288LAG4525/25.367878_4--Broadview Fee Pmt. Agt.
288LAG4525/25.367878_4
INDIVIDUAL, INC.
8 New England Executive Park West
Burlington, MA 01803
June 13, 1997
Broadview Associates
950 Tower Lane
18th Floor
Foster City, California 94404-2130
ClariNet Communications Corp.
4880 Stevens Creek Boulevard
Suite 206
San Jose, California 95129
RE: PAYMENT OF BROADVIEW SUCCESS FEE
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Ladies and Gentlemen:
This letter (the "Fee Payment Agreement") is being delivered to you
pursuant to Section 4.09 of that certain Agreement and Plan of Reorganization
(the "Merger Agreement") dated as of June 13, 1997 among Individual, Inc.
("Individual"), CN Merger Corp., a wholly-owned subsidiary of Individual
("Merger Sub"), ClariNet Communications Corp. ("ClariNet") and certain
shareholders of ClariNet, pursuant to which, subject to the terms and
conditions set forth in the Merger Agreement, Merger Sub will merge with and
into ClariNet, with ClariNet surviving as a wholly-owned subsidiary of
Individual (the "Merger"). Any capitalized terms used herein without
definition shall have the meanings given such terms in the Merger Agreement.
Pursuant to an agreement dated August 29, 1996 between ClariNet and
Broadview Associates ("Broadview") (the "Broadview/ClariNet Agreement"),
ClariNet has agreed to pay Broadview a success fee in the amount of $500,000
(the "Success Fee") upon the consummation of the Merger. By this letter,
Individual hereby agrees that, upon the consummation of the Merger, Individual
shall assume the obligation and pay directly to Broadview the Success Fee,
payable in Individual's sole discretion in cash, Buyer Stock or some
combination of both, in full payment for all services rendered by Broadview to
any Person in connection with the Merger, pursuant to the following terms and
conditions:
1. Delivery of Initial Shares. Upon the consummation of the Merger
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at the Effective Time, Individual shall issue and deliver to Broadview
certificates representing 100,000 shares of Buyer Stock (the "Initial
Shares"). The Initial Shares shall be subject to certain restrictions,
conditions and limitations, as provided herein.
2. Full Cash Payment. At any time on or before 5:00 p.m. (Eastern
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Standard time) on the day that the shelf Registration Statement (the "Resale
Registration Statement") which Individual is required to file with the
Securities and Exchange Commission pursuant to the Registration Rights
Agreement (the "Registration Rights Agreement") dated as of June 18, 1997
among Individual, Broadview, ClariNet and certain shareholders of ClariNet is
declared effective by the Securities and Exchange Commission (the
"Determination Date"), Individual may elect, in its sole discretion, by
written notice to Broadview, to pay $500,000 in cash to Broadview in full and
final payment of the Success Fee (the "Full Cash Payment"), in lieu of the
Initial Shares. Upon Broadview's receipt of the Full Cash Payment from
Individual, which shall be made by Individual not later than five (5) business
days following the date of the foregoing election notice, the Initial Shares
automatically shall be deemed to be canceled on the stock records of
Individual and Broadview shall promptly return the certificates representing
the Initial Shares to Individual for destruction. If the certificates
representing the Initial Shares were lost, stolen or destroyed or if for any
other reason Broadview fails to return the certificates representing the
Initial Shares to Individual, Broadview hereby agrees that it will indemnify
Individual and hold it harmless from any and all damages, losses, liabilities
and other expenses incurred by Individual as a result of such failure of
return, and, at the request of Individual, will sign a written indemnity
agreement to that effect.
3. Partial Cash Payment. Alternatively, Individual may instead
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elect, in its sole discretion, by written notice to Broadview delivered at any
time on or before 5:00 p.m. (Eastern Standard Time) on the Determination Date,
to pay Broadview an amount of cash less than $500,000 (the "Partial Cash
Payment"), which shall be paid by Individual not later than 5 business days
following the date of such notice, and which, together with the number of
Initial Shares (and, if applicable, additional shares of Buyer Stock) to be
retained by Broadview after the Determination Date in accordance with the
following provisions, will constitute full and final payment of the Success
Fee:
(A) In the event that the quotient (the "Partial Cash Adjustment
Quotient") obtained by dividing (i) the difference between $500,000 and the
amount of the Partial Cash Payment by (ii) the lower of (x) the average
closing sale price of Buyer Stock on the Nasdaq National Market for the 30-day
period ending on the day immediately preceding the Determination Date or (y)
the average closing sale price of Buyer Stock on the Nasdaq National Market
for the 5-day period ending on the day immediately preceding the Determination
Date, is greater than the total number of Initial Shares, Individual shall
issue and deliver to Broadview within five (5) business days after the
Determination Date an additional number of shares of Buyer Stock equal to the
difference between the Partial Cash Adjustment Quotient and the number of
Initial Shares.
(B) In the event that the Partial Cash Adjustment Quotient is
less than the total number of Initial Shares, the number of Initial Shares
equal to the difference between the total number of Initial Shares and the
Partial Cash Adjustment Quotient shall automatically be canceled on the stock
records of Individual as of the Determination Date and Broadview shall
promptly return the certificates representing such number of Initial Shares to
Individual for destruction. If Broadview does not return the certificates
representing such Initial Shares to Individual for destruction because such
certificates were lost, stolen or destroyed or for any other reason, Broadview
hereby agrees that it will indemnify Individual and hold it harmless from any
and all damages, losses, liabilities and other expenses incurred by Individual
as a result of such failure of return, and, at the request of Individual, will
sign a written indemnity agreement to that effect.
4. No Cash Payment. If Individual does not elect by 5:00 p.m.
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(Eastern Standard time) on the Determination Date to deliver either the Full
Cash Payment or a Partial Cash Payment to Broadview, Broadview shall retain
the Initial Shares as full and final payment for the Success Fee, subject to
either the issuance of additional shares of Buyer Stock to Broadview or the
cancellation and return of certain of the Initial Shares to Individual, in
accordance with the following:
(A) In the event that the quotient (the "Stock Only Adjustment
Quotient") obtained by dividing $500,000 by the lower of (i) the average
closing sale price of Buyer Stock on the Nasdaq National Market for the 30-day
period ending on the day immediately preceding the Determination Date or (ii)
the average closing sale price of Buyer Stock on the Nasdaq National Market
for the 5-day period ending on the day immediately preceding the Determination
Date, is greater than the total number of Initial Shares, Individual shall
issue and deliver to Broadview within five (5) business days after the
Determination Date an additional number of shares of Buyer Stock equal to the
difference between the Stock Only Adjustment Quotient and the number of
Initial Shares.
(B) In the event that the Stock Only Adjustment Quotient is less
than the total number of Initial Shares, the number of Initial Shares equal to
the difference between the total number of Initial Shares and the Stock Only
Adjustment Quotient shall automatically be canceled on the stock records of
Individual as of the Determination Date and Broadview shall promptly return
the certificates representing such number of Initial Shares to Individual for
destruction. If Broadview does not return the certificates representing such
Initial Shares to Individual for destruction because such certificates were
lost, stolen or destroyed or for any other reason, Broadview hereby agrees
that it will indemnify Individual and hold it harmless from any and all
damages, losses, liabilities and other expenses incurred by Individual as a
result of such failure of return, and, at the request of Individual, will sign
a written indemnity agreement to that effect.
5. Registration. In the event that Individual elects not to deliver
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the Full Cash Payment provided for in paragraph 2, Individual shall include
the Initial Shares, plus any additional shares of Buyer Stock issued to
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Broadview in accordance with paragraphs 3(A) or 4(A), or minus the Initial
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Shares canceled on the stock records of Individual and returned to Individual
in accordance with paragraphs 3(B) or 4(B), as the case may be (in total, the
"Final Shares"), in the Resale Registration Statement, subject to all of the
terms and conditions set forth in the Registration Rights Agreement and the
following additional terms:
(A) In the event that (i) the Resale Registration Statement is
not filed on or before October 1, 1997 (the "Initial Gross-up Date") and (ii)
Broadview has not sold, agreed to sell, transferred, pledged, assigned or
otherwise disposed of any of the Final Shares, then: (x) Individual will pay
Broadview within five (5) business days after the Initial Gross-up Date an
amount of cash equal to the difference between the Success Fee and any Partial
Cash Payment that Individual previously paid to Broadview pursuant to the
preceding paragraphs of this Fee Payment Agreement and (y) all of the Final
Shares shall automatically be canceled on the stock records of Individual as
of the Initial Gross-up Date and Broadview shall promptly return the
certificates representing all such Final Shares to Individual for destruction.
If Broadview does not return the certificates representing all such Final
Shares to Individual for destruction because the certificates representing
such Final Shares were lost, stolen or destroyed or for any other reason,
Broadview hereby agrees that it will indemnify Individual and hold it harmless
from any and all damages, losses, liabilities and other expenses incurred by
Individual as a result of such failure of return, and, at the request of
Individual, will sign a written indemnity agreement to that effect; and
(B) In the event that the Resale Registration Statement is filed
on or before October 1, 1997, but (i) the Resale Registration Statement is not
declared effective by the Securities and Exchange Commission on or before
November 15, 1997 (the "Final Gross-up Date") and (ii) Broadview has not sold,
agreed to sell, transferred, pledged, assigned or otherwise disposed of any of
the Final Shares, then: (x) Individual will pay Broadview within five (5)
business days after the Final Gross-up Date an amount of cash equal to the
difference between the Success Fee and any Partial Cash Payment that
Individual previously paid to Broadview pursuant to the preceding paragraphs
of this Fee Payment Agreement and (y) all of the Final Shares shall
automatically be canceled on the stock records of Individual as of the Final
Gross-up Date and Broadview shall promptly return the certificates
representing all such Final Shares to Individual for destruction. If
Broadview does not return the certificates representing all such Final Shares
to Individual for destruction because the certificates representing such Final
Shares were lost, stolen or destroyed or for any other reason, Broadview
hereby agrees that it will indemnify Individual and hold it harmless from any
and all damages, losses, liabilities and other expenses incurred by Individual
as a result of such failure of return, and, at the request of Individual, will
sign a written indemnity agreement to that effect.
6. Investment Representations.
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(A) No Distribution(a) No Distribution. Any shares of Buyer
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Stock acquired by Broadview hereunder are being acquired solely for the
purpose of investment for Broadview's own accounts, and not with a view to, or
for resale in connection with, any distribution of such shares; provided,
however, that, subject to the terms and conditions contained in this Fee
Payment Agreement and the Registration Rights Agreement, shares of Buyer Stock
issued to Broadview hereunder may be included for registration in the Resale
Registration Statement filed pursuant to the Registration Rights Agreement and
sold pursuant thereto. Broadview is not a party to any contract, undertaking,
agreement or arrangement with any Person to sell, transfer or grant
participation rights to any such Person or any third party with respect to
such shares of Buyer Stock.
(B) Investor Qualification"(b)InvestorQualification". Broadview
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has such knowledge and experience in financial and business matters so as to
enable Broadview to evaluate the merits and risks attendant to receipt of and
investment in the Buyer Stock. Broadview is able to bear the risk of a
complete loss of its investment in the Buyer Stock.
(C) Restrictions on Resale"(c)RestrictionsonResale". Broadview
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acknowledges and understands that:
(i) Except as otherwise provided herein, the shares of
Buyer Stock are being issued without registration under the 1933 Act based
upon an exemption provided under the 1933 Act, and Broadview's representations
contained in this Fee Payment Agreement are a material factor with respect to
that exemption.
(ii) The shares of Buyer Stock are "restricted securities"
within the meaning of Rule 144 under the 1933 Act and as such may not be sold
or disposed of other than pursuant to Rule 144, pursuant to an exemption from
registration provided by the 1933 Act or pursuant to an effective registration
statement thereunder.
(iii) Broadview hereby consents to the placement on the
certificates representing all of the shares of Buyer Stock issued to it
hereunder of the 1933 Act Legend and a legend reflecting the restrictions
imposed on such shares pursuant to this Fee Payment Agreement.
(D) Access to Information(D) ACCESS TO INFORMATION.
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Broadview acknowledges that it has had the opportunity to ask questions of and
receive answers from officers and employees of Individual relating to the
terms and conditions of this Fee Payment Agreement. Broadview has received
and reviewed complete and accurate copies, as amended or supplemented, of the
Buyer's SEC Reports. Broadview has had the opportunity to receive and review
such other documents concerning Individual as Broadview has requested.
7. Pooling Lock-Up Agreement. Broadview shall execute and deliver to
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Individual a pooling lock-up letter in substantially the form attached hereto
as Annex A, pursuant to which Broadview shall agree, among other things, not
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to sell or otherwise transfer any shares of Buyer Stock prior to twenty-four
hours after the release by Individual of financial results covering at least
30 days of combined operations of Individual and ClariNet.
8. Expense Reimbursement; Complete Payment; Termination. Individual
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shall reimburse Broadview for up to $5,000.00 in out-of-pocket costs and
expenses incurred by Broadview in connection with the Merger (the "Expense
Reimbursement"). Other than the Expense Reimbursement, the Success Fee is the
only compensation to which Broadview is entitled in connection with the
consummation of the Merger, whether from Individual, ClariNet, or any other
Person. If the Merger is not consummated for any reason, this Fee Payment
Agreement shall terminate in its entirety and be of no further force or
effect, and none of the parties hereto shall have any rights or obligations
hereunder. Without limiting the generality of the preceding sentence, if the
Merger is not consummated for any reason, Individual shall have no obligation
to pay the Success Fee or make any other payment to or for the benefit of
Broadview, whether in the form of cash, Buyer Stock or otherwise. Upon the
consummation of the Merger, the Broadview/ClariNet Agreement shall terminate
in its entirety and be of no further force or effect, and none of the parties
to the Broadview/ClariNet Agreement shall have any rights or obligations
thereunder.
9. Taxes. Individual shall be entitled to comply with all applicable
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Federal, State, local, and foreign tax payment, withholding and reporting
requirements imposed by law in connection with the payment of the Success Fee.
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Please acknowledge your agreement to the terms and conditions set forth
in this Fee Payment Agreement by signing below on the appropriate lines.
Sincerely,
Individual, Inc.
By: /s/ Robert L. Lentz
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Print Name: /s/ Robert L. Lentz
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Title: Senior Vice President, Finance and
Administration, Chief Financial Officer,
Treasurer and Secretary
AGREED TO AND ACCEPTED BY:
BROADVIEW ASSOCIATES
By: /s/ Stephen S. Smith
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Print Name: /s/ Stephen S. Smith
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Title:Managing Director
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CLARINET COMMUNICATIONS CORP.
By: /s/ Roy Folk
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Print Name: /s/ Roy Folk
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Title:President
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Annex A
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Broadview Pooling Lock-Up
POOLING LOCK-UP AGREEMENT
June 13, 1997
INDIVIDUAL, INC.
8 New England Executive Park West
Burlington, MA 01803
Ladies and Gentlemen:
Pursuant to the terms of the Agreement and Plan of Reorganization dated
as of June 13, 1997 (the "Agreement"), among INDIVIDUAL, INC., a Delaware
corporation ("Parent"), CN MERGER CORP., a Delaware corporation and
wholly-owned subsidiary of Parent ("Merger Sub"), and ClariNet Communications
Corp., a California corporation (the "Company"), Parent will acquire the
Company through the merger of Merger Sub with and into the Company (the
"Merger"). Subject to the terms and conditions of the Agreement, at the
Effective Time (as defined in the Agreement), outstanding shares of the Common
Stock, no par value per share, of the Company (the "Company Common Stock")
will be converted into the right to receive shares of the Common Stock, $.01
par value per share, of Parent (the "Parent Common Stock"), on the basis
described in the Agreement. Capitalized terms used herein without definition
shall have the meanings given such terms in the Agreement.
In addition, pursuant to the terms and conditions of the Fee Payment
Agreement dated as of June 13, 1997 among Parent, the undersigned and the
Company (the "Fee Payment Agreement"), the Parent has agreed to issue to the
undersigned at the Effective Time shares of Parent Common Stock. In
consideration for the receipt of such shares, pursuant to Section 5 of the Fee
Payment Agreement, the undersigned has agreed to execute and deliver to Parent
this Pooling Lock-Up Agreement (the "Pooling Lock-Up Agreement").
The undersigned understands that the representations, warranties and
covenants set forth herein will be relied upon by Parent, stockholders of
Parent, the Company, other shareholders of the Company and their respective
counsel and accountants.
The undersigned represents and warrants to and agrees with Parent that:
1. The undersigned has full power to execute and deliver this Pooling
Lock-Up Agreement and to make the representations and warranties herein and to
perform its obligations hereunder;
2. The undersigned has carefully read this Pooling Lock-Up Agreement
and the Agreement and discussed the requirements and other applicable
limitations upon its ability to sell, transfer or otherwise dispose of Parent
Common Stock to the extent the undersigned felt necessary, with its counsel or
counsel for the Company.
3. The undersigned shall not make any sale, transfer or other
disposition of Parent Common Stock in violation of the Act or the Rules and
Regulations.
4. Except as otherwise provided in the Agreement, the Fee Payment
Agreement or the other Ancillary Agreements, Parent is under no obligation to
register the sale, transfer or other disposition of Parent Common Stock by the
undersigned or on its behalf under the Act or to take any other action
necessary in order to make compliance with an exemption from such registration
available.
5. Parent, in its sole discretion, may cause stop transfer orders to
be placed with the transfer agent with respect to the undersigned's shares of
Parent Common Stock and may cause legends to be placed on the certificate(s)
representing such shares relating to this Pooling Lock-up Agreement, the Fee
Payment Agreement and other transfer restrictions applicable to such shares.
6. The undersigned has not at any time since May 10, 1997 or in
contemplation of the Merger engaged, and will not, after the Effective Time
(as defined in the Agreement) and until such time as results covering at least
30 days of combined operations of the Company and Parent have been published
by Parent, in the form of a quarterly or annual earnings report, an effective
registration statement filed with the Commission, a report to the Commission
on Form 10-K, 10-Q or 8-K, or any other public filing or announcement
(including a press release) which includes the combined results of operations,
engage, in any sale, exchange, transfer, pledge, disposition of or grant of
any option, the establishment of any "short" or put-equivalent position with
respect to or the entry into any similar transaction intended to reduce the
risk of the undersigned's risk of ownership of or investment in, any of the
following:
(a) any shares of Parent Common Stock which the undersigned acquires
in connection with the Merger and Fee Payment Agreement, or any securities
which may be paid as a dividend or otherwise distributed thereon or with
respect thereto or issued or delivered in exchange or substitution therefor
(all such shares and other securities being referred to herein, collectively,
as "Restricted Securities"), or any option, right or other interest with
respect to any Restricted Securities;
(b) any Company Securities; or
(c) any shares of Company Common Stock or other Company equity
securities which the undersigned purchases or otherwise acquires after the
execution of this Pooling Lock-up Agreement.
7. As promptly as practicable following the Merger, Parent shall
publish financial results covering at least 30 days of combined operations of
the Company and Parent in the form of a quarterly or annual earnings report,
an effective registration statement filed with the Commission, a report to the
Commission on Form 10-K, 10-Q or 8-K, or any other public filing or
announcement (including a press release) which includes the combined results
of operations of the Company and Parent; provided, however, that Parent shall
be under no obligation to publish any such financial information other than
with respect to a fiscal quarter of Parent.
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Very truly yours,
BROADVIEW ASSOCIATES
By: /s/ Javier E. Rojas__
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Print Name: /s/ Javier E. Rojas__
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Title: Managing Director
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Accepted this 18th day of
June, 1997, by:
INDIVIDUAL, INC.
By: /s/ Robert L. Lentz
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Name: Robert L. Lentz
Title: Senior Vice President, Finance and
Administration, Chief Financial Officer,
Treasurer and Secretary