AGREEMENT
by and among
KIRLIN HOLDING CORP.,
INDIVIDUAL INVESTOR GROUP, INC.
and
VENTUREHIGHWAY.COM INC.
Dated as of
June 2, 1999
TABLE OF CONTENTS
Page
ARTICLE I KIRLIN AND INDI EQUITY INTERESTS IN VENTUREHIGHWAY
AND EXECUTION OF OTHER AGREEMENTS...............................................................1
Section 1.1 Kirlin Equity Interest. .....................................................1
Section 1.2 INDI Equity Interest. .......................................................2
Section 1.3 Delivery of Certificates. ...................................................2
Section 1.4 Other Agreements. ...........................................................2
ARTICLE II INDI CONTRIBUTION...............................................................................3
Section 2.1 INDI Contribution.............................................................3
Section 2.2 Definition of "Promotions." .................................................3
Section 2.3 Valuation of Promotions Delivered. ..........................................3
Section 2.4 Promotion Utilization Commitments.............................................4
Section 2.5 Promotions Not Transferable. ................................................5
Section 2.6 Content of Promotions. ......................................................5
Section 2.7 Absolute Obligation. ........................................................6
Section 2.8 Sale of INDI Properties. ....................................................6
ARTICLE III THE BUSINESS....................................................................................6
Section 3.1 The Site. ...................................................................6
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................................7
Section 4.1 Corporate Existence...........................................................7
Section 4.2 Authorization; Binding Effect. ...............................................7
Section 4.3 No Conflicts with Agreements, Etc. ...........................................8
Section 4.4 Conduct of Business; Approvals. .............................................8
Section 4.5 Capitalization. ..............................................................9
Section 4.6 Subsidiaries. ...............................................................9
Section 4.7 Financial Statements..........................................................9
Section 4.8 Consents, Etc.................................................................9
Section 4.9 Title to Properties..........................................................10
Section 4.10 Material Contracts...........................................................10
Section 4.11 Taxes, Tax Returns and Audits. .............................................11
Section 4.12 Litigation. ................................................................12
Section 4.13 No Employee Benefit Plans. .................................................12
Section 4.14 Assets; Intellectual Property................................................12
ARTICLE V KIRLIN REPRESENTATIONS.........................................................................13
Section 5.1 Corporate Existence. .......................................................13
Section 5.2 Authorization: Binding Effect................................................14
Section 5.3 No Conflicts with Agreements, Etc............................................14
Section 5.4 Consents, Etc. .............................................................14
Section 5.5 Purchase for Own Account. ..................................................14
Section 5.6 Restricted Securities. ......................................................15
Section 5.7 Accredited Investor Status. ................................................15
Section 5.8 Litigation. ................................................................15
Section 5.9 Current Kirlin Websites. ...................................................15
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ARTICLE VI INDI REPRESENTATIONS...........................................................................15
Section 6.1 Corporate Existence. .......................................................15
Section 6.2 Authorization: Binding Effect................................................15
Section 6.3 No Conflicts with Agreements, Etc............................................16
Section 6.4 Consents, Etc. .............................................................16
Section 6.5 Purchase for Own Account. ..................................................16
Section 6.6 Restricted Securities. ......................................................16
Section 6.7 Accredited Investor Status. .................................................17
Section 6.8 Access to Information........................................................17
Section 6.9 Current INDI Websites. .....................................................17
Section 6.10 Litigation. ................................................................17
ARTICLE VII COVENANTS OF THE COMPANY.......................................................................17
Section 7.1 Financial Statements and Other Information. .................................17
Section 7.2 Registration Rights..........................................................18
Section 7.3 Management Services. .......................................................20
Section 7.4 Notification of Parties Requesting Financing through the Company. ..........21
ARTICLE VIII CONFIDENTIALITY................................................................................21
Section 8.1 Confidentiality. ...........................................................21
ARTICLE IX JOINT COVENANTS OF THE PARTIES.................................................................22
Section 9.1 Further Action...............................................................22
Section 9.2 Public Offering Lock-Ups ...................................................22
Section 9.3 Noncompete...................................................................22
Section 9.4 Press Release. .............................................................23
Section 9.5 Kirlin Advertising Commitment. .............................................23
ARTICLE X INDEMNIFICATION................................................................................23
Section 10.1 Indemnification of INDI......................................................23
Section 10.2 Indemnification of Kirlin. .................................................24
Section 10.3 Indemnification of the Company. ............................................24
Section 10.4 Notices; Third Party Claims..................................................25
ARTICLE XI MISCELLANEOUS..................................................................................26
Section 11.1 Survival.....................................................................26
Section 11.2 Successors and Assigns.......................................................26
Section 11.3 Governing Law; Venue. ......................................................26
Section 11.4 Counterparts and Facsimile Signatures. .....................................27
Section 11.5 Titles and Subtitles. .......................................................27
Section 11.6 Notices. ....................................................................27
Section 11.7 Termination Rights. ........................................................28
Section 11.8 Fees. ......................................................................28
Section 11.9 Entire Agreement; Amendments and Waivers. ..................................28
Section 11.10 Severability. ..............................................................28
Section 11.11 Compliance with Laws and Regulations. ......................................29
Section 11.12 Rights of Third Parties. ...................................................29
Section 11.13 Definition of Affiliates. ..................................................29
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Schedules
Schedule 4.9-Material Assets
Schedule 4.10-Material Contracts
Schedule 4.14(a)-Intellectual Property
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AGREEMENT
This AGREEMENT ("Agreement") is made as of the 2nd day of June, 1999,
by and among KIRLIN HOLDING CORP., a Delaware corporation ("Kirlin"), INDIVIDUAL
INVESTOR GROUP, INC., a Delaware corporation, ("INDI"), and VENTUREHIGHWAY.COM
INC., a New York corporation ("Company").
WHEREAS, the Company has created, owns and will operate a branded
website called "VentureHighway.com" (the "Site"), the primary focus, principal
theme and format of which shall be to serve as an interactive portal for one or
more of the following activities: (a) the matching of companies seeking funding
with qualified investors seeking to fund such companies ("Online Matching
Services"), (b) the facilitation of private placements of securities of
companies to qualified investors ("Online Private Placement Services"), and (c)
the facilitation of public offerings of securities of companies (the operation
of such a website (or site available on a proprietary online service) being
referred to herein as the "Business");
WHEREAS, in connection with the expansion, launch and marketing of the
Business, Kirlin and INDI have contributed and/or desire to contribute cash,
assets and other consideration to the Company in exchange for equity ownership
in the Company as provided in this Agreement; and
WHEREAS, Kirlin, INDI and the Company desire to set forth certain
representations, warranties and covenants with respect to each other and certain
covenants and parameters with respect to the management, operation and marketing
of the Business.
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
KIRLIN AND INDI EQUITY INTERESTS IN
VENTUREHIGHWAY AND EXECUTION OF OTHER AGREEMENTS
Section 1.1 Kirlin Equity Interest. The Company has previously
sold to Kirlin 10,000 shares ("Kirlin Shares") of the common stock, no par
value, of the Company ("Common Stock") for nominal consideration. As further
consideration for the Kirlin Shares, Kirlin is concurrently herewith
contributing to the capital of the Company the sum of $750,000 together with all
amounts owed by the Company to Kirlin for goods and services provided up to the
date hereof (such contributions by Kirlin being referred to herein as the
"Kirlin Contribution)."
Section 1.2 INDI Equity Interest. In consideration for the
"INDI Contribution" as defined and described in Article II below, the Company is
hereby selling to INDI 2,484 shares of Common Stock ("INDI Shares"). Upon
issuance, the INDI Shares shall represent 19.9% of the outstanding capital stock
of the Company and the Kirlin Shares shall represent 80.1% of the outstanding
capital stock of the Company. The terms "Kirlin Shares" and "INDI Shares" shall
each be deemed to include any additional shares of Common Stock acquired by the
owner thereof.
Section 1.3 Delivery of Certificates. Concurrently with the
execution of this Agreement, the Company shall deliver to INDI a certificate
representing the INDI Shares. Kirlin acknowledges its previous receipt of a
certificate representing the Kirlin Shares. Both certificates shall bear the
following legends:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
("ACT"), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 PROMULGATED UNDER
THE ACT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE TERMS OF A STOCKHOLDER AGREEMENT BETWEEN KIRLIN HOLDING
CORP., INDIVIDUAL INVESTOR GROUP, INC. AND THE COMPANY, DATED
AS OF THE 2ND DAY OF JUNE, 1999, A COPY OF WHICH IS ON FILE AT
THE OFFICES OF THE COMPANY.
Section 1.4 Other Agreements. Concurrently with the execution
and delivery of this Agreement, (a) the Company, INDI and Kirlin are each
executing and delivering the Stockholder Agreement, dated as of the date hereof
("Stockholder Agreement"), (b) Kirlin and the Company are each executing and
delivering the Management Services Agreement, dated as of the date hereof
("Management Services Agreement"), and (c) Kirlin and INDI are each executing
and delivering the Securities Purchase Agreement, dated as of the date hereof
("Securities Purchase Agreement").
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ARTICLE II
INDI CONTRIBUTION
Section 2.1 INDI Contribution. In consideration for the INDI
Shares, during the 30- month period ("Promotion Period") beginning on the Media
Start Date (which date shall be a date mutually agreed upon by Kirlin and INDI,
but in no event later than July 1, 1999, INDI shall provide the Company with
Promotions (as defined in Section 2.2 below). The Promotions delivered during
the Promotion Period shall have an aggregate value (as described in Section 2.3
below) of $3,184,000. The provision by INDI to the Company of the Promotions
pursuant to this Article II is referred to herein as the "INDI Contribution."
Section 2.2 Definition of "Promotions." "Promotions" shall
mean the placement of advertising relating to the Site, the Business or the
Company in media made available by INDI for purchase to advertisers for cash in
the ordinary course of INDI's business, including (a) in print medium magazines
published by INDI, such as Individual Investor and Ticker ("Print Advertising"),
and (b) on websites owned or controlled by INDI, such as Individual Investor
Online (www.iionline.com), using advertising buttons of various dimensions
typically sold by INDI (e.g., typically ranging in size from 120 x 60 pixels to
468 x 60 pixels) and on any other publications that INDI may distribute via
electronic means (such as electronic mail), using advertising in the form
typically sold by INDI for such publications ("Online Advertising").
Section 2.3 Valuation of Promotions Delivered. Print
Advertising shall be scheduled monthly by the parties and shall be valued at the
prices set forth on INDI's applicable 1999 rate cards (copies of which have been
delivered to the Company and Kirlin) for 24-page purchases (e.g., a full-page,
four-color ad in Individual Investor shall be valued at $31,080 and a full-page,
four-color ad in Ticker shall be valued at $9,874). Online Advertising will be
scheduled by the parties quarterly commencing July 1, 1999 and will be valued
during such quarter on a cost-per-thousand impressions ("CPM") basis. The CPM at
which the Company's Online Advertising during a calendar quarter shall be valued
shall be equal to the average prices charged by INDI during the immediately
preceding quarter for sponsorship advertisements sold on a CPM basis (without
limiting the foregoing, such sponsorship advertisements do not include (a)
banner advertisements sold through third-party sales agents, (b) advertisements
sold on a cost-per-action basis or (c) advertisements provided on a make-good or
value-added basis) having similar dimensions and similar visual accessibility
(i.e., advertisements requiring the same number of clicks from
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the home page to reach page where they are placed) to the Company's Online
Advertising. INDI shall notify the Company in writing by the twentieth day of
each quarter, of the CPM determined in accordance with the preceding sentence.
In the event that the Media Start Date is prior to July 1, 1999, the value of
Online Advertising that is displayed between the Media Start Date and June 30,
1999 shall be at the CPM charged by INDI during the first calendar quarter of
1999 for sponsorship advertisements sold on a CPM basis having similar
dimensions and similar visual accessibility to the Company's Online Advertising.
INDI shall determine the applicable CPM, as described above, for its electronic
publications (such as electronic mail) separately from those for its websites,
and shall notify the Company of each such CPM as described above.
Section 2.4 Promotion Utilization Commitments.
(a) The Company shall utilize all $3,184,000 of
Promotions during the Promotion Period. At least $983,000 of the Promotions
shall be Print Advertising (the "Aggregate Print Advertising Commitment") and at
least $1,600,000 of the Promotions shall be Online Advertising (the "Aggregate
Online Advertising Commitment"), in each instance based upon the valuation
described in Section 2.3. Moreover, during each of the first four (4) quarters
commencing July 1, 1999, the Company shall utilize at least $98,300 of Print
Advertising and at least $275,000 of Online Advertising per quarter, and during
each of the first six (6) quarters commencing July 1, 2000, the Company shall
utilize at least $98,300 of Print Advertising Promotions and at least $83,333 of
Online Advertising Promotions per quarter (the quarterly commitment set forth in
this sentence for Print Advertising and for Online Advertising, respectively,
for a given calendar quarter shall be described as the "Quarterly Print
Advertising Commitment" and the "Quarterly Online Advertising Commitment,"
respectively, for such quarter). Notwithstanding the foregoing and subject to
the Company's obligation to meet the Aggregate Print Advertising Commitment, the
Company shall have the right to defer the use of up to an aggregate of $98,300
of Print Advertising ("Deferred Print Advertising") and to use the Deferred
Print Advertising, in whole or part, at any time during the Promotion Period.
Upon each use of any Deferred Print Advertising, the Company shall have a
continuing right to defer additional amounts of Print Advertising in an amount
equal to the amount of Deferred Print Advertising so used. Subject to the
Company's requirement to utilize all $3,184,000 of Promotions during the
Promotion Period, and notwithstanding anything in this Agreement to the
contrary, (x) once the Company has utilized the Aggregate Print Advertising
Commitment, the Quarterly Print Advertising Commitment shall become zero and (y)
once the Company has utilized the Aggregate Online Advertising Commitment, the
Quarterly Online Advertising Commitment shall become zero.
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(b) Subject to the Company's Promotion
utilization commitments described above, INDI and the Company shall mutually
agree upon the calendaring of the Promotions during the Promotion Period. INDI
acknowledges that the Company may desire to receive more than $1,493,200 of
Promotions (which equals the sum of the Quarterly Print Advertising Commitment
and Quarterly Online Advertising Commitment for the first four quarters
commencing July 1, 1999) during the first year of the Promotion Period and shall
use commercially reasonable efforts to accommodate the Company's advertising
desires.
(c) So long as INDI is capable of delivering the
Quarterly Print Advertising Commitment during a given calendar quarter, the
Company shall be deemed to have utilized the Quarterly Print Advertising
Commitment for that quarter. So long as INDI is capable of delivering the
Quarterly Online Advertising Commitment during a given calendar quarter, the
Company shall be deemed to have utilized the Quarterly Online Advertising
Commitment for that quarter.
Section 2.5 Promotions Not Transferable. The Promotions are
not transferable in whole or in part by the Company. Without limiting the
foregoing, the Company may not assign in whole or in part any of its obligations
with respect to the utilization of Promotions described above.
Section 2.6 Content of Promotions. The content of the
Promotions shall be designed by the Company and the Company shall be solely
responsible for ensuring that the creative content of the Promotions do not
violate any laws (including without limitation federal and state securities
laws), do not infringe any copyright, trademark or other right of any third
party and are not actionable on grounds of false advertising or otherwise. It is
understood that INDI shall have no obligation to include any Promotions in any
particular advertising medium if INDI's general and customary standards and
practices would cause INDI to refuse to display such Promotions (without
limiting the foregoing, INDI may refuse to display, in print or online,
Promotions that INDI reasonably believes are false, libelous, scandalous or
violate the rights of third parties, and may refuse to display online Promotions
that have file sizes in excess of 12 kilobytes or which in INDI's reasonable
opinion would harm the user's experience on the INDI online site by causing the
site's pages to take an undue time to load). Provided that the Company provides
INDI with Promotions not objectionable ("Non-objectionable Creative"), INDI's
right to refuse to display certain Promotions described in the preceding
sentence shall not relieve INDI of its obligations to provide the total value
and type of Promotions set forth above.
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Section 2.7 Absolute Obligation. Subject only to the Company
providing INDI with Non-objectionable Creative, the obligation of INDI to
deliver the Promotions as provided above shall be absolute and unconditional so
long as neither Kirlin nor the Company is in material breach of this Agreement.
Such obligation shall survive any transfer by INDI of the INDI Shares and by
Kirlin of the Kirlin Shares, as well as any sale of assets of the Business,
except as otherwise specifically set forth herein.
Section 2.8 Sale of INDI Properties. Notwithstanding the
provisions of Section 11.2 or anything else in this Agreement to the contrary,
(a) INDI retains the right in its sole and absolute discretion to sell or
discontinue the publication of any of its print and online publications; (b) in
the event that INDI sells both Individual Investor magazine and Ticker magazine
to a single party ("Print Acquiror") and Print Acquiror agrees in writing to
provide the Print Promotions on the terms set forth herein, Kirlin and the
Company shall be deemed to have consented to the assignment to Print Acquiror of
INDI's rights and obligations pertaining to Print Promotions; and (c) in the
event that INDI sells Individual Investor Online to a third party ("Online
Acquiror") and Online Acquiror agrees in writing to provide the Online
Promotions on the terms set forth herein, Kirlin and the Company shall be deemed
to have consented to the assignment to Online Acquiror of INDI's rights and
obligations pertaining to Online Promotions.
ARTICLE III
THE BUSINESS
Section 3.1 The Site.
(a) It is anticipated that the Commercial Launch
(as defined below) of the Site shall occur on or prior to December 31, 1999.
(b) The "Commercial Launch" of the Site shall be
deemed to occur at such time as (i) the Site is available to the public through
the Internet, (ii) the Site possesses the functionality required to at least
allow the commercial operation of the Online Matching Services and Online
Private Placement Services and (iii) the Company is, either directly or through
a subsidiary, a broker-dealer registered with the Securities and Exchange
Commission and a member of the National Association of Securities Dealers, Inc.
It is anticipated that the Site shall satisfy the requirements of clause (i) of
the preceding sentence by August 1, 1999.
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(c) Until the expiration of the Promotion
Period, the Company shall not materially alter the Business without the written
consent of INDI.
(d) The Site shall contain business plans,
private placement memoranda, prospectuses and other information and content
provided by various sources, including the Company and Kirlin and their
respective affiliates (the "Materials"). The Company shall have the right to
display and transmit the Materials. The Company shall have the regulatory
authority, no later than the date of the Commercial Launch, to obtain a
transactional fee with respect to any financing that occurs as a result of the
use of the Online Matching Services or Online Private Placement Services (a
"Finder's Fee"). Prior to date of the Commercial Launch, Kirlin and/or its
Affiliates (as defined below) shall act in any broker-dealer capacity required
in connection with the Business and shall be entitled to receive any Finder's
Fee. The gross amount of the Finder's Fee, less the applicable taxes owed by
Kirlin and/or its Affiliates with respect to the Finder's Fee, shall be referred
to as the "After-tax Finder's Fee" and the "Kirlin Advertising Commitment" (as
discussed hereafter) shall be twenty-five percent of the After-tax Finder's Fee.
(e) Funding of the Business. The Kirlin
Contribution will be utilized to operate the Business until such time as the
Kirlin Contribution is exhausted. The parties hereto acknowledge that it is
likely that the Company will be required to seek additional funding to operate
the Business from Kirlin, INDI or third parties. Neither INDI nor Kirlin shall
be obligated to provide any additional funding to the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to INDI as follows:
Section 4.1 Corporate Existence. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New York and is duly qualified to do business in each additional
jurisdiction where the failure to so qualify would have, either singly or in the
aggregate, a material adverse effect on the operations, business, properties,
assets or condition (financial or otherwise) of the Company (a "Company Material
Adverse Effect").
Section 4.2 Authorization; Binding Effect. The Company
has all requisite corporate power and authority to (i) execute and deliver this
Agreement, the Stockholder Agreement and the
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Management Services Agreement (collectively, the "Transaction Documents"), (ii)
to issue the INDI Shares and (iii) to carry out and perform its obligations
under the terms of the Transaction Documents. The Transaction Documents have
been duly authorized, executed and delivered and constitute the legal, valid and
binding obligations of the Company, enforceable in accordance with their
respective terms, except, in each case, as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other laws
relating to or affecting the enforcement of creditors' rights generally in
effect from time to time and by general principles of equity, and except that
public policy may limit the Company's indemnification obligations under Section
7.2(c) hereof. The INDI Shares have been duly authorized, validly issued and are
fully paid and nonassessable.
Section 4.3 No Conflicts with Agreements, Etc. Neither the
execution and delivery of the Transaction Documents nor the fulfillment of or
compliance with the terms and provisions of the Transaction Documents, nor the
issuance of the INDI Shares, will conflict with, or result in a breach or
violation of any of the terms, conditions or provisions of, or constitute a
default under, the Company's Certificate of Incorporation or By-laws or any
contract, agreement, mortgage, indenture, lease, instrument, order, judgment,
statute, law, rule or regulation to which the Company or any of its assets is
subject, or result in the creation of any security interest, mortgage, pledge,
lien, claim, charge or encumbrance (collectively "Liens") on any properties of
the Company, except for such conflicts, breaches, violations, defaults or Liens
which would not have a Company Material Adverse Effect.
Section 4.4 Conduct of Business; Approvals. The Company has
all requisite corporate power to own, lease and operate its properties and to
carry on the Business as now being conducted. The Company has all necessary
authorizations, approval, orders, licenses, certificates and permits
(collectively, "Approvals") of all governmental and/or regulatory bodies to own
or lease its properties and conduct its business, except where the failure to
obtain such Approvals would not have a Company Material Adverse Effect. The
Company is and has been doing business in compliance with all such Approvals and
applicable federal, state and local laws, rules and regulations, except where
the failure to do so would not have a Company Material Adverse Effect. The
Company is not in violation or default in any material respect of any provision
of its Certificate of Incorporation or By-laws, or in any material respect of
any instrument, judgment, order, writ, decree or contract to which it is a party
or by which it is bound, except where such violation or default would not
reasonably be expected to have a Company Material Adverse Effect.
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Section 4.5 Capitalization. The authorized capital of the
Company consists of 30,000 shares, comprised of 25,000 shares of Common Stock
(of which 12,484 shares will be issued and outstanding, after giving effect to
the issuance of the INDI Shares) and 5,000 shares of preferred stock (of which
no shares are outstanding). All of the shares of Common Stock outstanding
immediately prior to the issuance of the INDI Shares are owned by Kirlin and
have been duly and validly issued and are fully paid, non-assessable and free
and clear of Liens. There are no outstanding options, warrants, rights
(including conversion or preemptive rights) or agreements for the purchase or
acquisition from the Company or Kirlin of any shares of the Company's capital
stock. The Company is not a party to or subject to any agreement or
understanding which affects or relates to the voting of, or giving of written
consents with respect to, any security of the Company. The Company is not
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any of its equity or ownership interests. The Company is not a
party to any agreement (other than this Agreement and the Stockholder Agreement)
that contains, nor does its Certificate of Incorporation or By-Laws contain, any
provision that would restrict or prohibit the transfer or sale of any shares of
Common Stock, including the INDI Shares, when transferred or sold in compliance
with federal and state securities laws.
Section 4.6 Subsidiaries. The Company does not own or
control, directly or indirectly, any interest in any corporation or other
entity.
Section 4.7 Financial Statements. The Company has delivered
to INDI a true and complete copy of its balance sheet as of April 30, 1999, and
the related statement of operations and cash flows for the period from inception
through April 30, 1999 (collectively, the "Financial Statements"). The Financial
Statements present fairly, in all material respects, the financial position of
the Company as at April 30, 1999 and the results of operations and cash flows of
the Company for the period then ended. There have been no material adverse
changes to the financial condition of the Company since April 30, 1999 other
than continuing losses from operations (which losses, since April 30, 1999, do
not exceed $25,000 in the aggregate), increased stockholders' deficit and
liabilities incurred in the regular course of business.
Section 4.8 Consents, Etc. No Approval from any governmental
body, office or agency or any nongovernmental person (including, without
limitation, any creditor of the Company) is required in connection with the
execution or delivery of the Transaction Documents by the Company, the
performance by the Company of its obligations under the Transaction Documents or
in connection with the consummation of any other transactions contemplated by
the Transaction Documents, including the
9
issuance of the INDI Shares, or as a condition to the legality, validity or
enforceability of the Transaction Documents or the issuance of the INDI Shares.
Section 4.9 Title to Properties. The Company does not own any
real property. The Company has good title to all of its material equipment,
personal property and assets (other than properties and assets leased from
others), subject to no Lien of any kind except Permitted Liens. "Permitted
Liens" shall mean: (i) Liens for taxes, assessments or governmental charges not
yet delinquent or being diligently contested in good faith; (ii) statutory Liens
of landlords, carriers, warehousemen, mechanics, materialmen and other Liens
imposed by law for sums not yet delinquent or being diligently contested in good
faith; (iii) leases or subleases granted to others and not interfering with the
ordinary conduct of the business of the Company; (iv) any interest or Lien of a
lessor under any permitted operating lease; and (v) any other Lien the granting
of which would not have a Company Material Adverse Effect. The Company's
material assets ("Material Assets") are described on Schedule 4.9 hereof. As of
the date hereof, the Company enjoys peaceful and undisturbed possession of all
equipment and other personal property and assets under all leases of the same to
which it is a party, and all such leases are valid and subsisting and in full
force and effect. As of the date hereof, the Company is not in breach or
violation of the terms of any of such leases (except for such breaches and
violations as will not have, individually or in the aggregate, a Company
Material Adverse Effect), and the Company does not know of any breach or
violation of any of such leases by the Company or any other party thereto.
Section 4.10 Material Contracts.
(a) Schedule 4.10 sets forth a complete and
correct list of all agreements of the following types to which the Company is a
party or by which it is bound and all or any portion of which are currently in
effect (collectively, the "Material Contracts"): (i) agreements which would be
required to be filed by the Company as exhibits to any filings made by the
Company if it were to register the Common Stock under the Securities Act of
1933, as amended (the "Act"); (ii) agreements governing (A) peering, porting,
wholesale carrier, caching, mirror site or any other network accessing
arrangements or relationships, (B) network and system monitoring or maintenance,
(C) vendor supply, (D) website hosting, content display, design and consulting,
Web media buying and online and print marketing, including Internet and intranet
development agreements, (E) customer services, (F) software technology
development or sharing arrangements, including related technologies such as
HTML, Java, Shockwave, Vivo Active, VAR and other formats or (G) other
agreements to provide or receive Web-related, intranet- related or
telecommunications-related services and related design, consulting and
development services;
10
(iii) employment, severance, termination, consulting and retirement agreements;
(iv) loan agreements, indentures, letters of credit, mortgages, notes and other
debt instruments; (v) agreements, including contracts with customers, that
require aggregate future payments to or by the Company of more than Twenty-Five
Thousand Dollars ($25,000); (vi) agreements containing any "change of control"
provisions; (vii) agreements, arrangements or understandings with any employee,
director or officer of the Company or with any Affiliate of the Company or with
any stockholder or with any affiliate of any thereof; (viii) agreements
prohibiting the Company from engaging or competing in any line of business or
limiting such competition; (ix) joint venture, partnership and similar
agreements; (x) acquisition or divestiture agreements relating to the (A) sale
or purchase of assets or stock of the Company (other than sales of inventory in
the ordinary course of business) or (B) the purchase of assets or stock of any
other person (other than the purchase of inventory, supplies or equipment in the
ordinary course of business); (xi) brokerage, finder's or financial advisory
agreements; (xii) guarantees of indebtedness for borrowed money of any person;
(xiii) reseller, agent and dealer agreements; (xiv) licensing and rights
arrangements for any Intellectual Property (as hereinafter defined), including
all licenses of Intellectual Property and any related rights to or by the
Company (or any stockholder); (xv) indefeasible rights of use, leases or other
agreements for the acquisition sale, transfer, assignment or use of or access
to, bandwidth, capacity or any other telecommunications network, facilities or
product; and (xvi) agreements that, individually or together with one or more
related agreements, are material to the assets, financial condition, business or
operations of the Company. True and complete copies of all Material Contracts
have been delivered to INDI or made available for inspection.
(b) All Material Contracts are valid and in full
force and effect and the Company has not violated any provision of, or committed
or failed to perform any act which with or without notice, lapse of time or both
would constitute a default under the provisions of, any Material Contract,
except such defaults as would not have a Company Material Adverse Effect.
Section 4.11 Taxes, Tax Returns and Audits. The Company
prepared and filed on a timely basis with all appropriate Federal, state, local
and foreign governmental authorities all returns in respect of taxes it is
required to file on or prior to the date hereof or has obtained the appropriate
extensions to file, and all such returns completely and accurately set forth the
amount due of any taxes relating to the applicable period. The Company has paid
in full all Taxes due on or before the date hereof and, in the case of taxes
accruing on or before the date hereof that are not due on or before the date
hereof, the Company has or will have established adequate reserves on its books
and records and financial statements for such payment. The Company has withheld
from each payment made to any of its present
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or former employees, officers, directors or other party all amounts required by
law to be withheld and has, where required, remitted such amounts within the
applicable periods to the appropriate governmental authorities. In addition, (i)
there are no assessments against the Company with respect to taxes that have
been issued and are outstanding; (ii) no governmental authorities have audited
or examined the Company in respect of taxes; (iii) the Company has not executed
or filed any agreement extending the period of assessment or collection of any
taxes which has not yet expired by its terms; (iv) the Company has not received
written notification from any governmental authority of its intention to
commence any audit or investigation; (v) the Company is not a party to, or bound
by, nor does it have any obligation under any tax sharing or tax indemnification
agreement, provision or arrangement, whether formal or informal, and no power of
attorney, which is currently in effect, has been granted with respect to any
matter relating to taxes of the Company; and (vi) the Company is not presently
required nor will it be required to include any adjustment in taxable income
under Section 481 of the Internal Revenue Code (or any similar provision of the
tax laws of any jurisdiction) as a result of any change in method of accounting
or otherwise.
Section 4.12 Litigation. There is no action, arbitration,
suit, proceeding or investigation pending, or to the Company's knowledge,
threatened against the Company which, if determined adversely to the Company,
would reasonably be expected to have a Company Material Adverse Effect. The
Company is not a party or subject to the provision of any order, injunction,
judgment or decree of any court or government agency or instrumentality. There
is no action, suit, proceeding or investigation by the Company currently pending
or that the Company intends to initiate.
Section 4.13 No Employee Benefit Plans. The Company does not,
in its own name, maintain any employee benefit plans (as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
programs and arrangements for the benefit of any current or former employee,
officer or director of the Company.
Section 4.14 Assets; Intellectual Property.
(a) All Intellectual Property that is either
owned or licensed to the Company is listed on Schedule 4.14(a). Except as
disclosed in Schedule 5.14(a), (i) the Company has the right to use such
Intellectual Property, (ii) all registrations with respect to Intellectual
Property owned by the Company thereto are in full force and effect, and (iii)
the Company has taken appropriate and reasonable
12
security measures to protect the secrecy, confidentiality, and value of the
Intellectual Property owned by the Company.
(b) To the knowledge of the Company, there has
been no disclosure of any Intellectual Property owned by the Company that has
had, or could be reasonably expected to have, a Company Material Adverse Effect.
The Company has taken customary steps to back up all of the material
Intellectual Property owned by it.
(c) The Company has not infringed,
misappropriated or otherwise violated any Intellectual Property of any other
person, except where any such infringement would not have a Company Material
Adverse Effect.
(d) The Company maintains the necessary "web
wrap" agreements alerting users and subscribers to the potential civil and
criminal liability to which they may be subject for intellectual property
infringement.
(e) "Intellectual Property" means all patents,
patent applications and patent disclosures; all inventions (whether or not
patentable and whether or not reduced to practice); all registered and
unregistered, statutory and common law trademarks, service marks and service
mark rights, trade dress, trade names and trade name rights, corporate names,
domain names and URLs, and all the goodwill associated therewith; all registered
and unregistered statutory and common law copyrights; all registrations,
applications and renewals for any of the foregoing; and all trade secrets,
confidential information and related proprietary information.
ARTICLE V
KIRLIN REPRESENTATIONS
Section 5.1 Corporate Existence. Kirlin is a corporation, duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is duly qualified to do business in each additional jurisdiction
where the failure to so qualify would have, either singly or in the aggregate, a
material adverse effect on the operations, business, properties, assets or
condition (financial or otherwise) of Kirlin (a "Kirlin Material Adverse
Effect").
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Section 5.2 Authorization: Binding Effect. Kirlin has all
requisite corporate power and authority to (i) execute and deliver the
Transaction Documents and (ii) to carry out and perform its obligations under
the terms of the Transaction Documents. The Transaction Documents have been duly
authorized, executed and delivered and constitute the legal, valid and binding
obligations of Kirlin, enforceable in accordance with their respective terms,
except, in each case, as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other laws relating to or
affecting the enforcement of creditors' rights generally in effect from time to
time and by general principles of equity, and except that public policy may
limit the Kirlin's indemnification obligations under Section 7.2(c) hereof.
Section 5.3 No Conflicts with Agreements, Etc. Neither the
execution and delivery of the Transaction Documents nor the fulfillment of or
compliance with the terms and provisions of the Transaction Documents will
conflict with, or result in a breach or violation of any of the terms,
conditions or provisions of, or constitute a default under, Kirlin's Certificate
of Incorporation or By-laws or any contract, agreement, mortgage, indenture,
lease, instrument, order, judgment, statute, law, rule or regulation to which
Kirlin or any of its assets is subject, or result in the creation of any Liens
on any properties of Kirlin, except for such conflicts, breaches, violations,
defaults or Liens which would not have a Kirlin Material Adverse Effect.
Section 5.4 Consents, Etc. No Approval from any governmental
body, office or agency or any nongovernmental person (including, without
limitation, any creditor, stockholder or other equity holder of any of Kirlin)
is required in connection with the execution or delivery of the Transaction
Documents, the performance by Kirlin of its obligations under the Transaction
Documents, or in connection with the consummation of the transactions
contemplated by the Transaction Documents, or as a condition to the legality,
validity or enforceability of the Transaction Documents.
Section 5.5 Purchase for Own Account. The Kirlin Shares were
acquired for investment for Kirlin's own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof, and Kirlin
has no present intention of selling, granting any participation in, or otherwise
distributing the same. Kirlin does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participations to such
person with respect to any of the Kirlin Shares, except as provided in the
Stockholder Agreement.
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Section 5.6 Restricted Securities. Kirlin understands that the
Kirlin Shares are characterized as "restricted securities" under the federal
securities laws inasmuch as they were acquired from the Company in a transaction
not involving a public offering and that under such laws and applicable
regulations such securities may be resold without registration under the Act,
only in certain limited circumstances. Kirlin understands that the Kirlin Shares
cannot be sold or transferred by it unless they are registered under the Act or
such sale or transfer is exempt from the Act's registration requirements.
Section 5.7 Accredited Investor Status. Kirlin is an
"accredited investor" within the meaning of Rule 501(a) of Regulation D
promulgated under the Act.
Section 5.8 Litigation. There is no action, arbitration, suit,
proceeding or investigation pending or, to Kirlin's knowledge, threatened
against any of the Kirlin, which questions the validity of the Transaction
Documents or the right of Kirlin to enter into such agreements, or to consummate
the transactions contemplated by the Transaction Documents.
Section 5.9 Current Kirlin Websites. None of the websites
currently owned and operated by Kirlin or any of its Affiliates is engaged in
Online Matching Services or Online Private Placement Services.
ARTICLE VI
INDI REPRESENTATIONS
Section 6.1 Corporate Existence. INDI is a corporation, duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is duly qualified to do business in each additional jurisdiction
where the failure to so qualify would have, either singly or in the aggregate, a
material adverse effect on the operations, business, properties, assets,
prospects or condition (financial or otherwise) of INDI and its subsidiaries,
taken as a whole (an "INDI Material Adverse Effect").
Section 6.2 Authorization: Binding Effect. INDI has all
requisite corporate power and authority to (i) execute and deliver the
Transaction Documents and (ii) to carry out and perform its obligations under
the terms of the Transaction Documents. The Transaction Documents have been duly
authorized, executed and delivered and constitute the legal, valid and binding
obligations of INDI, enforceable in accordance with their respective terms,
except, in each case, as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other laws relating to or
15
affecting the enforcement of creditors' rights generally in effect from time to
time and by general principles of equity, and except that public policy may
limit INDI's indemnification obligations under Section 7.2(c) hereof.
Section 6.3 No Conflicts with Agreements, Etc. Neither the
execution and delivery of the Transaction Documents nor the fulfillment of or
compliance with the terms and provisions of the Transaction Documents will
conflict with, or result in a breach or violation of any of the terms,
conditions or provisions of, or constitute a default under, INDI's Certificate
of Incorporation or By-laws or any contract, agreement, mortgage, indenture,
lease, instrument, order, judgment, statute, law, rule or regulation to which
INDI or any of its assets is subject, or result in the creation of any Liens on
any properties of INDI, except for such conflicts, breaches, violations,
defaults or Liens which would not have an INDI Material Adverse Effect.
Section 6.4 Consents, Etc. No Approval from any governmental
body, office or agency or any nongovernmental person (including, without
limitation, any creditor, stockholder or other equity holder of INDI) is
required in connection with the execution or delivery of the Transaction
Documents by INDI, the performance by INDI of its obligations under the
Transaction Documents, or in connection with the consummation of the
transactions contemplated by the Transaction Documents, or as a condition to the
legality, validity or enforceability of the Transaction Documents.
Section 6.5 Purchase for Own Account. The INDI Shares are
being acquired for investment for INDI's own account, not as a nominee or agent,
and not with a view to the resale or distribution of any part thereof, and INDI
has no present intention of selling, granting any participation in, or otherwise
distributing the same. INDI does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participations to such
person with respect to any of the INDI Shares, except as provided in the
Stockholder Agreement.
Section 6.6 Restricted Securities. INDI understands that the
INDI Shares are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Act, only in certain limited circumstances. INDI understands that the INDI
Shares cannot be sold or transferred by it unless they are registered under the
Act or such sale or transfer is exempt from the Act's registration requirements.
16
Section 6.7 Accredited Investor Status. INDI confirms that it
is an "accredited investor" within the meaning of Rule 501(a) of Regulation D
promulgated under the Act.
Section 6.8 Access to Information. INDI acknowledges that it
has been furnished by the Company and Kirlin during the course of this
transaction with all information regarding the Company which it had requested or
desired to know and that all documents which could be reasonably provided to it
have been made available for its inspection and review. INDI acknowledges that
it has been afforded the opportunity to ask questions of and receive answers
from duly authorized officers or other representatives of the Company and Kirlin
concerning the terms and conditions of its investment pursuant hereto. INDI
acknowledges that it has made such investigation of the Company and Kirlin,
including their respective business, properties, financial condition and
prospects as it has deemed necessary for its purposes and is not relying upon
any statements or information about the Company or Kirlin, or their business,
properties, financial condition and prospects, except the Financial Statements
and the representations and warranties set forth in this Agreement.
Section 6.9 Current INDI Websites. None of the websites
currently owned and operated by INDI or any of its Affiliates is engaged in the
Business.
Section 6.10 Litigation. There is no action, arbitration,
suit, proceeding or investigation pending or, to INDI's knowledge, threatened
against INDI, which questions the validity of the Transaction Documents or the
right of INDI to enter into the Transaction Documents or to consummate
transactions contemplated by the Transaction Documents.
ARTICLE VII
COVENANTS OF THE COMPANY
The Company covenants and agrees as follows:
Section 7.1 Financial Statements and Other Information.
Commencing on the date hereof, the Company shall deliver to INDI (i) quarterly
unaudited financial statements of the Company for each of the first three fiscal
quarters of each fiscal year within 50 days after the end of each such quarter,
(ii) annual audited financial statements of the Company within 105 days after
the end of each fiscal year, and (iii) any other information relating to the
Company, the Business or the Site as INDI may
17
reasonably request in writing. The obligations of the Company under this Section
7.1 shall immediately terminate upon consummation of an initial public offering
of the Common Stock and the obligations of clause (iii) of the preceding
sentence shall terminate at such time as INDI no longer has the right pursuant
to the Stockholder Agreement to designate a director of the Company.
Section 7.2 Registration Rights.
(a) Demand Registration.
(i) Grant of Right. INDI and Kirlin
(together, the "Investors") shall each have the right, on one occasion, upon
written demand to the Company ("Initial Demand Notice") to require the Company
to register all or any portion of the Common Stock owned by the Investor or
Investors making such demand as requested by such investor in the Initial Demand
Notice (the "Registrable Securities"); provided, however, that, the Company
shall not be obligated to register any Registrable Securities if the Company
shall promptly deliver to such Investor an opinion of counsel, reasonably
satisfactory to such Investor, stating that such securities are saleable without
restriction under an exemption from the registration requirements of the Act or
shall become so saleable within 90 days of the Initial Demand Notice. On such
occasion, the Company shall file a registration statement covering the
Registrable Securities within 60 days after Investor gave the Initial Demand
Notice; provided, however, the Company may delay such filing of a registration
statement for one period of up to ninety consecutive days after receipt of the
Initial Demand Notice if the Company believes, in good faith, that filing the
registration statement would materially adversely impact the Company's then
ongoing discussions or negotiations regarding a merger, acquisition, financing
transaction or other similar transaction or any other event that the Company
reasonably believes disclosure of would have a material adverse effect on the
Company. The demand for registration may be made at any time commencing 270 days
after the date ("Effective Date") on which the Common Stock of the Company
becomes publicly traded. The rights afforded to each Investor under this Section
7.2(a) shall terminate with respect to such Investor at such time as such
Investor owns less than 5% of the outstanding Common Stock.
(ii) Terms. The Company shall bear all fees
and expenses attendant to registering the Registrable Securities, but each
Investor shall pay any and all commissions in connection with the sale of the
Registrable Securities. The Company agrees to use its best efforts to cause the
filing required herein to become effective promptly and to qualify or register
the Registrable Securities in such States as are reasonably requested by an
Investor; provided, however, that in no event shall the Company
18
be required to register the Registrable Securities in a State in which such
registration would cause (a) the Company to be obligated to register or license
to do business in such State or consent to general service of process in such
jurisdiction, or (b) the principal stockholders of the Company to be obligated
to escrow their shares of capital stock of the Company. The Company shall cause
any registration statement filed pursuant to the demand rights granted under
Section 8.2(a) to remain effective for a period of at least 90 days from the
date the Registrable Securities may be first sold thereunder.
(b) "Piggy-Back" Registration.
(i) Grant of Right. Each Investor shall
also have the right at any time to include the Registrable Securities as part of
any other registration of securities filed by the Company (other than in
connection with a transaction contemplated by Rule 145(a) promulgated under the
Act or pursuant to Form S-8 or any equivalent form); provided, however, that,
(i) the Company shall not be obligated to register any Registrable Securities if
the Company shall promptly deliver to such Investor an opinion of counsel,
reasonably satisfactory to such Investor, stating that such securities are
saleable without restriction under an exemption from the registration
requirements of the Act or shall become so saleable within 90 days of the filing
of such registration; and (ii) if, in the opinion of the Company's managing
underwriter or underwriters, if any, for such offering, the inclusion of the
Registrable Securities, when added to the securities being registered by the
Company or the selling shareholder(s), will exceed the maximum amount of the
Company's securities that can be marketed (a) at a price reasonably related to
their then current market value, or (b) without materially and adversely
affecting the entire offering, each Investor shall agree to the following if and
as requested by the managing underwriter: (1) to withdraw the Registrable
Securities from inclusion on the registration; (2) to include the Registrable
Securities on the registration, but not to sell any Registrable Securities,
without the consent of the managing underwriter, for a period of 90 days from
the effective date of the registration or (3) to reduce the amount of
Registrable Securities to be included in such offering to the amount recommended
by such managing underwriter; provided that if securities are being offered for
the account of other persons or entities as well as the Company (and the
underwriters), such reduction shall not represent a greater fraction of the
number of Registrable Securities requested to be registered by the Investor than
the fraction of similar reductions imposed on such other persons or entities
over the amount of securities requested to be registered by such holders.
(ii) Terms. The Company shall bear all
fees and expenses attendant to registering the Registrable Securities, but each
Investor shall pay any and all commissions in connection
19
with the sale of the Registrable Securities. In the event of such a proposed
registration, the Company shall either furnish each Investor with not less than
15 days' written notice prior to the proposed date of filing of such
registration statement or simply include the shares of Common Stock owned by
such Investor thereon. The Investor shall exercise the "piggy-back" rights
provided for herein by giving written notice within 10 days of the receipt of
the Company's notice of its intention to file a registration statement. The
Company shall cause any registration statement filed pursuant to the above
"piggyback" rights to remain effective for a period of at least 90 days from the
date the Registrable Securities may be first sold thereunder.
(c) Indemnification. The Company shall
indemnify each Investor participating in a registration and their respective
officers, directors, employees and each person, if any, who controls such
Investor within the meaning of Section 15 of the Act or Section 20(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (collectively,
the "INDI Indemnitees" or "Kirlin Indemnitees," as the case may be), against all
loss, claim, damage, expense or liability (including all reasonable attorneys'
fees and other expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which they may become subject under
the Act, the Exchange Act or otherwise, arising from such Registration
Statement, except those arising from material misstatements or omissions in the
Investor Information (defined below). Each Investor participating in a
registration shall separately and not jointly indemnify the Company, its
affiliates and their respective officers, directors, employees and affiliates
(collectively, the "Company Indemnitees"), against all loss, claim, damage,
expense or liability (including all reasonable attorneys' fees and other
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which they may become subject under the Act, the
Exchange Act or otherwise, arising from material misstatements or omissions
related to information regarding the Investor's ownership of Registrable
Securities and plan of distribution with respect thereto furnished by or on
behalf of such Investor or its successors or assigns, in writing, for specific
inclusion in such Registration Statement.
Section 7.3 Management Services. During the Promotion Period,
Kirlin and/or its Affiliates shall provide Services (as defined) to the Company.
"Services" means those services deemed necessary or appropriate by the Company
for the development, management, operation and, prior to the Launch Date, the
launch, of the Site, and for the operation of the Business, including, but not
limited to certain marketing, MIS, corporate communications, corporate executive
management, HR administration, financial, legal and accounting services
(including processing of accounts payable, payroll and treasury) and other
services as may be requested from time to time by the Company in connection with
the
20
Business. In consideration of the Services, the Company shall pay Kirlin a
monthly fee representing a fair allocation of all indirect, non-out-of-pocket or
centralized expenses incurred by Kirlin on behalf of the Company (such fair
allocation to be based on actual cost, to the extent determinable), such fee not
to exceed $25,000 in any one month without the prior written consent of INDI.
The Company shall also reimburse Kirlin for all out-of-pocket expenses incurred
on behalf of the Company. Kirlin shall deliver to the Company and INDI quarterly
summaries of such Services and the fees and expenses charged by Kirlin to the
Company in connection therewith.
Section 7.4 Notification of Parties Requesting Financing
through the Company. The parties acknowledge that INDI's reputation for
journalistic integrity is of great value to INDI, that INDI desires to avoid the
suggestion of impropriety in connection with its editorial content, and that
INDI's reputation could be damaged were INDI to report on companies that receive
funding through the Business. The Company agrees to notify INDI in writing of
the name of any public company that submits to the Company a request to utilize
the Business to obtain financing, promptly after the Company's receipt of such
request. The Company also agrees to notify INDI in writing of the name of any
company that utilizes the Business in connection with the registered offering of
securities, promptly after the declared effectiveness of such offering. INDI
acknowledges that it shall be subject to the obligations of Section 8.1 with
respect to any information submitted to INDI pursuant to this Section 7.4.
ARTICLE VIII
CONFIDENTIALITY
Section 8.1 Confidentiality. INDI hereby agrees to hold in
strict confidence, unless compelled to disclose by judicial or administrative
process or by other requirements of law, all documents and information
concerning the Company obtained by INDI pursuant to the terms of this Agreement
or the Stockholder Agreement, except to the extent that such information can be
shown to have been (i) in the public domain through no fault of INDI, (ii)
lawfully acquired by INDI from another source, which source shall not be the
agent of any of INDI or person under confidentiality obligations to any of the
parties to this Agreement or their respective affiliates, or (iii) independently
developed by INDI or its affiliates. Except as otherwise required by applicable
law, rule or regulation, INDI shall not release or disclose such information to
any other person, except its attorneys and other consultants and advisors who
need to know same in connection with the Transaction Documents and the
transactions contemplated by the Transaction Documents, who shall each agree to
hold such information in confidence. The parties
21
understand that INDI may determine it is required to file a Current Report on
Form 8-K describing the Transaction Documents and attaching copies thereto as
exhibits to such report.
ARTICLE IX
JOINT COVENANTS OF THE PARTIES
Section 9.1 Further Action. Each of the Parties shall execute
such documents and other papers and take such further actions as may be
reasonably required or desirable to carry out the provisions hereof and the
transactions contemplated hereby. Upon the terms and subject to the conditions
hereof, each of the parties shall use commercially reasonable efforts to take,
or cause to be taken, all actions and to do, or cause to be done, all other
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement.
Section 9.2 Public Offering Lock-Ups. In the event the Company
commences and consummates an initial public offering of its Common Stock, each
of Kirlin, INDI and their respective affiliates agrees that, if required by the
managing underwriter of such offering, it shall execute an agreement by which it
shall be prohibited, for a period of up to one year following consummation of
the offering, from selling any shares of Common Stock owned by it without the
consent of such managing underwriter. Any party to which INDI or Kirlin or their
respective affiliates may transfer any of their shares of Common Stock shall be
required, as a condition to such transfer, to agree to be bound by this Section
9.2.
Section 9.3 Noncompete.
(a) So long as the Company continues to conduct
the Business, neither Kirlin nor INDI, nor any of their respective Affiliates,
shall directly or indirectly (i) engage in Online Matching Services or Online
Private Placement Services or (ii) allow the use of their respective names in
connection with the branding of such businesses. Notwithstanding the foregoing,
the restrictions set forth in this Section 9.3 shall terminate on the earlier of
(1) the expiration of the Promotion Period and (2) the consummation of an
initial public offering of the Common Stock.
(b) During the Promotion Period, INDI shall not
provide advertising or other promotions to or for entities engaged in the
Business, except to such entities who pay for advertising in cash or other
non-equity consideration at INDI's customary rates.
22
Section 9.4 Press Release. Kirlin and INDI shall issue a joint
press release, as promptly as practicable after execution of this Agreement, in
form and substance mutually satisfactory to the parties. All other press
releases relating to the existence of this Agreement or the transactions
contemplated hereby by either party shall be furnished for the other party's
review prior to dissemination.
Section 9.5 Kirlin Advertising Commitment. Each time Kirlin or
any Affiliate thereof (excluding the Company) receives a Finder's Fee, Kirlin
shall purchase from INDI, within 60 days of such receipt, Promotions in an
amount (valued as described in Section 2.3 above) equal to no less than the
Kirlin Advertising Commitment with respect to such Finder's Fee. Kirlin shall be
responsible for the content of such Promotions, which shall be subject to INDI's
reasonable approval as described in Section 2.6 above. For purposes of this
Section only, the term "Promotions" may include advertisements for Kirlin and
its Affiliates.
ARTICLE X
INDEMNIFICATION
Section 10.1 Indemnification of INDI.
(a) The Company shall, indemnify and hold
harmless the INDI Indemnitees from and against, and shall reimburse them for,
any losses, claims, damages and liabilities (including costs and expenses
attendant thereto, including reasonable attorneys' fees) which may be sustained,
suffered or incurred by the INDI Indemnitees, arising from or in connection with
(i) the breach of any of the Company's representations, warranties or covenants
contained in this Agreement, (ii) any content presented on the Site, except to
the extent such content was provided by INDI or (iii) the operation of the Site,
including without limitation, improper use of software and infringement of
patents.
(b) Kirlin shall, indemnify and hold harmless
the INDI Indemnitees from and against, and shall reimburse them for, any losses,
claims, damages and liabilities (including costs and expenses attendant thereto,
including reasonable attorneys' fees) which may be sustained, suffered or
incurred by the INDI Indemnitees, arising from or in connection with (i) the
breach of any of Kirlin's representations, warranties or covenants contained in
this Agreement or (ii) any content presented on the Site to the extent such
content was provided by Kirlin.
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Section 10.2 Indemnification of Kirlin.
(a) The Company shall, indemnify and hold
harmless the Kirlin Indemnitees from and against, and shall reimburse them for,
any losses, claims, damages and liabilities (including costs and expenses
attendant thereto, including reasonable attorneys' fees) which may be sustained,
suffered or incurred by the Kirlin Indemnitees, arising from or in connection
with (i) the breach of any of the Company's representations, warranties or
covenants contained in this Agreement, (ii) any content presented on the Site,
except to the extent such content was provided by Kirlin or (iii) the operation
of the Site, including without limitation, improper use of software and
infringement of patents.
(b) INDI shall indemnify and hold harmless the
Kirlin Indemnitees from and against, and shall reimburse them for, any losses,
claims, damages and liabilities (including costs and expenses attendant thereto,
including reasonable attorneys' fees) which may be sustained, suffered or
incurred by the Kirlin Indemnitees, arising from or in connection with (i) the
breach of any of INDI's representations, warranties or covenants contained in
this Agreement or (ii) any content presented on the Site to the extent such
content was provided by INDI.
Section 10.3 Indemnification of the Company.
(a) INDI shall indemnify and hold harmless the
Company Indemnitees from and against, and shall reimburse them for, any losses,
claims, damages and liabilities (including costs and expenses attendant thereto,
including reasonable attorneys' fees) which may be sustained, suffered or
incurred by the Company Indemnitees, arising from or in connection with (i) the
breach of any of INDI's representations, warranties or covenants contained in
this Agreement or (ii) any content presented on the Site to the extent such
content was provided by INDI.
(b) Kirlin shall indemnify and hold harmless the
Company Indemnitees from and against, and shall reimburse them for, any losses,
claims, damages and liabilities (including costs and expenses attendant thereto,
including reasonable attorneys' fees) which may be sustained, suffered or
incurred by the Company Indemnitees, arising from or in connection with (i) the
breach of any of Kirlin's representations, warranties or covenants contained in
this Agreement or (ii) any content presented on the Site to the extent such
content was provided by Kirlin.
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Section 10.4 Notices; Third Party Claims.
(a) A party required to make an indemnification
payment pursuant to this Article 11 ("Indemnifying Party") shall have no
liability to make such payment unless the party or parties entitled to receive
such indemnification payment (each an "Indemnified Party") gives notice to the
Indemnifying Party specifying (i) the covenant, representation or warranty
contained herein which it asserts has been breached, (ii) in reasonable detail,
the nature and dollar amount of any claim the Indemnified Party may have against
the Indemnifying Party by reason thereof under this Agreement, and (iii) whether
the claim is a third-party claim or a direct claim of the Indemnified Party
against the Indemnifying Party.
(b) If an Indemnified Party becomes aware of a
third-party claim for which an Indemnifying Party would be liable to an
Indemnified Party hereunder, the Indemnified Party shall, with reasonable
promptness, notify in writing the Indemnifying Party of such claim, identifying
the basis for such claim and the amount or the estimated amount thereof to the
extent then determinable which estimate shall not be conclusive of the final
amount of such claim (the "Claim Notice"); provided, however, that any failure
to give such Claim Notice will not be deemed a waiver of any rights of the
Indemnified Party except to the extent the rights of the Indemnifying Party are
actually prejudiced by such failure. The Indemnifying Party, upon request of the
Indemnified Party, shall retain counsel (who shall be reasonably acceptable to
the Indemnified Party) to represent the Indemnified Party and shall pay the
reasonable fees and expenses of such counsel with regard thereto; provided
further, however, that any Indemnified Party is hereby authorized, prior to the
date on which it receives written notice from the Indemnifying Party designating
such counsel, to retain counsel, whose reasonable fees and expenses shall be at
the expense of the Indemnifying Party, to file any motion, answer or other
pleading and take such other action which it reasonably shall deem necessary to
protect its interests or those of the Indemnifying Party until the date on which
the Indemnified Party receives such notice from the Indemnifying Party. After
the Indemnifying Party shall retain such counsel, the Indemnified Party shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party unless (i) the
Indemnifying Party and the Indemnified Party shall have mutually agreed to the
retention of such counsel or (ii) the named parties of any such proceeding
(including any impleaded parties) included both the Indemnifying Party and the
Indemnified Party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them. If
requested by the Indemnifying Party, the Indemnified Party agrees to cooperate
with the Indemnifying Party and its counsel (at the Indemnifying Party's
expense) in contesting any claim or demand which the
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Indemnifying Party defends. A claim or demand may not be settled by any party
without the prior written consent of the other party (which consent will not be
unreasonably withheld) unless, as part of such settlement, the Indemnified Party
shall receive a full and unconditional release reasonably satisfactory to the
Indemnifying Party. Notwithstanding the foregoing, the Indemnifying Party shall
not settle any claim without the prior written consent of the Indemnified Party
if the settlement would contain any injunctive obligations that would be binding
upon the Indemnified Party.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Survival. The warranties and representations of
the Company, Kirlin and INDI contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement.
Section 11.2 Successors and Assigns. None of the rights or
obligations of the parties hereto may be assigned without the written consent of
each of the parties, and any attempt to do so shall be null and void. Subject to
the preceding sentence, the rights and obligations of each party hereto shall be
binding on and inure to the benefit of its successors and permitted assigns.
Section 11.3 Governing Law; Venue. This Agreement shall be
governed by and construed under the law of the State of New York, disregarding
any principles of conflicts of law that would otherwise provide for the
application of the substantive law of another jurisdiction. Each of the Company,
Kirlin and INDI (i) agrees that any legal suit, action or proceeding arising out
of or relating to this Agreement shall be instituted exclusively in New York
State Supreme Court, County of New York, or in the United States District Court
for the Southern District of New York, (ii) waives any objection to the venue of
any such suit, action or proceeding and the right to assert that such forum is
not a convenient forum, and (iii) irrevocably consents to the jurisdiction of
the New York State Supreme Court, County of New York, and the United States
District Court for the Southern District of New York in any such suit, action or
proceeding. Each of the Company, Kirlin and INDI further agrees to accept and
acknowledge service of any and all process which may be served in any such suit,
action or proceeding in the New York State Supreme Court, County of New York, or
in the United States District Court for the Southern District of New York and
agrees that service of process upon it mailed by certified mail to its address
set forth herein shall be deemed in every respect effective service of process
upon it in any such suit, action or proceeding.
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Section 11.4 Counterparts and Facsimile Signatures. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument. A signature received via facsimile shall be deemed an original for
all purposes.
Section 11.5 Titles and Subtitles. The titles and subtitles
used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
Section 11.6 Notices. All notices and other communications
given or made pursuant hereto shall be in writing and shall be deemed to have
been duly given or made as of the date delivered if delivered personally or by
nationally recognized overnight courier, or four days after deposit with the
United States Post Office by certified mail, postage prepaid, in every case with
a copy by facsimile, to the parties at the following addresses and numbers (or
at such other address or number for a party as shall be specified by like
notice, except that notices of changes of address or number shall be effective
upon receipt):
If to INDI:
Individual Investor Group, Inc.
125 Broad Street, 14th Floor
New York, New York 10004
Attention: General Counsel
(Facsimile No.: 212/742-0742)
with a copy to:
Lowey Dannenberg Bemporad & Selinger, P.C.
One North Lexington Avenue
White Plains, New York 10601
Attention: Richard W. Cohen, Esq.
(Facsimile No.: 914/997-0035)
If to Kirlin Holding Corp. or the Company:
6901 Jericho Turnpike
Syosset, New York 11791
Attention: Anthony Kirincic
Facsimile No: 516/364-5199
and
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in either case, with a copy to
Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016
Attention: David Alan Miller, Esq.
(Facsimile No: 212/818-8881)
Section 11.7 Termination Rights. In the event the Commercial
Launch of the Site shall not have occurred by December 31, 1999, INDI shall have
the right, exercisable by written notice ("Termination Notice") to the Company
on or prior to January 31, 2000, to terminate this Agreement. If INDI elects to
so terminate, it must deliver the INDI shares to the Company, which shares shall
be immediately canceled or placed in the treasury of the Company. INDI shall
deliver the INDI Shares concurrently with the delivery of the Termination Notice
to the Company unless INDI elects to exercise its "put" right as described in
Section 7 of the Securities Purchase Agreement, in which event INDI shall
deliver the INDI Shares at the closing described in such Section of the
Securities Purchase Agreement. The Company shall not pay consideration of any
kind for the INDI Shares delivered to it in accordance with this Section 11.7.
Upon such termination, this Agreement and the Stockholder Agreement shall be of
no further force or effect.
Section 11.8 Fees. The Company shall pay the respective legal
fees of each party arising out of the negotiation, structuring and consummation
of the Transaction Documents and the transactions contemplated by the
Transaction Documents.
Section 11.9 Entire Agreement; Amendments and Waivers. This
Agreement constitutes the full and entire understanding and agreement between
the parties with regard to the subject matter hereof. Any term of this Agreement
may be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company, Kirlin and INDI.
Section 11.10 Severability. If one or more provisions of this
Agreement is or are held to be unenforceable under applicable law, such
provision(s) shall be excluded from this Agreement and the balance of the
Agreement shall be interpreted as if such provision(s) were so excluded and
shall be enforceable in accordance with its remaining terms.
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Section 11.11 Compliance with Laws and Regulations. The
parties shall comply with all applicable governmental laws, ordinances and
regulations. Each party will be solely responsible for its own individual
violations of any such laws, ordinances, and regulations.
Section 11.12 Rights of Third Parties. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective permitted successors and assigns any
rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
Section 11.13 Definition of Affiliates. "Affiliate" of a party
shall mean any person or entity owned or controlled by or under common control
with such party and any of their respective directors, officers or employees;
provided, however, that the parties' nonemployee directors and Saul Steinberg
and any entity controlled by such persons shall not be deemed Affiliates.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
INDIVIDUAL INVESTOR GROUP, INC. KIRLIN HOLDING CORP.
By:___________________________ By:_________________________
Name: Name:
Title: Title: President
VENTURE HIGHWAY.COM, INC.
By:__________________________
Name:
Title:
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