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Engage - CONVERTIBLE PREFERRED STOCK PURCHASE PLAN
Exhibit 10.6
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SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
This Series B Convertible Preferred Stock Purchase Agreement (this "Agreement") is made and entered into as of July 31, 1998, by and among:
ENGAGE TECHNOLOGIES, INC., a corporation duly organized and existing under
the laws of the State of Delaware, United States of America and having its
principal place of business at 100 Brickstone Square, First Floor, Andover,
Massachusetts 01810, United States of America ("Engage");
SUMITOMO CORPORATION, a corporation duly organized and existing under the
laws of Japan and having its principal place of business at 2-2,
Hitotsubashi 1-chome, Chiyoda-ku, Tokyo, Japan ("SC"); and
SUMITOMO CORPORATION OF AMERICA, a corporation duly organized and existing
under the laws of the State of New York, United States of America and
having a place of business at 345 Park Avenue, New York, New York 10154-
0042, United States of America ("SCOA", and together with SC, the
"Purchasers").
WHEREAS, Engage desires to sell to the Purchasers, and the Purchasers desire to purchase from Engage, the Engage Shares (as defined below), all on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual promises hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. AGREEMENT TO PURCHASE AND SELL STOCK.
1.1 Authorization. Prior to the Closing (as defined below), Engage's
------------- Board of Directors will have authorized the issuance of the Engage Shares (as defined below) pursuant to the terms and conditions of this Agreement. The Engage Shares, when issued, will have the rights and preferences set forth in the Certificate of Designation attached hereto as Exhibit A (the "Certificate of
--------- Designation").
1.2 Agreement to Purchase and Sell Common Stock. At the Closing (as
------------------------------------------- defined below), Engage hereby agrees to sell to the Purchasers and the Purchasers hereby agree to purchase from Engage an aggregate of 238,597 shares of Series B Convertible Preferred Stock of Engage, $0.01 par value per share (the "Engage
Shares"), at a price per share of $8.3823 for an aggregate purchase price of US $1,999,991.60, as follows: (a) Engage hereby agrees to sell to SC and SC hereby agrees to purchase from Engage 178,947 Engage Shares for an aggregate purchase price of US $1,499,987.40, and (b) Engage hereby agrees to sell to SCOA and SCOA hereby agrees to purchase from Engage 59,650 Engage Shares for an aggregate purchase price of US $500,004.20.
2. CLOSING.
2.1 The Closing. The purchase and sale of the Engage Shares shall take
----------- place at the offices of Palmer & Dodge LLP, One Beacon Street, Boston, Massachusetts 02108, at 10:00 a.m. Massachusetts time, within three (3) business days after the conditions set forth in Articles 5 and 6 have been satisfied, or at such other time and place as Engage and the Purchasers mutually agree upon (which time and place are referred to in this Agreement as the "Closing"). At the Closing, Engage will deliver to the Purchasers certificates representing the Engage Shares, against delivery to Engage by the Purchasers of the consideration set forth in Section 1.2 by wire transfer of funds to an account designated by Engage at least two business days prior to the Closing. It is expected that Closing documents will be delivered by facsimile with original signature pages sent by overnight courier.
3. REPRESENTATIONS AND WARRANTIES OF ENGAGE. Engage hereby represents and warrants to the Purchasers, at the date of execution of this Agreement and at the Closing, that the statements in this Section 3 are true and correct, except as set forth in the Disclosure Letter from Engage to the Purchasers of even date herewith (the "Disclosure Letter"):
3.1 Organization, Good Standing and Qualification. Engage is a
--------------------------------------------- corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, United States of America and has all corporate power and authority required to (a) carry on its business as presently conducted, and (b) enter into this Agreement and consummate the transactions contemplated hereby. Engage is qualified to do business and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect. As used in this Agreement, "Material Adverse Effect" means a material adverse effect on, or a material adverse change in, or a group of such effects on or changes in, the business, operations, financial condition, results of operations, prospects, assets or liabilities of Engage and its Subsidiaries (as defined below), taken as a whole.
3.2 Capitalization. As of the date hereof, the authorized stock of Engage
-------------- consists of 20,000,000 shares of Common Stock, par value $0.01 per share ("Common Stock") of which 93,750 shares are issued and outstanding, and 5,000,000 shares of Preferred Stock, $0.01 par value ("Preferred Stock") consisting of: 800,000 shares of Preferred Stock designated "Series A Preferred" of which 800,000 are issued and
outstanding and 4,200,000 undesignated shares of Preferred Stock. As of the Closing, the authorized stock of Engage will consist of 20,000,000 shares of Common Stock of which 93,750 shares will be issued and outstanding, 5,000,000 shares of Preferred Stock consisting of: 1,500,000 shares of Preferred Stock designated "Series A Preferred" of which 1,500,000 will be issued and outstanding, 238,597 shares of Preferred Stock designated "Series B Preferred" (the "Series B Preferred Stock") of which none shall be issued and outstanding, and 3,261,403 undesignated shares of Preferred Stock. Immediately prior to the Closing, all issued and outstanding shares will have been duly authorized, validly issued, and will be fully paid and nonassessable and free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. As of the date hereof, CMG Information Services, Inc. is the record holder of all of the outstanding shares of Series A Preferred Stock of Engage. As of the date hereof and as of the Closing, Engage shall have reserved 2,800,987 shares of Common Stock for issuance to officers, directors, employees or independent contractors or affiliates of Engage under Engage's employee benefit plans. As of the Closing, options shall have been issued under such employee benefit plans representing approximately 2,000,000 of such shares. All shares of Common Stock subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, shall be duly authorized, validly issued, fully paid and nonassessable. There are no other equity securities, convertible securities, options, warrants, calls, rights, commitments or agreements of any character to which Engage is a party or by which it is bound obligating Engage to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of Engage or obligating Engage to grant, extend or enter into any such equity security, convertible security, option, warrant, call, right, commitment or agreement.
3.3 Authorization. All corporate action on the part of Engage, its
------------- officers, directors and stockholders necessary for the authorization, execution, delivery of, and the performance of all obligations of Engage under this Agreement and the authorization, issuance, reservation for issuance and delivery of all of the Engage Shares being sold under this Agreement has been taken or will be taken prior to the Closing, and this Agreement constitutes a valid and binding obligation of Engage, enforceable against Engage in accordance with its terms, except as enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors' rights generally and (ii) the effect of rules of law governing the availability of equitable remedies.
3.4 Valid Issuance of Stock.
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(a) Valid Issuance. The Engage Shares, and the shares of Common
-------------- Stock issuable upon conversion thereof, when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration provided for herein, or the terms of the Certificate of Designation, as applicable, will be duly and validly issued, fully paid and nonassessable and will be free of any liens or encumbrances. The sale of the Engage Shares is not and will not be subject to any preemptive rights or rights of first refusal that have not been waived.
(b) Compliance with Securities Laws. Assuming the correctness of the
------------------------------- representations made by each of the Purchasers in Section 4 hereof, the Engage Shares will be issued in full compliance with the registration requirements of the Securities Act of 1933, as amended, and the rules and regulations of the Securities and Exchange Commission (the "Commission") issued under such act (collectively, the "Securities Act"), or in compliance with applicable exemptions therefrom, and the registration and qualification requirements of all applicable securities laws of the states of the United States.
3.5 Subsidiaries and Affiliates.
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(a) The Disclosure Letter sets forth a list of all entities in which Engage beneficially owns, directly or indirectly, 50% or more of the outstanding stock or other equity interests (collectively, the "Subsidiaries"). The Disclosure Letter also includes (i) a complete list of each partnership or joint venture agreement or arrangement to which Engage is a party and the nature and amount of the interest of Engage in such entities and (ii) a complete list of the corporations, partnerships, limited liability companies or other entities with respect to which Engage beneficially owns, directly or indirectly, the outstanding stock or other equity interests and the percentage ownership of such entity by Engage. Except as set forth in the Disclosure Letter, there is no other entity with respect to which: (i) Engage beneficially owns, directly or indirectly, any outstanding stock or other ownership interests of such entity; (ii) Engage may be deemed to be in control because of factors or relationships (contractual or otherwise) other than the quantity of stock or other interests owned; (iii) Engage may be liable under any circumstances for the payment of additional amounts with respect to its interest, whether in the form of assessments, capital calls, installment payments, general partner liability or otherwise; or (iv) the investment by Engage is accounted for by the equity method.
(b) All capital stock or other equity interests owned by Engage as described pursuant to Section 3.5(a) are owned by Engage or its Subsidiaries, as the case may be, as record and beneficial owner thereof free and clear of all liens, charges, encumbrances, equities and claims whatsoever. There is no outstanding or authorized option, subscription, warrant, call, right, commitment or other agreement of any character obligating Engage to issue, sell, transfer, pledge or otherwise encumber any share of capital stock or other equity interest described pursuant to Section 3.5(a) or any security or other instrument convertible into or exercisable for or
evidencing the right to subscribe for any such share of capital stock or other equity interest.
(c) Each Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of its state of organization. Each Subsidiary is duly qualified to do business as a foreign corporation and is in good standing in every jurisdiction in which the nature of the business conducted by it or the character or location of the properties owned or leased by it makes such qualification necessary, except where the failure to be so qualified would not have a Material Adverse Effect. Each Subsidiary has all requisite corporate power and authority to own or lease and operate its properties and assets and to carry on its business as now conducted.
3.6 Governmental Consents. No consent, approval, order or authorization
--------------------- of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority on the part of Engage is required in connection with the consummation of the transactions contemplated by this Agreement, except the filing of such qualifications or filings under the Securities Act and the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission issued under such act (collectively, the "Exchange Act") and all applicable state securities laws as may be required in connection with the transactions contemplated by this Agreement. All such qualifications and filings will, in the case of qualifications, be effective on the Closing and will, in the case of filings, be made within the time prescribed by law.
3.7 Non-Contravention. The execution, delivery and performance of this
----------------- Agreement by Engage and the consummation by Engage of the transactions contemplated hereby do not and will not (i) contravene or conflict with the Certificate of Incorporation, Certificate of Designation of Series A Preferred Stock or Bylaws of Engage; (ii) constitute a violation of any provision of any federal, state, local or foreign law binding upon or applicable to Engage; or (iii) constitute a default or require any consent under, give rise to any right of termination, cancellation or acceleration of, or to a loss of any benefit to which Engage is entitled under, or result in the creation or imposition of any lien, claim or encumbrance on any assets of Engage under, any contract to which Engage is a party or any permit, license or similar right relating to Engage or by which Engage may be bound or affected in such a manner as, individually or together with all other such matters, would have Material Adverse Effect.
3.8 Litigation. There is no action, suit, proceeding, claim, arbitration
---------- or investigation ("Action") pending or, to the best of Engage's knowledge, threatened: (a) against Engage or its Subsidiaries, their respective activities, properties or assets or against any officer, director or employee of Engage in connection with such officer's, director's or employee's relationship with, or actions taken on behalf of, Engage, in
each case which is reasonably likely to have a Material Adverse Effect, or (b) that seeks to prevent, enjoin, alter or delay the transactions contemplated by this Agreement. Engage is not a party to or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. No Action by Engage is currently pending nor does Engage intend to initiate any Action which is reasonably likely to have a Material Adverse Effect.
3.9 Compliance with Law and Charter Documents. Engage is not in violation
----------------------------------------- or default of any provisions of its Certificate of Incorporation or Bylaws, each as amended. Engage and its Subsidiaries have complied and are in compliance with all applicable statutes, laws, and regulations and executive orders of the United States of America and all states, foreign countries and other governmental bodies and agencies having jurisdiction over Engage's and its Subsidiaries' businesses or properties, except for any violations that would not, either individually or in the aggregate, have a Material Adverse Effect.
3.10 Financial Statements. Engage has provided the Purchasers with copies
-------------------- of the unaudited financial statements of Engage for the fiscal year ended July 31, 1997 and the audited financial statements of Accipiter, Inc. ("Accipiter") for the fiscal year ended December 31, 1997 (collectively, the "Annual Financial Statements"), and unaudited financial statements of Engage for the nine-month period ended April 30, 1998, which statements include the operations of Accipiter for the relevant period (the "Balance Sheet Date"). Such unaudited financial statements of Engage and Accipiter, Inc. fairly present, in conformity with generally accepted accounting principles ("GAAP") applied on a consistent basis (except as may be indicated in the notes thereto), the financial position of Engage and Accipiter as at the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject to normal year-end audit adjustments in the case of unaudited interim financial statements).
3.1 Absence of Certain Changes Since Balance Sheet Date. Except as set
--------------------------------------------------- forth in the Disclosure Letter, since the Balance Sheet Date, the business and operations of Engage and its Subsidiaries have been conducted in the ordinary course consistent with past practice, and there has not been:
(a) any declaration, setting aside or payment of any dividend or other distribution of the assets of Engage with respect to any shares of capital stock of Engage or any repurchase, redemption or other acquisition by Engage or any Subsidiary of Engage of any outstanding shares of Engage's or any Subsidiary's capital stock;
(b) any damage, destruction or loss, whether or not covered by insurance, except for such occurrences that have not resulted, and are not expected to result, in a Material Adverse Effect;
(c) any waiver by Engage or a Subsidiary of a valuable right or of a material debt owed to it, except for such waivers that have not resulted and are not expected to result, in a Material Adverse Effect;
(d) any material change or amendment to, or any waiver of any material rights under a material contract or arrangement by which Engage or a Subsidiary or any of its respective assets or properties is bound or subject, except for changes, amendments, or waivers that are expressly provided for or disclosed in this Agreement or the Disclosure Letter or that have not resulted, and are not expected to result, in a Material Adverse Effect;
(e) any change by Engage in its accounting principles, methods or practices or in the manner it keeps its accounting books and records, except any such change required by a change in GAAP; and
(f) any other event or condition of any character, except for such events and conditions that have not resulted, and are not expected to result, either individually or collectively, in a Material Adverse Effect.
3.12 Rights in Proprietary Information. Except as set forth in the
--------------------------------- Disclosure Letter, Engage has not received any communications alleging that Engage has violated or, by conducting its business, would violate any of the patents, trademarks, service marks, or other proprietary rights of any other person or entity, nor does Engage have reason to believe that it has violated or, by conducting its business, would violate any of the patents, trademarks, service marks, or other proprietary rights of any person or entity. Engage has sufficient right to proprietary information to conduct its business as currently conducted.
3.13 Conduct of Business; Liabilities. Engage is not in default under, and
-------------------------------- to the best of Engage's knowledge no condition exists that would by notice or lapse or time would constitute a default of Engage under (i) any mortgage, loan agreement, evidence of indebtedness, or other instrument evidencing borrowed money to which Engage is a party or by which Engage or the properties of Engage are bound or (ii) any judgment, order, or injunction of any court, arbitrator, or governmental agency that would reasonably be expected to have a Material Adverse Effect.
3.14 Permits. Engage has all franchises, permits, licenses and any similar
------- authority necessary for the conduct of its business as it is now being conducted, the lack of which could have a Material Adverse Effect, and believes it can obtain, without undue burden or expense, any similar authority for the conduct of its business as planned to be conducted. Engage is not in default in any material respect under any of such franchises, permits, licenses or other similar authority.
3.15 Full Disclosure. The information contained in this Agreement and the
--------------- Disclosure Letter with respect to the business, operations, assets, results of operations and financial condition of Engage and its Subsidiaries, and the transactions contemplated by this Agreement are true and complete in all material respects and do not omit to state any material fact necessary in order to make the statements herein and therein, in light of the circumstances under which they were made, not misleading.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS. Each of the Purchasers hereby jointly and severally represents and warrants to Engage, at the date of execution of this Agreement and at the Closing, and agrees that:
4.1 Organization and Good Standing. SC is a corporation duly organized,
------------------------------ validly existing and in good standing under the laws of Japan and has all corporate power and authority required to carry on its business as presently conducted, and to enter into this Agreement and to consummate the transactions contemplated hereby. SCOA is a corporation duly organized, validly existing and in good standing under the laws of the State of New York and has all corporate power and authority required to carry on its business as presently conducted, and enter into this Agreement and to consummate the transactions contemplated hereby.
4.2 Authorization. This Agreement has been duly authorized by all
------------- necessary corporate action on the part of each Purchaser. This Agreement constitutes a valid and binding obligation of each Purchaser, enforceable against each Purchaser in accordance with its terms, except as enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors' rights generally and (b) the effect of rules of law governing the availability of equitable remedies. Each Purchaser has full corporate power and authority to enter into this Agreement.
4.3 Governmental Consents. No consent, approval, order or authorization
--------------------- of, or registration, qualification, designation, declaration or filing with, any federal, state, local or foreign governmental authority on the part of either Purchaser is required in connection with the consummation of the transactions contemplated by this Agreement, except for such authorizations of the relevant authorities under all applicable laws of Japan as may be required in connection with the transactions contemplated by this Agreement. All such authorizations, qualifications and filings will, in the case of authorizations and qualifications, be effective on the Closing and will, in the case of filings, be made within the time prescribed by law.
4.4 Purchase for Own Account. The Engage Shares are being acquired for
------------------------ investment for each Purchaser's own account, not as a nominee or agent, and not with a view to the public resale or distribution thereof within the meaning of the
Securities Act, and neither Purchaser has the present intention of selling, granting any participation in, or otherwise distributing the same.
4.5 Investment Experience. Each Purchaser understands that the purchase
--------------------- of the Engage Shares involves substantial risk. Each Purchaser has experience as an investor in corporate securities and acknowledges that it is able to fend for itself, can bear the economic risk of its investment in the Engage Shares and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of this investment in the Engage Shares and protecting its own interests in connection with this investment.
4.6 Accredited Investor Status. Each Purchaser is an "accredited
-------------------------- investor" within the meaning of Regulation D promulgated under the Securities Act.
4.7 Restricted Securities. Each Purchaser understands that the Engage
--------------------- Shares are characterized as "restricted securities" under the Securities Act, inasmuch as they are being acquired from Engage in a transaction not involving a public offering and that under the Securities Act such securities may be resold without registration under the Securities Act only in certain limited circumstances. Each Purchaser is familiar with Rule 144 promulgated under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.
4.8 Legends. Each Purchaser agrees that the certificates for the Engage
------- Shares shall bear the following legend in addition to any legend required to provide notice of Engage's rights under Section 7.
"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended, or with any state securities
commission, and may not be transferred or disposed of by the holder in the
absence of a registration statement which is effective under the Securities
Act of 1933, as amended, and applicable state laws and rules, or, unless,
immediately prior to the time set for transfer, such transfer may be
effected without violation of the Securities Act of 1933, as amended, and
other applicable state laws and rules."
In addition, each Purchaser agrees that Engage may place stop transfer orders with its transfer agents with respect to such certificates to the extent necessary to enforce compliance with the requirements of the Securities Act. The appropriate portion of the legend and the stop transfer orders will be removed promptly upon delivery to Engage of such satisfactory evidence as reasonably may be required by Engage, that such legend or stop orders are not required to ensure compliance with the Securities Act.
5. CONDITIONS TO THE PURCHASERS' OBLIGATIONS AT CLOSING. The obligations of the Purchasers under Sections 1 and 2 of this Agreement are subject to the fulfillment or waiver, on or before the Closing, of each of the following conditions:
5.1 Representations and Warranties True. Each of the representations and
----------------------------------- warranties of Engage contained in Section 3 will be true and correct in all material respects on and as of the date hereof and on and as of the date of the Closing, except as set forth in the Disclosure Letter, with the same effect as though such representations and warranties had been made as of the Closing.
5.2 Performance. Engage will have performed and complied with all
----------- agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing and will have obtained all approvals, consents and qualifications necessary to complete the purchase and sale described herein.
5.3 Compliance Certificate. Engage will have delivered to the Purchasers
---------------------- at the Closing a certificate signed on its behalf by its Chief Executive Officer or Chief Financial Officer certifying that the conditions specified in Sections 5.1, 5.2 and 5.7 hereof have been fulfilled.
5.4 Securities Exemptions. The offer and sale of the Engage Shares to the
--------------------- Purchasers pursuant to this Agreement will be exempt from the registration requirements of the Securities Act and the registration and/or qualification requirements of all applicable state securities laws.
5.5 Proceedings and Documents. All corporate and other proceedings in
------------------------- connection with the transactions contemplated at the Closing and all documents incident thereto will be reasonably satisfactory in form and substance to the Purchasers and to the Purchasers' legal counsel, and the Purchasers will have received all such counterpart originals and certified or other copies of such documents as they may reasonably request. Such documents shall include, but not be limited to, the following:
(a) Certified Charter Documents. A copy of (i) the Certificate of
--------------------------- Incorporation and Certificate of Designation of Series A Preferred Stock, each certified as of a recent date by the Secretary of State of the State of Delaware as a complete and correct copy thereof; and (ii) the By-laws of Engage (as amended through the date of the Closing) certified by the Assistant Secretary of Engage as true and correct copies thereof as of the Closing.
(b) Board Resolutions. A copy, certified by the Assistant Secretary
----------------- of Engage, of the resolutions of the Board of Directors of Engage providing for the
approval of this Agreement and the issuance of the Engage Shares and the other matters contemplated hereby.
(c) Stock Certificates. Stock certificates representing the Engage
------------------ Shares.
5.6 Opinion of Engage Counsel. The Purchasers will have received an
------------------------- opinion on behalf of Engage, dated as of the date of the Closing, from Palmer & Dodge LLP, in substantially the form attached as Exhibit B hereto.
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5.7 No Material Adverse Effect. Between the date hereof and the Closing,
-------------------------- there shall not have occurred any Material Adverse Effect.
5.8 Satisfaction of Due Diligence. The Purchasers shall have completed to
----------------------------- their satisfaction a legal and financial review of Engage.
5.9 Merger of Accipiter. Engage shall have consummated the stock-for-
------------------- stock merger of Accipiter with and into Engage and Engage shall be the survivor of such merger. Evidence of consummation of the merger satisfactory to the Purchasers shall have been delivered by Engage.
6. CONDITIONS TO ENGAGE'S OBLIGATIONS AT CLOSING. The obligations of Engage to the Purchasers under Sections 1 and 2 of this Agreement are subject to the fulfillment or waiver on or before the Closing, of each of the following conditions:
6.1 Representations and Warranties True. The representations and
----------------------------------- warranties of the Purchasers contained in Section 4 will be true and correct in all material respects on and as of the date hereof and on and as of the date of the Closing with the same effect as though such representations and warranties had been made as of the Closing.
6.2 Performance. The Purchasers will have performed and complied with all
----------- agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing and will have obtained all approvals, consents and qualifications necessary to complete the purchase and sale described herein.
6.3 Payment of Purchase Price. The Purchasers will have delivered to
------------------------- Engage the full purchase price of the Engage Shares as specified in Section 1.2.
6.4 Securities Exemptions. The offer and sale of the Engage Shares to the
--------------------- Purchasers pursuant to this Agreement will be exempt from the registration requirements of the Securities Act and the registration
requirements of the Securities and/or qualification requirements of all applicable state securities laws.
6.5 Proceedings and Documents. All corporate and other proceedings in
------------------------- connection with the transactions contemplated at the Closing and all documents incident thereto will be reasonably satisfactory in form and substance to Engage and to Engage's legal counsel, and Engage will have received all such counterpart originals and certified or other copies of such documents as it may reasonably request.
7. COVENANTS OF THE PURCHASERS AND ENGAGE.
7.1 Covenants of the Purchasers. As long as a Purchaser holds any of the
--------------------------- Engage Shares, such Purchaser hereby covenants and agrees as follows:
7.1.1 Right of First Offer Upon Transfer of Engage Shares. If either
--------------------------------------------------- Purchaser intends to sell any of the Engage Shares to any person (other than an Affiliate of such Purchaser pursuant to Section 7.1.2 below), such Purchaser shall provide written notice thereof to Engage (the "Purchaser Notice"). The Purchaser Notice shall specify the number of Engage Shares involved and the proposed price per share. For a period of 48 hours after the receipt of the Purchaser Notice by Engage, Engage shall be entitled to elect to purchase all, but not less than all, of the Engage Shares described in the Purchaser Notice, at the price per share described in such notice, by delivery of a written notice (a "Company Purchase Election") to such Purchaser irrevocably electing to purchase such Shares and shall have twenty (20) business days to consummate said purchase from such Purchaser. In the event that Engage has not delivered a Company Purchase Election prior to the expiration of such 48-hour period or has failed to purchase such Engage Shares within said twenty (20) business day period, Engage's right to purchase such Engage Shares shall expire, and such Purchaser shall be entitled to sell the Engage Shares described in the Purchaser Notice for a period of ninety (90) days following the expiration of such twenty (20) day period, but only to the proposed purchaser set forth in the Purchaser Notice and only for a purchase price not less than the purchase price set forth in the Purchaser Notice. In the event such Purchaser has not sold such Engage Shares by the end of such ninety (90) day period, the rights of Engage set forth above in this Section 7.1.1 shall apply to any subsequent sales by such Purchaser. Each Purchaser further agrees that it will not sell the Engage Shares privately to an entity engaged in the same business as Engage at the time of such sale without the prior written consent of Engage, which consent shall not be unreasonably withheld.
7.1.2 Transfers to Affiliates.
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(a) Subject to the last sentence of Section 7.1.1, Engage Shares and the rights granted to a Purchaser under this Agreement relating thereto may be transferred by such Purchaser to any corporation or other entity which directly or indirectly controls, is controlled by or is under common control wit...
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