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Exhibit 10.12
OPTION AGREEMENT dated the 15th day of September, 1999.
B E T W E E N:
MEDIA SYNERGY INC., a corporation incorporated under the
laws of Ontario
(hereinafter referred to as "Media")
OF THE FIRST PART
- - and -
CNET, INC., a corporation incorporated under the laws of the
State of Delaware
(hereinafter referred to as "CNET")
OF THE SECOND PART
THIS AGREEMENT WITNESSES that in consideration of the sum of one dollar ($1.00)
and other good and valuable consideration (the receipt and sufficiency of which
is hereby acknowledged), it is agreed by and between the parties hereto as
follows:
1. DEFINITIONS. When used herein the following terms shall have the
following meanings, respectively:
"COMMON SHARES" means the issued and outstanding common shares in the
capital of Media;
"EXPIRY TIME" has the meaning set out in section 4 of this Agreement;
"FULLY DILUTED" means the number of Common Shares outstanding at any
time including any stock dividends which have been declared but not
issued and assuming all securities which are convertible directly or
indirectly into such Common Shares are converted into Common Shares and
all options, warrants or rights to acquire directly or indirectly such
Common Shares as if exercised;
"EQUITY FINANCING" means an equity financing of Media which yields net
proceeds to Media of not less than $2,000,000;
"IPO" means an offering of treasury securities of Media to the public
led by an underwriter chosen solely by the board of directors of Media,
pursuant to a prospectus filed with the applicable securities
regulatory authorities including the Ontario Securities Commission
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and/or the Securities & Exchange Commission of the United States and a
listing on an exchange approved by the board of directors of Media,
with net proceeds from the sale of such treasury securities and
secondary securities of at least $20,000,000 Cdn. with a pre-money
valuation of not less than $35,000,000 Cdn.;
"OPTION" means the irrevocable option granted by Media to CNET pursuant
to this Agreement;
"OPTION PRICE" means the prices referred to in section 3 payable in
respect of the exercise of the Option; and
"SHAREHOLDERS AGREEMENT" means Media's unanimous shareholders agreement
dated as of November 20, 1998 as amended.
2. GRANT OF OPTIONS. Media hereby grants to CNET, subject to the terms and
conditions hereinafter set out, an irrevocable option to subscribe for
and purchase such number of Common Shares equal to 5% of all the issued
and outstanding Common Shares on a Fully Diluted basis. In the event
the Option is exercised in conjunction with the completion of an Equity
Financing, the term "Common Shares" shall refer to the same class of
equity securities as is issued in such Equity Financing.
3. CONDITIONS. CNET shall be entitled to exercise the Option, in whole or
in part, at any time and from time to time in conjunction with or after
the completion of an Equity Financing and prior to the Expiry Time at
an exercise price per share equal to the price per share paid in the
Equity Financing. Notwithstanding the foregoing, in the event Media has
not completed an Equity Financing by September 30, 2000, CNET shall be
entitled at any time and from time to time thereafter and prior to the
Expiry Time to subscribe for and purchase such number of Common Shares
equal to 5% of the Common Shares on a Fully Diluted Basis at the time
of exercise, for an exercise price per share equal to the fair value of
the Common Shares determined in accordance with section 6.6 the
Shareholders Agreement.
4. EXPIRATION OF OPTION. The Option shall expire and terminate as to the
Common Shares in respect of which the Option has not then been
exercised on the earliest of the following dates and times (the "Expiry
Time"):
a. 6:00 p.m. (Toronto time) on September 15, 2001;
b. 6:00 p.m. (Toronto time) on the date which is 30 days
following the completion of an IPO; and
c. the date which is 90 days after termination or expiration of
the e-mail services agreement entered into between Media and
CNET dated July 19, 1999.
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5. METHOD OF EXERCISE OF OPTION. The Option may be exercised by CNET
giving to Media written notice of its desire to exercise the Option
accompanied by a certified cheque or bank draft representing the Option
Price in respect of the Common Shares for which the Option is being
exercised. The Common Shares subscribed for and purchased by exercise
of this Option shall be and be deemed to be issued to CNET as the
registered owner of such shares as of the close of business on the date
on which payment has been made for such shares as aforesaid.
Certificates for the Common Shares so purchased shall be delivered to
CNET within a reasonable time after the Option shall have been so
exercised.
6. ADJUSTMENT. In the event of any subdivision or change of the Common
Shares of Media into a greater number of Common Shares at any time
prior to the exercise in whole or in part of the Option, Media shall
deliver, in connection with any exercise of the Option occurring after
the record date or effective date of such subdivision or change, such
additional number of Common Shares as would have resulted from such
subdivision or change if such exercise of the Option had occurred prior
to the record date or effective date of such subdivision or change, and
the Exercise Price per Common share shall be decreased proportionately.
In the event of any consolidation or change of the Common Shares of
Media into a lesser number of Common Shares at any time prior to the
exercise in whole or in part of the Option, Media shall deliver, in
connection with any exercise of the Option occurring after the record
date or effective date of such consolidation or change, such lesser
number of Common Shares as would have resulted from such consolidation
or change if such exercise of the Option had occurred prior to the
record date or effective date of such consolidation or change, and the
Exercise Price per Common Share shall be increased proportionately.
In the event of any reclassification of the shares of Media at any time
prior to the exercise in whole or in part of the Option, Media shall
deliver, in connection with any exercise of the Option occurring after
the effective date of any such reclassification, such number and class
of shares as would have resulted from such reclassification if such
exercise of the Option had occurred prior to the effective date of such
reclassification.
In the event that Media proposes any reorganization, merger,
dissolution or sale of all or substantially all its assets or proposes
to amalgamate with one or more other corporations, it shall give notice
thereof to CNET in sufficient time to enable CNET to exercise the
Option to the extent that CNET is entitled to exercise the Option as at
the date of such reorganization, merger, dissolution, sale or
amalgamation. In addition, upon a reorganization, merger or
amalgamation with one or more other corporations, Media shall ensure
that the Option shall be exercisable into the same number and class of
securities of the reorganized, merged or amalgamated corporation that
would have been issued had the Option been exercised prior to the
reorganization, merger or amalgamation.
If Media shall at any time when CNET is entitled to exercise the
Option:
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a. declare any dividend upon its Common Shares;
b. offer for subscription pro rata to the holders of its Common
Shares any additional shares of any class or other rights;
c. effect any capital reorganization or reclassification of the
capital stock of Media, or consolidation, amalgamation or
merger of Media with, or sale of all or substantially all of
its assets to, another corporation;
d. effect a voluntary or involuntary dissolution, liquidation or
winding-up of Media; or
e. fix a record date for or take any other action which may
result in any adjustment under the within provisions,
then in any one or more of such cases, Media shall give to the holder
at least 20 days' written notice of the record date or effective date
as the case may be of any of the foregoing events.
The adjustments provided for herein are cumulative and shall apply
(without duplication) to successive subdivisions, consolidations,
distributions or other events resulting in any adjustment under the
within provisions, before the Expiry Time.
Media shall not be required to issue fractional Common Shares in
satisfaction of its obligations hereunder, but rather shall issue the
nearest whole number of Common Shares.
7. COVENANTS OF MEDIA. Media hereby agrees as follows:
a. All Common Shares which may be issued upon the exercise of the
rights represented by this Agreement will, upon issuance, be
validly issued, fully paid and non-assessable and free from
any and all taxes, liens and charges with respect to the issue
thereof.
b. During the period within which the rights represented by this
Agreement may be exercised, Media will at all times have
authorized and reserved a sufficient number of its Common
Shares to provide for the exercise of the rights represented
by this Agreement.
8. ASSIGNMENT. This Agreement shall be binding upon and enure to the
benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement and the rights granted hereunder may
be transferred by CNET only in accordance with the Shareholders
Agreement.
9. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the province of Ontario and the laws of
Canada applicable thereto.
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- - TIME OF THE ESSENCE. Time shall be of the essence of this Agreement.
- - EXECUTION. This Agreement may be executed by manual or facsimile
signature in several counterparts, each of which when so executed shall
be deemed to be an original and such counterparts shall constitute one
and the same instrument.
IN WITNESS WHEREOF the parties have executed this Agreement.
MEDIA SYNERGY INC.
By: /s/ Wilson Lee
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CNET, INC.
By: /s/ Douglas N. Woodrum
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