Filed Pursuant to Rule 424(b)(3)
Registration Number 333-60686
Prospectus Supplement Dated April 18, 2002 to
Prospectus Dated July 6, 2001 of LendingTree, Inc.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): April 16, 2002
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LENDINGTREE, INC.
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(Exact name of registrant as specified in charter)
Delaware 000-29215 25-1795344
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) file number) Identification Number)
11115 Rushmore Drive, Charlotte, North Carolina 28277
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (704) 541-5351
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ITEM 5. OTHER EVENTS.
On April 16, 2002, LendingTree announced that it has sold a total of
500,000 newly issued shares of common stock to a group of three institutional
and accredited investors in a private placement for gross proceeds of $5.9
million. See Exhibit 99.1.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements. Not applicable.
(b) Pro Forma Financial Information. Not applicable.
(c) Exhibits. The following exhibit is filed herewith:
10.1 Subscription Agreement between LendingTree, Inc. and
SMALLCAP World Fund, Inc. dated April 12, 2002
10.2 Subscription Agreement between LendingTree, Inc. and
Ashford Capital Management Inc. dated April 12, 2002
10.3 Subscription Agreement between LendingTree, Inc. and
Pequot Scout Fund, L.P.
10.4 Subscription Agreement between LendingTree, Inc. and
Pequot Navigator Offshore Fund, Inc.
99.1 Press release issued on April 16, 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LENDINGTREE, INC.
Date: April 16, 2002 By: /s/ Douglas R. Lebda
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Name: Douglas R. Lebda
Title: Chief Executive Officer
SECURITIES AND EXCHANGE COMMISSION
Washington, DC
EXHIBITS
CURRENT REPORT
ON
FORM 8-K
Date of Event Reported: Commission File No:
April 16, 2002 000-29215
LENDINGTREE, INC.
EXHIBIT INDEX
Exhibit No. Exhibit Description
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10.1 Subscription Agreement between LendingTree, Inc. and
SMALLCAP World Fund, Inc. dated April 12, 2002
10.2 Subscription Agreement between LendingTree, Inc. and
Ashford Capital Management Inc. dated April 12, 2002
10.3 Subscription Agreement between LendingTree, Inc. and
Pequot Scout Fund, L.P.
10.4 Subscription Agreement between LendingTree, Inc. and
Pequot Navigator Offshore Fund, Inc.
99.1 Press release issued on April 16, 2002.
Exhibit 10.1
SUBSCRIPTION AGREEMENT
This Subscription Agreement (this "Agreement") is entered into as of
the date set forth on the signature page hereof by and between LendingTree,
Inc., a Delaware corporation (together with its successors and permitted
assigns, the "Issuer"), and the undersigned investor (together with its
successors and permitted assigns, the "Investor"). Capitalized terms used but
not otherwise defined herein shall have the meanings set forth in Section 9.1.
RECITALS
Subject to the terms and conditions of this Agreement, the Investor
desires to subscribe for and purchase, and the Issuer desires to issue and sell
to the Investor, certain shares of the Issuer's common stock, par value $.01 per
share (the "Common Stock"). The Issuer is offering an aggregate of approximately
Five Hundred Thousand (500,000) shares of Common Stock in a private placement to
the Investor and other investors at a purchase price of $11.88 per share and on
the other terms and conditions contained in this Agreement (the "Offering"),
provided that the Issuer reserves the right to sell a lesser or greater number
of shares.
TERMS OF AGREEMENT
In consideration of the mutual representations and warranties,
covenants and agreements contained herein, the parties hereto agree as follows:
ARTICLE 1
SUBSCRIPTION AND ISSUANCE OF COMMON STOCK
1.1 SUBSCRIPTION AND ISSUANCE OF COMMON STOCK. Subject to the terms and
conditions of this Agreement, the Issuer will issue and sell to the Investor and
the Investor subscribes for and will purchase from the Issuer the number of
shares of Common Stock set forth on the signature page hereof (the "Shares") for
the aggregate purchase price set forth on the signature page hereof, which shall
be equal to the product of the number of Shares subscribed for by the Investor
times the per share purchase price specified in the above Recitals to this
Agreement (the "Purchase Price").
1.2 LEGEND. Any certificate or certificates representing the Shares
shall bear the following legend:
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW. THESE SECURITIES
MAY NOT BE PLEDGED, HYPOTHECATED, SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR ANY EXEMPTION THEREFROM UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND ANY APPLICABLE STATE SECURITIES LAW.
ARTICLE 2
CLOSING
2.1 CLOSING. The closing of the transactions contemplated herein (the
"Closing") shall take place on a date designated by the Issuer, which date shall
be on or before April 15, 2002. The Closing shall take place at the offices of
Heller Ehrman White & McAuliffe, counsel for the Issuer, 711 Fifth Avenue, New
York, New York 10022. At the Closing, unless the Investor and the Issuer
otherwise agree (i) the Investor shall pay the Purchase Price to the Issuer, by
wire transfer of immediately available funds to an account designated in writing
by the Issuer; (ii) the Issuer shall issue to the Investor the Shares, and
deliver to the Investor certificates for the Shares duly registered in the name
of the Investor; and (iii) all other agreements and other documents referred to
in this Agreement which are required for the Closing shall be executed and
delivered (if that is not done prior to the Closing).
2.2 TERMINATION. This Agreement may be terminated at any time prior to
the Closing:
(a) by mutual written consent of the Issuer and the Investor;
(b) by the Investor, upon a breach of any material representation
and warranty, covenant or agreement on the part of the Issuer set forth in this
Agreement, or if any material representation and warranty of the Issuer shall
have become untrue in any material respect, in either case such that the
conditions in Section 8.1 would be incapable of being satisfied by the date of
the Closing; or
(c) by the Issuer, upon a breach of any material representation and
warranty, covenant or agreement on the part of the Investor set forth in this
Agreement, or if any material representation and warranty of the Investor shall
have become untrue in any material respect, in either case such that the
conditions in Section 8.2 would be incapable of being satisfied by the date of
the Closing.
2.3 EFFECT OF TERMINATION. In the event of termination of this
Agreement pursuant to Section 2.2, this Agreement shall forthwith become void,
there shall be no liability on the part of the
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Issuer or the Investor to each other and all rights and obligations of any party
hereto shall cease; provided, however, that nothing herein shall relieve any
party from liability for the willful breach of any of its representations and
warranties, covenants or agreements set forth in this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE ISSUER
As a material inducement to the Investor entering into this Agreement
and subscribing for the Shares, the Issuer represents and warrants to the
Investor as follows:
3.1 CORPORATE STATUS. The Issuer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
3.2 CORPORATE POWER AND AUTHORITY. The Issuer has the corporate power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder and consummate the transactions contemplated hereby. At
the time of the closing, the Issuer will have taken all necessary corporate
action to authorize the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby.
3.3 ENFORCEABILITY. This Agreement has been duly executed and delivered
by the Issuer and constitutes a legal, valid and binding obligation of the
Issuer, enforceable against the Issuer in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and general equitable principles, regardless of
whether such enforceability is considered in a proceeding at law or in equity
and except as rights to indemnity or contribution hereunder may be limited by
Federal or state securities laws.
3.4 NO VIOLATION. The execution and delivery by the Issuer of this
Agreement, the consummation of the transactions contemplated hereby, and the
compliance by the Issuer with the terms and provisions hereof (including,
without limitation, the Issuer's issuance to the Investor of the Shares as
contemplated by and in accordance with this Agreement), will not, except as set
forth on Schedule 3.4, result in a default under (or give any other party the
right, with the giving of notice or the passage of time (or both), to declare a
default or accelerate any obligation under) or violate the Certificate of
Incorporation or By-Laws of the Issuer or any material Contract to which the
Issuer is a party (except to the extent such a default would not, in the case of
a Contract, have a Material Adverse Effect on the Issuer), or any Requirement of
Law applicable to the Issuer, or result in the creation or imposition of any
material Lien upon any of the capital stock, properties or assets of the Issuer
or any of its Subsidiaries (except where such Lien would not have a Material
Adverse Effect on the Issuer).
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3.5 CONSENTS/APPROVALS. Except for the filing of a registration
statement in accordance with Article 6 hereof and the filing of a Form D with
the SEC and as applicable, state agencies or authorities, no material consents,
filings, authorizations or other actions of any Governmental Authority are
required to be obtained or made by the Issuer for the Issuer's execution,
delivery and performance of this Agreement which have not already been obtained
or made. No consent, approval, waiver or other action by any Person under any
Contract to which the Issuer is a party or by which the Issuer or any of its
properties or assets are bound is required or necessary for the execution,
delivery or performance by the Issuer of this Agreement and the consummation of
the transactions contemplated hereby, except where the failure to obtain such
consents would not have a Material Adverse Effect on the Issuer.
3.6 VALID ISSUANCE. Upon payment of the Purchase Price by the Investor
and delivery to the Investor of the certificates for the Shares, such Shares
will be validly issued, fully paid and non-assessable.
3.7 SEC FILINGS, OTHER FILINGS AND NASDAQ COMPLIANCE. The Issuer has
timely made all filings required to be made by it under the Exchange Act. The
Issuer has delivered or made accessible to the Investor true, accurate and
complete copies of (i) Issuer's Annual Report on Form 10-K for the fiscal year
ended December 31, 2001; (ii) the Issuer's definitive proxy statement dated
March 15, 2002 relating to its 2002 Annual Meeting of Stockholders; and (iii)
the Issuer's Current Report on Form 8-K dated March 28, 2002 (the "SEC
Reports"). The SEC Reports, when filed, complied in all material respects with
all applicable requirements of the Exchange Act. None of the SEC Reports, at the
time of filing, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein not misleading in light of the circumstances in
which they were made. The Issuer has filed in a timely manner all documents that
the Issuer was required to file under the Exchange Act during the 12 months
preceding the date of this Agreement. The Issuer is currently eligible to
register the resale of the Shares in a secondary offering on a registration
statement on Form S-3 under the Securities Act. The Issuer has taken all
necessary actions required to be taken to date to ensure its continued inclusion
in, and the continued eligibility of the Common Stock for trading on, The Nasdaq
Stock Market under all currently effective inclusion requirements. Each balance
sheet included in the SEC Reports (including any related notes and schedules)
fairly presents in all material respects the consolidated financial position of
the Issuer as of its date, and each of the other financial statements included
in the SEC Reports (including any related notes and Schedules) fairly presents
in all material respects the consolidated results of operations of the Issuer
for the periods or as of the dates therein set forth in accordance with GAAP
consistently applied during the periods involved.
3.8 COMMISSIONS. The Issuer has not incurred any other obligation for
any finder's or broker's or agent's fees or commissions in connection with the
transactions contemplated hereby, except that the Issuer will pay a 4%
commission in cash to Allen & Company Incorporated ("Allen"), the placement
agent for the Offering.
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3.9 CAPITALIZATION. The authorized capital stock of the Issuer consists
of 100,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock.
All issued and outstanding shares of capital stock of the Issuer have been, and
as of the Closing Date will be, duly authorized and validly issued and are and
will be fully paid and non-assessable. As of the date of this Agreement, the
Issuer has issued and outstanding 19,686,744 shares of Common Stock and
6,842,858 shares of Preferred Stock. Except as described in this Section 3.9 and
on Schedule 3.9, there are no outstanding options, warrants, rights (including
conversion or preemptive rights and rights of first refusal and similar rights)
or agreements, orally or in writing, for the purchase or acquisition from the
Issuer of any shares of capital stock and the Issuer is not a party to or
subject to any agreement or understanding, and there is no agreement or
understanding between any person and/or entities, which affects or relates to
the voting or giving of written consents with respect to any security or by a
director of the Issuer. Except as set forth on Schedule 3.9, the Issuer has no
obligation, contingent or otherwise, to redeem or repurchase any equity security
or any security that is a combination of debt and equity.
3.10 MATERIAL CHANGES. Except as set forth in the SEC Reports or as
otherwise contemplated herein, since December 31, 2001, there has been no
Material Adverse Change in the Issuer and its subsidiaries taken as a whole.
Except as set forth in the SEC Reports, since December 31, 2001, there has not
been (i) any direct or indirect redemption, purchase or other acquisition by the
Issuer of any shares of the Common Stock or (ii) declaration, setting aside or
payment of any dividend or other distribution by the Issuer with respect to the
Common Stock (other than the accrual of dividends on the Series A Preferred
Stock of the Issuer which is convertible into Common Stock of the Issuer).
3.11 LITIGATION. Except as disclosed on Schedule 3.11 or as set forth
in the SEC Reports, there is no action, suit, proceeding or investigation
pending or, to the Issuer's knowledge, currently threatened against the Issuer
or any of its subsidiaries that questions the validity of this Agreement or the
right of the Issuer to enter into it, or to consummate the transactions
contemplated hereby, or that might result, either individually or in the
aggregate, in a Material Adverse Effect on the Issuer or any change in the
current equity ownership of the Issuer. The foregoing includes, without
limitation, actions pending or, to the Issuer's knowledge, threatened involving
the prior employment of any of the Issuer's employees or their use in connection
with the Issuer's business of any information or techniques allegedly
proprietary to any of their former employers. Neither the Issuer nor any of its
subsidiaries is a party to or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality not of general applicability. Except as set forth in the SEC
Reports, there is no action, suit, proceeding or investigation by the Issuer or
any of its subsidiaries currently pending or which the Issuer or any of its
subsidiaries currently intends to initiate.
3.12 RIGHTS OF REGISTRATION AND VOTING RIGHTS. Except as contemplated
in this Agreement and as disclosed on Schedule 3.12, the Issuer has not granted
or agreed to grant any
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registration rights, including piggyback rights, to any person or entity, and no
stockholder of the Issuer has entered into any agreements with respect to the
voting of capital shares of the Issuer.
3.13 OFFERINGS. Subject in part to the truth and accuracy of Investor's
representations and warranties set forth in this Agreement, the offer, sale and
issuance of the Shares as contemplated by this Agreement are exempt from the
registration requirements of the Securities Act and any applicable state
securities laws, and neither the Issuer nor any authorized agent acting on its
behalf will take any action hereafter that would cause the loss of such
exemption.
3.14 DISCLOSURE. The Issuer is aware of no facts which lead it to
believe that the Disclosure Documents, as of their respective dates, contain any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
As a material inducement to the Issuer entering into this Agreement and
issuing the Shares, the Investor represents and warrants to the Issuer as
follows:
4.1 POWER AND AUTHORITY. The Investor, if other than a natural person,
is an entity duly organized, validly existing and in good standing under the
laws of the state of its incorporation or formation. The Investor has the
corporate, partnership or other power and authority under applicable law to
execute and deliver this Agreement and consummate the transactions contemplated
hereby, and has all necessary authority to execute, deliver and perform its
obligations under this Agreement and consummate the transactions contemplated
hereby. The Investor has taken all necessary action to authorize the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby.
4.2 NO VIOLATION. The execution and delivery by the Investor of this
Agreement, the consummation of the transactions contemplated hereby, and the
compliance by the Investor with the terms and provisions hereof, will not result
in a default under (or give any other party the right, with the giving of notice
or the passage of time (or both), to declare a default or accelerate any
obligation under) or violate any charter or similar documents of the Investor,
if other than a natural person, or any Contract to which the Investor is a party
or by which it or its properties or assets are bound, or violate any Requirement
of Law applicable to the Investor, other than such violations or defaults which,
individually and in the aggregate, do not and will not have a Material Adverse
Effect on the Investor. The Investor is familiar with Regulation M promulgated
under the Exchange Act, a copy of which is attached hereto as Exhibit A, and is
in full compliance with the provisions thereof with respect to the transactions
contemplated hereby.
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4.3 CONSENTS/APPROVALS. No consents, filings, authorizations or actions
of any Governmental Authority are required for the Investor's execution,
delivery and performance of this Agreement. No consent, approval, waiver or
other actions by any Person under any Contract to which the Investor is a party
or by which the Investor or any of its properties or assets are bound is
required or necessary for the execution, delivery and performance by the
Investor of this Agreement and the consummation of the transactions contemplated
hereby.
4.4 ENFORCEABILITY. This Agreement has been duly executed and delivered
by the Investor and constitutes a legal, valid and binding obligation of the
Investor, enforceable against the Investor in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditor's rights generally and general equitable principles, regardless of
whether enforceability is considered in a proceeding at law or in equity.
4.5 INVESTMENT INTENT. The Investor is acquiring the Shares hereunder
for its own account and with no present intention of distributing or selling
such Shares and further agrees not to transfer such Shares in violation of the
Securities Act or any applicable state securities law, and no one other than the
Investor has any beneficial interest in the Shares. The Investor agrees that it
will not sell or otherwise dispose of any of the Shares unless such sale or
other disposition has been registered under the Securities Act or, in the
opinion of counsel acceptable to the Issuer, is exempt from registration under
the Securities Act and has been registered or qualified or, in the opinion of
such counsel acceptable to the Issuer, is exempt from registration or
qualification under applicable state securities laws. The Investor understands
that the offer and sale by the Issuer of the Shares being acquired by the
Investor hereunder has not been registered under the Securities Act by reason of
their contemplated issuance in transactions exempt from the registration and
prospectus delivery requirements of the Securities Act pursuant to Section 4(2)
thereof and Regulation D promulgated thereunder, and that the reliance of the
Issuer on such exemption from registration is predicated in part on these
representations and warranties of the Investor. The Investor acknowledges that
pursuant to Section 1.2 of this Agreement a restrictive legend consistent with
the foregoing has been or will be placed on the certificates for the Shares.
4.6 ACCREDITED INVESTOR. The Investor is an "accredited investor" as
such term is defined in Rule 501(a) of Regulation D under the Securities Act (a
copy of which is attached hereto as Exhibit B), and has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of the investment to be made by it hereunder.
4.7 ADEQUATE INFORMATION. The Investor has received from the Issuer,
and has reviewed, such information which the Investor considers necessary or
appropriate to evaluate the risks and merits of an investment in the Shares,
including without limitation, the documents listed on Exhibit C, which have been
received by Investor as part of an informational packet of materials from the
Issuer. The documents listed in Exhibit C are referred to herein as the
"Disclosure Documents."
-7-
4.8 OPPORTUNITY TO QUESTION. The Investor has had the opportunity to
question, and has questioned, to the extent it has deemed necessary or
appropriate, representatives of the Issuer so as to receive answers and verify
information obtained in the Investor's examination of the Issuer, including the
information that the Investor has received and reviewed as referenced in Section
4.7 hereof in relation to its investment in the Shares.
4.9 NO OTHER REPRESENTATIONS. No oral or written representations have
been made to the Investor in connection with the Investor's acquisition of the
Shares which were in any way inconsistent with the information reviewed by the
Investor. The Investor acknowledges that no representations or warranties of any
type or description have been made to it by any Person with regard to the
Issuer, any of its Subsidiaries, any of their respective businesses, properties
or prospects or the investment contemplated herein, other than the
representations and warranties set forth in Article 3 hereof.
4.10 KNOWLEDGE AND EXPERIENCE. The Investor has such knowledge and
experience in financial, tax and business matters, including substantial
experience in evaluating and investing in common stock and other securities
(including the common stock and other securities of speculative companies), so
as to enable the Investor to utilize the information referred to in Section 4.7
hereof and any other information made available by the Issuer to the Investor in
order to evaluate the merits and risks of an investment in the Shares and to
make an informed investment decision with respect thereto.
4.11 INDEPENDENT DECISION. The Investor is not relying on the Issuer or
on any legal or other opinion in the materials reviewed by the Investor with
respect to the financial or tax considerations of the Investor relating to its
investment in the Shares. The Investor has relied solely on the representations
and warranties, covenants and agreements of the Issuer in this Agreement
(including the Exhibits hereto) and on its examination and independent
investigation in making its decision to acquire the Shares.
4.12 COMMISSIONS. The Investor has not incurred any obligation for any
finder's or broker's or agent's fees or commissions in connection with the
transactions contemplated hereby.
ARTICLE 5
COVENANTS
5.1 PUBLIC ANNOUNCEMENTS. The Investor agrees not to make any public
announcement or issue any press release or otherwise publicly disseminate any
information about the subject matter of this Agreement. The Issuer shall have
the right to make such public announcements and shall control, in its sole and
absolute discretion, the timing, form and content of all press releases or other
public communications of any sort relating to the subject matter of this
Agreement, and the method of their release, or publication thereof.
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5.2 FURTHER ASSURANCES. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of the terms of this Agreement and the transactions contemplated hereby. Each of
the Investor and the Issuer shall make on a prompt and timely basis all
governmental or regulatory notifications and filings required to be made by it
with or to any Governmental Authority in connection with the consummation of the
transactions contemplated hereby. The Issuer and the Investor each agree to
cooperate with the other in the preparation and filing of all forms,
notifications, reports and information, if any, required or reasonably deemed
advisable pursuant to any Requirement of Law or the rules of Nasdaq Stock Market
in connection with the transactions contemplated by this Agreement and to use
their respective best efforts to agree jointly on a method to overcome any
objections by any Governmental Authority to any such transactions. Except as may
be specifically required hereunder, neither of the parties hereto or their
respective Affiliates shall be required to agree to take any action that in the
reasonable opinion of such party would result in or produce a Material Adverse
Effect on such party.
5.3 NOTIFICATION OF CERTAIN MATTERS. Each party hereto shall give
prompt notice to the other party of the occurrence, or non-occurrence, of any
event which would be likely to cause any representation and warranty herein to
be untrue or inaccurate in any material respect, or any covenant, condition or
agreement herein not to be complied with or satisfied in any material respect.
5.4 CONFIDENTIAL INFORMATION; STANDSTILL. (a) The Investor agrees that
no portion of the Confidential Information (as defined below) shall be disclosed
to third parties, except as may be required by law, without the prior express
written consent of the Issuer provided that the Investor may share such
information with such of its officers and professional advisors as may need to
know such information to assist the Investor in its evaluation thereof on the
condition that such parties agree to be bound by the terms hereof. All
Confidential Information received by the Investor shall be promptly returned or
destroyed, as directed by the Issuer. "Confidential Information" means all oral
or written data, reports, records or materials and any and all other
confidential or disclosure information or materials obtained from the Issuer or
its professional advisors, which are not yet publicly available. Confidential
Information excludes information that is publicly available or already known to
the Investor through a source not bound by any confidentiality obligation.
(b) For a period of one year from the Closing Date, the Investor
will not, without the prior written consent of the Issuer (i) propose to enter
into any acquisition of all or substantially of the assets or stock of the
Issuer or a merger or other business combination involving the Issuer; (ii) seek
to control the management, Board of Directors or policies of the Issuer; or
(iii) form, join or in any way participate in a "group" (within the meaning of
Section 13(d) (3) of the Securities Act of 1934) with respect to any securities
of the Issuer in connection with any of the foregoing. Notwithstanding the
foregoing, this section shall not restrict the Investor's acquisition of shares
of the Issuer's Common Stock through open market purchases.
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ARTICLE 6
REGISTRATION RIGHTS
The Investor shall have the following registration rights with respect
to the Registrable Securities owned by it:
6.1 TRANSFER OF REGISTRATION RIGHTS. The Investor may assign the
registration rights with respect to the Shares to any party or parties to which
it may from time to time transfer the Shares, provided that the transferee
acquires at least 20,000 shares of Common Stock of the Issuer and agrees in
writing with the Issuer to be bound by the applicable provisions of this
Agreement regarding such registration rights and indemnification relating
thereto. Upon assignment of any registration rights pursuant to this Section
6.1, the Investor shall deliver to the Issuer a notice of such assignment which
includes the identity and address of any assignee and such other information
reasonably requested by the Issuer in connection with effecting any such
registration (collectively, the Investor and each such subsequent holder is
referred to as a "Holder").
6.2 REQUIRED REGISTRATION. As promptly as practicable after the
Closing, but in no event later than forty-five (45) days after the date of the
Closing, the Issuer agrees to file a Registration Statement on Form S-3 (the
"Shelf Registration Statement") to register the resale of all of the Shares. The
Issuer shall use reasonable efforts to cause the SEC to declare the Shelf
Registration Statement effective as soon as practicable after filing and to
thereafter maintain the effectiveness of the Shelf Registration Statement until
such time as the Issuer reasonably determines, based on an opinion of counsel,
that the Holders will be eligible to sell all of the Shares then owned by the
Holders without the need for continued registration of the Shares in the three
month period immediately following the termination of the effectiveness of the
Shelf Registration Statement. The Issuer's obligations contained in this Section
6.2 shall terminate on the second anniversary of the date on which the Shares
are issued hereunder.
6.3 REGISTRATION PROCEDURES.
(a) In case of the Shelf Registration Statement effected by the
Issuer subject to this Article 6, the Issuer shall keep the Investor, on behalf
of each Holder, advised in writing as to the initiation of such registration,
and as to the completion thereof. In addition, subject to Section 6.2 above, the
Issuer shall, to the extent applicable to the Shelf Registration Statement:
(i) prepare and file with the SEC such amendments and
supplements to the Shelf Registration Statement as may be necessary to keep such
registration effective and comply with provisions of the Securities Act with
respect to the disposition of all securities covered thereby during the period
referred to in Section 6.2;
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(ii) update, correct, amend and supplement the Shelf
Registration Statement as necessary;
(iii) notify Holder when the Shelf Registration Statement is
declared effective by the SEC, and furnish such number of prospectuses and other
documents incident thereto as Holder may reasonably request from time to time;
(iv) use its commercially reasonable efforts to register or
qualify such Registrable Securities under such other securities or blue sky laws
of such jurisdictions of the United States where an exemption is not available
and as Holder may reasonably request to enable it to consummate the disposition
in such jurisdiction of the Registrable Securities (provided that the Issuer
will not be required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this provision, or
(ii) consent to general service of process in any such jurisdiction, or (iii)
subject itself to taxation in any jurisdiction where it is not already subject
to taxation);
(v) notify Holder at any time when a prospectus relating to the
Registrable Securities is required to be delivered under the Securities Act, of
the happening of any event as a result of which the prospectus included in the
Shelf Registration Statement contains an untrue statement of a material fact or
omits any fact necessary to make the statements therein not misleading, and at
the request of Holder, the Issuer will as promptly as it reasonably deems
practicable prepare a supplement or amendment to such prospectus, so that, as
thereafter delivered to purchasers of such shares, such prospectus will not
contain any untrue statements of a material fact or omit to state any fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;
(vi) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Issuer are then
listed and obtain all necessary approvals from the Nasdaq Stock Market for
trading thereon;
(vii) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of the Shelf
Registration Statement; and
(viii) upon the sale of any Registrable Securities pursuant to
the Shelf Registration Statement, direct the transfer agent to remove all
restrictive legends from all certificates or other instruments evidencing the
Registrable Securities.
(b) Notwithstanding anything stated or implied to the contrary in
Section 6.3(a) above, the Issuer shall not be required to consent to or
otherwise to take any actions to facilitate any underwritten offering of the
Registrable Securities or to consent to any specific underwriter participating
in any underwritten public offering of the Registrable Securities.
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(c) Each Holder agrees that upon receipt of any notice from the
Issuer of the happening of any event of the kind described in Section 6.3(a)(v),
such Holder will forthwith discontinue such Holder's disposition of Registrable
Securities pursuant to the registration statement relating to such Registrable
Securities until such Holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 6.3(a)(v) and, if so directed by the
Issuer, will deliver to the Issuer at the Issuer's expense all copies, other
than permanent file copies, then in such Holder's possession, of the prospectus
relating to such Registrable Securities current at the time of receipt of such
notice. Without limiting the foregoing, each Holder shall suspend, upon request
of the Issuer, any disposition of Registrable Securities pursuant to the
registration statement relating to such Registrable Securities during any three
periods (each, a "Blackout Period"), provided that no Blackout Period shall
exceed sixty (60) days and there may only be two Blackout Periods during any
twelve month period, when the Issuer determines in good faith that offers and
sales pursuant thereto should not be made by reason of the presence of material
undisclosed circumstances or developments with respect to which the disclosure
would be premature or would have an adverse effect on the Issuer.
(d) As a condition to the inclusion of its Registrable Securities
in the Shelf Registration Statement, each Holder shall furnish to the Issuer
such information regarding such Holder and the distribution of Registrable
Securities proposed by such Holder as the Issuer may request in writing.
(e) Each Holder hereby covenants with the Issuer (i) not to make
any sale of the Registrable Securities without effectively causing the
prospectus delivery requirements under the Securities Act to be satisfied and
(ii) if such Registrable Securities are to be sold by any method or in any
transaction other than on the Nasdaq National Market or in privately negotiated
transactions, or in a combination of such methods, to notify the Issuer at least
five (5) business days prior to the date on which the Holder first offers to
sell any such Registrable Securities by such method or in any such transaction
and, in any event, the Holder will not sell Registrable Securities by such
method or in such transaction unless the Issuer is reasonably satisfied that
there is an appropriate description of such method or transaction in the Shelf
Registration Statement.
(f) Except as required by law, all expenses incurred by the Issuer
in complying with this Article 6, including but not limited to, all
registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel and accountants for the Issuer, blue sky fees and
expenses (including fees and disbursements of counsel related to all blue sky
matters) ("Registration Expenses") incurred in connection with any registration,
qualification or compliance pursuant to this Article 6 shall be borne by the
Issuer. All underwriting discounts and selling commissions applicable to a sale
incurred in connection with any registration of Registrable Securities and the
legal fees and other expenses of a Holder shall be borne by such Holder.
6.4 FURTHER INFORMATION. If Registrable Securities owned by a Holder
are included in any registration, such Holder shall furnish the Issuer such
information regarding itself as the Issuer may reasonably request and as shall
be required in connection with any registration (or amendment
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thereto) referred to in this Agreement, and Holder shall indemnify the Issuer
with respect thereto in accordance with Article 7 hereof. The Investor hereby
represents and warrants to the Issuer that it has accurately and completely
provided the requested information and answered the questions numbered (a)
through (d) on the signature pages of this Agreement, and the Investor agrees
and acknowledges that the Issuer may rely on such information as being true and
correct for purposes of preparing and filing the Shelf Registration Statement at
the time of filing thereof and at the time it is declared effective, unless the
Investor has notified the Issuer in writing to the contrary prior to such time.
ARTICLE 7
INDEMNIFICATION
7.1 INDEMNIFICATION GENERALLY. The Issuer, on the one hand, and the
Investor, on the other hand (each an "Indemnifying Party"), shall indemnify the
other from and against any and all losses, damages, liabilities, claims,
charges, actions, proceedings, demands, judgments, settlement costs and expenses
of any nature whatsoever (including, without limitation, reasonable attorneys'
fees and expenses) or deficiencies resulting from any breach of a representation
and warranty, covenant or agreement by the Indemnifying Party and all claims,
charges, actions or proceedings incident to or arising out of the foregoing.
7.2 INDEMNIFICATION RELATING TO REGISTRATION RIGHTS.
(a) With respect to any registration, effected or to be effected
pursuant to Article 6 of this Agreement, the Issuer shall indemnify each Holder
of Registrable Securities whose securities are included or are to be included
therein, each of such Holder's directors and officers, each underwriter (as
defined in the Securities Act) of the securities sold by such Holder (if any),
and each Person who controls (within the meaning of the Securities Act) any such
Holder or underwriter (a "Controlling Person") from and against all losses,
damages, liabilities, claims, charges, actions, proceedings, demands, judgments,
settlement costs and expenses of any nature whatsoever (including, without
limitation, reasonable attorneys' fees and expenses) or deficiencies of any such
Holder or any such underwriter or Controlling Person concerning:
(i) any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or other document
(including any related registration statement, notification or the like)
incident to any such registration;
(ii) any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statement
therein, in the light of the circumstances under which it was made, not
misleading; or
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(iii) any violation by the Issuer of the Securities Act or any
rule or regulation promulgated thereunder applicable to the Issuer, or of any
blue sky or other state securities laws or any rule or regulation promulgated
thereunder applicable to the Issuer,
in each case, relating to any action or inaction required of the Issuer in
connection with any such registration, and subject to Section 7.3 below will
reimburse each such Person entitled to indemnity under this Section 7.2(a) for
all legal and other expenses reasonably incurred in connection with
investigating or defending any such loss, damage, liability, claim, charge,
action, proceeding, demand, judgment, settlement or deficiency; provided,
however, that, the foregoing indemnity and reimbursement obligation shall not be
applicable to the extent that any such matter arises out of or is based on (A)
any untrue statement (or alleged untrue statement) or omission (or alleged
omission) made in reliance upon and in conformity with written information
furnished to the Issuer by or on behalf of such Holder or by or on behalf of
such an underwriter specifically for use in such prospectus, offering circular
or other document or (B) a Holder's or any of its representatives' failure to
deliver a copy of the registration statement or prospectus or any amendment or
supplement thereto (the current version of which shall have been provided to
holder by the Issuer as contemplated by Section 6.3 hereof) to any purchaser of
shares in accordance with the requirements of applicable law.
(b) With respect to any registration, qualification or compliance
effected or to be effected pursuant to this Agreement, each Holder of
Registrable Securities whose securities are included or are to be included
therein, shall indemnify the Issuer, each of the Issuer's directors and officers
and each Person who controls (within the meaning of the Securities Act) the
Issuer or any of its directors or officers from and against all losses, damages,
liabilities, claims, charges, actions, proceedings, demands, judgments,
settlement costs and expenses of any nature whatsoever (including, without
limitation, reasonable attorneys' fees and expenses but which amount shall not
in any circumstance exceed the Purchase Price paid by the Investor) or
deficiencies of the Issuer concerning:
(i) any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or other document
(including any related registration statement, notification or the like)
incident to any such registration, qualification or compliance;
(ii) any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statement
therein, in the light of the circumstances under which it was made, not
misleading; or
(iii) any violation by such Holder of the Securities Act or any
rule or regulation promulgated thereunder applicable to the Issuer or such
Holder or of any blue sky or other state securities laws or any rule or
regulation promulgated thereunder applicable to the Issuer or such Holder,
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in each case, relating to any action or inaction required of such Holder in
connection with any such registration, qualification or compliance, and subject
to Section 7.3 below will reimburse each such person entitled to indemnity under
this Section 7.2(b) for all legal and other expenses reasonably incurred in
connection with investigating or defending any such loss, damage, liability,
claim, charge, action, proceeding, demand, judgment, settlement or deficiency;
provided, however, that, the foregoing indemnity and reimbursement obligation
shall only be applicable to the extent that any such matter arises out of or is
based on (A) any untrue statement (or alleged untrue statement) or omission (or
alleged omission) made in reliance upon and in conformity with written
information furnished to the Issuer by or on behalf of the Holder specifically
for use in such prospectus, offering circular or other document or (B) a
Holder's or any of its representatives' failure to deliver a copy of the
registration statement or prospectus or any amendment or supplement thereto to
any purchaser of shares in accordance with the requirements of applicable law.
7.3 INDEMNIFICATION PROCEDURES. Each Person entitled to indemnification
under this Section (an "Indemnified Party") shall give notice as promptly as
reasonably practicable to each party required to provide indemnification under
this Section (an "Indemnifying Party") of any action commenced against or by it
in respect of which indemnity may be sought hereunder, but failure to so notify
an Indemnifying Party shall not relieve such Indemnifying Party from any
liability that it may have otherwise than on account of this indemnity agreement
so long as such failure shall not have materially prejudiced the position of the
Indemnifying Party. Upon such notification, the Indemnifying Party shall assume
the defense of such action if it is a claim brought by a third party, if and
after such assumption the Indemnified Party shall not be entitled to
reimbursement of any expenses incurred by it in connection with such action
except as described below. In any such action, any 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 contrary or
(ii) the named parties in any such action (including any impleaded parties)
include 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 or conflicting interests between them. The Indemnifying
Party shall not be liable for any settlement of any proceeding effected without
its written consent (which shall not be unreasonably withheld or delayed by such
Indemnifying Party), but if settled with such consent or if there be final
judgment for the plaintiff, the Indemnifying Party shall indemnify the
Indemnified Party from and against any loss, damage or liability by reason of
such settlement or judgment.
ARTICLE 8
CONDITIONS TO CLOSING
8.1 CONDITIONS TO THE OBLIGATIONS OF THE INVESTOR. The obligations of
the Investor to proceed with the Closing is subject to the following conditions
any and all of which may be waived, in whole or in part, to the extent permitted
by applicable law:
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(a) Representations and Warranties. Each of the representations and
warranties of the Issuer contained in this Agreement shall be true and correct
in all material respects as of the Closing as though made on and as of the
Closing, except (i) for changes specifically permitted by this Agreement, and
(ii) that those representations and warranties which address matters only as of
a particular date shall remain true and correct as of such date, except in any
case for such failures to be true and correct which would not, individually or
in the aggregate, have a Material Adverse Effect on the Issuer. Unless the
Investor receives written notice to the contrary at the Closing, Investor shall
be entitled to assume that the preceding is accurate in all respects at the
Closing.
(b) Agreement and Covenants. The Issuer shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Closing. Unless the Investor receives written notice to the contrary at the
Closing, Investor shall be entitled to assume that the preceding is accurate in
all respects at the Closing.
(c) No Order. No governmental authority or other agency or
commission or federal or state court of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction, or other order (whether temporary,
preliminary or permanent) which is in effect and which materially restricts,
prevents or prohibits consummation of the Closing or any transaction
contemplated by this Agreement.
(d) Opinion of Issuer's Counsel. The Holder shall have received an
opinion of Issuer's counsel, dated the Closing Date in substantially the form
attached hereto as Exhibit E.
8.2 CONDITIONS TO THE OBLIGATIONS OF THE ISSUER. The obligations of the
Issuer to proceed with the Closing is subject to the following conditions any
and all of which may be waived, in whole or in part, to the extent permitted by
applicable law:
(a) Representations and Warranties. Each of the representations and
warranties of the Investor contained in this Agreement shall be true and correct
as of the Closing as though made on and as of the Closing, except for changes
specifically permitted by this Agreement. Unless the Issuer receives written
notification to the contrary at the Closing, the Issuer shall be entitled to
assume that the preceding is accurate in all respects at the Closing.
(b) Agreement and Covenants. The Investor shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Closing. Unless the Issuer receives written notification to the contrary at the
Closing, the Issuer shall be entitled to assume that the preceding is accurate
in all respects at the Closing.
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(c) No Order. No governmental authority or other agency or
commission or federal or state court of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction, or other order (whether temporary,
preliminary or permanent) which is in effect and which materially restricts,
prevents or prohibits consummation of the Closing or any transaction
contemplated by this Agreement.
ARTICLE 9
MISCELLANEOUS
9.1 DEFINED TERMS. As used herein the following terms shall have the
following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule 12b-2 of
the General Rules and Regulations under the Exchange Act, as in effect on the
date hereof.
"Certificate of Incorporation" means the Issuer's Certificate of
Incorporation, as the same may be supplemented, amended or restated from time to
time.
"Closing" has the meaning in Article 2 of this Agreement.
"Common Stock" has the meaning specified in the Recitals to this
Agreement.
"Contract" means any indenture, lease, sublease, loan agreement,
mortgage, note, restriction, commitment, obligation or other contract, agreement
or instrument.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means generally accepted accounting principles in effect in
the United States of America from time to time.
"Governmental Authority" means any nation or government, any state
or other political subdivision thereof, and any entity or official exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Investor" has the meaning specified in the Recitals to this
Agreement.
"Issuer" means LendingTree, Inc., a Delaware corporation.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform
-17-
Commercial Code or comparable law or any jurisdiction in connection with such
mortgage, pledge, security interest, encumbrance, lien or charge).
"Material Adverse Change (or Effect)" means a material and adverse
change in (or effect on) the financial condition, properties, assets,
liabilities, rights, obligations, operations or business, of a Person and its
Subsidiaries taken as a whole.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, estate, trust, unincorporated association, joint
venture, Governmental Authority or other entity, of whatever nature.
"Purchase Price" has the meaning specified in Section 1.1 of this
Agreement.
"Register", "registered" and "registration" refer to a registration
of the resale of Common Stock effected by preparing and filing a registration
statement in compliance with the Securities Act and the declaration or ordering
of the effectiveness of such registration statement.
"Registrable Securities" means all Shares of Common Stock acquired
by the Investor pursuant to this Agreement and any other shares of Common Stock
or other securities issued in respect of such Shares by way of a stock dividend
or stock split or in connection with a combination or subdivision of the
Issuer's Common Stock or by way of a recapitalization, merger or consolidation
or reorganization of the Issuer; provided, however, that, as to any particular
securities, such securities will cease to be Registrable Securities when they
have been sold pursuant to registration or in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(1) thereof so that all transfer restrictions and restrictive legends
with respect thereto are removed upon the consummation of such sale and the
purchaser and seller receive an opinion of counsel for the Issuer, which shall
be in form and substance reasonably satisfactory to the purchaser and seller and
their respective counsel, to the effect that such stock in the hands of the
purchaser is freely transferable without restriction or registration under the
Securities Act in any public or private transaction.
"Requirements of Law" means as to any Person, the certificate of
incorporation, by-laws or other organizational or governing documents of such
person, and any domestic or foreign and federal, state or local law, rule,
regulation, statute or ordinance or determination of any arbitrator or a court
or other Governmental Authority, in each case applicable to or binding upon such
Person or any of its properties or to which such Person or any of its property
is subject.
"SEC" means the Securities and Exchange Commission.
"SEC Reports" has the meaning specified in Section 3.7 of this
Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
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"Shares" has the meaning specified in Section 1.1 of this
Agreement.
"Subsidiary" means as to any Person, a corporation or limited
partnership of which more than 50% of the outstanding capital stock or
partnership interests having full voting power is at the time directly or
indirectly owned or controlled by such Person.
9.2 OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Agreement shall have the defined
meanings when used in any certificates, reports or other documents made or
delivered pursuant hereto or thereto, unless the context otherwise requires.
(b) Terms defined in the singular shall have a comparable meaning
when used in the plural, and vice versa.
(c) All accounting terms shall have a meaning determined in
accordance with GAAP.
(d) As used herein, the neuter gender shall also denote the
masculine and feminine, and the masculine gender shall also denote the neuter
and feminine, where the context so permits.
(e) The words "hereof," "herein" and "hereunder," and words of
similar import, when used in this Agreement shall refer to this Agreement as a
whole (including any Exhibits hereto) and not to any particular provision of
this Agreement.
9.3 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered by certified
or registered mail (first class postage pre-paid), guaranteed overnight
delivery, or facsimile transmission if such transmission is confirmed by
delivery by certified or registered mail (first class postage pre-paid) or
guaranteed overnight delivery, to the following addresses and telecopy numbers
(or to such other addresses or telecopy numbers which such party shall
subsequently designate in writing to the other party):
(a) if to the Issuer to:
LendingTree, Inc.
11115 Rushmore Drive
Charlotte, N.C. 28277
Attention: Douglas Lebda or Bob Flemma
Telecopy: (704) 331-7598
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with a copy to:
Kennedy Covington Lobdell & Hickman LLP
100 N. Tryon Street, Suite 4200
Charlotte, N.C. 28202
Attention: Sean M. Jones
Telecopy: (704) 331-7598
(b) if to the Investor to the address set forth next to its name on
the signature page hereto.
Each such notice or other communication shall for all purposes of this Agreement
be treated as effective or having been given when delivered if delivered by
hand, by certified or registered mail, by messenger or by courier, or if sent by
facsimile, upon confirmation of receipt.
9.4 ENTIRE AGREEMENT. This Agreement (including the Exhibits attached
hereto) and other documents delivered at the Closing pursuant hereto, contain
the entire understanding of the parties in respect of its subject matter and
supersedes all prior agreements and understandings between or among the parties
with respect to such subject matter. The Exhibits constitute a part hereof as
though set forth in full above.
9.5 EXPENSES; TAXES. Except as otherwise provided in this Agreement,
the parties shall pay their own fees and expenses, including their own counsel
fees, incurred in connection with this Agreement or any transaction contemplated
hereby. Any sales tax, stamp duty, deed transfer or other tax (except taxes
based on the income of the Investor) arising out of the issuance of the Shares
by the Issuer to the Investor shall be paid by the Issuer.
9.6 AMENDMENT; WAIVER. This Agreement may not be modified, amended,
supplemented, canceled or discharged, except by written instrument executed by
both parties. No failure to exercise, and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the exercise of any other right, power or privilege. No waiver of any breach of
any provision shall be deemed to be a waiver of any preceding or succeeding
breach of the same or any other provision, nor shall any waiver be implied from
any course of dealing between the parties. No extension of time for performance
of any obligations or other acts hereunder or under any other agreement shall be
deemed to be an extension of the time for performance of any other obligations
or any other acts. The rights and remedies of the parties under this Agreement
are in addition to all other rights and remedies, at law or equity, that they
may have against each other.
9.7 BINDING EFFECT; ASSIGNMENT. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective successors and permitted assigns. The
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rights and obligations of this Agreement may not be assigned by any party
without the prior written consent of the other party.
9.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
9.9 HEADINGS. The headings contained in this Agreement are for
convenience of reference only and are not to be given any legal effect and shall
not affect the meaning or interpretation of this Agreement.
9.10 GOVERNING LAW; INTERPRETATION. This Agreement shall be construed
in accordance with and governed for all purposes by the laws of the State of New
York applicable to contracts executed and to be wholly performed within such
State.
9.11 SEVERABILITY. The parties stipulate that the terms and provisions
of this Agreement are fair and reasonable as of the date of this Agreement.
However, if any provision of this Agreement shall be determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated. If, moreover, any of those provisions shall for any reason be
determined by a court of competent jurisdiction to be unenforceable because
excessively broad or vague as to duration, activity or subject, it shall be
construed by limiting, reducing or defining it, so as to be enforceable.
[SIGNATURES AND OTHER INFORMATION ON NEXT THREE PAGES]
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IN WITNESS WHEREOF, the parties hereto have caused this Subscription
Agreement to be duly executed and delivered as of the date set forth below.
NAME OF INVESTOR: ADDRESS FOR NOTICES (Please Print):
SMALLCAP World Fund, Inc., by
Capital Research and Management Company, 333 South Hope Street - 55th Floor
its Investment adviser Los Angeles, California 90071
SIGNATURE:
Attention: Michael J. Downer
By: /s/ Paul G. Haaga, Jr. Telecopy: (213) 486-9217
--------------------------
Name: Paul G. Haaga, Jr.
Title: Executive Vice President Tax Identification #: 95-4253845
Exact Name to appear on Stock Certificate: Clipperbay & Co.
------------------------------------
Number of Shares Subscribed For: 400,000
------------------------------------
Aggregate Purchase Price (see Section 1.1): $ 4,752,000
------------------------------------
The Investor hereby provides the following additional information:
(a) Excluding the shares of Common Stock subscribed for above, set
forth below is the number of shares of Common Stock and options rights or
warrants of LendingTree, Inc. ("Options" and together with the Common Stock,
"Securities") which the Investor beneficially owns or of which the Investor is
the record owner on the date hereof. Please refer to the definition of
beneficial ownership on Exhibit D attached hereto. If none, please so state.
Number of Shares: 0 (excluding the Shares subscribed for above)
------------------
Number of Options: 0
-----------------
Please indicate by an asterisk (*) above if the Investor disclaims "beneficial
ownership" of any of the above listed Securities, and indicate in response to
question (b) below who has beneficial ownership.
(b) If the Investor disclaims "beneficial ownership" in question (a),
please furnish the following information with respect to the person(s) other
than the Investor who is the beneficial owner(s) of the Securities in question.
If not applicable, please check box: [ ]
Name of Beneficial Owner:
-----------------------------------------
Relationship to the Investor:
-------------------------------------
Number of Securities Beneficially Owned:
--------------------------
NAME OF INVESTOR: SMALLCAP World Fund, Inc.
-------------------------
(c) Are any of the Securities listed in response to question (a) the
subject of a voting agreement, contract or other arrangement whereby others have
voting control over, or any other interest in, any of the Investor's Securities?
[ ] Yes [X] No
If the answer is "Yes", please give details:___________________________________.
(d) Please describe each position, office or other material
relationship which the Investor has had with the Issuer or any of its
affiliates, including any Subsidiary of the Issuer, within the past three years.
Please include a description of any loans or other indebtedness, and any
contracts or other arrangements or transactions involving a material amount,
payable by the Investor to the Issuer or any of its affiliates, including its
Subsidiaries, or by the Issuer or any of its affiliates, including its
Subsidiaries, to the Investor. "Affiliates" of the Issuer include its directors
and executive officers, and any other person controlling or controlled by the
Issuer. IF NONE, PLEASE SO STATE.
Answer: None.
(e) Please provide the name and address of other person(s), if any, to
whom any proxy statements, registration statements (including notice of
effectiveness thereof), prospectuses or similar documents and information should
be delivered by the Issuer on behalf of the Investor in the future, with respect
to the Investor's shares:
----------------------------- ----------------------------------
----------------------------- ----------------------------------
----------------------------- ----------------------------------
----------------------------- ----------------------------------
(f) Please advise of special stock certificate delivery requirements
for closing, if any:
(g) Please advise if a NASD member has placed with you the Shares being
purchased hereunder: (Name of Member:) N/A
-----------------------------------------
(h) The Investor agrees to notify the Issuer promptly of any changes in
any of the foregoing information.
================================================================================
ACCEPTED: LENDINGTREE, INC.
By: /s/ Keith B. Hall Dated: April 12, 2002
-------------------------------
Name: Keith B. Hall
Title: Sr VP and CFO
EXHIBIT A
[Copy of Regulation M is attached]
EXHIBIT B
[Copy of Rule 501(a) under Regulation D is attached]
EXHIBIT C
DISCLOSURE DOCUMENTS
THE INVESTOR IS URGED TO REVIEW THE FOLLOWING DOCUMENTS WHICH ARE DELIVERED
HEREWITH AND INCORPORATED BY REFERENCE HEREIN AS IF RESTATED HEREIN:
1. The Issuer's Annual Report on Form 10-K for the fiscal year
ended December 31, 2001
2. The Issuer's definitive proxy statement dated March 15, 2002
relating to its 2002 Annual Meeting of Stockholders
3. The Issuer's Current Report on Form 8-K dated March 28, 2002
4. Cover Letter From Allen & Company Incorporated, as Placement
Agent to Prospective Investors dated April __, 2002
EXHIBIT D
Explanation of "BENEFICIAL OWNERSHIP"
Securities that are subject to a power to vote or dispose are deemed
beneficially owned by the person who holds such power, directly or indirectly.
This means that the same securities may be deemed beneficially owned by more
than one person, if such power is shared. In addition, the beneficial ownership
rules provide that shares which may be acquired upon exercise of an option or
warrant, or which may be acquired upon the termination of a trust, discretionary
account or similar arrangement, which can be effected within a period of 60 days
from the date of determination, are deemed to be "beneficially" owned.
Furthermore, shares that are subject to rights or powers even though such rights
or powers to acquire are not exercisable within the 60-day period may also be
deemed to be beneficially owned if the rights or powers were acquired "with the
purpose or effect of changing or influencing the control of the issuer or in
connection with or as a participant in any transaction having such purpose or
effect."
In determining whether securities are "beneficially owned," benefits
which are substantially equivalent to those of ownership by virtue of any
contract, understanding, relationship, agreement or other arrangement should
cause the securities to be listed as "beneficially owned."
Thus, for example, securities held for a person's benefit in the name
of others or in the name of any estate or trust in which such person may be
interested should also be listed. Securities held by a person's spouse, children
or other members of such person's family who are such person's dependents or who
live in such person's household should be listed as "beneficially owned" unless
such person does not enjoy benefits equivalent to those of ownership with
respect to such securities.
If a person has a proprietary or beneficial interest in a controlled
corporation, partnership, personal holding company, trust or estate which owns
of record or beneficially any securities, such person should state the amount of
such securities owned by such controlled corporation, partnership, personal
holding company, trust or estate in lieu of allocating such person's proprietary
interest, and by note or otherwise, please indicate that. In any case, the name
of the controlled corporation, partnership, personal holding company, or estate
must be stated.
In all cases the nature of the beneficial ownership should be stated.
EXHIBIT E
[Form of Issuer's Counsel Opinion]
April 15, 2002
Allen & Company Incorporated and
Purchasers of LendingTree, Inc.
Common Stock listed on
Exhibit A attached hereto
RE: LendingTree, Inc.
Ladies and Gentlemen:
We have acted as special counsel to LendingTree, Inc., a Delaware
corporation ("LendingTree"), in connection with the transactions contemplated by
the Subscription Agreements dated April 12, 2002 (the "Subscription Agreements")
between LendingTree and the purchasers party thereto. This opinion letter is
delivered pursuant to Section 8.1(d) of the Subscription Agreements. All
capitalized terms used herein and not otherwise defined herein shall have same
meanings herein as are ascribed to them in the Subscription Agreements.
As such counsel, we have examined originals or copies of the
Subscription Agreements. We have also examined such certificates of
incorporation, bylaws, minute books and other documents, records and
certificates as we have deemed relevant or necessary as the basis for our
opinions hereinafter set forth. As such counsel, we have participated in the
preparation of the Subscription Agreements and have consulted with officers of
LendingTree regarding the terms and provisions thereof.
In giving the opinions expressed herein and making our investigations
in connection herewith, we have made the following assumptions: (a) the due
authorization, execution and delivery by the parties thereto other than
LendingTree of the documents examined by us, (b) the genuineness of all
signatures of individuals, (c) the personal legal capacity of all individual
signatories, (d) the authenticity of all documents presented to us as originals
and (e) the conformity to the originals of all documents presented to us as
copies. We have also assumed that the terms of the Subscription Agreements have
not been modified, supplemented or qualified by any other agreements or
understandings (written or oral) of the parties thereto that are not identified
above, or by any course of dealing or trade custom or usage, in any manner
affecting the opinions expressed herein.
The opinions set forth herein are limited to matters governed by the
laws of the State of North Carolina, the Delaware General Corporation Law and
the Federal laws of the United States generally applicable to transactions of
the type contemplated by the Subscription Agreements, and no opinion is
Allen & Company Incorporated and
Purchasers of LendingTree, Inc.
Common Stock listed on
Exhibit A attached hereto
April 15, 2002
Page 2
expressed herein as to any other laws. We note that the Subscription Agreements
provide that they are to be governed by laws of the State of New York. Our
opinion in paragraph 2 as to the legality, validity, binding effect and
enforceability of the Subscription Agreements is intended to address their
legality, validity, binding effect and enforceability under North Carolina law
were they, notwithstanding such choice of law provision, governed by the laws of
the State of the North Carolina and no opinions are expressed herein as to any
matters of New York law. Furthermore, we express no opinion concerning any
matter respecting or affected by any laws other than laws that a lawyer in North
Carolina exercising customary professional diligence would reasonably recognize
as being directly applicable to LendingTree, the transactions contemplated by
the Subscription Agreements, or both. We also express no opinion herein
concerning any real estate, mortgage, lending or other regulatory statutes,
rules and regulations specifically enacted to regulate the particular business
of LendingTree.
We express no opinion herein concerning the possible application to the
Subscription Agreements, the transactions contemplated thereby, or the
obligations of the parties thereunder of Section 548 of the Bankruptcy Code,
11 U.S.C. ss.548, Sections 39-23.1 through 39-23.12 of the North Carolina
General Statutes or other similar laws relating to "fraudulent transfers" or
"fraudulent conveyances."
Opinions or statements herein given "to the best of our knowledge" and
the factual matters on which we have relied in giving other opinions herein are
based upon (a) information coming to our attention in the course of our
representation of LendingTree in connection with the transactions contemplated
by the Subscription Agreements, or otherwise actually known to the lawyers in
our Firm who have given substantive attention to such transactions, (b) the
representations and warranties of LendingTree contained in the Subscription
Agreements, and (c) inquiries of representatives of LendingTree whom we believe
to be reasonably well-informed as to the factual matters in question, but
without any other investigations made for purposes of giving such opinions or
statements unless otherwise stated herein.
Based upon and subject to the foregoing and the further limitations and
qualifications hereinafter expressed, it is our opinion that:
1. LendingTree has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware.
2. Each of the Subscription Agreements has been duly
authorized, executed and delivered by LendingTree and constitutes a
valid and legally binding obligation of LendingTree enforceable in
accordance with its terms.
Allen & Company Incorporated and
Purchasers of LendingTree, Inc.
Common Stock listed on
Exhibit A attached hereto
April 15, 2002
Page 3
3. The Shares have been duly authorized and, when issued and
delivered by LendingTree against payment as provided under the
Subscription Agreements, will be validly issued, fully paid and
nonassessable.
4. Except as set forth on Schedule 3.4 to the Subscription
Agreement, the issuance and sale of the Shares, the execution, delivery
and performance by LendingTree of the Subscription Agreements, and the
consummation by LendingTree of the transactions contemplated thereby,
do not and will not (i) violate the Certificate of Incorporation or
Bylaws of LendingTree, (ii) violate any Federal law of the United
States, the laws of the State of North Carolina or the Delaware General
Corporation Law, or (iii) violate or result in a breach of, or default
under, any contract or agreement filed or listed as an exhibit to
LendingTree's Annual Report on Form 10-K for its fiscal year ended
December 31, 2001.
5. All prior regulatory consents, authorizations, approvals or
filings required to be obtained or made by LendingTree under the
Federal laws of the United States, the laws of the State of North
Carolina or the Delaware General Corporation Law as a condition to the
issuance, sale and delivery of the Shares pursuant to the Subscription
Agreement have been obtained or made.
6. The registration of the Shares under the Securities Act of
1933 (the "Securities Act") is not required in connection with the sale
of the Shares by LendingTree pursuant to the Subscription Agreements.
The foregoing opinions are subject to the following assumptions,
qualifications, exceptions and limitations in addition to the other assumptions,
qualifications, exceptions and limitations set forth in this letter:
(a) Enforceability of the Subscription Agreements may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar state or Federal laws from time to time in effect which affect
the enforcement of creditors' rights generally.
(b) Enforceability of the Subscription Agreements is subject
to general equitable principles and to general standards of commercial
reasonableness.
(c) We express no opinion on the enforceability of any
provisions contained in the Subscription Agreements that (i) purport to
excuse a party for liability for its own acts or omissions, (ii)
purport to authorize a party to act in its sole discretion, (iii)
relate to the effect of laws or regulations that may be enacted in the
future, (iv) require waivers to be made only in writing or (v) purport
to waive a trial by jury.
Allen & Company Incorporated and
Purchasers of LendingTree, Inc.
Common Stock listed on
Exhibit A attached hereto
April 15, 2002
Page 4
(d) Provisions of the Subscription Agreements purporting to
require a party thereto to pay or reimburse attorneys' fees incurred by
another party, or to indemnify another party therefor, may be limited
by applicable statutes and decisions relating to the collection and
award of attorneys' fees.
(e) No opinion is expressed as to the validity or
enforceability of provisions of the Subscription Agreements relating to
indemnity and contribution for liabilities under Federal or state
securities laws.
(f) For purposes of paragraph 4, (i) we express no opinion
with respect to Federal or state securities laws, other antifraud laws
or fraudulent transfer laws and (ii) insofar as performance by
LendingTree of its obligations under the Subscription Agreements is
concerned, we express no opinion as to bankruptcy, insolvency,
reorganization, moratorium or similar state or Federal laws from time
to time in effect which affect the enforcement of creditors' rights
generally.
(g) In connection with our opinion set forth in paragraph 6
above, with your approval, we have assumed the correctness of the
representations and warranties of, and the compliance with the
agreements and undertakings by, LendingTree and the Purchasers in the
Subscription Agreements. Insofar as such opinion relates to the sale of
the Shares to the Purchasers, we have, with your approval, assumed that
all offers and resales of the Shares will be made in accordance with
the Subscription Agreement. We express no opinion, however, as to when
and in what circumstances the Shares may be resold.
The opinions contained herein are being rendered to you in connection
with the closing of the transactions contemplated by the Subscription Agreements
and may not be disclosed to or relied upon by any other person without our prior
written consent. Our opinions expressed herein are as of the date hereof, and we
undertake no obligation to advise you of any changes in applicable law or any
other matters that may come to our attention after the date hereof that may
affect our opinions expressed herein.
Very truly yours,
Exhibit A
Names and Addresses of Purchasers
Ashford Capital Management Inc.,
P.O. Box 4172
Wilmington, Delaware 19807
SMALLCAP World Fund Inc.
333 South Hope Street - 55th Floor
Los Angeles, California 90071
Pequot Navigator Offshore Fund, Inc.
c/o Pequot Capital Management, Inc.
500 Nyala Farm Road
Westport, Connecticut 06880
Pequot Scout Fund, L.P.
c/o Pequot Capital Management, Inc.
500 Nyala Farm Road
Westport, Connecticut 06880
SCHEDULE 3.4
Conflicts
1. The holders of the Company's Series A Preferred Stock have the
preemptive right to participate in certain offerings by the Company of
its securities. The Company has obtained waivers of such preemptive
rights from all holders of Series A Preferred Stock other than William
Shiebler, TASK Foundation, Inc., Victor F. Keen, Terrence D. Daniels
and Keith Hall.
2. The Company has issued the Federal Home Loan Mortgage Association
("Freddie Mac") a warrant to purchase 12,500 shares of Common Stock.
The terms of such warrant require the Company to give Freddie Mac ten
days prior notice of any issuance of Common Stock below fair market
value. The Company has not delivered this notice, although it intends
to deliver such notice as soon as practicable after the date hereof.
SCHEDULE 3.9
Capitalization
OUTSTANDING STOCK OPTIONS
o As of April 11, 2002 there were options outstanding to acquire
6,411,223 shares of LendingTree, Inc. common stock.
OUTSTANDING COMMON STOCK WARRANTS
o As of April 11, 2002 there were warrants to acquire 399,710
shares of LendingTree, Inc. common stock outstanding.
COMMON STOCK ISSUABLE UPON CONVERSION OF SERIES A PREFERRED STOCK
o As of April 11, 2002 the 6,842,858 outstanding shares of
Series A Preferred Stock were convertible into 7,489,443
shares of LendingTree, Inc. common stock. Pursuant to the
Certificate of Designations, Preferences and Rights of Series
A 8% Convertible Preferred Stock of LendingTree, Inc., the
holders of the Series A Preferred Stock have certain
preemptive rights. See Schedule 3.4. The holders of Series A
Preferred Stock also have certain redemption rights pursuant
to the Certificate of Designations.
COMMON STOCK RESERVED FOR ISSUANCE
o LendingTree, Inc. has an Employee Stock Purchase Plan, under
which a total of 550,000 shares of LendingTree, Inc. common
stock have been reserved for issuance. As of April 11, 2002, a
total of 286,975 shares have been issued under this plan.
o LendingTree, Inc. maintains the 1997 Stock Option Plan, the
1998 Stock Option Plan, the 1999 Stock Option Plan and the
2001 Stock Incentive Plan under which there are, as of April
11, 2002, a combined 1,322,846 shares of Common Stock
available for the grant of options in the future.
TREASURY STOCK
o As of April 11, 2002 there were 664,321 shares of issued, but
not outstanding shares of LendingTree common stock accounted
for as Treasury Stock of LendingTree, Inc.
POTENTIALLY ISSUABLE SECURITIES
LendingTree, Inc. and the Federal Home Loan Mortgage Corporation are parties to
a credit facility agreement requires that a portion of the quarterly interest
payments be in the form of warrants to purchase our common stock at an exercise
price of $.01 per share. The amount of warrants to be issued will be calculated
by dividing the amount of interest to be paid in the
form of warrants by $3.99. The amount of interest expense that we will record
will be based upon the estimated fair value of the warrants on the date that
they are issued. As of April 11, 2002, no amounts had been borrowed under this
facility and no warrant-based interest charges had been incurred. The Federal
Home Loan Mortgage Corporation would also be entitled to additional warrants if
LendingTree, Inc. issues any shares of common stock or convertible securities at
a price less than the fair market value per share of common stock.
Under our 2001 Stock Incentive Plan, each non-employee director who is
a beneficial owner of (or represents an organization that is a beneficial owner
of) less than 5% of our combined voting power, upon his or her initial election
to the board, is granted a non-qualified stock option to purchase a number of
shares of common stock calculated by dividing $66,000 by one-third of the
average closing price of the common stock for five trading days immediately
preceding the grant date. Additionally, immediately following each annual
meeting of the company's stockholders, each such non-employee director then
serving is granted a non-qualified stock option to purchase a number of shares
of our common stock, calculated by dividing $22,000 by one-third of the average
closing price of our common stock for five trading days immediately preceding
the grant date. In lieu of the annual option grants, directors may elect to
receive an equivalent number of shares of restricted stock. The 2002 Annual
Meeting is scheduled for April 24, 2002, at which time, 6 directors will be
eligible for the compensation noted above.
SCHEDULE 3.11
Litigation
1. Block Financial Corporation v. LendingTree, Inc., Case Number
01-1007-CV-W-3 [United States District Court for the Western District of
Missouri, filed September 10, 2001]. See Item 3 on Page 13 of LendingTree's most
recent 10-K entitled "Legal Proceedings" for a summary of this litigation.
2. New York State Banking Department ("NYSBD") Regulatory Examination.
Please see Item 3 on Page 13 of LendingTree's most recent 10-K entitled "Legal
Proceedings" for a summary of the is regulatory matter.
SCHEDULE 3.12
Registration Rights
1. Registration Rights Agreement dated March 7, 2001 by and among
LendingTree, Inc. and the signing stockholders listed therein. (Requires
registration of shares of common stock issuable upon conversion of the series A
preferred shares, which registration was effected in June 2001.)
2. Registration Rights Agreement dated September 20, 1999 by and among
LendingTree, Inc. and the signing stockholders listed therein. (Includes
piggyback registration rights, which registration was effected in June 2001.)
3. Registration Rights Agreement dated March 6, 2001 by and between
LendingTree, Inc. and Paul Revere Capital Partners, Ltd. (Requires registration
of shares of common stock issuable under the Paul Revere equity line, which
registration was effected in June 2001.)
4. The Warrant dated September 20, 1999 to Prudential Securities
Incorporated ("Prudential") contain certain piggyback registration rights.
Prudential currently has piggyback registration rights with respect to 30,605
shares of common stock.
Exhibit 10.2
SUBSCRIPTION AGREEMENT
This Subscription Agreement (this "Agreement") is entered into as of
the date set forth on the signature page hereof by and between LendingTree,
Inc., a Delaware corporation (together with its successors and permitted
assigns, the "Issuer"), and the undersigned investor (together with its
successors and permitted assigns, the "Investor"). Capitalized terms used but
not otherwise defined herein shall have the meanings set forth in Section 9.1.
RECITALS
Subject to the terms and conditions of this Agreement, the Investor
desires to subscribe for and purchase, and the Issuer desires to issue and sell
to the Investor, certain shares of the Issuer's common stock, par value $.01 per
share (the "Common Stock"). The Issuer is offering an aggregate of approximately
Five Hundred Thousand (500,000) shares of Common Stock in a private placement to
the Investor and other investors at a purchase price of $11.88 per share and on
the other terms and conditions contained in this Agreement (the "Offering"),
provided that the Issuer reserves the right to sell a lesser or greater number
of shares.
TERMS OF AGREEMENT
In consideration of the mutual representations and warranties,
covenants and agreements contained herein, the parties hereto agree as follows:
ARTICLE 1
SUBSCRIPTION AND ISSUANCE OF COMMON STOCK
1.1 SUBSCRIPTION AND ISSUANCE OF COMMON STOCK. Subject to the terms and
conditions of this Agreement, the Issuer will issue and sell to the Investor and
the Investor subscribes for and will purchase from the Issuer the number of
shares of Common Stock set forth on the signature page hereof (the "Shares") for
the aggregate purchase price set forth on the signature page hereof, which shall
be equal to the product of the number of Shares subscribed for by the Investor
times the per share purchase price specified in the above Recitals to this
Agreement (the "Purchase Price").
1.2 LEGEND. Any certificate or certificates representing the Shares
shall bear the following legend:
-1-
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW. THESE SECURITIES
MAY NOT BE PLEDGED, HYPOTHECATED, SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR ANY EXEMPTION THEREFROM UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND ANY APPLICABLE STATE SECURITIES LAW.
ARTICLE 2
CLOSING
2.1 CLOSING. The closing of the transactions contemplated herein (the
"Closing") shall take place on a date designated by the Issuer, which date shall
be on or before April 15, 2002. The Closing shall take place at the offices of
Heller Ehrman White & McAuliffe, counsel for the Issuer, 711 Fifth Avenue, New
York, New York 10022. At the Closing, unless the Investor and the Issuer
otherwise agree (i) the Investor shall pay the Purchase Price to the Issuer, by
wire transfer of immediately available funds to an account designated in writing
by the Issuer; (ii) the Issuer shall issue to the Investor the Shares, and
deliver to the Investor certificates for the Shares duly registered in the name
of the Investor; and (iii) all other agreements and other documents referred to
in this Agreement which are required for the Closing shall be executed and
delivered (if that is not done prior to the Closing).
2.2 TERMINATION. This Agreement may be terminated at any time prior to
the Closing:
(a) by mutual written consent of the Issuer and the Investor;
(b) by the Investor, upon a breach of any material representation
and warranty, covenant or agreement on the part of the Issuer set forth in this
Agreement, or if any material representation and warranty of the Issuer shall
have become untrue in any material respect, in either case such that the
conditions in Section 8.1 would be incapable of being satisfied by the date of
the Closing; or
(c) by the Issuer, upon a breach of any material representation and
warranty, covenant or agreement on the part of the Investor set forth in this
Agreement, or if any material representation and warranty of the Investor shall
have become untrue in any material respect, in either case such that the
conditions in Section 8.2 would be incapable of being satisfied by the date of
the Closing.
2.3 EFFECT OF TERMINATION. In the event of termination of this
Agreement pursuant to Section 2.2, this Agreement shall forthwith become void,
there shall be no liability on the part of the
-2-
Issuer or the Investor to each other and all rights and obligations of any party
hereto shall cease; provided, however, that nothing herein shall relieve any
party from liability for the willful breach of any of its representations and
warranties, covenants or agreements set forth in this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE ISSUER
As a material inducement to the Investor entering into this Agreement
and subscribing for the Shares, the Issuer represents and warrants to the
Investor as follows:
3.1 CORPORATE STATUS. The Issuer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
3.2 CORPORATE POWER AND AUTHORITY. The Issuer has the corporate power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder and consummate the transactions contemplated hereby. At
the time of the closing, the Issuer will have taken all necessary corporate
action to authorize the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby.
3.3 ENFORCEABILITY. This Agreement has been duly executed and delivered
by the Issuer and constitutes a legal, valid and binding obligation of the
Issuer, enforceable against the Issuer in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and general equitable principles, regardless of
whether such enforceability is considered in a proceeding at law or in equity
and except as rights to indemnity or contribution hereunder may be limited by
Federal or state securities laws.
3.4 NO VIOLATION. The execution and delivery by the Issuer of this
Agreement, the consummation of the transactions contemplated hereby, and the
compliance by the Issuer with the terms and provisions hereof (including,
without limitation, the Issuer's issuance to the Investor of the Shares as
contemplated by and in accordance with this Agreement), will not, except as set
forth on Schedule 3.4, result in a default under (or give any other party the
right, with the giving of notice or the passage of time (or both), to declare a
default or accelerate any obligation under) or violate the Certificate of
Incorporation or By-Laws of the Issuer or any material Contract to which the
Issuer is a party (except to the extent such a default would not, in the case of
a Contract, have a Material Adverse Effect on the Issuer), or any Requirement of
Law applicable to the Issuer, or result in the creation or imposition of any
material Lien upon any of the capital stock, properties or assets of the Issuer
or any of its Subsidiaries (except where such Lien would not have a Material
Adverse Effect on the Issuer).
-3-
3.5 CONSENTS/APPROVALS. Except for the filing of a registration
statement in accordance with Article 6 hereof and the filing of a Form D with
the SEC and as applicable, state agencies or authorities, no material consents,
filings, authorizations or other actions of any Governmental Authority are
required to be obtained or made by the Issuer for the Issuer's execution,
delivery and performance of this Agreement which have not already been obtained
or made. No consent, approval, waiver or other action by any Person under any
Contract to which the Issuer is a party or by which the Issuer or any of its
properties or assets are bound is required or necessary for the execution,
delivery or performance by the Issuer of this Agreement and the consummation of
the transactions contemplated hereby, except where the failure to obtain such
consents would not have a Material Adverse Effect on the Issuer.
3.6 VALID ISSUANCE. Upon payment of the Purchase Price by the Investor
and delivery to the Investor of the certificates for the Shares, such Shares
will be validly issued, fully paid and non-assessable.
3.7 SEC FILINGS, OTHER FILINGS AND NASDAQ COMPLIANCE. The Issuer has
timely made all filings required to be made by it under the Exchange Act. The
Issuer has delivered or made accessible to the Investor true, accurate and
complete copies of (i) Issuer's Annual Report on Form 10-K for the fiscal year
ended December 31, 2001; (ii) the Issuer's definitive proxy statement dated
March 15, 2002 relating to its 2002 Annual Meeting of Stockholders; and (iii)
the Issuer's Current Report on Form 8-K dated March 28, 2002 (the "SEC
Reports"). The SEC Reports, when filed, complied in all material respects with
all applicable requirements of the Exchange Act. None of the SEC Reports, at the
time of filing, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein not misleading in light of the circumstances in
which they were made. The Issuer has filed in a timely manner all documents that
the Issuer was required to file under the Exchange Act during the 12 months
preceding the date of this Agreement. The Issuer is currently eligible to
register the resale of the Shares in a secondary offering on a registration
statement on Form S-3 under the Securities Act. The Issuer has taken all
necessary actions required to be taken to date to ensure its continued inclusion
in, and the continued eligibility of the Common Stock for trading on, The Nasdaq
Stock Market under all currently effective inclusion requirements. Each balance
sheet included in the SEC Reports (including any related notes and schedules)
fairly presents in all material respects the consolidated financial position of
the Issuer as of its date, and each of the other financial statements included
in the SEC Reports (including any related notes and Schedules) fairly presents
in all material respects the consolidated results of operations of the Issuer
for the periods or as of the dates therein set forth in accordance with GAAP
consistently applied during the periods involved.
3.8 COMMISSIONS. The Issuer has not incurred any other obligation for
any finder's or broker's or agent's fees or commissions in connection with the
transactions contemplated hereby, except that the Issuer will pay a 4%
commission in cash to Allen & Company Incorporated ("Allen"), the placement
agent for the Offering.
-4-
3.9 CAPITALIZATION. The authorized capital stock of the Issuer consists
of 100,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock.
All issued and outstanding shares of capital stock of the Issuer have been, and
as of the Closing Date will be, duly authorized and validly issued and are and
will be fully paid and non-assessable. As of the date of this Agreement, the
Issuer has issued and outstanding 19,686,744 shares of Common Stock and
6,842,858 shares of Preferred Stock. Except as described in this Section 3.9 and
on Schedule 3.9, there are no outstanding options, warrants, rights (including
conversion or preemptive rights and rights of first refusal and similar rights)
or agreements, orally or in writing, for the purchase or acquisition from the
Issuer of any shares of capital stock and the Issuer is not a party to or
subject to any agreement or understanding, and there is no agreement or
understanding between any person and/or entities, which affects or relates to
the voting or giving of written consents with respect to any security or by a
director of the Issuer. Except as set forth on Schedule 3.9, the Issuer has no
obligation, contingent or otherwise, to redeem or repurchase any equity security
or any security that is a combination of debt and equity.
3.10 MATERIAL CHANGES. Except as set forth in the SEC Reports or as
otherwise contemplated herein, since December 31, 2001, there has been no
Material Adverse Change in the Issuer and its subsidiaries taken as a whole.
Except as set forth in the SEC Reports, since December 31, 2001, there has not
been (i) any direct or indirect redemption, purchase or other acquisition by the
Issuer of any shares of the Common Stock or (ii) declaration, setting aside or
payment of any dividend or other distribution by the Issuer with respect to the
Common Stock (other than the accrual of dividends on the Series A Preferred
Stock of the Issuer which is convertible into Common Stock of the Issuer).
3.11 LITIGATION. Except as disclosed on Schedule 3.11 or as set forth
in the SEC Reports, there is no action, suit, proceeding or investigation
pending or, to the Issuer's knowledge, currently threatened against the Issuer
or any of its subsidiaries that questions the validity of this Agreement or the
right of the Issuer to enter into it, or to consummate the transactions
contemplated hereby, or that might result, either individually or in the
aggregate, in a Material Adverse Effect on the Issuer or any change in the
current equity ownership of the Issuer. The foregoing includes, without
limitation, actions pending or, to the Issuer's knowledge, threatened involving
the prior employment of any of the Issuer's employees or their use in connection
with the Issuer's business of any information or techniques allegedly
proprietary to any of their former employers. Neither the Issuer nor any of its
subsidiaries is a party to or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality not of general applicability. Except as set forth in the SEC
Reports, there is no action, suit, proceeding or investigation by the Issuer or
any of its subsidiaries currently pending or which the Issuer or any of its
subsidiaries currently intends to initiate.
3.12 RIGHTS OF REGISTRATION AND VOTING RIGHTS. Except as contemplated
in this Agreement and as disclosed on Schedule 3.12, the Issuer has not granted
or agreed to grant any
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registration rights, including piggyback rights, to any person or entity, and no
stockholder of the Issuer has entered into any agreements with respect to the
voting of capital shares of the Issuer.
3.13 OFFERINGS. Subject in part to the truth and accuracy of Investor's
representations and warranties set forth in this Agreement, the offer, sale and
issuance of the Shares as contemplated by this Agreement are exempt from the
registration requirements of the Securities Act and any applicable state
securities laws, and neither the Issuer nor any authorized agent acting on its
behalf will take any action hereafter that would cause the loss of such
exemption.
3.14 DISCLOSURE. The Issuer is aware of no facts which lead it to
believe that the Disclosure Documents, as of their respective dates, contain any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
As a material inducement to the Issuer entering into this Agreement and
issuing the Shares, the Investor represents and warrants to the Issuer as
follows:
4.1 POWER AND AUTHORITY. The Investor, if other than a natural person,
is an entity duly organized, validly existing and in good standing under the
laws of the state of its incorporation or formation. The Investor has the
corporate, partnership or other power and authority under applicable law to
execute and deliver this Agreement and consummate the transactions contemplated
hereby, and has all necessary authority to execute, deliver and perform its
obligations under this Agreement and consummate the transactions contemplated
hereby. The Investor has taken all necessary action to authorize the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby.
4.2 NO VIOLATION. The execution and delivery by the Investor of this
Agreement, the consummation of the transactions contemplated hereby, and the
compliance by the Investor with the terms and provisions hereof, will not result
in a default under (or give any other party the right, with the giving of notice
or the passage of time (or both), to declare a default or accelerate any
obligation under) or violate any charter or similar documents of the Investor,
if other than a natural person, or any Contract to which the Investor is a party
or by which it or its properties or assets are bound, or violate any Requirement
of Law applicable to the Investor, other than such violations or defaults which,
individually and in the aggregate, do not and will not have a Material Adverse
Effect on the Investor. The Investor is familiar with Regulation M promulgated
under the Exchange Act, a copy of which is attached hereto as Exhibit A, and is
in full compliance with the provisions thereof with respect to the transactions
contemplated hereby.
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4.3 CONSENTS/APPROVALS. No consents, filings, authorizations or actions
of any Governmental Authority are required for the Investor's execution,
delivery and performance of this Agreement. No consent, approval, waiver or
other actions by any Person under any Contract to which the Investor is a party
or by which the Investor or any of its properties or assets are bound is
required or necessary for the execution, delivery and performance by the
Investor of this Agreement and the consummation of the transactions contemplated
hereby.
4.4 ENFORCEABILITY. This Agreement has been duly executed and delivered
by the Investor and constitutes a legal, valid and binding obligation of the
Investor, enforceable against the Investor in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditor's rights generally and general equitable principles, regardless of
whether enforceability is considered in a proceeding at law or in equity.
4.5 INVESTMENT INTENT. The Investor is acquiring the Shares hereunder
for its own account and with no present intention of distributing or selling
such Shares and further agrees not to transfer such Shares in violation of the
Securities Act or any applicable state securities law, and no one other than the
Investor has any beneficial interest in the Shares. The Investor agrees that it
will not sell or otherwise dispose of any of the Shares unless such sale or
other disposition has been registered under the Securities Act or, in the
opinion of counsel acceptable to the Issuer, is exempt from registration under
the Securities Act and has been registered or qualified or, in the opinion of
such counsel acceptable to the Issuer, is exempt from registration or
qualification under applicable state securities laws. The Investor understands
that the offer and sale by the Issuer of the Shares being acquired by the
Investor hereunder has not been registered under the Securities Act by reason of
their contemplated issuance in transactions exempt from the registration and
prospectus delivery requirements of the Securities Act pursuant to Section 4(2)
thereof and Regulation D promulgated thereunder, and that the reliance of the
Issuer on such exemption from registration is predicated in part on these
representations and warranties of the Investor. The Investor acknowledges that
pursuant to Section 1.2 of this Agreement a restrictive legend consistent with
the foregoing has been or will be placed on the certificates for the Shares.
4.6 ACCREDITED INVESTOR. The Investor is an "accredited investor" as
such term is defined in Rule 501(a) of Regulation D under the Securities Act (a
copy of which is attached hereto as Exhibit B), and has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of the investment to be made by it hereunder.
4.7 ADEQUATE INFORMATION. The Investor has received from the Issuer,
and has reviewed, such information which the Investor considers necessary or
appropriate to evaluate the risks and merits of an investment in the Shares,
including without limitation, the documents listed on Exhibit C, which have been
received by Investor as part of an informational packet of materials from the
Issuer. The documents listed in Exhibit C are referred to herein as the
"Disclosure Documents."
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4.8 OPPORTUNITY TO QUESTION. The Investor has had the opportunity to
question, and has questioned, to the extent it has deemed necessary or
appropriate, representatives of the Issuer so as to receive answers and verify
information obtained in the Investor's examination of the Issuer, including the
information that the Investor has received and reviewed as referenced in Section
4.7 hereof in relation to its investment in the Shares.
4.9 NO OTHER REPRESENTATIONS. No oral or written representations have
been made to the Investor in connection with the Investor's acquisition of the
Shares which were in any way inconsistent with the information reviewed by the
Investor. The Investor acknowledges that no representations or warranties of any
type or description have been made to it by any Person with regard to the
Issuer, any of its Subsidiaries, any of their respective businesses, properties
or prospects or the investment contemplated herein, other than the
representations and warranties set forth in Article 3 hereof.
4.10 KNOWLEDGE AND EXPERIENCE. The Investor has such knowledge and
experience in financial, tax and business matters, including substantial
experience in evaluating and investing in common stock and other securities
(including the common stock and other securities of speculative companies), so
as to enable the Investor to utilize the information referred to in Section 4.7
hereof and any other information made available by the Issuer to the Investor in
order to evaluate the merits and risks of an investment in the Shares and to
make an informed investment decision with respect thereto.
4.11 INDEPENDENT DECISION. The Investor is not relying on the Issuer or
on any legal or other opinion in the materials reviewed by the Investor with
respect to the financial or tax considerations of the Investor relating to its
investment in the Shares. The Investor has relied solely on the representations
and warranties, covenants and agreements of the Issuer in this Agreement
(including the Exhibits hereto) and on its examination and independent
investigation in making its decision to acquire the Shares.
4.12 COMMISSIONS. The Investor has not incurred any obligation for any
finder's or broker's or agent's fees or commissions in connection with the
transactions contemplated hereby.
ARTICLE 5
COVENANTS
5.1 PUBLIC ANNOUNCEMENTS. The Investor agrees not to make any public
announcement or issue any press release or otherwise publicly disseminate any
information about the subject matter of this Agreement. The Issuer shall have
the right to make such public announcements and shall control, in its sole and
absolute discretion, the timing, form and content of all press releases or other
public communications of any sort relating to the subject matter of this
Agreement, and the method of their release, or publication thereof.
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5.2 FURTHER ASSURANCES. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of the terms of this Agreement and the transactions contemplated hereby. Each of
the Investor and the Issuer shall make on a prompt and timely basis all
governmental or regulatory notifications and filings required to be made by it
with or to any Governmental Authority in connection with the consummation of the
transactions contemplated hereby. The Issuer and the Investor each agree to
cooperate with the other in the preparation and filing of all forms,
notifications, reports and information, if any, required or reasonably deemed
advisable pursuant to any Requirement of Law or the rules of Nasdaq Stock Market
in connection with the transactions contemplated by this Agreement and to use
their respective best efforts to agree jointly on a method to overcome any
objections by any Governmental Authority to any such transactions. Except as may
be specifically required hereunder, neither of the parties hereto or their
respective Affiliates shall be required to agree to take any action that in the
reasonable opinion of such party would result in or produce a Material Adverse
Effect on such party.
5.3 NOTIFICATION OF CERTAIN MATTERS. Each party hereto shall give
prompt notice to the other party of the occurrence, or non-occurrence, of any
event which would be likely to cause any representation and warranty herein to
be untrue or inaccurate in any material respect, or any covenant, condition or
agreement herein not to be complied with or satisfied in any material respect.
5.4 CONFIDENTIAL INFORMATION; STANDSTILL. (a) The Investor agrees that
no portion of the Confidential Information (as defined below) shall be disclosed
to third parties, except as may be required by law, without the prior express
written consent of the Issuer provided that the Investor may share such
information with such of its officers and professional advisors as may need to
know such information to assist the Investor in its evaluation thereof on the
condition that such parties agree to be bound by the terms hereof. All
Confidential Information received by the Investor shall be promptly returned or
destroyed, as directed by the Issuer. "Confidential Information" means all oral
or written data, reports, records or materials and any and all other
confidential or disclosure information or materials obtained from the Issuer or
its professional advisors, which are not yet publicly available. Confidential
Information excludes information that is publicly available or already known to
the Investor through a source not bound by any confidentiality obligation.
(b) For a period of one year from the Closing Date, the Investor
will not, without the prior written consent of the Issuer (i) propose to enter
into any acquisition of all or substantially of the assets or stock of the
Issuer or a merger or other business combination involving the Issuer; (ii) seek
to control the management, Board of Directors or policies of the Issuer; or
(iii) form, join or in any way participate in a "group" (within the meaning of
Section 13(d) (3) of the Securities Act of 1934) with respect to any securities
of the Issuer in connection with any of the foregoing. Notwithstanding the
foregoing, this section shall not restrict the Investor's acquisition of shares
of the Issuer's Common Stock through open market purchases.
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ARTICLE 6
REGISTRATION RIGHTS
The Investor shall have the following registration rights with respect
to the Registrable Securities owned by it:
6.1 TRANSFER OF REGISTRATION RIGHTS. The Investor may assign the
registration rights with respect to the Shares to any party or parties to which
it may from time to time transfer the Shares, provided that the transferee
acquires at least 20,000 shares of Common Stock of the Issuer and agrees in
writing with the Issuer to be bound by the applicable provisions of this
Agreement regarding such registration rights and indemnification relating
thereto. Upon assignment of any registration rights pursuant to this Section
6.1, the Investor shall deliver to the Issuer a notice of such assignment which
includes the identity and address of any assignee and such other information
reasonably requested by the Issuer in connection with effecting any such
registration (collectively, the Investor and each such subsequent holder is
referred to as a "Holder").
6.2 REQUIRED REGISTRATION. As promptly as practicable after the
Closing, but in no event later than forty-five (45) days after the date of the
Closing, the Issuer agrees to file a Registration Statement on Form S-3 (the
"Shelf Registration Statement") to register the resale of all of the Shares. The
Issuer shall use reasonable efforts to cause the SEC to declare the Shelf
Registration Statement effective as soon as practicable after filing and to
thereafter maintain the effectiveness of the Shelf Registration Statement until
such time as the Issuer reasonably determines, based on an opinion of counsel,
that the Holders will be eligible to sell all of the Shares then owned by the
Holders without the need for continued registration of the Shares in the three
month period immediately following the termination of the effectiveness of the
Shelf Registration Statement. The Issuer's obligations contained in this Section
6.2 shall terminate on the second anniversary of the date on which the Shares
are issued hereunder.
6.3 REGISTRATION PROCEDURES.
(a) In case of the Shelf Registration Statement effected by the
Issuer subject to this Article 6, the Issuer shall keep the Investor, on behalf
of each Holder, advised in writing as to the initiation of such registration,
and as to the completion thereof. In addition, subject to Section 6.2 above, the
Issuer shall, to the extent applicable to the Shelf Registration Statement:
(i) prepare and file with the SEC such amendments and
supplements to the Shelf Registration Statement as may be necessary to keep such
registration effective and comply with provisions of the Securities Act with
respect to the disposition of all securities covered thereby during the period
referred to in Section 6.2;
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(ii) update, correct, amend and supplement the Shelf
Registration Statement as necessary;
(iii) notify Holder when the Shelf Registration Statement is
declared effective by the SEC, and furnish such number of prospectuses and other
documents incident thereto as Holder may reasonably request from time to time;
(iv) use its commercially reasonable efforts to register or
qualify such Registrable Securities under such other securities or blue sky laws
of such jurisdictions of the United States where an exemption is not available
and as Holder may reasonably request to enable it to consummate the disposition
in such jurisdiction of the Registrable Securities (provided that the Issuer
will not be required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this provision, or
(ii) consent to general service of process in any such jurisdiction, or (iii)
subject itself to taxation in any jurisdiction where it is not already subject
to taxation);
(v) notify Holder at any time when a prospectus relating to the
Registrable Securities is required to be delivered under the Securities Act, of
the happening of any event as a result of which the prospectus included in the
Shelf Registration Statement contains an untrue statement of a material fact or
omits any fact necessary to make the statements therein not misleading, and at
the request of Holder, the Issuer will as promptly as it reasonably deems
practicable prepare a supplement or amendment to such prospectus, so that, as
thereafter delivered to purchasers of such shares, such prospectus will not
contain any untrue statements of a material fact or omit to state any fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;
(vi) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Issuer are then
listed and obtain all necessary approvals from the Nasdaq Stock Market for
trading thereon;
(vii) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of the Shelf
Registration Statement; and
(viii) upon the sale of any Registrable Securities pursuant to
the Shelf Registration Statement, direct the transfer agent to remove all
restrictive legends from all certificates or other instruments evidencing the
Registrable Securities.
(b) Notwithstanding anything stated or implied to the contrary in
Section 6.3(a) above, the Issuer shall not be required to consent to or
otherwise to take any actions to facilitate any underwritten offering of the
Registrable Securities or to consent to any specific underwriter participating
in any underwritten public offering of the Registrable Securities.
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(c) Each Holder agrees that upon receipt of any notice from the
Issuer of the happening of any event of the kind described in Section 6.3(a)(v),
such Holder will forthwith discontinue such Holder's disposition of Registrable
Securities pursuant to the registration statement relating to such Registrable
Securities until such Holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 6.3(a)(v) and, if so directed by the
Issuer, will deliver to the Issuer at the Issuer's expense all copies, other
than permanent file copies, then in such Holder's possession, of the prospectus
relating to such Registrable Securities current at the time of receipt of such
notice. Without limiting the foregoing, each Holder shall suspend, upon request
of the Issuer, any disposition of Registrable Securities pursuant to the
registration statement relating to such Registrable Securities during any three
periods (each, a "Blackout Period"), provided that no Blackout Period shall
exceed sixty (60) days and there may only be two Blackout Periods during any
twelve month period, when the Issuer determines in good faith that offers and
sales pursuant thereto should not be made by reason of the presence of material
undisclosed circumstances or developments with respect to which the disclosure
would be premature or would have an adverse effect on the Issuer.
(d) As a condition to the inclusion of its Registrable Securities
in the Shelf Registration Statement, each Holder shall furnish to the Issuer
such information regarding such Holder and the distribution of Registrable
Securities proposed by such Holder as the Issuer may request in writing.
(e) Each Holder hereby covenants with the Issuer (i) not to make
any sale of the Registrable Securities without effectively causing the
prospectus delivery requirements under the Securities Act to be satisfied and
(ii) if such Registrable Securities are to be sold by any method or in any
transaction other than on the Nasdaq National Market or in privately negotiated
transactions, or in a combination of such methods, to notify the Issuer at least
five (5) business days prior to the date on which the Holder first offers to
sell any such Registrable Securities by such method or in any such transaction
and, in any event, the Holder will not sell Registrable Securities by such
method or in such transaction unless the Issuer is reasonably satisfied that
there is an appropriate description of such method or transaction in the Shelf
Registration Statement.
(f) Except as required by law, all expenses incurred by the Issuer
in complying with this Article 6, including but not limited to, all
registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel and accountants for the Issuer, blue sky fees and
expenses (including fees and disbursements of counsel related to all blue sky
matters) ("Registration Expenses") incurred in connection with any registration,
qualification or compliance pursuant to this Article 6 shall be borne by the
Issuer. All underwriting discounts and selling commissions applicable to a sale
incurred in connection with any registration of Registrable Securities and the
legal fees and other expenses of a Holder shall be borne by such Holder.
6.4 FURTHER INFORMATION. If Registrable Securities owned by a Holder
are included in any registration, such Holder shall furnish the Issuer such
information regarding itself as the Issuer may reasonably request and as shall
be required in connection with any registration (or amendment
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thereto) referred to in this Agreement, and Holder shall indemnify the Issuer
with respect thereto in accordance with Article 7 hereof. The Investor hereby
represents and warrants to the Issuer that it has accurately and completely
provided the requested information and answered the questions numbered (a)
through (d) on the signature pages of this Agreement, and the Investor agrees
and acknowledges that the Issuer may rely on such information as being true and
correct for purposes of preparing and filing the Shelf Registration Statement at
the time of filing thereof and at the time it is declared effective, unless the
Investor has notified the Issuer in writing to the contrary prior to such time.
ARTICLE 7
INDEMNIFICATION
7.1 INDEMNIFICATION GENERALLY. The Issuer, on the one hand, and the
Investor, on the other hand (each an "Indemnifying Party"), shall indemnify the
other from and against any and all losses, damages, liabilities, claims,
charges, actions, proceedings, demands, judgments, settlement costs and expenses
of any nature whatsoever (including, without limitation, reasonable attorneys'
fees and expenses) or deficiencies resulting from any breach of a representation
and warranty, covenant or agreement by the Indemnifying Party and all claims,
charges, actions or proceedings incident to or arising out of the foregoing.
7.2 INDEMNIFICATION RELATING TO REGISTRATION RIGHTS.
(a) With respect to any registration, effected or to be effected
pursuant to Article 6 of this Agreement, the Issuer shall indemnify each Holder
of Registrable Securities whose securities are included or are to be included
therein, each of such Holder's directors and officers, each underwriter (as
defined in the Securities Act) of the securities sold by such Holder (if any),
and each Person who controls (within the meaning of the Securities Act) any such
Holder or underwriter (a "Controlling Person") from and against all losses,
damages, liabilities, claims, charges, actions, proceedings, demands, judgments,
settlement costs and expenses of any nature whatsoever (including, without
limitation, reasonable attorneys' fees and expenses) or deficiencies of any such
Holder or any such underwriter or Controlling Person concerning:
(i) any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or other document
(including any related registration statement, notification or the like)
incident to any such registration;
(ii) any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statement
therein, in the light of the circumstances under which it was made, not
misleading; or
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(iii) any violation by the Issuer of the Securities Act or any
rule or regulation promulgated thereunder applicable to the Issuer, or of any
blue sky or other state securities laws or any rule or regulation promulgated
thereunder applicable to the Issuer,
in each case, relating to any action or inaction required of the Issuer in
connection with any such registration, and subject to Section 7.3 below will
reimburse each such Person entitled to indemnity under this Section 7.2(a) for
all legal and other expenses reasonably incurred in connection with
investigating or defending any such loss, damage, liability, claim, charge,
action, proceeding, demand, judgment, settlement or deficiency; provided,
however, that, the foregoing indemnity and reimbursement obligation shall not be
applicable to the extent that any such matter arises out of or is based on (A)
any untrue statement (or alleged untrue statement) or omission (or alleged
omission) made in reliance upon and in conformity with written information
furnished to the Issuer by or on behalf of such Holder or by or on behalf of
such an underwriter specifically for use in such prospectus, offering circular
or other document or (B) a Holder's or any of its representatives' failure to
deliver a copy of the registration statement or prospectus or any amendment or
supplement thereto (the current version of which shall have been provided to
holder by the Issuer as contemplated by Section 6.3 hereof) to any purchaser of
shares in accordance with the requirements of applicable law.
(b) With respect to any registration, qualification or compliance
effected or to be effected pursuant to this Agreement, each Holder of
Registrable Securities whose securities are included or are to be included
therein, shall indemnify the Issuer, each of the Issuer's directors and officers
and each Person who controls (within the meaning of the Securities Act) the
Issuer or any of its directors or officers from and against all losses, damages,
liabilities, claims, charges, actions, proceedings, demands, judgments,
settlement costs and expenses of any nature whatsoever (including, without
limitation, reasonable attorneys' fees and expenses but which amount shall not
in any circumstance exceed the Purchase Price paid by the Investor) or
deficiencies of the Issuer concerning:
(i) any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or other document
(including any related registration statement, notification or the like)
incident to any such registration, qualification or compliance;
(ii) any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statement
therein, in the light of the circumstances under which it was made, not
misleading; or
(iii) any violation by such Holder of the Securities Act or any
rule or regulation promulgated thereunder applicable to the Issuer or such
Holder or of any blue sky or other state securities laws or any rule or
regulation promulgated thereunder applicable to the Issuer or such Holder,
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in each case, relating to any action or inaction required of such Holder in
connection with any such registration, qualification or compliance, and subject
to Section 7.3 below will reimburse each such person entitled to indemnity under
this Section 7.2(b) for all legal and other expenses reasonably incurred in
connection with investigating or defending any such loss, damage, liability,
claim, charge, action, proceeding, demand, judgment, settlement or deficiency;
provided, however, that, the foregoing indemnity and reimbursement obligation
shall only be applicable to the extent that any such matter arises out of or is
based on (A) any untrue statement (or alleged untrue statement) or omission (or
alleged omission) made in reliance upon and in conformity with written
information furnished to the Issuer by or on behalf of the Holder specifically
for use in such prospectus, offering circular or other document or (B) a
Holder's or any of its representatives' failure to deliver a copy of the
registration statement or prospectus or any amendment or supplement thereto to
any purchaser of shares in accordance with the requirements of applicable law.
7.3 INDEMNIFICATION PROCEDURES. Each Person entitled to indemnification
under this Section (an "Indemnified Party") shall give notice as promptly as
reasonably practicable to each party required to provide indemnification under
this Section (an "Indemnifying Party") of any action commenced against or by it
in respect of which indemnity may be sought hereunder, but failure to so notify
an Indemnifying Party shall not relieve such Indemnifying Party from any
liability that it may have otherwise than on account of this indemnity agreement
so long as such failure shall not have materially prejudiced the position of the
Indemnifying Party. Upon such notification, the Indemnifying Party shall assume
the defense of such action if it is a claim brought by a third party, if and
after such assumption the Indemnified Party shall not be entitled to
reimbursement of any expenses incurred by it in connection with such action
except as described below. In any such action, any 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 contrary or
(ii) the named parties in any such action (including any impleaded parties)
include 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 or conflicting interests between them. The Indemnifying
Party shall not be liable for any settlement of any proceeding effected without
its written consent (which shall not be unreasonably withheld or delayed by such
Indemnifying Party), but if settled with such consent or if there be final
judgment for the plaintiff, the Indemnifying Party shall indemnify the
Indemnified Party from and against any loss, damage or liability by reason of
such settlement or judgment.
ARTICLE 8
CONDITIONS TO CLOSING
8.1 CONDITIONS TO THE OBLIGATIONS OF THE INVESTOR. The obligations of
the Investor to proceed with the Closing is subject to the following conditions
any and all of which may be waived, in whole or in part, to the extent permitted
by applicable law:
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(a) Representations and Warranties. Each of the representations and
warranties of the Issuer contained in this Agreement shall be true and correct
in all material respects as of the Closing as though made on and as of the
Closing, except (i) for changes specifically permitted by this Agreement, and
(ii) that those representations and warranties which address matters only as of
a particular date shall remain true and correct as of such date, except in any
case for such failures to be true and correct which would not, individually or
in the aggregate, have a Material Adverse Effect on the Issuer. Unless the
Investor receives written notice to the contrary at the Closing, Investor shall
be entitled to assume that the preceding is accurate in all respects at the
Closing.
(b) Agreement and Covenants. The Issuer shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Closing. Unless the Investor receives written notice to the contrary at the
Closing, Investor shall be entitled to assume that the preceding is accurate in
all respects at the Closing.
(c) No Order. No governmental authority or other agency or
commission or federal or state court of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction, or other order (whether temporary,
preliminary or permanent) which is in effect and which materially restricts,
prevents or prohibits consummation of the Closing or any transaction
contemplated by this Agreement.
(d) Opinion of Issuer's Counsel. The Holder shall have received an
opinion of Issuer's counsel, dated the Closing Date in substantially the form
attached hereto as Exhibit E.
8.2 CONDITIONS TO THE OBLIGATIONS OF THE ISSUER. The obligations of the
Issuer to proceed with the Closing is subject to the following conditions any
and all of which may be waived, in whole or in part, to the extent permitted by
applicable law:
(a) Representations and Warranties. Each of the representations and
warranties of the Investor contained in this Agreement shall be true and correct
as of the Closing as though made on and as of the Closing, except for changes
specifically permitted by this Agreement. Unless the Issuer receives written
notification to the contrary at the Closing, the Issuer shall be entitled to
assume that the preceding is accurate in all respects at the Closing.
(b) Agreement and Covenants. The Investor shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Closing. Unless the Issuer receives written notification to the contrary at the
Closing, the Issuer shall be entitled to assume that the preceding is accurate
in all respects at the Closing.
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(c) No Order. No governmental authority or other agency or
commission or federal or state court of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction, or other order (whether temporary,
preliminary or permanent) which is in effect and which materially restricts,
prevents or prohibits consummation of the Closing or any transaction
contemplated by this Agreement.
ARTICLE 9
MISCELLANEOUS
9.1 DEFINED TERMS. As used herein the following terms shall have the
following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule 12b-2 of
the General Rules and Regulations under the Exchange Act, as in effect on the
date hereof.
"Certificate of Incorporation" means the Issuer's Certificate of
Incorporation, as the same may be supplemented, amended or restated from time to
time.
"Closing" has the meaning in Article 2 of this Agreement.
"Common Stock" has the meaning specified in the Recitals to this
Agreement.
"Contract" means any indenture, lease, sublease, loan agreement,
mortgage, note, restriction, commitment, obligation or other contract, agreement
or instrument.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means generally accepted accounting principles in effect in
the United States of America from time to time.
"Governmental Authority" means any nation or government, any state
or other political subdivision thereof, and any entity or official exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Investor" has the meaning specified in the Recitals to this
Agreement.
"Issuer" means LendingTree, Inc., a Delaware corporation.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform
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Commercial Code or comparable law or any jurisdiction in connection with such
mortgage, pledge, security interest, encumbrance, lien or charge).
"Material Adverse Change (or Effect)" means a material and adverse
change in (or effect on) the financial condition, properties, assets,
liabilities, rights, obligations, operations or business, of a Person and its
Subsidiaries taken as a whole.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, estate, trust, unincorporated association, joint
venture, Governmental Authority or other entity, of whatever nature.
"Purchase Price" has the meaning specified in Section 1.1 of this
Agreement.
"Register", "registered" and "registration" refer to a registration
of the resale of Common Stock effected by preparing and filing a registration
statement in compliance with the Securities Act and the declaration or ordering
of the effectiveness of such registration statement.
"Registrable Securities" means all Shares of Common Stock acquired
by the Investor pursuant to this Agreement and any other shares of Common Stock
or other securities issued in respect of such Shares by way of a stock dividend
or stock split or in connection with a combination or subdivision of the
Issuer's Common Stock or by way of a recapitalization, merger or consolidation
or reorganization of the Issuer; provided, however, that, as to any particular
securities, such securities will cease to be Registrable Securities when they
have been sold pursuant to registration or in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(1) thereof so that all transfer restrictions and restrictive legends
with respect thereto are removed upon the consummation of such sale and the
purchaser and seller receive an opinion of counsel for the Issuer, which shall
be in form and substance reasonably satisfactory to the purchaser and seller and
their respective counsel, to the effect that such stock in the hands of the
purchaser is freely transferable without restriction or registration under the
Securities Act in any public or private transaction.
"Requirements of Law" means as to any Person, the certificate of
incorporation, by-laws or other organizational or governing documents of such
person, and any domestic or foreign and federal, state or local law, rule,
regulation, statute or ordinance or determination of any arbitrator or a court
or other Governmental Authority, in each case applicable to or binding upon such
Person or any of its properties or to which such Person or any of its property
is subject.
"SEC" means the Securities and Exchange Commission.
"SEC Reports" has the meaning specified in Section 3.7 of this
Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
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"Shares" has the meaning specified in Section 1.1 of this
Agreement.
"Subsidiary" means as to any Person, a corporation or limited
partnership of which more than 50% of the outstanding capital stock or
partnership interests having full voting power is at the time directly or
indirectly owned or controlled by such Person.
9.2 OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Agreement shall have the defined
meanings when used in any certificates, reports or other documents made or
delivered pursuant hereto or thereto, unless the context otherwise requires.
(b) Terms defined in the singular shall have a comparable meaning
when used in the plural, and vice versa.
(c) All accounting terms shall have a meaning determined in
accordance with GAAP.
(d) As used herein, the neuter gender shall also denote the
masculine and feminine, and the masculine gender shall also denote the neuter
and feminine, where the context so permits.
(e) The words "hereof," "herein" and "hereunder," and words of
similar import, when used in this Agreement shall refer to this Agreement as a
whole (including any Exhibits hereto) and not to any particular provision of
this Agreement.
9.3 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered by certified
or registered mail (first class postage pre-paid), guaranteed overnight
delivery, or facsimile transmission if such transmission is confirmed by
delivery by certified or registered mail (first class postage pre-paid) or
guaranteed overnight delivery, to the following addresses and telecopy numbers
(or to such other addresses or telecopy numbers which such party shall
subsequently designate in writing to the other party):
(a) if to the Issuer to:
LendingTree, Inc.
11115 Rushmore Drive
Charlotte, N.C. 28277
Attention: Douglas Lebda or Bob Flemma
Telecopy: (704) 331-7598
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with a copy to:
Kennedy Covington Lobdell & Hickman LLP
100 N. Tryon Street, Suite 4200
Charlotte, N.C. 28202
Attention: Sean M. Jones
Telecopy: (704) 331-7598
(b) if to the Investor to the address set forth next to its name on
the signature page hereto.
Each such notice or other communication shall for all purposes of this Agreement
be treated as effective or having been given when delivered if delivered by
hand, by certified or registered mail, by messenger or by courier, or if sent by
facsimile, upon confirmation of receipt.
9.4 ENTIRE AGREEMENT. This Agreement (including the Exhibits attached
hereto) and other documents delivered at the Closing pursuant hereto, contain
the entire understanding of the parties in respect of its subject matter and
supersedes all prior agreements and understandings between or among the parties
with respect to such subject matter. The Exhibits constitute a part hereof as
though set forth in full above.
9.5 EXPENSES; TAXES. Except as otherwise provided in this Agreement,
the parties shall pay their own fees and expenses, including their own counsel
fees, incurred in connection with this Agreement or any transaction contemplated
hereby. Any sales tax, stamp duty, deed transfer or other tax (except taxes
based on the income of the Investor) arising out of the issuance of the Shares
by the Issuer to the Investor shall be paid by the Issuer.
9.6 AMENDMENT; WAIVER. This Agreement may not be modified, amended,
supplemented, canceled or discharged, except by written instrument executed by
both parties. No failure to exercise, and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the exercise of any other right, power or privilege. No waiver of any breach of
any provision shall be deemed to be a waiver of any preceding or succeeding
breach of the same or any other provision, nor shall any waiver be implied from
any course of dealing between the parties. No extension of time for performance
of any obligations or other acts hereunder or under any other agreement shall be
deemed to be an extension of the time for performance of any other obligations
or any other acts. The rights and remedies of the parties under this Agreement
are in addition to all other rights and remedies, at law or equity, that they
may have against each other.
9.7 BINDING EFFECT; ASSIGNMENT. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective successors and permitted assigns. The
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rights and obligations of this Agreement may not be assigned by any party
without the prior written consent of the other party.
9.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
9.9 HEADINGS. The headings contained in this Agreement are for
convenience of reference only and are not to be given any legal effect and shall
not affect the meaning or interpretation of this Agreement.
9.10 GOVERNING LAW; INTERPRETATION. This Agreement shall be construed
in accordance with and governed for all purposes by the laws of the State of New
York applicable to contracts executed and to be wholly performed within such
State.
9.11 SEVERABILITY. The parties stipulate that the terms and provisions
of this Agreement are fair and reasonable as of the date of this Agreement.
However, if any provision of this Agreement shall be determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated. If, moreover, any of those provisions shall for any reason be
determined by a court of competent jurisdiction to be unenforceable because
excessively broad or vague as to duration, activity or subject, it shall be
construed by limiting, reducing or defining it, so as to be enforceable.
[SIGNATURES AND OTHER INFORMATION ON NEXT THREE PAGES]
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IN WITNESS WHEREOF, the parties hereto have caused this Subscription
Agreement to be duly executed and delivered as of the date set forth below.
NAME OF INVESTOR: ADDRESS FOR NOTICES (Please Print):
Ashford Capital Mgmt. Inc.
w/discretion for Anvil Investment P.O. Box 4172
Assoc. L.P. -----------------------------------
Wilmington, DE 19807
-----------------------------------
SIGNATURE:
-----------------------------------
Attention: Anthony Petrucci
-----------------------------------
By: /s/ Theodore H. Ashford Telecopy: 302-655-8690
-------------------------- -----------------------------------
Name: Theodore H. Ashford for
Title: Anvil Management Co., Tax Identification #: 06-1520893
LLC General Partner -------------
Exact Name to appear on Stock Certificate: Anvil Investment Associates, LP
------------------------------------
Number of Shares Subscribed For: 50,000
------------------------------------
Aggregate Purchase Price (see Section 1.1): $ 594,000
------------------------------------
The Investor hereby provides the following additional information:
(a) Excluding the shares of Common Stock subscribed for above, set
forth below is the number of shares of Common Stock and options rights or
warrants of LendingTree, Inc. ("Options" and together with the Common Stock,
"Securities") which the Investor beneficially owns or of which the Investor is
the record owner on the date hereof. Please refer to the definition of
beneficial ownership on Exhibit D attached hereto. If none, please so state.
Number of Shares: (excluding the Shares subscribed for above)
------------------
Number of Options:
-----------------
Please indicate by an asterisk (*) above if the Investor disclaims "beneficial
ownership" of any of the above listed Securities, and indicate in response to
question (b) below who has beneficial ownership.
(b) If the Investor disclaims "beneficial ownership" in question (a),
please furnish the following information with respect to the person(s) other
than the Investor who is the beneficial owner(s) of the Securities in question.
If not applicable, please check box: [X]
Name of Beneficial Owner:
-----------------------------------------
Relationship to the Investor:
-------------------------------------
Number of Securities Beneficially Owned:
--------------------------
NAME OF INVESTOR: Ashford Capital Mgmt. Inc.
w/ discretion for
Anvil Investment Associates LP
(c) Are any of the Securities listed in response to question (a) the
subject of a voting agreement, contract or other arrangement whereby others have
voting control over, or any other interest in, any of the Investor's Securities?
[ ] Yes [ ] No
If the answer is "Yes", please give details: N/A
-----------------------------------
(d) Please describe each position, office or other material
relationship which the Investor has had with the Issuer or any of its
affiliates, including any Subsidiary of the Issuer, within the past three years.
Please include a description of any loans or other indebtedness, and any
contracts or other arrangements or transactions involving a material amount,
payable by the Investor to the Issuer or any of its affiliates, including its
Subsidiaries, or by the Issuer or any of its affiliates, including its
Subsidiaries, to the Investor. "Affiliates" of the Issuer include its directors
and executive officers, and any other person controlling or controlled by the
Issuer. IF NONE, PLEASE SO STATE.
Answer: None
(e) Please provide the name and address of other person(s), if any, to
whom any proxy statements, registration statements (including notice of
effectiveness thereof), prospectuses or similar documents and information should
be delivered by the Issuer on behalf of the Investor in the future, with respect
to the Investor's shares:
----------------------------- ----------------------------------
----------------------------- ----------------------------------
----------------------------- ----------------------------------
----------------------------- ----------------------------------
(f) Please advise of special stock certificate delivery requirements
for closing, if any:
(g) Please advise if a NASD member has placed with you the Shares being
purchased hereunder: (Name of Member:) N/A
-----------------------------------------
(h) The Investor agrees to notify the Issuer promptly of any changes in
any of the foregoing information.
================================================================================
ACCEPTED: LENDINGTREE, INC.
By: /s/ Keith B. Hall Dated: April 12, 2002
-------------------------------
Name: Keith B. Hall
Title: Sr VP and CFO
EXHIBIT A
[Copy of Regulation M is attached]
EXHIBIT B
[Copy of Rule 501(a) under Regulation D is attached]
EXHIBIT C
DISCLOSURE DOCUMENTS
THE INVESTOR IS URGED TO REVIEW THE FOLLOWING DOCUMENTS WHICH ARE DELIVERED
HEREWITH AND INCORPORATED BY REFERENCE HEREIN AS IF RESTATED HEREIN:
1. The Issuer's Annual Report on Form 10-K for the fiscal year
ended December 31, 2001
2. The Issuer's definitive proxy statement dated March 15, 2002
relating to its 2002 Annual Meeting of Stockholders
3. The Issuer's Current Report on Form 8-K dated March 28, 2002
4. Cover Letter From Allen & Company Incorporated, as Placement
Agent to Prospective Investors dated April __, 2002
EXHIBIT D
Explanation of "BENEFICIAL OWNERSHIP"
Securities that are subject to a power to vote or dispose are deemed
beneficially owned by the person who holds such power, directly or indirectly.
This means that the same securities may be deemed beneficially owned by more
than one person, if such power is shared. In addition, the beneficial ownership
rules provide that shares which may be acquired upon exercise of an option or
warrant, or which may be acquired upon the termination of a trust, discretionary
account or similar arrangement, which can be effected within a period of 60 days
from the date of determination, are deemed to be "beneficially" owned.
Furthermore, shares that are subject to rights or powers even though such rights
or powers to acquire are not exercisable within the 60-day period may also be
deemed to be beneficially owned if the rights or powers were acquired "with the
purpose or effect of changing or influencing the control of the issuer or in
connection with or as a participant in any transaction having such purpose or
effect."
In determining whether securities are "beneficially owned," benefits
which are substantially equivalent to those of ownership by virtue of any
contract, understanding, relationship, agreement or other arrangement should
cause the securities to be listed as "beneficially owned."
Thus, for example, securities held for a person's benefit in the name
of others or in the name of any estate or trust in which such person may be
interested should also be listed. Securities held by a person's spouse, children
or other members of such person's family who are such person's dependents or who
live in such person's household should be listed as "beneficially owned" unless
such person does not enjoy benefits equivalent to those of ownership with
respect to such securities.
If a person has a proprietary or beneficial interest in a controlled
corporation, partnership, personal holding company, trust or estate which owns
of record or beneficially any securities, such person should state the amount of
such securities owned by such controlled corporation, partnership, personal
holding company, trust or estate in lieu of allocating such person's proprietary
interest, and by note or otherwise, please indicate that. In any case, the name
of the controlled corporation, partnership, personal holding company, or estate
must be stated.
In all cases the nature of the beneficial ownership should be stated.
EXHIBIT E
[Form of Issuer's Counsel Opinion]
April 15, 2002
Allen & Company Incorporated and
Purchasers of LendingTree, Inc.
Common Stock listed on
Exhibit A attached hereto
RE: LendingTree, Inc.
Ladies and Gentlemen:
We have acted as special counsel to LendingTree, Inc., a Delaware
corporation ("LendingTree"), in connection with the transactions contemplated by
the Subscription Agreements dated April 12, 2002 (the "Subscription Agreements")
between LendingTree and the purchasers party thereto. This opinion letter is
delivered pursuant to Section 8.1(d) of the Subscription Agreements. All
capitalized terms used herein and not otherwise defined herein shall have same
meanings herein as are ascribed to them in the Subscription Agreements.
As such counsel, we have examined originals or copies of the
Subscription Agreements. We have also examined such certificates of
incorporation, bylaws, minute books and other documents, records and
certificates as we have deemed relevant or necessary as the basis for our
opinions hereinafter set forth. As such counsel, we have participated in the
preparation of the Subscription Agreements and have consulted with officers of
LendingTree regarding the terms and provisions thereof.
In giving the opinions expressed herein and making our investigations
in connection herewith, we have made the following assumptions: (a) the due
authorization, execution and delivery by the parties thereto other than
LendingTree of the documents examined by us, (b) the genuineness of all
signatures of individuals, (c) the personal legal capacity of all individual
signatories, (d) the authenticity of all documents presented to us as originals
and (e) the conformity to the originals of all documents presented to us as
copies. We have also assumed that the terms of the Subscription Agreements have
not been modified, supplemented or qualified by any other agreements or
understandings (written or oral) of the parties thereto that are not identified
above, or by any course of dealing or trade custom or usage, in any manner
affecting the opinions expressed herein.
The opinions set forth herein are limited to matters governed by the
laws of the State of North Carolina, the Delaware General Corporation Law and
the Federal laws of the United States generally applicable to transactions of
the type contemplated by the Subscription Agreements, and no opinion is
Allen & Company Incorporated and
Purchasers of LendingTree, Inc.
Common Stock listed on
Exhibit A attached hereto
April 15, 2002
Page 2
expressed herein as to any other laws. We note that the Subscription Agreements
provide that they are to be governed by laws of the State of New York. Our
opinion in paragraph 2 as to the legality, validity, binding effect and
enforceability of the Subscription Agreements is intended to address their
legality, validity, binding effect and enforceability under North Carolina law
were they, notwithstanding such choice of law provision, governed by the laws of
the State of the North Carolina and no opinions are expressed herein as to any
matters of New York law. Furthermore, we express no opinion concerning any
matter respecting or affected by any laws other than laws that a lawyer in North
Carolina exercising customary professional diligence would reasonably recognize
as being directly applicable to LendingTree, the transactions contemplated by
the Subscription Agreements, or both. We also express no opinion herein
concerning any real estate, mortgage, lending or other regulatory statutes,
rules and regulations specifically enacted to regulate the particular business
of LendingTree.
We express no opinion herein concerning the possible application to the
Subscription Agreements, the transactions contemplated thereby, or the
obligations of the parties thereunder of Section 548 of the Bankruptcy Code,
11 U.S.C. ss.548, Sections 39-23.1 through 39-23.12 of the North Carolina
General Statutes or other similar laws relating to "fraudulent transfers" or
"fraudulent conveyances."
Opinions or statements herein given "to the best of our knowledge" and
the factual matters on which we have relied in giving other opinions herein are
based upon (a) information coming to our attention in the course of our
representation of LendingTree in connection with the transactions contemplated
by the Subscription Agreements, or otherwise actually known to the lawyers in
our Firm who have given substantive attention to such transactions, (b) the
representations and warranties of LendingTree contained in the Subscription
Agreements, and (c) inquiries of representatives of LendingTree whom we believe
to be reasonably well-informed as to the factual matters in question, but
without any other investigations made for purposes of giving such opinions or
statements unless otherwise stated herein.
Based upon and subject to the foregoing and the further limitations and
qualifications hereinafter expressed, it is our opinion that:
1. LendingTree has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware.
2. Each of the Subscription Agreements has been duly
authorized, executed and delivered by LendingTree and constitutes a
valid and legally binding obligation of LendingTree enforceable in
accordance with its terms.
Allen & Company Incorporated and
Purchasers of LendingTree, Inc.
Common Stock listed on
Exhibit A attached hereto
April 15, 2002
Page 3
3. The Shares have been duly authorized and, when issued and
delivered by LendingTree against payment as provided under the
Subscription Agreements, will be validly issued, fully paid and
nonassessable.
4. Except as set forth on Schedule 3.4 to the Subscription
Agreement, the issuance and sale of the Shares, the execution, delivery
and performance by LendingTree of the Subscription Agreements, and the
consummation by LendingTree of the transactions contemplated thereby,
do not and will not (i) violate the Certificate of Incorporation or
Bylaws of LendingTree, (ii) violate any Federal law of the United
States, the laws of the State of North Carolina or the Delaware General
Corporation Law, or (iii) violate or result in a breach of, or default
under, any contract or agreement filed or listed as an exhibit to
LendingTree's Annual Report on Form 10-K for its fiscal year ended
December 31, 2001.
5. All prior regulatory consents, authorizations, approvals or
filings required to be obtained or made by LendingTree under the
Federal laws of the United States, the laws of the State of North
Carolina or the Delaware General Corporation Law as a condition to the
issuance, sale and delivery of the Shares pursuant to the Subscription
Agreement have been obtained or made.
6. The registration of the Shares under the Securities Act of
1933 (the "Securities Act") is not required in connection with the sale
of the Shares by LendingTree pursuant to the Subscription Agreements.
The foregoing opinions are subject to the following assumptions,
qualifications, exceptions and limitations in addition to the other assumptions,
qualifications, exceptions and limitations set forth in this letter:
(a) Enforceability of the Subscription Agreements may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar state or Federal laws from time to time in effect which affect
the enforcement of creditors' rights generally.
(b) Enforceability of the Subscription Agreements is subject
to general equitable principles and to general standards of commercial
reasonableness.
(c) We express no opinion on the enforceability of any
provisions contained in the Subscription Agreements that (i) purport to
excuse a party for liability for its own acts or omissions, (ii)
purport to authorize a party to act in its sole discretion, (iii)
relate to the effect of laws or regulations that may be enacted in the
future, (iv) require waivers to be made only in writing or (v) purport
to waive a trial by jury.
Allen & Company Incorporated and
Purchasers of LendingTree, Inc.
Common Stock listed on
Exhibit A attached hereto
April 15, 2002
Page 4
(d) Provisions of the Subscription Agreements purporting to
require a party thereto to pay or reimburse attorneys' fees incurred by
another party, or to indemnify another party therefor, may be limited
by applicable statutes and decisions relating to the collection and
award of attorneys' fees.
(e) No opinion is expressed as to the validity or
enforceability of provisions of the Subscription Agreements relating to
indemnity and contribution for liabilities under Federal or state
securities laws.
(f) For purposes of paragraph 4, (i) we express no opinion
with respect to Federal or state securities laws, other antifraud laws
or fraudulent transfer laws and (ii) insofar as performance by
LendingTree of its obligations under the Subscription Agreements is
concerned, we express no opinion as to bankruptcy, insolvency,
reorganization, moratorium or similar state or Federal laws from time
to time in effect which affect the enforcement of creditors' rights
generally.
(g) In connection with our opinion set forth in paragraph 6
above, with your approval, we have assumed the correctness of the
representations and warranties of, and the compliance with the
agreements and undertakings by, LendingTree and the Purchasers in the
Subscription Agreements. Insofar as such opinion relates to the sale of
the Shares to the Purchasers, we have, with your approval, assumed that
all offers and resales of the Shares will be made in accordance with
the Subscription Agreement. We express no opinion, however, as to when
and in what circumstances the Shares may be resold.
The opinions contained herein are being rendered to you in connection
with the closing of the transactions contemplated by the Subscription Agreements
and may not be disclosed to or relied upon by any other person without our prior
written consent. Our opinions expressed herein are as of the date hereof, and we
undertake no obligation to advise you of any changes in applicable law or any
other matters that may come to our attention after the date hereof that may
affect our opinions expressed herein.
Very truly yours,
Exhibit A
Names and Addresses of Purchasers
Ashford Capital Management Inc.,
P.O. Box 4172
Wilmington, Delaware 19807
SMALLCAP World Fund Inc.
333 South Hope Street - 55th Floor
Los Angeles, California 90071
Pequot Navigator Offshore Fund, Inc.
c/o Pequot Capital Management, Inc.
500 Nyala Farm Road
Westport, Connecticut 06880
Pequot Scout Fund, L.P.
c/o Pequot Capital Management, Inc.
500 Nyala Farm Road
Westport, Connecticut 06880
SCHEDULE 3.4
Conflicts
1. The holders of the Company's Series A Preferred Stock have the
preemptive right to participate in certain offerings by the Company of
its securities. The Company has obtained waivers of such preemptive
rights from all holders of Series A Preferred Stock other than William
Shiebler, TASK Foundation, Inc., Victor F. Keen, Terrence D. Daniels
and Keith Hall.
2. The Company has issued the Federal Home Loan Mortgage Association
("Freddie Mac") a warrant to purchase 12,500 shares of Common Stock.
The terms of such warrant require the Company to give Freddie Mac ten
days prior notice of any issuance of Common Stock below fair market
value. The Company has not delivered this notice, although it intends
to deliver such notice as soon as practicable after the date hereof.
SCHEDULE 3.9
Capitalization
OUTSTANDING STOCK OPTIONS
o As of April 11, 2002 there were options outstanding to acquire
6,411,223 shares of LendingTree, Inc. common stock.
OUTSTANDING COMMON STOCK WARRANTS
o As of April 11, 2002 there were warrants to acquire 399,710
shares of LendingTree, Inc. common stock outstanding.
COMMON STOCK ISSUABLE UPON CONVERSION OF SERIES A PREFERRED STOCK
o As of April 11, 2002 the 6,842,858 outstanding shares of
Series A Preferred Stock were convertible into 7,489,443
shares of LendingTree, Inc. common stock. Pursuant to the
Certificate of Designations, Preferences and Rights of Series
A 8% Convertible Preferred Stock of LendingTree, Inc., the
holders of the Series A Preferred Stock have certain
preemptive rights. See Schedule 3.4. The holders of Series A
Preferred Stock also have certain redemption rights pursuant
to the Certificate of Designations.
COMMON STOCK RESERVED FOR ISSUANCE
o LendingTree, Inc. has an Employee Stock Purchase Plan, under
which a total of 550,000 shares of LendingTree, Inc. common
stock have been reserved for issuance. As of April 11, 2002, a
total of 286,975 shares have been issued under this plan.
o LendingTree, Inc. maintains the 1997 Stock Option Plan, the
1998 Stock Option Plan, the 1999 Stock Option Plan and the
2001 Stock Incentive Plan under which there are, as of April
11, 2002, a combined 1,322,846 shares of Common Stock
available for the grant of options in the future.
TREASURY STOCK
o As of April 11, 2002 there were 664,321 shares of issued, but
not outstanding shares of LendingTree common stock accounted
for as Treasury Stock of LendingTree, Inc.
POTENTIALLY ISSUABLE SECURITIES
LendingTree, Inc. and the Federal Home Loan Mortgage Corporation are parties to
a credit facility agreement requires that a portion of the quarterly interest
payments be in the form of warrants to purchase our common stock at an exercise
price of $.01 per share. The amount of warrants to be issued will be calculated
by dividing the amount of interest to be paid in the
form of warrants by $3.99. The amount of interest expense that we will record
will be based upon the estimated fair value of the warrants on the date that
they are issued. As of April 11, 2002, no amounts had been borrowed under this
facility and no warrant-based interest charges had been incurred. The Federal
Home Loan Mortgage Corporation would also be entitled to additional warrants if
LendingTree, Inc. issues any shares of common stock or convertible securities at
a price less than the fair market value per share of common stock.
Under our 2001 Stock Incentive Plan, each non-employee director who is
a beneficial owner of (or represents an organization that is a beneficial owner
of) less than 5% of our combined voting power, upon his or her initial election
to the board, is granted a non-qualified stock option to purchase a number of
shares of common stock calculated by dividing $66,000 by one-third of the
average closing price of the common stock for five trading days immediately
preceding the grant date. Additionally, immediately following each annual
meeting of the company's stockholders, each such non-employee director then
serving is granted a non-qualified stock option to purchase a number of shares
of our common stock, calculated by dividing $22,000 by one-third of the average
closing price of our common stock for five trading days immediately preceding
the grant date. In lieu of the annual option grants, directors may elect to
receive an equivalent number of shares of restricted stock. The 2002 Annual
Meeting is scheduled for April 24, 2002, at which time, 6 directors will be
eligible for the compensation noted above.
SCHEDULE 3.11
Litigation
1. Block Financial Corporation v. LendingTree, Inc., Case Number
01-1007-CV-W-3 [United States District Court for the Western District of
Missouri, filed September 10, 2001]. See Item 3 on Page 13 of LendingTree's most
recent 10-K entitled "Legal Proceedings" for a summary of this litigation.
2. New York State Banking Department ("NYSBD") Regulatory Examination.
Please see Item 3 on Page 13 of LendingTree's most recent 10-K entitled "Legal
Proceedings" for a summary of the is regulatory matter.
SCHEDULE 3.12
Registration Rights
1. Registration Rights Agreement dated March 7, 2001 by and among
LendingTree, Inc. and the signing stockholders listed therein. (Requires
registration of shares of common stock issuable upon conversion of the series A
preferred shares, which registration was effected in June 2001.)
2. Registration Rights Agreement dated September 20, 1999 by and among
LendingTree, Inc. and the signing stockholders listed therein. (Includes
piggyback registration rights, which registration was effected in June 2001.)
3. Registration Rights Agreement dated March 6, 2001 by and between
LendingTree, Inc. and Paul Revere Capital Partners, Ltd. (Requires registration
of shares of common stock issuable under the Paul Revere equity line, which
registration was effected in June 2001.)
4. The Warrant dated September 20, 1999 to Prudential Securities
Incorporated ("Prudential") contain certain piggyback registration rights.
Prudential currently has piggyback registration rights with respect to 30,605
shares of common stock.
Exhibit 10.3
SUBSCRIPTION AGREEMENT
This Subscription Agreement (this "Agreement") is entered into as of
the date set forth on the signature page hereof by and between LendingTree,
Inc., a Delaware corporation (together with its successors and permitted
assigns, the "Issuer"), and the undersigned investor (together with its
successors and permitted assigns, the "Investor"). Capitalized terms used but
not otherwise defined herein shall have the meanings set forth in Section 9.1.
RECITALS
Subject to the terms and conditions of this Agreement, the Investor
desires to subscribe for and purchase, and the Issuer desires to issue and sell
to the Investor, certain shares of the Issuer's common stock, par value $.01 per
share (the "Common Stock"). The Issuer is offering an aggregate of approximately
Five Hundred Thousand (500,000) shares of Common Stock in a private placement to
the Investor and other investors at a purchase price of $11.88 per share and on
the other terms and conditions contained in this Agreement (the "Offering"),
provided that the Issuer reserves the right to sell a lesser or greater number
of shares.
TERMS OF AGREEMENT
In consideration of the mutual representations and warranties,
covenants and agreements contained herein, the parties hereto agree as follows:
ARTICLE 1
SUBSCRIPTION AND ISSUANCE OF COMMON STOCK
1.1 SUBSCRIPTION AND ISSUANCE OF COMMON STOCK. Subject to the terms and
conditions of this Agreement, the Issuer will issue and sell to the Investor and
the Investor subscribes for and will purchase from the Issuer the number of
shares of Common Stock set forth on the signature page hereof (the "Shares") for
the aggregate purchase price set forth on the signature page hereof, which shall
be equal to the product of the number of Shares subscribed for by the Investor
times the per share purchase price specified in the above Recitals to this
Agreement (the "Purchase Price").
1.2 LEGEND. Any certificate or certificates representing the Shares
shall bear the following legend:
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW. THESE SECURITIES
MAY NOT BE PLEDGED, HYPOTHECATED, SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR ANY EXEMPTION THEREFROM UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND ANY APPLICABLE STATE SECURITIES LAW.
ARTICLE 2
CLOSING
2.1 CLOSING. The closing of the transactions contemplated herein (the
"Closing") shall take place on a date designated by the Issuer, which date shall
be on or before April 15, 2002. The Closing shall take place at the offices of
Heller Ehrman White & McAuliffe, counsel for the Issuer, 711 Fifth Avenue, New
York, New York 10022. At the Closing, unless the Investor and the Issuer
otherwise agree (i) the Investor shall pay the Purchase Price to the Issuer, by
wire transfer of immediately available funds to an account designated in writing
by the Issuer; (ii) the Issuer shall issue to the Investor the Shares, and
deliver to the Investor certificates for the Shares duly registered in the name
of the Investor; and (iii) all other agreements and other documents referred to
in this Agreement which are required for the Closing shall be executed and
delivered (if that is not done prior to the Closing).
2.2 TERMINATION. This Agreement may be terminated at any time prior to
the Closing:
(a) by mutual written consent of the Issuer and the Investor;
(b) by the Investor, upon a breach of any material representation
and warranty, covenant or agreement on the part of the Issuer set forth in this
Agreement, or if any material representation and warranty of the Issuer shall
have become untrue in any material respect, in either case such that the
conditions in Section 8.1 would be incapable of being satisfied by the date of
the Closing; or
(c) by the Issuer, upon a breach of any material representation and
warranty, covenant or agreement on the part of the Investor set forth in this
Agreement, or if any material representation and warranty of the Investor shall
have become untrue in any material respect, in either case such that the
conditions in Section 8.2 would be incapable of being satisfied by the date of
the Closing.
2.3 EFFECT OF TERMINATION. In the event of termination of this
Agreement pursuant to Section 2.2, this Agreement shall forthwith become void,
there shall be no liability on the part of the
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Issuer or the Investor to each other and all rights and obligations of any party
hereto shall cease; provided, however, that nothing herein shall relieve any
party from liability for the willful breach of any of its representations and
warranties, covenants or agreements set forth in this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE ISSUER
As a material inducement to the Investor entering into this Agreement
and subscribing for the Shares, the Issuer represents and warrants to the
Investor as follows:
3.1 CORPORATE STATUS. The Issuer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
3.2 CORPORATE POWER AND AUTHORITY. The Issuer has the corporate power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder and consummate the transactions contemplated hereby. At
the time of the closing, the Issuer will have taken all necessary corporate
action to authorize the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby.
3.3 ENFORCEABILITY. This Agreement has been duly executed and delivered
by the Issuer and constitutes a legal, valid and binding obligation of the
Issuer, enforceable against the Issuer in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and general equitable principles, regardless of
whether such enforceability is considered in a proceeding at law or in equity
and except as rights to indemnity or contribution hereunder may be limited by
Federal or state securities laws.
3.4 NO VIOLATION. The execution and delivery by the Issuer of this
Agreement, the consummation of the transactions contemplated hereby, and the
compliance by the Issuer with the terms and provisions hereof (including,
without limitation, the Issuer's issuance to the Investor of the Shares as
contemplated by and in accordance with this Agreement), will not, except as set
forth on Schedule 3.4, result in a default under (or give any other party the
right, with the giving of notice or the passage of time (or both), to declare a
default or accelerate any obligation under) or violate the Certificate of
Incorporation or By-Laws of the Issuer or any material Contract to which the
Issuer is a party (except to the extent such a default would not, in the case of
a Contract, have a Material Adverse Effect on the Issuer), or any Requirement of
Law applicable to the Issuer, or result in the creation or imposition of any
material Lien upon any of the capital stock, properties or assets of the Issuer
or any of its Subsidiaries (except where such Lien would not have a Material
Adverse Effect on the Issuer).
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3.5 CONSENTS/APPROVALS. Except for the filing of a registration
statement in accordance with Article 6 hereof and the filing of a Form D with
the SEC and as applicable, state agencies or authorities, no material consents,
filings, authorizations or other actions of any Governmental Authority are
required to be obtained or made by the Issuer for the Issuer's execution,
delivery and performance of this Agreement which have not already been obtained
or made. No consent, approval, waiver or other action by any Person under any
Contract to which the Issuer is a party or by which the Issuer or any of its
properties or assets are bound is required or necessary for the execution,
delivery or performance by the Issuer of this Agreement and the consummation of
the transactions contemplated hereby, except where the failure to obtain such
consents would not have a Material Adverse Effect on the Issuer.
3.6 VALID ISSUANCE. Upon payment of the Purchase Price by the Investor
and delivery to the Investor of the certificates for the Shares, such Shares
will be validly issued, fully paid and non-assessable.
3.7 SEC FILINGS, OTHER FILINGS AND NASDAQ COMPLIANCE. The Issuer has
timely made all filings required to be made by it under the Exchange Act. The
Issuer has delivered or made accessible to the Investor true, accurate and
complete copies of (i) Issuer's Annual Report on Form 10-K for the fiscal year
ended December 31, 2001; (ii) the Issuer's definitive proxy statement dated
March 15, 2002 relating to its 2002 Annual Meeting of Stockholders; and (iii)
the Issuer's Current Report on Form 8-K dated March 28, 2002 (the "SEC
Reports"). The SEC Reports, when filed, complied in all material respects with
all applicable requirements of the Exchange Act. None of the SEC Reports, at the
time of filing, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein not misleading in light of the circumstances in
which they were made. The Issuer has filed in a timely manner all documents that
the Issuer was required to file under the Exchange Act during the 12 months
preceding the date of this Agreement. The Issuer is currently eligible to
register the resale of the Shares in a secondary offering on a registration
statement on Form S-3 under the Securities Act. The Issuer has taken all
necessary actions required to be taken to date to ensure its continued inclusion
in, and the continued eligibility of the Common Stock for trading on, The Nasdaq
Stock Market under all currently effective inclusion requirements. Each balance
sheet included in the SEC Reports (including any related notes and schedules)
fairly presents in all material respects the consolidated financial position of
the Issuer as of its date, and each of the other financial statements included
in the SEC Reports (including any related notes and Schedules) fairly presents
in all material respects the consolidated results of operations of the Issuer
for the periods or as of the dates therein set forth in accordance with GAAP
consistently applied during the periods involved.
3.8 COMMISSIONS. The Issuer has not incurred any other obligation for
any finder's or broker's or agent's fees or commissions in connection with the
transactions contemplated hereby, except that the Issuer will pay a 4%
commission in cash to Allen & Company Incorporated ("Allen"), the placement
agent for the Offering.
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3.9 CAPITALIZATION. The authorized capital stock of the Issuer consists
of 100,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock.
All issued and outstanding shares of capital stock of the Issuer have been, and
as of the Closing Date will be, duly authorized and validly issued and are and
will be fully paid and non-assessable. As of the date of this Agreement, the
Issuer has issued and outstanding 19,686,744 shares of Common Stock and
6,842,858 shares of Preferred Stock. Except as described in this Section 3.9 and
on Schedule 3.9, there are no outstanding options, warrants, rights (including
conversion or preemptive rights and rights of first refusal and similar rights)
or agreements, orally or in writing, for the purchase or acquisition from the
Issuer of any shares of capital stock and the Issuer is not a party to or
subject to any agreement or understanding, and there is no agreement or
understanding between any person and/or entities, which affects or relates to
the voting or giving of written consents with respect to any security or by a
director of the Issuer. Except as set forth on Schedule 3.9, the Issuer has no
obligation, contingent or otherwise, to redeem or repurchase any equity security
or any security that is a combination of debt and equity.
3.10 MATERIAL CHANGES. Except as set forth in the SEC Reports or as
otherwise contemplated herein, since December 31, 2001, there has been no
Material Adverse Change in the Issuer and its subsidiaries taken as a whole.
Except as set forth in the SEC Reports, since December 31, 2001, there has not
been (i) any direct or indirect redemption, purchase or other acquisition by the
Issuer of any shares of the Common Stock or (ii) declaration, setting aside or
payment of any dividend or other distribution by the Issuer with respect to the
Common Stock (other than the accrual of dividends on the Series A Preferred
Stock of the Issuer which is convertible into Common Stock of the Issuer).
3.11 LITIGATION. Except as disclosed on Schedule 3.11 or as set forth
in the SEC Reports, there is no action, suit, proceeding or investigation
pending or, to the Issuer's knowledge, currently threatened against the Issuer
or any of its subsidiaries that questions the validity of this Agreement or the
right of the Issuer to enter into it, or to consummate the transactions
contemplated hereby, or that might result, either individually or in the
aggregate, in a Material Adverse Effect on the Issuer or any change in the
current equity ownership of the Issuer. The foregoing includes, without
limitation, actions pending or, to the Issuer's knowledge, threatened involving
the prior employment of any of the Issuer's employees or their use in connection
with the Issuer's business of any information or techniques allegedly
proprietary to any of their former employers. Neither the Issuer nor any of its
subsidiaries is a party to or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality not of general applicability. Except as set forth in the SEC
Reports, there is no action, suit, proceeding or investigation by the Issuer or
any of its subsidiaries currently pending or which the Issuer or any of its
subsidiaries currently intends to initiate.
3.12 RIGHTS OF REGISTRATION AND VOTING RIGHTS. Except as contemplated
in this Agreement and as disclosed on Schedule 3.12, the Issuer has not granted
or agreed to grant any
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registration rights, including piggyback rights, to any person or entity, and no
stockholder of the Issuer has entered into any agreements with respect to the
voting of capital shares of the Issuer.
3.13 OFFERINGS. Subject in part to the truth and accuracy of Investor's
representations and warranties set forth in this Agreement, the offer, sale and
issuance of the Shares as contemplated by this Agreement are exempt from the
registration requirements of the Securities Act and any applicable state
securities laws, and neither the Issuer nor any authorized agent acting on its
behalf will take any action hereafter that would cause the loss of such
exemption.
3.14 DISCLOSURE. The Issuer is aware of no facts which lead it to
believe that the Disclosure Documents, as of their respective dates, contain any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
As a material inducement to the Issuer entering into this Agreement and
issuing the Shares, the Investor represents and warrants to the Issuer as
follows:
4.1 POWER AND AUTHORITY. The Investor, if other than a natural person,
is an entity duly organized, validly existing and in good standing under the
laws of the state of its incorporation or formation. The Investor has the
corporate, partnership or other power and authority under applicable law to
execute and deliver this Agreement and consummate the transactions contemplated
hereby, and has all necessary authority to execute, deliver and perform its
obligations under this Agreement and consummate the transactions contemplated
hereby. The Investor has taken all necessary action to authorize the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby.
4.2 NO VIOLATION. The execution and delivery by the Investor of this
Agreement, the consummation of the transactions contemplated hereby, and the
compliance by the Investor with the terms and provisions hereof, will not result
in a default under (or give any other party the right, with the giving of notice
or the passage of time (or both), to declare a default or accelerate any
obligation under) or violate any charter or similar documents of the Investor,
if other than a natural person, or any Contract to which the Investor is a party
or by which it or its properties or assets are bound, or violate any Requirement
of Law applicable to the Investor, other than such violations or defaults which,
individually and in the aggregate, do not and will not have a Material Adverse
Effect on the Investor. The Investor is familiar with Regulation M promulgated
under the Exchange Act, a copy of which is attached hereto as Exhibit A, and is
in full compliance with the provisions thereof with respect to the transactions
contemplated hereby.
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4.3 CONSENTS/APPROVALS. No consents, filings, authorizations or actions
of any Governmental Authority are required for the Investor's execution,
delivery and performance of this Agreement. No consent, approval, waiver or
other actions by any Person under any Contract to which the Investor is a party
or by which the Investor or any of its properties or assets are bound is
required or necessary for the execution, delivery and performance by the
Investor of this Agreement and the consummation of the transactions contemplated
hereby.
4.4 ENFORCEABILITY. This Agreement has been duly executed and delivered
by the Investor and constitutes a legal, valid and binding obligation of the
Investor, enforceable against the Investor in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditor's rights generally and general equitable principles, regardless of
whether enforceability is considered in a proceeding at law or in equity.
4.5 INVESTMENT INTENT. The Investor is acquiring the Shares hereunder
for its own account and with no present intention of distributing or selling
such Shares and further agrees not to transfer such Shares in violation of the
Securities Act or any applicable state securities law, and no one other than the
Investor has any beneficial interest in the Shares. The Investor agrees that it
will not sell or otherwise dispose of any of the Shares unless such sale or
other disposition has been registered under the Securities Act or, in the
opinion of counsel acceptable to the Issuer, is exempt from registration under
the Securities Act and has been registered or qualified or, in the opinion of
such counsel acceptable to the Issuer, is exempt from registration or
qualification under applicable state securities laws. The Investor understands
that the offer and sale by the Issuer of the Shares being acquired by the
Investor hereunder has not been registered under the Securities Act by reason of
their contemplated issuance in transactions exempt from the registration and
prospectus delivery requirements of the Securities Act pursuant to Section 4(2)
thereof and Regulation D promulgated thereunder, and that the reliance of the
Issuer on such exemption from registration is predicated in part on these
representations and warranties of the Investor. The Investor acknowledges that
pursuant to Section 1.2 of this Agreement a restrictive legend consistent with
the foregoing has been or will be placed on the certificates for the Shares.
4.6 ACCREDITED INVESTOR. The Investor is an "accredited investor" as
such term is defined in Rule 501(a) of Regulation D under the Securities Act (a
copy of which is attached hereto as Exhibit B), and has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of the investment to be made by it hereunder.
4.7 ADEQUATE INFORMATION. The Investor has received from the Issuer,
and has reviewed, such information which the Investor considers necessary or
appropriate to evaluate the risks and merits of an investment in the Shares,
including without limitation, the documents listed on Exhibit C, which have been
received by Investor as part of an informational packet of materials from the
Issuer. The documents listed in Exhibit C are referred to herein as the
"Disclosure Documents."
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4.8 OPPORTUNITY TO QUESTION. The Investor has had the opportunity to
question, and has questioned, to the extent it has deemed necessary or
appropriate, representatives of the Issuer so as to receive answers and verify
information obtained in the Investor's examination of the Issuer, including the
information that the Investor has received and reviewed as referenced in Section
4.7 hereof in relation to its investment in the Shares.
4.9 NO OTHER REPRESENTATIONS. No oral or written representations have
been made to the Investor in connection with the Investor's acquisition of the
Shares which were in any way inconsistent with the information reviewed by the
Investor. The Investor acknowledges that no representations or warranties of any
type or description have been made to it by any Person with regard to the
Issuer, any of its Subsidiaries, any of their respective businesses, properties
or prospects or the investment contemplated herein, other than the
representations and warranties set forth in Article 3 hereof.
4.10 KNOWLEDGE AND EXPERIENCE. The Investor has such knowledge and
experience in financial, tax and business matters, including substantial
experience in evaluating and investing in common stock and other securities
(including the common stock and other securities of speculative companies), so
as to enable the Investor to utilize the information referred to in Section 4.7
hereof and any other information made available by the Issuer to the Investor in
order to evaluate the merits and risks of an investment in the Shares and to
make an informed investment decision with respect thereto.
4.11 INDEPENDENT DECISION. The Investor is not relying on the Issuer or
on any legal or other opinion in the materials reviewed by the Investor with
respect to the financial or tax considerations of the Investor relating to its
investment in the Shares. The Investor has relied solely on the representations
and warranties, covenants and agreements of the Issuer in this Agreement
(including the Exhibits hereto) and on its examination and independent
investigation in making its decision to acquire the Shares.
4.12 COMMISSIONS. The Investor has not incurred any obligation for any
finder's or broker's or agent's fees or commissions in connection with the
transactions contemplated hereby.
ARTICLE 5
COVENANTS
5.1 PUBLIC ANNOUNCEMENTS. The Investor agrees not to make any public
announcement or issue any press release or otherwise publicly disseminate any
information about the subject matter of this Agreement. The Issuer shall have
the right to make such public announcements and shall control, in its sole and
absolute discretion, the timing, form and content of all press releases or other
public communications of any sort relating to the subject matter of this
Agreement, and the method of their release, or publication thereof.
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5.2 FURTHER ASSURANCES. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of the terms of this Agreement and the transactions contemplated hereby. Each of
the Investor and the Issuer shall make on a prompt and timely basis all
governmental or regulatory notifications and filings required to be made by it
with or to any Governmental Authority in connection with the consummation of the
transactions contemplated hereby. The Issuer and the Investor each agree to
cooperate with the other in the preparation and filing of all forms,
notifications, reports and information, if any, required or reasonably deemed
advisable pursuant to any Requirement of Law or the rules of Nasdaq Stock Market
in connection with the transactions contemplated by this Agreement and to use
their respective best efforts to agree jointly on a method to overcome any
objections by any Governmental Authority to any such transactions. Except as may
be specifically required hereunder, neither of the parties hereto or their
respective Affiliates shall be required to agree to take any action that in the
reasonable opinion of such party would result in or produce a Material Adverse
Effect on such party.
5.3 NOTIFICATION OF CERTAIN MATTERS. Each party hereto shall give
prompt notice to the other party of the occurrence, or non-occurrence, of any
event which would be likely to cause any representation and warranty herein to
be untrue or inaccurate in any material respect, or any covenant, condition or
agreement herein not to be complied with or satisfied in any material respect.
5.4 CONFIDENTIAL INFORMATION; STANDSTILL. (a) The Investor agrees that
no portion of the Confidential Information (as defined below) shall be disclosed
to third parties, except as may be required by law, without the prior express
written consent of the Issuer provided that the Investor may share such
information with such of its officers and professional advisors as may need to
know such information to assist the Investor in its evaluation thereof on the
condition that such parties agree to be bound by the terms hereof. All
Confidential Information received by the Investor shall be promptly returned or
destroyed, as directed by the Issuer. "Confidential Information" means all oral
or written data, reports, records or materials and any and all other
confidential or disclosure information or materials obtained from the Issuer or
its professional advisors, which are not yet publicly available. Confidential
Information excludes information that is publicly available or already known to
the Investor through a source not bound by any confidentiality obligation.
(b) For a period of one year from the Closing Date, the Investor
will not, without the prior written consent of the Issuer (i) propose to enter
into any acquisition of all or substantially of the assets or stock of the
Issuer or a merger or other business combination involving the Issuer; (ii) seek
to control the management, Board of Directors or policies of the Issuer; or
(iii) form, join or in any way participate in a "group" (within the meaning of
Section 13(d) (3) of the Securities Act of 1934) with respect to any securities
of the Issuer in connection with any of the foregoing. Notwithstanding the
foregoing, this section shall not restrict the Investor's acquisition of shares
of the Issuer's Common Stock through open market purchases.
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ARTICLE 6
REGISTRATION RIGHTS
The Investor shall have the following registration rights with respect
to the Registrable Securities owned by it:
6.1 TRANSFER OF REGISTRATION RIGHTS. The Investor may assign the
registration rights with respect to the Shares to any party or parties to which
it may from time to time transfer the Shares, provided that the transferee
acquires at least 20,000 shares of Common Stock of the Issuer and agrees in
writing with the Issuer to be bound by the applicable provisions of this
Agreement regarding such registration rights and indemnification relating
thereto. Upon assignment of any registration rights pursuant to this Section
6.1, the Investor shall deliver to the Issuer a notice of such assignment which
includes the identity and address of any assignee and such other information
reasonably requested by the Issuer in connection with effecting any such
registration (collectively, the Investor and each such subsequent holder is
referred to as a "Holder").
6.2 REQUIRED REGISTRATION. As promptly as practicable after the
Closing, but in no event later than forty-five (45) days after the date of the
Closing, the Issuer agrees to file a Registration Statement on Form S-3 (the
"Shelf Registration Statement") to register the resale of all of the Shares. The
Issuer shall use reasonable efforts to cause the SEC to declare the Shelf
Registration Statement effective as soon as practicable after filing and to
thereafter maintain the effectiveness of the Shelf Registration Statement until
such time as the Issuer reasonably determines, based on an opinion of counsel,
that the Holders will be eligible to sell all of the Shares then owned by the
Holders without the need for continued registration of the Shares in the three
month period immediately following the termination of the effectiveness of the
Shelf Registration Statement. The Issuer's obligations contained in this Section
6.2 shall terminate on the second anniversary of the date on which the Shares
are issued hereunder.
6.3 REGISTRATION PROCEDURES.
(a) In case of the Shelf Registration Statement effected by the
Issuer subject to this Article 6, the Issuer shall keep the Investor, on behalf
of each Holder, advised in writing as to the initiation of such registration,
and as to the completion thereof. In addition, subject to Section 6.2 above, the
Issuer shall, to the extent applicable to the Shelf Registration Statement:
(i) prepare and file with the SEC such amendments and
supplements to the Shelf Registration Statement as may be necessary to keep such
registration effective and comply with provisions of the Securities Act with
respect to the disposition of all securities covered thereby during the period
referred to in Section 6.2;
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(ii) update, correct, amend and supplement the Shelf
Registration Statement as necessary;
(iii) notify Holder when the Shelf Registration Statement is
declared effective by the SEC, and furnish such number of prospectuses and other
documents incident thereto as Holder may reasonably request from time to time;
(iv) use its commercially reasonable efforts to register or
qualify such Registrable Securities under such other securities or blue sky laws
of such jurisdictions of the United States where an exemption is not available
and as Holder may reasonably request to enable it to consummate the disposition
in such jurisdiction of the Registrable Securities (provided that the Issuer
will not be required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this provision, or
(ii) consent to general service of process in any such jurisdiction, or (iii)
subject itself to taxation in any jurisdiction where it is not already subject
to taxation);
(v) notify Holder at any time when a prospectus relating to the
Registrable Securities is required to be delivered under the Securities Act, of
the happening of any event as a result of which the prospectus included in the
Shelf Registration Statement contains an untrue statement of a material fact or
omits any fact necessary to make the statements therein not misleading, and at
the request of Holder, the Issuer will as promptly as it reasonably deems
practicable prepare a supplement or amendment to such prospectus, so that, as
thereafter delivered to purchasers of such shares, such prospectus will not
contain any untrue statements of a material fact or omit to state any fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;
(vi) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Issuer are then
listed and obtain all necessary approvals from the Nasdaq Stock Market for
trading thereon;
(vii) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of the Shelf
Registration Statement; and
(viii) upon the sale of any Registrable Securities pursuant to
the Shelf Registration Statement, direct the transfer agent to remove all
restrictive legends from all certificates or other instruments evidencing the
Registrable Securities.
(b) Notwithstanding anything stated or implied to the contrary in
Section 6.3(a) above, the Issuer shall not be required to consent to or
otherwise to take any actions to facilitate any underwritten offering of the
Registrable Securities or to consent to any specific underwriter participating
in any underwritten public offering of the Registrable Securities.
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(c) Each Holder agrees that upon receipt of any notice from the
Issuer of the happening of any event of the kind described in Section 6.3(a)(v),
such Holder will forthwith discontinue such Holder's disposition of Registrable
Securities pursuant to the registration statement relating to such Registrable
Securities until such Holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 6.3(a)(v) and, if so directed by the
Issuer, will deliver to the Issuer at the Issuer's expense all copies, other
than permanent file copies, then in such Holder's possession, of the prospectus
relating to such Registrable Securities current at the time of receipt of such
notice. Without limiting the foregoing, each Holder shall suspend, upon request
of the Issuer, any disposition of Registrable Securities pursuant to the
registration statement relating to such Registrable Securities during any three
periods (each, a "Blackout Period"), provided that no Blackout Period shall
exceed sixty (60) days and there may only be two Blackout Periods during any
twelve month period, when the Issuer determines in good faith that offers and
sales pursuant thereto should not be made by reason of the presence of material
undisclosed circumstances or developments with respect to which the disclosure
would be premature or would have an adverse effect on the Issuer.
(d) As a condition to the inclusion of its Registrable Securities
in the Shelf Registration Statement, each Holder shall furnish to the Issuer
such information regarding such Holder and the distribution of Registrable
Securities proposed by such Holder as the Issuer may request in writing.
(e) Each Holder hereby covenants with the Issuer (i) not to make
any sale of the Registrable Securities without effectively causing the
prospectus delivery requirements under the Securities Act to be satisfied and
(ii) if such Registrable Securities are to be sold by any method or in any
transaction other than on the Nasdaq National Market or in privately negotiated
transactions, or in a combination of such methods, to notify the Issuer at least
five (5) business days prior to the date on which the Holder first offers to
sell any such Registrable Securities by such method or in any such transaction
and, in any event, the Holder will not sell Registrable Securities by such
method or in such transaction unless the Issuer is reasonably satisfied that
there is an appropriate description of such method or transaction in the Shelf
Registration Statement.
(f) Except as required by law, all expenses incurred by the Issuer
in complying with this Article 6, including but not limited to, all
registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel and accountants for the Issuer, blue sky fees and
expenses (including fees and disbursements of counsel related to all blue sky
matters) ("Registration Expenses") incurred in connection with any registration,
qualification or compliance pursuant to this Article 6 shall be borne by the
Issuer. All underwriting discounts and selling commissions applicable to a sale
incurred in connection with any registration of Registrable Securities and the
legal fees and other expenses of a Holder shall be borne by such Holder.
6.4 FURTHER INFORMATION. If Registrable Securities owned by a Holder
are included in any registration, such Holder shall furnish the Issuer such
information regarding itself as the Issuer may reasonably request and as shall
be required in connection with any registration (or amendment
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thereto) referred to in this Agreement, and Holder shall indemnify the Issuer
with respect thereto in accordance with Article 7 hereof. The Investor hereby
represents and warrants to the Issuer that it has accurately and completely
provided the requested information and answered the questions numbered (a)
through (d) on the signature pages of this Agreement, and the Investor agrees
and acknowledges that the Issuer may rely on such information as being true and
correct for purposes of preparing and filing the Shelf Registration Statement at
the time of filing thereof and at the time it is declared effective, unless the
Investor has notified the Issuer in writing to the contrary prior to such time.
ARTICLE 7
INDEMNIFICATION
7.1 INDEMNIFICATION GENERALLY. The Issuer, on the one hand, and the
Investor, on the other hand (each an "Indemnifying Party"), shall indemnify the
other from and against any and all losses, damages, liabilities, claims,
charges, actions, proceedings, demands, judgments, settlement costs and expenses
of any nature whatsoever (including, without limitation, reasonable attorneys'
fees and expenses) or deficiencies resulting from any breach of a representation
and warranty, covenant or agreement by the Indemnifying Party and all claims,
charges, actions or proceedings incident to or arising out of the foregoing.
7.2 INDEMNIFICATION RELATING TO REGISTRATION RIGHTS.
(a) With respect to any registration, effected or to be effected
pursuant to Article 6 of this Agreement, the Issuer shall indemnify each Holder
of Registrable Securities whose securities are included or are to be included
therein, each of such Holder's directors and officers, each underwriter (as
defined in the Securities Act) of the securities sold by such Holder (if any),
and each Person who controls (within the meaning of the Securities Act) any such
Holder or underwriter (a "Controlling Person") from and against all losses,
damages, liabilities, claims, charges, actions, proceedings, demands, judgments,
settlement costs and expenses of any nature whatsoever (including, without
limitation, reasonable attorneys' fees and expenses) or deficiencies of any such
Holder or any such underwriter or Controlling Person concerning:
(i) any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or other document
(including any related registration statement, notification or the like)
incident to any such registration;
(ii) any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statement
therein, in the light of the circumstances under which it was made, not
misleading; or
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(iii) any violation by the Issuer of the Securities Act or any
rule or regulation promulgated thereunder applicable to the Issuer, or of any
blue sky or other state securities laws or any rule or regulation promulgated
thereunder applicable to the Issuer,
in each case, relating to any action or inaction required of the Issuer in
connection with any such registration, and subject to Section 7.3 below will
reimburse each such Person entitled to indemnity under this Section 7.2(a) for
all legal and other expenses reasonably incurred in connection with
investigating or defending any such loss, damage, liability, claim, charge,
action, proceeding, demand, judgment, settlement or deficiency; provided,
however, that, the foregoing indemnity and reimbursement obligation shall not be
applicable to the extent that any such matter arises out of or is based on (A)
any untrue statement (or alleged untrue statement) or omission (or alleged
omission) made in reliance upon and in conformity with written information
furnished to the Issuer by or on behalf of such Holder or by or on behalf of
such an underwriter specifically for use in such prospectus, offering circular
or other document or (B) a Holder's or any of its representatives' failure to
deliver a copy of the registration statement or prospectus or any amendment or
supplement thereto (the current version of which shall have been provided to
holder by the Issuer as contemplated by Section 6.3 hereof) to any purchaser of
shares in accordance with the requirements of applicable law.
(b) With respect to any registration, qualification or compliance
effected or to be effected pursuant to this Agreement, each Holder of
Registrable Securities whose securities are included or are to be included
therein, shall indemnify the Issuer, each of the Issuer's directors and officers
and each Person who controls (within the meaning of the Securities Act) the
Issuer or any of its directors or officers from and against all losses, damages,
liabilities, claims, charges, actions, proceedings, demands, judgments,
settlement costs and expenses of any nature whatsoever (including, without
limitation, reasonable attorneys' fees and expenses but which amount shall not
in any circumstance exceed the Purchase Price paid by the Investor) or
deficiencies of the Issuer concerning:
(i) any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or other document
(including any related registration statement, notification or the like)
incident to any such registration, qualification or compliance;
(ii) any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statement
therein, in the light of the circumstances under which it was made, not
misleading; or
(iii) any violation by such Holder of the Securities Act or any
rule or regulation promulgated thereunder applicable to the Issuer or such
Holder or of any blue sky or other state securities laws or any rule or
regulation promulgated thereunder applicable to the Issuer or such Holder,
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in each case, relating to any action or inaction required of such Holder in
connection with any such registration, qualification or compliance, and subject
to Section 7.3 below will reimburse each such person entitled to indemnity under
this Section 7.2(b) for all legal and other expenses reasonably incurred in
connection with investigating or defending any such loss, damage, liability,
claim, charge, action, proceeding, demand, judgment, settlement or deficiency;
provided, however, that, the foregoing indemnity and reimbursement obligation
shall only be applicable to the extent that any such matter arises out of or is
based on (A) any untrue statement (or alleged untrue statement) or omission (or
alleged omission) made in reliance upon and in conformity with written
information furnished to the Issuer by or on behalf of the Holder specifically
for use in such prospectus, offering circular or other document or (B) a
Holder's or any of its representatives' failure to deliver a copy of the
registration statement or prospectus or any amendment or supplement thereto to
any purchaser of shares in accordance with the requirements of applicable law.
7.3 INDEMNIFICATION PROCEDURES. Each Person entitled to indemnification
under this Section (an "Indemnified Party") shall give notice as promptly as
reasonably practicable to each party required to provide indemnification under
this Section (an "Indemnifying Party") of any action commenced against or by it
in respect of which indemnity may be sought hereunder, but failure to so notify
an Indemnifying Party shall not relieve such Indemnifying Party from any
liability that it may have otherwise than on account of this indemnity agreement
so long as such failure shall not have materially prejudiced the position of the
Indemnifying Party. Upon such notification, the Indemnifying Party shall assume
the defense of such action if it is a claim brought by a third party, if and
after such assumption the Indemnified Party shall not be entitled to
reimbursement of any expenses incurred by it in connection with such action
except as described below. In any such action, any 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 contrary or
(ii) the named parties in any such action (including any impleaded parties)
include 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 or conflicting interests between them. The Indemnifying
Party shall not be liable for any settlement of any proceeding effected without
its written consent (which shall not be unreasonably withheld or delayed by such
Indemnifying Party), but if settled with such consent or if there be final
judgment for the plaintiff, the Indemnifying Party shall indemnify the
Indemnified Party from and against any loss, damage or liability by reason of
such settlement or judgment.
ARTICLE 8
CONDITIONS TO CLOSING
8.1 CONDITIONS TO THE OBLIGATIONS OF THE INVESTOR. The obligations of
the Investor to proceed with the Closing is subject to the following conditions
any and all of which may be waived, in whole or in part, to the extent permitted
by applicable law:
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(a) Representations and Warranties. Each of the representations and
warranties of the Issuer contained in this Agreement shall be true and correct
in all material respects as of the Closing as though made on and as of the
Closing, except (i) for changes specifically permitted by this Agreement, and
(ii) that those representations and warranties which address matters only as of
a particular date shall remain true and correct as of such date, except in any
case for such failures to be true and correct which would not, individually or
in the aggregate, have a Material Adverse Effect on the Issuer. Unless the
Investor receives written notice to the contrary at the Closing, Investor shall
be entitled to assume that the preceding is accurate in all respects at the
Closing.
(b) Agreement and Covenants. The Issuer shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Closing. Unless the Investor receives written notice to the contrary at the
Closing, Investor shall be entitled to assume that the preceding is accurate in
all respects at the Closing.
(c) No Order. No governmental authority or other agency or
commission or federal or state court of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction, or other order (whether temporary,
preliminary or permanent) which is in effect and which materially restricts,
prevents or prohibits consummation of the Closing or any transaction
contemplated by this Agreement.
(d) Opinion of Issuer's Counsel. The Holder shall have received an
opinion of Issuer's counsel, dated the Closing Date in substantially the form
attached hereto as Exhibit E.
8.2 CONDITIONS TO THE OBLIGATIONS OF THE ISSUER. The obligations of the
Issuer to proceed with the Closing is subject to the following conditions any
and all of which may be waived, in whole or in part, to the extent permitted by
applicable law:
(a) Representations and Warranties. Each of the representations and
warranties of the Investor contained in this Agreement shall be true and correct
as of the Closing as though made on and as of the Closing, except for changes
specifically permitted by this Agreement. Unless the Issuer receives written
notification to the contrary at the Closing, the Issuer shall be entitled to
assume that the preceding is accurate in all respects at the Closing.
(b) Agreement and Covenants. The Investor shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Closing. Unless the Issuer receives written notification to the contrary at the
Closing, the Issuer shall be entitled to assume that the preceding is accurate
in all respects at the Closing.
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(c) No Order. No governmental authority or other agency or
commission or federal or state court of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction, or other order (whether temporary,
preliminary or permanent) which is in effect and which materially restricts,
prevents or prohibits consummation of the Closing or any transaction
contemplated by this Agreement.
ARTICLE 9
MISCELLANEOUS
9.1 DEFINED TERMS. As used herein the following terms shall have the
following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule 12b-2 of
the General Rules and Regulations under the Exchange Act, as in effect on the
date hereof.
"Certificate of Incorporation" means the Issuer's Certificate of
Incorporation, as the same may be supplemented, amended or restated from time to
time.
"Closing" has the meaning in Article 2 of this Agreement.
"Common Stock" has the meaning specified in the Recitals to this
Agreement.
"Contract" means any indenture, lease, sublease, loan agreement,
mortgage, note, restriction, commitment, obligation or other contract, agreement
or instrument.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means generally accepted accounting principles in effect in
the United States of America from time to time.
"Governmental Authority" means any nation or government, any state
or other political subdivision thereof, and any entity or official exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Investor" has the meaning specified in the Recitals to this
Agreement.
"Issuer" means LendingTree, Inc., a Delaware corporation.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform
-17-
Commercial Code or comparable law or any jurisdiction in connection with such
mortgage, pledge, security interest, encumbrance, lien or charge).
"Material Adverse Change (or Effect)" means a material and adverse
change in (or effect on) the financial condition, properties, assets,
liabilities, rights, obligations, operations or business, of a Person and its
Subsidiaries taken as a whole.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, estate, trust, unincorporated association, joint
venture, Governmental Authority or other entity, of whatever nature.
"Purchase Price" has the meaning specified in Section 1.1 of this
Agreement.
"Register", "registered" and "registration" refer to a registration
of the resale of Common Stock effected by preparing and filing a registration
statement in compliance with the Securities Act and the declaration or ordering
of the effectiveness of such registration statement.
"Registrable Securities" means all Shares of Common Stock acquired
by the Investor pursuant to this Agreement and any other shares of Common Stock
or other securities issued in respect of such Shares by way of a stock dividend
or stock split or in connection with a combination or subdivision of the
Issuer's Common Stock or by way of a recapitalization, merger or consolidation
or reorganization of the Issuer; provided, however, that, as to any particular
securities, such securities will cease to be Registrable Securities when they
have been sold pursuant to registration or in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(1) thereof so that all transfer restrictions and restrictive legends
with respect thereto are removed upon the consummation of such sale and the
purchaser and seller receive an opinion of counsel for the Issuer, which shall
be in form and substance reasonably satisfactory to the purchaser and seller and
their respective counsel, to the effect that such stock in the hands of the
purchaser is freely transferable without restriction or registration under the
Securities Act in any public or private transaction.
"Requirements of Law" means as to any Person, the certificate of
incorporation, by-laws or other organizational or governing documents of such
person, and any domestic or foreign and federal, state or local law, rule,
regulation, statute or ordinance or determination of any arbitrator or a court
or other Governmental Authority, in each case applicable to or binding upon such
Person or any of its properties or to which such Person or any of its property
is subject.
"SEC" means the Securities and Exchange Commission.
"SEC Reports" has the meaning specified in Section 3.7 of this
Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
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"Shares" has the meaning specified in Section 1.1 of this
Agreement.
"Subsidiary" means as to any Person, a corporation or limited
partnership of which more than 50% of the outstanding capital stock or
partnership interests having full voting power is at the time directly or
indirectly owned or controlled by such Person.
9.2 OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Agreement shall have the defined
meanings when used in any certificates, reports or other documents made or
delivered pursuant hereto or thereto, unless the context otherwise requires.
(b) Terms defined in the singular shall have a comparable meaning
when used in the plural, and vice versa.
(c) All accounting terms shall have a meaning determined in
accordance with GAAP.
(d) As used herein, the neuter gender shall also denote the
masculine and feminine, and the masculine gender shall also denote the neuter
and feminine, where the context so permits.
(e) The words "hereof," "herein" and "hereunder," and words of
similar import, when used in this Agreement shall refer to this Agreement as a
whole (including any Exhibits hereto) and not to any particular provision of
this Agreement.
9.3 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered by certified
or registered mail (first class postage pre-paid), guaranteed overnight
delivery, or facsimile transmission if such transmission is confirmed by
delivery by certified or registered mail (first class postage pre-paid) or
guaranteed overnight delivery, to the following addresses and telecopy numbers
(or to such other addresses or telecopy numbers which such party shall
subsequently designate in writing to the other party):
(a) if to the Issuer to:
LendingTree, Inc.
11115 Rushmore Drive
Charlotte, N.C. 28277
Attention: Douglas Lebda or Bob Flemma
Telecopy: (704) 331-7598
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with a copy to:
Kennedy Covington Lobdell & Hickman LLP
100 N. Tryon Street, Suite 4200
Charlotte, N.C. 28202
Attention: Sean M. Jones
Telecopy: (704) 331-7598
(b) if to the Investor to the address set forth next to its name on
the signature page hereto.
Each such notice or other communication shall for all purposes of this Agreement
be treated as effective or having been given when delivered if delivered by
hand, by certified or registered mail, by messenger or by courier, or if sent by
facsimile, upon confirmation of receipt.
9.4 ENTIRE AGREEMENT. This Agreement (including the Exhibits attached
hereto) and other documents delivered at the Closing pursuant hereto, contain
the entire understanding of the parties in respect of its subject matter and
supersedes all prior agreements and understandings between or among the parties
with respect to such subject matter. The Exhibits constitute a part hereof as
though set forth in full above.
9.5 EXPENSES; TAXES. Except as otherwise provided in this Agreement,
the parties shall pay their own fees and expenses, including their own counsel
fees, incurred in connection with this Agreement or any transaction contemplated
hereby. Any sales tax, stamp duty, deed transfer or other tax (except taxes
based on the income of the Investor) arising out of the issuance of the Shares
by the Issuer to the Investor shall be paid by the Issuer.
9.6 AMENDMENT; WAIVER. This Agreement may not be modified, amended,
supplemented, canceled or discharged, except by written instrument executed by
both parties. No failure to exercise, and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the exercise of any other right, power or privilege. No waiver of any breach of
any provision shall be deemed to be a waiver of any preceding or succeeding
breach of the same or any other provision, nor shall any waiver be implied from
any course of dealing between the parties. No extension of time for performance
of any obligations or other acts hereunder or under any other agreement shall be
deemed to be an extension of the time for performance of any other obligations
or any other acts. The rights and remedies of the parties under this Agreement
are in addition to all other rights and remedies, at law or equity, that they
may have against each other.
9.7 BINDING EFFECT; ASSIGNMENT. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective successors and permitted assigns. The
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rights and obligations of this Agreement may not be assigned by any party
without the prior written consent of the other party.
9.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
9.9 HEADINGS. The headings contained in this Agreement are for
convenience of reference only and are not to be given any legal effect and shall
not affect the meaning or interpretation of this Agreement.
9.10 GOVERNING LAW; INTERPRETATION. This Agreement shall be construed
in accordance with and governed for all purposes by the laws of the State of New
York applicable to contracts executed and to be wholly performed within such
State.
9.11 SEVERABILITY. The parties stipulate that the terms and provisions
of this Agreement are fair and reasonable as of the date of this Agreement.
However, if any provision of this Agreement shall be determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated. If, moreover, any of those provisions shall for any reason be
determined by a court of competent jurisdiction to be unenforceable because
excessively broad or vague as to duration, activity or subject, it shall be
construed by limiting, reducing or defining it, so as to be enforceable.
[SIGNATURES AND OTHER INFORMATION ON NEXT THREE PAGES]
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IN WITNESS WHEREOF, the parties hereto have caused this Subscription
Agreement to be duly executed and delivered as of the date set forth below.
NAME OF INVESTOR: ADDRESS FOR NOTICES (Please Print):
Pequot Scout Fund, L.P. c/o Pequot Capital Management, Inc.
------------------------------------- ------------------------------------
500 Nyala Farm Road
------------------------------------
SIGNATURE: Westport, Connecticut 06880
------------------------------------
Attention: Slavko Negulis
------------------------
By: /s/ Steve Pakutka Telecopy: 203 429-2430
---------------------------------- -------------------------
Name: Steve Pakutka
Title: Senior V.P. Tax Identification #: 13-3741801
Pequot Capital Management, Inc. --------------
its Investment Advisor
Exact Name to appear on Stock Certificate: Pequot Navigator Offshore Fund, Inc.
------------------------------------
Number of Shares Subscribed For: 33,000
------------------------------------
Aggregate Purchase Price (see Section 1.1): $ 392,040
------------------------------------
The Investor hereby provides the following additional information:
(a) Excluding the shares of Common Stock subscribed for above, set
forth below is the number of shares of Common Stock and options rights or
warrants of LendingTree, Inc. ("Options" and together with the Common Stock,
"Securities") which the Investor beneficially owns or of which the Investor is
the record owner on the date hereof. Please refer to the definition of
beneficial ownership on Exhibit D attached hereto. If none, please so state.
Number of Shares: 26,500 excluding the Shares subscribed for above)
------------------
Number of Options: 0
-----------------
Please indicate by an asterisk (*) above if the Investor disclaims "beneficial
ownership" of any of the above listed Securities, and indicate in response to
question (b) below who has beneficial ownership.
(b) If the Investor disclaims "beneficial ownership" in question (a),
please furnish the following information with respect to the person(s) other
than the Investor who is the beneficial owner(s) of the Securities in question.
If not applicable, please check box: [ ]
Name of Beneficial Owner: Pequot Capital Management, Inc.
-----------------------------------
Relationship to the Investor: Investment Advisor
-------------------------------
Number of Securities Beneficially Owned: 90,000
--------------------
NAME OF INVESTOR: Pequot Scout Fund, L.P.
--------------------------
(c) Are any of the Securities listed in response to question (a) the
subject of a voting agreement, contract or other arrangement whereby others have
voting control over, or any other interest in, any of the Investor's Securities?
[ ] Yes [X] No
If the answer is "Yes", please give details:____________________________________
(d) Please describe each position, office or other material
relationship which the Investor has had with the Issuer or any of its
affiliates, including any Subsidiary of the Issuer, within the past three years.
Please include a description of any loans or other indebtedness, and any
contracts or other arrangements or transactions involving a material amount,
payable by the Investor to the Issuer or any of its affiliates, including its
Subsidiaries, or by the Issuer or any of its affiliates, including its
Subsidiaries, to the Investor. "Affiliates" of the Issuer include its directors
and executive officers, and any other person controlling or controlled by the
Issuer. IF NONE, PLEASE SO STATE.
Answer: NONE
(e) Please provide the name and address of other person(s), if any, to
whom any proxy statements, registration statements (including notice of
effectiveness thereof), prospectuses or similar documents and information should
be delivered by the Issuer on behalf of the Investor in the future, with respect
to the Investor's shares:
Slavko Negulis
--------------------------------- --------------------------------
Pequot Capital Management, Inc.
--------------------------------- --------------------------------
500 Nyala Farm Rd.
--------------------------------- --------------------------------
Westport, Connecticut 06880
--------------------------------- --------------------------------
(f) Please advise of special stock certificate delivery
requirements for closing, if any: If escrow acct - copy of
stock cert faxed on day of close to fund 203 429-2430,
otherwise Fex ex overnight.
(g) Please advise if a NASD member has placed with you the Shares being
purchased hereunder: (Name of Member:) N/A
-----------------------------------------
(h) The Investor agrees to notify the Issuer promptly of any changes in
any of the foregoing information.
================================================================================
ACCEPTED: LENDINGTREE, INC.
By: /s/ Keith B. Hall Dated: April 12, 2002
-----------------------------
Name: Keith B. Hall
Title: Sr VP and CFO
EXHIBIT A
[Copy of Regulation M is attached]
EXHIBIT B
[Copy of Rule 501(a) under Regulation D is attached]
EXHIBIT C
DISCLOSURE DOCUMENTS
THE INVESTOR IS URGED TO REVIEW THE FOLLOWING DOCUMENTS WHICH ARE DELIVERED
HEREWITH AND INCORPORATED BY REFERENCE HEREIN AS IF RESTATED HEREIN:
1. The Issuer's Annual Report on Form 10-K for the fiscal year
ended December 31, 2001
2. The Issuer's definitive proxy statement dated March 15, 2002
relating to its 2002 Annual Meeting of Stockholders
3. The Issuer's Current Report on Form 8-K dated March 28, 2002
4. Cover Letter From Allen & Company Incorporated, as Placement
Agent to Prospective Investors dated April __, 2002
EXHIBIT D
Explanation of "BENEFICIAL OWNERSHIP"
Securities that are subject to a power to vote or dispose are deemed
beneficially owned by the person who holds such power, directly or indirectly.
This means that the same securities may be deemed beneficially owned by more
than one person, if such power is shared. In addition, the beneficial ownership
rules provide that shares which may be acquired upon exercise of an option or
warrant, or which may be acquired upon the termination of a trust, discretionary
account or similar arrangement, which can be effected within a period of 60 days
from the date of determination, are deemed to be "beneficially" owned.
Furthermore, shares that are subject to rights or powers even though such rights
or powers to acquire are not exercisable within the 60-day period may also be
deemed to be beneficially owned if the rights or powers were acquired "with the
purpose or effect of changing or influencing the control of the issuer or in
connection with or as a participant in any transaction having such purpose or
effect."
In determining whether securities are "beneficially owned," benefits
which are substantially equivalent to those of ownership by virtue of any
contract, understanding, relationship, agreement or other arrangement should
cause the securities to be listed as "beneficially owned."
Thus, for example, securities held for a person's benefit in the name
of others or in the name of any estate or trust in which such person may be
interested should also be listed. Securities held by a person's spouse, children
or other members of such person's family who are such person's dependents or who
live in such person's household should be listed as "beneficially owned" unless
such person does not enjoy benefits equivalent to those of ownership with
respect to such securities.
If a person has a proprietary or beneficial interest in a controlled
corporation, partnership, personal holding company, trust or estate which owns
of record or beneficially any securities, such person should state the amount of
such securities owned by such controlled corporation, partnership, personal
holding company, trust or estate in lieu of allocating such person's proprietary
interest, and by note or otherwise, please indicate that. In any case, the name
of the controlled corporation, partnership, personal holding company, or estate
must be stated.
In all cases the nature of the beneficial ownership should be stated.
EXHIBIT E
[Form of Issuer's Counsel Opinion]
April 15, 2002
Allen & Company Incorporated and
Purchasers of LendingTree, Inc.
Common Stock listed on
Exhibit A attached hereto
RE: LendingTree, Inc.
Ladies and Gentlemen:
We have acted as special counsel to LendingTree, Inc., a Delaware
corporation ("LendingTree"), in connection with the transactions contemplated by
the Subscription Agreements dated April 12, 2002 (the "Subscription Agreements")
between LendingTree and the purchasers party thereto. This opinion letter is
delivered pursuant to Section 8.1(d) of the Subscription Agreements. All
capitalized terms used herein and not otherwise defined herein shall have same
meanings herein as are ascribed to them in the Subscription Agreements.
As such counsel, we have examined originals or copies of the
Subscription Agreements. We have also examined such certificates of
incorporation, bylaws, minute books and other documents, records and
certificates as we have deemed relevant or necessary as the basis for our
opinions hereinafter set forth. As such counsel, we have participated in the
preparation of the Subscription Agreements and have consulted with officers of
LendingTree regarding the terms and provisions thereof.
In giving the opinions expressed herein and making our investigations
in connection herewith, we have made the following assumptions: (a) the due
authorization, execution and delivery by the parties thereto other than
LendingTree of the documents examined by us, (b) the genuineness of all
signatures of individuals, (c) the personal legal capacity of all individual
signatories, (d) the authenticity of all documents presented to us as originals
and (e) the conformity to the originals of all documents presented to us as
copies. We have also assumed that the terms of the Subscription Agreements have
not been modified, supplemented or qualified by any other agreements or
understandings (written or oral) of the parties thereto that are not identified
above, or by any course of dealing or trade custom or usage, in any manner
affecting the opinions expressed herein.
The opinions set forth herein are limited to matters governed by the
laws of the State of North Carolina, the Delaware General Corporation Law and
the Federal laws of the United States generally applicable to transactions of
the type contemplated by the Subscription Agreements, and no opinion is
Allen & Company Incorporated and
Purchasers of LendingTree, Inc.
Common Stock listed on
Exhibit A attached hereto
April 15, 2002
Page 2
expressed herein as to any other laws. We note that the Subscription Agreements
provide that they are to be governed by laws of the State of New York. Our
opinion in paragraph 2 as to the legality, validity, binding effect and
enforceability of the Subscription Agreements is intended to address their
legality, validity, binding effect and enforceability under North Carolina law
were they, notwithstanding such choice of law provision, governed by the laws of
the State of the North Carolina and no opinions are expressed herein as to any
matters of New York law. Furthermore, we express no opinion concerning any
matter respecting or affected by any laws other than laws that a lawyer in North
Carolina exercising customary professional diligence would reasonably recognize
as being directly applicable to LendingTree, the transactions contemplated by
the Subscription Agreements, or both. We also express no opinion herein
concerning any real estate, mortgage, lending or other regulatory statutes,
rules and regulations specifically enacted to regulate the particular business
of LendingTree.
We express no opinion herein concerning the possible application to the
Subscription Agreements, the transactions contemplated thereby, or the
obligations of the parties thereunder of Section 548 of the Bankruptcy Code,
11 U.S.C. ss.548, Sections 39-23.1 through 39-23.12 of the North Carolina
General Statutes or other similar laws relating to "fraudulent transfers" or
"fraudulent conveyances."
Opinions or statements herein given "to the best of our knowledge" and
the factual matters on which we have relied in giving other opinions herein are
based upon (a) information coming to our attention in the course of our
representation of LendingTree in connection with the transactions contemplated
by the Subscription Agreements, or otherwise actually known to the lawyers in
our Firm who have given substantive attention to such transactions, (b) the
representations and warranties of LendingTree contained in the Subscription
Agreements, and (c) inquiries of representatives of LendingTree whom we believe
to be reasonably well-informed as to the factual matters in question, but
without any other investigations made for purposes of giving such opinions or
statements unless otherwise stated herein.
Based upon and subject to the foregoing and the further limitations and
qualifications hereinafter expressed, it is our opinion that:
1. LendingTree has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware.
2. Each of the Subscription Agreements has been duly
authorized, executed and delivered by LendingTree and constitutes a
valid and legally binding obligation of LendingTree enforceable in
accordance with its terms.
Allen & Company Incorporated and
Purchasers of LendingTree, Inc.
Common Stock listed on
Exhibit A attached hereto
April 15, 2002
Page 3
3. The Shares have been duly authorized and, when issued and
delivered by LendingTree against payment as provided under the
Subscription Agreements, will be validly issued, fully paid and
nonassessable.
4. Except as set forth on Schedule 3.4 to the Subscription
Agreement, the issuance and sale of the Shares, the execution, delivery
and performance by LendingTree of the Subscription Agreements, and the
consummation by LendingTree of the transactions contemplated thereby,
do not and will not (i) violate the Certificate of Incorporation or
Bylaws of LendingTree, (ii) violate any Federal law of the United
States, the laws of the State of North Carolina or the Delaware General
Corporation Law, or (iii) violate or result in a breach of, or default
under, any contract or agreement filed or listed as an exhibit to
LendingTree's Annual Report on Form 10-K for its fiscal year ended
December 31, 2001.
5. All prior regulatory consents, authorizations, approvals or
filings required to be obtained or made by LendingTree under the
Federal laws of the United States, the laws of the State of North
Carolina or the Delaware General Corporation Law as a condition to the
issuance, sale and delivery of the Shares pursuant to the Subscription
Agreement have been obtained or made.
6. The registration of the Shares under the Securities Act of
1933 (the "Securities Act") is not required in connection with the sale
of the Shares by LendingTree pursuant to the Subscription Agreements.
The foregoing opinions are subject to the following assumptions,
qualifications, exceptions and limitations in addition to the other assumptions,
qualifications, exceptions and limitations set forth in this letter:
(a) Enforceability of the Subscription Agreements may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar state or Federal laws from time to time in effect which affect
the enforcement of creditors' rights generally.
(b) Enforceability of the Subscription Agreements is subject
to general equitable principles and to general standards of commercial
reasonableness.
(c) We express no opinion on the enforceability of any
provisions contained in the Subscription Agreements that (i) purport to
excuse a party for liability for its own acts or omissions, (ii)
purport to authorize a party to act in its sole discretion, (iii)
relate to the effect of laws or regulations that may be enacted in the
future, (iv) require waivers to be made only in writing or (v) purport
to waive a trial by jury.
Allen & Company Incorporated and
Purchasers of LendingTree, Inc.
Common Stock listed on
Exhibit A attached hereto
April 15, 2002
Page 4
(d) Provisions of the Subscription Agreements purporting to
require a party thereto to pay or reimburse attorneys' fees incurred by
another party, or to indemnify another party therefor, may be limited
by applicable statutes and decisions relating to the collection and
award of attorneys' fees.
(e) No opinion is expressed as to the validity or
enforceability of provisions of the Subscription Agreements relating to
indemnity and contribution for liabilities under Federal or state
securities laws.
(f) For purposes of paragraph 4, (i) we express no opinion
with respect to Federal or state securities laws, other antifraud laws
or fraudulent transfer laws and (ii) insofar as performance by
LendingTree of its obligations under the Subscription Agreements is
concerned, we express no opinion as to bankruptcy, insolvency,
reorganization, moratorium or similar state or Federal laws from time
to time in effect which affect the enforcement of creditors' rights
generally.
(g) In connection with our opinion set forth in paragraph 6
above, with your approval, we have assumed the correctness of the
representations and warranties of, and the compliance with the
agreements and undertakings by, LendingTree and the Purchasers in the
Subscription Agreements. Insofar as such opinion relates to the sale of
the Shares to the Purchasers, we have, with your approval, assumed that
all offers and resales of the Shares will be made in accordance with
the Subscription Agreement. We express no opinion, however, as to when
and in what circumstances the Shares may be resold.
The opinions contained herein are being rendered to you in connection
with the closing of the transactions contemplated by the Subscription Agreements
and may not be disclosed to or relied upon by any other person without our prior
written consent. Our opinions expressed herein are as of the date hereof, and we
undertake no obligation to advise you of any changes in applicable law or any
other matters that may come to our attention after the date hereof that may
affect our opinions expressed herein.
Very truly yours,
Exhibit A
Names and Addresses of Purchasers
Ashford Capital Management Inc.,
P.O. Box 4172
Wilmington, Delaware 19807
SMALLCAP World Fund Inc.
333 South Hope Street - 55th Floor
Los Angeles, California 90071
Pequot Navigator Offshore Fund, Inc.
c/o Pequot Capital Management, Inc.
500 Nyala Farm Road
Westport, Connecticut 06880
Pequot Scout Fund, L.P.
c/o Pequot Capital Management, Inc.
500 Nyala Farm Road
Westport, Connecticut 06880
SCHEDULE 3.4
Conflicts
1. The holders of the Company's Series A Preferred Stock have the
preemptive right to participate in certain offerings by the Company of
its securities. The Company has obtained waivers of such preemptive
rights from all holders of Series A Preferred Stock other than William
Shiebler, TASK Foundation, Inc., Victor F. Keen, Terrence D. Daniels
and Keith Hall.
2. The Company has issued the Federal Home Loan Mortgage Association
("Freddie Mac") a warrant to purchase 12,500 shares of Common Stock.
The terms of such warrant require the Company to give Freddie Mac ten
days prior notice of any issuance of Common Stock below fair market
value. The Company has not delivered this notice, although it intends
to deliver such notice as soon as practicable after the date hereof.
SCHEDULE 3.9
Capitalization
OUTSTANDING STOCK OPTIONS
o As of April 11, 2002 there were options outstanding to acquire
6,411,223 shares of LendingTree, Inc. common stock.
OUTSTANDING COMMON STOCK WARRANTS
o As of April 11, 2002 there were warrants to acquire 399,710
shares of LendingTree, Inc. common stock outstanding.
COMMON STOCK ISSUABLE UPON CONVERSION OF SERIES A PREFERRED STOCK
o As of April 11, 2002 the 6,842,858 outstanding shares of
Series A Preferred Stock were convertible into 7,489,443
shares of LendingTree, Inc. common stock. Pursuant to the
Certificate of Designations, Preferences and Rights of Series
A 8% Convertible Preferred Stock of LendingTree, Inc., the
holders of the Series A Preferred Stock have certain
preemptive rights. See Schedule 3.4. The holders of Series A
Preferred Stock also have certain redemption rights pursuant
to the Certificate of Designations.
COMMON STOCK RESERVED FOR ISSUANCE
o LendingTree, Inc. has an Employee Stock Purchase Plan, under
which a total of 550,000 shares of LendingTree, Inc. common
stock have been reserved for issuance. As of April 11, 2002, a
total of 286,975 shares have been issued under this plan.
o LendingTree, Inc. maintains the 1997 Stock Option Plan, the
1998 Stock Option Plan, the 1999 Stock Option Plan and the
2001 Stock Incentive Plan under which there are, as of April
11, 2002, a combined 1,322,846 shares of Common Stock
available for the grant of options in the future.
TREASURY STOCK
o As of April 11, 2002 there were 664,321 shares of issued, but
not outstanding shares of LendingTree common stock accounted
for as Treasury Stock of LendingTree, Inc.
POTENTIALLY ISSUABLE SECURITIES
LendingTree, Inc. and the Federal Home Loan Mortgage Corporation are parties to
a credit facility agreement requires that a portion of the quarterly interest
payments be in the form of warrants to purchase our common stock at an exercise
price of $.01 per share. The amount of warrants to be issued will be calculated
by dividing the amount of interest to be paid in the
form of warrants by $3.99. The amount of interest expense that we will record
will be based upon the estimated fair value of the warrants on the date that
they are issued. As of April 11, 2002, no amounts had been borrowed under this
facility and no warrant-based interest charges had been incurred. The Federal
Home Loan Mortgage Corporation would also be entitled to additional warrants if
LendingTree, Inc. issues any shares of common stock or convertible securities at
a price less than the fair market value per share of common stock.
Under our 2001 Stock Incentive Plan, each non-employee director who is
a beneficial owner of (or represents an organization that is a beneficial owner
of) less than 5% of our combined voting power, upon his or her initial election
to the board, is granted a non-qualified stock option to purchase a number of
shares of common stock calculated by dividing $66,000 by one-third of the
average closing price of the common stock for five trading days immediately
preceding the grant date. Additionally, immediately following each annual
meeting of the company's stockholders, each such non-employee director then
serving is granted a non-qualified stock option to purchase a number of shares
of our common stock, calculated by dividing $22,000 by one-third of the average
closing price of our common stock for five trading days immediately preceding
the grant date. In lieu of the annual option grants, directors may elect to
receive an equivalent number of shares of restricted stock. The 2002 Annual
Meeting is scheduled for April 24, 2002, at which time, 6 directors will be
eligible for the compensation noted above.
SCHEDULE 3.11
Litigation
1. Block Financial Corporation v. LendingTree, Inc., Case Number
01-1007-CV-W-3 [United States District Court for the Western District of
Missouri, filed September 10, 2001]. See Item 3 on Page 13 of LendingTree's most
recent 10-K entitled "Legal Proceedings" for a summary of this litigation.
2. New York State Banking Department ("NYSBD") Regulatory Examination.
Please see Item 3 on Page 13 of LendingTree's most recent 10-K entitled "Legal
Proceedings" for a summary of the is regulatory matter.
SCHEDULE 3.12
Registration Rights
1. Registration Rights Agreement dated March 7, 2001 by and among
LendingTree, Inc. and the signing stockholders listed therein. (Requires
registration of shares of common stock issuable upon conversion of the series A
preferred shares, which registration was effected in June 2001.)
2. Registration Rights Agreement dated September 20, 1999 by and among
LendingTree, Inc. and the signing stockholders listed therein. (Includes
piggyback registration rights, which registration was effected in June 2001.)
3. Registration Rights Agreement dated March 6, 2001 by and between
LendingTree, Inc. and Paul Revere Capital Partners, Ltd. (Requires registration
of shares of common stock issuable under the Paul Revere equity line, which
registration was effected in June 2001.)
4. The Warrant dated September 20, 1999 to Prudential Securities
Incorporated ("Prudential") contain certain piggyback registration rights.
Prudential currently has piggyback registration rights with respect to 30,605
shares of common stock.
Exhibit 10.4
SUBSCRIPTION AGREEMENT
This Subscription Agreement (this "Agreement") is entered into as of
the date set forth on the signature page hereof by and between LendingTree,
Inc., a Delaware corporation (together with its successors and permitted
assigns, the "Issuer"), and the undersigned investor (together with its
successors and permitted assigns, the "Investor"). Capitalized terms used but
not otherwise defined herein shall have the meanings set forth in Section 9.1.
RECITALS
Subject to the terms and conditions of this Agreement, the Investor
desires to subscribe for and purchase, and the Issuer desires to issue and sell
to the Investor, certain shares of the Issuer's common stock, par value $.01 per
share (the "Common Stock"). The Issuer is offering an aggregate of approximately
Five Hundred Thousand (500,000) shares of Common Stock in a private placement to
the Investor and other investors at a purchase price of $11.88 per share and on
the other terms and conditions contained in this Agreement (the "Offering"),
provided that the Issuer reserves the right to sell a lesser or greater number
of shares.
TERMS OF AGREEMENT
In consideration of the mutual representations and warranties,
covenants and agreements contained herein, the parties hereto agree as follows:
ARTICLE 1
SUBSCRIPTION AND ISSUANCE OF COMMON STOCK
1.1 SUBSCRIPTION AND ISSUANCE OF COMMON STOCK. Subject to the terms and
conditions of this Agreement, the Issuer will issue and sell to the Investor and
the Investor subscribes for and will purchase from the Issuer the number of
shares of Common Stock set forth on the signature page hereof (the "Shares") for
the aggregate purchase price set forth on the signature page hereof, which shall
be equal to the product of the number of Shares subscribed for by the Investor
times the per share purchase price specified in the above Recitals to this
Agreement (the "Purchase Price").
1.2 LEGEND. Any certificate or certificates representing the Shares
shall bear the following legend:
-1-
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW. THESE SECURITIES
MAY NOT BE PLEDGED, HYPOTHECATED, SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR ANY EXEMPTION THEREFROM UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND ANY APPLICABLE STATE SECURITIES LAW.
ARTICLE 2
CLOSING
2.1 CLOSING. The closing of the transactions contemplated herein (the
"Closing") shall take place on a date designated by the Issuer, which date shall
be on or before April 15, 2002. The Closing shall take place at the offices of
Heller Ehrman White & McAuliffe, counsel for the Issuer, 711 Fifth Avenue, New
York, New York 10022. At the Closing, unless the Investor and the Issuer
otherwise agree (i) the Investor shall pay the Purchase Price to the Issuer, by
wire transfer of immediately available funds to an account designated in writing
by the Issuer; (ii) the Issuer shall issue to the Investor the Shares, and
deliver to the Investor certificates for the Shares duly registered in the name
of the Investor; and (iii) all other agreements and other documents referred to
in this Agreement which are required for the Closing shall be executed and
delivered (if that is not done prior to the Closing).
2.2 TERMINATION. This Agreement may be terminated at any time prior to
the Closing:
(a) by mutual written consent of the Issuer and the Investor;
(b) by the Investor, upon a breach of any material representation
and warranty, covenant or agreement on the part of the Issuer set forth in this
Agreement, or if any material representation and warranty of the Issuer shall
have become untrue in any material respect, in either case such that the
conditions in Section 8.1 would be incapable of being satisfied by the date of
the Closing; or
(c) by the Issuer, upon a breach of any material representation and
warranty, covenant or agreement on the part of the Investor set forth in this
Agreement, or if any material representation and warranty of the Investor shall
have become untrue in any material respect, in either case such that the
conditions in Section 8.2 would be incapable of being satisfied by the date of
the Closing.
2.3 EFFECT OF TERMINATION. In the event of termination of this
Agreement pursuant to Section 2.2, this Agreement shall forthwith become void,
there shall be no liability on the part of the
-2-
Issuer or the Investor to each other and all rights and obligations of any party
hereto shall cease; provided, however, that nothing herein shall relieve any
party from liability for the willful breach of any of its representations and
warranties, covenants or agreements set forth in this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE ISSUER
As a material inducement to the Investor entering into this Agreement
and subscribing for the Shares, the Issuer represents and warrants to the
Investor as follows:
3.1 CORPORATE STATUS. The Issuer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
3.2 CORPORATE POWER AND AUTHORITY. The Issuer has the corporate power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder and consummate the transactions contemplated hereby. At
the time of the closing, the Issuer will have taken all necessary corporate
action to authorize the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby.
3.3 ENFORCEABILITY. This Agreement has been duly executed and delivered
by the Issuer and constitutes a legal, valid and binding obligation of the
Issuer, enforceable against the Issuer in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and general equitable principles, regardless of
whether such enforceability is considered in a proceeding at law or in equity
and except as rights to indemnity or contribution hereunder may be limited by
Federal or state securities laws.
3.4 NO VIOLATION. The execution and delivery by the Issuer of this
Agreement, the consummation of the transactions contemplated hereby, and the
compliance by the Issuer with the terms and provisions hereof (including,
without limitation, the Issuer's issuance to the Investor of the Shares as
contemplated by and in accordance with this Agreement), will not, except as set
forth on Schedule 3.4, result in a default under (or give any other party the
right, with the giving of notice or the passage of time (or both), to declare a
default or accelerate any obligation under) or violate the Certificate of
Incorporation or By-Laws of the Issuer or any material Contract to which the
Issuer is a party (except to the extent such a default would not, in the case of
a Contract, have a Material Adverse Effect on the Issuer), or any Requirement of
Law applicable to the Issuer, or result in the creation or imposition of any
material Lien upon any of the capital stock, properties or assets of the Issuer
or any of its Subsidiaries (except where such Lien would not have a Material
Adverse Effect on the Issuer).
-3-
3.5 CONSENTS/APPROVALS. Except for the filing of a registration
statement in accordance with Article 6 hereof and the filing of a Form D with
the SEC and as applicable, state agencies or authorities, no material consents,
filings, authorizations or other actions of any Governmental Authority are
required to be obtained or made by the Issuer for the Issuer's execution,
delivery and performance of this Agreement which have not already been obtained
or made. No consent, approval, waiver or other action by any Person under any
Contract to which the Issuer is a party or by which the Issuer or any of its
properties or assets are bound is required or necessary for the execution,
delivery or performance by the Issuer of this Agreement and the consummation of
the transactions contemplated hereby, except where the failure to obtain such
consents would not have a Material Adverse Effect on the Issuer.
3.6 VALID ISSUANCE. Upon payment of the Purchase Price by the Investor
and delivery to the Investor of the certificates for the Shares, such Shares
will be validly issued, fully paid and non-assessable.
3.7 SEC FILINGS, OTHER FILINGS AND NASDAQ COMPLIANCE. The Issuer has
timely made all filings required to be made by it under the Exchange Act. The
Issuer has delivered or made accessible to the Investor true, accurate and
complete copies of (i) Issuer's Annual Report on Form 10-K for the fiscal year
ended December 31, 2001; (ii) the Issuer's definitive proxy statement dated
March 15, 2002 relating to its 2002 Annual Meeting of Stockholders; and (iii)
the Issuer's Current Report on Form 8-K dated March 28, 2002 (the "SEC
Reports"). The SEC Reports, when filed, complied in all material respects with
all applicable requirements of the Exchange Act. None of the SEC Reports, at the
time of filing, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein not misleading in light of the circumstances in
which they were made. The Issuer has filed in a timely manner all documents that
the Issuer was required to file under the Exchange Act during the 12 months
preceding the date of this Agreement. The Issuer is currently eligible to
register the resale of the Shares in a secondary offering on a registration
statement on Form S-3 under the Securities Act. The Issuer has taken all
necessary actions required to be taken to date to ensure its continued inclusion
in, and the continued eligibility of the Common Stock for trading on, The Nasdaq
Stock Market under all currently effective inclusion requirements. Each balance
sheet included in the SEC Reports (including any related notes and schedules)
fairly presents in all material respects the consolidated financial position of
the Issuer as of its date, and each of the other financial statements included
in the SEC Reports (including any related notes and Schedules) fairly presents
in all material respects the consolidated results of operations of the Issuer
for the periods or as of the dates therein set forth in accordance with GAAP
consistently applied during the periods involved.
3.8 COMMISSIONS. The Issuer has not incurred any other obligation for
any finder's or broker's or agent's fees or commissions in connection with the
transactions contemplated hereby, except that the Issuer will pay a 4%
commission in cash to Allen & Company Incorporated ("Allen"), the placement
agent for the Offering.
-4-
3.9 CAPITALIZATION. The authorized capital stock of the Issuer consists
of 100,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock.
All issued and outstanding shares of capital stock of the Issuer have been, and
as of the Closing Date will be, duly authorized and validly issued and are and
will be fully paid and non-assessable. As of the date of this Agreement, the
Issuer has issued and outstanding 19,686,744 shares of Common Stock and
6,842,858 shares of Preferred Stock. Except as described in this Section 3.9 and
on Schedule 3.9, there are no outstanding options, warrants, rights (including
conversion or preemptive rights and rights of first refusal and similar rights)
or agreements, orally or in writing, for the purchase or acquisition from the
Issuer of any shares of capital stock and the Issuer is not a party to or
subject to any agreement or understanding, and there is no agreement or
understanding between any person and/or entities, which affects or relates to
the voting or giving of written consents with respect to any security or by a
director of the Issuer. Except as set forth on Schedule 3.9, the Issuer has no
obligation, contingent or otherwise, to redeem or repurchase any equity security
or any security that is a combination of debt and equity.
3.10 MATERIAL CHANGES. Except as set forth in the SEC Reports or as
otherwise contemplated herein, since December 31, 2001, there has been no
Material Adverse Change in the Issuer and its subsidiaries taken as a whole.
Except as set forth in the SEC Reports, since December 31, 2001, there has not
been (i) any direct or indirect redemption, purchase or other acquisition by the
Issuer of any shares of the Common Stock or (ii) declaration, setting aside or
payment of any dividend or other distribution by the Issuer with respect to the
Common Stock (other than the accrual of dividends on the Series A Preferred
Stock of the Issuer which is convertible into Common Stock of the Issuer).
3.11 LITIGATION. Except as disclosed on Schedule 3.11 or as set forth
in the SEC Reports, there is no action, suit, proceeding or investigation
pending or, to the Issuer's knowledge, currently threatened against the Issuer
or any of its subsidiaries that questions the validity of this Agreement or the
right of the Issuer to enter into it, or to consummate the transactions
contemplated hereby, or that might result, either individually or in the
aggregate, in a Material Adverse Effect on the Issuer or any change in the
current equity ownership of the Issuer. The foregoing includes, without
limitation, actions pending or, to the Issuer's knowledge, threatened involving
the prior employment of any of the Issuer's employees or their use in connection
with the Issuer's business of any information or techniques allegedly
proprietary to any of their former employers. Neither the Issuer nor any of its
subsidiaries is a party to or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality not of general applicability. Except as set forth in the SEC
Reports, there is no action, suit, proceeding or investigation by the Issuer or
any of its subsidiaries currently pending or which the Issuer or any of its
subsidiaries currently intends to initiate.
3.12 RIGHTS OF REGISTRATION AND VOTING RIGHTS. Except as contemplated
in this Agreement and as disclosed on Schedule 3.12, the Issuer has not granted
or agreed to grant any
-5-
registration rights, including piggyback rights, to any person or entity, and no
stockholder of the Issuer has entered into any agreements with respect to the
voting of capital shares of the Issuer.
3.13 OFFERINGS. Subject in part to the truth and accuracy of Investor's
representations and warranties set forth in this Agreement, the offer, sale and
issuance of the Shares as contemplated by this Agreement are exempt from the
registration requirements of the Securities Act and any applicable state
securities laws, and neither the Issuer nor any authorized agent acting on its
behalf will take any action hereafter that would cause the loss of such
exemption.
3.14 DISCLOSURE. The Issuer is aware of no facts which lead it to
believe that the Disclosure Documents, as of their respective dates, contain any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
As a material inducement to the Issuer entering into this Agreement and
issuing the Shares, the Investor represents and warrants to the Issuer as
follows:
4.1 POWER AND AUTHORITY. The Investor, if other than a natural person,
is an entity duly organized, validly existing and in good standing under the
laws of the state of its incorporation or formation. The Investor has the
corporate, partnership or other power and authority under applicable law to
execute and deliver this Agreement and consummate the transactions contemplated
hereby, and has all necessary authority to execute, deliver and perform its
obligations under this Agreement and consummate the transactions contemplated
hereby. The Investor has taken all necessary action to authorize the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby.
4.2 NO VIOLATION. The execution and delivery by the Investor of this
Agreement, the consummation of the transactions contemplated hereby, and the
compliance by the Investor with the terms and provisions hereof, will not result
in a default under (or give any other party the right, with the giving of notice
or the passage of time (or both), to declare a default or accelerate any
obligation under) or violate any charter or similar documents of the Investor,
if other than a natural person, or any Contract to which the Investor is a party
or by which it or its properties or assets are bound, or violate any Requirement
of Law applicable to the Investor, other than such violations or defaults which,
individually and in the aggregate, do not and will not have a Material Adverse
Effect on the Investor. The Investor is familiar with Regulation M promulgated
under the Exchange Act, a copy of which is attached hereto as Exhibit A, and is
in full compliance with the provisions thereof with respect to the transactions
contemplated hereby.
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4.3 CONSENTS/APPROVALS. No consents, filings, authorizations or actions
of any Governmental Authority are required for the Investor's execution,
delivery and performance of this Agreement. No consent, approval, waiver or
other actions by any Person under any Contract to which the Investor is a party
or by which the Investor or any of its properties or assets are bound is
required or necessary for the execution, delivery and performance by the
Investor of this Agreement and the consummation of the transactions contemplated
hereby.
4.4 ENFORCEABILITY. This Agreement has been duly executed and delivered
by the Investor and constitutes a legal, valid and binding obligation of the
Investor, enforceable against the Investor in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditor's rights generally and general equitable principles, regardless of
whether enforceability is considered in a proceeding at law or in equity.
4.5 INVESTMENT INTENT. The Investor is acquiring the Shares hereunder
for its own account and with no present intention of distributing or selling
such Shares and further agrees not to transfer such Shares in violation of the
Securities Act or any applicable state securities law, and no one other than the
Investor has any beneficial interest in the Shares. The Investor agrees that it
will not sell or otherwise dispose of any of the Shares unless such sale or
other disposition has been registered under the Securities Act or, in the
opinion of counsel acceptable to the Issuer, is exempt from registration under
the Securities Act and has been registered or qualified or, in the opinion of
such counsel acceptable to the Issuer, is exempt from registration or
qualification under applicable state securities laws. The Investor understands
that the offer and sale by the Issuer of the Shares being acquired by the
Investor hereunder has not been registered under the Securities Act by reason of
their contemplated issuance in transactions exempt from the registration and
prospectus delivery requirements of the Securities Act pursuant to Section 4(2)
thereof and Regulation D promulgated thereunder, and that the reliance of the
Issuer on such exemption from registration is predicated in part on these
representations and warranties of the Investor. The Investor acknowledges that
pursuant to Section 1.2 of this Agreement a restrictive legend consistent with
the foregoing has been or will be placed on the certificates for the Shares.
4.6 ACCREDITED INVESTOR. The Investor is an "accredited investor" as
such term is defined in Rule 501(a) of Regulation D under the Securities Act (a
copy of which is attached hereto as Exhibit B), and has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of the investment to be made by it hereunder.
4.7 ADEQUATE INFORMATION. The Investor has received from the Issuer,
and has reviewed, such information which the Investor considers necessary or
appropriate to evaluate the risks and merits of an investment in the Shares,
including without limitation, the documents listed on Exhibit C, which have been
received by Investor as part of an informational packet of materials from the
Issuer. The documents listed in Exhibit C are referred to herein as the
"Disclosure Documents."
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4.8 OPPORTUNITY TO QUESTION. The Investor has had the opportunity to
question, and has questioned, to the extent it has deemed necessary or
appropriate, representatives of the Issuer so as to receive answers and verify
information obtained in the Investor's examination of the Issuer, including the
information that the Investor has received and reviewed as referenced in Section
4.7 hereof in relation to its investment in the Shares.
4.9 NO OTHER REPRESENTATIONS. No oral or written representations have
been made to the Investor in connection with the Investor's acquisition of the
Shares which were in any way inconsistent with the information reviewed by the
Investor. The Investor acknowledges that no representations or warranties of any
type or description have been made to it by any Person with regard to the
Issuer, any of its Subsidiaries, any of their respective businesses, properties
or prospects or the investment contemplated herein, other than the
representations and warranties set forth in Article 3 hereof.
4.10 KNOWLEDGE AND EXPERIENCE. The Investor has such knowledge and
experience in financial, tax and business matters, including substantial
experience in evaluating and investing in common stock and other securities
(including the common stock and other securities of speculative companies), so
as to enable the Investor to utilize the information referred to in Section 4.7
hereof and any other information made available by the Issuer to the Investor in
order to evaluate the merits and risks of an investment in the Shares and to
make an informed investment decision with respect thereto.
4.11 INDEPENDENT DECISION. The Investor is not relying on the Issuer or
on any legal or other opinion in the materials reviewed by the Investor with
respect to the financial or tax considerations of the Investor relating to its
investment in the Shares. The Investor has relied solely on the representations
and warranties, covenants and agreements of the Issuer in this Agreement
(including the Exhibits hereto) and on its examination and independent
investigation in making its decision to acquire the Shares.
4.12 COMMISSIONS. The Investor has not incurred any obligation for any
finder's or broker's or agent's fees or commissions in connection with the
transactions contemplated hereby.
ARTICLE 5
COVENANTS
5.1 PUBLIC ANNOUNCEMENTS. The Investor agrees not to make any public
announcement or issue any press release or otherwise publicly disseminate any
information about the subject matter of this Agreement. The Issuer shall have
the right to make such public announcements and shall control, in its sole and
absolute discretion, the timing, form and content of all press releases or other
public communications of any sort relating to the subject matter of this
Agreement, and the method of their release, or publication thereof.
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5.2 FURTHER ASSURANCES. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of the terms of this Agreement and the transactions contemplated hereby. Each of
the Investor and the Issuer shall make on a prompt and timely basis all
governmental or regulatory notifications and filings required to be made by it
with or to any Governmental Authority in connection with the consummation of the
transactions contemplated hereby. The Issuer and the Investor each agree to
cooperate with the other in the preparation and filing of all forms,
notifications, reports and information, if any, required or reasonably deemed
advisable pursuant to any Requirement of Law or the rules of Nasdaq Stock Market
in connection with the transactions contemplated by this Agreement and to use
their respective best efforts to agree jointly on a method to overcome any
objections by any Governmental Authority to any such transactions. Except as may
be specifically required hereunder, neither of the parties hereto or their
respective Affiliates shall be required to agree to take any action that in the
reasonable opinion of such party would result in or produce a Material Adverse
Effect on such party.
5.3 NOTIFICATION OF CERTAIN MATTERS. Each party hereto shall give
prompt notice to the other party of the occurrence, or non-occurrence, of any
event which would be likely to cause any representation and warranty herein to
be untrue or inaccurate in any material respect, or any covenant, condition or
agreement herein not to be complied with or satisfied in any material respect.
5.4 CONFIDENTIAL INFORMATION; STANDSTILL. (a) The Investor agrees that
no portion of the Confidential Information (as defined below) shall be disclosed
to third parties, except as may be required by law, without the prior express
written consent of the Issuer provided that the Investor may share such
information with such of its officers and professional advisors as may need to
know such information to assist the Investor in its evaluation thereof on the
condition that such parties agree to be bound by the terms hereof. All
Confidential Information received by the Investor shall be promptly returned or
destroyed, as directed by the Issuer. "Confidential Information" means all oral
or written data, reports, records or materials and any and all other
confidential or disclosure information or materials obtained from the Issuer or
its professional advisors, which are not yet publicly available. Confidential
Information excludes information that is publicly available or already known to
the Investor through a source not bound by any confidentiality obligation.
(b) For a period of one year from the Closing Date, the Investor
will not, without the prior written consent of the Issuer (i) propose to enter
into any acquisition of all or substantially of the assets or stock of the
Issuer or a merger or other business combination involving the Issuer; (ii) seek
to control the management, Board of Directors or policies of the Issuer; or
(iii) form, join or in any way participate in a "group" (within the meaning of
Section 13(d) (3) of the Securities Act of 1934) with respect to any securities
of the Issuer in connection with any of the foregoing. Notwithstanding the
foregoing, this section shall not restrict the Investor's acquisition of shares
of the Issuer's Common Stock through open market purchases.
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ARTICLE 6
REGISTRATION RIGHTS
The Investor shall have the following registration rights with respect
to the Registrable Securities owned by it:
6.1 TRANSFER OF REGISTRATION RIGHTS. The Investor may assign the
registration rights with respect to the Shares to any party or parties to which
it may from time to time transfer the Shares, provided that the transferee
acquires at least 20,000 shares of Common Stock of the Issuer and agrees in
writing with the Issuer to be bound by the applicable provisions of this
Agreement regarding such registration rights and indemnification relating
thereto. Upon assignment of any registration rights pursuant to this Section
6.1, the Investor shall deliver to the Issuer a notice of such assignment which
includes the identity and address of any assignee and such other information
reasonably requested by the Issuer in connection with effecting any such
registration (collectively, the Investor and each such subsequent holder is
referred to as a "Holder").
6.2 REQUIRED REGISTRATION. As promptly as practicable after the
Closing, but in no event later than forty-five (45) days after the date of the
Closing, the Issuer agrees to file a Registration Statement on Form S-3 (the
"Shelf Registration Statement") to register the resale of all of the Shares. The
Issuer shall use reasonable efforts to cause the SEC to declare the Shelf
Registration Statement effective as soon as practicable after filing and to
thereafter maintain the effectiveness of the Shelf Registration Statement until
such time as the Issuer reasonably determines, based on an opinion of counsel,
that the Holders will be eligible to sell all of the Shares then owned by the
Holders without the need for continued registration of the Shares in the three
month period immediately following the termination of the effectiveness of the
Shelf Registration Statement. The Issuer's obligations contained in this Section
6.2 shall terminate on the second anniversary of the date on which the Shares
are issued hereunder.
6.3 REGISTRATION PROCEDURES.
(a) In case of the Shelf Registration Statement effected by the
Issuer subject to this Article 6, the Issuer shall keep the Investor, on behalf
of each Holder, advised in writing as to the initiation of such registration,
and as to the completion thereof. In addition, subject to Section 6.2 above, the
Issuer shall, to the extent applicable to the Shelf Registration Statement:
(i) prepare and file with the SEC such amendments and
supplements to the Shelf Registration Statement as may be necessary to keep such
registration effective and comply with provisions of the Securities Act with
respect to the disposition of all securities covered thereby during the period
referred to in Section 6.2;
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(ii) update, correct, amend and supplement the Shelf
Registration Statement as necessary;
(iii) notify Holder when the Shelf Registration Statement is
declared effective by the SEC, and furnish such number of prospectuses and other
documents incident thereto as Holder may reasonably request from time to time;
(iv) use its commercially reasonable efforts to register or
qualify such Registrable Securities under such other securities or blue sky laws
of such jurisdictions of the United States where an exemption is not available
and as Holder may reasonably request to enable it to consummate the disposition
in such jurisdiction of the Registrable Securities (provided that the Issuer
will not be required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this provision, or
(ii) consent to general service of process in any such jurisdiction, or (iii)
subject itself to taxation in any jurisdiction where it is not already subject
to taxation);
(v) notify Holder at any time when a prospectus relating to the
Registrable Securities is required to be delivered under the Securities Act, of
the happening of any event as a result of which the prospectus included in the
Shelf Registration Statement contains an untrue statement of a material fact or
omits any fact necessary to make the statements therein not misleading, and at
the request of Holder, the Issuer will as promptly as it reasonably deems
practicable prepare a supplement or amendment to such prospectus, so that, as
thereafter delivered to purchasers of such shares, such prospectus will not
contain any untrue statements of a material fact or omit to state any fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;
(vi) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Issuer are then
listed and obtain all necessary approvals from the Nasdaq Stock Market for
trading thereon;
(vii) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of the Shelf
Registration Statement; and
(viii) upon the sale of any Registrable Securities pursuant to
the Shelf Registration Statement, direct the transfer agent to remove all
restrictive legends from all certificates or other instruments evidencing the
Registrable Securities.
(b) Notwithstanding anything stated or implied to the contrary in
Section 6.3(a) above, the Issuer shall not be required to consent to or
otherwise to take any actions to facilitate any underwritten offering of the
Registrable Securities or to consent to any specific underwriter participating
in any underwritten public offering of the Registrable Securities.
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(c) Each Holder agrees that upon receipt of any notice from the
Issuer of the happening of any event of the kind described in Section 6.3(a)(v),
such Holder will forthwith discontinue such Holder's disposition of Registrable
Securities pursuant to the registration statement relating to such Registrable
Securities until such Holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 6.3(a)(v) and, if so directed by the
Issuer, will deliver to the Issuer at the Issuer's expense all copies, other
than permanent file copies, then in such Holder's possession, of the prospectus
relating to such Registrable Securities current at the time of receipt of such
notice. Without limiting the foregoing, each Holder shall suspend, upon request
of the Issuer, any disposition of Registrable Securities pursuant to the
registration statement relating to such Registrable Securities during any three
periods (each, a "Blackout Period"), provided that no Blackout Period shall
exceed sixty (60) days and there may only be two Blackout Periods during any
twelve month period, when the Issuer determines in good faith that offers and
sales pursuant thereto should not be made by reason of the presence of material
undisclosed circumstances or developments with respect to which the disclosure
would be premature or would have an adverse effect on the Issuer.
(d) As a condition to the inclusion of its Registrable Securities
in the Shelf Registration Statement, each Holder shall furnish to the Issuer
such information regarding such Holder and the distribution of Registrable
Securities proposed by such Holder as the Issuer may request in writing.
(e) Each Holder hereby covenants with the Issuer (i) not to make
any sale of the Registrable Securities without effectively causing the
prospectus delivery requirements under the Securities Act to be satisfied and
(ii) if such Registrable Securities are to be sold by any method or in any
transaction other than on the Nasdaq National Market or in privately negotiated
transactions, or in a combination of such methods, to notify the Issuer at least
five (5) business days prior to the date on which the Holder first offers to
sell any such Registrable Securities by such method or in any such transaction
and, in any event, the Holder will not sell Registrable Securities by such
method or in such transaction unless the Issuer is reasonably satisfied that
there is an appropriate description of such method or transaction in the Shelf
Registration Statement.
(f) Except as required by law, all expenses incurred by the Issuer
in complying with this Article 6, including but not limited to, all
registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel and accountants for the Issuer, blue sky fees and
expenses (including fees and disbursements of counsel related to all blue sky
matters) ("Registration Expenses") incurred in connection with any registration,
qualification or compliance pursuant to this Article 6 shall be borne by the
Issuer. All underwriting discounts and selling commissions applicable to a sale
incurred in connection with any registration of Registrable Securities and the
legal fees and other expenses of a Holder shall be borne by such Holder.
6.4 FURTHER INFORMATION. If Registrable Securities owned by a Holder
are included in any registration, such Holder shall furnish the Issuer such
information regarding itself as the Issuer may reasonably request and as shall
be required in connection with any registration (or amendment
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thereto) referred to in this Agreement, and Holder shall indemnify the Issuer
with respect thereto in accordance with Article 7 hereof. The Investor hereby
represents and warrants to the Issuer that it has accurately and completely
provided the requested information and answered the questions numbered (a)
through (d) on the signature pages of this Agreement, and the Investor agrees
and acknowledges that the Issuer may rely on such information as being true and
correct for purposes of preparing and filing the Shelf Registration Statement at
the time of filing thereof and at the time it is declared effective, unless the
Investor has notified the Issuer in writing to the contrary prior to such time.
ARTICLE 7
INDEMNIFICATION
7.1 INDEMNIFICATION GENERALLY. The Issuer, on the one hand, and the
Investor, on the other hand (each an "Indemnifying Party"), shall indemnify the
other from and against any and all losses, damages, liabilities, claims,
charges, actions, proceedings, demands, judgments, settlement costs and expenses
of any nature whatsoever (including, without limitation, reasonable attorneys'
fees and expenses) or deficiencies resulting from any breach of a representation
and warranty, covenant or agreement by the Indemnifying Party and all claims,
charges, actions or proceedings incident to or arising out of the foregoing.
7.2 INDEMNIFICATION RELATING TO REGISTRATION RIGHTS.
(a) With respect to any registration, effected or to be effected
pursuant to Article 6 of this Agreement, the Issuer shall indemnify each Holder
of Registrable Securities whose securities are included or are to be included
therein, each of such Holder's directors and officers, each underwriter (as
defined in the Securities Act) of the securities sold by such Holder (if any),
and each Person who controls (within the meaning of the Securities Act) any such
Holder or underwriter (a "Controlling Person") from and against all losses,
damages, liabilities, claims, charges, actions, proceedings, demands, judgments,
settlement costs and expenses of any nature whatsoever (including, without
limitation, reasonable attorneys' fees and expenses) or deficiencies of any such
Holder or any such underwriter or Controlling Person concerning:
(i) any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or other document
(including any related registration statement, notification or the like)
incident to any such registration;
(ii) any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statement
therein, in the light of the circumstances under which it was made, not
misleading; or
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(iii) any violation by the Issuer of the Securities Act or any
rule or regulation promulgated thereunder applicable to the Issuer, or of any
blue sky or other state securities laws or any rule or regulation promulgated
thereunder applicable to the Issuer,
in each case, relating to any action or inaction required of the Issuer in
connection with any such registration, and subject to Section 7.3 below will
reimburse each such Person entitled to indemnity under this Section 7.2(a) for
all legal and other expenses reasonably incurred in connection with
investigating or defending any such loss, damage, liability, claim, charge,
action, proceeding, demand, judgment, settlement or deficiency; provided,
however, that, the foregoing indemnity and reimbursement obligation shall not be
applicable to the extent that any such matter arises out of or is based on (A)
any untrue statement (or alleged untrue statement) or omission (or alleged
omission) made in reliance upon and in conformity with written information
furnished to the Issuer by or on behalf of such Holder or by or on behalf of
such an underwriter specifically for use in such prospectus, offering circular
or other document or (B) a Holder's or any of its representatives' failure to
deliver a copy of the registration statement or prospectus or any amendment or
supplement thereto (the current version of which shall have been provided to
holder by the Issuer as contemplated by Section 6.3 hereof) to any purchaser of
shares in accordance with the requirements of applicable law.
(b) With respect to any registration, qualification or compliance
effected or to be effected pursuant to this Agreement, each Holder of
Registrable Securities whose securities are included or are to be included
therein, shall indemnify the Issuer, each of the Issuer's directors and officers
and each Person who controls (within the meaning of the Securities Act) the
Issuer or any of its directors or officers from and against all losses, damages,
liabilities, claims, charges, actions, proceedings, demands, judgments,
settlement costs and expenses of any nature whatsoever (including, without
limitation, reasonable attorneys' fees and expenses but which amount shall not
in any circumstance exceed the Purchase Price paid by the Investor) or
deficiencies of the Issuer concerning:
(i) any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or other document
(including any related registration statement, notification or the like)
incident to any such registration, qualification or compliance;
(ii) any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statement
therein, in the light of the circumstances under which it was made, not
misleading; or
(iii) any violation by such Holder of the Securities Act or any
rule or regulation promulgated thereunder applicable to the Issuer or such
Holder or of any blue sky or other state securities laws or any rule or
regulation promulgated thereunder applicable to the Issuer or such Holder,
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in each case, relating to any action or inaction required of such Holder in
connection with any such registration, qualification or compliance, and subject
to Section 7.3 below will reimburse each such person entitled to indemnity under
this Section 7.2(b) for all legal and other expenses reasonably incurred in
connection with investigating or defending any such loss, damage, liability,
claim, charge, action, proceeding, demand, judgment, settlement or deficiency;
provided, however, that, the foregoing indemnity and reimbursement obligation
shall only be applicable to the extent that any such matter arises out of or is
based on (A) any untrue statement (or alleged untrue statement) or omission (or
alleged omission) made in reliance upon and in conformity with written
information furnished to the Issuer by or on behalf of the Holder specifically
for use in such prospectus, offering circular or other document or (B) a
Holder's or any of its representatives' failure to deliver a copy of the
registration statement or prospectus or any amendment or supplement thereto to
any purchaser of shares in accordance with the requirements of applicable law.
7.3 INDEMNIFICATION PROCEDURES. Each Person entitled to indemnification
under this Section (an "Indemnified Party") shall give notice as promptly as
reasonably practicable to each party required to provide indemnification under
this Section (an "Indemnifying Party") of any action commenced against or by it
in respect of which indemnity may be sought hereunder, but failure to so notify
an Indemnifying Party shall not relieve such Indemnifying Party from any
liability that it may have otherwise than on account of this indemnity agreement
so long as such failure shall not have materially prejudiced the position of the
Indemnifying Party. Upon such notification, the Indemnifying Party shall assume
the defense of such action if it is a claim brought by a third party, if and
after such assumption the Indemnified Party shall not be entitled to
reimbursement of any expenses incurred by it in connection with such action
except as described below. In any such action, any 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 contrary or
(ii) the named parties in any such action (including any impleaded parties)
include 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 or conflicting interests between them. The Indemnifying
Party shall not be liable for any settlement of any proceeding effected without
its written consent (which shall not be unreasonably withheld or delayed by such
Indemnifying Party), but if settled with such consent or if there be final
judgment for the plaintiff, the Indemnifying Party shall indemnify the
Indemnified Party from and against any loss, damage or liability by reason of
such settlement or judgment.
ARTICLE 8
CONDITIONS TO CLOSING
8.1 CONDITIONS TO THE OBLIGATIONS OF THE INVESTOR. The obligations of
the Investor to proceed with the Closing is subject to the following conditions
any and all of which may be waived, in whole or in part, to the extent permitted
by applicable law:
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(a) Representations and Warranties. Each of the representations and
warranties of the Issuer contained in this Agreement shall be true and correct
in all material respects as of the Closing as though made on and as of the
Closing, except (i) for changes specifically permitted by this Agreement, and
(ii) that those representations and warranties which address matters only as of
a particular date shall remain true and correct as of such date, except in any
case for such failures to be true and correct which would not, individually or
in the aggregate, have a Material Adverse Effect on the Issuer. Unless the
Investor receives written notice to the contrary at the Closing, Investor shall
be entitled to assume that the preceding is accurate in all respects at the
Closing.
(b) Agreement and Covenants. The Issuer shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Closing. Unless the Investor receives written notice to the contrary at the
Closing, Investor shall be entitled to assume that the preceding is accurate in
all respects at the Closing.
(c) No Order. No governmental authority or other agency or
commission or federal or state court of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction, or other order (whether temporary,
preliminary or permanent) which is in effect and which materially restricts,
prevents or prohibits consummation of the Closing or any transaction
contemplated by this Agreement.
(d) Opinion of Issuer's Counsel. The Holder shall have received an
opinion of Issuer's counsel, dated the Closing Date in substantially the form
attached hereto as Exhibit E.
8.2 CONDITIONS TO THE OBLIGATIONS OF THE ISSUER. The obligations of the
Issuer to proceed with the Closing is subject to the following conditions any
and all of which may be waived, in whole or in part, to the extent permitted by
applicable law:
(a) Representations and Warranties. Each of the representations and
warranties of the Investor contained in this Agreement shall be true and correct
as of the Closing as though made on and as of the Closing, except for changes
specifically permitted by this Agreement. Unless the Issuer receives written
notification to the contrary at the Closing, the Issuer shall be entitled to
assume that the preceding is accurate in all respects at the Closing.
(b) Agreement and Covenants. The Investor shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Closing. Unless the Issuer receives written notification to the contrary at the
Closing, the Issuer shall be entitled to assume that the preceding is accurate
in all respects at the Closing.
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(c) No Order. No governmental authority or other agency or
commission or federal or state court of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction, or other order (whether temporary,
preliminary or permanent) which is in effect and which materially restricts,
prevents or prohibits consummation of the Closing or any transaction
contemplated by this Agreement.
ARTICLE 9
MISCELLANEOUS
9.1 DEFINED TERMS. As used herein the following terms shall have the
following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule 12b-2 of
the General Rules and Regulations under the Exchange Act, as in effect on the
date hereof.
"Certificate of Incorporation" means the Issuer's Certificate of
Incorporation, as the same may be supplemented, amended or restated from time to
time.
"Closing" has the meaning in Article 2 of this Agreement.
"Common Stock" has the meaning specified in the Recitals to this
Agreement.
"Contract" means any indenture, lease, sublease, loan agreement,
mortgage, note, restriction, commitment, obligation or other contract, agreement
or instrument.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means generally accepted accounting principles in effect in
the United States of America from time to time.
"Governmental Authority" means any nation or government, any state
or other political subdivision thereof, and any entity or official exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Investor" has the meaning specified in the Recitals to this
Agreement.
"Issuer" means LendingTree, Inc., a Delaware corporation.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform
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Commercial Code or comparable law or any jurisdiction in connection with such
mortgage, pledge, security interest, encumbrance, lien or charge).
"Material Adverse Change (or Effect)" means a material and adverse
change in (or effect on) the financial condition, properties, assets,
liabilities, rights, obligations, operations or business, of a Person and its
Subsidiaries taken as a whole.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, estate, trust, unincorporated association, joint
venture, Governmental Authority or other entity, of whatever nature.
"Purchase Price" has the meaning specified in Section 1.1 of this
Agreement.
"Register", "registered" and "registration" refer to a registration
of the resale of Common Stock effected by preparing and filing a registration
statement in compliance with the Securities Act and the declaration or ordering
of the effectiveness of such registration statement.
"Registrable Securities" means all Shares of Common Stock acquired
by the Investor pursuant to this Agreement and any other shares of Common Stock
or other securities issued in respect of such Shares by way of a stock dividend
or stock split or in connection with a combination or subdivision of the
Issuer's Common Stock or by way of a recapitalization, merger or consolidation
or reorganization of the Issuer; provided, however, that, as to any particular
securities, such securities will cease to be Registrable Securities when they
have been sold pursuant to registration or in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(1) thereof so that all transfer restrictions and restrictive legends
with respect thereto are removed upon the consummation of such sale and the
purchaser and seller receive an opinion of counsel for the Issuer, which shall
be in form and substance reasonably satisfactory to the purchaser and seller and
their respective counsel, to the effect that such stock in the hands of the
purchaser is freely transferable without restriction or registration under the
Securities Act in any public or private transaction.
"Requirements of Law" means as to any Person, the certificate of
incorporation, by-laws or other organizational or governing documents of such
person, and any domestic or foreign and federal, state or local law, rule,
regulation, statute or ordinance or determination of any arbitrator or a court
or other Governmental Authority, in each case applicable to or binding upon such
Person or any of its properties or to which such Person or any of its property
is subject.
"SEC" means the Securities and Exchange Commission.
"SEC Reports" has the meaning specified in Section 3.7 of this
Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
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"Shares" has the meaning specified in Section 1.1 of this
Agreement.
"Subsidiary" means as to any Person, a corporation or limited
partnership of which more than 50% of the outstanding capital stock or
partnership interests having full voting power is at the time directly or
indirectly owned or controlled by such Person.
9.2 OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Agreement shall have the defined
meanings when used in any certificates, reports or other documents made or
delivered pursuant hereto or thereto, unless the context otherwise requires.
(b) Terms defined in the singular shall have a comparable meaning
when used in the plural, and vice versa.
(c) All accounting terms shall have a meaning determined in
accordance with GAAP.
(d) As used herein, the neuter gender shall also denote the
masculine and feminine, and the masculine gender shall also denote the neuter
and feminine, where the context so permits.
(e) The words "hereof," "herein" and "hereunder," and words of
similar import, when used in this Agreement shall refer to this Agreement as a
whole (including any Exhibits hereto) and not to any particular provision of
this Agreement.
9.3 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered by certified
or registered mail (first class postage pre-paid), guaranteed overnight
delivery, or facsimile transmission if such transmission is confirmed by
delivery by certified or registered mail (first class postage pre-paid) or
guaranteed overnight delivery, to the following addresses and telecopy numbers
(or to such other addresses or telecopy numbers which such party shall
subsequently designate in writing to the other party):
(a) if to the Issuer to:
LendingTree, Inc.
11115 Rushmore Drive
Charlotte, N.C. 28277
Attention: Douglas Lebda or Bob Flemma
Telecopy: (704) 331-7598
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with a copy to:
Kennedy Covington Lobdell & Hickman LLP
100 N. Tryon Street, Suite 4200
Charlotte, N.C. 28202
Attention: Sean M. Jones
Telecopy: (704) 331-7598
(b) if to the Investor to the address set forth next to its name on
the signature page hereto.
Each such notice or other communication shall for all purposes of this Agreement
be treated as effective or having been given when delivered if delivered by
hand, by certified or registered mail, by messenger or by courier, or if sent by
facsimile, upon confirmation of receipt.
9.4 ENTIRE AGREEMENT. This Agreement (including the Exhibits attached
hereto) and other documents delivered at the Closing pursuant hereto, contain
the entire understanding of the parties in respect of its subject matter and
supersedes all prior agreements and understandings between or among the parties
with respect to such subject matter. The Exhibits constitute a part hereof as
though set forth in full above.
9.5 EXPENSES; TAXES. Except as otherwise provided in this Agreement,
the parties shall pay their own fees and expenses, including their own counsel
fees, incurred in connection with this Agreement or any transaction contemplated
hereby. Any sales tax, stamp duty, deed transfer or other tax (except taxes
based on the income of the Investor) arising out of the issuance of the Shares
by the Issuer to the Investor shall be paid by the Issuer.
9.6 AMENDMENT; WAIVER. This Agreement may not be modified, amended,
supplemented, canceled or discharged, except by written instrument executed by
both parties. No failure to exercise, and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the exercise of any other right, power or privilege. No waiver of any breach of
any provision shall be deemed to be a waiver of any preceding or succeeding
breach of the same or any other provision, nor shall any waiver be implied from
any course of dealing between the parties. No extension of time for performance
of any obligations or other acts hereunder or under any other agreement shall be
deemed to be an extension of the time for performance of any other obligations
or any other acts. The rights and remedies of the parties under this Agreement
are in addition to all other rights and remedies, at law or equity, that they
may have against each other.
9.7 BINDING EFFECT; ASSIGNMENT. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective successors and permitted assigns. The
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rights and obligations of this Agreement may not be assigned by any party
without the prior written consent of the other party.
9.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
9.9 HEADINGS. The headings contained in this Agreement are for
convenience of reference only and are not to be given any legal effect and shall
not affect the meaning or interpretation of this Agreement.
9.10 GOVERNING LAW; INTERPRETATION. This Agreement shall be construed
in accordance with and governed for all purposes by the laws of the State of New
York applicable to contracts executed and to be wholly performed within such
State.
9.11 SEVERABILITY. The parties stipulate that the terms and provisions
of this Agreement are fair and reasonable as of the date of this Agreement.
However, if any provision of this Agreement shall be determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated. If, moreover, any of those provisions shall for any reason be
determined by a court of competent jurisdiction to be unenforceable because
excessively broad or vague as to duration, activity or subject, it shall be
construed by limiting, reducing or defining it, so as to be enforceable.
[SIGNATURES AND OTHER INFORMATION ON NEXT THREE PAGES]
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IN WITNESS WHEREOF, the parties hereto have caused this Subscription
Agreement to be duly executed and delivered as of the date set forth below.
NAME OF INVESTOR: ADDRESS FOR NOTICES (Please Print):
Pequot Navigator Offshore Fund, Inc. c/o Pequot Capital Management, Inc.
---------------------------------------- --------------------------------------
500 Nyala Farm Road
--------------------------------------
SIGNATURE: Westport, Connecticut 06880
--------------------------------------
Attention:
By: /s/ Steve Pakutka ----------------------------
--------------------------------- Telecopy:
Name: Steve Pakutka -----------------------------
Title: Senior V.P. Tax Identification #: N/A
Pequot Capital Management, ----------------
Inc., its Investment Advisor Incorporated in British Virgin Islands
--------------------------------------
Exact Name to appear on Stock Certificate: Pequot Navigator Offshore Fund, Inc.
------------------------------------
Number of Shares Subscribed For: 17,000
------------------------------------
Aggregate Purchase Price (see Section 1.1): $ 201,960
------------------------------------
The Investor hereby provides the following additional information:
(a) Excluding the shares of Common Stock subscribed for above, set
forth below is the number of shares of Common Stock and options rights or
warrants of LendingTree, Inc. ("Options" and together with the Common Stock,
"Securities") which the Investor beneficially owns or of which the Investor is
the record owner on the date hereof. Please refer to the definition of
beneficial ownership on Exhibit D attached hereto. If none, please so state.
Number of Shares: 13,500 excluding the Shares subscribed for above)
------------------
Number of Options: 0
-------------------
Please indicate by an asterisk (*) above if the Investor disclaims "beneficial
ownership" of any of the above listed Securities, and indicate in response to
question (b) below who has beneficial ownership.
(b) If the Investor disclaims "beneficial ownership" in question (a),
please furnish the following information with respect to the person(s) other
than the Investor who is the beneficial owner(s) of the Securities in question.
If not applicable, please check box: [ ]
Name of Beneficial Owner: Pequot Capital Management, Inc.
-----------------------------------
Relationship to the Investor: Investment Advisor
-------------------------------
Number of Securities Beneficially Owned: 90,000
--------------------
NAME OF INVESTOR: Pequot Navigator Offshore Fund, Inc.
-------------------------------------
(c) Are any of the Securities listed in response to question (a) the
subject of a voting agreement, contract or other arrangement whereby others have
voting control over, or any other interest in, any of the Investor's Securities?
[ ] Yes [X] No
If the answer is "Yes", please give details:____________________________________
(d) Please describe each position, office or other material
relationship which the Investor has had with the Issuer or any of its
affiliates, including any Subsidiary of the Issuer, within the past three years.
Please include a description of any loans or other indebtedness, and any
contracts or other arrangements or transactions involving a material amount,
payable by the Investor to the Issuer or any of its affiliates, including its
Subsidiaries, or by the Issuer or any of its affiliates, including its
Subsidiaries, to the Investor. "Affiliates" of the Issuer include its directors
and executive officers, and any other person controlling or controlled by the
Issuer. IF NONE, PLEASE SO STATE.
Answer: NONE
(e) Please provide the name and address of other person(s), if any, to
whom any proxy statements, registration statements (including notice of
effectiveness thereof), prospectuses or similar documents and information should
be delivered by the Issuer on behalf of the Investor in the future, with respect
to the Investor's shares:
Slavko Negulis
--------------------------------- ------------------------------
Pequot Capital Management, Inc.
--------------------------------- ------------------------------
500 Nyala Farm Rd.
--------------------------------- ------------------------------
Westport, Connecticut 06880
--------------------------------- ------------------------------
(f) Please advise of special stock certificate delivery
requirements for closing, if any: If escrow acct - copy of
stock cert faxed on day of close to fun 203 429-2430,
otherwise Fex ex overnight.
(g) Please advise if a NASD member has placed with you the Shares being
purchased hereunder: (Name of Member:) N/A
-----------------------------------------
(h) The Investor agrees to notify the Issuer promptly of any changes in
any of the foregoing information.
================================================================================
ACCEPTED: LENDINGTREE, INC.
By: /s/ Keith B. Hall Dated: April 12, 2002
---------------------------
Name: Keith B. Hall
Title: Sr VP and CFO
EXHIBIT A
[Copy of Regulation M is attached]
EXHIBIT B
[Copy of Rule 501(a) under Regulation D is attached]
EXHIBIT C
DISCLOSURE DOCUMENTS
THE INVESTOR IS URGED TO REVIEW THE FOLLOWING DOCUMENTS WHICH ARE DELIVERED
HEREWITH AND INCORPORATED BY REFERENCE HEREIN AS IF RESTATED HEREIN:
1. The Issuer's Annual Report on Form 10-K for the fiscal year
ended December 31, 2001
2. The Issuer's definitive proxy statement dated March 15, 2002
relating to its 2002 Annual Meeting of Stockholders
3. The Issuer's Current Report on Form 8-K dated March 28, 2002
4. Cover Letter From Allen & Company Incorporated, as Placement
Agent to Prospective Investors dated April __, 2002
EXHIBIT D
Explanation of "BENEFICIAL OWNERSHIP"
Securities that are subject to a power to vote or dispose are deemed
beneficially owned by the person who holds such power, directly or indirectly.
This means that the same securities may be deemed beneficially owned by more
than one person, if such power is shared. In addition, the beneficial ownership
rules provide that shares which may be acquired upon exercise of an option or
warrant, or which may be acquired upon the termination of a trust, discretionary
account or similar arrangement, which can be effected within a period of 60 days
from the date of determination, are deemed to be "beneficially" owned.
Furthermore, shares that are subject to rights or powers even though such rights
or powers to acquire are not exercisable within the 60-day period may also be
deemed to be beneficially owned if the rights or powers were acquired "with the
purpose or effect of changing or influencing the control of the issuer or in
connection with or as a participant in any transaction having such purpose or
effect."
In determining whether securities are "beneficially owned," benefits
which are substantially equivalent to those of ownership by virtue of any
contract, understanding, relationship, agreement or other arrangement should
cause the securities to be listed as "beneficially owned."
Thus, for example, securities held for a person's benefit in the name
of others or in the name of any estate or trust in which such person may be
interested should also be listed. Securities held by a person's spouse, children
or other members of such person's family who are such person's dependents or who
live in such person's household should be listed as "beneficially owned" unless
such person does not enjoy benefits equivalent to those of ownership with
respect to such securities.
If a person has a proprietary or beneficial interest in a controlled
corporation, partnership, personal holding company, trust or estate which owns
of record or beneficially any securities, such person should state the amount of
such securities owned by such controlled corporation, partnership, personal
holding company, trust or estate in lieu of allocating such person's proprietary
interest, and by note or otherwise, please indicate that. In any case, the name
of the controlled corporation, partnership, personal holding company, or estate
must be stated.
In all cases the nature of the beneficial ownership should be stated.
EXHIBIT E
[Form of Issuer's Counsel Opinion]
April 15, 2002
Allen & Company Incorporated and
Purchasers of LendingTree, Inc.
Common Stock listed on
Exhibit A attached hereto
RE: LendingTree, Inc.
Ladies and Gentlemen:
We have acted as special counsel to LendingTree, Inc., a Delaware
corporation ("LendingTree"), in connection with the transactions contemplated by
the Subscription Agreements dated April 12, 2002 (the "Subscription Agreements")
between LendingTree and the purchasers party thereto. This opinion letter is
delivered pursuant to Section 8.1(d) of the Subscription Agreements. All
capitalized terms used herein and not otherwise defined herein shall have same
meanings herein as are ascribed to them in the Subscription Agreements.
As such counsel, we have examined originals or copies of the
Subscription Agreements. We have also examined such certificates of
incorporation, bylaws, minute books and other documents, records and
certificates as we have deemed relevant or necessary as the basis for our
opinions hereinafter set forth. As such counsel, we have participated in the
preparation of the Subscription Agreements and have consulted with officers of
LendingTree regarding the terms and provisions thereof.
In giving the opinions expressed herein and making our investigations
in connection herewith, we have made the following assumptions: (a) the due
authorization, execution and delivery by the parties thereto other than
LendingTree of the documents examined by us, (b) the genuineness of all
signatures of individuals, (c) the personal legal capacity of all individual
signatories, (d) the authenticity of all documents presented to us as originals
and (e) the conformity to the originals of all documents presented to us as
copies. We have also assumed that the terms of the Subscription Agreements have
not been modified, supplemented or qualified by any other agreements or
understandings (written or oral) of the parties thereto that are not identified
above, or by any course of dealing or trade custom or usage, in any manner
affecting the opinions expressed herein.
The opinions set forth herein are limited to matters governed by the
laws of the State of North Carolina, the Delaware General Corporation Law and
the Federal laws of the United States generally applicable to transactions of
the type contemplated by the Subscription Agreements, and no opinion is
Allen & Company Incorporated and
Purchasers of LendingTree, Inc.
Common Stock listed on
Exhibit A attached hereto
April 15, 2002
Page 2
expressed herein as to any other laws. We note that the Subscription Agreements
provide that they are to be governed by laws of the State of New York. Our
opinion in paragraph 2 as to the legality, validity, binding effect and
enforceability of the Subscription Agreements is intended to address their
legality, validity, binding effect and enforceability under North Carolina law
were they, notwithstanding such choice of law provision, governed by the laws of
the State of the North Carolina and no opinions are expressed herein as to any
matters of New York law. Furthermore, we express no opinion concerning any
matter respecting or affected by any laws other than laws that a lawyer in North
Carolina exercising customary professional diligence would reasonably recognize
as being directly applicable to LendingTree, the transactions contemplated by
the Subscription Agreements, or both. We also express no opinion herein
concerning any real estate, mortgage, lending or other regulatory statutes,
rules and regulations specifically enacted to regulate the particular business
of LendingTree.
We express no opinion herein concerning the possible application to the
Subscription Agreements, the transactions contemplated thereby, or the
obligations of the parties thereunder of Section 548 of the Bankruptcy Code,
11 U.S.C. ss.548, Sections 39-23.1 through 39-23.12 of the North Carolina
General Statutes or other similar laws relating to "fraudulent transfers" or
"fraudulent conveyances."
Opinions or statements herein given "to the best of our knowledge" and
the factual matters on which we have relied in giving other opinions herein are
based upon (a) information coming to our attention in the course of our
representation of LendingTree in connection with the transactions contemplated
by the Subscription Agreements, or otherwise actually known to the lawyers in
our Firm who have given substantive attention to such transactions, (b) the
representations and warranties of LendingTree contained in the Subscription
Agreements, and (c) inquiries of representatives of LendingTree whom we believe
to be reasonably well-informed as to the factual matters in question, but
without any other investigations made for purposes of giving such opinions or
statements unless otherwise stated herein.
Based upon and subject to the foregoing and the further limitations and
qualifications hereinafter expressed, it is our opinion that:
1. LendingTree has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware.
2. Each of the Subscription Agreements has been duly
authorized, executed and delivered by LendingTree and constitutes a
valid and legally binding obligation of LendingTree enforceable in
accordance with its terms.
Allen & Company Incorporated and
Purchasers of LendingTree, Inc.
Common Stock listed on
Exhibit A attached hereto
April 15, 2002
Page 3
3. The Shares have been duly authorized and, when issued and
delivered by LendingTree against payment as provided under the
Subscription Agreements, will be validly issued, fully paid and
nonassessable.
4. Except as set forth on Schedule 3.4 to the Subscription
Agreement, the issuance and sale of the Shares, the execution, delivery
and performance by LendingTree of the Subscription Agreements, and the
consummation by LendingTree of the transactions contemplated thereby,
do not and will not (i) violate the Certificate of Incorporation or
Bylaws of LendingTree, (ii) violate any Federal law of the United
States, the laws of the State of North Carolina or the Delaware General
Corporation Law, or (iii) violate or result in a breach of, or default
under, any contract or agreement filed or listed as an exhibit to
LendingTree's Annual Report on Form 10-K for its fiscal year ended
December 31, 2001.
5. All prior regulatory consents, authorizations, approvals or
filings required to be obtained or made by LendingTree under the
Federal laws of the United States, the laws of the State of North
Carolina or the Delaware General Corporation Law as a condition to the
issuance, sale and delivery of the Shares pursuant to the Subscription
Agreement have been obtained or made.
6. The registration of the Shares under the Securities Act of
1933 (the "Securities Act") is not required in connection with the sale
of the Shares by LendingTree pursuant to the Subscription Agreements.
The foregoing opinions are subject to the following assumptions,
qualifications, exceptions and limitations in addition to the other assumptions,
qualifications, exceptions and limitations set forth in this letter:
(a) Enforceability of the Subscription Agreements may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar state or Federal laws from time to time in effect which affect
the enforcement of creditors' rights generally.
(b) Enforceability of the Subscription Agreements is subject
to general equitable principles and to general standards of commercial
reasonableness.
(c) We express no opinion on the enforceability of any
provisions contained in the Subscription Agreements that (i) purport to
excuse a party for liability for its own acts or omissions, (ii)
purport to authorize a party to act in its sole discretion, (iii)
relate to the effect of laws or regulations that may be enacted in the
future, (iv) require waivers to be made only in writing or (v) purport
to waive a trial by jury.
Allen & Company Incorporated and
Purchasers of LendingTree, Inc.
Common Stock listed on
Exhibit A attached hereto
April 15, 2002
Page 4
(d) Provisions of the Subscription Agreements purporting to
require a party thereto to pay or reimburse attorneys' fees incurred by
another party, or to indemnify another party therefor, may be limited
by applicable statutes and decisions relating to the collection and
award of attorneys' fees.
(e) No opinion is expressed as to the validity or
enforceability of provisions of the Subscription Agreements relating to
indemnity and contribution for liabilities under Federal or state
securities laws.
(f) For purposes of paragraph 4, (i) we express no opinion
with respect to Federal or state securities laws, other antifraud laws
or fraudulent transfer laws and (ii) insofar as performance by
LendingTree of its obligations under the Subscription Agreements is
concerned, we express no opinion as to bankruptcy, insolvency,
reorganization, moratorium or similar state or Federal laws from time
to time in effect which affect the enforcement of creditors' rights
generally.
(g) In connection with our opinion set forth in paragraph 6
above, with your approval, we have assumed the correctness of the
representations and warranties of, and the compliance with the
agreements and undertakings by, LendingTree and the Purchasers in the
Subscription Agreements. Insofar as such opinion relates to the sale of
the Shares to the Purchasers, we have, with your approval, assumed that
all offers and resales of the Shares will be made in accordance with
the Subscription Agreement. We express no opinion, however, as to when
and in what circumstances the Shares may be resold.
The opinions contained herein are being rendered to you in connection
with the closing of the transactions contemplated by the Subscription Agreements
and may not be disclosed to or relied upon by any other person without our prior
written consent. Our opinions expressed herein are as of the date hereof, and we
undertake no obligation to advise you of any changes in applicable law or any
other matters that may come to our attention after the date hereof that may
affect our opinions expressed herein.
Very truly yours,
Exhibit A
Names and Addresses of Purchasers
Ashford Capital Management Inc.,
P.O. Box 4172
Wilmington, Delaware 19807
SMALLCAP World Fund Inc.
333 South Hope Street - 55th Floor
Los Angeles, California 90071
Pequot Navigator Offshore Fund, Inc.
c/o Pequot Capital Management, Inc.
500 Nyala Farm Road
Westport, Connecticut 06880
Pequot Scout Fund, L.P.
c/o Pequot Capital Management, Inc.
500 Nyala Farm Road
Westport, Connecticut 06880
SCHEDULE 3.4
Conflicts
1. The holders of the Company's Series A Preferred Stock have the
preemptive right to participate in certain offerings by the Company of
its securities. The Company has obtained waivers of such preemptive
rights from all holders of Series A Preferred Stock other than William
Shiebler, TASK Foundation, Inc., Victor F. Keen, Terrence D. Daniels
and Keith Hall.
2. The Company has issued the Federal Home Loan Mortgage Association
("Freddie Mac") a warrant to purchase 12,500 shares of Common Stock.
The terms of such warrant require the Company to give Freddie Mac ten
days prior notice of any issuance of Common Stock below fair market
value. The Company has not delivered this notice, although it intends
to deliver such notice as soon as practicable after the date hereof.
SCHEDULE 3.9
Capitalization
OUTSTANDING STOCK OPTIONS
o As of April 11, 2002 there were options outstanding to acquire
6,411,223 shares of LendingTree, Inc. common stock.
OUTSTANDING COMMON STOCK WARRANTS
o As of April 11, 2002 there were warrants to acquire 399,710
shares of LendingTree, Inc. common stock outstanding.
COMMON STOCK ISSUABLE UPON CONVERSION OF SERIES A PREFERRED STOCK
o As of April 11, 2002 the 6,842,858 outstanding shares of
Series A Preferred Stock were convertible into 7,489,443
shares of LendingTree, Inc. common stock. Pursuant to the
Certificate of Designations, Preferences and Rights of Series
A 8% Convertible Preferred Stock of LendingTree, Inc., the
holders of the Series A Preferred Stock have certain
preemptive rights. See Schedule 3.4. The holders of Series A
Preferred Stock also have certain redemption rights pursuant
to the Certificate of Designations.
COMMON STOCK RESERVED FOR ISSUANCE
o LendingTree, Inc. has an Employee Stock Purchase Plan, under
which a total of 550,000 shares of LendingTree, Inc. common
stock have been reserved for issuance. As of April 11, 2002, a
total of 286,975 shares have been issued under this plan.
o LendingTree, Inc. maintains the 1997 Stock Option Plan, the
1998 Stock Option Plan, the 1999 Stock Option Plan and the
2001 Stock Incentive Plan under which there are, as of April
11, 2002, a combined 1,322,846 shares of Common Stock
available for the grant of options in the future.
TREASURY STOCK
o As of April 11, 2002 there were 664,321 shares of issued, but
not outstanding shares of LendingTree common stock accounted
for as Treasury Stock of LendingTree, Inc.
POTENTIALLY ISSUABLE SECURITIES
LendingTree, Inc. and the Federal Home Loan Mortgage Corporation are parties to
a credit facility agreement requires that a portion of the quarterly interest
payments be in the form of warrants to purchase our common stock at an exercise
price of $.01 per share. The amount of warrants to be issued will be calculated
by dividing the amount of interest to be paid in the
form of warrants by $3.99. The amount of interest expense that we will record
will be based upon the estimated fair value of the warrants on the date that
they are issued. As of April 11, 2002, no amounts had been borrowed under this
facility and no warrant-based interest charges had been incurred. The Federal
Home Loan Mortgage Corporation would also be entitled to additional warrants if
LendingTree, Inc. issues any shares of common stock or convertible securities at
a price less than the fair market value per share of common stock.
Under our 2001 Stock Incentive Plan, each non-employee director who is
a beneficial owner of (or represents an organization that is a beneficial owner
of) less than 5% of our combined voting power, upon his or her initial election
to the board, is granted a non-qualified stock option to purchase a number of
shares of common stock calculated by dividing $66,000 by one-third of the
average closing price of the common stock for five trading days immediately
preceding the grant date. Additionally, immediately following each annual
meeting of the company's stockholders, each such non-employee director then
serving is granted a non-qualified stock option to purchase a number of shares
of our common stock, calculated by dividing $22,000 by one-third of the average
closing price of our common stock for five trading days immediately preceding
the grant date. In lieu of the annual option grants, directors may elect to
receive an equivalent number of shares of restricted stock. The 2002 Annual
Meeting is scheduled for April 24, 2002, at which time, 6 directors will be
eligible for the compensation noted above.
SCHEDULE 3.11
Litigation
1. Block Financial Corporation v. LendingTree, Inc., Case Number
01-1007-CV-W-3 [United States District Court for the Western District of
Missouri, filed September 10, 2001]. See Item 3 on Page 13 of LendingTree's most
recent 10-K entitled "Legal Proceedings" for a summary of this litigation.
2. New York State Banking Department ("NYSBD") Regulatory Examination.
Please see Item 3 on Page 13 of LendingTree's most recent 10-K entitled "Legal
Proceedings" for a summary of the is regulatory matter.
SCHEDULE 3.12
Registration Rights
1. Registration Rights Agreement dated March 7, 2001 by and among
LendingTree, Inc. and the signing stockholders listed therein. (Requires
registration of shares of common stock issuable upon conversion of the series A
preferred shares, which registration was effected in June 2001.)
2. Registration Rights Agreement dated September 20, 1999 by and among
LendingTree, Inc. and the signing stockholders listed therein. (Includes
piggyback registration rights, which registration was effected in June 2001.)
3. Registration Rights Agreement dated March 6, 2001 by and between
LendingTree, Inc. and Paul Revere Capital Partners, Ltd. (Requires registration
of shares of common stock issuable under the Paul Revere equity line, which
registration was effected in June 2001.)
4. The Warrant dated September 20, 1999 to Prudential Securities
Incorporated ("Prudential") contain certain piggyback registration rights.
Prudential currently has piggyback registration rights with respect to 30,605
shares of common stock.
Exhibit 99.1
FOR IMMEDIATE RELEASE
Contacts: Keith Hall Brian Regan Deborah Roth
(704) 944-8580 (704) 944-8531 (704) 944-8571
khall@lendingtree.com bregan@lendingtree.com droth@lendingtree.com
LENDINGTREE ANNOUNCES $5.9 MILLION
COMMON STOCK PRIVATE PLACEMENT
CHARLOTTE, N.C., APRIL 16, 2002 - LendingTree(R), Inc. (NASDAQ: TREE), the
leading online lending exchange and technology provider, today announced that it
completed the sale of a total of 500,000 newly-issued shares of common stock to
a group of three institutional investors in a private placement for gross
proceeds of $5.9 million. The shares were priced at $11.88 per share on April
11, 2002, and the transaction closed on April 16, 2002.
LendingTree intends to use the proceeds from this private placement for general
corporate purposes, including the cash payment of quarterly dividends to the
holders of its Series A Preferred Stock. The cash payment of dividends should
reduce the Company's dividend expense in future quarters.
The shares of common stock have not been registered under the Securities Act of
1933 and may not be subsequently offered or sold by the investors in the United
States absent registration or an applicable exemption from the registration
requirements. LendingTree has agreed to file a registration statement covering
resales of the common stock by investors. This press release does not constitute
an offer to sell or the solicitation of an offer to buy any security and shall
not constitute an offer, solicitation or sale of any securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of such jurisdiction.
ABOUT LENDINGTREE, INC.
Founded in 1996, LendingTree (NASDAQ: TREE) is the leading online lending
Exchange that connects consumers, Lenders, and related service providers. The
LendingTree Exchange is made up of more than 140 banks, lenders, and brokers
(Lenders) and has facilitated nearly $18 billion in closed loans since
inception. Millions of consumers have accessed the LendingTree Exchange though
the Company's site at www.lendingtree.com and through online and offline
partners. Loans available via the LendingTree Exchange include home mortgage,
home equity, automobile, personal, debt consolidation, and credit cards.
LendingTree is the No. 1 brand in the online lending market for consumers, with
59 percent national awareness. The LendingTree Lend-X technology has been cited
as "the platform of choice"(1) for online lending and has been adopted by
industry leaders to power their online lending initiatives. The LendingTree
RealtyServices offering connects consumers to a nationwide network of
approximately 7,000 real estate professionals. The Company's services and
products are specifically designed to empower
consumers, Lenders, and related service providers throughout the lending
process, on and offline, delivering convenience, choice, and excellent value.
(1) Resuscitating Mortgage Lending. Forrester Research, March 2001
This press release contains forward-looking statements within the meaning of the
"Safe Harbor" provisions of the Private Securities Litigation Reform Act of
1995. Forward- looking statements include statements regarding our anticipated
use of proceeds from the private placement and projected future expenses. These
statements are based on management's current expectations or beliefs and are
subject to a number of risks and uncertainties that could cause actual results
to differ materially from those set forth in the forward looking statements. The
Company's actual results might differ materially from those stated or implied by
such forward-looking statements due to risks and uncertainties associated with
the Company's business, which include, but are not limited to: variations in
consumer demand or acceptance; the willingness of lending institutions to offer
their products over the Internet; further changes in the Company's relationships
with existing lenders, companies, and/or strategic partners; the Company's
ability to attract and integrate new lending companies and strategic partners;
implementation of competing Internet strategies by existing and potential
lending participants; implementation and acceptance of new product or service
offerings, consumer lending industry regulation; competition in all aspects of
the Company's business; fluctuations in operating results; or other unforeseen
factors. The forward-looking statements should be considered in the context of
these and other risk factors disclosed in the Company's filings with the
Securities and Exchange Commission.
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