopy No.: (781) 359-8118
Attention: Regina O. Sommer
with a copies to:
OPEN MARKET, INC.
One Wayside Road
Burlington, MA 01803
Telephone No.: (781) 359-3000
Telecopy No.: (781) 359-8129
Attention: Legal Counsel
and
HALE & DORR LLP
60 State Street
Boston, MA 02109
Telephone No.: (617) 526-6000
Telecopy No.: (617) 526-5000
Attention: John H. Chory, Esq.
If to the Purchaser, to the address set forth under the Purchaser's name on
the signature page hereto executed by the Purchaser.
Each party shall provide notice to the other parties 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. Except as
provided herein, neither the Company nor the Purchaser shall assign this
Agreement or any rights or obligations hereunder. Notwithstanding the foregoing,
the Purchaser may assign its rights hereunder to any of its "affiliates," as
that term is defined under the Exchange Act, without the consent of the Company
or to any other person or entity with the consent of the Company. This
provision shall not limit the Purchaser's right to transfer the Securities
pursuant to the terms of this Agreement, the Warrants or the Registration Rights
Agreement or to assign the Purchaser's rights hereunder to any such transferee.
19
<PAGE>
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. 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 Purchaser so long as the Purchaser or any of its permitted
assigns own Registrable Securities (as defined in the Registration Rights
Agreement). Moreover, none of the representations and warranties made by the
Company herein shall act as a waiver of any rights or remedies the Purchaser may
have under applicable federal or state securities laws. The Company agrees to
indemnify and hold harmless the Purchaser and each of the Purchaser's officers,
directors, employees, partners, members, agents and affiliates for loss or
damage relating to the Securities purchased hereunder arising as a result of or
related to any breach by the Company of any of its representations or covenants
set forth herein, including advancement of expenses as they are incurred.
j. Publicity. The Company and the Purchaser shall have the right to
---------
approve before issuance any press releases, SEC, NASDAQ or NASD filings, or any
other public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of the Purchaser, to make any press release or SEC, NASDAQ or NASD
filings with respect to such transactions as is required by applicable law and
regulations (although the Purchaser shall be entitled to review and comment upon
any such press release prior to its release). In furtherance of the foregoing,
the Company shall prepare and file with the SEC within five (5) calendar days of
the Closing, a Current Report on Form 8-K describing the transactions
contemplated herein, which Current Report shall include as exhibits copies of
this Agreement, the Warrant and the Registration Rights Agreement.
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. Termination. In the event that the Closing Date shall not have
-----------
occurred on or before July 31, 1998, unless the parties agree otherwise, this
Agreement shall terminate at the close of business on such date.
Notwithstanding any termination of this Agreement, any party not in breach of
this Agreement shall preserve all rights and remedies it may have against
another party hereto for a breach of this Agreement prior to or relating to the
termination hereof.
m. Exclusivity. Until the earlier of the Closing Date or the date this
-----------
Agreement is terminated as provided in Section 8(l) hereof, the Company shall
not directly or indirectly, solicit, initiate, consider or encourage any
proposal or offer from any person other than the Purchaser, relating to the
issuance and the sale of any Common Stock or security, warrant or right
convertible into or exercisable for any Common Stock.
20
<PAGE>
n. Joint Participation in Drafting. Each party to this Agreement has
-------------------------------
participated in the negotiation and drafting of this Agreement, the Warrants
and the Registration Rights Agreement. As such, the language used herein and
therein shall be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction will be applied
against any party to this Agreement.
o. Equitable Relief. The Company acknowledges that a breach by it of its
----------------
obligations hereunder will cause irreparable harm to the Purchaser 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
hereunder (including, but not limited to, its obligations pursuant to Section 5
hereof) will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Agreement (including, but not
limited to, its obligations pursuant to Section 5 hereof), that the Purchaser
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
21
<PAGE>
IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused
this Agreement to be duly executed as of the date first above written.
COMPANY:
OPEN MARKET, INC.
By: /s/ Regina O. Sommer
---------------------------------------------
Name: Regina O. Sommmer
Title: Senior Vice President and Chief Financial Officer
PURCHASER:
CAPITAL VENTURES INTERNATIONAL
By: Heights Capital Management,
its authorized agent
By: /s/ Michael L. Spolan
---------------------------------------------
Name: Michael L. Spolan
Title: General Counsel and Secretary
Residence: Cayman Islands
Address: c/o Heights Capital Management
425 California, Suite 1100
San Francisco, CA 94104
Telephone No.: (415) 403-6500
Telecopy No.: (415) 403-6525
Attention: Michael Spolan
with copies of all notices to:
Wolf, Block, Schorr and Solis-Cohen LLP
Packard Building - 12th Floor
111 South 15th Street
Philadelphia, PA 19102
Telephone No.: (215) 977-2000
Telecopy No.: (215) 977-2334/2346
Attention:
22
<PAGE>
EXHIBIT 99.3
VOID AFTER 5:00 P.M. NEW YORK CITY
TIME ON JULY 30, 2003
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES
REPRESENTED HEREBY AND THEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED UNLESS THE SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS
ARE MADE PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS.
Right to Purchase Common Shares,
par value $0.001 per share
Date: July 30, 1998
OPEN MARKET, INC.
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, CMG INFORMATION SERVICES,
INC., a corporation organized under the laws of ________________________________
("CMG"), or its registered assigns, is entitled to purchase from OPEN MARKET,
INC., a corporation organized under the laws of the State of Delaware (the
"COMPANY"), at any time or from time to time during the period specified in
Section 2 hereof, 83,682 fully paid and nonassessable shares of the Company's
Common Stock, par value $0.001 per share (the "COMMON STOCK"), at an exercise
price per share (the "EXERCISE PRICE") of $16.43 (and in no event less than
$0.001). The number of shares of Common Stock purchasable hereunder (the
"WARRANT SHARES") and the Exercise Price are subject to adjustment as provided
in Section 4 hereof. The term "WARRANTS" means this Warrant and the other
warrants, if any, of the Company issued in connection with the Securities
Purchase Agreement by and between the Company and CMG, dated July 30, 1998 (the
"SECURITIES PURCHASE AGREEMENT").
This Warrant is subject to the following terms, provisions, and conditions:
1
<PAGE>
1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
----------------------------------------------------------------
Subject to the provisions hereof, including, without limitation, the limitations
contained in Section 7 hereof, this Warrant may be exercised by the holder
hereof, in whole or in part by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "EXERCISE
AGREEMENT"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in cash, by certified or official bank check or by wire
transfer for the account of the Company, of the Exercise Price for the Warrant
Shares specified in the Exercise Agreement or (ii) if the resale of the Warrant
Shares by the holder is not then registered pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), delivery to the Company of a written notice of an election to
effect a Net Issuance (as defined in Section 11(c) below) for the Warrant Shares
specified in the Exercise Agreement. The Warrant Shares so purchased shall be
deemed to be issued to the holder hereof or such holder's designee, as the
record owner of such shares, as of the close of business on the date on which
this Warrant shall have been surrendered, the completed Exercise Agreement shall
have been delivered, and payment shall have been made for such shares as set
forth above. Certificates for the Warrant Shares so purchased, representing the
aggregate number of shares specified in the Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding three (3)
business days, after this Warrant shall have been so exercised. The certificates
so delivered shall be in such denominations as may be requested by the holder
hereof and shall be registered in the name of such holder or such other name as
shall be designated by such holder. If this Warrant shall have been exercised
only in part, then, unless this Warrant has expired, the Company shall, at its
expense, at the time of delivery of such certificates, deliver to the holder a
new Warrant representing the number of shares with respect to which this Warrant
shall not then have been exercised. In the alternative, the holder hereof may
elect to effect exercises of this Warrant through one or more transactions of a
type commonly referred to as a "cashless exercise" in conformity with the
provisions of Regulation T of the Federal Reserve Board of Governors (each a
"CASHLESS EXERCISE"). To effect a Cashless Exercise of this Warrant, the holder
hereof shall deliver to the Company and to a broker selected by such holder and
acceptable to the Company in its reasonable discretion such holder's completed
Exercise Agreement together with instructions for the Company to deliver to such
broker the Warrant Shares issuable upon such exercise, and the Company shall
take such actions as are necessary and appropriate to facilitate such Cashless
Exercise, including (without limitation) to verify to such broker that it will
deliver, and to deliver, such Warrant Shares promptly to such broker.
2. PERIOD OF EXERCISE. This Warrant is exercisable at any time or from
------------------
time to time on or after the date on which this Warrant is issued and before
5:00 p.m., New York City time on the fifth (5th) anniversary of the date of
issuance (the "EXERCISE PERIOD").
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants and
---------------------------------
agrees as follows:
2
<PAGE>
(a) SHARES TO BE FULLY PAID. All Warrant Shares will, upon issuance
-----------------------
in accordance with the terms of this Warrant, be validly issued, fully paid, and
nonassessable and free from all taxes, liens, claims and encumbrances.
(b) RESERVATION OF SHARES. During the Exercise Period, the Company
---------------------
shall at all times have authorized, and reserved for the purpose of issuance
upon exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
(c) LISTING. The Company shall promptly secure the listing of the
-------
shares of Common Stock issuable upon exercise of this Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed or become listed (subject to official notice of
issuance upon exercise of this Warrant) and shall maintain, so long as any other
shares of Common Stock shall be so listed, such listing of all shares of Common
Stock from time to time issuable upon the exercise of this Warrant; and the
Company shall so list on each national securities exchange or automated
quotation system, as the case may be, and shall maintain such listing of, any
other shares of capital stock of the Company issuable upon the exercise of this
Warrant if and so long as any shares of the same class shall be listed on such
national securities exchange or automated quotation system.
(d) CERTAIN ACTIONS PROHIBITED. The Company will not, by amendment of
--------------------------
its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Exercise Price then in effect, and (ii)
will take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
(e) SUCCESSORS AND ASSIGNS. This Warrant will be binding upon any
----------------------
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all of the Company's assets.
4. ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise
-----------------------
Price and the number of Warrant Shares shall be subject to adjustment from time
to time as provided in this Section 4.
In the event that any adjustment of the Exercise Price as required herein
results in a fraction of a cent, such Exercise Price shall be rounded up to the
nearest cent.
(a) ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON ISSUANCE OF
------------------------------------------------------------------
COMMON STOCK. Except as otherwise provided in Sections 4(c) and 4(e) hereof, if
- ------------
and whenever
3
<PAGE>
on or after the date of the Closing under and as defined in the
Securities Purchase Agreement, the Company issues or sells, or in accordance
with Section 4(b) hereof is deemed to have issued or sold, any shares of Common
Stock for no consideration or for a consideration per share less than the Market
Price (as hereinafter defined) on the date of issuance ("DILUTIVE ISSUANCE"),
then effective immediately upon the Dilutive Issuance, the Exercise Price will
be adjusted in accordance with the following formula:
E' = E x O+P/M
-------------
CSDO
where:
E' = the adjusted Exercise Price;
E = the then current Exercise Price;
M = the then current Market Price (as defined in Section 4(1));
O = the number of shares of Common Stock outstanding immediately
prior to the Dilutive Issuance;
P = the aggregate consideration, calculated as set forth in
Section 4(b) hereof, received by the Company upon such
Dilutive Issuance; and
CSDO = the total number of shares of Common Stock Deemed Outstanding
(as defined in Section 4(1)) immediately after the Dilutive
Issuance.
(b) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes of
------------------------------------------
determining the adjusted Exercise Price under Section 4(a) hereof, the following
will be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any manner
-----------------------------
issues or grants any warrants, rights or options, whether or not immediately
exercisable, to subscribe for or to purchase Common Stock or other securities
exercisable, convertible into or exchangeable for Common Stock ("CONVERTIBLE
SECURITIES") (such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as "OPTIONS") and the price
per share for which Common Stock is issuable upon the exercise of such Options
is less than the Market Price on the date of issuance ("BELOW MARKET OPTIONS"),
then the maximum total number of shares of Common Stock issuable upon the
exercise of all such Below Market Options (assuming full exercise, conversion or
exchange of Convertible Securities, if applicable) will, as of the date of the
issuance or grant of such Below Market Options, be deemed to be outstanding and
to have been issued and sold by the Company for such price per share. For
purposes of the preceding sentence, the "price per share for which Common Stock
is issuable upon the exercise of such Below Market Options" is determined by
dividing (i) the total amount, if any, received or receivable by the Company as
consideration for the issuance or granting of all such Below Market Options,
plus the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the exercise of all such Below Market Options, plus, in the
case of Convertible Securities issuable upon the exercise of such Below Market
Options, the minimum aggregate amount of additional consideration payable upon
the exercise, conversion or exchange thereof at the time such Convertible
Securities first become exercisable, convertible or exchangeable, by (ii) the
maximum total number of shares of Common Stock issuable upon the exercise of all
such Below Market Options (assuming full conversion of Convertible Securities,
if applicable). No further adjustment to the Exercise Price will be made upon
the actual issuance of such Common Stock upon the exercise of such Below Market
4
<PAGE>
Options or upon the exercise, conversion or exchange of Convertible Securities
issuable upon exercise of such Below Market Options.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES.
----------------------------------
(A) If the Company in any manner issues or sells any
Convertible Securities, whether or not immediately convertible (other than where
the same are issuable upon the exercise of Options) and the price per share for
which Common Stock is issuable upon such exercise, conversion or exchange (as
determined pursuant to Section 4(b)(ii)(B) if applicable) is less than the
Market Price on the date of issuance, then the maximum total number of shares of
Common Stock issuable upon the exercise, conversion or exchange of all such
Convertible Securities will, as of the date of the issuance of such Convertible
Securities, be deemed to be outstanding and to have been issued and sold by the
Company for such price per share. For the purposes of the preceding sentence,
the "price per share for which Common Stock is issuable upon such exercise,
conversion or exchange" is determined by dividing (i) the total amount, if any,
received or receivable by the Company as consideration for the issuance or sale
of all such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the exercise,
conversion or exchange thereof at the time such Convertible Securities first
become exercisable, convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the exercise, conversion or
exchange of all such Convertible Securities. No further adjustment to the
Exercise Price will be made upon the actual issuance of such Common Stock upon
exercise, conversion or exchange of such Convertible Securities.
(B) If the Company in any manner issues or sells any
Convertible Securities with a fluctuating conversion or exercise price or
exchange ratio (a "VARIABLE RATE CONVERTIBLE SECURITY"), then the price per
share for which Common Stock is issuable upon such exercise, conversion or
exchange for purposes of the calculation contemplated by Section 4(b)(ii)(A)
shall be deemed to be the lowest price per share which would be applicable
(assuming all holding period and other conditions to any discounts contained in
such Convertible Security have been satisfied) if the Market Price on the date
of issuance of such Convertible Security was 75% of the Market Price on such
date (the "ASSUMED VARIABLE MARKET PRICE"). Further, if the Market Price at any
time or times thereafter is less than or equal to the Assumed Variable Market
Price last used for making any adjustment under this Section 4 with respect to
any Variable Rate Convertible Security, the Exercise Price in effect at such
time shall be readjusted to equal the Exercise Price which would have resulted
if the Assumed Variable Market Price at the time of issuance of the Variable
Rate Convertible Security had been 75% of the Market Price existing at the time
of the adjustment required by this sentence.
(ii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If there is a
-----------------------------------------
change at any time in (i) the amount of additional consideration payable to the
Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the exercise, conversion or
exchange of any Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock
(other than under or by reason of provisions designed to protect against
dilution), the Exercise Price in effect at the time of such change will be
readjusted to the Exercise Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding
5
<PAGE>
provided for such changed additional consideration or changed conversion rate,
as the case may be, at the time initially granted, issued or sold.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
--------------------------------------------------------
SECURITIES. If, in any case, the total number of shares of Common Stock
- ----------
issuable upon exercise of any Option or upon exercise, conversion or exchange of
any Convertible Securities is not, in fact, issued and the rights to exercise
such Option or to exercise, convert or exchange such Convertible Securities
shall have expired or terminated, the Exercise Price then in effect will be
readjusted to the Exercise Price which would have been in effect at the time of
such expiration or termination had such Option or Convertible Securities, to the
extent outstanding immediately prior to such expiration or termination (other
than in respect of the actual number of shares of Common Stock issued upon
exercise or conversion thereof), never been issued.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock,
-------------------------------------
Options or Convertible Securities are issued, granted or sold for cash, the
consideration received therefor for purposes of this Warrant will be the amount
received by the Company therefor, before deduction of reasonable commissions,
underwriting discounts or allowances or other reasonable expenses paid or
incurred by the Company in connection with such issuance, grant or sale. In
case any Common Stock, Options or Convertible Securities are issued or sold for
a consideration part or all of which shall be other than cash, the amount of the
consideration other than cash received by the Company will be the fair market
value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the Company
will be the Market Price thereof as of the date of receipt. In case any Common
Stock, Options or Convertible Securities are issued in connection with any
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair market value of
such portion of the net assets and business of the non-surviving corporation as
is attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair market value of any consideration other than cash or
securities will be determined: (a) by the Board of Directors of the Company in
cases where the Common Stock, Options or Convertible Securities are issued to
Strategic Partners (as defined below) or to employees, independent contractors
or others who perform services for the Company (provided that such determination
shall be made in good faith and be based upon the assessment by the Board of
Directors of the value of the services provided to the Company); and (b) in all
other cases, in good faith by an investment banker or other appropriate expert
of national reputation selected by the Company and reasonably acceptable to the
holders hereof, with the costs of such appraisal to be borne by the Company.
For purposes of this Warrant, the term "STRATEGIC PARTNER" means a person or
entity with whom the Company has entered, or proposes to enter, into a strategic
relationship involving the sale, marketing, manufacturing, or development of
products of the Company or such other person or entity.
(vi) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No adjustment
------------------------------------------
to the Exercise Price will be made (i) upon the exercise of any warrants,
options or convertible securities issued and outstanding on the date of the
Closing as defined in the Securities Purchase Agreement in accordance with the
terms of such securities as of such date; (ii) upon the grant or exercise of any
stock or options which may hereafter be granted or exercised under any employee
benefit plan of the Company now existing or to be implemented in the future, so
long as the issuance of such stock or options is approved by a majority of the
non-employee members
6
<PAGE>
of the Board of Directors of the Company or a majority of the members of a
committee of non-employee directors established for such purpose; (iii) upon the
exercise of the Warrants; (iv) upon the issuance of any Adjustment Shares as
defined in the Securities Purchase Agreement and issued in accordance with its
terms; or (v) upon the issuance of the Warrant, the Initial Shares, the
Adjustment Shares or the Warrant Shares as defined in the Securities Purchase
Agreement dated as of July 30, 1998 between the Company and Capital Venture
International (the "CVI SECURITIES PURCHASE AGREEMENT") and as issued in
accordance with the terms of such agreement or the Warrant, as applicable.
(c) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company at any
------------------------------------------
time after the closing under the Securities Purchase Agreement subdivides (by
any stock split, stock dividend, recapitalization, reorganization,
reclassification or otherwise) its shares of Common Stock into a greater number
of shares, then, after the date of record for effecting such subdivision, the
Exercise Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time after the closing under the
Securities Purchase Agreement combines (by reverse stock split,
recapitalization, reorganization, reclassification or otherwise) its shares of
Common Stock into a smaller number of shares, then, after the date of record for
effecting such combination, the Exercise Price in effect immediately prior to
such combination will be proportionately increased.
(d) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the
------------------------------
Exercise Price pursuant to the provisions of this Section 4, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be adjusted
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.
(e) CONSOLIDATION, MERGER OR SALE. In case of any consolidation of
-----------------------------
the Company with, or merger of the Company into any other entity, or in case of
any sale or conveyance of all or substantially all of the assets of the Company
other than in connection with a plan of complete liquidation of the Company at
any time after the closing under the Securities Purchase Agreement, then as a
condition of such consolidation, merger or sale or conveyance, adequate
provision will be made whereby the holder of this Warrant will have the right,
at its sole option, to acquire and receive upon exercise of this Warrant in
lieu of the shares of Common Stock immediately theretofore acquirable upon the
exercise of this Warrant, (i) such shares of stock, securities or assets as may
be issued or payable with respect to or in exchange for the number of shares of
Common Stock immediately theretofore acquirable and receivable upon exercise of
this Warrant had such consolidation, merger or sale or conveyance not taken
place, or (ii) the fair value of this Warrant based on an exercise price equal
to the market price of the Common Stock immediately prior to the first public
announcement of such consolidation, merger or sale or conveyance, otherwise
disregarding the existence of such transaction. In any such case, the Company
will make appropriate provision to insure that the provisions of this Section 4
hereof will thereafter be applicable as nearly as may be in relation to any
shares of stock or securities thereafter deliverable upon the exercise of this
Warrant. The Company will not effect any consolidation, merger or sale or
conveyance unless prior to the consummation thereof, the successor corporation
(if other than the Company) assumes by written instrument the obligations under
this Section 4 and the obligations to deliver to the holder of this Warrant
7
<PAGE>
such shares of stock, securities or assets as, in accordance with the foregoing
provisions, the holder may be entitled to acquire.
(f) DISTRIBUTION OF ASSETS. In case the Company shall declare or make
----------------------
any distribution of its assets (or rights to acquire its assets) to holders of
Common Stock as a partial liquidating dividend, by way of return of capital or
otherwise (including any dividend or distribution to the Company's shareholders
of cash or shares (or rights to acquire shares) of capital stock of a
subsidiary) (a "DISTRIBUTION") at any time after the closing under the
Securities Purchase Agreement, then the holder of this Warrant shall be entitled
upon exercise of this Warrant for the purchase of any or all of the shares of
Common Stock subject hereto, to receive the amount of such assets (or rights)
which would have been payable to the holder had such holder been the holder of
such shares of Common Stock on the record date for the determination of
shareholders entitled to such Distribution.
(g) NOTICE OF ADJUSTMENT. Upon the occurrence of any event which
--------------------
requires any adjustment of the Exercise Price, then, and in each such case, the
Company shall give notice thereof to the holder of this Warrant, which notice
shall state the Exercise Price resulting from such adjustment and the increase
or decrease in the number of Warrant Shares, setting forth in reasonable detail
the method of calculation and the facts upon which such calculation is based.
Such calculation shall be certified by the chief financial officer of the
Company.
(h) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of the
------------------------------------
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(i) NO FRACTIONAL SHARES. No fractional shares of Common Stock are to
--------------------
be issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the Market Price of a share of Common
Stock on the date of such exercise.
(j) OTHER NOTICES. In case at any time:
-------------
(i) the Company shall declare any dividend upon the Common
Stock payable in shares of stock of any class or make any other distribution
(other than dividends or distributions payable in cash out of retained earnings
consistent with the Company's past practices with respect to declaring dividends
and making distributions) to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or other
rights;
(iii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or consolidation or merger of
the Company with or into, or sale of all or substantially all of its assets to,
another corporation or entity; or
8
<PAGE>
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company; then, in each such case, the Company
shall give to the holder of this Warrant (a) notice of the date on which the
books of the Company shall close or a record shall be taken for determining the
holders of Common Stock entitled to receive any such dividend, distribution, or
subscription rights or for determining the holders of Common Stock entitled to
vote in respect of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up and (b) in the case of any
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, notice of the date (or, if not then known, a
reasonable approximation thereof by the Company) when the same shall take place.
Such notice shall also specify the date on which the holders of Common Stock
shall be entitled to receive such dividend, distribution, or subscription rights
or to exchange their Common Stock for stock or other securities or property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, or winding-up, as the case may be. Such notice
shall be given at least 30 days prior to the record date or the date on which
the Company's books are closed in respect thereto. Failure to give any such
notice or any defect therein shall not affect the validity of the proceedings
referred to in clauses (i), (ii), (iii) and (iv) above.
(k) CERTAIN EVENTS. If, at any time after the Closing under the
--------------
Securities Purchase Agreement, any event occurs of the type contemplated by the
adjustment provisions of this Section 4 but not expressly provided for by such
provisions, the Company will give notice of such event as provided in Section
4(g) hereof, and the Company's Board of Directors will make an appropriate
adjustment in the Exercise Price and the number of shares of Common Stock
acquirable upon exercise of this Warrant so that the rights of the holder shall
be neither enhanced nor diminished by such event.
(l) CERTAIN DEFINITIONS.
-------------------
(i) "COMMON STOCK DEEMED OUTSTANDING" shall mean the number
-------------------------------
of shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Company), plus (x) in the case of any
adjustment required by Section 4(a) resulting from the issuance of any Options,
the maximum total number of shares of Common Stock issuable upon the exercise of
the Options for which the adjustment is required (including any Common Stock
issuable upon the conversion of Convertible Securities issuable upon the
exercise of such Options), and (y) in the case of any adjustment required by
Section 4(a) resulting from the issuance of any Convertible Securities, the
maximum total number of shares of Common Stock issuable upon the exercise,
conversion or exchange of the Convertible Securities for which the adjustment is
required, as of the date of issuance of such Convertible Securities, if any.
(ii) "MARKET PRICE," as of any date, (i) means the average of
------------
the closing bid prices for the shares of Common Stock as reported on the NASDAQ
National Market for the five (5) trading days immediately preceding such date,
or (ii) if the NASDAQ National Market is not the principal trading market for
the shares of Common Stock, the average of the last reported bid prices on the
principal trading market for the Common Stock during the same period, or, if
there is no bid price for such period, the last reported sales price for such
period,
9
<PAGE>
or (iii) if market value cannot be calculated as of such date on any of
the foregoing bases, the Market Price shall be the average fair market value as
reasonably determined by an investment banking firm selected by the Company and
reasonably acceptable to the holder, with the costs of the appraisal to be borne
by the Company. The manner of determining the Market Price of the Common Stock
set forth in the foregoing definition shall apply with respect to any other
security in respect of which a determination as to market value must be made
hereunder. Notwithstanding the other provisions of this Section 4(1)(ii), the
Market Price of shares of Common Stock issued by the Company (x) to any
Strategic Partner shall mean the value for such shares as determined in good
faith by the Company's Board of Directors taking into consideration all the
facts and circumstances surrounding the issuance thereof to such Strategic
Partner, based upon the assessment by the Board of Directors of the value of the
services provided, or to be provided, to the Company by such Strategic Partner
and (y) in connection with an underwritten public offering effected at a
discount not in excess of five percent (5%) of the closing bid price reported on
the Nasdaq National Market on the day that such shares are sold to the
underwriters shall mean the price at which such shares are sold to the
underwriters.
(iii) "COMMON STOCK," for purposes of this Section 4,
------------
includes the Common Stock and any additional class of stock of the Company
having no preference as to dividends or distributions on liquidation, provided
that the shares purchasable pursuant to this Warrant shall include only Common
Shares, par value $0.001 per share, in respect of which this Warrant is
exercisable, or shares resulting from any subdivision or combination of such
Common Stock, or in the case of any reorganization, reclassification,
consolidation, merger, or sale of the character referred to in Section 4(e)
hereof, the stock or other securities or property provided for in such Section.
5. ISSUE TAX. The issuance of certificates for Warrant Shares upon the
---------
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
6. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
-----------------------------------------
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase the Warrant Shares, and no mere
enumeration herein of the rights or privileges of the holder hereof, shall give
rise to any liability of such holder for the Exercise Price or as a shareholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
7. TRANSFER. EXCHANGE. REDEMPTION AND REPLACEMENT OF WARRANT.
---------------------------------------------------------
(a) RESTRICTION ON TRANSFER. This Warrant and the rights granted to
-----------------------
the holder hereof are transferable, in whole or in part, upon surrender of this
Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Section 7(e)
below, provided, however, that any transfer or assignment shall be subject to
the conditions set forth in Sections 7(f) and (g) hereof and to the provisions
of Section 2(f) of the Securities Purchase Agreement. Until due presentment for
registration of transfer on the books of the Company, the Company may treat the
registered holder hereof as the owner and
10
<PAGE>
holder hereof for all purposes, and the Company shall not be affected by any
notice to the contrary. Notwithstanding anything to the contrary contained
herein, the registration rights described in Section 8 below are assignable only
in accordance with the provisions of that certain Registration Rights Agreement,
dated as of July 30, 1998 by and among the Company and the other signatory
thereto (the "REGISTRATION RIGHTS AGREEMENT").
(b) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Warrant is
------------------------------------------------
exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Section 7(e) below, for new Warrants of
like tenor of different denominations representing in the aggregate the right to
purchase the number of shares of Common Stock which may be purchased hereunder,
each of such new Warrants to represent the right to purchase such number of
shares as shall be designated by the holder hereof at the time of such
surrender.
(c) REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
----------------------
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
(d) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this
---------------------------------
Warrant in connection with any transfer, exchange, or replacement as provided in
this Section 7, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses (other than legal or due diligence expenses, if any, incurred by the
Holder or transferees) and charges payable in connection with the preparation,
execution, and delivery of Warrants pursuant to this Section 7.
(e) WARRANT REGISTER. The Company shall maintain, at its principal
----------------
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in which
the Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.
(f) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the time of
-----------------------------------------
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act and under applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such exercise, transfer, or exchange, (i)
that the holder or transferee of this Warrant, as the case may be, furnish to
the Company a written opinion of counsel, which counsel shall be reasonably
acceptable to the Company (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to the effect that
such exercise, transfer, or exchange may be made without registration under the
Securities Act and under applicable state securities or blue sky laws, (ii) that
the holder or transferee execute and deliver to the Company an investment letter
in form and substance acceptable to the Company and (iii) that the transferee be
an "ACCREDITED INVESTOR"
11
<PAGE>
as defined in Rule 501(a) promulgated under the Securities Act; provided that no
such opinion, letter or status as an "accredited investor" shall be required in
connection with a transfer pursuant to Rule 144 under the Securities Act.
(g) ADDITIONAL RESTRICTIONS ON EXERCISE OR TRANSFER. Notwithstanding
-----------------------------------------------
anything contained herein to the contrary, in no event shall the holder hereof
exercise Warrants to the extent that (a) the number of shares of Common Stock
beneficially owned by such holder and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unexercised portion of the Warrants or the unexercised or unconverted portion of
any other securities (including, without limitation, the Preferred Stock) of the
Company subject to a limitation on conversion or exercise analogous to the
limitation contained herein) and (b) the number of shares of Common Stock
issuable upon exercise of the Warrants (or portion thereof) with respect to
which the determination described herein is being made, would result in
beneficial Ownership by such holder and its affiliates of more than 4.9% of the
outstanding shares of Common Stock. For purposes of 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) hereof. In addition, no
Subject Holder (as defined below) may sell or otherwise transfer in a private
sale which is not a Permitted Sale (as defined below) during any ninety (90) day
period a portion(s) of the Warrants or any other securities of the Company
subject to limitations on sale or transfer analogous to the limitations
contained herein, which, if exercised for or converted into Common Stock at the
time of the transfer, would represent, in the aggregate (together with any other
shares of Common Stock transferred), beneficial ownership by the transferee(s)
of more than 4.9% of the Common Stock then outstanding. For purposes of this
paragraph, (i) "SUBJECT HOLDER" means any holder of Warrants who, but for the
provisions of the immediately preceding Section and this Section, may be deemed
to beneficially own 5% or more of the outstanding Common Stock of the Company
and (ii) "PERMITTED SALE" means any sale or transfer (x) to the Company or to a
shareholder or a group of shareholders who immediately prior to the sale control
a majority of the Company's voting shares; (y) to an affiliate of such holder;
or (z) in connection with any merger, consolidation, reorganization or sale of
more than 50% of the outstanding Common Stock of the Company. The first holder
of this Warrant, by taking and holding the same, represents to the Company that
such holder is acquiring this Warrant for investment only and not with a view to
the distribution thereof, except pursuant to sales that are exempt from the
registration requirements of the Securities Act and/or sales registered under
the Securities Act.
8. REGISTRATION RIGHTS. The initial holder of this Warrant (and certain
-------------------
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in the Registration Rights
Agreement.
9. NOTICES. Any notices required or permitted to be given under the
-------
terms of this Warrant shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, or
upon receipt or refusal of receipt, if delivered personally or by courier or
12
<PAGE>
confirmed telecopy, in each case addressed to a party. The addresses for such
communications shall be:
If to the Company:
OPEN MARKET, INC.
One Wayside Road
Burlington, MA 01803
Telephone No.: (781) 359-3000
Telecopy No. : (781)359-8118
Attention: Ms. Regina O. Sommer
with a copies to:
OPEN MARKET, INC.
One Wayside Road
Burlington, MA 01803
Telephone No.: (781) 359-3000
Telecopy No.: (781) 359-8129
Attention: Legal Counsel
and
Hale & Dorr LLP
60 State Street
Boston, MA 02109
Telephone No.: (617) 526-6000
Telecopy No.: (617) 526-5000
Attention: John H. Chory, Esq.
and if to the holder, at such address as such holder shall have provided in
writing to the Company, or at such other address as each such party furnishes by
notice given in accordance with this Section 9.
10. GOVERNING LAW; JURISDICTION. This Warrant shall be governed by and
---------------------------
construed in accordance with the laws of the Commonwealth of Massachusetts
applicable to contracts made and to be performed in the Commonwealth of
Massachusetts. The Company irrevocably consents to the jurisdiction of the
United States federal courts and state courts located in Boston, Massachusetts
in any suit or proceeding based on or arising under this Warrant and irrevocably
agrees that all claims in respect of such suit or proceeding may be determined
in such courts. The Company irrevocably waives the defense of an inconvenient
forum to the maintenance of such suit or proceeding. The Company further agrees
that service of process upon the Company mailed by first class mail shall be
deemed in every respect effective service of process upon the Company in any
such suit or proceeding. Nothing herein shall affect the holder's right to serve
process in any other manner permitted by law. The Company agrees that 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.
13
<PAGE>
11. MISCELLANEOUS.
-------------
(a) AMENDMENTS. This Warrant and any provision hereof may only be
----------
amended by an instrument in writing signed by the Company and the holder hereof.
(b) DESCRIPTIVE HEADINGS. The descriptive headings of the several
--------------------
Sections of this Warrant are inserted for purposes of reference only, and shall
not affect the meaning or construction of any of the provisions hereof.
(c) NET ISSUANCE. Notwithstanding anything to the contrary contained
------------
in this Warrant, if this Warrant cannot be exercised through the means of a
Cashless Exercise in a commercially reasonable manner, this Warrant may be
exercised at any time during the Exercise Period, by presentation and surrender
of this Warrant to the Company at its principal executive offices with a written
notice of the holder's intention to effect a net issuance, including a
calculation of the number of shares of Common Stock to be issued upon such
exercise in accordance with the terms hereof (a "NET ISSUANCE"). In the event of
a Net Issuance, in lieu of paying the Exercise Price in cash, the holder shall
surrender this Warrant for that number of shares of Common Stock determined by
multiplying the number of Warrant Shares to which it would otherwise be entitled
by a fraction, the numerator of which shall be the difference between the then
current Market Price per share of the Common Stock and the Exercise Price, and
the denominator of which shall be the then current Market Price per share of
Common Stock.
14
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
COMPANY:
OPEN MARKET, INC.
By: /s/ Regina O. Sommer
---------------------------------------------
Name: Regina O. Sommer
Title: Senior Vice President and Chief Financial Officer
15
<PAGE>
FORM OF EXERCISE AGREEMENT
(To be Executed by the Holder in order to Exercise the Warrant)
The undersigned hereby irrevocably exercises the right to purchase _______
shares of Common Stock of Open Market, Inc., a corporation organized under the
laws of the State of Delaware (the "COMPANY"), evidenced by the attached
Warrant, and herewith makes payment of the Exercise Price with respect to such
shares in full, all in accordance with the conditions and provisions of said
Warrant.
1. The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Common Stock obtained on exercise of the Warrant, except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws, and agrees that the following legend
may be affixed to the stock certificate for the Common Stock hereby subscribed
for if resale of such Common Stock is not registered or if Rule 144(k) is
unavailable:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO THE COMPANY, IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF
COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144(K) UNDER SAID ACT.
2. The undersigned requests that stock certificates for such shares be
issued, and a Warrant representing any unexercised portion hereof be issued,
pursuant to the Warrant in the name of the Holder and delivered to the
undersigned at the address set forth below:
Dated:_____________________
Signature of Holder
Name of Holder (Print)
Address:
16
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights of the undersigned under the within Warrant, with respect to the
number of shares of Common Stock covered thereby set forth herein below, to:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
and hereby irrevocably constitutes and appoints ________________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.
Dated:_______________, ___
In the presence of
________________ Name:
Signature:
Title of Signing Officer or Agent (if any):
Address:
Note: The above signature should correspond
exactly with the name on the face of
the within Warrant.
17
<PAGE>
EXHIBIT 99.4
VOID AFTER 5:00 P.M. NEW YORK CITY
TIME ON JULY 30, 2003
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES
REPRESENTED HEREBY AND THEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED UNLESS THE SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS
ARE MADE PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS.
Right to Purchase Common Shares,
par value $0.001 per share
Date: July 30, 1998
OPEN MARKET, INC.
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, CAPITAL VENTURES INTERNATIONAL, a
corporation organized under the laws of the Cayman Islands ("CVI"), or its
registered assigns, is entitled to purchase from OPEN MARKET, INC., a
corporation organized under the laws of the State of Delaware (the "COMPANY"),
at any time or from time to time during the period specified in Section 2
hereof, 251,046 fully paid and nonassessable shares of the Company's Common
Stock, par value $0.001 per share (the "COMMON STOCK"), at an exercise price per
share (the "EXERCISE PRICE") of $16.43 (and in no event less than $0.001). The
number of shares of Common Stock purchasable hereunder (the "WARRANT SHARES")
and the Exercise Price are subject to adjustment as provided in Section 4
hereof. The term "WARRANTS" means this Warrant and the other warrants, if any,
of the Company issued in connection with the Securities Purchase Agreement by
and between the Company and CVI, dated July 30, 1998 (the "SECURITIES PURCHASE
AGREEMENT").
This Warrant is subject to the following terms, provisions, and conditions:
1
<PAGE>
1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
----------------------------------------------------------------
Subject to the provisions hereof, including, without limitation, the limitations
contained in Section 7 hereof, this Warrant may be exercised by the holder
hereof, in whole or in part by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "EXERCISE
AGREEMENT"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in cash, by certified or official bank check or by wire
transfer for the account of the Company, of the Exercise Price for the Warrant
Shares specified in the Exercise Agreement or (ii) if the resale of the Warrant
Shares by the holder is not then registered pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), delivery to the Company of a written notice of an election to
effect a Net Issuance (as defined in Section 11(c) below) for the Warrant Shares
specified in the Exercise Agreement. The Warrant Shares so purchased shall be
deemed to be issued to the holder hereof or such holder's designee, as the
record owner of such shares, as of the close of business on the date on which
this Warrant shall have been surrendered, the completed Exercise Agreement shall
have been delivered, and payment shall have been made for such shares as set
forth above. Certificates for the Warrant Shares so purchased, representing the
aggregate number of shares specified in the Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding three (3)
business days, after this Warrant shall have been so exercised. The certificates
so delivered shall be in such denominations as may be requested by the holder
hereof and shall be registered in the name of such holder or such other name as
shall be designated by such holder. If this Warrant shall have been exercised
only in part, then, unless this Warrant has expired, the Company shall, at its
expense, at the time of delivery of such certificates, deliver to the holder a
new Warrant representing the number of shares with respect to which this Warrant
shall not then have been exercised. In the alternative, the holder hereof may
elect to effect exercises of this Warrant through one or more transactions of a
type commonly referred to as a "cashless exercise" in conformity with the
provisions of Regulation T of the Federal Reserve Board of Governors (each a
"CASHLESS EXERCISE"). To effect a Cashless Exercise of this Warrant, the holder
hereof shall deliver to the Company and to a broker selected by such holder and
acceptable to the Company in its reasonable discretion such holder's completed
Exercise Agreement together with instructions for the Company to deliver to such
broker the Warrant Shares issuable upon such exercise, and the Company shall
take such actions as are necessary and appropriate to facilitate such Cashless
Exercise, including (without limitation) to verify to such broker that it will
deliver, and to deliver, such Warrant Shares promptly to such broker.
2. PERIOD OF EXERCISE. This Warrant is exercisable at any time or from
------------------
time to time on or after the date on which this Warrant is issued and before
5:00 p.m., New York City time on the fifth (5th) anniversary of the date of
issuance (the "EXERCISE PERIOD").
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants and
---------------------------------
agrees as follows:
2
<PAGE>
(a) SHARES TO BE FULLY PAID. All Warrant Shares will, upon issuance
-----------------------
in accordance with the terms of this Warrant, be validly issued, fully paid, and
nonassessable and free from all taxes, liens, claims and encumbrances.
(b) RESERVATION OF SHARES. During the Exercise Period, the Company
---------------------
shall at all times have authorized, and reserved for the purpose of issuance
upon exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
(c) LISTING. The Company shall promptly secure the listing of the
-------
shares of Common Stock issuable upon exercise of this Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed or become listed (subject to official notice of
issuance upon exercise of this Warrant) and shall maintain, so long as any other
shares of Common Stock shall be so listed, such listing of all shares of Common
Stock from time to time issuable upon the exercise of this Warrant; and the
Company shall so list on each national securities exchange or automated
quotation system, as the case may be, and shall maintain such listing of, any
other shares of capital stock of the Company issuable upon the exercise of this
Warrant if and so long as any shares of the same class shall be listed on such
national securities exchange or automated quotation system.
(d) CERTAIN ACTIONS PROHIBITED. The Company will not, by amendment of
--------------------------
its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Exercise Price then in effect, and (ii)
will take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
(e) SUCCESSORS AND ASSIGNS. This Warrant will be binding upon any
----------------------
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all of the Company's assets.
4. ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise
-----------------------
Price and the number of Warrant Shares shall be subject to adjustment from time
to time as provided in this Section 4.
In the event that any adjustment of the Exercise Price as required herein
results in a fraction of a cent, such Exercise Price shall be rounded up to the
nearest cent.
(a) ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON ISSUANCE OF
------------------------------------------------------------------
COMMON STOCK. Except as otherwise provided in Sections 4(c) and 4(e) hereof, if
- ------------
and whenever
3
<PAGE>
on or after the date of the Closing under and as defined in the Securities
Purchase Agreement, the Company issues or sells, or in accordance with Section
4(b) hereof is deemed to have issued or sold, any shares of Common Stock for no
consideration or for a consideration per share less than the Exercise Price in
effect immediately prior to such issuance or sale ("DILUTIVE ISSUANCE"), then
effective immediately upon the Dilutive Issuance, the Exercise Price will be
adjusted in accordance with the following formula:
E' = (O x E) +P
---------------------
CSDO
where:
E' = the adjusted Exercise Price;
E = the then current Exercise Price;
O = the number of shares of Common Stock outstanding immediately
= prior to the Dilutive Issuance;
P = the aggregate consideration, calculated as set forth in Section
4(b)hereof, received by the Company upon such Dilutive
CSDO = Issuance; and the total number of shares of Common Stock Deemed
Outstanding (as defined in Section 4(1)) immediately after the
Dilutive Issuance.
(b) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes of
------------------------------------------
determining the adjusted Exercise Price under Section 4(a) hereof, the following
will be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any
-----------------------------
manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock or other
securities exercisable, convertible into or exchangeable for Common Stock
("CONVERTIBLE SECURITIES") (such warrants, rights and options to purchase Common
Stock or Convertible Securities are hereinafter referred to as "OPTIONS") and
the price per share for which Common Stock is issuable upon the exercise of such
Options is less than the Exercise Price on the date of issuance ("BELOW EXERCISE
OPTIONS"), then the maximum total number of shares of Common Stock issuable upon
the exercise of all such Below Exercise Options (assuming full exercise,
conversion or exchange of Convertible Securities, if applicable) will, as of the
date of the issuance or grant of such Below Exercise Options, be deemed to be
outstanding and to have been issued and sold by the Company for such price per
share. For purposes of the preceding sentence, the "price per share for which
Common Stock is issuable upon the exercise of such Below Exercise Options" is
determined by dividing (i) the total amount, if any, received or receivable by
the Company as consideration for the issuance or granting of all such Below
Exercise Options, plus the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the exercise of all such Below Exercise
Options, plus, in the case of Convertible Securities issuable upon the exercise
of such Below Exercise Options, the minimum aggregate amount of additional
consideration payable upon the exercise, conversion or exchange thereof at the
time such Convertible Securities first become exercisable, convertible or
exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the exercise of all such Below Exercise Options (assuming full
conversion of Convertible Securities, if applicable). No further adjustment to
the Exercise Price will be made upon the actual issuance of such Common Stock
upon the exercise of such Below Exercise
4
<PAGE>
Options or upon the exercise, conversion or exchange of Convertible Securities
issuable upon exercise of such Below Exercise Options.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES.
----------------------------------
(A) If the Company in any manner issues or sells any
Convertible Securities, whether or not immediately convertible (other than where
the same are issuable upon the exercise of Options) and the price per share for
which Common Stock is issuable upon such exercise, conversion or exchange (as
determined pursuant to Section 4(b)(ii)(B) if applicable) is less than the
Exercise Price on the date of issuance, then the maximum total number of shares
of Common Stock issuable upon the exercise, conversion or exchange of all such
Convertible Securities will, as of the date of the issuance of such Convertible
Securities, be deemed to be outstanding and to have been issued and sold by the
Company for such price per share. For the purposes of the preceding sentence,
the "price per share for which Common Stock is issuable upon such exercise,
conversion or exchange" is determined by dividing (i) the total amount, if any,
received or receivable by the Company as consideration for the issuance or sale
of all such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the exercise,
conversion or exchange thereof at the time such Convertible Securities first
become exercisable, convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the exercise, conversion or
exchange of all such Convertible Securities. No further adjustment to the
Exercise Price will be made upon the actual issuance of such Common Stock upon
exercise, conversion or exchange of such Convertible Securities.
(B) If the Company in any manner issues or sells any
Convertible Securities with a fluctuating conversion or exercise price or
exchange ratio (a "VARIABLE RATE CONVERTIBLE SECURITY"), then the price per
share for which Common Stock is issuable upon such exercise, conversion or
exchange for purposes of the calculation contemplated by Section 4(b)(ii)(A)
shall be deemed to be the lowest price per share which would be applicable
(assuming all holding period and other conditions to any discounts contained in
such Convertible Security have been satisfied) if the Market Price (as defined
in Section 4(l)) on the date of issuance of such Convertible Security was 75% of
the Market Price on such date (the "ASSUMED VARIABLE MARKET PRICE"). Further, if
the Market Price at any time or times thereafter is less than or equal to the
Assumed Variable Market Price last used for making any adjustment under this
Section 4 with respect to any Variable Rate Convertible Security, the Exercise
Price in effect at such time shall be readjusted to equal the Exercise Price
which would have resulted if the Assumed Variable Market Price at the time of
issuance of the Variable Rate Convertible Security had been 75% of the Market
Price existing at the time of the adjustment required by this sentence.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If there
-----------------------------------------
is a change at any time in (i) the amount of additional consideration payable to
the Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the exercise, conversion or
exchange of any Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock
(other than under or by reason of provisions designed to protect against
dilution), the Exercise Price in effect at the time of such change will be
readjusted to the Exercise Price which would
5
<PAGE>
have been in effect at such time had such Options or Convertible Securities
still outstanding provided for such changed additional consideration or changed
conversion rate, as the case may be, at the time initially granted, issued or
sold.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
--------------------------------------------------------
SECURITIES. If, in any case, the total number of shares of Common Stock
- ----------
issuable upon exercise of any Option or upon exercise, conversion or exchange of
any Convertible Securities is not, in fact, issued and the rights to exercise
such Option or to exercise, convert or exchange such Convertible Securities
shall have expired or terminated, the Exercise Price then in effect will be
readjusted to the Exercise Price which would have been in effect at the time of
such expiration or termination had such Option or Convertible Securities, to the
extent outstanding immediately prior to such expiration or termination (other
than in respect of the actual number of shares of Common Stock issued upon
exercise or conversion thereof), never been issued.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common
-------------------------------------
Stock, Options or Convertible Securities are issued, granted or sold for cash,
the consideration received therefor for purposes of this Warrant will be the
amount received by the Company therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Company in connection with such issuance, grant or sale.
In case any Common Stock, Options or Convertible Securities are issued or sold
for a consideration part or all of which shall be other than cash, the amount of
the consideration other than cash received by the Company will be the fair
market value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the Company
will be the Market Price thereof as of the date of receipt. In case any Common
Stock, Options or Convertible Securities are issued in connection with any
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair market value of
such portion of the net assets and business of the non-surviving corporation as
is attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair market value of any consideration other than cash or
securities will be determined: (a) by the Board of Directors of the Company in
cases where the Common Stock, Options or Convertible Securities are issued to
Strategic Partners (as defined below) or to employees, independent contractors
or others who perform services for the Company (provided that such determination
shall be made in good faith and be based upon the assessment by the Board of
Directors of the value of the services provided to the Company); and (b) in all
other cases, in good faith by an investment banker or other appropriate expert
of national reputation selected by the Company and reasonably acceptable to the
holders hereof, with the costs of such appraisal to be borne by the Company. For
purposes of this Warrant, the term "STRATEGIC PARTNER" means a person or entity
with whom the Company has entered, or proposes to enter, into a strategic
relationship involving the sale, marketing, manufacturing, or development of
products of the Company or such other person or entity.
(vi) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No
------------------------------------------
adjustment to the Exercise Price will be made (i) upon the exercise of any
warrants, options or convertible securities issued and outstanding on the date
of the Closing as defined in the Securities Purchase Agreement in accordance
with the terms of such securities as of such date; (ii) upon the grant or
exercise of any stock or options which may hereafter be granted or exercised
under any employee benefit plan of the Company now existing or to be implemented
in the future, so long
6
<PAGE>
as the issuance of such stock or options is approved by a majority of the non-
employee members of the Board of Directors of the Company or a majority of the
members of a committee of non-employee directors established for such purpose;
(iii) upon the exercise of the Warrants; (iv) upon the issuance of any
Adjustment Shares as defined in the Securities Purchase Agreement and issued in
accordance with its terms; or (v) upon the issuance of the Warrant, the Initial
Shares, the Adjustment Shares or the Warrant Shares as defined in the Securities
Purchase Agreement dated as of July 30, 1998 between the Company and CMG
Information Services (the "CMG SECURITIES PURCHASE AGREEMENT") and as issued in
accordance with the terms of such agreement or the Warrant, as applicable.
(c) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the
------------------------------------------
Company at any time after the closing under the Securities Purchase Agreement
subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) its shares of Common Stock into a
greater number of shares, then, after the date of record for effecting such
subdivision, the Exercise Price in effect immediately prior to such subdivision
will be proportionately reduced. If the Company at any time after the closing
under the Securities Purchase Agreement combines (by reverse stock split,
recapitalization, reorganization, reclassification or otherwise) its shares of
Common Stock into a smaller number of shares, then, after the date of record for
effecting such combination, the Exercise Price in effect immediately prior to
such combination will be proportionately increased.
(d) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment
------------------------------
of the Exercise Price pursuant to the provisions of this Section 4, the number
of shares of Common Stock issuable upon exercise of this Warrant shall be
adjusted by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price.
(e) CONSOLIDATION, MERGER OR SALE. In case of any
-----------------------------
consolidation of the Company with, or merger of the Company into any other
entity, or in case of any sale or conveyance of all or substantially all of the
assets of the Company other than in connection with a plan of complete
liquidation of the Company at any time after the closing under the Securities
Purchase Agreement, then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be made whereby the holder of this Warrant
will have the right, at its sole option, to acquire and receive upon exercise of
this Warrant in lieu of the shares of Common Stock immediately theretofore
acquirable upon the exercise of this Warrant, (i) such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for the number of shares of Common Stock immediately theretofore acquirable and
receivable upon exercise of this Warrant had such consolidation, merger or sale
or conveyance not taken place, or (ii) the fair value of this Warrant based on
an exercise price equal to the market price of the Common Stock immediately
prior to the first public announcement of such consolidation, merger or sale or
conveyance, otherwise disregarding the existence of such transaction. In any
such case, the Company will make appropriate provision to insure that the
provisions of this Section 4 hereof will thereafter be applicable as nearly as
may be in relation to any shares of stock or securities thereafter deliverable
upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor corporation (if other than the Company) assumes by
written instrument
7
<PAGE>
the obligations under this Section 4 and the obligations to deliver to the
holder of this Warrant such shares of stock, securities or assets as, in
accordance with the foregoing provisions, the holder may be entitled to acquire.
(f) DISTRIBUTION OF ASSETS. In case the Company shall
----------------------
declare or make any distribution of its assets (or rights to acquire its assets)
to holders of Common Stock as a partial liquidating dividend, by way of return
of capital or otherwise (including any dividend or distribution to the Company's
shareholders of cash or shares (or rights to acquire shares) of capital stock of
a subsidiary) (a "DISTRIBUTION") at any time after the closing under the
Securities Purchase Agreement, then the holder of this Warrant shall be entitled
upon exercise of this Warrant for the purchase of any or all of the shares of
Common Stock subject hereto, to receive the amount of such assets (or rights)
which would have been payable to the holder had such holder been the holder of
such shares of Common Stock on the record date for the determination of
shareholders entitled to such Distribution.
(g) NOTICE OF ADJUSTMENT. Upon the occurrence of any
--------------------
event which requires any adjustment of the Exercise Price, then, and in each
such case, the Company shall give notice thereof to the holder of this Warrant,
which notice shall state the Exercise Price resulting from such adjustment and
the increase or decrease in the number of Warrant Shares, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. Such calculation shall be certified by the chief financial
officer of the Company.
(h) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment
------------------------------------
of the Exercise Price shall be made in an amount of less than 1% of the Exercise
Price in effect at the time such adjustment is otherwise required to be made,
but any such lesser adjustment shall be carried forward and shall be made at the
time and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(i) NO FRACTIONAL SHARES. No fractional shares of Common
--------------------
Stock are to be issued upon the exercise of this Warrant, but the Company shall
pay a cash adjustment in respect of any fractional share which would otherwise
be issuable in an amount equal to the same fraction of the Market Price of a
share of Common Stock on the date of such exercise.
(j) OTHER NOTICES. In case at any time:
-------------
(i) the Company shall declare any dividend upon the
Common Stock payable in shares of stock of any class or make any other
distribution (other than dividends or distributions payable in cash out of
retained earnings consistent with the Company's past practices with respect to
declaring dividends and making distributions) to the holders of the Common
Stock;
(ii) the Company shall offer for subscription pro rata
to the holders of the Common Stock any additional shares of stock of any class
or other rights;
8
<PAGE>
(iii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or consolidation or merger of
the Company with or into, or sale of all or substantially all of its assets to,
another corporation or entity; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also specify the date
on which the holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for stock
or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any defect therein shall not
affect the validity of the proceedings referred to in clauses (i), (ii), (iii)
and (iv) above.
(k) CERTAIN EVENTS. If, at any time after the Closing
--------------
under the Securities Purchase Agreement, any event occurs of the type
contemplated by the adjustment provisions of this Section 4 but not expressly
provided for by such provisions, the Company will give notice of such event as
provided in Section 4(g) hereof, and the Company's Board of Directors will make
an appropriate adjustment in the Exercise Price and the number of shares of
Common Stock acquirable upon exercise of this Warrant so that the rights of the
holder shall be neither enhanced nor diminished by such event.
(l) CERTAIN DEFINITIONS.
-------------------
(i) "COMMON STOCK DEEMED OUTSTANDING" shall mean the
-------------------------------
number of shares of Common Stock actually outstanding (not including shares of
Common Stock held in the treasury of the Company), plus (x) in the case of any
adjustment required by Section 4(a) resulting from the issuance of any Options,
the maximum total number of shares of Common Stock issuable upon the exercise of
the Options for which the adjustment is required (including any Common Stock
issuable upon the conversion of Convertible Securities issuable upon the
exercise of such Options), and (y) in the case of any adjustment required by
Section 4(a) resulting from the issuance of any Convertible Securities, the
maximum total number of shares of Common Stock issuable upon the exercise,
conversion or exchange of the Convertible Securities for which the adjustment is
required, as of the date of issuance of such Convertible Securities, if any.
(ii) "MARKET PRICE," as of any date, (i) means the
------------
average of the closing bid prices for the shares of Common Stock as reported on
the NASDAQ National Market for the
9
<PAGE>
five (5) trading days immediately preceding such date, or (ii) if the NASDAQ
National Market is not the principal trading market for the shares of Common
Stock, the average of the last reported bid prices on the principal trading
market for the Common Stock during the same period, or, if there is no bid price
for such period, the last reported sales price for such period, or (iii) if
market value cannot be calculated as of such date on any of the foregoing bases,
the Market Price shall be the average fair market value as reasonably determined
by an investment banking firm selected by the Company and reasonably acceptable
to the holder, with the costs of the appraisal to be borne by the Company. The
manner of determining the Market Price of the Common Stock set forth in the
foregoing definition shall apply with respect to any other security in respect
of which a determination as to market value must be made hereunder.
Notwithstanding the other provisions of this Section 4(1)(ii), the Market Price
of shares of Common Stock issued by the Company (x) to any Strategic Partner
shall mean the value for such shares as determined in good faith by the
Company's Board of Directors taking into consideration all the facts and
circumstances surrounding the issuance thereof to such Strategic Partner, based
upon the assessment by the Board of Directors of the value of the services
provided, or to be provided, to the Company by such Strategic Partner and (y) in
connection with an underwritten public offering effected at a discount not in
excess of five percent (5%) of the closing bid price reported on the Nasdaq
National Market on the day that such shares are sold to the underwriters shall
mean the price at which such shares are sold to the underwriters.
(iii) "COMMON STOCK," for purposes of this Section 4,
------------
includes the Common Stock and any additional class of stock of the Company
having no preference as to dividends or distributions on liquidation, provided
that the shares purchasable pursuant to this Warrant shall include only Common
Shares, par value $0.001 per share, in respect of which this Warrant is
exercisable, or shares resulting from any subdivision or combination of such
Common Stock, or in the case of any reorganization, reclassification,
consolidation, merger, or sale of the character referred to in Section 4(e)
hereof, the stock or other securities or property provided for in such Section.
5. ISSUE TAX. The issuance of certificates for Warrant Shares upon the
---------
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
6. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
-----------------------------------------
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase the Warrant Shares, and no mere
enumeration herein of the rights or privileges of the holder hereof, shall give
rise to any liability of such holder for the Exercise Price or as a shareholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
7. TRANSFER. EXCHANGE. REDEMPTION AND REPLACEMENT OF WARRANT.
---------------------------------------------------------
(a) RESTRICTION ON TRANSFER. This Warrant and the rights granted to
-----------------------
the holder hereof are transferable, in whole or in part, upon surrender of this
Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company
10
<PAGE>
referred to in Section 7(e) below, provided, however, that any transfer or
assignment shall be subject to the conditions set forth in Sections 7(f) and (g)
hereof and to the provisions of Section 2(f) of the Securities Purchase
Agreement. Until due presentment for registration of transfer on the books of
the Company, the Company may treat the registered holder hereof as the owner and
holder hereof for all purposes, and the Company shall not be affected by any
notice to the contrary. Notwithstanding anything to the contrary contained
herein, the registration rights described in Section 8 below are assignable only
in accordance with the provisions of that certain Registration Rights Agreement,
dated as of July 30, 1998 by and among the Company and the other signatory
thereto (the "REGISTRATION RIGHTS AGREEMENT").
(b) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS.
------------------------------------------------
This Warrant is exchangeable, upon the surrender hereof by the holder hereof at
the office or agency of the Company referred to in Section 7(e) below, for new
Warrants of like tenor of different denominations representing in the aggregate
the right to purchase the number of shares of Common Stock which may be
purchased hereunder, each of such new Warrants to represent the right to
purchase such number of shares as shall be designated by the holder hereof at
the time of such surrender.
(c) REPLACEMENT OF WARRANT. Upon receipt of evidence
----------------------
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant and, in the case of any such loss, theft, or
destruction, upon delivery of an indemnity agreement reasonably satisfactory in
form and amount to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant, the Company, at its expense, will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
(d) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender
---------------------------------
of this Warrant in connection with any transfer, exchange, or replacement as
provided in this Section 7, this Warrant shall be promptly canceled by the
Company. The Company shall pay all taxes (other than securities transfer taxes)
and all other expenses (other than legal or due diligence expenses, if any,
incurred by the Holder or transferees) and charges payable in connection with
the preparation, execution, and delivery of Warrants pursuant to this Section 7.
(e) WARRANT REGISTER. The Company shall maintain, at its
----------------
principal executive offices (or such other office or agency of the Company as it
may designate by notice to the holder hereof), a register for this Warrant, in
which the Company shall record the name and address of the person in whose name
this Warrant has been issued, as well as the name and address of each transferee
and each prior owner of this Warrant.
(f) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the
-----------------------------------------
time of the surrender of this Warrant in connection with any exercise, transfer,
or exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act and under applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such exercise, transfer, or exchange, (i)
that the holder or transferee of this Warrant, as the case may be, furnish to
the Company a written opinion of counsel, which counsel shall be reasonably
acceptable to the Company (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable
11
<PAGE>
transactions) to the effect that such exercise, transfer, or exchange may be
made without registration under the Securities Act and under applicable state
securities or blue sky laws, (ii) that the holder or transferee execute and
deliver to the Company an investment letter in form and substance acceptable to
the Company and (iii) that the transferee be an "ACCREDITED INVESTOR" as defined
in Rule 501(a) promulgated under the Securities Act; provided that no such
opinion, letter or status as an "accredited investor" shall be required in
connection with a transfer pursuant to Rule 144 under the Securities Act.
(g) ADDITIONAL RESTRICTIONS ON EXERCISE OR TRANSFER.
-----------------------------------------------
Notwithstanding anything contained herein to the contrary, in no event shall the
holder hereof exercise Warrants to the extent that (a) the number of shares of
Common Stock beneficially owned by such holder and its affiliates (other than
shares of Common Stock which may be deemed beneficially owned through the
ownership of the unexercised portion of the Warrants or the unexercised or
unconverted portion of any other securities (including, without limitation, the
Preferred Stock) of the Company subject to a limitation on conversion or
exercise analogous to the limitation contained herein) and (b) the number of
shares of Common Stock issuable upon exercise of the Warrants (or portion
thereof) with respect to which the determination described herein is being made,
would result in beneficial Ownership by such holder and its affiliates of more
than 4.9% of the outstanding shares of Common Stock. For purposes of 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) hereof. In addition, no Subject Holder (as defined below) may sell or
otherwise transfer in a private sale which is not a Permitted Sale (as defined
below) during any ninety (90) day period a portion(s) of the Warrants or any
other securities of the Company subject to limitations on sale or transfer
analogous to the limitations contained herein, which, if exercised for or
converted into Common Stock at the time of the transfer, would represent, in the
aggregate (together with any other shares of Common Stock transferred),
beneficial ownership by the transferee(s) of more than 4.9% of the Common Stock
then outstanding. For purposes of this paragraph, (i) "SUBJECT HOLDER" means any
holder of Warrants who, but for the provisions of the immediately preceding
Section and this Section, may be deemed to beneficially own 5% or more of the
outstanding Common Stock of the Company and (ii) "PERMITTED SALE" means any sale
or transfer (x) to the Company or to a shareholder or a group of shareholders
who immediately prior to the sale control a majority of the Company's voting
shares; (y) to an affiliate of such holder; or (z) in connection with any
merger, consolidation, reorganization or sale of more than 50% of the
outstanding Common Stock of the Company. The first holder of this Warrant, by
taking and holding the same, represents to the Company that such holder is
acquiring this Warrant for investment only and not with a view to the
distribution thereof, except pursuant to sales that are exempt from the
registration requirements of the Securities Act and/or sales registered under
the Securities Act.
8. REGISTRATION RIGHTS. The initial holder of this Warrant (and certain
-------------------
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in the Registration Rights
Agreement.
12
<PAGE>
9. NOTICES. Any notices required or permitted to be given under the
-------
terms of this Warrant shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, or
upon receipt or refusal of receipt, if delivered personally or by courier or
confirmed telecopy, in each case addressed to a party. The addresses for such
communications shall be:
If to the Company:
OPEN MARKET, INC.
One Wayside Road
Burlington, MA 01803
Telephone No.: (781) 359-3000
Telecopy No. : (781)359-8118
Attention: Ms. Regina O. Sommer
with a copies to:
OPEN MARKET, INC.
One Wayside Road
Burlington, MA 01803
Telephone No.: (781) 359-3000
Telecopy No.: (781) 359-8129
Attention: Legal Counsel
and
Hale & Dorr LLP
60 State Street
Boston, MA 02109
Telephone No.: (617) 526-6000
Telecopy No.: (617) 526-5000
Attention: John H. Chory, Esq.
and if to the holder, at such address as such holder shall have provided in
writing to the Company, or at such other address as each such party furnishes by
notice given in accordance with this Section 9.
10. GOVERNING LAW; JURISDICTION. This Warrant shall be governed by and
---------------------------
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed in the State of New York. The Company
irrevocably consents to the jurisdiction of the United States federal courts and
state courts located in New York, New York in any suit or proceeding based on or
arising under this Warrant and irrevocably agrees that all claims in respect of
such suit or proceeding may be determined in such courts. The Company
irrevocably waives the defense of an inconvenient forum to the maintenance of
such suit or proceeding. The Company further agrees that service of process upon
the Company mailed by first class mail shall be deemed in every respect
effective service of process upon the Company in any such suit or
13
<PAGE>
proceeding. Nothing herein shall affect the holder's right to serve process in
any other manner permitted by law. The Company agrees that 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.
11. MISCELLANEOUS.
-------------
(a) AMENDMENTS. This Warrant and any provision hereof may
----------
only be amended by an instrument in writing signed by the Company and the
holder hereof.
(b) DESCRIPTIVE HEADINGS. The descriptive headings of the
--------------------
several Sections of this Warrant are inserted for purposes of reference only,
and shall not affect the meaning or construction of any of the provisions
hereof.
(c) NET ISSUANCE. Notwithstanding anything to the contrary
------------
contained in this Warrant, if this Warrant cannot be exercised through the means
of a Cashless Exercise in a commercially reasonable manner, this Warrant may be
exercised at any time during the Exercise Period, by presentation and surrender
of this Warrant to the Company at its principal executive offices with a written
notice of the holder's intention to effect a net issuance, including a
calculation of the number of shares of Common Stock to be issued upon such
exercise in accordance with the terms hereof (a "NET ISSUANCE"). In the event of
a Net Issuance, in lieu of paying the Exercise Price in cash, the holder shall
surrender this Warrant for that number of shares of Common Stock determined by
multiplying the number of Warrant Shares to which it would otherwise be entitled
by a fraction, the numerator of which shall be the difference between the then
current Market Price per share of the Common Stock and the Exercise Price, and
the denominator of which shall be the then current Market Price per share of
Common Stock.
14
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
COMPANY:
OPEN MARKET, INC.
By: /s/ Regina O. Sommer
---------------------------------------------
Name: Regina O. Sommer
Title: Senior Vice President and Chief Financial Officer
15
<PAGE>
FORM OF EXERCISE AGREEMENT
(To be Executed by the Holder in order to Exercise the Warrant)
The undersigned hereby irrevocably exercises the right to purchase _______
shares of Common Stock of Open Market, Inc., a corporation organized under the
laws of the State of Delaware (the "COMPANY"), evidenced by the attached
Warrant, and herewith makes payment of the Exercise Price with respect to such
shares in full, all in accordance with the conditions and provisions of said
Warrant.
1. The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Common Stock obtained on exercise of the Warrant, except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws, and agrees that the following legend
may be affixed to the stock certificate for the Common Stock hereby subscribed
for if resale of such Common Stock is not registered or if Rule 144(k) is
unavailable:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
SAID ACT, OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY,
IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN
COMPARABLE TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR UNLESS SOLD PURSUANT TO RULE 144(K) UNDER SAID ACT.
2. The undersigned requests that stock certificates for such shares be
issued, and a Warrant representing any unexercised portion hereof be issued,
pursuant to the Warrant in the name of the Holder and delivered to the
undersigned at the address set forth below:
Dated:_____________________
Signature of Holder
Name of Holder (Print)
Address:
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights of the undersigned under the within Warrant, with respect to the
number of shares of Common Stock covered thereby set forth herein below, to:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
and hereby irrevocably constitutes and appoints ________________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.
Dated:_______________, ___
In the presence of
________________ Name:
Signature:
Title of Signing Officer or Agent (if any):
Address:
Note: The above signature should correspond
exactly with the name on the face of the
within Warrant.
<PAGE>
EXHIBIT 99.5
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this AGREEMENT"), dated as of July 30,
1998, by and among OPEN MARKET, INC., a corporation organized under the laws of
the State of Delaware, with executive offices located at One Wayside Road,
Burlington, MA 01803 (the "COMPANY"), and the undersigned (together with
affiliates, the "INITIAL INVESTOR").
WHEREAS:
A. In connection with the Securities Purchase Agreement of even date
herewith by and between the Company and the Initial Investor (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 Investor (i) Five
Million United States Dollars ($5,000,000) of the Company's common stock, par
value $.001 per share (the "COMMON STOCK") of which the shares issued at the
Closing (under and as defined in the Securities Purchase Agreement) constitute
Initial Shares (as defined in the Securities Purchase Agreement) and 20% of the
Initial Shares constitute Adjustment Shares (as defined in the Securities
Purchase Agreement) which shares may be issuable as a result of a decline in the
Closing Price (as defined in the Securities Purchase Agreement) of the Common
Stock after the Closing Date, (as defined in the Securities Purchase Agreement),
and (ii) warrants (the "WARRANTS") to acquire an aggregate of 83,682 shares of
Common Stock (the "WARRANT SHARES").
B. To induce the Initial Investor 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 thereunder, or any similar successor statute (collectively, the
"SECURITIES 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 the Initial
Investor hereby agree as follows:
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have the
following meanings:
1
<PAGE>
(i) "INVESTORS" means the Initial Investor and any transferees or
assignees who agree to become bound by the provisions of this Agreement in
accordance with Section 9 hereof and are entitled to the rights 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 Securities Act and pursuant to Rule 415 under
the Securities 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 (a) the Initial Shares, (b) the
Adjustment Shares, if any, (c) the Warrant Shares and (d) any shares of capital
stock issued or issuable, from time to time (with any adjustments), as a
distribution on or in exchange for or otherwise with respect to any of the
foregoing, provided, however, that shares of capital stock which are Registrable
Securities shall cease to be Registrable Securities upon (i) any resale thereof
pursuant to a Registration Statement filed under the Securities Act or pursuant
to Rule 144 promulgated under the Securities Act or any other similar rule or
regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration ("RULE 144"), or
(ii) any sale in any manner to a person or entity which, by virtue of Section 9,
is not entitled to the rights provided by this Agreement.
(iv) "REGISTRATION STATEMENT" means a registration statement of the
Company under the Securities Act.
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 Registrations.
-----------------------
(i) The Company shall prepare and use its best efforts to file with
the SEC on or prior to the date (the "FILING DATE") which is ten (10) days after
the Closing Date, 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 all of the Registrable Securities, covering the resale
of the Registrable Securities, which Registration Statement, to the extent
allowable under the Securities Act and the Rules promulgated thereunder
(including Rule 416), shall state that such Registration Statement also covers
such number of additional shares of Common Stock as may become issuable as
Adjustment Shares pursuant to the Securities Purchase Agreement or upon the
exercise of the Warrants, to prevent dilution by reason of (i) stock splits,
stock dividends or similar transactions or (ii) reductions in the Exercise Price
of the Warrants in accordance with the terms thereof, and/or (iii) a decline in
the Per Share Purchase Price to the extent the Closing Price of the Common Stock
decreases after the Closing Date and
2
<PAGE>
on or prior to the Adjustment Date. The Registrable Securities included in the
Registration Statement filed in accordance with this Section 2(a)(i) shall be
allocated to the Investors as set forth in Section 11(k) hereof. Such
Registration Statement (and each amendment or supplement thereto, and each
request for acceleration of effectiveness thereof) shall be provided to the
Initial Investor and its counsel prior to its filing or other submission. The
Company shall use its best efforts to cause the Registration Statement to be
filed pursuant to this Section 2(a)(i) hereof to become effective as soon as
practicable after the filing thereof.
(ii) If after the initial filing of a Registration Statement covering
all of the Registrable Securities as required by the first sentence of Section
2(a)(i) above, the SEC advises the Company (the "SEC DENIAL") that the SEC will
not permit the registration of the resale of the Adjustment Shares or the
Warrant Shares, or both, as the case may be, until the actual issuance of such
shares, then, the Company may abandon its efforts to cause the shares
identified in the SEC Denial to be included in the Registration Statement
required by the first sentence of Section 2(i)(a) above upon advanced written
notice (the "ABANDONMENT NOTICE" ) sent by the Company to the Investors and
accompanied by the SEC Denial, if in writing. In addition, at any time
Investors holding a majority in interest of the Registrable Securities may
require that the Company abandon its efforts to cause Registrable Shares that
have not been issued to be included in the Registration Statement required by
the first sentence of Section 2(a)(i) above by sending to the Company an
Abandonment Notice.
(iii) If the Adjustment Shares are for any reason not included in the
Registration Statement required by the first sentence of Section 2(a)(i) above,
and if such shares are required to be issued as provided in the Securities
Purchase Agreement, the Company shall prepare and use its best efforts to file
with the SEC on or prior to the date (the "ADJUSTMENT SHARE FILING DATE") which
is three (3) business days after the Adjustment Date, 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 resale of the
Adjustment Shares, if any, and any shares of capital stock issued or issuable,
from time to time (with any adjustments), as a distribution on or in exchange
for or otherwise with respect to any of the Adjustment Shares. The Registrable
Securities included in the Registration Statement filed in accordance with this
Section 2(a)(iii) shall be allocated to the Investors as set forth in Section
11(k) hereof. Such Registration Statement (and each amendment or supplement
thereto, and each request for acceleration of effectiveness thereof) shall be
provided to the Initial Investor and its counsel prior to its filing or other
submission. The Company shall use its best efforts to cause the Registration
Statement required to be filed pursuant to this Section 2(a)(iii) to become
effective as soon as practicable after the filing thereof.
(iv) If the Warrant Shares are for any reason not included in the
Registration Statement required by the first sentence of Section 2(a)(i) above,
the Investors who hold a majority in interest of outstanding Warrant Shares, may
request and the Company shall prepare and use its best efforts to file with the
SEC on or prior to a date (the "WARRANT SHARE FILING DATE") which is twenty (20)
days after the date of such request (the "REQUEST DATE"), a Registration
Statement on Form S-3 (or, if Form S-3 is not then available, on such form of
3
<PAGE>
Registration Statement as is then available) to effect a registration of the
resale of the outstanding Warrant Shares and any shares of capital stock issued
or issuable from time to time (with any adjustments), as a distribution on or in
exchange for or otherwise with respect to any of the outstanding Warrant Shares.
The Registrable Securities included in the Registration Statement filed in
accordance with this Section 2(a)(iv) shall be allocated to the Investors as set
forth in Section 11(k) hereof. Such Registration Statement (and each amendment
or supplement thereto, and each request for acceleration of effectiveness
thereof) shall be provided to the Initial Investor and its counsel prior to its
filing or other submission. The Company shall use its best efforts to cause the
Registration Statement required to be filed pursuant to this Section 2(a)(iv) to
become effective as soon as practicable after the filing thereof. The Investors
shall be entitled two (2) registrations under this Section 2(a)(iv) for which
the Company will pay all registration expenses as provided in Section 5 hereof,
provided that each Registration Statement shall cover not less than fifty
thousand (50,000) Warrant Shares.
b. Underwritten Offering. If any Registration Statement filed pursuant
---------------------
to Section 2(a) hereof involves an underwritten offering, the Investors who hold
a majority in interest of the Registrable Securities subject to such
underwritten offering, with the consent of the Initial Investor, shall have the
right to select one legal counsel to represent the Investors and an investment
banker or bankers and manager or managers to administer the offering, which
investment banker or bankers or manager or managers shall be reasonably
satisfactory to the Company. In the event that any Investors elect not to
participate in such underwritten offering, the Registration Statement covering
all of the Registrable Securities shall contain appropriate plans of
distribution reasonably satisfactory to the Investors participating in such
underwritten offering and the Investors electing not to participate in such
underwritten offering (including, without limitation, the ability of
nonparticipating Investors to sell from time to time and at any time during the
effectiveness of such Registration Statement).
c. Payments by the Company.
-----------------------
(i) If (A) the Registration Statement(s) covering the Registrable
Securities required to be filed by the Company pursuant to Section 2(a) (i) and
2(a)(iii) above are not declared effective by the SEC on or before (x) sixty
(60) calendar days after the Filing Date in respect of the Registration
Statement filed pursuant to Section 2(a)(i) above, (y) twenty (20 )calendar days
after the Adjustment Share Filing Date in respect of a Registration Statement
filed pursuant to Section 2(a)(iii) above and (z) thirty (30) calendar days
after the Warrant Share Filing Date in respect of a Registration Statement filed
pursuant to Section 2(a)(iv) (each a "REGISTRATION DEADLINE") or (B) after the
applicable Registration Statement has been declared effective by the SEC, sales
of all applicable Registrable Securities (including any Registrable Securities
required to be registered pursuant to Section 3(b) hereof) cannot be made
pursuant to such Registration Statement (by reason of a stop order or the
Company's failure to update such Registration Statement (unless within the
period specified in Section 3(f) below) for any other reason outside the control
of the Investors), then the Company will make payments to the Investors in such
amounts and at such times as shall be determined pursuant to this Section 2(c)
as the sole and exclusive relief for the damages to the Investors by reason of
any such delay in
4
<PAGE>
their ability to sell the Registrable Securities; provided that such remedy
shall not be the sole and exclusive in the event the Company has breached its
obligations under this Agreement.
(ii) The Company shall pay to each Investor an amount equal to the sum
---
of (i) the product of (a) the Total Purchase Price (as defined in the Securities
Purchase Agreement) multiplied by (b) a fraction, the numerator of which is
----------
equal to the number of Registrable Securities held by such Investor as
determined pursuant to Section 11(k) and the denominator of which is the total
number of Registrable Securities determined in the same manner (the "INVESTOR'S
FRACTIONAL INTEREST OF REGISTRABLE SHARES"), multiplied by (c) one-half of one
-----------
percent ( 1/2 % ) for the first thirty (30) days or portion thereof, pro rata,
after the Registration Deadline provided in Section 2(c)(i)(A)(x) and prior to
the date the Registration Statement filed pursuant to Section 2(a)(i) is
declared effective by the SEC, or the first thirty (30) days or portion
thereof, pro rata, that sales of any Registrable Securities cannot be made
pursuant to such Registration Statement after the Registrations Statement has
been declared effective after the period in Section 3(f) below has expired plus
----
(ii) the product of (a) the Total Purchase Price multiplied by (b) the
----------
Investor's Fractional Interest of Registrable Securities multiplied by (c) one
-----------
and one-half percent (1 1/2 %) for the second thirty (30) days or portion
thereof, pro rata, after the Registration Deadline provided in Section 2(a)(i)
hereof and prior to the date the Registration Statement filed pursuant to
Section 2(a)(i) hereof is declared effective by the SEC or the second thirty
(30) days or portion thereof, pro rata, that sales of any Registrable Securities
cannot be made pursuant to such Registration Statement after such Registration
Statement has been declared effective after the period in Section 3(f) below has
expired. If the Company is current in the payment of the foregoing penalties
and has paid in full the aggregate Redemption Price (as defined in Section 2(d))
for all shares of Common Stock subject to Redemption Notices as defined in and
as given in accordance with Section 2(d) below hereof, no additional penalties
shall be payable under this Section 2(c)(ii). If however, the Company is not
current in the payment of the penalties described in this Section 2(c)(ii) or
has not paid in full the aggregate Redemption Price for all shares of Common
Stock subject to Redemption Notices given in accordance with Section 2(d) below,
then the penalties shall be deemed to recommence on the 120th day after the
Closing Date at the rate of two percent (2%) for every thirty (30) day period or
portion thereof, pro rata, thereafter, until all penalties have been paid in
full and all obligations to redeem shares pursuant to Section 2(d) have been
honored.
(iii) The Company shall pay to each Investor an amount equal to the
sum of (i) the product of (a) the Total Purchase Price multiplied by (b) a
----------
fraction, the numerator of which is the total number of Adjustment Shares and
the denominator of which is the total number of Shares (as such term is defined
in the Securities Purchase Agreement) issued in accordance with the terms of the
Securities Purchase Agreement, multiplied by (c) a fraction, the numerator of
----------
which is equal to the number of Adjustment Shares held by such Investor and the
denominator of which is the total number of all Adjustment Shares (the
"INVESTOR'S FRACTIONAL INTEREST OF ADJUSTMENT SHARES"), multiplied (d) by one-
----------
half of one percent ( 1/2 % ) for the first thirty (30) days, or portion
thereof, pro rata, after the Registration Deadline provided in Section
2(c)(i)(A)(y) and prior to the date the Registration Statement filed pursuant to
Section 2(a)(iii) is declared effective by the SEC, or the first thirty (30)
days or portion thereof, pro rata, that
5
<PAGE>
sales of any Adjustment Shares cannot be made pursuant to such Registration
Statement after such Registration Statement has been declared effective plus
----
(ii) the product of (a) the Total Purchase Price multiplied by (b) a fraction,
----------
the numerator of which is the total number of Adjustment Shares and the
denominator of which is the total number of Shares issued in accordance with the
terms of the Securities Purchase Agreement, multiplied by (c) the Investor's
----------
Fractional Interest of Adjustment Shares multiplied by (d) one and one-half
----------
percent (1 1/2 %) for the second thirty (30) days or portion thereof, pro rata,
after the Registration Deadline provided in Section 2(c)(i)(A)(y) hereof and
prior to the date the Registration Statement filed pursuant to Section 2(a)(iii)
hereof is declared effective by the SEC or the second thirty (30) days or
portion thereof, pro rata, that sales of any Adjustment Shares cannot be made
pursuant to such Registration Statement after such Registration Statement has
been declared effective after the period specified in Section 3(f) below has
expired. Notwithstanding the foregoing, no penalties shall accrue under this
Section 2(c)(iii) by reason of the failure of the Registration Statement to be
declared effective on or before the Registration Deadline provided in Section
2(c)(i)A)(y) if such Registration Statement is declared effective on or before
the lapse of forty (40) calendar days after the Adjustment Share Filing Date.
If, however such Registration Statement is not declared effective on or before
the lapse of forty (40) calendar days after the Adjustment Date Filing Date, the
penalties under this Section 2(c)(iii) shall be deemed to have commenced as of
the Registration Deadline provided in Section 2(c)(i)(A)(y). If the Company is
current in the payment of the penalties described in this Section 2(c)(iii) and
has paid in full the aggregate Redemption Price for all shares of Common Stock
subject to Redemption Notice(s) given in accordance with Section 2(d) below, no
additional penalties shall be payable under this Section 2(c)(iii). If however,
the Company is not current in the payment of the penalties described in this
Section 2(c)(iii) or has not paid in full the aggregate Redemption Price for all
shares of Common Stock subject to Redemption Notice(s) given in accordance with
Section 2(d) below, then the penalties under this Section 2(c)(iii) shall be
deemed to recommence on the seventy-fifth (75th) day after the Adjustment Date
at the rate of two percent (2%) for every thirty (30) day period , or portion
thereof, pro rata, thereafter, until all penalties have been paid in full and
all obligations to redeem shares pursuant to Section 2(d) have been honored.
(iv) The Company shall pay to each Investor who requested that its
Warrant Shares be included in a Registration Statement filed pursuant to Section
2(c)(iv) an amount equal to the sum of (i) the product of (a) the difference
between (I) the Closing Price of a share of Common Stock on the day which is the
Registration Deadline as provided in Section 2(c)(i)(A)(z) applicable to such
Registration Statement and (II) the Exercise Price as defined in the Warrants
(the "NET VALUE") multiplied by (b) the number of Warrant Shares which such
----------
Investor had requested be included in the Registration Statement filed pursuant
to Section 2(c)(iv), appropriately adjusted in the event such shares were issued
in a cashless exercise of the Warrants, (the "INVESTOR'S WARRANT SHARES")
multiplied (c) by one-half of one percent ( 1/2 % ) for the first thirty (30)
- ----------
days, or portion thereof, pro rata, after the date which is sixty (60) days
after the Request Date and prior to the date the Registration Statement filed
pursuant to Section 2(c)(iv) is declared effective by the SEC, or the first
thirty (30) days or portion thereof, pro rata, that sales of any Warrant
Shares subject to such Registration Statement cannot be made pursuant to such
Registration Statement after such Registration Statement has been declared
effective plus
----
6
<PAGE>
(ii) the product of (a) the Net Value multiplied by (b) the Investor's Warrant
----------
Shares multiplied by (c) one and one-half percent (1 1/2 %) for the second
----------
thirty (30) days or portion thereof, pro rata, after the date which is sixty
(60) days after the Request Date and prior to the date the Registration
Statement filed pursuant to Section 2(a)(iv) hereof is declared effective by the
SEC or the second thirty (30) days or portion thereof, pro rata, that sales of
any Warrant Shares subject to such Registration Statement cannot be made
pursuant to such Registration Statement after such Registration Statement has
been declared effective after the period specified in Section 3(f) has expired.
If the Company is current in the payment of the penalties described in this
Section 2(c)(iv) and has paid in full the aggregate Redemption Price for all
shares of Common Stock subject to Redemption Notice(s) given in accordance with
Section 2(d) below, no additional penalties shall be payable under this Section
2(c)(iv). If however, the Company is not current in the payment of the penalties
described in this Section 2(c)(iv) or has not paid in full the aggregate
Redemption Price for all shares of Common Stock subject to Redemption Notice(s)
given in accordance with Section 2(d) below, then the penalties under this
Section 2(c)(iv) shall be deemed to recommence on the 120th day after the
Request Date at the rate of two percent (2%) for every thirty (30) day period ,
or portion thereof, pro rata, thereafter, until all penalties have been paid in
full and all obligations to redeem shares pursuant to Section 2(d) have been
honored.
(v) Notwithstanding the foregoing, there shall be excluded from each
penalty period described in Sections 2(c)(ii), 2(c)(iii) and 2(c)(iv)above any
delays which are solely attributable to changes (other than corrections of the
Company's mistakes with respect to information previously provided by the
Investors) required by the Investors in such Registration Statement with respect
to information relating to the Investors, including without limitation, changes
to the plan of distribution or any periods prior to an Abandonment Notice sent
by the Investors to the Company pursuant to Section 2(a)(ii).
In addition, the penalties under Sections 2(c)(ii) and 2(c)(iii) are
not intended to be duplicative and shall be appropriately adjusted if at any
time penalties are accruing simultaneously under both Sections 2(c)(ii) and
(iii).
(vi) Penalties incurred under this Section 2(c) shall be paid in cash
within five(5) days after the end of each period that gives rise to such
obligation or, if earlier, within five (5) days after the end of each calendar
month in which such obligation accrues. If such payment is not made within such
five (5) day period, the Investor thereafter shall be entitled to interest on
the unpaid amount at a rate equal of two percent (2%) per month until such
amount is paid in full to the Investor. If the Company is unable to pay all
amounts due and payable with respect to the penalties, the Company will pay the
Investors such amounts pro rata based upon the total amounts payable to each
Investor relative to the total amounts payable to all Investors.
d. Put. If the Company fails to obtain the effectiveness of a
---
Registration Statement covering the Initial Shares within one hundred twenty
(120) calendar days after the Closing Date under and as defined in the
Securities Purchase Agreement, each Investor shall thereafter have
7
<PAGE>
the option, exercisable in whole or in part, at any time and from time to time
by delivery of a written notice to the Company (a "REDEMPTION NOTICE"), to
require the Company to purchase for cash all or any part of the Investor's
Initial Shares at a redemption price per share (the "REDEMPTION PRICE") equal to
the sum of (i) the Estimated Price Per Share, (as defined in the Securities
Purchase Agreement, but subject to appropriate adjustment in the event of a
stock splits, stock dividends or similar transactions) plus (ii) any penalty
that has accrued on such share in accordance with Section 2(c) above, which
penalty remains unpaid. The aggregate Redemption Price shall be paid in cash
within three (3) days after the Company's receipt of a Redemption Notice. If
such payment is not made within such three (3) day period, the redeeming
Investor shall be entitled to interest on the unpaid amount at a rate of two
percent (2%) per month until the aggregate Redemption Price, together with
interest thereon is paid to the redeeming Investor. If the Company is unable to
pay the Redemption Price for the Initial Shares covered by all Investors'
Redemption Notices, the Company will redeem the shares covered by the Investors'
Redemption Notices, pro rata., based upon the aggregate Redemption Price payable
to each redeeming Investor relative to the aggregate Redemption Price payable to
all redeeming Investors.
e. Piggy-Back Registrations. If at any time (y) prior to the date the
------------------------
Registration Statement required to be filed by the Company pursuant to Section
2(a)(i) hereof is declared effective by the SEC, or (z) between the Adjustment
Date and the date the Registration Statement required to be filed by the Company
pursuant to Section 2(a)(iii) is declared effective by the SEC, the Company
shall file with the SEC a Registration Statement relating to an offering for its
own account or the account of others under the Securities 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 fifteen (15) days after
the date of such notice, such Investor 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
such limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registrable Securities with respect to which such Investor has
requested inclusion hereunder as the underwriter shall permit. 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 inclusion of such securities in such Registration Statement or are not
entitled to pro rata inclusion with the Registrable Securities; and provided,
further, however, that, after giving effect to the immediately preceding
proviso, any exclusion of Registrable Securities shall be made pro rata with
holders of other
8
<PAGE>
securities having the right to include such securities in the Registration
Statement other than holders of securities entitled to inclusion of their
securities in such Registration Statement by reason of demand registration
rights (except to the extent any existing agreements otherwise provide). No
right to registration of Registrable Securities under this Section 2(e) 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(e) 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.
f. Eligibility for Form S-3. The Company represents and warrants that it
------------------------
meets the requirements for the use of Form S-3 for registration of the sale by
the Initial Investor and any other Investor of the Registrable Securities and
the Company shall file all reports required to be filed by the Company with the
SEC in a timely manner necessary to maintain such eligibility for the use of
Form S-3.
g. Rule 416. The Company and the Investors each acknowledge that a
--------
number of Registrable Securities shall be registered pursuant to Rule 416 under
the Securities Act so as to include in such Registration Statement any and all
Registrable Securities which may become issuable to prevent dilution by reason
of (i) stock splits, stock dividends or similar transactions , (ii) a decline on
the Per Share Price as provided in the Securities Purchase Agreement to the
extent the bid price of the Common Stock decreases after the Closing Date and
prior to the Adjustment Date and (iii) reductions in the Exercise Price of the
Warrants in accordance with the terms thereof (collectively, the "RULE 416
SECURITIES"). In this regard, the Company agrees to take all steps reasonably
necessary to ensure that the maximum number of Registrable Securities which may
be registered pursuant to Rule 416 under the Securities Act are covered by the
Registration Statement filed pursuant to Section 2(a)(i) hereof and, absent
guidance from the SEC or other definitive authority to the contrary, the Company
shall affirmatively support and not take any action adverse to the position that
the Registration Statements filed hereunder cover all of the Rule 416
Securities. If the Company determines that the Registration Statements filed
hereunder do not cover all of the Rule 416 Securities, the Company shall
immediately provide to each Investor written notice (a "RULE 416 NOTICE")
setting forth the basis for the Company's position and the authority therefor.
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 promptly and use its best efforts to file
with the SEC the Registration Statements required by Section 2(a)(i), 2(a)(iii)
and 2(a)(iv) as soon as practicable in accordance with the applicable Filing
Date, Adjustment Share Filing Date and Warrant Share Filing Date, respectively,
and to cause such Registration Statement(s) relating to Registrable Securities
to become effective as soon as practicable thereafter and keep such
9
<PAGE>
Registration Statements effective pursuant to Rule 415 at all times until such
date as is the earlier of (i) the date on which all of the applicable
Registrable Securities have been sold and (ii) the date on which all of the
Registrable Securities (in the reasonable opinion of counsel to the Initial
Investor) may be immediately sold to the public without registration or
restriction pursuant to Rule 144(k) under the Securities Act (the "REGISTRATION
PERIOD"), which Registration Statement(s) as amended or supplemented, including
the prospectuses contained therein and all documents incorporated by reference
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.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement(s) and the prospectus(es) used in connection with the Registration
Statement(s) as may be necessary to keep such Registration Statement(s)
effective at all times during the applicable Registration Period, and, during
such period, comply with the provisions of the Securities Act with respect to
the disposition of all Registrable Securities of the Company covered by the
applicable Registration Statement 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 such Registration
Statement.
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 such Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and, in the case of the Registration Statements 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 (including, without limitation, any request to
accelerate the effectiveness of such Registration Statements or amendment
thereto), and each item of correspondence from the SEC or the staff of the SEC,
in each case relating to such Registration Statements (other than any portion,
if any, thereof which contains information for which the Company has sought
confidential treatment), (ii) on the date of effectiveness of such Registration
Statement(s) or any amendment thereto, a notice stating that such Registration
Statement or amendment has been declared effective, and (iii) 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.
d. The Company shall use its best efforts to (i) register and qualify the
Registrable Securities covered by a Registration Statement under such other
securities or "blue sky" laws of such jurisdictions in the United States as each
Investor who holds Registrable Securities being offered reasonably requests,
(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 applicable
Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and
10
<PAGE>
qualifications in effect at all times during such 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.
e. In the event the Investors who hold a majority in interest of the
Registrable Securities being offered in an offering select underwriters for the
offering, the Company 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 any event, the
Company shall notify each Investor of the happening of such event, of which the
Company has knowledge, as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of a
material fact or 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 such Registration
Statement to correct such untrue statement or omission but in any event within
ten (10) calendar days, and deliver such number of copies of such supplement or
amendment to each Investor as such Investor may reasonably request.
g. The Company shall use its best efforts to prevent the issuance of any
stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued, to obtain the withdrawal of such order at the
earliest practicable moment (including in each case by amending or supplementing
such Registration Statement) 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
(and if such Registration Statement is supplemented or amended, deliver such
number of copies of such supplement or amendment to each Investor as such
Investor may reasonably request).
h. The Company shall permit a single firm of counsel designated by the
Initial Investor to review each Registration Statement and all amendments and
supplements thereto a reasonable period of time prior to their filing with the
SEC, and not file any document in a form to which such counsel reasonably
objects.
i. The Company shall make generally available to its security holders as
soon as practical, 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 Securities Act)
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covering a twelve- month period beginning not later than the first day of the
Company's fiscal quarter next following the effective date of each Registration
Statement.
j. At the request of any Investor whose Registrable Securities are
included in a Registration Statement, the Company shall furnish, on the date of
effectiveness of such Registration Statement in an underwritten offering, (i) an
opinion, dated as of such date, from counsel representing the Company addressed
to the underwriters and in form, scope and substances as is customarily given in
an underwritten public offering 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. In addition, at
the request of any Investor whose Registrable Securities are included in a
Registration Statement, the Company shall furnish on the date of effectiveness
of such Registration Statement an opinion, dated as of such date, from counsel
representing the Company to the Investors to the effect that the Registration
Statement and the Prospectus comply as to form in all material respects with the
requirements of the Securities Act and the applicable rules and regulations
thereunder (except that no opinion need be expressed with respect to the
financial statements, including the notes and schedules thereto, or any other
financial, statistical or accounting information, or information relating to the
Investors or any underwriters or the method of distribution of the Registrable
Securities by the Investors and any underwriters included therein).
k. The Company shall make available for inspection by (i) any Investor
whose Registrable Securities are included in a Registration Statement, (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 Investors, and (iv) one firm of attorneys retained by all
such 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 the Company's expense, to
undertake
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appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential. Nothing herein shall be deemed to limit
the Investors' ability to sell Registrable Securities in a manner which is
otherwise consistent with applicable laws and regulations or to effect the
obligations of the Company to comply with applicable securities 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, (iv) such information has been
made generally available to the public other than by disclosure in violation of
this or any other agreement, or (v) such Investor consents to the form and
content of any such disclosure. 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 appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
m. The Company shall use its best efforts to promptly either (i) cause
all the Registrable Securities covered by a Registration Statement to be listed
on the New York Stock Exchange or the American Stock Exchange or another
national securities exchange and on each additional 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) secure the designation and quotation,
of all the Registrable Securities covered by each Registration Statement on the
Nasdaq National Market and, without limiting the generality of the foregoing, to
arrange for or maintain at least two market makers to register with the National
Association of Securities Dealers ("NASD") 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 each 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, and shall cause legal
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<PAGE>
counsel selected by the Company to deliver, to the transfer agent for the
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) an opinion of such
counsel sufficient to permit the free transferability of the Registrable
Securities covered by such Registration Statement.
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 the prospectus used in connection
with such Registration Statement as may be necessary in order to change the plan
of distribution set forth in such Registration Statement.
q. The Company shall comply with all applicable laws related to a
Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith
(including without limitation the Securities Act and the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated by the SEC).
r. The Company shall, subject to reasonable business considerations,
take such other actions to expedite or facilitate the disposition of Registrable
Securities as are reasonably requested by any Investor or the underwriters.
s. From and after the date of this Agreement, the Company shall not, and
shall not agree to, allow the holders of any securities of the Company to
include any of their securities in any Registration Statement under Section 2(a)
hereof or any amendment or supplement thereto under Section 3(b) hereof without
the consent of the holders of a majority in interest of the Registrable
Securities.
4. OBLIGATIONS OF THE INVESTORS. In connection with the registration of the
Registrable Securities, the Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall furnish
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 five (5) business
days prior to the first anticipated filing date of a Registration Statement, the
Company shall notify each Investor of the information the Company requires from
each such Investor.
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 each 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.
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<PAGE>
c. In the event Investors holding a majority in interest of the
Registrable Securities being offered 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 underwriter(s) of such offering and the Company 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 not to participate in such
underwritten distribution.
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). The Company shall deliver to
each Investor copies of such supplemented or amended prospectuses no later than
one (1) business day after the earlier of the date such supplemented or amended
prospectus is filed with or declared effective by the SEC.
e. No Investor may participate in any underwritten distribution 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. The Initial Investor and its affiliates will not during the five
Trading Days (as defined in the Securities Purchase Agreement) immediately
preceding the Adjustment Date engage in any sales (including any short sales) of
the Company's Common Stock; provided that if the Adjustment Date is the date a
--------
Registration Statement filed pursuant to Section 2(a)(i) is declared effective,
the Company shall have notified the Initial Investor of the effectiveness date
of such Registration Statement at least five (5) days in advance of such date.
5. EXPENSES OF REGISTRATION.
All reasonable expenses incurred by the Company or the Investors in
connection with registrations, filings or qualifications pursuant to Sections 2
and 3 above, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, the fees and disbursements of
counsel for the Company and the reasonable fees and disbursements of one
counsel selected by the Investors, shall be borne by the Company. In addition,
the Company shall pay all of the Investors' costs and expenses (including legal
fees) incurred in connection with the enforcement of the rights of the Investors
hereunder if, in any action to enforce their rights hereunder, the Investors
prevail in whole or in part.
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<PAGE>
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 whose Registrable Securities were included
in a Registration Statement prepared under Section 2 hereof, and (ii) the
directors, officers, partners, members, employees and agents of such Investor
and each person who controls any Investor within the meaning of Section 15 of
the Securities Act or Section 20 of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE 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 of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation resulting from action or inaction by the Company under the Securities
Act, the Exchange Act or any state securities law, 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
Investors and each other Indemnified Person, promptly as such expenses are
incurred and are due and payable, for any reasonable legal fees or other
reasonable out-of-pocket 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 such Indemnified Person expressly for use
in the Registration Statement 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; and
(iii) with respect to any preliminary prospectus, shall not inure to the benefit
of any Indemnified Person 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, if 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 the incorrect prospectus or failed to
deliver the correct prospectus as required by the Securities Act. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on
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<PAGE>
behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement covering Registrable
Securities, each Investor whose Registrable Securities are included therein
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, its
employees, agents and each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
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 Securities Act or the
Exchange Act (collectively and together with an Indemnified Person, an
"INDEMNIFIED PARTY"), against any Claim to which any of them may become subject,
under the Securities Act, the Exchange Act or otherwise, insofar as such Claim
arises out of or is based upon any Violation, 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; 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; 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
actually received by 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 used by the Company in
connection with any Registration Statement filed under Section 2(e) hereof 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, and the
Indemnified Party failed to utilize such corrected prospectus.
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 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 indemnifying party
and the Indemnified Person or the Indemnified Party, as the case may be;
provided, however, that if, in the reasonable opinion of counsel
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<PAGE>
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party in conducting
the defense of any action would be inappropriate due to actual or potential
conflicts of interest between such Indemnified Person or Indemnified Party and
the indemnifying party or if the actual or potential defendants in, or targets
of, any such action include both the Indemnified Person or the Indemnified Party
and the indemnifying party and any such Indemnified Person or Indemnified Party
reasonably determines that there may be legal defenses available to such
Indemnified Person or Indemnified Party which are in conflict with those
available to or may not be asserted by such indemnifying party, then such
Indemnified Person or Indemnified Party shall have the right to retain separate
counsel to assume such legal defenses or defend such action in its entirety on
behalf of such Indemnified Person or Indemnified Party, if appropriate, with the
fees and expenses to be paid by the indemnifying party. The indemnifying party
shall pay for only 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, if the Investors are
entitled to indemnification hereunder, or by the Company, if the Company or any
of its directors, officers or any person who controls the Company within the
meaning of the Securities Act or the Exchange Act, 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.
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 person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person 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.
8. REPORTS UNDER THE EXCHANGE ACT. With a view to making available to the
Investors the benefits of Rule 144, the Company agrees to:
a. file with the SEC in a timely manner and make and keep available all
reports and other documents required of the Company under the Securities Act and
the Exchange 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)
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and the filing and availability of such reports and other documents is required
for the applicable provisions of Rule 144; and
b. furnish to each Investor so long as such Investor owns Shares,
Warrants or Registrable Securities, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting requirements of
Rule 144, the Securities Act and the Exchange 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 of the Investors hereunder,
including the right to have the Company register Registrable Securities pursuant
to this Agreement, shall be automatically assignable by each Investor to any
transferee of at least ten percent (10%) of the 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 after such
assignment, (ii) the Company is 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 Securities Act
and applicable state securities laws, (iv) the transferee or assignee agrees in
writing with the Company to be bound by all of the provisions contained herein,
and (v) such transfer shall have been made in accordance with the applicable
requirements of the Securities Purchase Agreement.
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
written consent of the Company and Investors who hold a majority in interest of
the Registrable Securities or in the case of a waiver by the Company, with the
written consent of the Company or in the case of a waiver by the Investors, with
the written consent of 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 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 instructions, notice or election received
from the registered owner of such Registrable Securities.
b. Any notices required or permitted to be given under the terms of this
Agreement shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier or by confirmed telecopy, and
shall be effective five (5) days after being placed in the
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mail, if mailed, or upon receipt or refusal of receipt, if delivered personally
or by courier or confirmed telecopy, in each case addressed to a party. The
addresses for such communications shall be:
If to the Company:
OPEN MARKET, INC.
One Wayside Road
Burlington, MA 01803
Telephone No.: (781) 359-3000
Telecopy No.: (781) 359-8118
Attention: Regina O. Sommer
with copies to:
OPEN MARKET, INC.
One Wayside Road
Burlington, MA 01803
Telephone No.: (781) 359-3000
Telecopy No.: (781) 359-8129
Attention: Legal Counsel
and
HALE & DORR LLP
60 State Street
Boston, MA 02109
Telephone No.: (617) 526-6000
Telecopy No.: (617) 526-5000
Attention: John H. Chory, Esq.
If to an Investor, at such address as such Investor shall have
provided in writing to the Company or such other address as such Investor
furnishes by notice given in accordance with this Section 11(b).
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. Governing Law; Jurisdiction. This Agreement shall be governed by and
---------------------------
construed in accordance with the laws of the Commonwealth of Massachusetts
applicable to contracts made and to be performed in the Commonwealth of
Massachusetts. The Company irrevocably consents to the jurisdiction of the
United States federal courts and state courts located in Boston, Massachusetts
in any suit or proceeding based on or arising under this Agreement and
irrevocably agrees that all claims in respect of such suit or proceeding may be
determined in such courts. The
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Company irrevocably waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding. The Company further agrees that service
of process upon the Company mailed by first class mail shall be deemed in every
respect effective service of process upon the Company in any such suit or
proceeding. Nothing herein shall affect an Investor's right to serve process in
any other manner permitted by law. The Company agrees that 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, the Securities Purchase Agreement, and the Warrants
(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, the
Securities Purchase Agreement, and the Warrants supersede all prior agreements
and understandings among the parties hereto and thereto 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 parties hereto.
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. All consents, approvals and other determinations to be made by the
Investors or the Initial Investor pursuant to this Agreement shall be made by
the Investors holding a majority in interest of the Registrable Securities
(determined as if all Warrants then outstanding had been exercised for
Registrable Securities and assuming no Adjustment Shares are outstanding prior
to the Adjustment Date) then held by all Investors or by the Initial Investor,
as the case may be.
k. The initial number of Registrable Securities included on any
Registration Statement and each increase to the number of Registrable Securities
included thereon shall be allocated pro rata among the Investors based on the
number of Registrable Securities held by each Investor at the time of such
establishment or increase, as the case may be. In the event an Investor shall
sell
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or otherwise transfer any of such holder's Registrable Securities, each
transferee shall be allocated a pro rata portion of the number of Registrable
Securities included on a Registration Statement for such transferor. Any shares
of Common Stock included on a Registration Statement and which remain allocated
to any person or entity which does not hold any Registrable Securities shall be
allocated to the remaining Investors, pro rata based on the number of shares of
Registrable Securities then held by such Investors. For the avoidance of doubt,
the number of Registrable Securities held by an Investor shall be determined as
if all Warrants then outstanding and held by an Investor were exercised for
Registrable Securities. In addition, in calculating the number of Registrable
Securities held by an Investor, Adjustment Shares shall constitute Registrable
Securities for this purpose only after the Adjustment Date.
l. For purposes of this Agreement, the term "BUSINESS DAY" means any day
other than a Saturday or Sunday or a day on which banking institutions in the
State of New York are authorized or obligated by law, regulation or executive
order to close.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
OPEN MARKET, INC.
By: /s/ Regina O. Sommer
---------------------------------------------
Name: Regina O. Sommer
Title: Senior Vice President and Chief Financial Officer
INITIAL INVESTOR:
CMG INFORMATION SERVICES, INC.
By: /s/ Andrew Hajducky
---------------------------------------------
Name: Andrew Hajducky
Title: Treasurer and Chief Financial Officer
Address: 100 Brickstone Square
Andover, MA 10810
Telephone No.: (978) 684-3660
Telecopy No.:: (978) 684-3672
Attention: Andrew Hajducky
Treasurer and Chief Financial Officer
23
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EXHIBIT 99.6
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this AGREEMENT"), dated as of July 30,
1998, by and among OPEN MARKET, INC., a corporation organized under the laws of
the State of Delaware, with executive offices located at One Wayside Road,
Burlington, MA 01803 (the "COMPANY"), and the undersigned (together with
affiliates, the "INITIAL INVESTOR").
WHEREAS:
A. In connection with the Securities Purchase Agreement of even date
herewith by and between the Company and the Initial Investor (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 Investor (i) up
to 1,205,022 shares of the Company's common stock, par value $.001 per share
(the "COMMON STOCK") of which not more than 1,004,185 shares constitute Initial
Shares (as defined in the Securities Purchase Agreement) and not more than
200,837 shares constitute Adjustment Shares (as defined in the Securities
Purchase Agreement) which shares may be issuable as a result of a decline in the
Closing Price (as defined in the Securities Purchase Agreement) of the Common
Stock after the Closing Date, (as defined in the Securities Purchase Agreement),
and (ii) warrants (the "WARRANTS") to acquire an aggregate of 251,046 shares of
Common Stock (the "WARRANT SHARES").
B. To induce the Initial Investor 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 thereunder, or any similar successor statute (collectively, the
"SECURITIES 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 the Initial
Investor hereby agree as follows:
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have the
following meanings:
(i) "INVESTORS" means the Initial Investor and any transferees or
assignees who agree to become bound by the provisions of this Agreement in
accordance with Section 9 hereof and are entitled to the rights of this
Agreement in accordance with Section 9 hereof.
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(ii) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities 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 (a) the Initial Shares, (b) the
Adjustment Shares, if any, (c) the Warrant Shares and (d) any shares of capital
stock issued or issuable, from time to time (with any adjustments), as a
distribution on or in exchange for or otherwise with respect to any of the
foregoing, provided, however, that shares of capital stock which are Registrable
Securities shall cease to be Registrable Securities upon (i) any resale thereof
pursuant to a Registration Statement filed under the Securities Act or pursuant
to Rule 144 promulgated under the Securities Act or any other similar rule or
regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration ("RULE 144"), or
(ii) any sale in any manner to a person or entity which, by virtue of Section 9,
is not entitled to the rights provided by this Agreement.
(iv) "REGISTRATION STATEMENT" means a registration statement of the
Company under the Securities Act.
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 Registrations.
-----------------------
(i) The Company shall prepare and use its best efforts to file with
the SEC on or prior to the date (the "FILING DATE") which is ten (10) days after
the Closing Date, 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 all of the Registrable Securities, covering the resale
of the Registrable Securities, which Registration Statement, to the extent
allowable under the Securities Act and the Rules promulgated thereunder
(including Rule 416), shall state that such Registration Statement also covers
such number of additional shares of Common Stock as may become issuable as
Adjustment Shares pursuant to the Securities Purchase Agreement or upon the
exercise of the Warrants, to prevent dilution by reason of (i) stock splits,
stock dividends or similar transactions or (ii) reductions in the Exercise Price
of the Warrants in accordance with the terms thereof, and/or (iii) a decline in
the Per Share Purchase Price to the extent the Closing Price of the Common Stock
decreases after the Closing Date and on or prior to the Adjustment Date. The
Registrable Securities included in the Registration Statement filed in
accordance with this Section 2(a)(i) shall be allocated to the Investors as set
forth in Section 11(k) hereof. Such Registration Statement (and each amendment
or supplement
2
<PAGE>
thereto, and each request for acceleration of effectiveness thereof) shall be
provided to the Initial Investor and its counsel prior to its filing or other
submission. The Company shall use its best efforts to cause the Registration
Statement to be filed pursuant to this Section 2(a)(i) hereof to become
effective as soon as practicable after the filing thereof.
(ii) If after the initial filing of a Registration Statement covering
all of the Registrable Securities as required by the first sentence of Section
2(a)(i) above, the SEC advises the Company (the "SEC DENIAL") that the SEC will
not permit the registration of the resale of the Adjustment Shares or the
Warrant Shares, or both, as the case may be, until the actual issuance of such
shares, then, the Company may abandon its efforts to cause the shares
identified in the SEC Denial to be included in the Registration Statement
required by the first sentence of Section 2(i)(a) above upon advanced written
notice (the "ABANDONMENT NOTICE") sent by the Company to the Investors and
accompanied by the SEC Denial, if in writing. In addition, at any time
Investors holding a majority in interest of the Registrable Securities may
require that the Company abandon its efforts to cause Registrable Shares that
have not been issued to be included in the Registration Statement required by
the first sentence of Section 2(a)(i) above by sending to the Company an
Abandonment Notice.
(iii) If the Adjustment Shares are for any reason not included in the
Registration Statement required by the first sentence of Section 2(a)(i) above,
and if such shares are required to be issued as provided in the Securities
Purchase Agreement, the Company shall prepare and use its best efforts to file
with the SEC on or prior to the date (the "ADJUSTMENT SHARE FILING DATE") which
is three (3) business days after the Adjustment Date, 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 resale of the
Adjustment Shares, if any, and any shares of capital stock issued or issuable,
from time to time (with any adjustments), as a distribution on or in exchange
for or otherwise with respect to any of the Adjustment Shares. The Registrable
Securities included in the Registration Statement filed in accordance with this
Section 2(a)(iii) shall be allocated to the Investors as set forth in Section
11(k) hereof. Such Registration Statement (and each amendment or supplement
thereto, and each request for acceleration of effectiveness thereof) shall be
provided to the Initial Investor and its counsel prior to its filing or other
submission. The Company shall use its best efforts to cause the Registration
Statement required to be filed pursuant to this Section 2(a)(iii) to become
effective as soon as practicable after the filing thereof.
(iv) If the Warrant Shares are for any reason not included in the
Registration Statement required by the first sentence of Section 2(a)(i) above,
the Investors who hold a majority in interest of outstanding Warrant Shares, may
request and the Company shall prepare and use its best efforts to file with the
SEC on or prior to a date (the "WARRANT SHARE FILING DATE") which is twenty (20)
days after the date of such request (the "REQUEST DATE"), 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
resale of the outstanding Warrant Shares and any shares of capital stock issued
or issuable from time to time (with any adjustments), as a distribution on or in
exchange for or otherwise with respect to any of the
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<PAGE>
outstanding Warrant Shares. The Registrable Securities included in the
Registration Statement filed in accordance with this Section 2(a)(iv) shall be
allocated to the Investors as set forth in Section 11(k) hereof. Such
Registration Statement (and each amendment or supplement thereto, and each
request for acceleration of effectiveness thereof) shall be provided to the
Initial Investor and its counsel prior to its filing or other submission. The
Company shall use its best efforts to cause the Registration Statement required
to be filed pursuant to this Section 2(a)(iv) to become effective as soon as
practicable after the filing thereof. The Investors shall be entitled two (2)
registrations under this Section 2(a)(iv) for which the Company will pay all
registration expenses as provided in Section 5 hereof, provided that each
Registration Statement shall cover not less than fifty thousand (50,000) Warrant
Shares.
b. Underwritten Offering. If any Registration Statement filed pursuant
---------------------
to Section 2(a) hereof involves an underwritten offering, the Investors who hold
a majority in interest of the Registrable Securities subject to such
underwritten offering, with the consent of the Initial Investor, shall have the
right to select one legal counsel to represent the Investors and an investment
banker or bankers and manager or managers to administer the offering, which
investment banker or bankers or manager or managers shall be reasonably
satisfactory to the Company. In the event that any Investors elect not to
participate in such underwritten offering, the Registration Statement covering
all of the Registrable Securities shall contain appropriate plans of
distribution reasonably satisfactory to the Investors participating in such
underwritten offering and the Investors electing not to participate in such
underwritten offering (including, without limitation, the ability of
nonparticipating Investors to sell from time to time and at any time during the
effectiveness of such Registration Statement).
c. Payments by the Company.
-----------------------
(i) If (A) the Registration Statement(s) covering the Registrable
Securities required to be filed by the Company pursuant to Section 2(a) (i) and
2(a)(iii) above are not declared effective by the SEC on or before (x) sixty
(60) calendar days after the Filing Date in respect of the Registration
Statement filed pursuant to Section 2(a)(i) above, (y) twenty (20 )calendar days
after the Adjustment Share Filing Date in respect of a Registration Statement
filed pursuant to Section 2(a)(iii) above and (z) thirty (30) calendar days
after the Warrant Share Filing Date in respect of a Registration Statement filed
pursuant to Section 2(a)(iv) (each a "REGISTRATION DEADLINE") or (B) after the
applicable Registration Statement has been declared effective by the SEC, sales
of all applicable Registrable Securities (including any Registrable Securities
required to be registered pursuant to Section 3(b) hereof) cannot be made
pursuant to such Registration Statement (by reason of a stop order or the
Company's failure to update such Registration Statement (unless within the
period specified in Section 3(f) below) for any other reason outside the control
of the Investors), then the Company will make payments to the Investors in such
amounts and at such times as shall be determined pursuant to this Section 2(c)
as the sole and exclusive relief for the damages to the Investors by reason of
any such delay in their ability to sell the Registrable Securities; provided
that such remedy shall not be the sole and exclusive in the event the Company
has breached its obligations under this Agreement.
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<PAGE>
(ii) The Company shall pay to each Investor an amount equal to the sum
---
of (i) the product of (a) the Total Purchase Price (as defined in the Securities
Purchase Agreement) multiplied by (b) a fraction, the numerator of which is
----------
equal to the number of Registrable Securities held by such Investor as
determined pursuant to Section 11(k) and the denominator of which is the total
number of Registrable Securities determined in the same manner (the "INVESTOR'S
FRACTIONAL INTEREST OF REGISTRABLE SHARES"), multiplied by (c) one-half of one
----------
percent (1/2 %) for the first thirty (30) days or portion thereof, pro rata,
after the Registration Deadline provided in Section 2(c)(i)(A)(x) and prior to
the date the Registration Statement filed pursuant to Section 2(a)(i) is
declared effective by the SEC, or the first thirty (30) days or portion
thereof, pro rata, that sales of any Registrable Securities cannot be made
pursuant to such Registration Statement after the Registrations Statement has
been declared effective after the period in Section 3(f) below has expired plus
----
(ii) the product of (a) the Total Purchase Price multiplied by (b) the
----------
Investor's Fractional Interest of Registrable Securities multiplied by (c) one
-----------
and one-half percent (1 1/2 %) for the second thirty (30) days or portion
thereof, pro rata, after the Registration Deadline provided in Section 2(a)(i)
hereof and prior to the date the Registration Statement filed pursuant to
Section 2(a)(i) hereof is declared effective by the SEC or the second thirty
(30) days or portion thereof, pro rata, that sales of any Registrable Securities
cannot be made pursuant to such Registration Statement after such Registration
Statement has been declared effective after the period in Section 3(f) below has
expired. If the Company is current in the payment of the foregoing penalties
and has paid in full the aggregate Redemption Price (as defined in Section 2(d))
for all shares of Common Stock subject to Redemption Notices as defined in and
as given in accordance with Section 2(d) below hereof, no additional penalties
shall be payable under this Section 2(c)(ii). If however, the Company is not
current in the payment of the penalties described in this Section 2(c)(ii) or
has not paid in full the aggregate Redemption Price for all shares of Common
Stock subject to Redemption Notices given in accordance with Section 2(d) below,
then the penalties shall be deemed to recommence on the 120th day after the
Closing Date at the rate of two percent (2%) for every thirty (30) day period or
portion thereof, pro rata, thereafter, until all penalties have been paid in
full and all obligations to redeem shares pursuant to Section 2(d) have been
honored.
(iii) The Company shall pay to each Investor an amount equal to the
sum of (i) the product of (a) the Total Purchase Price multiplied by (b) a
----------
fraction, the numerator of which is the total number of Adjustment Shares and
the denominator of which is the total number of Shares (as such term is defined
in the Securities Purchase Agreement) issued in accordance with the terms of the
Securities Purchase Agreement, multiplied by (c) a fraction, the numerator of
----------
which is equal to the number of Adjustment Shares held by such Investor and the
denominator of which is the total number of all Adjustment Shares (the
"INVESTOR'S FRACTIONAL INTEREST OF ADJUSTMENT SHARES"), multiplied (d) by one-
----------
half of one percent (1/2 %) for the first thirty (30) days, or portion
thereof, pro rata, after the Registration Deadline provided in Section
2(c)(i)(A)(y) and prior to the date the Registration Statement filed pursuant to
Section 2(a)(iii) is declared effective by the SEC, or the first thirty (30)
days or portion thereof, pro rata, that sales of any Adjustment Shares cannot
be made pursuant to such Registration Statement after such Registration
Statement has been declared effective plus (ii) the product of (a) the Total
----
Purchase Price multiplied by (b) a fraction, the numerator of which is the total
----------
number of
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<PAGE>
Adjustment Shares and the denominator of which is the total number of Shares
issued in accordance with the terms of the Securities Purchase Agreement,
multiplied by (c) the Investor's Fractional Interest of Adjustment Shares
- ----------
multiplied by (d) one and one-half percent (1 1/2 %) for the second thirty (30)
- ----------
days or portion thereof, pro rata, after the Registration Deadline provided in
Section 2(c)(i)(A)(y) hereof and prior to the date the Registration Statement
filed pursuant to Section 2(a)(iii) hereof is declared effective by the SEC or
the second thirty (30) days or portion thereof, pro rata, that sales of any
Adjustment Shares cannot be made pursuant to such Registration Statement after
such Registration Statement has been declared effective after the period
specified in Section 3(f) below has expired. Notwithstanding the foregoing, no
penalties shall accrue under this Section 2(c)(iii) by reason of the failure of
the Registration Statement to be declared effective on or before the
Registration Deadline provided in Section 2(c)(i)A)(y) if such Registration
Statement is declared effective on or before the lapse of forty (40) calendar
days after the Adjustment Share Filing Date. If, however such Registration
Statement is not declared effective on or before the lapse of forty (40)
calendar days after the Adjustment Date Filing Date, the penalties under this
Section 2(c)(iii) shall be deemed to have commenced as of the Registration
Deadline provided in Section 2(c)(i)(A)(y). If the Company is current in the
payment of the penalties described in this Section 2(c)(iii) and has paid in
full the aggregate Redemption Price for all shares of Common Stock subject to
Redemption Notice(s) given in accordance with Section 2(d) below, no additional
penalties shall be payable under this Section 2(c)(iii). If however, the
Company is not current in the payment of the penalties described in this Section
2(c)(iii) or has not paid in full the aggregate Redemption Price for all shares
of Common Stock subject to Redemption Notice(s) given in accordance with Section
2(d) below, then the penalties under this Section 2(c)(iii) shall be deemed to
recommence on the seventy-fifth (75th) day after the Adjustment Date at the rate
of two percent (2%) for every thirty (30) day period , or portion thereof, pro
rata, thereafter, until all penalties have been paid in full and all obligations
to redeem shares pursuant to Section 2(d) have been honored.
(iv) The Company shall pay to each Investor who requested that its
Warrant Shares be included in a Registration Statement filed pursuant to Section
2(c)(iv) an amount equal to the sum of (i) the product of (a) the difference
between (I) the Closing Price of a share of Common Stock on the day which is the
Registration Deadline as provided in Section 2(c)(i)(A)(z) applicable to such
Registration Statement and (II) the Exercise Price as defined in the Warrants
(the "NET VALUE") multiplied by (b) the number of Warrant Shares which such
----------
Investor had requested be included in the Registration Statement filed pursuant
to Section 2(c)(iv), appropriately adjusted in the event such shares were issued
in a cashless exercise of the Warrants, (the "INVESTOR'S WARRANT SHARES")
multiplied (c) by one-half of one percent (1/2 %) for the first thirty (30)
- ----------
days, or portion thereof, pro rata, after the date which is sixty (60) days
after the Request Date and prior to the date the Registration Statement filed
pursuant to Section 2(c)(iv) is declared effective by the SEC, or the first
thirty (30) days or portion thereof, pro rata, that sales of any Warrant
Shares subject to such Registration Statement cannot be made pursuant to such
Registration Statement after such Registration Statement has been declared
effective plus (ii) the product of (a) the Net Value multiplied by (b) the
---- ----------
Investor's Warrant Shares multiplied by (c) one and one-half percent (1 1/2 %)
-----------
for the second thirty (30) days or portion thereof, pro rata, after the date
which is sixty (60) days after the Request Date and prior to the date the
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<PAGE>
Registration Statement filed pursuant to Section 2(a)(iv) hereof is declared
effective by the SEC or the second thirty (30) days or portion thereof, pro
rata, that sales of any Warrant Shares subject to such Registration Statement
cannot be made pursuant to such Registration Statement after such Registration
Statement has been declared effective after the period specified in Section 3(f)
has expired. If the Company is current in the payment of the penalties
described in this Section 2(c)(iv) and has paid in full the aggregate Redemption
Price for all shares of Common Stock subject to Redemption Notice(s) given in
accordance with Section 2(d) below, no additional penalties shall be payable
under this Section 2(c)(iv). If however, the Company is not current in the
payment of the penalties described in this Section 2(c)(iv) or has not paid in
full the aggregate Redemption Price for all shares of Common Stock subject to
Redemption Notice(s) given in accordance with Section 2(d) below, then the
penalties under this Section 2(c)(iv) shall be deemed to recommence on the
120th day after the Request Date at the rate of two percent (2%) for every
thirty (30) day period , or portion thereof, pro rata, thereafter, until all
penalties have been paid in full and all obligations to redeem shares pursuant
to Section 2(d) have been honored.
(v) Notwithstanding the foregoing, there shall be excluded from each
penalty period described in Sections 2(c)(ii), 2(c)(iii) and 2(c)(iv)above any
delays which are solely attributable to changes (other than corrections of the
Company's mistakes with respect to information previously provided by the
Investors) required by the Investors in such Registration Statement with respect
to information relating to the Investors, including without limitation, changes
to the plan of distribution or any periods prior to an Abandonment Notice sent
by the Investors to the Company pursuant to Section 2(a)(ii).
In addition, the penalties under Sections 2(c)(ii) and 2(c)(iii) are
not intended to be duplicative and shall be appropriately adjusted if at any
time penalties are accruing simultaneously under both Sections 2(c)(ii) and
(iii).
(vi) Penalties incurred under this Section 2(c) shall be paid in cash
within five(5) days after the end of each period that gives rise to such
obligation or, if earlier, within five (5) days after the end of each calendar
month in which such obligation accrues. If such payment is not made within such
five (5) day period, the Investor thereafter shall be entitled to interest on
the unpaid amount at a rate equal of two percent (2%) per month until such
amount is paid in full to the Investor. If the Company is unable to pay all
amounts due and payable with respect to the penalties, the Company will pay the
Investors such amounts pro rata based upon the total amounts payable to each
Investor relative to the total amounts payable to all Investors.
d. Put. If the Company fails to obtain the effectiveness of a
---
Registration Statement covering the Initial Shares within one hundred twenty
(120) calendar days after the Closing Date under and as defined in the
Securities Purchase Agreement, each Investor shall thereafter have the option,
exercisable in whole or in part, at any time and from time to time by delivery
of a written notice to the Company (a "REDEMPTION NOTICE"), to require the
Company to purchase for cash all or any part of the Investor's Initial Shares at
a redemption price per share (the
7
<PAGE>
"REDEMPTION PRICE") equal to the sum of (i) the Estimated Price Per Share, (as
defined in the Securities Purchase Agreement, but subject to appropriate
adjustment in the event of a stock splits, stock dividends or similar
transactions) plus (ii) any penalty that has accrued on such share in accordance
with Section 2(c) above, which penalty remains unpaid. The aggregate Redemption
Price shall be paid in cash within three (3) days after the Company's receipt of
a Redemption Notice. If such payment is not made within such three (3) day
period, the redeeming Investor shall be entitled to interest on the unpaid
amount at a rate of two percent (2%) per month until the aggregate Redemption
Price, together with interest thereon is paid to the redeeming Investor. If the
Company is unable to pay the Redemption Price for the Initial Shares covered by
all Investors' Redemption Notices, the Company will redeem the shares covered by
the Investors' Redemption Notices, pro rata., based upon the aggregate
Redemption Price payable to each redeeming Investor relative to the aggregate
Redemption Price payable to all redeeming Investors.
e. Piggy-Back Registrations. If at any time (y) prior to the date the
------------------------
Registration Statement required to be filed by the Company pursuant to Section
2(a)(i) hereof is declared effective by the SEC, or (z) between the Adjustment
Date and the date the Registration Statement required to be filed by the Company
pursuant to Section 2(a)(iii) is declared effective by the SEC, the Company
shall file with the SEC a Registration Statement relating to an offering for its
own account or the account of others under the Securities 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 fifteen (15) days after
the date of such notice, such Investor 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
such limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registrable Securities with respect to which such Investor has
requested inclusion hereunder as the underwriter shall permit. 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 inclusion of such securities in such Registration Statement or are not
entitled to pro rata inclusion with the Registrable Securities; and provided,
further, however, that, after giving effect to the immediately preceding
proviso, 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 holders of securities entitled to inclusion of
their securities in such Registration Statement by reason of demand registration
rights (except to the extent any existing agreements otherwise
8
<PAGE>
provide). No right to registration of Registrable Securities under this Section
2(e) 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(e) 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.
f. Eligibility for Form S-3. The Company represents and warrants that it
------------------------
meets the requirements for the use of Form S-3 for registration of the sale by
the Initial Investor and any other Investor of the Registrable Securities and
the Company shall file all reports required to be filed by the Company with the
SEC in a timely manner necessary to maintain such eligibility for the use of
Form S-3.
g. Rule 416. The Company and the Investors each acknowledge that a
--------
number of Registrable Securities shall be registered pursuant to Rule 416 under
the Securities Act so as to include in such Registration Statement any and all
Registrable Securities which may become issuable to prevent dilution by reason
of (i) stock splits, stock dividends or similar transactions, (ii) a decline on
the Per Share Price as provided in the Securities Purchase Agreement to the
extent the bid price of the Common Stock decreases after the Closing Date and
prior to the Adjustment Date and (iii) reductions in the Exercise Price of the
Warrants in accordance with the terms thereof (collectively, the "RULE 416
SECURITIES"). In this regard, the Company agrees to take all steps reasonably
necessary to ensure that the maximum number of Registrable Securities which may
be registered pursuant to Rule 416 under the Securities Act are covered by the
Registration Statement filed pursuant to Section 2(a)(i) hereof and, absent
guidance from the SEC or other definitive authority to the contrary, the Company
shall affirmatively support and not take any action adverse to the position that
the Registration Statements filed hereunder cover all of the Rule 416
Securities. If the Company determines that the Registration Statements filed
hereunder do not cover all of the Rule 416 Securities, the Company shall
immediately provide to each Investor written notice (a "RULE 416 NOTICE")
setting forth the basis for the Company's position and the authority therefor.
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 promptly and use its best efforts to file
with the SEC the Registration Statements required by Section 2(a)(i), 2(a)(iii)
and 2(a)(iv) as soon as practicable in accordance with the applicable Filing
Date, Adjustment Share Filing Date and Warrant Share Filing Date, respectively,
and to cause such Registration Statement(s) relating to Registrable Securities
to become effective as soon as practicable thereafter and keep such
Registration Statements effective pursuant to Rule 415 at all times until such
date as is the earlier of (i) the date on which all of the applicable
Registrable Securities have been sold and (ii) the date on which all of the
Registrable Securities (in the reasonable opinion of counsel to the Initial
9
<PAGE>
Investor) may be immediately sold to the public without registration or
restriction pursuant to Rule 144(k) under the Securities Act (the "REGISTRATION
PERIOD"), which Registration Statement(s) as amended or supplemented, including
the prospectuses contained therein and all documents incorporated by reference
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.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement(s) and the prospectus(es) used in connection with the Registration
Statement(s) as may be necessary to keep such Registration Statement(s)
effective at all times during the applicable Registration Period, and, during
such period, comply with the provisions of the Securities Act with respect to
the disposition of all Registrable Securities of the Company covered by the
applicable Registration Statement 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 such Registration
Statement.
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 such Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and, in the case of the Registration Statements 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 (including, without limitation, any request to
accelerate the effectiveness of such Registration Statements or amendment
thereto), and each item of correspondence from the SEC or the staff of the SEC,
in each case relating to such Registration Statements (other than any portion,
if any, thereof which contains information for which the Company has sought
confidential treatment), (ii) on the date of effectiveness of such Registration
Statement(s) or any amendment thereto, a notice stating that such Registration
Statement or amendment has been declared effective, and (iii) 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.
d. The Company shall use its best efforts to (i) register and qualify the
Registrable Securities covered by a Registration Statement under such other
securities or "blue sky" laws of such jurisdictions in the United States as each
Investor who holds Registrable Securities being offered reasonably requests,
(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 applicable
Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during
such 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
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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.
e. In the event the Investors who hold a majority in interest of the
Registrable Securities being offered in an offering select underwriters for the
offering, the Company 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 any event, the
Company shall notify each Investor of the happening of such event, of which the
Company has knowledge, as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of a
material fact or 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 such Registration
Statement to correct such untrue statement or omission but in any event within
ten (10) calendar days, and deliver such number of copies of such supplement or
amendment to each Investor as such Investor may reasonably request.
g. The Company shall use its best efforts to prevent the issuance of any
stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued, to obtain the withdrawal of such order at the
earliest practicable moment (including in each case by amending or supplementing
such Registration Statement) 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
(and if such Registration Statement is supplemented or amended, deliver such
number of copies of such supplement or amendment to each Investor as such
Investor may reasonably request).
h. The Company shall permit a single firm of counsel designated by the
Initial Investor to review each Registration Statement and all amendments and
supplements thereto a reasonable period of time prior to their filing with the
SEC, and not file any document in a form to which such counsel reasonably
objects.
i. The Company shall make generally available to its security holders as
soon as practical, 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 Securities 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 each Registration Statement.
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<PAGE>
j. At the request of any Investor whose Registrable Securities are
included in a Registration Statement in an underwritten offering, the Company
shall furnish, on the date of effectiveness of such Registration Statement (i)
an opinion, dated as of such date, from counsel representing the Company
addressed to the underwriters and in form, scope and substances as is
customarily given in an underwritten public offering 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. In addition at the request of any Investor whose Registrable
Securities are included in a Registation Statement, the Company shall furnish on
the date of effectiveness of such Registration Statement an opinion, dated as of
such date, from counsel representing the Company to the Investors to the effect
that the Registration Statement and the Prospectus comply as to form in all
material respects with the requirements of the Securities Act and the applicable
rules and regulations thereunder (except that no opinion need b expressed with
respect to the financial statements, including the notes and schedules thereto,
or any other financial, statistical or accounting information, or information
relating to the Investors or any underwriters or the method of distribution of
the Registrable Securities by the Investors and any underwriters included
therein).
k. The Company shall make available for inspection by (i) any Investor
whose Registrable Securities are included in a Registration Statement, (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 Investors, and (iv) one firm of attorneys retained by all
such 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 the Company's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential. Nothing herein shall be deemed to
limit the Investors' ability to sell Registrable Securities in a manner which is
otherwise consistent with applicable laws and
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<PAGE>
regulations or to effect the obligations of the Company to comply with
applicable securities 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, (iv) such information has been
made generally available to the public other than by disclosure in violation of
this or any other agreement, or (v) such Investor consents to the form and
content of any such disclosure. 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 appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
m. The Company shall use its best efforts to promptly either (i) cause
all the Registrable Securities covered by a Registration Statement to be listed
on the New York Stock Exchange or the American Stock Exchange or another
national securities exchange and on each additional 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) secure the designation and quotation,
of all the Registrable Securities covered by each Registration Statement on the
Nasdaq National Market and, without limiting the generality of the foregoing, to
arrange for or maintain at least two market makers to register with the National
Association of Securities Dealers ("NASD") 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 each 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, and shall cause legal counsel selected by the Company to
deliver, to the transfer agent for the Registrable Securities (with copies to
the Investors whose Registrable Securities are included in such Registration
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<PAGE>
Statement) an opinion of such counsel sufficient to permit the free
transferability of the Registrable Securities covered by such Registration
Statement.
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 the prospectus used in connection
with such Registration Statement as may be necessary in order to change the plan
of distribution set forth in such Registration Statement.
q. The Company shall comply with all applicable laws related to a
Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith
(including without limitation the Securities Act and the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated by the SEC).
r. The Company shall, subject to reasonable business considerations,
take such other actions to expedite or facilitate the disposition of Registrable
Securities as are reasonably requested by any Investor or the underwriters.
s. From and after the date of this Agreement, the Company shall not, and
shall not agree to, allow the holders of any securities of the Company to
include any of their securities in any Registration Statement under Section 2(a)
hereof or any amendment or supplement thereto under Section 3(b) hereof without
the consent of the holders of a majority in interest of the Registrable
Securities.
4. OBLIGATIONS OF THE INVESTORS. In connection with the registration of the
Registrable Securities, the Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall furnish
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 five (5) business
days prior to the first anticipated filing date of a Registration Statement, the
Company shall notify each Investor of the information the Company requires from
each such Investor.
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 each 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 Investors holding a majority in interest of the
Registrable Securities being offered determine to engage the services of an
underwriter, each Investor agrees to enter
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<PAGE>
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 underwriter(s) of such
offering and the Company 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 not to participate in such underwritten distribution.
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). The Company shall deliver to
each Investor copies of such supplemented or amended prospectuses no later than
one (1) business day after the earlier of the date such supplemented or amended
prospectus is filed with or declared effective by the SEC.
e. No Investor may participate in any underwritten distribution 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. The Initial Investor, its agent Heights Capital Management and
affiliates of the Initial Investor over which the Initial Investor or Heights
Capital Management is exercising investment discretion will not during the five
Trading Days (as defined in the Securities Purchase Agreement) immediately
preceding the Adjustment Date engage in any sales (including any short sales) of
the Company's Common Stock; provided that if the Adjustment Date is the date a
--------
Registration Statement filed pursuant to Section 2(a)(i) is declared effective,
the Company shall have notified the Initial Investor of the effectiveness date
of such Registration Statement at least five (5) days in advance of such date.
5. EXPENSES OF REGISTRATION.
All reasonable expenses incurred by the Company or the Investors in
connection with registrations, filings or qualifications pursuant to Sections 2
and 3 above, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, the fees and disbursements of
counsel for the Company and the reasonable fees and disbursements of one
counsel selected by the Investors, shall be borne by the Company. In addition,
the Company shall pay all of the Investors' costs and expenses (including legal
fees) incurred in connection with the enforcement of the rights of the Investors
hereunder if, in any action to enforce their rights hereunder, the Investors
prevail in whole or in part.
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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 whose Registrable Securities were included
in a Registration Statement prepared under Section 2 hereof, and (ii) the
directors, officers, partners, members, employees and agents of such Investor
and each person who controls any Investor within the meaning of Section 15 of
the Securities Act or Section 20 of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE 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 of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation resulting from an action or inaction by the Company under the
Securities Act, the Exchange Act or any state securities law, 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 Investors and each other Indemnified Person, promptly as such expenses are
incurred and are due and payable, for any reasonable legal fees or other
reasonable out-of-pocket 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 such Indemnified Person expressly for use
in the Registration Statement 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; and
(iii) with respect to any preliminary prospectus, shall not inure to the benefit
of any Indemnified Person 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, if 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 the incorrect prospectus or failed to
deliver the correct prospectus as required by the Securities Act. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on
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<PAGE>
behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement covering Registrable
Securities, each Investor whose Registrable Securities are included therein
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, its
employees, agents and each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
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 Securities Act or the
Exchange Act (collectively and together with an Indemnified Person, an
"INDEMNIFIED PARTY"), against any Claim to which any of them may become subject,
under the Securities Act, the Exchange Act or otherwise, insofar as such Claim
arises out of or is based upon any Violation, 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; 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; 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
actually received by 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 used by the Company in
connection with any Registration Statement filed under Section 2(e) hereof 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, and the
Indemnified Party failed to utilize such corrected prospectus.
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 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 indemnifying party
and the Indemnified Person or the Indemnified Party, as the case may be;
provided, however, that if, in the reasonable opinion of counsel
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<PAGE>
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party in conducting
the defense of any action would be inappropriate due to actual or potential
conflicts of interest between such Indemnified Person or Indemnified Party and
the indemnifying party or if the actual or potential defendants in, or targets
of, any such action include both the Indemnified Person or the Indemnified Party
and the indemnifying party and any such Indemnified Person or Indemnified Party
reasonably determines that there may be legal defenses available to such
Indemnified Person or Indemnified Party which are in conflict with those
available to or may not be asserted by such indemnifying party, then such
Indemnified Person or Indemnified Party shall have the right to retain separate
counsel to assume such legal defenses or defend such action in its entirety on
behalf of such Indemnified Person or Indemnified Party, if appropriate, with the
fees and expenses to be paid by the indemnifying party. The indemnifying party
shall pay for only 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, if the Investors are
entitled to indemnification hereunder, or by the Company, if the Company or any
of its directors, officers or any person who controls the Company within the
meaning of the Securities Act or the Exchange Act, 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.
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 person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person 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.
8. REPORTS UNDER THE EXCHANGE ACT. With a view to making available to the
Investors the benefits of Rule 144, the Company agrees to:
a. file with the SEC in a timely manner and make and keep available all
reports and other documents required of the Company under the Securities Act and
the Exchange 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)
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and the filing and availability of such reports and other documents is required
for the applicable provisions of Rule 144; and
b. furnish to each Investor so long as such Investor owns Shares,
Warrants or Registrable Securities, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting requirements of
Rule 144, the Securities Act and the Exchange 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 of the Investors hereunder,
including the right to have the Company register Registrable Securities pursuant
to this Agreement, shall be automatically assignable by each Investor to any
transferee of at least ten percent (10%) of the 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 after such
assignment, (ii) the Company is 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 Securities Act
and applicable state securities laws, (iv) the transferee or assignee agrees in
writing with the Company to be bound by all of the provisions contained herein,
and (v) such transfer shall have been made in accordance with the applicable
requirements of the Securities Purchase Agreement.
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
written consent of the Company and Investors who hold a majority in interest of
the Registrable Securities or in the case of a waiver by the Company, with the
written consent of the Company or in the case of a waiver by the Investors, with
the written consent of 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 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 instructions, notice or election received
from the registered owner of such Registrable Securities.
b. Any notices required or permitted to be given under the terms of this
Agreement shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier or by confirmed telecopy, and
shall be effective five (5) days after being placed in the
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mail, if mailed, or upon receipt or refusal of receipt, if delivered personally
or by courier or confirmed telecopy, in each case addressed to a party. The
addresses for such communications shall be:
If to the Company:
OPEN MARKET, INC.
One Wayside Road
Burlington, MA 01803
Telephone No.: (781) 359-3000
Telecopy No.: (781) 359-8118
Attention: Regina O. Sommer
with copies to:
OPEN MARKET, INC.
One Wayside Road
Burlington, MA 01803
Telephone No.: (781) 359-3000
Telecopy No.: (781) 359-8129
Attention: Legal Counsel
and
HALE & DORR LLP
60 State Street
Boston, MA 02109
Telephone No.: (617) 526-6000
Telecopy No.: (617) 526-5000
Attention: John H. Chory, Esq.
If to an Investor, at such address as such Investor shall have
provided in writing to the Company or such other address as such Investor
furnishes by notice given in accordance with this Section 11(b).
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. Governing Law; Jurisdiction. This Agreement shall be governed by and
---------------------------
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed in the State of New York. The Company
irrevocably consents to the jurisdiction of the United States federal courts and
state courts located in New York, New York in any suit or proceeding based on or
arising under this Agreement and irrevocably agrees that all claims in
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respect of such suit or proceeding may be determined in such courts. The Company
irrevocably waives the defense of an inconvenient forum to the maintenance of
such suit or proceeding. The Company further agrees that service of process upon
the Company mailed by first class mail shall be deemed in every respect
effective service of process upon the Company in any such suit or proceeding.
Nothing herein shall affect an Investor's right to serve process in any other
manner permitted by law. The Company agrees that 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, the Securities Purchase Agreement, and the Warrants
(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, the
Securities Purchase Agreement, and the Warrants supersede all prior agreements
and understandings among the parties hereto and thereto 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 parties hereto.
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. All consents, approvals and other determinations to be made by the
Investors or the Initial Investor pursuant to this Agreement shall be made by
the Investors holding a majority in interest of the Registrable Securities
(determined as if all Warrants then outstanding had been exercised for
Registrable Securities and assuming no Adjustment Shares are outstanding prior
to the Adjustment Date) then held by all Investors or by the Initial Investor,
as the case may be.
k. The initial number of Registrable Securities included on any
Registration Statement and each increase to the number of Registrable Securities
included thereon shall be allocated pro rata among the Investors based on the
number of Registrable Securities held by each Investor at
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the time of such establishment or increase, as the case may be. In the event an
Investor shall sell or otherwise transfer any of such holder's Registrable
Securities, each transferee shall be allocated a pro rata portion of the number
of Registrable Securities included on a Registration Statement for such
transferor. Any shares of Common Stock included on a Registration Statement and
which remain allocated to any person or entity which does not hold any
Registrable Securities shall be allocated to the remaining Investors, pro rata
based on the number of shares of Registrable Securities then held by such
Investors. For the avoidance of doubt, the number of Registrable Securities held
by an Investor shall be determined as if all Warrants then outstanding and held
by an Investor were exercised for Registrable Securities. In addition, in
calculating the number of Registrable Securities held by an Investor, Adjustment
Shares shall constitute Registrable Securities for this purpose only after the
Adjustment Date.
l. For purposes of this Agreement, the term "BUSINESS DAY" means any day
other than a Saturday or Sunday or a day on which banking institutions in the
State of New York are authorized or obligated by law, regulation or executive
order to close.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
OPEN MARKET, INC.
By: /s/ Regina O. Sommer
-------------------------------------
Name: Regina O. Sommer
Title: Senior Vice President and
Chief Financial Officer
INITIAL INVESTOR:
CAPITAL VENTURES INTERNATIONAL
By: Heights Capital Management,
its authorized agent
By: /s/ Michael L. Spolan
-------------------------------------
Name: Michael L. Spolan
Title: General Counsel and Secretary
Residence: Cayman Islands
Address: c/o Heights Capital Management
425 California - Suite 1100
San Francisco, CA 94104
Telephone No.: (415) 403-6500
Telecopy No.: (415) 403-6525
Attention: Michael L. Spolan
with copies of all notices to:
Heights Capital Management
401 City Line Avenue - Suite 220
Bala Cynwyd, PA 19004
Telephone No.: (610) 617-2700
Telecopy No.: (610) 617-2707
Attention: Michael J. Howe
Wolf, Block, Schorr and Solis-Cohen LLP
Packard Building - 12th Floor
111 South 15th Street
Philadelphia, PA 19102
Telephone No.: (215) 977-2000
Telecopy No.: (215) 977-2334/2346
Attention: Richard A. Silfen
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EXHIBIT 99.7
FOR IMMEDIATE RELEASE
MEDIA CONTACT: Beth Winkowski INVESTOR CONTACT: Julie Lorigan
781.359.7411 781.359.7589
[email protected] [email protected]
OPEN MARKET RAISES $20 MILLION IN EQUITY
THROUGH PRIVATE PLACEMENT
BURLINGTON, MA -- July 31, 1998 -- Open Market, Inc. (NASDAQ: OMKT), a leading
provider of Internet commerce and information management software, today
announced that it has closed a $20 million private placement of common stock to
CMG Information Services, Inc. (NASDAQ: CMGI), an investor and developer of
Internet companies, and a fund managed by Heights Capital Management, a leader
in equity financing for emerging growth companies.
"The additional working capital provided by this financing strengthens our
balance sheet and gives the Company more financial flexibility," said Regina
Sommer, senior vice president and chief financial officer of Open Market, Inc.
"We are pleased to be in a position to leverage market opportunities as they
arise in this exciting and rapidly growing marketplace. In addition, this
investment solidifies our strong relationship with CMG Information Services, who
is also a customer and a partner."
Under the terms of the agreement, Open Market sold an aggregate of 1,338,912
shares of unregistered common stock at a price of $14.94 per share. In addition
to the common stock, the new investors received warrants to purchase an
additional 334,728 common shares at a price of $16.43 per share. The Company
will file a registration statement covering the common shares. Included in the
terms of the agreement are certain adjustments, and other provisions including a
repurchase provision which become operative in the event that the registration
statement is not declared effective in a timely manner.
PaineWebber, Inc. served as the Company's placement agent on this transaction.
MORE ABOUT OPEN MARKET
Founded in 1994, Open Market, Inc. (NASDAQ: OMKT) provides high-performance
application software products and professional services that allow its customers
to engage in business-to-consumer and business-to-business Internet commerce,
information commerce, and commercial publishing. Among Open Market's
distinguished roster of global customers are five of the world's ten-largest
telecommunications firms and more than 700 publishers. The company,
headquartered in Burlington, Massachusetts, can be reached by calling
1.888.OPEN.MKT or by visiting http://www.openmarket.com.
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This news release contains forward-looking statements that involve a number of
risks and uncertainties. Among the important factors that could cause actual
results to differ materially from those indicated by such forward-looking
statements are the company's limited operating history, delays in product
development, development of the Internet market, changes in product pricing
policies, competitive pressures, and the risk factors detailed from time to time
in the company's periodic reports and registration statements filed with the
Securities and Exchange Commission.
Open Market, Transact, and We ARE Internet Commerce are trademarks or registered
trademarks of Open Market, Inc. in the United States and other countries. All
other names are used for identification purposes only and may be trademarks of
their respective owners.
