INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT (this "Agreement") is made and entered into
as of the 12th day of May, 1999, between WebMD, Inc., a Georgia corporation (the
"Company"), Microsoft Corporation, a Washington corporation (the "Microsoft"),
and each of the other persons listed on Schedule I hereto (the "Purchasers" and
collectively with Microsoft, the "Investors").
1. AUTHORIZATION; SALE AND ISSUANCE OF SECURITIES.
1.1 Authorization. The Company has authorized the sale and
issuance of up to 792,000 shares of its Series E Preferred Stock, no par value
per share (the "Series E Preferred Stock"), and the issuance of up to 1,180,000
shares of its Series F Preferred Stock, no par value per share (the "Series F
Preferred Stock"), each having the rights, restrictions, privileges and
preferences as set forth in the Company's Amendment to the Amended and Restated
Articles of Incorporation, as amended, in substantially the form set forth in
Exhibit 1.1 attached hereto.
1.2 Sale of Shares. Subject to the terms and conditions hereof,
the Company shall issue and sell to the Investors, and the Investors shall
purchase from the Company, up to 738,416 shares (collectively, the "Purchased
Shares") of Series E Preferred Stock, in accordance with the following:
1.2.1 At the Initial Microsoft Closing (as defined below),
Microsoft shall purchase 184,604 shares of Series E Preferred Stock for an
aggregate purchase price of $99,999,986.80 (the "Initial Microsoft Purchase");
and
1.2.2 On the Investor Closing Date (as defined below), each
Purchaser shall purchase (the "Purchaser Investment") the number of shares of
Series E Preferred Stock set forth opposite its name on Schedule I hereto at a
purchase price of $541.70 per share. Anything herein to the contrary
notwithstanding, on or prior to May 17, 1999, the Company may designate one or
more persons to become additional Purchasers to purchase shares of Series E
Preferred Stock, provided that the Purchasers shall not purchase in the
aggregate more than 276,906 shares of Series E Preferred Stock. The Company
shall advise Microsoft from time to time regarding the status of persons who may
become Purchasers hereunder. Each of the Additional Purchasers and the amount of
shares to be purchased by each additional Purchaser shall be approved by
Microsoft, which approval will not be unreasonably withheld. Any such additional
Purchaser will become a Purchaser by executing and delivering to the Company a
counterpart of this Agreement, whereupon the Company shall amend Schedule I
attached hereto to give effect to any such Purchaser's agreement to purchase
Series E Preferred Stock.
1.2.3 Following the Initial Microsoft Closing and at any
time prior to: (i) the date on which any person (the "Acquirer") enters into a
binding definitive agreement with the Company which sets forth a "Change of
Control Transaction" (as defined below) and (ii)
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November 10, 1999 (the earlier of such times being the "Expiration Time"),
Microsoft shall have the right to purchase (the "Additional Microsoft Purchase")
up to 276,906 additional shares of Series E Preferred Stock at a purchase price
of $541.70 per share. The Company shall notify Microsoft at least 24 hours prior
to the execution of such definitive agreement, which notice shall describe the
material terms of such Change of Control Transaction. Microsoft shall notify the
Company of its intention to exercise its right to effectuate the Additional
Microsoft Purchase by written notice (the "Notice of Purchase") delivered on or
prior to the Expiration Time, which notice shall specify the number of shares of
Series E Preferred Stock to be purchased and the aggregate exercise price
therefor and which may be conditioned on the execution of the definitive
agreement with respect to such Change of Control Transaction. For purposes of
the foregoing, a "Change of Control Transaction" shall mean any transaction or
series of related transactions which result in (i) the acquisition of the
Company by another entity by means of any transaction or series of related
transactions (including, without limitation, any reorganization, merger or
consolidation) that results in the Company's shareholders immediately prior to
such transaction not holding (by virtue of such shares or securities issued
solely with respect thereto) at least 60% of the voting power of the surviving
or continuing entity, or (ii) a sale, conveyance or disposition of all or
substantially all of the assets of the Company unless the Company's shareholders
immediately prior to such transaction will, as a result of such sale, conveyance
or disposition hold (by virtue of securities issued as consideration for such
sale, conveyance or disposition) at least 60% of the voting power of the
purchasing entity, or (iii) the effectuation by the Company or its shareholders
of a transaction or series of related transactions that results in the Company's
shareholders immediately prior to such transaction not holding (by virtue of
such shares or securities issued solely with respect thereto) at least 60% of
the voting power of the Company.
2. CLOSINGS; DELIVERIES; ADDITIONAL SHARES.
2.1 Closings.
2.1.1. The closing of the Initial Microsoft Purchase (the
"Initial Microsoft Closing") shall be held at 10:00 a.m. Seattle Time on May 13,
1999 (the date of such Initial Microsoft Closing being referred to as the
"Initial Microsoft Closing Date"). The Initial Microsoft Closing shall take
place by exchanging facsimile signatures of the documents to be executed at the
Initial Microsoft Closing. Each party covenants to deliver to the other party
executed originals of documents executed by it or its agents by overnight
courier the next business day.
2.1.2 The closing of the Purchaser Investment (the
"Investor Closing") shall be held at such time and place as shall be designated
by the Company, which in no event shall be later than May 21, 1999 (the date of
such Investor Closing being referred to as the "Investor Closing Date"). The
Investor Closing shall take place by exchanging facsimile signatures of the
documents to be executed at the Investor Closing. Each party covenants to
deliver to the other party executed originals of documents executed by it or its
agents by overnight courier the next business day.
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2.1.3 The closing of the Additional Microsoft Purchase (the
"Second Microsoft Closing;" the Initial Microsoft Closing, the Investor Closing
and the Second Microsoft Closing and are sometimes collectively referred to
herein as the "Closings"), if any, shall be held at such time and place as shall
be designated by Microsoft in the Notice of Purchase, which in no event shall be
later than November 30, 1999, or, if a Change of Control Transaction has been
publicly announced prior to November 10, 1999 as provided in Section 1.2.3
hereof, the day immediately prior to the consummation of the Change of Control
Transaction (the date of such Second Microsoft Closing being referred to as the
"Second Microsoft Closing Date"). The Second Microsoft Closing shall take place
by exchanging facsimile signatures of the documents to be executed at the Second
Microsoft Closing. Each party covenants to deliver to the other party executed
originals of documents executed by it or its agents by overnight courier the
next business day.
2.2 Deliveries at Initial Microsoft Closing. At the Initial
Microsoft Closing, the Company shall deliver to Microsoft a certificate, issued
in Microsoft's name, representing 184,604 Purchased Shares, and Microsoft shall
deliver the purchase price to the Company by wire transfer in the amount of
$99,999,986.80. In addition, the Company shall deliver to Microsoft such other
instruments and documents as are described in Article 5 hereof, and Microsoft
shall deliver to the Company such other instruments and documents as are
described in Article 6 hereof.
2.3 Deliveries at Investor Closing. At the Investor Closing, the
Company shall deliver to each Purchaser a certificate, issued in such
Purchaser's name, representing that number of shares to be purchased as stated
on Schedule I attached hereto, and such Purchaser shall deliver the purchase
price to the Company by wire transfer.
2.4 Deliveries at Second Microsoft Closing. At the Second
Microsoft Closing, the Company shall deliver to Microsoft a certificate, issued
in Microsoft's name, representing that number of shares to be purchased as
stated in the Notice of Purchase, and Microsoft shall deliver the purchase price
to the Company by wire transfer.
3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to each Investor as of the
date hereof and as of the Initial Microsoft Closing and the Investor Closing
that, except as set forth on the attached Disclosure Exhibits, (which Disclosure
Exhibits may be updated by the Company with the written consent of Microsoft not
less than 48 hours prior to the Investor Closing, provided that the Company may
amend Section 3.4 without the consent of Microsoft to reflect such changes in
capitalization as are contemplated by this Agreement):
3.1 Organization and Standing; Charter and Bylaws. The Company is
a corporation duly organized and validly existing under the laws of the State of
Georgia and is in good standing under such laws, and each of the Company's
subsidiaries is duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization. Each of the Company and its
subsidiaries has all requisite power and authority and possesses all franchises,
licenses, permits, authorizations and approvals from governmental authorities
necessary to
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enable it to use its corporate name and to own, lease or otherwise hold its
properties and assets and to carry on its business as presently conducted and
proposed to be conducted. Each of the Company and its subsidiaries is duly
qualified to do business as a foreign corporation in each jurisdiction in which
the nature of its business or the ownership, leasing or holding of its
properties or assets requires qualification and where failure to do so would
have a material adverse effect on the business, assets, condition (financial or
otherwise) or results of operations of the Company and its subsidiaries, taken
as a whole (a "Material Adverse Effect"). The Company has previously delivered
to the Investors true and accurate copies of its Amended and Restated Articles
of Incorporation, as amended (the "Articles"), and its Amended and Restated
Bylaws, as presently in effect. The share certificate and transfer books and the
minute books of the Company (which have been made available for inspection by
the Investors and their representatives) are true and complete.
3.2 Corporate Power. The Company has all requisite legal and
corporate power and authority to enter into this Agreement and the Registration
Rights Agreements, to sell the Purchased Shares and to carry out and perform its
other obligations under the terms of this Agreement and the Registration Rights
Agreements.
3.3 Subsidiaries and Affiliates. Except as set forth in Disclosure
Exhibit 3.3 attached hereto, the Company does not own or control, directly or
indirectly, any interest or investment in any corporation, partnership,
association or other form of business entity. The Company beneficially owns all
the capital stock or other equity interests in each of the entities listed on
Disclosure Exhibit 3.3.
3.4 Capitalization. On the Initial Microsoft Closing Date without
giving effect to any shares of the capital stock of the Company owned in
connection with the exercise of any options or warrants of the Company after
April 10, 1999, the authorized capital stock of the Company shall consist of
107,000,000 shares of capital stock, of which: (a) 75,000,000 shares are
designated as Common Stock, voting and without par value per share, of which
2,500,000 are issued and outstanding; (b) 3,000,000 have been designated as
Common Stock Series B, nonvoting and without par value per share, of which
1,400,000 are issued and outstanding; (c) 1,500,000 shares have been designated
as Common Stock Series C, nonvoting and without par value per share, of which
1,500,000 are issued and outstanding; (d) 15,000,000 shares have been designated
as Common Stock Series D, nonvoting and without par value per share, of which
5,096,805 are issued and outstanding; (e) 2,500,000 shares have been designated
as Common Stock Series E, nonvoting and without par value per share, of which
2,100,000 are issued and outstanding; and (f) 10,000,000 shares of preferred
stock, of which (i) 1,600,000 shares have been designated as Series A Preferred
Stock, without par value per share, and of which 831,000 shares are issued and
outstanding, (ii) 3,400,000 shares have been designated as Series B Preferred
Stock, of which 2,976,807 shares are issued and outstanding, (iii) 2,000,000
shares have been designated as Series C Preferred Stock, of which 1,008,750
shares are issued and outstanding, (iv) 200,000 shares have been designated as
Series D Preferred Stock, all of which is issued and outstanding, (v) 792,000
shares have been designated as Series E Preferred Stock, none of which is issued
and outstanding, and (vi) 1,180,000 shares have been designated as Series F
Preferred Stock, of which 698,349 are issued and outstanding. The Company
declared on April 9, 1999 a stock dividend in the
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amount of .03846 shares of Series F Preferred Stock for each share of Common
Stock (on a fully diluted as converted basis) of the Company outstanding on the
date hereof (the "Series F Dividend"). All such issued and outstanding shares
have been duly authorized and validly issued, are fully paid and nonassessable,
and are owned beneficially and of record by the shareholders and in the amounts
set forth in Disclosure Exhibit 3.4 attached hereto. Except as shown in
Disclosure Exhibit 3.4 and as contemplated by this Agreement, there are no
outstanding rights, options, warrants, conversion rights or agreements for the
purchase or acquisition from the Company of any shares of its capital stock.
3.5 Authorization. All corporate action on the part of the Company
and its directors, officers and shareholders and holders of contractual or other
rights necessary for (i) the authorization, execution, delivery and performance
of all its obligations under this Agreement and any document contemplated
hereby, (ii) the establishment of the preferences, limitations and rights of the
Series E Preferred Stock and the Series F Preferred Stock and the authorization,
issuance and delivery by the Company of the Purchased Shares, (iii) the
authorization and declaration of the Series F Dividend, and (iv) the
authorization and reservation of the shares of the Common Stock issuable upon
conversion of all such Series E Preferred Stock pursuant to the terms of the
Company's Articles (the "Conversion Shares"), has been (or will be) taken prior
to the Initial Microsoft Closing. This Agreement and the Registration Rights
Agreements constitute (or will constitute upon execution and delivery) the
legal, valid and binding obligations of the Company and are enforceable against
it in accordance with their terms, except as enforceability may be limited by
bankruptcy, insolvency or other laws affecting the enforcement of creditors'
rights generally, and except that the availability of the remedy of specific
performance or other equitable relief is subject to the discretion of the court
before which any proceeding therefor may be brought.
3.6 Validity of Stock. The Purchased Shares will be duly
authorized, validly issued, fully paid and nonassessable, will be free of any
liens or encumbrances, and will not be subject to any preemptive rights, rights
of first refusal or redemption rights, other than as expressly provided in
Section 3.15 hereof, in the Articles or as will have been waived. The Conversion
Shares have been duly and validly reserved, and neither they nor the issuance
thereof are subject to any preemptive rights or rights of first refusal or
redemption rights, and, upon issuance, they will be validly issued, fully paid
and nonassessable. The Series F Preferred Stock has been duly and validly
reserved and will be fully paid and nonassessable upon payment of the Series F
Dividend.
3.7 Financial Statements. The Company has furnished the Investors
with audited consolidated balance sheets of the Company and its subsidiaries as
of December 31, 1996, 1997 and 1998 together with audited consolidated
statements of income and cash flows for the three-year period ended December 31,
1998 (collectively referred to hereafter as the "Financial Statements"). The
Financial Statements have been prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied and fairly present the
financial position of the Company and the results of its operations as of the
dates and for the periods indicated.
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3.8 Changes. Except as disclosed in Disclosure Exhibit 3.8
attached hereto and as disclosed in the Financial Statements, and other than
changes or events which have affected the Internet portal (e.g., Yahoo and
Excite) or vertical content aggregator sector (e.g., CNET and Sportsline USA) in
general, since December 31, 1998, there has not been:
3.8.1 any change in the assets, liabilities, financial
condition, or operations of the Company considered in the aggregate from that
reflected in the Financial Statements, other than in the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency);
3.8.2 any materially adverse change (individually or in the
aggregate) in the contingent obligations of the Company or any of its
subsidiaries by way of guaranty, endorsement, indemnity, warranty, or otherwise;
3.8.3 any damage, destruction or loss that had a Material
Adverse Effect on the Company or any of its subsidiaries, whether or not covered
by insurance;
3.8.4 any loans made by the Company or any of its
subsidiaries to its employees, officers, or directors or members of their
immediate families other than travel and other commercially reasonable advances
made in the ordinary course of business;
3.8.5 any declaration or payment of any dividend or other
distribution of the assets of the Company, other than the Series F Dividend;
3.8.6 any other event or condition of any character that
has had or could reasonably be expected to have a Material Adverse Effect on the
Company or any of its subsidiaries; or
3.8.7 any agreement or commitment by the Company or any of
its subsidiaries to do any of the things described in this Section 3.8.
3.9 Material Liabilities. Except (a) as disclosed in Disclosure
Exhibit 3.9 attached hereto or as reflected in the Financial Statements, (b) for
the obligations and liabilities incurred in the ordinary course of business
since December 31, 1998, and (c) for obligations under contracts made in the
ordinary course of business that would not be required by GAAP to be reflected
in the Financial Statements or obligations under contracts listed on Disclosure
Exhibit 3.10 attached hereto, neither the Company nor any subsidiary thereof has
any material liabilities or obligations, absolute or contingent.
3.10 Contracts and Commitments. Other than this Agreement, the
Registration Rights Agreements, the Cross Promotion Agreement (as defined below)
and the Master Agreement dated as of the date hereof (the "Master Agreement")
between Microsoft and the Company, the agreements contemplated thereby, and as
set forth in Disclosure Exhibit 3.10 attached hereto, neither the Company nor
any subsidiary thereof has any contracts, agreements or instruments to which it
is a party and that involve either (a) a commitment by, or revenue to, the
Company in excess of $25,000 annually, or (b) provisions restricting or
affecting the development, manufacture or distribution of the Company's products
or services. Except as
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set forth in Disclosure Exhibit 3.10, all contracts, agreements or instruments
to which each of the Company or its subsidiaries is a party are valid and
binding upon the Company or a subsidiary thereof, as applicable, and the other
parties thereto and are in full force and effect and enforceable in accordance
with their terms, subject to bankruptcy, insolvency, reorganization, moratorium
and similar laws of general application relating to or affecting creditors'
rights and to general equitable principles, and neither the Company, its
subsidiaries nor, to the Knowledge of the Company (as defined in Section 8.8
hereof), any other party to any such contract, agreement or instrument has
breached any provision of, or is in default under, the terms thereof, and there
are no claims or allegations of offset, defense, or counterclaims that would
prevent the work in process of the Company or its subsidiaries or their
contracts and agreements from maturing in due course into fully collectible
accounts receivable. Except as set forth on Disclosure Exhibit 3.10, the Company
and its subsidiaries have complied with all applicable statutes, ordinances,
rules, regulations and orders relating to seeking, bidding, obtaining,
performing under or otherwise complying with, contracts with governmental and
quasi-governmental authorities, agencies or other entities.
3.11 Protection of Intellectual Property Generally.
(a) Disclosure Exhibit 3.11 hereto sets forth a complete
and correct list and summary description of all registered and material
unregistered trademarks, trade or company names, service marks, service names,
domain names, brand names and registrations, if any, therefor; all registered
copyrights; and all patents and all patent applications, if any, in each case
applicable to or used or intended to be used in the business of the Company or
any of its subsidiaries, together with a complete list of all licenses granted
by or to the Company or any of its subsidiaries with respect to any of the
above. The Company has filed applications in the United States Patent and
Trademark Office for registration of "Web-MD", "WebMD" and "WebMD OnCall" as
service marks (the application for "Web-MD" was initially denied, but the
Company filed a response on November 20, 1998), but otherwise the Company has
not sought governmental protection by way of patent, trademark or copyright
registration or application for the property listed in Disclosure Exhibit 3.11
hereto. Each of the Company and its subsidiaries validly owns or is validly
licensed to use all inventions, processes, know-how, formulas, patterns,
designs, and trade secrets that are used in the conduct of its business as now
conducted or proposed to be conducted. All such rights and all rights listed in
Disclosure Exhibit 3.11 hereto are valid and enforceable and are free from any
security interest, lien or encumbrance or any default on the part of the Company
or any of its subsidiaries, and are not now involved in any pending or, to the
Knowledge of the Company, threatened interference proceeding. No option,
license, sublicense or other agreement has been granted in respect of any
patent, trademark, brand name, trade secret, copyright or pending application
therefor listed in Disclosure Exhibit 3.11 hereto, except as noted in Disclosure
Exhibit 3.11. Except as set forth on Disclosure Exhibit 3.11, none of the
Company's or any of its subsidiaries' owned intellectual property infringes any
patent, trademark, service mark, trade or company name or application therefor
or any related technological right of any other person. None of the rights of
the Company or any of its subsidiaries described in this Section 3.11 will be
impaired in any way by the transactions provided for herein, and all of such
rights will be fully enforceable by the Company or any of its subsidiaries after
the Initial Microsoft Closing Date and after the Second Microsoft Closing Date
without the consent or agreement of any other party. The
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Company does not believe it is or will be necessary to utilize any inventions of
any of its employees (or individuals it currently intends to hire) made prior to
their employment by the Company.
(b) The Company has all patents, patent applications,
patent rights, trademarks, trademark registrations, trademark applications,
licenses, brand names, trade names, service marks, all other names or slogans
embodying business or product goodwill, copyrights, copyright registrations,
computer programs, software (including all source code and object code,
development documentation, programming tools, specifications, data, designs,
trade secrets, technology, inventions, discoveries and improvements), know-how,
proprietary rights, processes, confidential and proprietary information, and
other intellectual property rights, whether or not subject to statutory
registration or protection, required for use in its business as presently
conducted or proposed to be conducted, except where the failure to have would
not have a Material Adverse Effect on the Company.
3.12 Compliance with Other Instruments. The execution, delivery and
performance of and compliance with this Agreement, the Registration Rights
Agreements and the issuance of the Purchased Shares, the Conversion Shares and
the Series F Preferred Stock pursuant to the Series F Dividend will not result
in any violation or be in conflict with or constitute a default (with or without
notice or lapse of time or both) under, or give rise to a right of termination,
cancellation or acceleration or the loss of any material benefit under (i) any
of the terms or provisions of the Articles or Bylaws of the Company (or
comparable organizational documents of the Company's subsidiaries), or (ii) any
mortgage, indenture, license, lease, contract, agreement or instrument to which
the Company or any of its subsidiaries is a party, or (iii) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the Company,
its subsidiaries or their properties or assets, or (iv) result in the creation
of any mortgage, pledge, lien, encumbrance or charge upon any of the properties
or assets of the Company or any of its subsidiaries pursuant to any such term or
provision.
3.13 Litigation and Other Proceedings. Except as disclosed in
Disclosure Exhibit 3.13 attached hereto, there are no actions, proceedings or
investigations pending against the Company or its properties or shareholders
(or, to the Knowledge of the Company, any basis therefor or threat thereof)
that, either in any case or in the aggregate, involve an amount in controversy
in excess of $50,000 or could reasonably be expected to have a Material Adverse
Effect on the Company and its subsidiaries taken as a whole, or result in any
material impairment of the right or ability of the Company or any of its
subsidiaries to carry on their business as now conducted, or in any material
liability on the part of the Company or any of its subsidiaries, and none that
challenges the validity of this Agreement or any action taken or to be taken in
connection herewith. The foregoing includes, without limiting its generality,
actions pending or, to the Knowledge of the Company, threatened (or any threat
thereof) involving the prior employment of the Company's or any subsidiary's
employees or their use in connection with the Company's or any subsidiary's
business of any information or techniques allegedly proprietary to any of their
former employers.
3.14 Employees. Except as disclosed in Disclosure Exhibit 3.14
attached hereto, neither the Company nor any subsidiary thereof has any
employment contracts with any of its
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employees not expressly terminable at will and no collective bargaining
agreements covering any of its employees. Further, neither the Company nor any
subsidiary thereof has any policies, procedures or handbooks providing for other
than at-will employment. No employee, agent, consultant or contractor associated
with any of the members of management or key personnel of the Company or its
subsidiaries who has contributed to or participated in the conception and
development of proprietary rights, including software, of the Company or its
subsidiaries has asserted or threatened any claim against the Company or the
applicable subsidiary in connection with such person's involvement in the
conception and development of the software or other proprietary rights of the
Company and its subsidiaries and, to the best knowledge of the Company after due
inquiry, no such person has a reasonable basis for any such claim. The Company
is not aware of any proposed, threatened or actual union organization activity
affecting the Company's and its subsidiaries' current or prospective operations.
The Company and its subsidiaries are in compliance in all material respects with
all applicable laws respecting employment and employment practices, occupational
safety and health standards, terms and conditions of employment and wages and
hours, and are not engaged in any unfair labor practice. There is no unfair
labor practice charge or complaint against the Company or any subsidiary pending
or threatened before the National Labor Relations Board or any comparable state
agency or authority. There is no labor strike, dispute, request for
representation, slowdown or stoppage actually pending or threatened against or
affecting the Company or any subsidiary.
3.15 Registration Rights; Stockholder Agreements. Except as
provided for in the Registration Rights Agreements between the Company and the
Investors, as such may be amended from time to time, and except as set forth in
Disclosure Exhibit 3.15 attached hereto, (i) the Company is under no obligation
to register any of its presently outstanding securities or any of its securities
that may hereafter be issued pursuant to this or any other existing agreement,
and (ii) the Company is not a party to and, to the Knowledge of the Company,
there are no agreements among shareholders of the Company relating to voting or
transfer of equity in the Company.
3.16 Governmental Consents. Except for the filing of a Form D with
the Securities and Exchange Commission (the "Commission") and other filings
required by the blue sky laws of the states where the Investors are located, no
consent, approval or authorization of, or registration, declaration,
designation, qualification or filing with, any governmental authority on the
part of the Company is required in connection with the valid execution and
delivery of this Agreement, the offer, sale or issuance of the Purchased Shares
by the Company, the issuance by the Company of the Conversion Shares, the
issuance of the Series F Preferred Stock pursuant to the Series F Dividend, or
the consummation of any other transaction contemplated hereby.
3.17 Other Consents. All consents of third parties and any
shareholders of the Company necessary for the execution, delivery and
performance by the Company of this Agreement or the consummation of the
transactions contemplated hereby have been (or will be) received prior to the
Initial Microsoft Closing.
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3.18 Title to Property and Assets. Except as disclosed in
Disclosure Exhibit 3.18 attached hereto, each of the Company and its
subsidiaries has good and marketable title to its material properties and assets
and has good title to all its leasehold interests, in each case subject to no
mortgage, pledge, lien, encumbrance or charge. All material tangible personal
property owned by the Company and its subsidiaries is in good operating
condition and repair, ordinary wear and tear excepted, and all material personal
property leased by the Company and its subsidiaries is in all material respects
in the condition required of such property by the terms of the lease applicable
thereto during the term of such lease and upon the expiration thereof.
3.19 Insurance. The Company has valid, outstanding and enforceable
liability, workmen's compensation, health, fire, general liability and casualty
insurance policies. The fire and casualty insurance policies are in an amount
sufficient to allow it to replace with proceeds from such insurance any of its
material, tangible properties that might be damaged or destroyed.
3.20 Licenses and Permits; Compliance with Laws. Except as
disclosed in Disclosure Exhibit 3.20 attached hereto, each of the Company and
its subsidiaries holds all licenses, certificates, permits, franchises and
rights from all appropriate federal, state or other public authorities necessary
for the conduct of its business and the use of its assets. Except as disclosed
in Disclosure Exhibit 3.20 attached hereto, each of the Company and its
subsidiaries and their respective properties, assets, operations and businesses
are in compliance (except where the Company reasonably believes such
non-compliance will not have a Material Adverse Effect on the Company and its
subsidiaries, taken as a whole) with all applicable statutes, laws, ordinances,
rules, regulations and orders of any governmental authority. Further, except as
disclosed in Disclosure Exhibit 3.20, the Company and its subsidiaries are not
presently charged with or, to the Knowledge of the Company, under governmental
investigation with respect to, any actual or alleged violation of any statute,
law, ordinance, rule or regulation. To the Knowledge of the Company, the Company
is not presently the subject of any pending or, to the Knowledge of the Company,
threatened adverse proceeding by any regulatory authority having jurisdiction
over its business, properties or operations. Neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated hereby
will result in the termination of any such license, certificate, permit,
franchise or right held by the Company or its subsidiaries.
3.21 Tax Matters. Except as disclosed in Disclosure Exhibit 3.21
attached hereto, each of the Company and all members of any affiliated group
within the meaning of Section 1504 of the Internal Revenue Code of 1986, as
amended (an "Affiliated Group") has accurately prepared and timely filed all
income and other tax returns, if any, that are required to be filed, and has
paid, or made provision for the payment of, all taxes that have or may have
become due pursuant to said returns or pursuant to any assessment that has or
may be received from any taxing authority for the period through December 31,
1998, and there are no outstanding agreements by the Company or any member of
any Affiliated Group for the extension of time for the assessment of any tax.
The United States income tax returns of the Company or any member of any
Affiliated Group have not been audited by the Internal Revenue Service. Except
as disclosed in Disclosure Exhibit 3.21, no deficiency assessment or
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proposed adjustment of the Company's or any member of any Affiliated Group's
United States income tax or state or municipal taxes (if any) is pending, and
the Company has no Knowledge of any proposed liability for any tax to be imposed
upon the Company's or any member of any Affiliated Group's properties or assets
for which there is not an adequate reserve reflected in the Financial
Statements.
3.22 Employment; No Conflicting Agreements. Except as disclosed in
Disclosure Exhibit 3.22 attached hereto, none of the officers, directors, and
key employees of the Company or any of its subsidiaries is obligated under any
contract (including licenses, covenants, or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would conflict with his or her obligation to use his
or her best efforts to promote the interests of the Company or that would
conflict with the business of the Company as the Company presently conducts the
same.
3.23 Indebtedness to Directors and Officers; Interested Party
Transactions. Except as disclosed in Disclosure Exhibit 3.23 attached hereto,
the Company is not indebted to any of its directors or officers or party to any
contract with any affiliate of its directors or officers, and, to the Knowledge
of the Company, none of such directors or officers has a claim of any nature
against the Company except for compensation due for past or current pay periods.
To the Knowledge of the Company and except as disclosed in Disclosure Exhibit
3.23, no officer, director or holder of more than 5% of the capital stock of the
Company or any "affiliate" or "associate" (as these terms are defined in Rule
405 promulgated under the Securities Act of 1933, as amended (the "Securities
Act")) of any such person or entity or the Company has or has had, either
directly or indirectly, (a) an interest in any person or entity that (i)
furnishes or sells services or products that are furnished or sold or are
proposed to be furnished or sold by the Company, or (ii) purchases from or sells
or furnishes to the Company any goods or services, or (b) a beneficial interest
in any contract or agreement to which the Company is a party or by which it may
be bound or affected. Except as set forth in Disclosure Exhibit 3.23 hereto,
there are no existing material arrangements or proposed material transactions
between the Company and any officer, director, or holder of more than 5% of the
capital stock of the Company or any affiliate or associate of any such person.
3.24 Employee Plans. Disclosure Exhibit 3.24 attached hereto lists
all employee benefit plans as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974 ("ERISA") and all severance, bonus, retirement,
pension, profit-sharing, deferred compensation plans and other similar fringe or
employee benefit plans, programs or arrangements, and all employee or
compensation agreements, written or otherwise, for the benefit of or relating to
any employee of the Company (collectively, "Employee Plans"). The Company has
complied with all terms and conditions of the Employee Plans, except where the
violation would not have a Material Adverse Effect on the Company and its
subsidiaries taken as a whole. The Company is in compliance with the provisions
of ERISA and the regulations and published interpretations thereunder, except
where the noncompliance would not have a Material Adverse Effect on the Company
and its subsidiaries taken as a whole.
3.25 Customers and Suppliers. Except as disclosed in Disclosure
Exhibit 3.25 attached hereto, no customer or supplier has taken, and neither the
Company nor any of its
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subsidiaries has received any notice or has any Knowledge that any customer or
supplier of the Company or any of its subsidiaries contemplates taking, any
steps that could disrupt the business relationship of the Company or any of its
subsidiaries with such customer or supplier or could result in a diminution in
the value of the Company or any of its subsidiaries in a manner that would have
a Material Adverse Effect on the Company and its subsidiaries, taken as a whole.
3.26 Disclosure. The Company has not knowingly failed to disclose
to the Investors any facts material to the Company and its subsidiaries, taken
as a whole. No representation or warranty of the Company contained in this
Agreement, and no statement contained in any document, certificate or schedule
furnished or to be furnished by or on behalf of the Company to the Investors or
any of their representatives pursuant to this Agreement, contains or will
contain any untrue statement of a material fact or omits or will omit to state
any material fact necessary, in light of the circumstances under which it was or
will be made, in order to make the statements herein or therein not misleading.
4 REPRESENTATIONS AND WARRANTIES OF THE INVESTORS.
Each of the Investors, severally and not jointly, represents and
warrants to the Company, as of any of the Closing Dates on which such Investor
purchases Purchased Shares, as follows:
4.1 Access to Information.
4.1.1 Such Investor acknowledges that the Company filed a
Registration Statement on Form S-1 (No. 333-71359) with the Commission on
January 28, 1999, which was amended on February 26, 1999, with respect to the
initial public offering of the Company's Common Stock (the "Registration
Statement"). Prior to any Investor (other than Microsoft) becoming a Purchaser
hereunder, the Company shall withdraw such Registration Statement. Microsoft
acknowledges that it had commenced discussions with the Company prior to the
filing of the Registration Statement which discussions resulted directly in this
Agreement and the other agreements between Microsoft and the Company
contemplated by the Master Agreement. Each Purchaser represents and warrants
that it became aware of the Company and the opportunity to become a Purchaser
hereunder through Microsoft and not as a result of the Registration Statement or
any advertising, news articles, internet chat rooms or other means of general
solicitation . Each Investor represents that while it may have reviewed the
Registration Statement, it has not relied on the Registration Statement for
purposes of making its investment hereunder, but rather has had the opportunity
to perform its own independent due diligence review of the Company and such
Investor and its advisor or advisors, or a person or persons acting on its
behalf, has had a reasonable opportunity to ask questions of and receive answers
from the officers of the Company, concerning the business and financial
condition of the Company and the terms and conditions of the offering of the
Purchased Shares, and to obtain additional information, to the extent possessed
or obtainable without unreasonable effort or expense by the officers of the
Company. All such questions have been answered to the full satisfaction of such
Investor. Microsoft acknowledges that the opportunity to enter into the Cross
Promotion Agreement with the Company was an integral
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part of its decision to purchase the Purchased Shares. Each Purchaser
acknowledges that the opportunity to enter into a strategic operating agreement
with the Company was an integral part of its decision to purchase the Purchased
Shares. In addition, each Purchaser acknowledges that it has not relied on any
due diligence, representations or other information or advice from Microsoft in
making its investment decision to purchase the Purchased Shares hereunder.
4.1.2 Such Investor acknowledges that, from time to time, statements
about the Company may be made by third parties, in writing or otherwise, that
may purport to contain information about the Company, including in newspaper
articles, internet chat rooms and, except as provided below, other publications
and communications, and that such statements have been and may be incorrect or
inaccurate in several material respects. Such Investor agrees that neither the
Company nor any of its affiliates or representatives has made any representation
or warranty as to the accuracy or completeness of any such information or
statements. Furthermore, such Investor has not relied, and will not rely, upon
any such statements in making any investment decision in connection with the
Purchased Shares; rather, the only representations or statements that such
Investor has relied upon or will rely upon will be those made by the Company in
the Registration Statement, as set forth in this Agreement, and in the following
parts of the Company's web site as it exists as of the date hereof: About WebMD
(other than Featured Topics and the Press Releases), Learn More about WebMD,
Meet our Strategic Partners, and Review our Products and Services.
4.2 Experience; Investment. Such Investor is acquiring the
Purchased Shares solely for its own account, not as a nominee or agent, and not
with a view to, or for sale in connection with, any distribution thereof, as
that term is used under the Securities Act. Such Investor represents that such
Investor is an "accredited investor" within the meaning of Rule 501(a)(3) of
Regulation D promulgated by the Commission under the Securities Act and either
it or persons in control of its investment decision have assets in excess of
$100 million, and that it has been represented by counsel in connection with
this investment, and either it or persons representing it have considerable
experience in making investments of this nature.
4.3 Registration under the Securities Act. Such Investor
understands that (a) neither the offering nor the sale of the Purchased Shares
has been registered under the Securities Act or applicable state securities
laws, in reliance upon exemptions from the registration provisions of the
Securities Act and applicable state securities laws, (b) the Purchased Shares
purchased by such Investor must be held by it indefinitely unless the sale or
transfer thereof is subsequently registered under the Securities Act and
applicable state securities laws or an exemption from such registration is
available, and the certificates or documents representing all Purchased Shares
will be legended to reflect such restrictions, (c) except as provided in the
Registration Rights Agreements between the Company and the Investors, the
Company is under no obligation to register any Purchased Shares, Conversion
Shares on such Investor's behalf or to assist it in complying with any exemption
from registration, and (d) the officers of the Company will rely in part upon
the representations and warranties made by such Investor in this Agreement in
order to establish such exemption from the registration provisions of the
Securities Act and applicable state securities laws.
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4.4 Transfer. Such Investor will not transfer any Purchased Shares
or Conversion Shares without registration under the Securities Act and
applicable state securities laws unless the transfer is exempt from registration
under the Securities Act and such laws and is made in compliance with the
legends contemplated by Section 8.10 herein.
4.5 Authorization. All action on the part of such Investor
necessary for the authorization, execution, delivery and performance of all
obligations of such Investor under this Agreement or any document contemplated
hereby has been (or will be) taken prior to the Initial Microsoft Closing. This
Agreement, when executed and delivered by such Investor, will constitute the
valid and binding obligation of such Investor and is enforceable against it in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency or other laws affecting the enforcement of creditors'
rights generally, and except that the availability of the remedy of specific
performance or other equitable relief is subject to the discretion of the court
before which any proceeding therefor may be brought.
5 CONDITIONS TO CLOSING OF THE INVESTORS.
The obligation of Microsoft to purchase and pay for the Purchased
Shares at the Initial Microsoft Closing is, at Microsoft's option, subject to
the fulfillment on or prior to the Initial Microsoft Closing Date of the
conditions specified below. The obligation of each Purchaser to purchase and pay
for the Purchased Shares at the Investor Closing is, at such Purchaser's option,
subject to fulfillment on or prior to the Investor Closing Date of the
conditions specified in Sections 5.1, 5.2 and 5.9. The obligation of Microsoft
to purchase and pay for the Purchased Shares at the Second Microsoft Closing is,
at Microsoft's option, subject to the fulfillment on or prior to the Second
Microsoft Closing Date of the conditions specified in Sections 5.11 and 5.12.
5.1 Representations and Warranties Correct. The representations
and warranties made by the Company in Article 3 hereof, and with respect to the
Initial Microsoft Closing only, in the Distribution and Cross Promotion
Agreement effective as of May 6, 1999 ("Cross Promotion Agreement"), shall be
true and correct on and as of the date hereof and the applicable Closing Date as
though made on such date, but excluding any disclosures made by the Company in
the Disclosure Exhibit delivered at least 48 hours prior to the Investor Closing
Date.
5.2 Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Company on
or prior to the applicable Closing Date shall have been performed or complied
with in all respects.
5.3 Filing of Charter Amendment. The Amendment to the Amended and
Restated Articles of Incorporation shall have been properly filed with the
Secretary of State of the State of Georgia prior to the Initial Microsoft
Closing Date.
5.4 Registration Rights Agreements. The Company shall have
executed and delivered (i) a Registration Rights Agreement by and between the
Company and Microsoft in the form attached hereto as Exhibit 5.4A (the
"MS Registration Rights Agreement") and (ii) a Registration Rights Agreement
among the Company and the Purchasers in the form attached
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>PAGE> 15
hereto as Exhibit 5.4B (the "Purchaser Registration Rights Agreement;"
and together with the MS Registration Rights Agreement, the "Registration Rights
Agreements").
5.5 Cross Promotion Agreement. The Company shall have executed
and delivered the Cross Promotion Agreement. All covenants, agreements and
conditions contained in this Agreement and in the Cross Promotion Agreement to
be performed or complied with by the Company on or prior to the Initial
Microsoft Closing shall have been performed or complied with in all material
respects.
5.6 Compliance Certificate. Unless the Closing Date is the same as
the date of this Agreement, the Investors shall have received a certificate
executed by the President of the Company, dated as of the Closing Date,
certifying that the conditions specified in Sections 5.1, 5.2, 5.3 and 5.9
hereof have been fulfilled.
5.7 Opinion of Company's Counsel. The Investors shall have
received from Nelson Mullins Riley & Scarborough, L.L.P., counsel to the
Company, in form and substance reasonably satisfactory to the Investors and
their counsel, a favorable opinion addressed to the Investors, dated as of the
Initial Microsoft Closing Date.
5.8 Evidence of Consents. The Company shall have given the
Investors evidence satisfactory to the Investors that it has received all
necessary consents of third parties and shareholders of the Company, including
HBO & Company of Georgia ("HBOC"), pursuant to Section 3.17 hereof, in order to
consummate the transactions contemplated by this Agreement and the Exhibits
hereto.
5.9 Injunctions, etc. No injunction or order of any governmental
authority shall be in effect as of the applicable Closing, and no lawsuit,
claim, proceeding or investigation shall be pending or threatened by or before
any governmental authority as of the applicable Closing, which would restrain or
prohibit the issuance and sale of the Purchased Shares or the Conversion Shares
or the consummation of any of the other transactions contemplated by this
Agreement or invalidate or suspend any provision of this Agreement, the
Registration Rights Agreements, the Articles or the Cross Promotion Agreement.
5.10 Rights of First Refusal; Registration Rights. HBOC shall have
waived its right of first refusal to acquire securities of the Company which are
issued after the date hereof pursuant to Sections 9 of the Investment Agreement
dated August 24, 1998, as amended (the "HBOC Investment Agreement) between the
Company and HBOC. HBOC, Sirrom Investments, Inc., Premier Technologies, Inc.,
and Matria Healthcare, Inc. shall have waived any rights which such shareholders
have pursuant to agreements with the Company (i) to limit the number of shares a
selling shareholder may include in a piggyback registration to a number which is
less than the number of securities included in such offering by any one of such
shareholders unless all securities held by such shareholder and requested to be
included in such offering are included therein and (ii) to restrict the ability
of the Company to grant registration rights except as permitted by Section 11.3
of the HBOC Investment Agreement.
5.11 Change of Control Transaction. If the Second Microsoft Closing
is a result of a Change of Control Transaction, the Company shall have
consummated the Change of Control
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Transaction and no material adverse amendment or modification shall have been
made to the definitive agreement with respect thereto since its execution,
without the consent of Microsoft.
5.12 Strategic Relationship. If the Second Microsoft Closing is a
result of a Change of Control Transaction, Microsoft and the Acquirer in such
Change of Control Transaction shall have entered into a mutually acceptable
strategic relationship substantially in accordance with any memorandum of
understanding between such parties executed on or before the Change of Control
Transaction.
6 CONDITIONS TO CLOSING OF THE COMPANY.
The obligation of the Company to sell the Purchased Shares at the
Initial Microsoft Closing is subject to the fulfillment on or prior to the
Initial Microsoft Closing Date of the conditions specified below. The obligation
of the Company to sell the Purchased Shares at the Investor Closing and the
Second Microsoft Closing is subject to fulfillment on or prior to the Investor
Closing Date and the Second Microsoft Closing Date, respectively, of the
conditions specified in Sections 6.1, 6.2 and 6.4.
6.1 Representations and Warranties Correct. The representations
and warranties made by the Investors in Article 4 hereof and, with respect to
the Initial Microsoft Closing only, the representations and warranties made by
Microsoft in the Cross Promotion Agreement, shall be true and correct on and as
of the date hereof and the applicable Closing Date as though made on such date.
6.2 Performance. All covenants, agreements and conditions
contained in this Agreement to be performed by or complied with by the Investors
and, with respect to the Initial Microsoft Closing only, all covenants,
agreements and conditions contained in the Cross Promotion Agreement to be
performed by or complied with by Microsoft, on or prior to the applicable
Closing Date shall have been performed or complied with in all respects.
6.3 Registration Rights Agreements. The Investors shall have
executed and delivered the Registration Rights Agreements.
6.4 Injunctions, etc. No injunction or order of any governmental
authority shall be in effect as of the applicable Closing, and no lawsuit,
claim, proceeding or investigation shall be pending or threatened by or before
any governmental authority as of the applicable Closing, which would restrain or
prohibit the issuance and sale of the Purchased Shares or the Conversion Shares
or the consummation of any of the other transactions contemplated by this
Agreement or invalidate or suspend any provision of this Agreement, the
Registration Rights Agreements, the Articles or the Cross Promotion Agreement.
6.5 Cross Promotion Agreement. Microsoft shall have executed and
delivered the Cross Promotion Agreement, with such changes as the Company and
Microsoft shall agree after good faith negotiations.
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7 COVENANTS.
7.1 Basic Information. Subject to Section 7.2 hereof:
7.1.1 As soon as practicable after the end of each fiscal
year, and in any event within 90 days thereafter, beginning with the year ending
December 31, 1999, the Company shall furnish to the Investors audited
consolidated balance sheets of the Company and its subsidiaries, if any, as of
the end of such fiscal year and audited consolidated statements of income and
cash flow of the Company and its subsidiaries, if any, for such fiscal year,
prepared in accordance with GAAP consistently applied and setting forth in each
case in comparative form the figures for the previous fiscal year, all in
reasonable detail and certified by Ernst & Young, LLP or another independent
public accounting firm, which shall also be one of the six largest firms of
nationally recognized standing in the United States, or a firm acceptable to the
Investors.
7.1.2 As soon as practicable after the end of each fiscal
quarter, and in any event within 45 days thereafter, the Company shall furnish
to the Investors consolidated balance sheets of the Company and its
subsidiaries, if any, as of the end of such fiscal quarter, and consolidated
statements of income and cash flow of the Company and its subsidiaries, if any,
for such fiscal quarter and for the current fiscal year to date, prepared in
accordance with GAAP consistently applied, with such statements certified by the
chief financial officer of the Company as having been prepared in accordance
with GAAP consistently applied, and accompanied by a brief narrative description
of the Company's business activities during said quarter.
7.2 Suspension of Certain Covenants. The covenants set forth in
Section 7.1 hereof, shall be suspended and be of no force or effect if the
Company becomes subject to the reporting requirements of the federal Securities
Exchange Act of 1934, as amended.
7.3 Hart-Scott-Rodino.
7.3.1 In the event that, under the designations of the
Series E Preferred Stock contained in the Amendment to the Amended and Restated
Articles of Incorporation, any Investor would acquire the right to vote such
shares, because of the occurrence or nonoccurrence of a particular event, and
the acquisition of such right would require any filing by such Investor under
the Hart Scott Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), or the
acquisition or disposition by any Investor of the Conversion Shares would
require any such filing, then, before such voting right shall become effective,
either (1) the parties shall have been granted early termination of the waiting
period under the HSR Act, or (2) the applicable waiting period shall have
expired without any agency having sought injunctive relief with respect to the
effectiveness of the voting rights. Each of the Company and such Investors shall
cooperate in making any such filing promptly and shall furnish one another such
information and commercially reasonable assistance as necessary for any such
filing.
7.3.2 In the event that the Company enters into an
agreement that contemplates a Change of Control Transaction and, as a result,
filings under the HSR Act are required as a condition to the closing of such
transaction, then the Company and Microsoft covenant and
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agree to cause the other party to the Change of Control agreement to covenant to
file the information and documents required by HSR and to condition or delay any
Change of Control until either (1) the parties shall have been granted early
termination of any waiting period under the HSR Act, or (2) the applicable
waiting period shall have expired without any agency having sought injunctive
relief. In the event that the applicable HSR waiting periods have not expired 90
days after the initial HSR filing, then Microsoft's right and obligation to
purchase Purchased Shares in the Additional Microsoft Purchase shall be
converted into a right and obligation to purchase an equivalent number of
nonvoting preferred stock that, by their terms, convert to voting common stock
and have such terms as may be mutually agreed by Microsoft and the Company and
an equivalent change shall be made to the consideration to be received with
respect to the Purchased Shares in such Change of Control Transaction.
8 MISCELLANEOUS.
8.1 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Georgia, without regard to its
principles of conflicts of laws.
8.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Investors and
the closing of the transactions contemplated hereby.
8.3 Assignment. This Agreement may not be assigned by any
Purchaser without the express written consent of the Company (which consent may
be granted or withheld in the sole discretion of the Company). This Agreement
may not be assigned by the Company without the express written consent of each
Investor except that the Company may assign this Agreement directly or
indirectly by operation of law in connection with a Change of Control if the
successor company or its parent company, which is a company whose securities are
registered pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended, execute a joinder to this Agreement as of the closing of any Change of
Control. Notwithstanding the foregoing sentences, each Investor shall have the
right to assign its right to purchase any or all of the Purchased Shares to one
or more Authorized Transferees who agree to be bound by the terms and provisions
of this Agreement. As used herein, an "Authorized Transferee" of an Investor
shall mean a limited number of institutional accredited investors within the
meaning of Rule 501 promulgated under the Securities Act of 1933, as amended,
with gross assets in excess of $100,000,000 who became aware of the Company and
the opportunity to acquire Series E Preferred Stock and Series F Preferred Stock
as a result of contacts by such Investor and not as a result of the Registration
Statement, the identity of which shall be reasonably acceptable to the Company.
8.4 Entire Agreement; Amendment. This Agreement and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement among the parties with regard to the subjects hereof and thereof.
Neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated except by a written instrument signed by each Investor and a
representative of the Company so authorized by its Board of Directors.
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8.5 Notices. All notices and other communications required or
permitted hereunder shall be given in writing and shall be deemed effectively
given upon personal delivery or three (3) business days following deposit with
the United States Postal Service, by certified mail, return receipt requested,
postage prepaid, or otherwise delivered by hand or by messenger, addressed: (a)
if to Microsoft, at Microsoft Corporation, One Microsoft Way, Redmond,
Washington 98052-5399, Attn: Chief Financial Officer with a copy to General
Counsel - Finance and Administration, and Preston Gates & Ellis LLP, 5000
Columbia Center, 701 Fifth Avenue, Seattle, Washington 98104, or (b) if to any
Purchaser, at the address set forth opposite such Purchaser's name on Schedule I
hereto, or (c) if to any other holder of any shares of Series E Preferred Stock
or Conversion Shares, at such address as such holder shall have furnished the
Company in writing, or, until any such holder so furnishes an address to the
Company, then to and at the address of the last holder of such shares of Series
E Preferred Stock or Conversion Shares who has so furnished an address to the
Company, or (d) if to the Company, at WebMD, Inc., 400 The Lenox Building, 3399
Peachtree Road, Atlanta, Georgia 30326, Attn: General Counsel, with a copy to
Nelson Mullins Riley & Scarborough, L.L.P., Bank of America Corporate Center,
Suite 2600, 100 North Tryon Street, Charlotte, North Carolina 28202, Attn: H.
Bryan Ives III and C. Mark Kelly, or at such other address as the Company shall
have furnished to the Investors and each such other holder in writing.
8.6 Agent's Fees. Each party (a) represents and warrants that it
has retained no finder or broker in connection with the transactions
contemplated by this Agreement (except as disclosed to the other party hereto as
of the date hereof), and (b) hereby agrees to indemnify and to hold the other
party harmless of and from any liability for commissions or compensation in the
nature of an agent's, finder's or broker's fee to any broker or other person or
firm (and the cost and expenses of defending against such liability or asserted
liability) for which said party is responsible.
8.7 Expenses. Each party shall bear its own expenses and legal
fees (and expenses and disbursements of its legal counsel) incurred on its
behalf with respect to this Agreement and the transactions contemplated hereby.
8.8 Construction of Certain Terms. The titles of the articles,
sections, and subsections of this Agreement are for convenience of reference
only and are not to be considered in construing this Agreement. For purposes of
this Agreement, the terms "Company's Knowledge," "Knowledge of the Company" and
"Knowledge" as applied to the Company means, as to a particular matter, the
actual knowledge of the Company's executive officers and in-house corporate
counsel. Wherever words "including", "include" or "includes" are used in this
Agreement, they shall be deemed followed by the words "without limitation".
References to any gender shall be deemed to mean any gender.
8.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
8.10 Legends. In addition to any legends required by the Securities
Act or any applicable state securities laws, the Company shall place the
following legend on the front or back of each certificate evidencing ownership
of shares of Series E Preferred Stock:
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The Corporation will furnish without charge to each
shareholder who so requests a statement of the designations,
relative rights, preferences and limitations applicable to
each class, and series within a class, of capital stock of the
Corporation and the variations in rights, preferences and
limitations applicable to each series (and the authority of
the Corporation's board of directors to determine variations
for future series).
The Company shall place legends on each certificate evidencing
ownership of shares of Common Stock identical to those initially placed on the
certificates for Series E Preferred Stock relating to the Securities Act and all
applicable state securities laws.
8.11 Enforcement.
8.11.1 Remedies at Law or in Equity. If the Company shall
default in any of its obligations under this Agreement or if any representation
or warranty made by or on behalf of the Company in this Agreement or in any
certificate, report or other instrument delivered under or pursuant to any term
hereof shall be untrue or misleading in any material respect as of the date of
this Agreement or as of the applicable Closing Date or as of the date it was
made, furnished or delivered, each Investor may proceed to protect and enforce
its rights by suit in equity or action at law, whether for the specific
performance of any term contained in this Agreement, injunction against the
breach of any such term or in furtherance of the exercise of any power granted
in this Agreement, or to enforce any other legal or equitable right of such
party or to take any one of more of such actions.
8.11.2 Remedies Cumulative; Waiver. No remedy referred to
herein or in any exhibit hereto is intended to be exclusive, but each shall be
cumulative and in addition to any other remedy referred to above or otherwise
available to a party at law or in equity. No express or implied waiver by any
party of any default shall be a waiver of any future or subsequent default. The
failure or delay of any party in exercising any rights granted it hereunder
shall not constitute a waiver of any such right and any single or partial
exercise of any particular right by such party shall not exhaust the same or
constitute a waiver of any other right provided herein.
8.12 Timely Performance. Time is of the essence as to the
performance of the obligations required of the respective parties under this
Agreement.
8.13 No Joint Venture. Nothing in this Agreement shall be deemed to
constitute the Company and any Investor as partners, agents or joint venturers.
8.14 Severability. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
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8.15 Further Assurances. The Company shall use its best efforts to
obtain and assist each Investor in obtaining promptly all necessary waivers,
consents and approvals from any governmental authority or any other person
(including the approval of the stockholders of the Company, if necessary) for
any exercise by such Investor of its rights under this Agreement, the
Registration Rights Agreements, the Purchased Shares, or the Conversion Shares
and to take such other actions as may reasonably be requested by such Investor
to effect the purpose of this Agreement or the Registration Rights Agreements.
The period of time provided for any closing of the transactions pursuant to such
rights may, at the option of each Investor, be extended as necessary in order to
obtain any such waivers, consents and approvals.
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SIGNATURE PAGE TO THE INVESTMENT AGREEMENT
DATED MAY 12, 1999 AMONG WEBMD, INC.,
MICROSOFT CORPORATION AND THE PURCHASERS NAMED THEREIN
THE COMPANY:
WEBMD, INC.
BY: /s/ Jeff Arnold
-----------------------------------
ITS: Chief Executive Officer
-------------------------------
MICROSOFT:
MICROSOFT CORPORATION
BY: /s/ Greg B. Maffie
------------------------------------
ITS: Senior Vice President - Finance
--------------------------------
and Administration Chief
Financial Officer
22
>PAGE> 23
SIGNATURE PAGE TO THE INVESTMENT AGREEMENT
DATED MAY 12, 1999 AMONG WEBMD, INC.,
MICROSOFT CORPORATION AND THE PURCHASERS NAMED THEREIN
PURCHASERS:
INTEL CORPORATION
BY: /s/ Arnold Sodhani
-------------------------------------
ITS: Vice President and Treasurer
----------------------------------
COVAD COMMUNICATIONS GROUP INC.
BY: /s/ Robert Davenport
-------------------------------------
ITS: EVP Business Development
----------------------------------
EXCITE, INC.
BY: /s/ Mark C. Stevens
-------------------------------------
ITS: Executive Vice President
----------------------------------
Business Affairs
SOFTBANK AMERICA INC.
BY: /s/ Stephen J. Murray
-------------------------------------
ITS: Treasurer, SOFTBANK America, Inc.
----------------------------------
SUPERIOR CONSULTANT
HOLDINGS CORPORATION
BY: /s/ Susan M. Syner
-------------------------------------
ITS: Vice President & CAO Corporate
----------------------------------
Secretary
23
>PAGE> 24
SIGNATURE PAGE TO THE INVESTMENT AGREEMENT
DATED MAY 12, 1999 AMONG WEBMD, INC.,
MICROSOFT CORPORATION AND THE PURCHASERS NAMED THEREIN
DELL USA, L.P.
BY: DELL GEN. P. CORP.
ITS: GENERAL PARTNER
BY: /s/
-----------------------------------
ITS:
--------------------------------
THE READER'S DIGEST ASSOCIATION, INC.
BY: /s/
-----------------------------------
ITS:
--------------------------------
24
>PAGE> 25
SCHEDULE I
LIST OF PURCHASERS
>TABLE>
>CAPTION>
PURCHASER ADDRESSES NUMBER OF SHARES
>S> >C> >C>
Intel Corporation 2200 Mission College Boulevard 26,768
Santa Clara, CA 95052
Covad Communications 2330 Central Expressway 27,691
Group Inc. Santa Clara, CA 95050
Excite Inc. 555 Broadway 46,151
Redwood City, CA 94063
SOFTBANK America Inc. 10 Langley Road 92,302
Suite 403
Newton Center, MA 02459
Superior Consultant 4000 Town Center 18,460
Holdings Corporation Suite 1100
Southfield, MI 48075
The Reader's Digest Reader's Digest Road 23,999
Association, Inc. Pleasantville, New York 10570-7000
Dell USA, L.P. One Dell Way 36,921
Round Rock, Texas 78682
[TO COME] 4,614
-------
Total 276,906
=======
>/TABLE>
>PAGE> 26
ARTICLES OF AMENDMENT TO AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF WEBMD, INC.
In accordance with Section 14-2-1006 of the Georgia Business
Corporation Code (the "Code"), WebMD, Inc. (the "Corporation"), a corporation
organized and existing under and by virtue of the Code, DOES HEREBY CERTIFY:
1. The name of the Corporation is WebMD, Inc.
2. The following resolution setting forth an amendment to the
Corporation's Articles of Incorporation has been duly adopted
by the Board of Directors:
RESOLVED, THAT ARTICLE II.B OF THE AMENDED AND
RESTATED ARTICLES OF INCORPORATION IS HEREBY AMENDED BY ADDING
THE FOLLOWING PROVISIONS TO THE END THEREOF: "THE CORPORATION
IS AUTHORIZED TO ISSUE 185,000 SHARES OF SERIES E CONVERTIBLE
PREFERRED STOCK, WITHOUT PAR VALUE PER SHARE (THE "SERIES E
PREFERRED STOCK") AND 1,180,000 SHARES OF SERIES F CONVERTIBLE
PREFERRED STOCK, WITHOUT PAR VALUE PER SHARE (THE "SERIES F
PREFERRED STOCK"). THE SERIES E PREFERRED STOCK AND THE SERIES
F PREFERRED STOCK SHALL HAVE THE PREFERENCES, LIMITATIONS AND
RELATIVE RIGHTS SET FORTH ON EXHIBIT G TO THIS RESOLUTION."
3. The "Exhibit G" referenced in the foregoing resolution is
included in these Articles of Amendment and is the same
"Exhibit A" as is attached hereto.
4. The foregoing resolution containing the amendment was duly
adopted on April 9, 1999, by the Corporation's Board of
Directors in accordance with the provisions of Section
14-2-1002 of the Code.
IN WITNESS WHEREOF, the Corporation has caused this Amendment to be
signed by the undersigned duly authorized officer, this 12th day of April, 1999.
WEBMD, INC.
By: /s/ W. Michael Heekin
--------------------------------
Name (print): W. Michael Heekin
----------------------
Title: Executive Vice President
-----------------------------
>PAGE> 27
EXHIBIT A
DESIGNATIONS OF PREFERENCES,
LIMITATIONS, AND RELATIVE RIGHTS OF
SERIES E PREFERRED STOCK OF WEBMD, INC.
For the purposes of these Designations, the following terms shall have
the meanings specified:
"Any Common Stock" shall mean the Corporation's common stock, with or
without series designation.
"Articles of Incorporation" shall mean the Amended and Restated
Articles of Incorporation of the Corporation, as amended from time to time.
"Board of Directors" shall mean the board of directors of the
Corporation.
"Bylaws" shall mean the bylaws of the Corporation, as amended.
"Common Equity" shall mean Any Common Stock and any other securities
entitled generally to participate in the earnings or assets of the Corporation.
"Common Stock" shall mean the voting common stock, without designation
as to series and without par value per share, of the Corporation.
"Common Stock Deemed Outstanding" shall mean the total number of
outstanding shares of Any Common Stock plus the total number of shares of Any
Common Stock of the Corporation into which all Common Stock Equivalents are
exercisable or convertible, in each case other than shares held in the treasury
of the Corporation.
"Common Stock Equivalents" shall mean any securities or rights
convertible or exercisable into or otherwise entitling the holder thereof,
directly or indirectly, to receive additional shares of Any Common Stock.
"Conversion Price" shall have the meaning provided in Subsection (d)(1)
hereof.
"Conversion Shares" shall mean the shares of Common Stock into which
each share of Series E Preferred Stock is convertible pursuant to Section (d) of
these Designations.
"Corporation" shall mean WebMD, Inc., a Georgia corporation.
"Designations" shall mean the terms, preferences, limitations and
relative rights of the Series E Preferred Stock established hereby and set forth
hereinafter.
>PAGE> 28
"Initial Public Offering" shall have the meaning provided in the
Articles of Incorporation.
"Invested Amount" per share of Series E Preferred Stock shall mean
$541.70 per share (as adjusted pursuant to Section (d)(5) hereof after the
Original Issue Date).
"Liquidation" shall have the meaning provided in Section (b) hereof.
"Series E Preferred Stock" shall mean the 185,000 shares of Series E
Preferred Stock, without par value per share, hereby designated.
"Original Issue Date" shall mean, with respect to each share of Series
E Preferred Stock, the date on which such share of Series E Preferred Stock is
first issued by the Corporation.
"Securities Act" shall mean the federal Securities Act of 1933, as
amended.
The Designations granted to and imposed upon the Series E Preferred
Stock are as follows:
(a) Dividend Rights. The holders of Series E Preferred Stock shall
not be entitled to receive dividends; provided, however, that no dividend shall
be paid on or declared and set apart for any share of Common Equity, other than
the Series A Preferred Stock, for any period unless at the same time an equal
dividend for the same dividend period shall be paid on or declared and set apart
for each share of Series E Preferred Stock based on the number of Conversion
Shares into which each share is then convertible. No dividends shall be paid
with respect to the Series E Preferred Stock unless and until dividends have
been declared and paid on the Corporation's Series A Preferred Stock in
accordance with the Series A Preferred Stock Designations of Preferences,
Limitations and Relative Rights. Dividends on shares of capital stock of the
Corporation shall be payable only out of funds legally available therefor.
(b) Liquidation Rights. In the event of the liquidation,
dissolution or winding up for any reason, including, without limitation,
bankruptcy, of the Corporation or any of the Corporation's subsidiaries, the
assets of which constitute all or substantially all the assets of the business
of the Corporation and its subsidiaries taken as a whole or such events
specified in the next sentence (each such event referred to as a "Liquidation"),
the holders of the outstanding shares of Series E Preferred Stock shall, at
their election, be entitled to receive in exchange for and in redemption of each
share of their Series E Preferred Stock, and on a parity with the holders of any
capital stock ranking pari passu to (including the Series B, C and D Preferred
Stock), and prior to any capital stock ranking junior to, the Series E Preferred
Stock by reason of their ownership thereof, from any funds or assets legally
available for distribution to shareholders that portion of such funds, proceeds
or assets in an amount equal to a fraction,
(1) the numerator of which is the number of Conversion
Shares to which the holder of such share of Series E Preferred Stock
would be entitled by virtue of
>PAGE> 29
converting such share; and
(2) the denominator of which is the Common Stock Deemed
Outstanding immediately prior to such Liquidation;
provided, however, that, notwithstanding the foregoing, the amount payable to
such holder of a share of Series E Preferred Stock in the event of a Liquidation
of the Corporation, as provided above, shall not be less than, and shall be
increased if necessary (with sums payable to holders of shares of any other
capital stock to be reduced ratably per share as necessary) to equal, the
Invested Amount plus declared but unpaid dividends payable with respect to such
Series E Preferred Stock; provided further, however, that no amount shall be
paid with respect to the Series B, C, D or E Preferred Stock until the holders
of the Corporation's Series A Preferred Stock have been paid in full all amounts
owed upon a Liquidation to the holders of Series A Preferred Stock in accordance
with the Series A Preferred Stock Designation of Preferences, Limitations and
Relative Rights. A Liquidation shall also be deemed to have occurred upon (i)
the acquisition of the Corporation by another entity by means of any transaction
or series of related transactions (including, without limitation, any
reorganization, merger or consolidation) that results in the Corporation's
shareholders immediately prior to such transaction not holding (by virtue of
such shares or securities issued solely with respect thereto) at least 50% of
the voting power of the surviving or continuing entity, or (ii) a sale,
conveyance or disposition of all or substantially all of the assets of the
Corporation unless the Corporation's shareholders immediately prior to such
transaction will, as a result of such sale, conveyance or disposition hold (by
virtue of securities issued as consideration for such sale, conveyance or
disposition) at least 50% of the voting power of the purchasing entity, or (iii)
the effectuation by the Corporation or its stockholders of a transaction or
series of related transactions that results in the Corporation's shareholders
immediately prior to such transaction not holding (by virtue of such shares or
securities issued solely with respect thereto) at least 50% of the voting power
of the Corporation.
To the extent necessary, the Corporation shall cause such actions to be
taken by any of its subsidiaries so as to enable the proceeds of a Liquidation
to be distributed to the holders of shares of Series E Preferred Stock in
accordance with this Section (b). All the preferential amounts to be paid to the
holders of Series E Preferred Stock under this Section (b) shall be paid or set
apart for payment before the payment or setting apart for payment of any amount
for, or the distribution of any assets of the Corporation to, the holders of
shares of Any Common Stock or any class or series of stock of the Corporation
ranking junior to Series E Preferred Stock in connection with a Liquidation as
to which this Section (b) applies. If the assets or surplus funds to be
distributed to the holders of Series E Preferred Stock are insufficient to
permit the payment to such holders of the full amounts payable to such holders,
the assets and surplus funds legally available for distribution shall be
distributed ratably among the holders of Series E Preferred Stock in proportion
to the full amount each such holder is otherwise entitled to receive.
(c) Voting Rights. Except as provided by the Georgia Business
Corporation Code or as otherwise expressly provided herein, the Series E
Preferred Stock shall be non-voting; provided, however, that, with respect to
special class voting arrangements, each holder of a
>PAGE> 30
share of Series E Preferred Stock shall be entitled to the number of votes equal
to the number of Conversion Shares into which such share of Series E Preferred
Stock would be convertible under the circumstances described in Section (d)
hereof on the record date for the vote or consent of shareholders.
(d) Conversion. The holders of Series E Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(1) Conversion Rate.
(A) For purposes of this Section (d), the shares
of Series E Preferred Stock shall be convertible, at the times
and under the conditions described in this Section (d)
hereafter, at the rate (the "Conversion Rate") of one share of
Series E Preferred Stock to the number of shares of Common
Stock that equals the quotient obtained by dividing the
Invested Amount by the Conversion Price (defined hereinafter).
Thus, the number of shares of Common Stock to which a holder
of Series E Preferred Stock shall be entitled upon any
conversion provided for in this Section (d) shall be the
product obtained by multiplying the Conversion Rate by the
number of shares of Series E Preferred Stock being converted.
Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of the surrender of
the shares of Series E Preferred Stock to be converted in
accordance with the procedures described in Subsection (d)(4)
below. The "Conversion Price" shall be equal to $54.17, except
as otherwise adjusted as provided hereafter in this Section
(d). The initial Conversion Rate shall be one share of Series
E Preferred Stock for 10 shares of Common Stock.
(B) No fractional shares of Common Stock shall
be issued upon conversion of Series E Preferred Stock, and to
the extent that the aggregate of all shares of Series E
Preferred Stock surrendered at any one time by a single holder
thereof would result in the issuance of a fractional share of
Common Stock, such fractional share shall be redeemed in cash
at the then effective Conversion Price per share, payable as
promptly as possible when funds are legally available
therefor.
(2) Optional. Subject to Subsection (d)(3) below, each
share of Series E Preferred Stock shall be convertible, at the option
of the holder thereof, at any time after the Effective Date (as defined
in Subsection (d)(9) below) in whole or in part, at the office of the
Corporation or any transfer agent for the Series E Preferred Stock,
into Common Stock at the then effective Conversion Rate.
(3) Automatic.
(A) Should the holders of at least a majority of
the then outstanding shares of Series E Preferred Stock so
elect at any time after the Effective Date by delivery of
written notice or notices to the Corporation, each and every
>PAGE> 31
outstanding share of Series E Preferred Stock held by all
holders of Series E Preferred Stock (whether or not so
electing) shall automatically be converted into Common Stock
at the then effective Conversion Rate. Such conversion shall
be deemed to have been made immediately prior to the close of
business on the date of receipt of the last written notice
described above necessary to effect such request by a majority
of holders. Such conversion shall be automatic, without need
for any further action by the holders of shares of Series E
Preferred Stock and regardless of whether the certificates
representing such shares are surrendered to the Corporation or
its transfer agent; provided, however, that the Corporation
shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion unless
certificates evidencing such shares of Series E Preferred
Stock so converted are surrendered, or a notice that such
certificates have been lost, stolen or destroyed shall have
been given, to the Corporation in accordance with the
procedures described in Subsection (d)(4) below. Upon the
conversion of Series E Preferred Stock pursuant to this
Subsection (d)(3)(A), the Corporation shall promptly send
written notice thereof, by registered or certified mail,
return receipt requested and postage prepaid, by hand delivery
or by overnight delivery, to each holder of record of Series E
Preferred Stock at his, her or its address then shown on the
records of the Corporation, which notice shall state that
certificates evidencing shares of Series E Preferred Stock
must be surrendered at the office of the Corporation (or of
its transfer agent for the Common Stock, if applicable) in the
manner described in Subsection (d)(4) below.
(B) The Corporation shall notify each holder of
Series E Preferred Stock at least ninety (90) days prior to
the anticipated effective date of a registration statement
filed by the Corporation under the Securities Act covering an
Initial Public Offering; provided that, in the event the
Corporation contemplates that such registration statement will
become effective at any time during the ninety (90)-day period
following the Original Issue Date, the Corporation shall
provide such notice to each holder of Series E Preferred Stock
at least ten (10) days prior to such effective date. Upon the
closing of, but effective immediately prior to, the first sale
in an Initial Public Offering, each and every share of
outstanding Series E Preferred Stock held by all holders of
Series E Preferred Stock shall automatically be converted into
Common Stock at the then effective Conversion Rate. Such
conversion shall be automatic, without need for any further
action by the holders of shares of Series E Preferred Stock
and regardless of whether the certificates representing such
shares are surrendered to the Corporation or its transfer
agent; provided, however, that the Corporation shall not be
obligated to issue certificates evidencing the shares of
Common Stock issuable upon such conversion unless certificates
evidencing such shares of Series E Preferred Stock so
converted are surrendered to the Corporation or the holder of
record of such shares notifies the Corporation that such
certificates have been lost, stolen or destroyed and executes
an agreement to indemnify the Corporation from any loss
incurred by it in connection with
>PAGE> 32
such certificates, in each case in accordance with the
procedures described in Subsection (d)(4) below. Upon the
conversion of Series E Preferred Stock pursuant to this
Subsection (d)(3)(B), the Corporation shall promptly send
written notice thereof, by registered or certified mail,
return receipt requested and postage prepaid, by hand delivery
or by overnight delivery, to each holder of record of Series E
Preferred Stock at his, her or its address then shown on the
records of the Corporation, which notice shall state that
certificates evidencing shares of Series E Preferred Stock
must be surrendered at the office of the Corporation (or of
its transfer agent for the Common Stock, if applicable) in the
manner described in Subsection (d)(4) below.
(4) Mechanics of Conversion. Before any holder of Series
E Preferred Stock shall be entitled to receive certificates
representing the shares of Common Stock into which shares of Series E
Preferred Stock are converted in accordance with Subsections (d)(2) or
(d)(3) above, such holder shall surrender the certificate or
certificates for such shares of Series E Preferred Stock, duly
endorsed, at the office of the Corporation or of any transfer agent for
the Series E Preferred Stock, and shall give written notice to the
Corporation at such office of the name or names in which such holder
wishes the certificate or certificates for shares of Common Stock to be
issued, if different from the name shown on the books and records of
the Corporation (the "Conversion Notice"); provided, that in lieu of
delivery of the certificates representing shares of Series E Preferred
Stock, a holder may notify the Corporation that such certificates have
been lost, stolen or destroyed and execute an agreement satisfactory to
the Corporation to indemnify the Corporation from any loss incurred by
it in connection with such certificates. The Conversion Notice shall
also contain such representations as may reasonably be required by the
Corporation to the effect that the shares to be received upon
conversion are not being acquired and will not be transferred in any
way that might violate the then applicable securities laws. The
Corporation shall, as soon as practicable thereafter and in no event
later than thirty (30) days after the delivery of said certificates,
issue and deliver at such office to such holder of Series E Preferred
Stock, or to the nominee or nominees of such holder as provided in the
Conversion Notice, a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled as
aforesaid. The person or persons entitled to receive the shares of
Common Stock issuable upon a conversion pursuant to Subsections (d)(2)
or (d)(3) above shall be treated for all purposes as the record holder
or holders of such shares of Common Stock as of the effective date of
conversion specified in such section. All certificates issued upon the
exercise or occurrence of the conversion shall contain a legend
governing restrictions upon such shares imposed by law or agreement of
the holder or his, her or its predecessors.
(5) Adjustment for Subdivisions or Combinations of Common
Stock. In the event the Corporation at any time, or from time to time,
after the Original Issue Date effects a subdivision or combination of
Any Common Stock then outstanding into a greater or lesser number of
shares without a proportionate and corresponding subdivision or
combination of the outstanding Series E Preferred Stock, then and in
each such event the Conversion Price shall be decreased or increased
proportionately.
>PAGE> 33
(6) Adjustments for Dividends, Distributions and Other
Common Stock Equivalents. In the event that the Corporation at any
time, or from time to time, after the Original Issue Date shall make or
issue, or fix a record date to determine the holders of Any Common
Stock or other Common Equity entitled to receive, a dividend or other
distribution payable in additional shares of Any Common Stock or Common
Stock Equivalents without payment of any consideration by such holder
of such Common Stock Equivalents or the additional shares of Any Common
Stock, and without a proportionate and corresponding dividend or other
distribution to holders of Series E Preferred Stock, then and in each
such event the maximum number of shares (as set forth in the instrument
relating thereto without regard to any provisions contained therein for
subsequent adjustment of such number) of the type of Any Common Stock
issuable in payment of such dividend or distribution or upon conversion
or exercise of such Common Stock Equivalents shall be deemed, for
purposes of this Subsection (d)(6), to be issued and outstanding as of
the time of such issuance or, in the event such a record date shall
have been fixed, as of the close of business on such record date. In
each such event the Conversion Price shall be decreased as of the time
of such issuance or, in the event such a record date shall have been
fixed, as of the close of business on such record date, by multiplying
the Conversion Price by a fraction,
(A) the numerator of which shall be the Common
Stock Deemed Outstanding immediately prior to the time of such
issuance or the close of business on such record date; and
(B) the denominator of which shall be the total
number of shares of Common Stock Deemed Outstanding (not
including any shares described in clause (ii) immediately
below) immediately prior to the time of such issuance or the
close of business on such record date, plus (ii) the number of
shares of Any Common Stock issuable in payment of such
dividend or distribution or upon conversion or exercise of
such Common Stock Equivalents;
provided, however, that (i) if such record date shall have been fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Conversion Price shall be recomputed accordingly as of the
close of business on such record date and thereafter the Conversion Price shall
be adjusted pursuant to this Subsection (d)(6) as of the time of actual payment
of such dividend or distribution; or (ii) if such Common Stock Equivalents
provide, with the passage of time or otherwise, for any decrease in the number
of shares of Any Common Stock issuable upon conversion or exercise thereof (or
upon the occurrence of a record date with respect thereto), the Conversion Price
computed upon the original issue thereof (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments based thereon, shall,
upon any such decrease becoming effective, be recomputed to reflect such
decrease insofar as it affects the rights of conversion or exercise of the
Common Stock Equivalents then outstanding; or (iii) upon the expiration of any
rights of conversion or exercise under any unexercised Common Stock Equivalents,
the Conversion Price computed upon the original issue thereof (or upon the
occurrence of a record date with
>PAGE> 34
respect thereto), and any subsequent adjustments based thereon, shall,
upon such expiration, be recomputed as if the only additional shares of Any
Common Stock issued were the shares of such stock, if any, actually issued upon
the conversion or exercise of such Common Stock Equivalents; or (iv) in the
event of issuance of Common Stock Equivalents that expire by their terms not
more than sixty (60) days after the date of issuance thereof, no adjustments of
the Conversion Price shall be made until the expiration or exercise of all such
Common Stock Equivalents, whereupon the adjustment otherwise required by this
Subsection (d)(6) shall be made in the manner provided herein.
(7) Adjustment of Conversion Rate for Diluting Issues.
Except as otherwise provided in this Subsection (d)(7), in the event,
and each time as, the Corporation sells or issues shares of Any Common
Stock or Common Stock Equivalents following the Original Issue Date, at
a per share consideration (as defined below) less than the Conversion
Price then in effect, then the Conversion Price shall be adjusted as
provided in this Subsection (d)(7). For purposes of the foregoing, the
per share consideration with respect to the sale or issuance of a share
of Any Common Stock shall be the price per share received by the
Corporation, prior to the payment of any expenses, commissions,
discounts and other applicable costs. With respect to the sale or
issuance of Common Stock Equivalents that are convertible or
exercisable into or exchangeable for Any Common Stock without further
consideration, the per share consideration shall be determined by
dividing the maximum number of shares (as set forth in the instrument
relating thereto without regard to any provisions contained therein for
subsequent adjustment of such number) of Any Common Stock issuable,
directly or indirectly with respect to such Common Stock Equivalents
into the aggregate consideration received by the Corporation upon the
sale or issuance of such Common Stock Equivalents. With respect to the
issuance of all other Common Stock Equivalents, the per share
consideration shall be determined by dividing the maximum number of
shares (as set forth in the instrument relating thereto without regard
to any provisions contained therein for subsequent adjustment of such
number) of Any Common Stock issuable with respect to such Common Stock
Equivalents into the aggregate consideration received by the
Corporation upon the sale or issuance of such Common Stock Equivalents
plus the total consideration receivable by the Corporation upon
conversion or exercise of such Common Stock Equivalents. The issuance
of shares of Any Common Stock or Common Stock Equivalents for no
consideration shall be deemed to be an issuance of shares of Any Common
Stock at a per share consideration of $.01. In connection with the sale
or issuance of Common Stock and/or Common Stock Equivalents for
non-cash consideration, the amount of consideration shall be determined
by the Board of Directors in good faith.
As used herein, "Additional Shares of Common Stock" shall
mean, with respect to such adjustments to be made to the Conversion
Price, either shares of Any Common Stock issued subsequent to the
Original Issue Date, or, with respect to the issuance of Common Stock
Equivalents, the maximum number of shares (as set forth in the
instrument relating thereto without regard to any provisions contained
therein for subsequent adjustment of such number) of Any Common Stock
issuable in exchange for, upon conversion of, or upon exercise of such
Common Stock Equivalents.
>PAGE> 35
(A) Upon the issuance or sale by the Corporation
of Additional Shares of Common Stock to the public pursuant to
an effective registration statement under the Securities Act
of 1933, as amended (the "IPO Registration Statement"), either
at a price per share to the public (the "IPO Price") less than
111% of the Conversion Price then in effect or where the
midpoint of the price range set forth on the cover page of the
prospectus forming a part of the IPO Registration Statement
when such prospectus is first filed with the Securities and
Exchange Commission (the "Filing Midpoint") is less than the
Conversion Price then in effect, the Conversion Price shall be
reduced to the lower of (i) 90% of the Conversion Price then
in effect or (ii) the Conversion Price then in effect less 50%
of the difference between the Conversion Price then in effect
and the lesser of (A) 90% of the IPO Price or (B) the Filing
Midpoint.
(B) Upon each issuance or sale by the
Corporation of Any Common Stock for a per share consideration
less than the Conversion Price as in effect on the date of
such issuance, the Conversion Price as in effect on such date
shall be adjusted by multiplying it by a fraction:
(i) the numerator of which shall be the
total number of shares of Common Stock Deemed
Outstanding immediately prior to the issuance or sale
of such Additional Shares of Common Stock plus the
number of shares of Any Common Stock that the
aggregate net consideration received by the
Corporation for the total number of such Additional
Shares of Common Stock so issued or sold would
purchase at the Conversion Price then in effect; and
(ii) the denominator of which shall be
the total number of shares of Common Stock Deemed
Outstanding immediately prior to the issuance or sale
of such Additional Shares of Common plus the number
of shares of Any Common Stock so issued.
(C) Upon each issuance or sale by the
Corporation of Common Stock Equivalents that are exchangeable
without further consideration into Common Stock, for a per
share consideration less than the Conversion Price as in
effect on the date of such issuance, the Conversion Price
shall be adjusted as provided in paragraph (B) of this
Subsection (d)(7) on the basis that the Additional Shares of
Common Stock are to be treated as having been issued on the
date of issuance or sale of the Common Stock Equivalents, and
the aggregate consideration received by the Corporation for
such Common Stock Equivalents shall be deemed to have been
received for such Additional Shares of Common Stock.
(D) Upon each issuance or sale by the
Corporation of Common Stock Equivalents other than those
described in paragraph (C) of this Subsection (d)(7) for a per
share consideration less than the Conversion Price as in
effect on the date of such issuance, the Conversion Price
shall be adjusted as provided in
>PAGE> 36
paragraph (B) of this Subsection (d)(7) on the basis that the
Additional Shares of Common Stock are to be treated as having
been issued on the date of issuance or sale of such Common
Stock Equivalents, and the aggregate consideration received
and receivable by the Corporation upon the sale and issuance
and on conversion or exercise of such Common Stock Equivalents
shall be deemed to have been received for such Additional
Shares of Common Stock.
(E) Once any Additional Shares of Common Stock
have been treated as having been issued or sold for the
purpose of this Subsection (d)(7), they shall be treated as
issued and outstanding shares of Any Common Stock whenever any
subsequent calculations must be made pursuant hereto; provided
that on the expiration of any options, warrants or rights to
purchase Additional Shares of Common Stock, the termination of
any rights to convert or exchange for Additional Shares of
Common Stock, or the expiration of any options or rights
related to such convertible or exchangeable securities on
account of which an adjustment in the Conversion Price has
been made previously pursuant to this Subsection (d)(7), such
Conversion Price shall forthwith be readjusted to the
Conversion Price as would have obtained had the adjustment
made upon the issuance of such options, warrants, rights,
securities or options or rights related to such securities
been made upon the basis of the issuance of only the number of
shares of Any Common Stock actually issued upon the exercise
of such options, warrants or rights, upon the conversion or
exchange of such securities or upon the exercise of the
options or rights related to such securities.
(F) Upon each issuance or sale by the
Corporation of Additional Shares of Common Stock in connection
with any merger, consolidation or other reorganization in
which the Corporation is the surviving corporation which
results in an adjustment pursuant to this Subsection (d)(7),
the amount of consideration received therefrom shall be deemed
to be the fair market value, as determined in good faith by
the Board of Directors, of such portion of the assets and
business of the non-surviving person or persons as the Board
of Directors determines in good faith to be attributable to
such Additional Shares of Common Stock and evidence of such
determination shall be filed with the minutes of the
Corporation.
(G) The foregoing notwithstanding, no adjustment
of the Conversion Price shall be made pursuant to this
Subsection (d)(7) as a result of the issuance of:
(i) any shares of Common Stock upon the
conversion of shares of Series E Preferred Stock;
(ii) except as specifically contemplated
by Subsection (d)(7)(A), securities of the
Corporation offered to the public pursuant to an
effective registration statement under the Securities
Act;
>PAGE> 37
(iii) the Corporation's securities
pursuant to the acquisition by the Corporation of any
product, technology, know-how or another corporation
by merger, purchase of all or substantially all the
securities or assets, or any other reorganization
whereby the Corporation owns over fifty percent (50%)
of the voting power of such corporation;
(iv) any shares of Common Stock or
Common Stock Equivalents pursuant to which the
Conversion Price is adjusted under Subsection (5),
(6), (8) or (9) of this Section (d) (including,
without limitation, any shares of Common Stock or
Common Stock Equivalents pursuant to which a
proportionate and corresponding dividend is made to
the holders of the Series E Preferred Stock as
contemplated by Subsections (d)(6) or (8));
(v) any shares of Any Common Stock
issued at any time following the Original Issue Date
pursuant to options, warrants or rights granted
either before or after the Original Issue Date to
purchase shares of such series of Any Common Stock,
less the number of any such options, warrants or
rights that are repurchased by the Corporation, are
canceled or expire, in each case in favor of
employees, directors, officers or consultants of the
Corporation or any subsidiary thereof pursuant to a
stock option plan or agreement approved by the Board
of Directors; provided, however, that such stock
options thereunder, if granted after the Original
Issue Date, are granted at a conversion or exercise
price that the Board of Directors determines in good
faith is not less than the fair market value of the
securities into which they are exercisable as of the
date of grant; or
(vi) any shares of Any Common Stock
issued pursuant to the exchange, conversion or
exercise of any Common Stock Equivalents that have
previously been incorporated into computations
hereunder on the date when such Common Stock
Equivalents were issued.
(8) In-Kind Distributions. In the event the Corporation
shall declare a distribution payable generally to holders of its
outstanding shares of Common Equity in any securities of other persons,
evidences of indebtedness issued by the Corporation or other persons or
assets (excluding cash dividends) then, in each such case for the
purpose of this subsection (d)(8) the holders of the Series E Preferred
Stock shall be entitled to a proportionate of any such distribution as
though they were the holders of the Conversion Shares as of the record
date fixed for determination of the holders of Common Equity entitled
to such distribution.
(9) Adjustment of Conversion Shares--Delay Shares. In the
event the Corporation has not issued or sold any Additional Shares of
Common Stock to the public pursuant to an effective registration
statement under the Securities Act of 1933, as amended, on or prior to
the Effective Date, the Conversion Price then in effect shall
>PAGE> 38
be adjusted to 71.72% of the Conversion Price then in effect. As used
herein, the "Effective Date" shall mean January 15, 2000 plus the
number of days during the period from and including (i) the date that
Corporation receives notice from the Securities and Exchange Commission
that the Corporation should discontinue the disposition of the Common
Stock contemplated by the Registration Statement of the Corporation on
Form S-1 (No. 333-71359), as amended, as a result of the issuance of
the Series E Preferred Stock or the Series F Preferred Stock or the
transactions contemplated by the Master Agreement dated as of April 10,
1999 (the "Master Agreement") between the Corporation and Microsoft
Corporation to and including (ii) the date the Corporation can resume