0000950133-01-502755.txt : 20011009
0000950133-01-502755.hdr.sgml : 20011009
ACCESSION NUMBER: 0000950133-01-502755
CONFORMED SUBMISSION TYPE: SC 13D/A
PUBLIC DOCUMENT COUNT: 2
FILED AS OF DATE: 20011002
GROUP MEMBERS: FRANK A. MCGREW IV
GROUP MEMBERS: IMAGES INVESTOR PORTFOLIO
GROUP MEMBERS: MEMPHIS ANGELS, LLC
GROUP MEMBERS: PARADIGM CAPITAL EQUITY PARTNER
GROUP MEMBERS: PARADIGM HOLDINGS
FILED BY:
COMPANY DATA:
COMPANY CONFORMED NAME: IMAGE INVESTOR PORTFOLIO A SEP SER OF MEMPHIS ANGELS LLC
CENTRAL INDEX KEY: 0001141302
STANDARD INDUSTRIAL CLASSIFICATION: []
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: SC 13D/A
BUSINESS ADDRESS:
STREET 1: 6410 POPLAR AVENUE
STREET 2: SUITE 395
CITY: MEMPHIS
STATE: TN
ZIP: 38119
BUSINESS PHONE: 9016826060
SUBJECT COMPANY:
COMPANY DATA:
COMPANY CONFORMED NAME: INTERNET PICTURES CORP
CENTRAL INDEX KEY: 0001088022
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389]
IRS NUMBER: 522213841
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: SC 13D/A
SEC ACT: 1934 Act
SEC FILE NUMBER: 005-57597
FILM NUMBER: 1750199
BUSINESS ADDRESS:
STREET 1: 1009 COMMERCE PARK DR
CITY: OAK RIDGE
STATE: TN
ZIP: 37830
BUSINESS PHONE: 8654823000
MAIL ADDRESS:
STREET 1: 1009 COMMERCE PARK DR
CITY: OAK RIDGE
STATE: TN
ZIP: 37830
FORMER COMPANY:
FORMER CONFORMED NAME: BAMBOO COM INC
DATE OF NAME CHANGE: 19990604
SC 13D/A
1
w53607sc13da.txt
AMENDMENT #2 TO SCHEDULE 13D
1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
AMENDMENT NO. 2
UNDER THE SECURITIES EXCHANGE ACT OF 1934
Internet Pictures Corporation
---------------------------------
(Name of Issuer)
COMMON STOCK
--------------------------------
(Title of Class of Securities)
46059S200
-----------------
(CUSIP Number)
Warner B. Rodda, Esq.
Paradigm Capital Equity Partners, LLC
6410 Poplar Ave., Ste 395
Memphis, TN 38119
(901) 682-6060
----------------------------------------
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
September 26, 2001
---------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is filing
this schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g),
check the following box. |_|
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Section 240.13d-7(b) for
other parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
(Continued on following page(s))
Page 1 of 13 pages
2
Page 2 of 14 pages
CUSIP No. 46059S200 13D
---------
-----------------------------------------------------------------------------------------------------
(1) Names of Reporting Persons. SS or I.R.S. Identification Nos. of Above Persons
Image Investor Portfolio, a separate series of Memphis Angels, LLC
-----------------------------------------------------------------------------------------------------
(2) Check The Appropriate Box If A Member Of A Group (a) : X
(b) :
-----------------------------------------------------------------------------------------------------
(3) SEC Use Only
-----------------------------------------------------------------------------------------------------
(4) Source Of Funds*
WC
-----------------------------------------------------------------------------------------------------
(5) Check Box If Disclosure Of Legal Proceedings Is Required Pursuant To Items 2(d) Or 2(e):
-----------------------------------------------------------------------------------------------------
(6) Citizenship Or Place Of Organization
Delaware
-----------------------------------------------------------------------------------------------------
Number Of Shares (7) Sole Voting Power 7,030,640 (1)
Beneficially Owned
By Each Reporting
Person With (8) Shared Voting Power 0
(9) Sole Dispositive Power 7,030,640 (1)
(10) Shared Dispositive Power 0
(11) Aggregate Amount Beneficially Owned By Each Reporting Person 7,030,640 (1)
-----------------------------------------------------------------------------------------------------
(12) Check If The Aggregate Amount In Row (11) Excludes Certain Shares* [ ]
-----------------------------------------------------------------------------------------------------
(13) Percent Of Class Represented By Amount In Row (11) 51.2% (2)
-----------------------------------------------------------------------------------------------------
(14) Type Of Reporting Person OO
--------------------------------------------------------------------------------
(1) Consists of shares of Common Stock issuable upon conversion of (i) 500,000
shares of Series B Preferred Stock acquired in the Third Closing (as
defined herein) upon conversion of the outstanding principal of a
convertible promissory note that had been issued in connection with the
First Closing and Second Closing (each as defined herein) and 13,830
shares of Series B Preferred Stock issued in consideration for
substantially all of the accrued interest on such promissory note at the
time of conversion; (ii) 250,000 shares of Series B Preferred Stock
underlying warrants (the "Tranche A Warrants") issued in the First Closing
and Second Closing; and (iii) 115,000 shares of Series B Preferred Stock
acquired upon partial exercise of a warrant (the "Tranche B Warrant") in
the Third Closing. Each share of Series B Preferred Stock is initially
convertible into 8 shares of Common Stock (subject to adjustment--See Item
4 of this Amendment).
(2) Calculated in accordance with Rule 13d-3 under the Securities Exchange Act
of 1934, as amended. The Reporting Person's actual voting interest is
39.9% because all shares of Series B Preferred Stock, including the shares
acquired by the New Investors (as defined herein), vote on an as-converted
basis with the Common Stock.
SEE INSTRUCTION BEFORE FILLING OUT!
3
Page 3 of 14 pages
CUSIP No. 46059S200 13D
---------
----------------------------------------------------------------------------------------------
(1) Names of Reporting Persons. SS or I.R.S. Identification Nos. of Above Persons
Memphis Angels, LLC
----------------------------------------------------------------------------------------------
(2) Check The Appropriate Box If A Member Of A Group (a) : X
(b) :
----------------------------------------------------------------------------------------------
(3) SEC Use Only
----------------------------------------------------------------------------------------------
(4) Source Of Funds*
WC
----------------------------------------------------------------------------------------------
(5) Check Box If Disclosure Of Legal Proceedings Is Required Pursuant To Items 2(d) Or 2(e):
----------------------------------------------------------------------------------------------
(6) Citizenship Or Place Of Organization
Delaware
----------------------------------------------------------------------------------------------
Number Of Shares (7) Sole Voting Power 7,030,640 (1)
Beneficially Owned
By Each Reporting
Person With (8) Shared Voting Power 0
(9) Sole Dispositive Power 7,030,640 (1)
(10) Shared Dispositive Power 0
(11) Aggregate Amount Beneficially Owned By Each Reporting Person 7,030,640 (1)
-----------------------------------------------------------------------------------------------------
(12) Check If The Aggregate Amount In Row (11) Excludes Certain Shares* [ ]
-----------------------------------------------------------------------------------------------------
(13) Percent Of Class Represented By Amount In Row (11) 51.2% (2)
-----------------------------------------------------------------------------------------------------
(14) Type Of Reporting Person OO
--------------------------------------------------------------------------------
(1) Consists of shares of Common Stock issuable upon conversion of (i) 500,000
shares of Series B Preferred Stock acquired in the Third Closing (as
defined herein) upon conversion of the outstanding principal of a
convertible promissory note that had been issued in connection with the
First Closing and Second Closing (each as defined herein) and 13,830
shares of Series B Preferred Stock issued in consideration for
substantially all of the accrued interest on such promissory note at the
time of conversion; (ii) 250,000 shares of Series B Preferred Stock
underlying warrants (the "Tranche A Warrants") issued in the First Closing
and Second Closing; and (iii) 115,000 shares of Series B Preferred Stock
acquired upon partial exercise of a warrant (the "Tranche B Warrant") in
the Third Closing. Each share of Series B Preferred Stock is initially
convertible into 8 shares of Common Stock (subject to adjustment--See Item
4 of this Amendment). All of such shares are held or may be acquired by
Image Investor Portfolio, a separate series of Memphis Angels LLC, a
Delaware limited liability company.
(2) Calculated in accordance with Rule 13d-3 under the Securities Exchange Act
of 1934, as amended. The Reporting Person's actual voting interest is
39.9% because all shares of Series B Preferred Stock, including the shares
acquired by the New Investors (as defined herein), vote on an as-converted
basis with the Common Stock.
SEE INSTRUCTION BEFORE FILLING OUT!
4
Page 4 of 13 pages
CUSIP No. 46059S200 13D
---------
----------------------------------------------------------------------------------------------
(1) Names of Reporting Persons. SS or I.R.S. Identification Nos. of Above Persons
Paradigm Capital Equity Partners, LLC
----------------------------------------------------------------------------------------------
(2) Check The Appropriate Box If A Member Of A Group (a) : X
(b) :
----------------------------------------------------------------------------------------------
(3) SEC Use Only
----------------------------------------------------------------------------------------------
(4) Source Of Funds*
AF
----------------------------------------------------------------------------------------------
(5) Check Box If Disclosure Of Legal Proceedings Is Required Pursuant To Items 2(d) Or 2(e):
----------------------------------------------------------------------------------------------
(6) Citizenship Or Place Of Organization
Delaware
----------------------------------------------------------------------------------------------
Number Of Shares (7) Sole Voting Power 7,030,640 (1)
Beneficially Owned
By Each Reporting
Person With (8) Shared Voting Power 0
(9) Sole Dispositive Power 7,030,640 (1)
(10) Shared Dispositive Power 0
(11) Aggregate Amount Beneficially Owned By Each Reporting Person 7,030,640 (1)
----------------------------------------------------------------------------------------------
(12) Check If The Aggregate Amount In Row (11) Excludes Certain Shares* [ ]
----------------------------------------------------------------------------------------------
(13) Percent Of Class Represented By Amount In Row (11) 51.2% (2)
----------------------------------------------------------------------------------------------
(14) Type Of Reporting Person OO
--------------------------------------------------------------------------------
(1) Consists of shares of Common Stock issuable upon conversion of (i) 500,000
shares of Series B Preferred Stock acquired in the Third Closing (as
defined herein) upon conversion of the outstanding principal of a
convertible promissory note that had been issued in connection with the
First Closing and Second Closing (each as defined herein) and 13,830
shares of Series B Preferred Stock issued in consideration for
substantially all of the accrued interest on such promissory note at the
time of conversion; (ii) 250,000 shares of Series B Preferred Stock
underlying warrants (the "Tranche A Warrants") issued in the First Closing
and Second Closing; and (iii) 115,000 shares of Series B Preferred Stock
acquired upon partial exercise of a warrant (the "Tranche B Warrant") in
the Third Closing. Each share of Series B Preferred Stock is initially
convertible into 8 shares of Common Stock (subject to adjustment--See Item
4 of this Amendment). All of such shares are held or may be acquired by
Image Investor Portfolio, a separate series of Memphis Angels LLC, a
Delaware limited liability company, of which Paradigm Capital Equity
Partners, LLC, a Delaware limited liability company, is the Manager.
(2) Calculated in accordance with Rule 13d-3 under the Securities Exchange Act
of 1934, as amended. The Reporting Person's actual voting interest is
39.9% because all shares of Series B Preferred Stock, including the shares
acquired by the New Investors (as defined herein), vote on an as-converted
basis with the Common Stock.
SEE INSTRUCTION BEFORE FILLING OUT!
5
Page 5 of 13 pages
CUSIP No. 46059S200 13D
---------
-----------------------------------------------------------------------------------------------------
(1) Names of Reporting Persons. SS or I.R.S. Identification Nos. of Above Persons
Paradigm Holdings
-----------------------------------------------------------------------------------------------------
(2) Check The Appropriate Box If A Member Of A Group (a) : X
(b) :
-----------------------------------------------------------------------------------------------------
(3) SEC Use Only
-----------------------------------------------------------------------------------------------------
(4) Source Of Funds*
AF
-----------------------------------------------------------------------------------------------------
(5) Check Box If Disclosure Of Legal Proceedings Is Required Pursuant To Items 2(d) Or 2(e):
-----------------------------------------------------------------------------------------------------
(6) Citizenship Or Place Of Organization
Delaware
-----------------------------------------------------------------------------------------------------
Number Of Shares (7) Sole Voting Power 7,030,640 (1)
Beneficially Owned
By Each Reporting
Person With (8) Shared Voting Power 0
(9) Sole Dispositive Power 7,030,640 (1)
(10) Shared Dispositive Power 0
(11) Aggregate Amount Beneficially Owned By Each Reporting Person 7,030,640 (1)
-----------------------------------------------------------------------------------------------------
(12) Check If The Aggregate Amount In Row (11) Excludes Certain Shares* [ ]
-----------------------------------------------------------------------------------------------------
(13) Percent Of Class Represented By Amount In Row (11) 51.2% (2)
-----------------------------------------------------------------------------------------------------
(14) Type Of Reporting Person PN
--------------------------------------------------------------------------------
(1) Consists of shares of Common Stock issuable upon conversion of (i) 500,000
shares of Series B Preferred Stock acquired in the Third Closing (as
defined herein) upon conversion of the outstanding principal of a
convertible promissory note that had been issued in connection with the
First Closing and Second Closing (each as defined herein) and 13,830
shares of Series B Preferred Stock issued in consideration for
substantially all of the accrued interest on such promissory note at the
time of conversion; (ii) 250,000 shares of Series B Preferred Stock
underlying warrants (the "Tranche A Warrants") issued in the First Closing
and Second Closing; and (iii) 115,000 shares of Series B Preferred Stock
acquired upon partial exercise of a warrant (the "Tranche B Warrant") in
the Third Closing. Each share of Series B Preferred Stock is initially
convertible into 8 shares of Common Stock (subject to adjustment--See Item
4 of this Amendment). All of such shares are held or may be acquired by
Image Investor Portfolio, a separate series of Memphis Angels LLC, a
Delaware limited liability company, of which Paradigm Capital Equity
Partners, LLC, a Delaware limited liability company, is the Manager, of
which Paradigm Holdings, a Delaware general partnership, is the Managing
Member.
(2) Calculated in accordance with Rule 13d-3 under the Securities Exchange Act
of 1934, as amended. The Reporting Person's actual voting interest is
39.9% because all shares of Series B Preferred Stock, including the shares
acquired by the New Investors (as defined herein), vote on an as-converted
basis with the Common Stock.
SEE INSTRUCTION BEFORE FILLING OUT!
6
Page 6 of 13 pages
CUSIP No. 46059S200 13D
---------
-----------------------------------------------------------------------------------------------------
(1) Names of Reporting Persons. SS or I.R.S. Identification Nos. of Above Persons
Frank A. McGrew IV
-----------------------------------------------------------------------------------------------------
(2) Check The Appropriate Box If A Member Of A Group (a) : X
(b) :
-----------------------------------------------------------------------------------------------------
(3) SEC Use Only
-----------------------------------------------------------------------------------------------------
(4) Source Of Funds*
AF
-----------------------------------------------------------------------------------------------------
(5) Check Box If Disclosure Of Legal Proceedings Is Required Pursuant To Items 2(d) Or 2(e):
-----------------------------------------------------------------------------------------------------
(6) Citizenship Or Place Of Organization
Tennessee
-----------------------------------------------------------------------------------------------------
Number Of Shares (7) Sole Voting Power 7,030,640 (1)
Beneficially Owned
By Each Reporting
Person With (8) Shared Voting Power 0
(9) Sole Dispositive Power 7,030,640 (1)
(10) Shared Dispositive Power 0
-----------------------------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned By Each Reporting Person 7,030,640 (1)
-----------------------------------------------------------------------------------------------------
(12) Check If The Aggregate Amount In Row (11) Excludes Certain Shares* [ ]
-----------------------------------------------------------------------------------------------------
(13) Percent Of Class Represented By Amount In Row (11) 51.2% (2)
-----------------------------------------------------------------------------------------------------
(14) Type Of Reporting Person IN
--------------------------------------------------------------------------------
(1) Consists of shares of Common Stock issuable upon conversion of (i) 500,000
shares of Series B Preferred Stock acquired in the Third Closing (as
defined herein) upon conversion of the outstanding principal a convertible
promissory note that had been issued in connection with the First Closing
and Second Closing (each as defined herein) and 13,830 shares of Series B
Preferred Stock issued in consideration for substantially all of the
accrued interest on such promissory note at the time of conversion; (ii)
250,000 shares of Series B Preferred Stock underlying warrants (the
"Tranche A Warrants") issued in the First Closing and Second Closing; and
(iii) 115,000 shares of Series B Preferred Stock acquired upon partial
exercise of a warrant (the "Tranche B Warrant") in the Third Closing. Each
share of Series B Preferred Stock is initially convertible into 8 shares
of Common Stock (subject to adjustment--See Item 4 of this Amendment). All
of such shares are held or may be acquired by Image Investor Portfolio, a
separate series of Memphis Angels LLC, a Delaware limited liability
company, of which Paradigm Capital Equity Partners, LLC, a Delaware
limited liability company, is the Manager, of which Paradigm Holdings, a
Delaware general partnership, is the Managing Member, of which Mr. McGrew
is the Managing Partner.
(2) Calculated in accordance with Rule 13d-3 under the Securities Exchange Act
of 1934, as amended. The Reporting Person's actual voting interest is
39.9% because all shares of Series B Preferred Stock, including the shares
acquired by the New Investors (as defined herein), vote on an as-converted
basis with the Common Stock.
SEE INSTRUCTION BEFORE FILLING OUT!
7
Page 7 of 13 pages
ITEM 1. SECURITY AND ISSUER.
This Amendment No. 2 to Schedule 13D (this "Amendment") relates to the
Common Stock, $.001 par value per share (the "shares"), of Internet Pictures
Corporation, a Delaware corporation (the "Company"), and is being filed on
behalf of the undersigned to amend the Schedule 13D originally filed on May
24, 2001 (the "Schedule 13D") and amended on May 30, 2001. The principal
executive offices of the Company are located at 3160 Crow Canyon Road, Suite
400, San Ramon, CA 94503, (925) 242-4000. Unless otherwise indicated, all
capitalized terms used herein but not defined shall have the same meaning as
set forth in the Schedule 13D.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Item 3 of the Schedule 13D is amended, in pertinent part, to add the
following paragraph:
On September 26, 2001, pursuant to the Third Closing to the Purchase
Agreement, Image exercised a portion of the Tranche B Warrant, acquiring
115,000 shares of Series B Preferred Stock of the Company in exchange for an
aggregate exercise price of $2,300,000. Additionally, Image transferred a
portion of the Tranche B Warrant that it did not exercise to certain
unaffiliated third parties (the "New Investors"). The New Investors exercised
such portion of the Tranche B Warrant for their own accounts, acquiring an
aggregate of 486,250 shares of Series B Preferred Stock of the Company for an
aggregate exercise price of $9,725,000. The unexercised remainder of the
Tranche B Warrant expired according to its terms at the time of the Third
Closing. The source of funds used by Image in connection with the exercise of
the Tranche B Warrant in the Third Closing was working capital and other
funds.
In connection with the Third Closing, the principal amount of the
Promissory Note was automatically converted, along with substantially all of
the accrued interest, into an aggregate of 513,830 shares of Series B
Preferred Stock.
ITEM 4. PURPOSE OF TRANSACTION.
Item 4 of the Schedule 13D is amended and restated in its entirety as
follows:
Image acquired the securities of the Company to obtain a controlling
equity interest in the Company. Depending on its evaluation of the Company's
business and prospects, and upon future developments (including, but not
limited to, performance of the Common Stock in the market, availability of
funds, alternative uses of funds, and money, stock market and general economic
conditions), Image may, from time to time, purchase additional securities of
the Company, dispose of all or a portion of the securities held by it, or
cease buying or selling such securities. Any such additional purchases or
sales of the securities of the Company may be in open market or privately
negotiated transactions or otherwise.
Pursuant to the Purchase Agreement, in the First Closing, Image
received the Promissory Note in the principal amount of $3,000,000 in exchange
for its initial cash investment of $3,000,000. The Promissory Note was secured
by substantially all of the assets of the Company and its subsidiaries and was
initially convertible into 150,000 shares of the Company's newly authorized
Series B Preferred Stock. In addition, the Company issued to Image two
warrants (the "Tranche A Warrants") to purchase shares of the Series B
Preferred Stock. One of the Tranche A Warrants was initially exercisable for
45,000 shares of Series B Preferred Stock at an
8
Page 8 of 13 pages
exercise price of $20 per share and the other Tranche A Warrant was initially
exercisable for 30,000 shares of Series B Preferred Stock at an exercise price
of $40 per share. Except for standard adjustment provisions in connection with
stock splits, stock dividends, combinations, recapitalizations and other
similar corporate events, the exercise prices of the Tranche A Warrants are
fixed.
On May 29, 2001, pursuant to the terms and conditions of the Purchase
Agreement, Image exercised its right to make an additional investment in the
Company in connection with the Second Closing (as defined in the Purchase
Agreement). In the Second Closing, Image invested an additional $7,000,000 in
the Company. In exchange for such additional investment, the principal amount
of the Promissory Note was increased to $10,000,000 and the Promissory Note
became convertible into 500,000 shares of Series B Preferred Stock. The number
of shares underlying each of the Tranche A Warrants also increased in
connection with the Second Closing. The first Tranche A Warrant became
exercisable for 150,000 shares of Series B Preferred Stock (at an exercise
price of $20 per share) and the second Tranche A Warrant became exercisable
for 100,000 shares of Series B Preferred Stock (at an exercise price of $40
per share). In addition, Image received a warrant (the "Tranche B Warrant") to
purchase 1,000,000 shares of Series B Preferred Stock at an exercise price of
$20 per share.
The Promissory Note had a 15-month term, accrued interest at 8% per
annum and was, by its terms, automatically convertible into Shares of Series B
Preferred Stock upon the Third Closing. The Tranche A Warrants expire on May
14, 2006. The expiration date of the Tranche B Warrant was the earlier of (i)
the date of the Third Closing (as defined in the Purchase Agreement) or (ii)
if no Third Closing occurred, 15 months from the date of issuance.
The Third Closing occurred on September 26, 2001. In connection with
the Third Closing, the principal amount of the Promissory Note automatically
converted into 500,000 shares of Series B Preferred Stock and substantially
all of the accrued interest on the Promissory Note converted into 13,830
shares of Series B Preferred Stock. Additionally, Image exercised a portion of
the Tranche B Warrant, acquiring 115,000 shares of Series B Preferred Stock
upon the payment of an exercise price of $2,300,000. Additionally, in
connection with the Third Closing, Image transferred a portion of the Tranche
B Warrant to the New Investors who exercised such portion of the Tranche B
Warrant for their own accounts, acquiring an aggregate of 486,250 shares of
Series B Preferred Stock of the Company for an aggregate exercise price of
$9,725,000. The unexercised remainder of the Tranche B Warrant expired
according to its terms at the time of the Third Closing.
The foregoing description of the Purchase Agreement and the
description of the Purchase Agreement throughout this Schedule 13D are
qualified in their entirety by reference to the copy of the Purchase
Agreement, which was filed as Exhibit 1 to the Schedule 13D and is
incorporated herein by reference.
Image has also been granted certain registration rights pursuant to a
Registration Rights Agreement dated as of May 14, 2001, between Image and the
Company (the "Registration Rights Agreement"). Under the Registration Rights
Agreement, Image may require the Company to file a registration statement
covering resales of Common Stock issuable upon conversion of the Series B
Preferred Stock within twenty days of each of the Second Closing and the Third
Closing. In addition, Image has demand and piggy-back registration rights with
respect to the shares purchased by it pursuant to the Purchase Agreement.
Image agreed to waive its right to
9
Page 9 of 13 pages
require the Company to file a registration statement covering resales within
twenty days of the Second Closing, but has not waived its right to require
such a filing within twenty days of the Third Closing. The foregoing summary
of the Registration Rights Agreement is qualified in its entirety by reference
to the Registration Rights Agreement filed as Exhibit 2 to the Schedule 13D
and incorporated herein by reference.
In accordance with the provisions of the Purchase Agreement, the
Company's Board of Directors was reduced from nine to seven members at the
time of the Second Closing. At the time of the Second Closing, four directors
resigned from the Board of Directors of the Company and four nominees of
Image, including Mr. McGrew, were appointed to fill the resulting vacancies in
the Board of Directors of the Company. Pursuant to the Purchase Agreement,
Image was entitled to retain its representatives on the Board of Directors
until the Third Closing. In connection with the Third Closing, Mr. McGrew
resigned from the Board of Directors of the Company and the resulting vacancy
was filled by a representative of First Avenue Partners, L.P ("First Avenue"),
a New Investor. Pursuant to the terms of the Preferred Stockholders Agreement
described below, following the Third Closing, one additional representative of
Image will resign from the board and the resulting vacancy will be filled by a
representative designated by NewSouth Capital Management Inc. ("NewSouth"),
another New Investor, at such time as NewSouth designates such representative.
Following the Third Closing, the holders of Series B Preferred Stock are
entitled, as a class, to elect four of the Company's seven directors.
In connection with the Third Closing, Image, PCEP and each of the New
Investors entered into a Preferred Stockholders Agreement (the "Stockholders
Agreement"). The Stockholders Agreement sets forth, among other things,
restrictions on transfer of Series B Preferred Stock, including rights of
first refusal, drag-along and tag-along rights, as well as certain voting
agreements. For the purposes of the following description of the Stockholders
Agreement, PCEP, Image, Paradigm and Memphis Angels are each individually
referred to as a "Paradigm Entity" and collectively as the "Paradigm
Entities." The Paradigm Entities and the New Investors are collectively
referred to as the "Series B Stockholders."
Prior to transferring any shares of Series B Preferred Stock to a
third party, a New Investor must first provide PCEP with the opportunity to
purchase such shares on the same terms as those of the proposed sale. Any
shares not acquired by PCEP or its designee must then be offered to the other
New Investors on the same terms. Any shares not acquired by PCEP or the other
New Investors may then be transferred to such third party on the terms
originally proposed. Notwithstanding the foregoing, each New Stockholder may
transfer an unlimited number of shares of Series B Preferred Stock to one or
more of its affiliates, or to its partners, members or stockholders as part of
a distribution, and may transfer up to 20% of the aggregate shares of Series B
Preferred Stock owned by such stockholder on the date of the Stockholders
Agreement, without complying with the above provisions.
In the event that a Paradigm Entity wishes to transfer any of its
shares of Series B Preferred Stock, other than to another Paradigm Entity or
to an affiliate of PCEP, the Paradigm Entity must allow the New Investors to
participate in such proposed sale (the "Tag-Along Right"). A New Investor who
exercises its Tag-Along Right will be entitled to include in the transaction a
portion of its shares of Series B Preferred Stock that represents the same
percentage of its total shares of Series B Preferred Stock as the shares being
transferred by the Paradigm Entity represent to the total number of shares of
Series B Preferred Stock held by all Paradigm Entities. Notwithstanding the
foregoing, any Paradigm Entity may transfer an unlimited number
10
Page 10 of 13 pages
of shares of Series B Preferred Stock to one or more of its affiliates or to
any other Paradigm Entity, or to its partners, members or stockholders as part
of a distribution, and may transfer up to 20% of the aggregate shares of
Series B Preferred Stock owned by the Paradigm Entities on the date of the
Stockholders Agreement without complying with the above provisions.
In the event that any one or more of the Paradigm Entities wish to
sell at least 50% of the aggregate shares of Series B Preferred Stock held by
the Paradigm Entities on the date of the Stockholders Agreement, the Paradigm
Entity may require the New Investors to participate in the proposed sale (the
"Drag-Along Right"). If the Paradigm Entity exercises the Drag-Along Right,
each New Investor will be obligated to transfer a portion of its shares of
Series B Preferred Stock that represents the same percentage of its total
shares of Series B Preferred Stock as the shares being transferred by the
Paradigm Entities represent to the total number of shares of Series B
Preferred Stock held by all Paradigm Entities.
Notwithstanding the foregoing, no Series B Stockholder may transfer
any shares of Series B Preferred Stock to any competitor of the Company (or
any employee, shareholder, officer, director or other affiliate of any such
competitor) without the Company's prior written consent.
The Stockholders Agreement also prohibits any of the Series B
Stockholders from transferring any shares of Common Stock (or securities
convertible into, or exercisable or exchangeable for, Common Stock) for a
period of 180 days after the date of the Stockholders Agreement (the "Lock-Up
Period"), otherwise than: (i) a bona fide gift, provided that the donee agrees
to be bound by this restriction; (ii) a distribution to a Series B
Stockholder's partners, members or stockholders; or (iii) transfers of Series
B Preferred Stock in compliance with the paragraphs above. This prohibition
prohibits the Series B Stockholders from engaging in any hedging or other
transaction that is designed or reasonably expected to result in a transfer of
Common Stock by a third party during the Lock-Up Period (e.g., short sale, put
or call option, etc.).
Additionally, the Stockholders Agreement includes an agreement among
the Series B Stockholders to vote all shares of Series B Preferred Stock held
by them so as to elect two representatives of Image, one representative of
First Avenue and one representative of NewSouth to serve as the four members
of the Company's Board of Directors that are elected by the holders of the
Series B Preferred Stock.
The Stockholders Agreement will terminate and be of no further force
and effect upon the first to occur of (i) the date that the Paradigm Entities
no longer own at least 25% of the Series B Preferred Stock and (ii) the date
upon which PCEP and the holders of at least fifty percent (50%) of the shares
of Series B Preferred Stock then held by the New Investors agree to terminate
the Stockholders Agreement.
The foregoing description of the Stockholders Agreement and the
description of the Stockholders Agreement throughout this Schedule 13D are
qualified in their entirety by reference to the copy of the Stockholders
Agreement, which is filed as Exhibit 4 hereto and is incorporated herein by
reference.
The Company's amended certificate of designation setting forth the
rights and privileges of the Series B Preferred Stock (the "Certificate of
Designation") provides, in pertinent part, that
11
Page 11 of 13 pages
the shares of Series B Preferred Stock vote on an as-converted basis with the
Common Stock (subject to certain class vote matters). The Series B Preferred
Stock accrues dividends at 8% per annum and has a liquidation preference of
$20 per share plus all accrued and unpaid dividends (as adjusted for any stock
dividends, stock splits, combinations, recapitalizations or other similar
corporate events). The Series B Preferred Stock is initially convertible into
Common Stock at a conversion price of $2.50 (the "Conversion Price") per share
(or 8 shares of Common Stock per share of Series B Preferred Stock). The
Conversion Price is subject to adjustment for stock splits, stock dividends,
combinations, recapitalizations and other similar corporate events.
Additionally, the Series B Preferred Stock contains a reset feature (the
"Reset Feature") that would result in a one-time reduction of the Conversion
Price if the average daily trading price of the Common Stock for the twenty
days prior to the 180 day anniversary of the Third Closing (the "Average
Trading Price") is below $2.50. If the Reset Feature is triggered, the
Conversion Price will be reset to the greater of the Average Trading Price or
$2.00. As a result, the number of shares issuable upon conversion of the
Series B Preferred Stock may increase by as much as 25% (with each share of
Series B Preferred Stock converting into a maximum of 10 shares of Common
Stock). If the Average Trading Price ultimately is less than or equal to $2.00
and, as a result of the Reset Feature, the Conversion Price is reset to $2.00,
the total number of shares of Common Stock beneficially owned by the Filing
Persons would increase to 8,788,300 and the corresponding percentage ownership
of the Filing Persons would be 56.7% (assuming no intervening change in the
total outstanding shares of the Company). Because it is based solely on the
trading price of the Common Stock during a period after the date of this
Amendment, there can be no assurance that the Reset Feature will not be
triggered, or if it is triggered, what the resulting Conversion Price will be.
The Conversion Price is also subject to a weighted-average antidilution
adjustment in the event that the Company sells shares of Common Stock (or
securities convertible into, or exercisable or exchangeable for Common Stock)
at a price less than the Conversion Price, subject to certain exceptions.
The Series B Preferred Stock is also redeemable at the option of the
Company any time on or after May 29, 2006, upon the affirmative vote of at
least five of the Company's directors. If the Company elects to redeem the
Series B Preferred Stock, the redemption price shall be equal to $20 per share
plus all accrued and unpaid dividends.
Other than as described above, none of the Filing Persons have any
current plans or proposals which relate to or would result in any transaction,
change or event specified in clauses (a) through (j) of Item 4 of Schedule
13D. The Filing Persons reserve the right to develop such plans or proposals
in the future.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
Item 5 of the Schedule 13D is amended and restated in its entirety as
follows:
Each of the Filing Persons may be deemed to beneficially own 7,030,640
shares of Common Stock. Such shares, based on the capitalization of the
Company as of September 26, 2001 as represented to Image in the Purchase
Agreement in connection with the Third Closing, constitute 51.2% of the Common
Stock. However, the Filing Persons' actual voting interest is 39.9% because
all shares of Series B Preferred Stock, including the shares acquired by the
New Investors, vote on an as-converted basis with the Common Stock.
12
Page 12 of 13 pages
The 7,030,640 shares of Common Stock beneficially owned by the Filing
Persons include 4,110,640 shares of Common Stock underlying the 513,830 shares
of Series B Preferred Stock that Image acquired upon conversion of the
principal amount of, and substantially all of the accrued interest on, the
Promissory Note at the Third Closing and 920,000 shares of Common Stock
underlying the 115,000 shares of Series B Preferred Stock that Image acquired
upon exercise of a portion of the Tranche B Warrant at the Third Closing. It
also includes an additional 2,000,000 shares of Common Stock issuable upon
conversion of 250,000 shares of Series B Preferred Stock currently underlying
the Tranche A Warrants.
Other than under the transactions described above, no transactions in
the Common Stock of the Company have been effected by Image, Memphis Angels,
PCEP, Paradigm or Mr. McGrew, or to the knowledge of Image, Memphis Angels,
PCEP, Paradigm or Mr. McGrew, by any of the general partners of Paradigm,
during the past 60 days.
To the knowledge of the Filing Persons, no other person has the right
to receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of, the securities covered by this Schedule 13D.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO THE SECURITIES OF THE ISSUER.
Item 6 of the Schedule 13D is amended and restated in its entirety as
follows:
Other than the Securities Purchase Agreement, the Registration Rights
Agreement, the Stockholders Agreement and the Certificate of Designation, to
the knowledge of the Filing Persons, there are no contracts, arrangements,
understandings or relationships among the persons named in Item 2 and between
such persons and any person with respect to any securities of the Company,
including but not limited to transfer or voting of any of the securities,
finder's fees, joint ventures, loan or option arrangements, puts or calls,
guarantees of profits, division of profits or loss, or the giving or
withholding of proxies.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1: Securities Purchase Agreement, dated May 14, 2001, by and between
Image and the Company. (1)
Exhibit 2: Registration Rights Agreement, dated May 14, 2001, by and between
Image and the Company. (1)
Exhibit 3: Joint Filing Statement. (1)
Exhibit 4: Series B Preferred Stockholders Agreement, dated September 26,
2001, by and among Image, PCEP, the New Investors and the Company.
(1) previously filed as an exhibit to the Schedule 13D (File No. 5-57597) on
May 24, 2001.
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Page 13 of 13 pages
SIGNATURES
After reasonable inquiry and to the best of its knowledge and belief,
the undersigned each certifies that the information set forth in this
statement is true, complete and correct.
Dated October 1, 2001
IMAGE INVESTOR PORTFOLIO,
a separate series of
MEMPHIS ANGELS, LLC,
a Delaware limited liability company
By: PARADIGM CAPITAL EQUITY
PARTNERS, LLC,
its Manager
By: PARADIGM HOLDINGS,
its Managing Member
By: /s/ Frank A. McGrew IV
----------------------
Name: Frank A. McGrew IV
Title: Managing Partner
PARADIGM CAPITAL EQUITY
PARTNERS, LLC,
a Delaware limited liability company
By: PARADIGM HOLDINGS,
its Managing Member
By: /s/ Frank A. McGrew IV
-----------------------------
Name: Frank A. McGrew IV
Title: Managing Partner
PARADIGM HOLDINGS,
a Delaware general partnership
By: /s/ Frank A. McGrew IV
--------------------------------
Name: Frank A. McGrew IV
Title: Managing Partner
FRANK A. MCGREW IV
/s/ Frank A. McGrew IV
--------------------------------------
EX-4
3
w53607ex4.txt
PREFERRED STOCKHOLDERS AGREEMEND
1
PREFERRED STOCKHOLDERS AGREEMENT
THIS PREFERRED STOCKHOLDERS AGREEMENT (this "AGREEMENT"), dated as of
September 26, 2001, is entered into by and among Paradigm Capital Equity
Partners, LLC, a Delaware limited liability company ("PARADIGM"), Image Investor
Portfolio, a separate series of Memphis Angels, LLC, a Delaware limited
liability company ("IMAGE"), and the stockholders listed on Schedule A hereto
(herein, together with Image, the "PREFERRED STOCKHOLDERS"), each of which is a
holder of Preferred Stock (as defined) of Internet Pictures Corporation, a
Delaware corporation (the "COMPANY").
RECITALS
1. Certain terms are defined in Section 1 of this Agreement and
will have the meanings specified in Section 1.
2. In connection with the execution of this Agreement, Paradigm has
Transferred, or caused to be Transferred, to the Preferred Stockholders rights
to acquire Preferred Stock.
3. The Preferred Stockholders own all of the issued and outstanding
shares of the Series B Convertible Preferred Stock, $0.001 par value, of the
Company (the "PREFERRED STOCK").
4. The Preferred Stockholders desire to agree upon certain terms
and conditions that will govern the ownership and transfer of the Shares.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and provisions set forth in this Agreement, the parties agree as
follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following terms have the following
respective meanings:
"ACCEPTANCE PERIOD" means the fifteen (15) business days from and after
the date of receipt by the Company of a Notice of Intention to Sell.
"AFFILIATE" means with respect to any Person, any other Person (other
than the Company or any Subsidiary of the Company) that directly or indirectly
controls, is controlled by or is under common control with such Person.
"AGREEMENT" has the meaning set forth in the preamble hereto.
"BOARD OF DIRECTORS" means the Board of Directors of the Company.
"COMMON STOCK" means the common stock, $0.001 par value, of the Company.
"COMPANY" has the meaning set forth in the preamble hereto.
"COMPETITOR" shall mean those persons who compete against the Company by
offering immersive images and digital media formatting and infrastructure
products and services.
"IMAGE" has the meaning set forth in the preamble hereto, together with
its successors and transferees.
"LOCK-UP PERIOD" has the meaning set forth in Section 5.
"NOTICE" has the meaning set forth in Section 3.3.
2
"NOTICE OF INTENTION TO SELL" means the written notice specified in
Section 3.1.
"OFFERED SHARES" has the meaning set forth in Section 3.1.
"OTHER STOCKHOLDER" means any Preferred Stockholder other than a
Paradigm Entity, together with their respective heirs, administrators,
executors, successors and assigns, as applicable.
"PARADIGM" has the meaning set forth in the preamble hereto, together
with its successors and transferees.
"PARADIGM ENTITIES" means Paradigm, Image, Memphis Angels, LLC, a
Delaware limited liability company, and Paradigm Holdings, a Delaware
partnership, together with each of their successors and transferees identified
in clauses (i), (ii) and (iv) of Section 2.1(c)..
"PARADIGM SHARES" means any and all Shares held by the Paradigm
Entities.
"PARTICIPATION OFFER" has the meaning set forth in Section 4.1(a).
"PERSON" means any individual, corporation, partnership, limited
liability company, trust, unincorporated association or other entity.
"PREFERRED STOCKHOLDER" means each of the signatories to this Agreement
and each other Person who hereafter becomes the owner of any Shares.
"SALE" has the meaning set forth in Section 4.1(a).
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time.
"SELLING STOCKHOLDER" has the meaning set forth in Section 3.1.
"SHARES" means shares of Preferred Stock now or hereafter outstanding
and any securities now or hereafter outstanding (including the Warrants) that
may be exercised, converted or exchanged for Preferred Stock.
"SUBSIDIARY" means any Person of which at least a majority of the voting
stock or voting interests of such Person are owned, directly or indirectly, by
any other Person.
"SUBSTANTIAL SALE" means the sale of the Company or its business to any
Person whether by merger, consolidation, sale of all or substantially all of the
assets or capital stock of the Company or otherwise, which has been approved by
the Board of Directors but shall not include a public offering of equity
securities by the Company or any Subsidiary of the Company.
"TRANSFER" means sale, transfer, assignment, gift, pledge,
hypothecation, encumbrance, or other disposition, whether voluntary or
involuntary, or any contract to do any of the forgoing.
"WARRANTS" means any and all warrants to purchase Shares, whether such
warrants are now or hereafter outstanding.
SECTION 2. RESTRICTIONS ON TRANSFER
2.1 RESTRICTION ON TRANSFER. At no time during the term of
this Agreement may a Preferred Stockholder Transfer any Shares or any interest
in Shares except:
(a) in the case of an Other Stockholder, to the extent
permitted and under the conditions set forth in Sections 3 or 4;
3
(b) subject to the restrictions of Section 3.7(b),
that any Other Stockholder may Transfer any of its Shares to (i) any Affiliate
of such Other Stockholder (ii) any Person (other than an Affiliate of such Other
Stockholder) so long as all Transfers to any Persons on a cumulative basis
pursuant to this clause (ii) do not, in the aggregate, exceed 20% of the
aggregate Shares held by such Other Stockholder on the date of this Agreement or
(iii) the partners, members or stockholders, as the case may be, of such Other
Stockholder as part of a distribution by such Other Stockholder;
(c) subject to the restrictions of Section 3.7(b),
that any Paradigm Entity may Transfer any of its Shares to (i) any Affiliate of
any Paradigm Entity, (ii) any other Paradigm Entity, (iii) any Person (other
than a Paradigm Entity) so long as all Transfers to any Persons on a cumulative
basis pursuant to this clause (iii) do not, in the aggregate, exceed 20% of the
aggregate Shares held by Paradigm Entities on the date of this Agreement or (iv)
the partners, members or stockholders, as the case may be, of any Paradigm
Entity as part of a distribution by such Paradigm Entity; and
(d) subject to the restrictions of Section 3.7(b),
that any Paradigm Entity may Transfer any of its Shares to any Person provided
that such Paradigm Entity complies with the provisions of Section 4, if
applicable.
Each Preferred Stockholder agrees and consents to the entry of stop
transfer instructions with the Company's transfer agent against the Transfer of
Shares unless such Transfer is made in full compliance with all provisions of
this Agreement. Any transferee of any Shares must agree in writing to become a
party to, and to be bound by the provisions of, this Agreement.
2.2 SECURITIES LAW RESTRICTIONS. Notwithstanding any other
provision in this Agreement, no Preferred Stockholder may Transfer any Shares
without the registration of the Transfer of such Shares under the Securities Act
unless such Transfer is exempt from the registration requirements under the
Securities Act and applicable state securities laws.
SECTION 3. RIGHT OF FIRST REFUSAL
3.1 INTENTION TO SELL. If any Other Stockholder wishes to sell
all or any portion of the Shares owned by such Other Stockholder to a bona fide
third party for cash (other than a Transfer pursuant to Section 4 or permitted
pursuant to Section 2.1(b)), such Other Stockholder (a "SELLING STOCKHOLDER")
promptly shall deliver to Paradigm a Notice of Intention to Sell setting forth
the number of Shares to be sold (the "OFFERED SHARES"), the proposed purchase
price per Offered Share, the proposed purchaser (including any information
concerning such purchaser and its Affiliates as Paradigm may reasonably request)
and the other terms of sale.
3.2 ACCEPTANCE PERIOD. Upon receipt of a Notice of Intention
to Sell and for the duration of the Acceptance Period, Paradigm or its designee
will have the right and option to elect to purchase all or any portion of such
Offered Shares at the purchase price and on the terms stated in the Notice of
Intention to Sell. On or before the expiration of the Acceptance Period,
Paradigm may give the Selling Stockholder written notice of Paradigm's intention
to exercise its rights to purchase, or cause such designee to purchase, the
Offered Shares.
3.3 NOTICE OF ELECTION TO PURCHASE; FAILURE TO EXERCISE OPTION
TO PURCHASE. If Paradigm or such designee fails to elect to purchase all of the
Offered Shares in accordance with the provisions of Sections 3.1 and 3.2, then,
prior to the expiration of the Acceptance Period, Paradigm shall give written
notice to each Other Stockholder (the "NOTICE") setting forth the number of
Offered Shares remaining available for purchase pursuant to the Notice of
Intention to Sell, and each Other Stockholder will then have the right and
option to, within ten (10) business days after receiving the Notice from
Paradigm, elect to purchase (i) all of such Offered Shares so remaining
available (if there is only one Other Stockholder electing to purchase such
Shares) or (ii) up to its pro rata share of such Offered Shares so remaining
available (if there is more than one Other Stockholder electing to purchase such
Shares), or (iii) such Offered Shares so remaining available in such other
proportions as the Other Stockholders may mutually agree, at the purchase price
and on the terms stated in the Notice of Intention to Sell, such election to be
made by giving written notice to Paradigm within ten (10) business days after
the receipt of the Notice.
4
3.4 SELLING STOCKHOLDER'S RIGHTS UPON FAILURE TO EXERCISE
RIGHT TO PURCHASE ALL OFFERED SHARES. If Paradigm and the Other Stockholders
fail to elect to purchase all of the Offered Shares under Sections 3.1, 3.2 and
3.3, then the Selling Stockholder who or which delivered the Notice of Intention
to Sell may sell all (but not less than all) of the Offered Shares to the
purchaser specified in the Notice of Intention to Sell at the price and upon the
same terms set forth in the Notice of Intention to Sell, at any time within
twenty (20) business days after the last date on which any Other Stockholder
will be entitled to make any election pursuant to the provisions of Section 3.3.
The purchaser specified in the Notice of Intention to Sell must, prior to
purchasing the Offered Shares, agree in writing to become a party to, and to be
bound by the provisions of, this Agreement, and the Company will not recognize
any Transfer to such purchaser of Offered Shares until such agreement has been
executed and delivered to Paradigm. If the Offered Shares are not sold by the
Selling Stockholder during such twenty (20) business-day period, the right of
the Selling Stockholder to sell such Offered Shares will expire and such
remaining Offered Shares again will be subject to the restrictions contained in
this Agreement and may not thereafter be Transferred except in compliance with
this Agreement.
3.5 PAYMENT FOR OFFERED SHARES. Payment by Paradigm or the
Other Stockholders for the Offered Shares will be made by certified or official
bank check, payable to the order of the Selling Stockholder of the Offered
Shares against delivery by such seller of (a) a certificate or certificates
representing the Offered Shares so sold, duly endorsed for transfer to the
purchasing party or accompanied by a stock transfer power duly endorsed for
transfer, with all requisite stock transfer taxes paid and stamps affixed and
(b) written representations and warranties of such Selling Stockholder to the
effect that: (i) such Selling Stockholder is the record and beneficial owner of
the Shares being purchased and sold, has good and valid title to the Shares and
the absolute right to transfer the same to the purchaser, and the same, upon
transfer to the purchaser, will be free and clear of all claims, liens, pledges,
restrictions (other than restrictions imposed by this Agreement and restrictions
under federal and state securities laws) or encumbrances of any nature
whatsoever; (ii) such Selling Stockholder has full power, authority or capacity,
as applicable, to perform the terms of this Agreement relating to such purchase
and sale; and (iii) any consent or approval of any governmental authority, court
or third person required to be obtained by such Selling Stockholder to permit
the Transfer of the Shares has been obtained.
3.6 CLOSING DATE. The closing of the sale and delivery of
Offered Shares being purchased and sold pursuant to this Section 3 to Paradigm
(or its designee) or an Other Stockholder, and payment for such Offered Shares,
will be held at a time and place designated by Paradigm as follows:
(a) If Paradigm has elected to purchase, or cause its
designee to purchase, all of the Offered Shares, any date on or prior to the
twentieth (20th) business day after the date on which the Other Stockholder
receives notification of Paradigm's intention to, or cause its designee to, so
purchase; or
(b) In all other cases, any date on or prior to the
twentieth (20th) business day after the last day upon which any Other
Stockholder can elect to purchase Offered Shares pursuant to this Section 3.
3.7 RESTRICTIONS. Notwithstanding the foregoing provisions of
this Section 3 to the contrary, (a) no Other Stockholder shall deliver any
Notice of Intention to Sell if such Other Stockholder did not at the time of
giving such Notice of Intention to Sell have a good faith belief that such
purchaser would purchase all of the Offered Shares at the price and on the terms
contained in the Notice of Intention to Sell and (b) no Preferred Stockholder
shall Transfer any Shares to any Competitor or any employee, shareholder,
officer, director or other Affiliate of any Competitor, without the prior
written consent of the Company.
SECTION 4. TAG-ALONG/CO-SALE RIGHTS
4.1 TAG-ALONG RIGHTS.
(a) If any Paradigm Entity desires to Transfer any
Shares (other than a Transfer pursuant to Section 2.1(c) of this Agreement)
whether by sale, merger or otherwise (a "SALE") and Paradigm does not elect to
or is not entitled to exercise its rights under Section 4.2, then at least
fifteen (15) days prior to the closing of such Sale, Paradigm shall make an
offer (the "PARTICIPATION OFFER") to the Other Stockholders to include in the
proposed Sale a portion of each Other Stockholder's Shares that represents the
same percentage of such Shares as the Shares being Transferred by the Paradigm
Entities represent to all Shares held by the Paradigm Entities.
5
(b) The Participation Offer must describe the terms
(including purchase price) and conditions of the proposed Sale and the number of
Shares that an Other Stockholder may Transfer in the proposed Sale and must be
conditioned upon (i) the consummation of the transactions contemplated in the
Participation Offer, and (ii) each Other Stockholder's execution and delivery of
all agreements and other documents as may be reasonably required by the acquiror
in connection with such Sale. If any Other Stockholder accepts the Participation
Offer, the Paradigm Entities will reduce, to the extent necessary, the number of
Shares they otherwise would have Transferred in the proposed Sale so as to
permit those Other Stockholders who have accepted the Participation Offer to
Transfer the number of Shares that they are entitled to Transfer under this
Section 4, and such Other Stockholders shall Transfer the number of Shares
specified in the Participation Offer to the proposed transferee in accordance
with the terms set forth in the Participation Offer.
(c) Any Other Stockholder that desires to exercise its
right to Transfer Shares in the Participation Offer shall deliver notice to
Paradigm within ten (10) days after its receipt of the Participation Offer,
specifying the number of Shares (up to the number of such Shares specified in
the Participation Offer) that such Other Stockholder desires to Transfer in the
Participation Offer, whereupon such Other Stockholder shall be obligated to
Transfer such Shares at the closing of such Sale, if and when it occurs. All
Shares Transferred by the Other Stockholders pursuant to this Section 4.1 must
be Transferred at the same price and terms (including form of consideration) as
the Shares being Transferred by the Paradigm Entities.
4.2 DRAG-ALONG RIGHTS.
(a) In connection with any Sale by any one or more of
the Paradigm Entities of at least 50% of the aggregate Shares held by the
Paradigm Entities on the date of this Agreement, Paradigm has the right to
require each Other Stockholder to Transfer a portion of such Other Stockholder's
Shares that represents the same percentage of such Other Stockholders Shares as
the Shares being Transferred by the Paradigm Entities. All Shares Transferred by
the Other Stockholders pursuant to this Section 4.2 must be Transferred at the
same price and terms (including form of consideration) as the Shares being
Transferred by the Paradigm Entities. All Warrants Transferred by Other
Stockholders pursuant to this Section 4.2 must be Transferred at the same price
(less the applicable exercise price in respect of each such Warrant) and terms
(including form of consideration) as the Shares being Transferred by the
Paradigm Entities.
(b) Paradigm shall give the Company and the Other
Stockholders at least fifteen (15) days' prior written notice of any Sale as to
which Paradigm intends to exercise its rights under Section 4.2(a).
4.3 SALE REQUIREMENTS. All Other Stockholders, if Paradigm
elects to exercise its rights under Section 4.2(a), or the electing Other
Stockholders if such Other Stockholders elect to exercise their rights under
Section 4.1(a), shall (i) take such actions as may be reasonably requested by
Paradigm in connection with consummating the Sale, (ii) vote in favor of,
consent to, and raise no objections against, the Sale or the process pursuant to
which the Sale was arranged, (iii) waive any dissenter's rights and other
similar rights, (iv) if the Sale is structured as a sale of Shares, agree to
sell its Shares on the terms and conditions of the Sale and (v) execute and
deliver such documents as may be reasonably requested by Paradigm in connection
with any Sale, including, without limitation, written consents of stockholders,
proxies, letters of transmittal, purchase agreements and stock powers, in each
case so long as the Paradigm Entities also have executed such documents on no
more favorable a basis than the Other Stockholders. At the closing of such Sale,
the participating Other Stockholders shall deliver certificates for all Shares
(or, in the case of the Warrants, such reasonable and customary transfer
documentation as may be specified by Paradigm) to be Transferred by Other
Stockholders, duly endorsed for transfer, to the purchaser against delivery of
the appropriate purchase price.
4.4 COST OF SALE. In connection with any Sale, Paradigm may,
or may cause the Company or the Company's Subsidiaries to, hire legal counsel
and other professional advisors as it deems necessary or desirable to effectuate
the contemplated transaction on behalf of all of the participating Preferred
Stockholders. In the case of a sale pursuant to Section 4.1, all Preferred
Stockholders participating in such Sale agree to bear their pro rata share
(based upon the number of Shares sold or to be sold) of the reasonable costs of
such Sale to the extent such costs are not otherwise paid by the Company or the
acquiring Person whether or not such Sale closes. Costs incurred by any
Preferred Stockholder on its own behalf (other than the costs of the
professional advisors hired by Paradigm) will not be considered costs of a Sale
and must be paid solely by such Preferred Stockholder.
6
4.5 ASSET SALE. In the event that Paradigm determines to
pursue a sale of all or substantially all of the assets of the Company, the
Other Stockholders shall participate therein and take the action contemplated in
this Section 4 to the extent applicable so long as the Other Stockholders are
treated no less favorably than the Paradigm Entities (including form of
consideration) in any such transaction.
4.6 PRICE. For the purposes of this Section 4, unless the
context otherwise requires, the term "PRICE" shall mean all consideration
received by the Paradigm Entities and their Affiliates in connection with a
Sale.
SECTION 5. COMMON STOCK LOCKUP
The Paradigm Entities and each Other Stockholder hereby agree
for a period of 180 days after the date of this Agreement (the "LOCK-UP PERIOD")
that each of them will not Transfer any shares of Common Stock, any options or
warrants to purchase any shares of Common Stock or any securities convertible
into or exchangeable for shares of Common Stock now owned or hereafter acquired
directly by such Person or with respect to which such Person has or hereafter
acquires the power of disposition, otherwise than (i) as a bona fide gift or
gifts, provided the donee or donees thereof agree in writing to be bound by this
restriction, (ii) as a distribution to partners, members or stockholders of such
Person, provided that the distributees thereof agree in writing to be bound by
the terms of this restriction, or (iii) Transfers of Preferred Stock in
compliance with this Agreement. The foregoing restriction has been expressly
agreed to by each Other Stockholder so as to preclude such Other Stockholder
from engaging in any hedging or other transaction that is designed to or
reasonably expected to lead to or result in a Transfer of Common Stock during
the Lock-up Period, even if such Common Stock would be Transferred by someone
other than such Other Stockholder. Such prohibited hedging or other transactions
would include, without limitation, any short sale (whether or not against the
box) or any purchase, sale or grant of any right (including, without limitation,
any put or call option) with respect to any Common Stock or with respect to any
security (other than a broad-based market basket or index) that included,
relates to or derives any significant part of its value from the Common Stock.
Each Other Stockholder also agrees and consents to the entry of stop transfer
instructions with the Company's transfer agent and registrar against the
Transfer of Common Stock held by such Other Stockholder except in compliance
with the foregoing restrictions.
SECTION 6. LEGEND ON SHARE CERTIFICATES
All certificates representing Shares now or hereafter held by a
Preferred Stockholder will be endorsed with the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR UNDER THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF UNLESS EITHER (A) THEY ARE REGISTERED UNDER THE ACT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT OR (B) THE COMPANY HAS RECEIVED
EVIDENCE SATISFACTORY TO IT (WHICH MAY INCLUDE AN OPINION OF COUNSEL)
THAT SUCH PROPOSED DISPOSITION IS EXEMPT FROM SUCH REGISTRATION.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS
AND CONDITIONS OF A PREFERRED STOCKHOLDERS AGREEMENT DATED AS OF
SEPTEMBER __, 2001. A COPY OF SUCH AGREEMENT IS ON FILE AT THE
CORPORATION'S PRINCIPAL PLACE OF BUSINESS AND MAY BE OBTAINED AT NO COST
BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO
THE CORPORATE SECRETARY OF THE COMPANY."
SECTION 7. DURATION OF AGREEMENT
This Agreement will terminate and be of no further force and
effect upon the first to occur of (a) the date that less than 25% of the Shares
are outstanding, and (b) the date upon which Paradigm and the holders of at
least fifty percent (50%) of the Shares then held by Other Stockholders agree in
writing to terminate this Agreement.
7
SECTION 8. BOARD OF DIRECTORS.
On all matters relating to the election of directors of the
Company where the holders of Preferred Stock are entitled to elect directors as
a class, the Preferred Stockholders agree to vote all Shares held by them (or
the holders thereof shall consent pursuant to an action by written consent) so
as to elect members of the Board of Directors as follows: (i) one representative
designated by First Avenue Partners, L/P.; (ii) one representative designated by
NewSouth Capital Management Inc.; and (iii) two representatives designated by
the Paradigm Entities. Any vote taken to remove any director elected pursuant to
this Section 8), or to fill any vacancy created by the resignation, removal or
death of a director elected pursuant to this Section 8, shall also be subject to
the provisions of this Section 8.
SECTION 9. REPRESENTATIONS AND WARRANTIES OF THE PREFERRED STOCKHOLDERS
Each Preferred Stockholder severally represents and warrants to
each other Preferred Stockholder as follows as may be applicable to such
Preferred Stockholder:
(a) If a corporation, the Preferred Stockholder is a
corporation duly organized, validly existing, and in good standing under the
laws of the state of its incorporation and has requisite corporate power and
authority to enter into this Agreement and to undertake the transactions
contemplated in this Agreement;
(b) If a partnership, the Preferred Stockholder is a
partnership duly organized, validly existing, and in good standing under the
laws of the state of its formation and has requisite partnership power and
authority to enter into this Agreement and to undertake the transactions
contemplated in this Agreement;
(c) If a limited liability company, the Preferred
Stockholder is a limited liability company duly organized, validly existing, and
in good standing under the laws of the state of its formation and has the
requisite limited liability company power and authority to enter into this
Agreement and to undertake the transactions contemplated in this Agreement;
(d) If an individual, the Preferred Stockholder is
legally competent to enter into this Agreement and to undertake the transactions
contemplated in this Agreement;
(e) The address of the Preferred Stockholder set forth
on Schedule A is true, correct and complete; and
(f) This Agreement has been duly and validly
authorized, as applicable, executed, and delivered by the Preferred Stockholder
and constitutes the legal, valid, and binding obligation of the Preferred
Stockholder, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation, fraudulent
conveyance and other similar laws and principles of equity affecting creditors'
rights and remedies generally.
SECTION 10. GOVERNING LAW; CONSTRUCTION
This Agreement is governed by and construed in accordance with
the laws of the State of Delaware, without regard to its conflict of law rules.
The headings or titles to Sections in this Agreement are intended solely for
convenience and no provision of this Agreement is to be construed by reference
to the heading or title of any Section. Unless otherwise specifically stated,
references in this Agreement to Sections or Schedules refer to Sections and
Schedules of this Agreement.
SECTION 11. CONSENT TO JURISDICTION AND SERVICE OF PROCESS
Each Preferred Stockholder irrevocably consents to the
non-exclusive jurisdiction of the state and federal courts located in the State
of Delaware, agrees that any action, suit or proceeding by or among the
Preferred Stockholders (or any of them) or the Company and any Preferred
Stockholder may be brought in any court in the
8
State of Delaware, and waives any objection which the Preferred Stockholder may
now or hereafter have to the choice of forum whether personal jurisdiction,
venue, forum non conveniens or on any other ground. Each Preferred Stockholder
hereby irrevocably designates, appoints and empowers the Secretary of the State
of Delaware to receive for and on behalf of such Preferred Stockholder service
of process in the State of Delaware, and each Preferred Stockholder irrevocably
consents to the service of process outside of the territorial jurisdiction of
said courts by mailing copies thereof by registered or certified United States
mail, postage prepaid, to such Preferred Stockholder's last known address as
shown in the records of the Company with the same effect as if the Preferred
Stockholder were a resident of the State of Delaware and had been lawfully
served in such State. Nothing in this Agreement will affect the right to service
of process in any other manner permitted by law. Each Preferred Stockholder
further agrees that final judgment against it or him in any such action or
proceeding will be conclusive and may be enforced in any other jurisdiction
within or outside the State of Delaware by suit on the judgment, a certified or
exemplified copy of which will be conclusive evidence of the fact and the amount
of such judgment.
SECTION 12. BENEFITS OF AGREEMENT; ASSIGNMENT
This Agreement is irrevocable and is binding upon and inures to
the benefit of the parties and their respective successors, permitted assigns,
heirs, executors, administrators, and legal representatives. Except as otherwise
provided in this Agreement, no Preferred Stockholder may assign or delegate any
of its rights or obligations under this Agreement without the prior written
consent of Paradigm.
SECTION 13. NOTICES
(a) All notices, requests, consents, and other
communications required by this Agreement must be in writing, delivered in
person or duly sent by recognized overnight courier or sent by facsimile or by
first-class registered or certified mail, postage prepaid, addressed to Paradigm
or the applicable Preferred Stockholders at the addresses set forth for such
Persons on Schedule A hereto, or to such other address which has been designated
by notice in writing by such party to the others in accordance with the
provisions of this Section 13.
(b) Each party will at all times have an address to
which any communications may be sent. All such notices, requests, consents and
other communications will be deemed to have been received (i) in the case of
personal delivery or facsimile, on the date of such delivery, (ii) in the case
of delivery by recognized overnight courier service, on the first business day
following delivery of such notice to the overnight courier, and (iii) in the
case of mailing, on the third (3rd) business day following such mailing.
SECTION 14. MODIFICATION AND WAIVER
Except as otherwise provided in this Agreement, neither this
Agreement, nor any provision of this Agreement, may be modified, changed,
waived, discharged or terminated except by an instrument in writing signed by
the holders of at least two-thirds of the Shares.
SECTION 15. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement among the parties
with respect to matters or understandings involving the ownership, control or
disposition of the Shares, and supersedes in its entirety any and all prior
agreements or understandings, oral or written, among any or all of the
undersigned relating to such ownership, control or disposition.
SECTION 16. SEVERABILITY
If any provision of this Agreement, or the application of such
provision to any Person or circumstance, is adjudged or ruled to be invalid or
unenforceable, the remaining provisions of this Agreement and the application of
such provisions to other Persons or circumstances will not be affected by such
invalidity or unenforceability.
SECTION 17. REMEDIES
9
The parties recognize and agree that if Paradigm or any of the
Preferred Stockholders breaches its or his obligations under this Agreement, the
other parties may not have an adequate remedy at law. Such breach will cause
such other parties irreparable harm for which there may be no adequate remedy at
law. If any party institutes an action or proceeding to enforce the provisions
of this Agreement, such party will be entitled to the remedies of specific
performance and injunctive relief, and any such Person against whom such action
or proceeding is brought hereby waives any claim or defense that there is an
adequate remedy at law. The right to obtain an injunction hereunder will not be
considered a waiver of any right on the part of the non-breaching parties to
recover damages and to assert any other claims for remedies which such parties
may have at law or in equity. The non-prevailing party in any such action agrees
to bear any expenses incurred by the prevailing party, including reasonable
attorneys' fees, in enforcing its rights under this Agreement.
SECTION 18. GENDER
Whenever the context requires, pronouns of any gender will be
deemed to include and designate the feminine, masculine or neuter gender.
SECTION 19. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each
of which will be deemed to be an original, but all of which taken together will
constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
10
SIGNATURE PAGE TO PREFERRED STOCKHOLDERS AGREEMENT
IN WITNESS WHEREOF, the undersigned have duly executed or caused this
Agreement to be executed as of the day and year first above written.
IMAGE INVESTOR PORTFOLIO,
a separate series of
MEMPHIS ANGELS, LLC,
a Delaware limited liability company
By: PARADIGM CAPITAL EQUITY
PARTNERS, LLC,
(individually and as Manager of
Memphis Angels, LLC)
By: PARADIGM HOLDINGS,
its Managing Member
By: /s/ Frank A. McGrew IV
-----------------------
Name: Frank A. McGrew IV
Title: Managing Partner
11
SIGNATURE PAGE TO PREFERRED STOCKHOLDERS AGREEMENT
IN WITNESS WHEREOF, the undersigned have duly executed or caused this
Agreement to be executed as of the day and year first above written.
NATIONAL FIRE & CASUALTY
By: /s/ Charles K. Slatery
----------------------
Name: Charles K. Slatery
Title: President
12
SIGNATURE PAGE TO PREFERRED STOCKHOLDERS AGREEMENT
IN WITNESS WHEREOF, the undersigned have duly executed or caused this
Agreement to be executed as of the day and year first above written.
NEWSOUTH CAPITAL MANAGEMENT, INC.
PROFIT SHARING PLAN
By: /s/ D. Stephen Morrow
---------------------
Name: D. Stephen Morrow
Title: Executive Vice President
13
SIGNATURE PAGE TO PREFERRED STOCKHOLDERS AGREEMENT
IN WITNESS WHEREOF, the undersigned have duly executed or caused this
Agreement to be executed as of the day and year first above written.
PHOTO OP, LLC
By: /s/ D. Stephen Morrow
---------------------
Name: D. Stephen Morrow
Title: Chief Manager
14
SIGNATURE PAGE TO PREFERRED STOCKHOLDERS AGREEMENT
IN WITNESS WHEREOF, the undersigned have duly executed or caused this
Agreement to be executed as of the day and year first above written.
NEWSOUTH SPECIAL EQUITIES, L.P.
By: NewSouth Capital Management, Inc.
General Partner
By: /s/ D. Stephen Morrow
---------------------
Name: D. Stephen Morrow
Title: Executive Vice President
15
SIGNATURE PAGE TO PREFERRED STOCKHOLDERS AGREEMENT
IN WITNESS WHEREOF, the undersigned have duly executed or caused this
Agreement to be executed as of the day and year first above written.
FIRST AVENUE PARTNERS, L.P.
By: FRONT STREET, LLC,
General Partner
By: /s/ Croley W. Graham, Jr.
-------------------------
Name: Croley W. Graham, Jr.
Title: Member
16
SIGNATURE PAGE TO PREFERRED STOCKHOLDERS AGREEMENT
IN WITNESS WHEREOF, the undersigned have duly executed or caused this
Agreement to be executed as of the day and year first above written.
eBAY INC.
By: /s/ Michael R. Jacobson
-----------------------
Name: Michael R. Jacobson
Title: Vice President, Legal Affairs
17
SIGNATURE PAGE TO PREFERRED STOCKHOLDERS AGREEMENT
IN WITNESS WHEREOF, the undersigned have duly executed or caused this
Agreement to be executed as of the day and year first above written.
/s/ John S. Cannon
------------------
By: A. Martin F. Cannon, POA
------------------------
18
SIGNATURE PAGE TO PREFERRED STOCKHOLDERS AGREEMENT
IN WITNESS WHEREOF, the undersigned have duly executed or caused this
Agreement to be executed as of the day and year first above written.
1935 DALTON TRUST
By: /s/ David P. Mixer
------------------
Name: David P. Mixer
Title: Trustee
19
SIGNATURE PAGE TO PREFERRED STOCKHOLDERS AGREEMENT
IN WITNESS WHEREOF, the undersigned have duly executed or caused this
Agreement to be executed as of the day and year first above written.
/s/ Brian Walsh
----------------
Brian Walsh
20
SCHEDULE A
NATIONAL FIRE & CASUALTY
NEWSOUTH CAPITAL MANAGEMENT, INC. PROFIT SHARING PLAN
PHOTO OP, LLC
NEWSOUTH SPECIAL EQUITIES, INC.
FIRST AVENUE PARTNERS, L.P.
EBAY INC.
JOHN S. CANNON
1995 DALTON TRUST
BRIAN WALSH