EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
BETWEEN
GO2NET, INC.
AND
VULCAN VENTURES INCORPORATED
MARCH 15, 1999
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT is made as of March 15, 1999 between
GO2NET, INC. (the "Company"), a corporation organized under the laws of the
State of Delaware, and VULCAN VENTURES INCORPORATED, a corporation organized
under the laws of the State of Washington ("Purchaser").
WHEREAS, the Company wishes to sell to Purchaser 300,000 shares of the
Company's Series A Convertible Preferred Stock, $.01 par value (the "Series A
Preferred Stock"), on the terms and conditions hereinafter provided;
WHEREAS, as an inducement to Purchaser to enter into this Agreement,
certain executive officers and directors of the Company (the "Management
Stockholders") have entered into agreements with Purchaser (the "Management
Agreements") pursuant to which, among other things (i) each Management
Stockholder has agreed to sell to Purchaser, and Purchaser has agreed to
purchase from him, certain of his shares of the Company's Common Stock, $.01 par
value (the "Common Stock") (including certain shares of Common Stock issuable
pursuant to the exercise of vested stock options) aggregating a total of
1,403,312 shares of Common Stock under all the Management Agreements taken
together, at $90 per share, and (ii) each Management Stockholder has agreed to
vote all of his shares of Common Stock in favor of the issuance to Purchaser of
the Series A Preferred Stock to be issued at the Second Closing (as defined
below), in each case upon the terms and subject to the conditions set forth
therein; and
WHEREAS, Purchaser will commence, within five (5) business days of the
date hereof, at a price of $90 per share net to the seller in cash, a tender
offer (the "Offer") for up to 3,596,688 shares of Common Stock (the "Offer
Shares"), which shares, together with the maximum number of shares of Series A
Preferred Stock that may be purchased by Purchaser under this Agreement, would
equal at least 51% of the outstanding shares of Common Stock (assuming
conversion into Common Stock, at the initial conversion rate, of all such shares
of Series A Preferred Stock).
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained in this Agreement, the Company and Purchaser agree as
follows:
1. Purchase and Sale of Shares. On the terms and subject to the
conditions set forth herein, the Company agrees to issue and sell to Purchaser,
and Purchaser agrees to purchase from the Company, (a) at the First Closing (as
defined below), 167,507 shares (the "First Issuance Shares") of Series A
Preferred Stock, and (b) at the Second Closing (as defined below), an additional
132,493 shares of Series A Preferred Stock (the "Second Issuance Shares," and
collectively with the First Issuance Shares, the "Shares"), in each case for a
purchase price of One Thousand Dollars ($1,000) per share. The Series A
Preferred Stock shall have the terms
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designated in the Certificate of Designation of Series A Convertible Preferred
Stock attached hereto as Exhibit A (the "Certificate of Designation").
2. Closing; Deliveries.
2.1. First Closing. The closing of the purchase and sale of
the First Issuance Shares (the "First Closing") shall occur at the offices of
Irell & Xxxxxxx LLP ("I&M"), 0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000, Xxx Xxxxxxx,
Xxxxxxxxxx 00000, concurrently with the execution of this Agreement. At the
First Closing, the Company shall deliver to Purchaser one or more stock
certificates evidencing the First Issuance Shares registered in the name of
Purchaser and Purchaser shall pay to the Company the purchase price for the
First Issuance Shares $25,000 by check or wire transfer and the balance in the
form of a promissory note in the form of Exhibit B hereto. At the First Closing,
the parties will also duly execute and deliver the Registration Rights Agreement
in the form of Exhibit C hereto (the "Registration Rights Agreement") and the
Purchaser shall receive an opinion from Xxxxxxxx, Xxxxxxx & Xxxxxxx as to
certain matters. The date on which the First Closing occurs is hereinafter
referred to as the "First Closing Date." The First Closing shall occur prior to
any public announcement of the tender offer contemplated hereby.
2.2. Second Closing. The closing of the purchase and sale of
the Second Issuance Shares (the "Second Closing") shall occur at the offices of
I&M as soon as practicable (but not more than three (3) business days) after the
satisfaction or waiver of all of the conditions to the Second Closing set forth
herein, or at such other place and time as the Company and Purchaser may agree.
At the Second Closing, the Company shall deliver to Purchaser one or more stock
certificates evidencing the Second Issuance Shares registered in the name of
Purchaser and Purchaser shall pay to the Company the purchase price for the
Second Issuance Shares by check or wire transfer. The date on which the Second
Closing occurs is hereinafter referred to as the "Second Closing Date."
3. Representations and Warranties of the Company. The Company hereby
represents and warrants to Purchaser as follows (it being agreed that for
purposes of the representations and warranties set forth in this Section 3, the
term the "Company" shall be deemed to refer to the Company and each of its
subsidiaries on a consolidated basis, except where the context reasonably
indicates otherwise):
3.1. Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation, has all requisite corporate power and authority
to conduct its business as currently conducted and to enter into and to carry
out and perform its obligations under the Transaction Documents. For purposes of
this Agreement, "Transaction Documents" shall mean (a) this Agreement, (b) the
Registration Rights Agreement, and (c) the Certificate of Designation. The
Company is duly qualified as a foreign corporation and is in good standing in
each jurisdiction in which the failure
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to be so qualified or in good standing could reasonably be expected to have a
material adverse effect on the business, properties, results of operations or
financial condition of the Company and its subsidiaries taken as a whole, other
than any adverse effect following the date of this Agreement that the Company
shall have demonstrated is substantially attributable to (i) the transactions
contemplated by this Agreement or the announcement of the transactions
contemplated by this Agreement or (ii) any material economic downturn in the
Internet industry generally or any material national economic downturn (a
"Material Adverse Effect").
3.2. Authorized Capital Stock. As of the date hereof, the
authorized capital stock of the Company consists of (a) 50,000,000 shares of
Common Stock, and (b) 1,000,000 shares of Preferred Stock, $.01 par value per
share, 300,000 shares of which are designated as Series A Preferred Stock. As of
March 11, 1999, there were 12,732,545 shares of Common Stock outstanding and no
shares of Preferred Stock outstanding. All of the outstanding shares of Common
Stock have been duly authorized and validly issued and are fully paid and
nonassessable. The Company has reserved for issuance upon conversion of the
Series A Preferred Stock 4,537,891 shares of Common Stock. The Company has
reserved for issuance upon exercise of options granted under its 1996 Stock
Option Plan ("Company Option Plan") and outside such plan an aggregate of
5,182,293 shares of Common Stock. The Company's Board of Directors has
authorized an increase in the number of shares of Common Stock reserved for
issuance under the Company Option Plan from 5,000,000 to 8,000,000 shares of
Common Stock, subject to stockholder approval. The Company also assumed the
outstanding options under the former Silicon Investor and Web21 stock option
plans (the "Assumed Option Plans"), the shares under which are in addition to
the shares available under the Company Option Plan. An aggregate of 121,944
shares of Common Stock are reserved for issuance upon exercise of options
pursuant to the Assumed Option Plans. As of March 11, 1999, there were not
outstanding or existing any options, warrants, rights (including conversion or
preemptive rights) or agreements for the purchase or acquisition from the
Company of any shares of its capital stock or any securities exercisable for or
convertible into shares of its capital stock, except for options to purchase an
aggregate of 5,304,237 shares of Common Stock outstanding under the Company
Option Plan and the Assumed Option Plans.
3.3. Subsidiaries. Except as set forth in Schedule 3.3, the
Company (a) owns no equity securities of any other corporation, limited
partnership or similar entity, and (b) is not a participant in any joint
venture, partnership or similar arrangement.
3.4. Due Execution, Delivery and Performance of the
Agreement; No Conflict.
3.4.1. Subject only to approval of the issuance and
sale to Purchaser of the Second Issuance Shares by the holders of the Common
Stock, the execution, delivery and performance of the Transaction Documents
have been duly authorized by all necessary corporate action on the part of
the Company. The Company's Board of Directors has approved the Certificate of
Designation. This Agreement has been, and when executed and delivered at the
First Closing or the Second Closing (as the case may be) the other Transaction
Documents will
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be, duly executed and delivered by the Company and constitutes, or when executed
and delivered at the First Closing or the Second Closing (as the case may be)
will constitute, valid and binding obligations of the Company, enforceable
against it in accordance with their respective terms, except as may be limited
by bankruptcy, insolvency, reorganization, moratorium and other similar laws and
equitable principles relating to or limiting creditors' rights generally.
3.4.2. The execution, delivery and, subject to
obtaining the consents set forth in Schedule 3.4, performance by the Company
of the Transaction Documents and the consummation of the transactions
contemplated thereby will not, except in each case where the effect of
non-compliance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, (i) modify, breach or constitute
grounds for the occurrence or declaration of a default under or give rise
to a right to terminate any agreement, license, indenture, undertaking or
other instrument to which the Company is a party or by which it or any of its
assets may be bound or affected, (ii) violate any provision of law or
any regulation or any order, judgment, or decree of any court or other
agency of government to which the Company is subject, (iii)
violate any provision of the Restated Certificate of Incorporation (the
"Certificate of Incorporation") or By-Laws of the Company, or (iv) result in the
creation or imposition of (or the obligation to create or impose) any liens,
mortgages, pledges, charges, claims or other encumbrances (collectively,
"Liens") on any of the Company's properties.
3.5. State Takeover Statutes. The Board, at a meeting duly
called (or for which notice was duly waived by all directors of the Company) and
held on March 14, 1999, has unanimously approved the terms of this Agreement and
the other Transaction Documents and the consummation of the transactions
contemplated hereby and thereby (including without limitation the sale and
issuance to Purchaser of the Shares pursuant to this Agreement, and Purchaser's
acquisition of shares of Common Stock pursuant to the Management Agreements and
the Offer) and such approval constitutes approval of such transactions by the
Board under the provisions of Section 203 of the Delaware General Corporation
Law (the "DGCL") and Chapter 23B.19 of the Washington Business Corporation Act
(the "WBCA"), and constitutes all actions necessary to ensure that the
restrictions contained in Section 203 of the DGCL and Chapter 23B.19 of the WBCA
will not apply to Purchaser in connection with or following such transactions.
To its knowledge, no other state takeover statute is applicable to the
transactions contemplated by this Agreement and the other Transaction Documents.
3.6. Issuance, Sale and Delivery of the Shares.
3.6.1. When issued in compliance with the provisions
of this Agreement, the Shares will be validly issued, fully paid and
nonassessable, and will be free of any Liens, other than restrictions on
transfer under state and/or federal securities laws. The sale of the Shares is
not subject to any preemptive rights or rights of first refusal that have not
been properly waived or complied with. Upon the filing with the Delaware
Secretary of State and effectiveness of the Certificate of Designation, the
rights, privileges and preferences of the Series A Preferred Stock set
forth in the Certificate of Designation will constitute the valid and binding
obligations
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of the Company, enforceable against it in accordance with their respective
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws and equitable principles relating to or
limiting creditors' rights generally.
3.6.2. The shares of Common Stock that are issuable
upon conversion of the Series A Preferred, when so issued, will be validly
issued, fully paid and nonassessable, and will be free of any Liens, other
than restrictions on transfer under state and/or federal securities laws.
Issuance of such shares of Common Stock is not subject to any preemptive
rights or rights of first refusal that have not been properly waived or
complied with.
3.7. Governmental Consent. No consent, approval or
authorization of, or declaration or filing with, any governmental authority on
the part of the Company is required for the execution and delivery of the
Transaction Documents or the sale of the Shares to Purchaser pursuant to this
Agreement, except for the filing of the Certificate of Designation and, to the
extent applicable, the required filing under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the expiration or
early termination of the waiting period thereunder.
3.8. SEC Reports; Financial Statements.
3.8.1. The Company has filed all forms, reports and
documents (except for employment agreements with certain executive officers of
the Company, copies of which have been provided to Purchaser (the "Executive
Employment Agreements")) required to be filed by it with the Securities and
Exchange Commission (the "SEC") since and including the filing date of the
Registration Statement with respect to the Company's initial public offering
(the "SEC Reports"). The SEC Reports (x) were prepared in accordance with the
requirements of the Securities Act of 1933, as amended (the "Securities
Act") and the Exchange Act, as the case may be, and the rules and regulations
thereunder and (y) did not at the time they were filed, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
3.8.2. Each of the financial statements (including,
in each case, any notes thereto) of the Company included in the SEC Reports (the
"Financial Statements"), was prepared in accordance with GAAP (subject, in the
case of unaudited statements, to the absence of footnotes thereto and to normal
and recurring year-end adjustments which were not and are not expected to be
material in amount) and each fairly presented the financial position, results of
operations and cash flows of the Company as at the respective dates thereof and
for the respective periods indicated therein (except as may be indicated in the
notes thereto) in all material respects.
3.8.3. Except as set forth in Schedule 3.8 hereto,
to the Company's knowledge, the Company has no liability or obligation (whether
accrued, absolute, contingent or
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otherwise) other than (a) liabilities and obligations reflected on the unaudited
balance sheet of the Company as of December 31, 1998 contained in the Financial
Statements (the "Unaudited Balance Sheet"), and (b) liabilities or obligations
incurred since December 31, 1998 in the ordinary course of business consistent
with past practice or that, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
3.9. Proxy Statement; Offer Documents. The Proxy Statement
described in Section 5.3, including any amendments or supplements thereto, shall
not, at the time filed with the SEC, as of the date mailed to the Company's
stockholders or at the time of the Stockholders Meeting (as defined in Section
5.2), contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. Neither the Schedule 14D-9 (as defined in Section 7.8), nor any of
the information supplied by the Company for inclusion in the Offer Documents (as
defined in Section 7.7), shall, at the respective times such Schedule 14D-9, the
Offer Documents or any amendments or supplements thereto are filed with the SEC
or are first published, sent or given to shareholders, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing, the Company makes no representation
or warranty with respect to any information provided by Purchaser specifically
for use in the Proxy Statement or the Schedule 14D-9. The Proxy Statement and
the Schedule 14D-9 will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder.
3.10. Absence of Litigation. Except as set forth on Schedule
3.10 hereto, there is no claim, action, proceeding or investigation pending or,
to the knowledge of the Company, threatened against the Company, any director or
officer of the Company or any property or asset of the Company, before any
court, arbitrator or administrative, governmental or regulatory authority or
body, domestic or foreign that individually or in the aggregate could reasonably
be expected to have a Material Adverse Effect on the Company. Except as set
forth on Schedule 3.10 hereto, neither the Company nor any of its properties or
assets is subject to any order, writ, judgment, injunction, decree,
determination or award that individually or in the aggregate could reasonably be
expected to have a Material Adverse Effect on the Company.
3.11. Absence of Certain Changes or Events. Except as
disclosed in the Company's Annual Report on Form 10-K for the fiscal year ending
September 30, 1998, the Quarterly Report on Form 10-Q for the period ending
December 31, 1998 or in Schedule 3.11, or as specifically contemplated by this
Agreement, since September 30, 1998 there has not been (i) any transaction,
commitment, dispute or other event or condition (financial or otherwise) of any
character (whether or not in the ordinary course of business) individually or in
the aggregate which has had or could reasonably be expected to have a Material
Adverse Effect; (ii) any damage, destruction or loss, whether or not covered by
insurance, which, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect; (iii) any declaration,
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setting aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to the capital stock of the Company; (iv) except
for normal increases in the ordinary course of business and except for the
execution of amended and restated employment agreements entered into with
certain executive officers (copies of which have been provided to Purchaser),
any increases by the Company in the wages, salaries, compensation, pension or
other fringe benefits or perquisites payable to any executive officer or
director, grants by the Company of any severance or termination pay, execution
by the Company of any contract to make or grant any severance or termination
pay, or payments by the Company of any bonus, in each case with respect to any
such executive officer or director, other than pursuant to preexisting
agreements or arrangements; or (v) entry into any commitment or transaction
material to the Company (including, without limitation, any borrowing or sale of
assets) except in the ordinary course of business consistent with past practice.
3.12. Compliance with Laws; Permits. The Company has at all
times complied, and it currently in compliance, with all applicable statutes,
rules, regulations and orders of the United States or any state in which the
Company is engaged in business and has obtained all required licenses, permits
and other approvals of any governmental authority, except where a failure to
comply or obtain such approvals, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
3.13. Material Contracts. Each of the contracts required to be
filed as contracts as exhibits to the SEC Reports (the "Material Contracts")
(including all amendments, modifications and waivers) (a) except for the
Executive Employment Agreements, has been filed with the SEC, (b) has been duly
authorized, executed and delivered by the parties thereto, (c) remains in full
force and effect to the extent of its terms without any amendment, modification
or waiver not reflected in the Material Contracts, (d) is binding on the parties
thereto in accordance with and to the extent of its terms and applicable laws,
and (e) is not subject to, and the Company has not received any written notice
threatening or declaring, termination as a result of any alleged uncured breach
or default. The Company has performed all material obligations required to be
performed by it to date under each Material Contract, and the Company is not in
material breach or default under any Material Contract. To the Company's
knowledge, without a specific review having been conducted by the Company, no
other party to any Material Contract is in material breach or default thereunder
or in material violation thereof, and no condition exists that with notice or
lapse of time or both would constitute a material violation thereof or a
material default thereunder.
3.14. Intellectual Property Rights.
3.14.1. The Company owns or has licenses to use
registered copyrights, copyright registration and copyright applications,
trademark registrations and applications for registration, patents and patent
applications, trademarks, service marks, trade names, Internet domain
names and other intellectual property rights (collectively, "Intellectual
Property Rights") which are sufficient to carry on the business of the
Company as presently conducted, except
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where a failure to own or license Intellectual Property Rights could not, either
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company.
3.14.2. To the Company's knowledge, the operation
of the business of the Company does not, and except as identified on Schedule
3.14, the Company has not received any notice from any person claiming that
the business of the Company does infringe or misappropriate the Intellectual
Property Rights of any person, violate any export control law or regulation,
violate the rights of any person (including rights to privacy or publicity),
or constitute unfair competition or trade practices under any applicable laws.
3.14.3. Except as set forth on Schedule 3.14, to the
knowledge of the Company, no person is infringing or misappropriating any
Intellectual Property Rights owned or licensed by the Company or engaging in
other conduct that may diminish or undermine such Intellectual Property Rights,
such as the disclosure of Company confidential information, except for any
such infringements that, individually or in the aggregate, could not reasonably
be expected to have a Material Adverse Effect.
3.14.4. The Company has taken all reasonable steps
to protect the Company's rights in confidential information and trade secrets
of the Company or provided by any other person to the Company subject to a duty
of confidentiality. Without limiting the foregoing, the Company has, and
enforces, a policy requiring each of its executive officers and research and
development personnel to execute proprietary information, confidentiality and
invention and copyright assignment agreements, and all such individuals have
executed such an agreement.
3.15. Certain Matters Regarding Employees. To the best
knowledge of the Company, no officer or key employee of the Company is subject
to any contract, agreement, undertaking, commitment or instrument (including any
no hire or non-competition agreements) which would impair his or her ability to
perform the services on behalf of Company contemplated to be performed by such
officers or key employee.
3.16. Tax Matters.
3.16.1. The Company (i) has timely filed all
material Tax Returns required to be filed by it as of the date hereof,
(ii) has used its commercially reasonable efforts to maintain all required
records with respect to any liability for Taxes for taxable years with respect
to which the statute of limitations has not yet expired, regardless of whether
such liability has been previously assessed in whole or in part or is
assessed in whole or in part after the date of this Agreement, and (iii) has
timely paid, or has made appropriate provision on its balance sheet (in
accordance with GAAP) for, all Taxes due or claimed to be due from it by any
Governmental Body with respect to any liability for Taxes except where such
failure, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on the Company. All Tax Returns described in
clause (i) are true, correct and complete in all material respects.
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With respect to periods commencing on or after September 30, 1996, the Company
has not incurred any liability for Taxes which could reasonably be expected to
have a Material Adverse Effect other than (i) as set forth on Schedule 3.16,
(ii) as reflected on the audited balance sheet of the Company as of September
30, 1998 contained in the Financial Statements (the "Audited Balance Sheet") or
the Unaudited Balance Sheet, or (iii) federal and state income taxes payable on
the Company's income after December 31, 1998. There are no material Liens with
respect to Taxes upon any of the Company's properties or assets, except for
current Taxes not yet due.
3.16.2. Except as set forth in Schedule 3.16, to the
Company's knowledge, none of the Tax Returns of the Company have been or is
currently being audited or examined by the Internal Revenue Service (the
"IRS"). Except to the extent reserved for in the Audited Balance Sheet,
no material issue of which the Company has received notice has been raised by
a Governmental Body in any audit or examination which reasonably could be
expected to result in a proposed deficiency, penalty or interest for any other
period, which could reasonably be expected to have a Material Adverse Effect
on the Company.
3.16.3. There are no outstanding agreements or
waivers extending the statutory period of limitation applicable to any Tax
Returns required to be filed by, or which include or are treated as including,
the Company.
3.16.4. The Company is not involved in or subject to
any joint venture, partnership or other arrangement or contract which is treated
as a partnership for federal, state, local or foreign income tax purposes.
3.16.5. All material elections with respect to
Taxes affecting the Company as of the date hereof are set forth in Schedule
3.16. No consent to the application of section 341(f)(2) of the Code (as
defined below) has been filed with respect to any property or assets held,
acquired, or to be acquired by the Company.
3.16.6. There are no tax sharing agreements or
similar arrangements with respect to or involving the Company.
3.16.7. The Company was not included and is not
includible in any consolidated or unitary Tax Return with any corporation other
than such a return of which the Company is the common parent corporation.
3.16.8. The Company has not agreed to and is not
required to make any material adjustment under section 481(a) of the Internal
Revenue Code of 1986, as amended (the "Code").
3.16.9. "Tax" or "Taxes", as the context may
require, include: (i) any income, alternative or add-on minimum tax, gross
income, gross receipts, franchise, profits, sales, use, ad valorem,
business license, withholding, payroll, employment, excise, stamp,
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transfer, recording, occupation, premium, property, value added, custom duty,
severance, windfall profit or license tax, including estimated taxes relating to
any of the foregoing, or other similar tax or other like assessment or charge of
similar kind whatsoever together with any interest and any penalty, addition to
tax or additional amount imposed by any Governmental Body responsible for the
imposition of any such Tax; or (ii) any liability of a Person for the payment of
any taxes, interest, penalty, addition to tax or like additional amount
resulting from the application of Treas. Reg. (S) 1.1502-6 or comparable
provisions of any Governmental Body in respect of a consolidated or combined
return.
3.16.10. "Tax Return" means any return (including
any information return), report, statement, schedule, notice, form, or other
document or information filed with or submitted to, or required to be filed with
or submitted to, any Governmental Body in connection with the determination,
assessment, collection, or payment of any Tax or in connection with the
administration, implementation, or enforcement of or compliance with any Law
relating to any Tax.
3.17. Title to Properties; Liens and Encumbrances. The Company
has good and marketable title to all of its material owned properties and assets
and such properties and assets are not subject to any Liens, except for (a)
Liens under the line of credit between the Company and Imperial Bank, (b)
immaterial Liens which arise in the ordinary course of business (including
without limitation Liens from current taxes not yet due and payable), and (c)
Liens which individually or in the aggregate could not reasonably be expected to
have a Material Adverse Effect on the Company or its material properties. All
material leases, subleases, conditional sale contracts and other agreements
pursuant to which the Company leases or otherwise uses real or personal property
(collectively, "Leases") are in good standing and are valid and effective in
accordance with their respective terms. The Company has performed its
obligations in all material respects to date under all such Leases.
3.18. Employee Benefit Plans. Except as listed in Schedule
3.18 or as described in the SEC Reports or as could not, either individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect, the
Company does not maintain, sponsor, or contribute to any program or arrangement
that is an "employee welfare benefit plan," as that term is defined in Section
3(1) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or any similar employment, severance or other arrangement or policy
of the Company (whether written or oral) providing for insurance coverage
(including self-insured arrangements), workers' compensation, disability
benefits, supplemental unemployment benefits, vacation benefits, fringe benefits
or for deferred compensation, bonuses, stock options, stock appreciation or
other forms of incentive compensation or post-retirement insurance, compensation
or benefits (a "Plan"). Neither the Company nor or any member of the same
controlled group of businesses as the Company within the meaning of Section
4001(a)(14) of ERISA (an "ERISA Affiliate") maintains or is obligated to
contribute to, or has ever maintained or been obligated to contribute to, any
"pension plan" within the meaning of Section 3(2) of
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ERISA, or any "multiemployer plan" within the meaning of Section 3(37) of ERISA
(a "Pension Plan"). Each Plan which is subject to ERISA is in substantial
compliance with ERISA. None of the Plans provides or provided post-retirement
medical or health benefits. None of the Plans is or was a "welfare benefit
fund," as defined in Section 419(e) of the Code, or an organization described in
Sections 501(c)(9) or 501(c)(20) of the Code. The Company is not and never has
been a party to any collective bargaining agreement. Except as disclosed in the
SEC Reports, the Company has not announced or otherwise made any commitment to
create or amend any Plan, and neither the Company nor any ERISA Affiliate has
announced or otherwise made any commitment to create or begin contributing to
any Pension Plan. All contributions required to be made under the terms of each
Plan have been timely made. Each Plan which is required to comply with the
provisions of Sections 4980B and 4980C of the Code, or with the requirements
referred to in Section 4980D(a) of the Code, has complied in all material
respects. Each Plan intended to meet the requirements for tax-favored treatment
under Subchapter B of Chapter 1 of the Code meets such requirements. Except as
provided in Section 5.4(e), the execution and performance of this Agreement will
not (i) result in any obligation or liability (with respect to accrued benefits
or otherwise) of the Company to any Plan, or any present or former employee of
the Company, (ii) be a trigger event under any Plan that will result in any
payment (whether of severance pay or otherwise) becoming due to any present or
former employee, officer, director, stockholder, contractor, or consultant, or
any of their dependents, or (iii) except as otherwise expressly contemplated by
this Agreement, accelerate the time of payment or vesting, or increase the
amount, of compensation due to any employee, officer, director, stockholder,
contractor, or consultant of the Company.
3.19. Year 2000 Compliance. The Company has completed its
assessment of all current versions (including products and services currently
operating or under development) of its information technology systems (including
systems utilized in the operation of its Internet sites) and believes they are
year 2000 compliant. The Company has made appropriate inquiries of its key
vendors and suppliers and has been assured that such persons have also taken
appropriate actions to assure that there shall be no material adverse change to
its business and electronic systems related to year 2000 issues. Based upon the
information provided to the Company and its own internal assessment, the Company
does not believe that its year 2000 issues will have a Material Adverse Effect
on the Company.
3.20. Fairness Opinion. The Company has received the opinion
of Broadview International LLC (the "Company Financial Advisor") that the
transactions contemplated hereby, including the issuance of the Class A
Preferred Stock [and the acquisition by Purchaser of shares of Common Stock
pursuant to the Offer,] are fair to the Company's stockholders from a financial
point of view.
3.21. Finders' Fees. There is no investment banker, broker,
finder or other intermediary that has been retained by or is authorized to act
on behalf of Company who might be entitled to any fee or commission upon
consummation of the transactions contemplated by
23
this Agreement and each of the other Transaction Documents other than the
Company Financial Advisor.
4. Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to the Company as follows:
4.1. Organization and Qualification. Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Washington. Purchaser has all requisite corporate power and
authority to conduct its business as currently conducted and to enter into and
to carry out and perform its obligations under the Transaction Documents.
4.2. Due Execution, Delivery and Performance of the Agreement.
The execution, delivery and performance of the Transaction Documents have been
duly authorized by all necessary corporate action on the part of Purchaser. This
Agreement has been, and when executed and delivered at the First Closing or the
Second Closing (as the case may be) the other Transaction Documents will be,
duly executed and delivered by Purchaser and constitutes, or when executed and
delivered at the First Closing or the Second Closing (as the case may be) will
constitute, valid and binding obligations of Purchaser, enforceable against it
in accordance with their respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws and
equitable principles relating to or limiting creditors' rights generally.
4.3. Evaluation; Purchase for Investment, Illiquid Investment.
Purchaser has been furnished any and all materials relating to the Company and
its Affiliates (as defined below) and the offering of the Shares that Purchaser
has requested and Purchaser has been afforded the opportunity to obtain any
additional information necessary to verify the accuracy of any such information.
Purchaser is a sophisticated investor capable of evaluating the merits and risks
of the purchase of the Shares. Purchaser is purchasing the Shares for its own
account as principal, for investment and not with a view to the resale or
distribution of all or any part thereof. Purchaser recognizes that the Shares
being purchased pursuant to this Agreement have not been registered under
applicable Federal or State securities laws, and that such Shares are being
offered and sold in reliance upon the exemptions from registration provided in
the Securities Act and applicable exemptions under State securities laws.
Purchaser is an accredited investor (as that term is defined in Regulation D
under the Securities Act) and has the economic ability to maintain its
investment in such Shares for an indefinite period of time. For purposes of this
Agreement, "Affiliate" shall have the meaning set forth in Rule 501(d) under the
Securities Act.
4.4. Proxy Statement; Offer Documents. All information
included in the Proxy Statement (as defined in Section 5.3) furnished by
Purchaser will not, at the date of mailing of the Proxy Statement to the
stockholders of the Company, contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which made, not misleading.
Neither the Offer Documents (as
24
defined in Section 7.7)nor any of the information supplied by Purchaser for
inclusion in the Schedule 14D-9 shall, at the respective times such Offer
Documents and Schedule 14D-9 are filed with the SEC or are first published, sent
or given to shareholders, as the case may be, contain any untrue statement of a
material fact or omit to state any material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing, Purchaser makes no representation or
warranty with respect to any information supplied by the Company or any of its
representatives which is contained in the Offer Documents. The Schedule 14D-1
will comply in all material respects as to form with the requirements of the
Exchange Act and the rules and regulations promulgated thereunder.
4.5. Finders' Fees. Except for NationsBanc Xxxxxxxxxx
Securities LLC, there is no investment banker, broker, finder or other
intermediary that has been retained by or is authorized to act on behalf of
Purchaser who might be entitled to any fee or commission upon consummation of
the transactions contemplated by this Agreement and each of the other
Transaction Documents.
4.6. Financial Condition. As of the date hereof, Purchaser
has sufficient resources to fulfill its financial obligations under this
Agreement and the transactions contemplated hereby.
4.7. Cable Subscribers. As of the date hereof, Purchaser
controls, directly or indirectly, cable television companies which have an
aggregate number of subscribers of not less than 2,000,000.
4.8. Ownership. As of the date hereof, Purchaser and its
Affiliates are the record and beneficial owner of not more than 40,000 shares
of Common Stock in the aggregate.
4.9. Interested Stockholder. In each case within the
meaning of Section 203 of the Delaware General Corporation Law:
(a) at no time since immediately prior to the time
the Company's Board of Directors approved the transactions contemplated by
this Agreement through the time of the signing hereof, has Purchaser or any
"affiliate" or "associate" of Purchaser "owned" fifteen percent (15%) or more
of the Company's "voting stock";
and
(b) there are no facts known to Purchaser or any
"affiliate" or "associate" of Purchaser, that have not been disclosed to the
Company that relate to whether Purchaser or any "affiliate" or "associate" of
Purchaser, directly or indirectly, through one or more intermediaries,
"controls" or "controlled" or is or was "controlled by" or is or was "under
common control with" the Company.
25
4.10. Acquiring Person. At no time since immediately prior to
the time the Company's Board of Directors approved the transactions contemplated
by this Agreement through the time of the signing hereof, has Purchaser or any
group of which Purchaser is a part become an "acquiring person" under Section
23B.19 of the Washington Business Corporation Act.
5. Covenants of the Company. The Company hereby covenants and agrees
with Purchaser as follows:
5.1. Access. At all times through the Second Closing, the
Company will permit Purchaser and its authorized representatives, at reasonable
times during ordinary business hours and upon reasonable advance notice, access
to all of the books, records, personnel and properties of the Company and its
subsidiaries for the purpose of verifying the accuracy of the Company's
representations and warranties contained herein and the satisfaction of
Purchaser's conditions to the Second Closing and the Offer contained in Section
8.1 and Annex A, respectively.
5.2. Stockholders Meeting. The Company shall cause a meeting
of its stockholders to be duly called and held as soon as reasonably practicable
for the purpose of voting on the approval of the issuance and sale to Purchaser
of the Second Issuance Shares and the acquisition of Common Stock pursuant to
the Management Agreements and the election of directors pursuant to this
Agreement ( the "Stockholders Meeting"). The proxy materials relating to such
meeting shall (i) contain the recommendation of the Board that the stockholders
approve the issuance and sale to Purchaser of the Second Issuance Shares
pursuant to this Agreement and Purchaser's acquisition of Common Stock pursuant
to the Management Agreement (collectively, the "Purchaser Acquisitions"), and
(ii) state that the Company is neutral with respect to or recommends the Offer.
5.3. Proxy Statement. As promptly as practicable after the
date of this Agreement, the Company shall prepare and cause to be filed with the
SEC a Proxy Statement in connection with the transactions contemplated hereby
(the "Proxy Statement"), and the Company shall respond promptly to any comments
of the SEC or its staff with respect thereto. The Company will afford Purchaser
a reasonable opportunity to review and comment on the proposed form of Proxy
Statement prior to its filing with the SEC. Purchaser shall promptly furnish to
the Company all information concerning Purchaser and its stockholders as may be
required or reasonably requested in connection with any action contemplated by
this Section 5.3. The Company shall (a) notify Purchaser promptly of the receipt
of any comments from the SEC or its staff and of any request by the SEC or its
staff for amendments or supplements to the Proxy Statement or for additional
information and (b) supply Purchaser with copies of all correspondence with the
SEC or its staff with respect to the Proxy Statement. Whenever any event occurs
that should be set forth in an amendment or supplement to the Proxy Statement,
Purchaser or the Company, as the case may be, shall promptly inform the other of
such
26
occurrence and shall cooperate in filing with the SEC or its staff, and, if
appropriate, mailing to stockholders of the Company, such amendment or
supplement.
5.4. Conduct of Business. From the date hereof through the
Second Closing, the Company shall and shall cause each of its subsidiaries to,
as contemplated by this Agreement, or as consented to by Purchaser in writing,
operate its businesses in the ordinary course of business and in accordance with
past practice and not take any action inconsistent with this Agreement or with
the consummation of the Second Closing. Without limiting the generality of the
foregoing, the Company shall not and shall cause each of its subsidiaries not
to, except as specifically contemplated by this Agreement or as consented to by
Purchaser in writing :
(a) change or amend the Certificate of Incorporation or
By-Laws of the Company;
(b) enter into, extend, materially modify, terminate or renew
any Material Contract, except in the ordinary course of business;
(c) sell, assign, transfer, convey, lease, mortgage, pledge
dispose of or encumber any assets, or any interests therein, except in the
ordinary course of business;
(d) make new commitments for capital expenditures in excess
of $2,000,000 in any one quarter;
(e) take any action with respect to the grant of any bonus,
severance or termination pay or with respect to any increase of benefits payable
(including the grant of stock options) under its severance or termination pay
policies or agreements in effect on the date hereof or increase in any manner
the compensation or benefits of any executive officer except in the ordinary
course of business consistent with past practice or pay any benefit not required
by any existing employee benefit plan or policy (except that the Company shall
not be permitted to grant stock options or accelerate the vesting of stock
options except as permitted by the following proviso); provided, however, that
the Company shall be permitted (i) to accelerate, effective on the Second
Closing, the vesting of up to 35% of the unvested portion (determined as of the
Second Closing) of the shares issuable upon exercise of all outstanding options;
provided that (a) the Company accelerates the vesting of the options that would
otherwise vest closest in time to the date of the Second Closing and (b) the
Company receives written waivers prior to any such acceleration from any officer
or employee (including the Company's Chief Executive Officer, President and
Chief Operating Officer) of any right they may have under any agreement or
arrangement with the Company which would otherwise require that, as a result of
such acceleration, a greater percentage of their unvested options be accelerated
than the percentage of options that the Company proposes to accelerate for other
employees generally, (ii) grant options to bona fide new employees hired after
the date hereof (provided that the Company shall consult with Purchaser
regarding the hiring or appointment of any executive officer of the Company who
would have the title of Vice President or higher) in the ordinary course of
business, but in no
27
event covering more than the number of shares of Common Stock set forth in
Schedule 5.3(e) hereto for the position of such new employee, (iii) grant
options covering up to 5,000 shares of Common Stock to an employee as part of
his or her normal review, (iv) adopt the 1999 Employee Stock Purchase Plan as
described in the Proxy Statement for the annual meeting of Stockholders dated
February 22, 1999, (v) to pay to and hold harmless its officers, on an after-tax
basis, for any excise taxes (including any "gross-up" payments) in an aggregate
amount not to exceed $3,000,000 incurred by them in connection with the
acceleration of options under (i) above (which amount the Company represents is
based on the stock price of the Company's Common Stock as of March 12, 1999, and
which amount the parties understand may increase due to increases in the Common
Stock price), so long as such payments are not made prior to the time such tax
payments are actually due; and (vi) the Company will be permitted to enter into
severance agreements with certain key employees (not to exceed 10 persons)
providing for six months severance and the acceleration of all options currently
held by such a key employee in the event of a termination of such key employee's
employment by the Company "without cause" or by the employee for "good reason"
(as such terms are defined in the Company's currently existing employment
agreements with its executive officers);
(f) make any change in the key management structure,
including, without limitation, the hiring of additional executive officers or
the termination of existing executive officers;
(g) acquire by merger or consolidation with, or merge or
consolidate with, or purchase substantially all of the assets of, or otherwise
acquire any material assets or business of any corporation, partnership,
association or other business organization or division thereof; provided,
however, that the Company shall be permitted to consummate any such transaction
involving the payment by the Company of cash or the issuance by the Company of
shares of Common Stock with an aggregate value per transaction not to exceed
$10,000,000 and on an aggregate basis not to exceed $100,000,000;
(h) declare, set aside, make or pay any dividend or other
distribution in respect of its capital stock, other than a split of the Common
Stock or a dividend payable in shares of Common Stock pro rata to all holders of
the Common Stock;
(i) fail to comply in all material respects with all legal
requirements applicable to it, its assets and its business;
(j) intentionally do any other act which would cause any
representation or warranty of the Company in this Agreement to be or become
untrue in any material respect;
(k) issue, repurchase or redeem or commit to issue, repurchase
or redeem, any shares of its capital stock, any options or other rights to
acquire such stock or any securities convertible into or exchangeable for such
stock, other than the following: (i) issuance of shares in connection with the
consummation of a Superior Proposal (as defined in Section 5.5.2) or in
28
connection with stock issuances permitted under Section 5.4(g) (subject to the
provisions of Section 5.6), (ii) issuance of shares by employees, consultants
and directors of the Company pursuant to stock options existing as of the date
hereof and those permitted to be granted by Section 5.4(e) above, (iii)
repurchases of shares from employees or consultants in connection with the
termination of their employment or consultancy with the Company, and (iv) the
issuance of up to an aggregate of $10,000,000 in value of shares of the
Company's capital stock (subject to the provisions of Section 5.6);
(l) fail to use its reasonable best efforts to (i) retain its
key employees and (ii) maintain existing relationships with material suppliers,
customers and others having business dealings with it and (iii) otherwise
preserve the goodwill of its business so that such relationships and goodwill
will be preserved on and after the Second Closing Date; or
(m) enter into any agreement, or otherwise become obligated,
to do any action prohibited under this Section 5.4.
5.5. No Solicitation.
5.5.1. Subject to Section 5.5.3 the Company shall
not, and the Company shall cause its Affiliates and the respective officers,
directors, employees, investment bankers, attorneys, accountants and other
representatives and agents (collectively, "Representatives") of the Company
and its Affiliates not to, directly or indirectly, initiate, solicit, encourage
or participate in negotiations or discussions relating to, or provide any
information to any person concerning, or take any action to facilitate the
making of, any offer or proposal which constitutes or is reasonably likely to
lead to any Transaction Proposal (as defined below), or any inquiry with respect
thereto, or agree to approve or recommend any Transaction Proposal. The Company
shall, and shall cause its Affiliates and the respective Representatives of the
Company and its Affiliates to, immediately cease and cause to be terminated
all existing activities, discussions and negotiations, if any, with any parties
conducted heretofore with respect to any of the foregoing.
5.5.2. For purposes of this Agreement, "Transaction
Proposal" shall mean any proposal (other than any proposal by Purchaser or its
Affiliates) regarding (i) any merger, consolidation, share exchange, business
combination or other similar transaction or series of related transactions
involving the Company or a subsidiary of the Company (other than a merger
involving a newly-formed subsidiary of the Company in order to effect an
acquisition permitted under Section 5.4(g)); (ii) any sale, lease, exchange,
transfer or other disposition of more than twenty percent (20%) of the assets
of the Company or any subsidiary of the Company; (iii) any acquisition of a
substantial equity interest in the Company or any equity interest in any of its
subsidiaries (with "substantial equity interest" meaning (a) in the case of an
institutional investor acquiring such interest for investment purposes only,
equity interests representing at least 20% of the Company's outstanding
capital stock (by voting power or otherwise) prior to such investment and (b)
in any other case, at least 10% of the Company's outstanding capital stock (by
voting power or otherwise) prior to such investment); (iv) any offer to purchase
(whether from the
29
Company or otherwise), tender offer, exchange offer or similar transaction
involving the capital stock of the Company or any subsidiary of the Company; and
(v) a liquidation or dissolution of the Company.
5.5.3. Notwithstanding anything to the contrary
contained in this Section 5.5 or elsewhere in this Agreement, the Company
may, in response to an unsolicited bona fide Transaction Proposal from an
unaffiliated third party, participate in discussions or negotiations with or
furnish information to the third party making such Transaction Proposal, if
all of the following events have occurred: (a) such third party has made a
written proposal to the Board of Directors of the Company to consummate a
Transaction Proposal which proposal identifies a price to be paid for the
capital stock or assets of the Company that the Board has determined, after
consultation with the investment bankers for the Company, if such transaction is
consummated, would be financially more favorable than the Offer (assuming for
these purposes that the Offer is for 5,000,000 shares of Common Stock) to the
stockholders of the Company (a "Superior Proposal"); (b) the Board has
determined, after consultation with the Company's investment bankers, that such
third party is financially capable of consummating such Superior Proposal and
that such Superior Proposal is at least as likely to be consummated, and is not
subject to materially greater conditions, than the transactions contemplated by
this Agreement; (c) the Board shall have determined, after consultation with its
outside legal counsel, that the failure to participate in discussions or
negotiation with or furnish information to such third party would result in a
substantial risk of liability for a breach of the fiduciary duties of the
members of such Board under applicable Delaware law; and (d) Purchaser shall
have been notified in writing of such Transaction Proposal, including its
principal financial and other material terms and conditions, including the
identity of the person and its Affiliates (if relevant) making such Transaction
Proposal.
Notwithstanding the foregoing, the Company shall not provide any non-
public information to such third party unless (a) it has prior to the date
thereof provided such information to Purchaser or its Representatives, and (b)
it has provided such non-public information pursuant to a non-disclosure
agreement with terms which are at least as restrictive as the nondisclosure
agreement heretofore entered into between the Company and Purchaser. In addition
to the foregoing, the Company shall not accept or enter into any agreement
concerning a Superior Proposal nor issue any securities or agree to pay a
termination or break-up fee in connection with a Superior Proposal for a period
of not less than 36 hours after Purchaser's receipt of the notification in
clause (d) of the preceding paragraph, and the Company will afford Purchaser an
opportunity to discuss with the Company what, if any, response Purchaser may
desire to make with to such Transaction Proposal. Upon the occurrence of all of
the events in the preceding paragraph and this paragraph, the Company shall be
entitled to (1) change its recommendations concerning the Purchaser
Acquisitions, (2) accept such Superior Proposal, and (3) enter into an agreement
with such third party concerning a Superior Proposal provided that the Company
shall immediately make payment in full to Purchaser of the cash fee provided for
in Section 10.2. Company will promptly communicate to Purchaser the principal
terms of any proposal or inquiry, including the identity of the person and its
Affiliates making the same, that it
30
may receive in respect of any such Transaction Proposal, or of any such
information requested from it or of any such negotiations or discussions being
sought to be initiated with it regarding a Transaction Proposal.
5.5.4. Notwithstanding anything to the contrary
contained in this Section 5.4.3 or elsewhere in the Agreement, at any time after
the date hereof, the Company may file with the Commission a Current Report on
Form 8-K with respect to this Agreement and may file a copy of this Agreement
and any related agreement as an exhibit to such Report.
5.6. Additional Issuances.
5.6.1. At any time after the date hereof, so long as
Purchaser (together with its Affiliates) holds of record or beneficially owns at
least fifteen percent (15%) of the outstanding Common Stock of the Company
(measured as of the date of this Agreement if the Additional Issuance is prior
to the Second Closing and measured as of the date of the Additional Issuance if
occurring after the Second Closing) (the "Minimum Percentage") (assuming
conversion into Common Stock, at the conversion rate then in effect, of all
shares of Series A Preferred Stock held of record or beneficially owned by
Purchaser and its Affiliates), in the event the Company shall issue (an
"Additional Issuance") any capital stock, including securities of any type that
are, or may become, convertible into or exercisable or exchangeable for capital
stock of the Company (the "Additional Securities"), Purchaser shall have the
right to subscribe for and to purchase that number of Additional Securities such
that Purchaser holds the same percentage of the Company's outstanding capital
stock immediately prior to and immediately following the Additional Issuance
(the "Pro Rata Share"); provided, however, that this Section 5.6 shall not
apply to shares issued:
(a) to employees, officers or directors of, or consultants or
advisors to the Company or any subsidiary, pursuant to stock purchase, Company
Option Plans, Assumed Option Plans or other option plans or arrangements
approved by the Board;
(b) pursuant to any options, warrants, conversion rights or
other rights or agreements outstanding as of the date of this Agreement or
pursuant to the conversion of the shares of Series A Preferred Stock
contemplated to be issued pursuant to this Agreement;
(c) in connection with any stock split, stock dividend or
recapitalization by the Company;
(d) pursuant to a Superior Proposal if this Agreement is
terminated in connection therewith;
(e) in any Additional Issuance that reduces the Purchaser's
equity percentage by less than 10% of its holdings, so long as at the time of an
Additional Issuance which either solely or considered together with prior
Additional Issuances that reduced the Purchaser's equity
31
percentage by less than 10% is an Additional Issuance of greater than 10%, the
Purchaser has the right to purchase common stock in order to retain the
percentage ownership it had at the time of the first Additional Issuance which
did not exceed 10%; or
(f) pursuant to any equipment leasing arrangement or debt
financing from a bank or similar financial institution, not to exceed 100,000
shares of Common Stock in the aggregate; provided further, Purchaser's rights
under this Section 5.6 shall terminate if the Second Closing is not consummated.
5.6.2. If the Company proposes an Additional
Issuance, the Company shall, at least five (5) business days prior to the
proposed closing date of such issuance, give written notice to Purchaser and
offer to sell to Purchaser its Pro Rata Share of the Additional Securities at
the lowest price per share, and otherwise on the same terms and conditions (or,
if the nature of the transaction involves an exchange of assets or securities
which cannot be delivered by Purchaser, then for cash on the same economic
terms), offered to other investors. Such notice shall describe the type of
Additional Securities which the Company is offering to Purchaser, the price of
the Additional Securities and the general terms upon which the Company will
issue same. Purchaser shall have five (5) business days from the date of
mailing of any such notice to agree to purchase its Pro Rata Share of such
Additional Securities for the price and upon the general terms specified in the
notice by giving written notice to the Company and stating therein the
quantity of Additional Securities to be purchased. Sale and issuance of the
Additional Securities which Purchaser has elected to purchase shall be effected
concurrently with the closing of the issuance of securities which gave rise to
Purchaser's right to buy such securities, but only after compliance with all
governmental regulations, including but not limited to the expiration or early
termination of the applicable waiting periods under the HSR Act, if applicable.
5.6.3. In the event that, at any time, the
percentage of the outstanding Common Stock held of record or beneficially owned
by Purchaser and its affiliates (assuming conversion into Common Stock, at the
conversion rate then in effect, of all shares of Series A Preferred Stock held
of record or beneficially owned by Purchaser and its affiliates) shall be
decreased as a result of (i) any transfer by Purchaser or any of its affiliates
to one or more transferees that are not affiliates of Purchaser of any
Shares or other securities held of record or beneficially owned by Purchaser
or its affiliates, or (ii) Purchaser's not purchasing the full amount of
Additional Securities offered for purchase pursuant to this Section 5.6, a new
percentage ownership level shall be established based on the percentage
ownership of Purchaser and its affiliates in effect immediately following
such transfer or Additional Issuance (the "Reduced Percentage Ownership"), and
thereafter the Company shall be required to offer to Purchaser only such
number of Additional Securities pursuant to this Section 5.6 as would permit
Purchaser to maintain the Reduced Percentage Ownership.
5.7. Tag Along. From and after the Second Closing,
Purchaser shall not consummate a Tag-Along Sale (as defined below) unless, in
connection therewith, the buying
32
parties in such Tag-Along Sale shall have agreed to make, as soon as practicable
after the closing of the Tag-Along Sale, an offer to purchase from each other
stockholder of the Company (by merger, tender offer or otherwise) an Equivalent
Percentage (as defined below) of the shares of Common Stock held by such other
stockholder (including, in the case of Company employees, shares of Common Stock
purchasable upon exercise of vested employee stock options), on terms no less
favorable than those received by Purchaser in the Tag-Along Sale. "Tag-Along
Sale" shall mean a sale for cash by Purchaser, in a privately negotiated
transaction (other than to an Affiliate of Purchaser (with a person or entity to
be deemed to be an Affiliate of Purchaser for purposes of this Section 5.7,
Section 7.9 and Section 12.4 only if the control relationship involves direct or
indirect ownership of at least a majority of the outstanding voting interests of
the applicable entity, it being understood that any entity that is majority
owned (directly or indirectly) by a person or entity that directly or indirectly
owns a majority of the outstanding voting interests of Purchaser shall be an
Affiliate of Purchaser for these purposes)), in which (a) Purchaser's sale price
per share of Common Stock (assuming conversion into Common Stock of any Series A
Preferred Stock included in the Tag-Along Sale) exceeds the average closing
trading price of the Common Stock for the ten consecutive trading days prior to
the date of announcement of the proposed Tag-Along Sale, and (b) the number of
shares of Common Stock sold by Purchaser (assuming conversion into Common Stock
of any Series A Preferred Stock included in the Tag-Along Sale) represents
greater than twenty-five percent (25%) of the sum of (i) the total number of
shares of Common Stock acquired by Purchaser pursuant to the Management
Agreements and the Offer and (ii) the total number of shares of Common Stock
underlying the shares of Series A Preferred Stock that is purchased by Purchaser
in the First Closing and the Second Closing. "Equivalent Percentage" shall mean
the percentage the number of shares of Common Stock sold by Purchaser in the
Tag-Along Sale bears to Purchaser's total holdings of Common Stock immediately
prior to such sale (assuming conversion into Common Stock, prior to the
Tag-Along Sale, of the Series A Preferred Stock).
6. Covenants of Purchaser. Purchaser hereby covenants and agrees with
the Company as follows:
6.1. Transfer Restrictions. Purchaser agrees that it will not
sell or otherwise transfer any Shares unless such sale or transfer is made under
an effective Securities Act registration statement or pursuant to an available
exemption from the registration requirements of the Securities Act and Purchaser
shall have delivered to the Company an opinion of securities counsel to
Purchaser, in form and substance reasonably satisfactory to the Company, to the
forgoing effect. Each certificate representing any Shares shall contain a legend
to the following effect:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT
BE SOLD OR OTHERWISE TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS MADE UNDER AN
EFFECTIVE SECURITIES ACT REGISTRATION STATEMENT OR PURSUANT TO AN
33
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT.
Notwithstanding the foregoing, certificates issued after the date
hereof and representing Shares shall not contain the foregoing legend to the
extent that Purchaser shall have delivered to the Company an opinion of
securities counsel to Purchaser, in form and substance reasonably satisfactory
to the Company, to the effect that the statements made in such legend are no
longer relevant.
6.2. Distribution Arrangement. The Company and Purchaser
acknowledge that an important consideration for the Company entering into this
Agreement is the fact that the Purchaser, through its affiliated entities Marcus
Cable and Charter Communications (the "Cable Companies"), operates cable systems
that serve over 2 million cable subscribers and that such Cable Companies will
provide an opportunity for the Company to establish a distribution or other
relationship with them. Accordingly, after the consummation of the transactions
contemplated by this Agreement, the Company shall promptly commence negotiations
with the Cable Companies, and Purchaser shall cause the Cable Companies to
commence such negotiations, with respect to the establishment of a distribution
or other relationship to offer the Company's content to their subscribers. The
parties will negotiate in good faith and use reasonable efforts to establish
such distribution or other relationship, but neither Purchaser nor the Cable
Companies, on the one hand, or the Company, on the other hand, shall have any
legal obligation to the other if such a relationship is not established.
7. Additional Covenants of the Parties.
7.1. Conditions to the Second Closing. The Company and
Purchaser agree to use their respective best efforts to ensure that the
conditions set forth in Section 8 are satisfied, insofar as such matters are
within their respective control.
7.2. Board Composition.
7.2.1. Immediately upon expiration or early
termination of the waiting period under the HSR Act applicable to the
transactions contemplated hereby, Purchaser shall be entitled to designate
two (2) directors to serve on the Board of Directors of the Company. The
Company shall, as soon as practicable after such time, take all action
necessary to cause such individuals to be appointed to the Board and to have
at least one such individual on each committee of the Board, including
either increasing the size of the Board or securing the resignations of
incumbent directors or both.
7.2.2. In connection with the Stockholders Meeting,
the Company shall (i) set the size of its Board at five directors and (ii)
nominate for election at the Stockholders Meeting a slate of director candidates
reasonably acceptable to Purchaser, which shall include three candidates
designated by Purchaser ("Purchaser Designees"), the existing Chief Executive
34
Officer (the "Management Designee") and one candidate selected by the Purchaser
and the Company who shall not be an Affiliate or employee of either the
Purchaser or the Company and shall otherwise constitute an "independent
director" under the rules of the The Nasdaq Stock Market (the "Outside
Designee"), and the Company shall, at such time, promptly take all action
necessary to cause the Purchaser Designees, the Management Designee and the
Outside Designee to be so elected, including either increasing the size of the
Board or securing the resignations of incumbent directors or both. To the extent
that Purchaser is otherwise permitted to vote in the election of directors at
the Stockholders Meeting, Purchaser agrees to vote any shares of the Series A
Preferred Stock or Common Stock it owns in favor of the election of the Outside
Designee and the Management Designee at the Stockholders Meeting. To the extent
that the Purchaser Designees and the Management Designee are elected as
directors, the Company will use its reasonable best efforts to cause the number
of Purchaser Designees and Management Designee, respectively, to constitute the
same percentage as they represent on the Board of each committee of the Board.
Nothing in this Section 7.2.2 shall be deemed to constitute an admission that
any of the Purchaser Designees are not "independent directors" for purposes of
the rules of The Nasdaq Stock Market. In connection with the Stockholders
Meeting, Purchaser agrees to vote all shares of the Series A Preferred Stock and
Common Stock owned by it in favor of the Purchaser Acquisitions.
7.2.3. If the Company terminates the Second Issuance
Agreements pursuant to Section 9.1.4, then to the extent that three Purchaser
Designees have been elected to the Company's Board of Directors at the
Stockholders Meeting, then Purchaser agrees to cause such number of Purchaser
Designees to resign from the Company's Board of Directors so as to reflect a
reallocation of board seats (based on a five-person Board of Directors)
proportionate to Purchaser's economic interest in the Company, rounded down to
the nearest whole number of directors; provided however, that in no event
shall Purchaser have fewer than two Purchaser Designees on the Company's
Board of the Directors following such reallocation.
7.2.4. At each annual or other meeting after the
Stockholders Meeting at which the election of directors is considered, so
long as Purchaser owns not less than one-half of the aggregate shares of
Common Stock (including those issuable upon conversion of the Series A
Preferred Stock) purchased in the Offer and in the First Closing, the Board of
Directors of the Company, subject to its fiduciary duties, shall continue to
nominate at least two representatives of Purchaser for election to the Board.
Purchaser agrees that, so long as the current Management Designee is the Chief
Executive Officer, Purchaser will vote its shares in favor of such person's
election at each annual or other meeting after the Stockholders Meeting at
which the election of directors is considered.
7.3. Transaction Documents. At the Second Closing, each party
shall, and shall cause each of its Affiliates to, execute and deliver to the
other party the Transaction Documents that are to be delivered at the Second
Closing.
35
7.4. Regulatory Approval. The Company and Purchaser shall use
commercially reasonable efforts to file, as soon as practicable after the date
of this Agreement, all notices, reports and other documents required to be filed
with any federal, state, local, municipal, foreign or other governmental body
("Governmental Body") with respect to the transactions contemplated by this
Agreement, and to submit promptly any additional information requested by any
such Governmental Body. Without limiting the generality of the foregoing, the
Company and Purchaser shall, promptly after the date of this Agreement, prepare
and file the notifications required under the HSR Act in connection with the
transactions contemplated by this Agreement. The Company and Purchaser shall
respond as promptly as practicable to (i) any inquiries or requests received
from the Federal Trade Commission or the Department of Justice for additional
information or documentation and (ii) any inquiries or requests received from
any state attorney general or other Governmental Body in connection with
antitrust or related matters. Each of the Company and Purchaser shall (A) give
the other party prompt notice of the commencement of any action, suit,
litigation, arbitration, preceding or investigation ("Legal Proceeding") by or
before any Governmental Body with respect to the transactions contemplated by
this Agreement, (B) keep the other party informed as to the status of any such
Legal Proceeding, and (C) promptly inform the other party of any communication
to or from the Federal Trade Commission, the Department of Justice or any other
Governmental Body regarding the transactions contemplated by this Agreement.
7.5. Amendment of Certificate of Incorporation or By-Laws. The
Company shall take all steps reasonably necessary to amend the Certificate of
Incorporation and By-Laws to implement the rights and obligations of the parties
contained herein to the extent necessary or appropriate under Delaware law.
7.6. Disclosure; Public Announcements. At all times at or
before the Second Closing, no party hereto will issue or make any reports,
statements or releases to the public with respect to this Agreement or the
transactions contemplated hereby without the consent of the other party hereto,
which consent shall not be unreasonably withheld. If either party hereto is
unable to obtain, after reasonable effort, the approval of its public report,
statement or release from the other party hereto and such report, statement or
release is, in the opinion of legal counsel to such party, required by law in
order to discharge such party's disclosure obligations, then such party may make
or issue the legally required report, statement or release and promptly furnish
the other parties with a copy thereof. Each party hereto will also obtain the
prior approval of the other party hereto of any press release to be issued
announcing the consummation of the transactions contemplated by this Agreement;
provided, however, no such press release shall be issued prior to consummation
of the First Closing.
7.7 Tender Offer.
7.7.1. Within five (5) business days after the date
hereof, Purchaser shall commence the Offer to purchase up to 3,596,688 shares of
the Company's Common Stock (the
36
"Maximum Tender Number") at $90 per share in cash (the "Offer Price"), subject
only to the conditions set forth in Annex A hereto.
7.7.2. On the date of commencement of the Offer,
Purchaser shall file with the SEC a Tender Offer Statement on Schedule 14D-1
(together with all amendments and supplements thereto, the "Schedule 14D-1")
with respect to the Offer. The Schedule 14D-1 shall contain or shall
incorporate by reference an offer to purchase (the "Offer to Purchase")
and forms of the related letter of transmittal and any related summary
advertisement (the Schedule 14D-1, the Offer to Purchase and such other
documents, together with all supplements and amendments thereto, being
referred to herein collectively as the "Offer Documents"). Purchaser and
the Company agree to promptly correct any information provided by either of
them for use in the Offer Documents which shall have become false or
misleading, and Purchaser further agrees to take all steps necessary to
cause the Schedule 14D-1 as so corrected to be filed with the SEC
and the other Offer Documents as so corrected to be disseminated to holders of
shares of Common Stock, in each case as and to the extent required by applicable
federal securities laws. Purchaser agrees to provide the Company with a written
copy of any comments it or its counsel may receive from time to time from the
SEC or its staff with respect to the Schedule 14D-1 promptly after receipt of
such comments.
7.7.3. Purchaser shall not, without the prior
written consent of the Company, (i) terminate the Offer other than in accordance
with its terms, (ii) extend the Expiration Date to a date later than August
31, 1999, or (iii) amend the Offer, other than as permitted in Annex A;
provided, however, it is understood that i) Purchaser shall have the right to
close the Offer and accept and pay for tendered shares of Common Stock at any
time it may be permitted to under applicable law, (ii) Purchaser is not
obligated to keep the Offer open until the Stockholders Meeting occurs and
(iii) in the event that the Second Issuance Agreements are terminated, Purchaser
may elect, in its sole discretion, to continue to conduct the Offer and may
increase the Maximum Tender Number to 5,000,000 shares of Common Stock.
7.7.4. The Company's obligations hereunder shall not
be conditioned on the number of shares tendered to Purchaser. Purchaser shall
purchase all shares of Common Stock tendered pursuant to the Offer up to the
Maximum Tender Number. Purchaser shall not have any right hereunder to
acquire the Second Issuance Shares if Purchaser fails to acquire in
contravention of the terms of Annex A all shares of Common Stock tendered
pursuant to the Offer up to the Maximum Tender Number.
7.8. Company Action.
7.8.1. The Company shall use its reasonable best
efforts to cause the Company Financial Adviser to permit the inclusion of the
fairness opinion referred to in Section 3.21 (or a reference thereto) in the
Schedule 14D-9 referred to below and the Proxy Statement referred to in
Section 5.3 and a reference to such opinion in the Offer Documents. The Company
37
hereby consents to the inclusion in the Offer Documents of the recommendations
of the Board described in Section 5.2.
7.8.2. The Company shall file with the SEC,
contemporaneously with the commencement of the Offer pursuant to Section
7.7, a Solicitation/Recommendation Statement on Schedule 14D-9 (together
with all amendments and supplements thereto, the "Schedule 14D- 9")
containing the statements of the Board described in Section 5.2, and shall
promptly mail the Schedule 14D-9 to the shareholders of the Company. The
Schedule 14D-9 and all amendments thereto will comply in all material
respects with the Exchange Act and the rules and regulations promulgated
thereunder. The Company and Purchaser each agrees promptly to correct any
information provided by it for use in the Schedule 14D-9 that shall have become
false or misleading in any material respect, and the Company further agrees
to take all steps necessary to cause the Schedule 14D-9 as so corrected to be
filed with the SEC and disseminated to holders of shares of Common Stock,
in each case as and to the extent required by applicable federal securities
laws.
7.8.3. In connection with the Offer, the Company
shall promptly furnish Purchaser with mailing labels, security position
listings, any non-objecting beneficial owner lists and any available listings
or computer files containing the names and addresses of the record holders of
shares of Common Stock, each as of a recent date, and shall promptly furnish
Purchaser with such additional information (including but not limited to
updated lists of shareholders, mailing labels, security position listings and
non-objecting beneficial owner lists) and such other assistance as Parent,
Purchaser or their agents may reasonably require in communicating the
Offer to the record and beneficial holders of shares of Common Stock.
Subject to the requirements of applicable law, and except for such steps
as are appropriate to disseminate the Offer Documents and any other documents
necessary to consummate the Preferred Stock Sale, Purchaser and its affiliates,
associates, agents and advisors shall use the information contained in any such
labels, listings and files only in connection with the Offer and the
Preferred Stock Sale, and, if this Agreement shall be terminated, will
deliver to the Company all copies of such information then in their
possession.
7.9. Advertising. As an inducement to Purchaser to enter into
this Agreement, the Company agrees that, Purchaser shall have the right to use
up to ten percent of the Company's unsold advertising inventory in existence
from time to time. Purchaser shall have such right for a period of five years
from the date hereof , provided that, following the first anniversary of the
date hereof, Purchaser shall have such right for the balance of such five-year
period only so long as Purchaser (together with its Affiliates) holds of record
or beneficially owns at least ten percent (10%) of the outstanding Common Stock
of the Company (assuming conversion into Common Stock, at the conversion rate
then in effect, of all shares of Series A Preferred Stock held of record or
beneficially by Purchaser and its Affiliates). The Company and Purchaser shall
cooperate in establishing procedures to implement this agreement, including the
provision of reasonable advance notice by the Company to Purchaser of the
advertising space available. Purchaser agrees to comply with all of the
Company's generally- applicable advertising
38
guidelines, as they may be in effect from time to time. The Company agrees that
Purchaser may allocate some or all of the advertising space to which it may
become entitled to any entity in which it or an Affiliate (as defined in Section
5.7) has at least a five percent voting or economic equity interest, provided
that neither Purchaser nor any such entity may commercially resell any of such
advertising space. The parties agree that advertising space that the Company
trades for goods and services or other promotions in "barter" transactions shall
not be deemed to be unsold for purposes of this Section. Notwithstanding any
provision to the contrary in this Agreement, this covenant will survive any
termination of this Agreement or the Second Issuance Agreements. In no event
will Purchaser or any other entity that is permitted to use advertising under
this Section 7.9 be entitled to use advertising that the Company reasonably
determines conflicts or competes with the Company's products or services or the
Company's contractual arrangements with third parties.
8. Conditions to the Second Closing.
8.1. Conditions to Purchaser's Obligations at the Second
Closing. Purchaser's obligations to purchase the Second Issuance Shares at the
Second Closing are subject to the satisfaction (or waiver by Purchaser), at or
prior to the Second Closing, of the following conditions:
8.1.1. Representations and Warranties True. The
representations and warranties of the Company set forth in Section 3 hereof
shall be true and correct (determined without regard to any materiality
qualifiers, including without limitation "Material Adverse Effect,"
contained in the specific representation or warranty) (i) as of the date
hereof and (ii) as of the Second Closing Date as if made on such date (provided
that in the cases of clauses (i) and (ii) any such representation and warranty
made as of a specific date shall be true and correct as of such specific date),
except for such inaccuracies in the cases of clauses (i) and (ii) that
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect.
8.1.2. Performance of Obligations. The Company shall
have performed in all material respects all covenants and obligations
herein required to be performed or observed by it on or prior to the Second
Closing.
8.1.3. Consents, Permits, and Waivers. On or prior
to the Second Closing Date, Purchaser and the Company shall have obtained
any and all consents, permits and waivers necessary for consummation of the
transactions contemplated by this Agreement and the other Transaction Documents
(except for such as may be properly obtained subsequent to the Second Closing)
unless the failure to obtain such consents, permits or waivers is a result of a
breach by Purchaser or would not have a Material Adverse Effect. All waiting
periods under the HSR Act shall have expired or terminated.
39
8.1.4. Absence of Restraint. No order to restrain,
enjoin or otherwise prevent the consummation of the transactions contemplated
hereby shall have been entered by any court or other governmental authority
and not rescinded or overturned. No litigation instituted by any
governmental body or other regulatory authority shall be pending to restrain
or invalidate any material part of the transactions contemplated by this
Agreement.
8.1.5. Absence of Material Adverse Change. There
shall not have occurred after the date hereof any material adverse change in
the business, properties, results of operation or financial condition of the
Company and its subsidiaries taken as a whole, other than any adverse change
following the date of this Agreement that the Company shall have demonstrated
is substantially attributable to (i) the transactions contemplated by this
Agreement or the announcement of the transactions contemplated by this
Agreement or (ii) any material economic downturn in the Internet industry
generally or any material national economic downturn.
8.1.6. Stockholder Approval. On or prior to the
Second Closing Date, the Purchaser Acquisitions shall have been approved by the
affirmative vote of the holders of a majority of the capital stock of the
Company represented and voting on such matters (the "Requisite Vote").
8.1.7. Board of Directors. As of the Second Closing,
all of the Purchaser Designees shall have been duly elected to the Board by a
vote of the Company's stockholders and shall constitute a majority of the
entire Board.
8.1.8. Compliance Certificate. The Company shall
have delivered to Purchaser or its counsel a Compliance Certificate, executed by
the President and the Chief Financial Officer of the Company, dated as of the
Closing Date, to the effect that the conditions specified in Sections 8.1.1
through 8.1.7 have been satisfied.
8.1.9. Legal Opinion. Purchaser shall have received
from Xxxxxxxx, Xxxxxxx & Xxxxxxx an opinion addressed to it, dated as of the
Second Closing date, covering the matters set forth in Exhibit D and
otherwise in form and substance satisfactory to Purchaser.
8.1.10. Management Agreements. Each Management
Agreement executed as of the date hereof shall be in full force and effect and
no breach shall have occurred on the part of any Management Stockholder
under such agreement.
8.2. Conditions to Obligations of the Company. The Company's
obligation to issue and sell the Second Issuance Shares at the Second Closing is
subject to the satisfaction (or waiver by the Company), on or prior to the
Second Closing, of the following conditions:
8.2.1. Representations and Warranties True. The
representations and warranties of Purchaser set forth in Section 4 hereof shall
be true and correct in all material
40
respects (i) as of the date hereof and (ii) as of the Second Closing Date as if
made on such date (provided that in the cases of clauses (i) and (ii) any such
representation and warranty made as of a specific date shall be true and correct
in all material respects as of such specific date).
8.2.2. Performance of Obligations. Purchaser shall
have performed in all material respects all covenants and obligations herein
required to be performed or observed by it on or prior to the Second Closing.
8.2.3. Consents, Permits, and Waivers. On or prior
to the Second Closing Date, Purchaser and the Company shall have obtained
any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by this Agreement and the other
Transaction Documents (except for such as may be properly obtained subsequent
to the Second Closing) unless the failure to obtain such consents, permits or
waivers is a result of a breach by the Company. All waiting periods under the
HSR Act shall have expired or terminated.
8.2.4. Absence of Restraint. No order to restrain,
enjoin or otherwise prevent the consummation of the transactions contemplated
hereby shall have been entered by any court or other governmental authority.
8.2.5. Stockholder Approval. On or prior to the
Second Closing Date, the issuance and sale to Purchaser of the Second Issuance
Shares and the purchase of Common Stock pursuant to the Management Agreements
shall have been approved by the Requisite Vote of the Company's stockholders.
8.2.6. Tender Offer. The Purchaser shall have made
the Offer and shall not have terminated such Offer except in accordance with
its terms, and shall have purchased all shares tendered thereby in accordance
with the Offer up to the Maximum Tender Number.
8.2.7. Legal Opinion. The Company shall have
received from Irell & Xxxxxxx LLP an opinion addressed to it, dated as of the
Second Closing date, covering the matters set forth in Exhibit E and
otherwise in form and substance satisfactory to the Company.
9. Termination.
9.1. Termination. The obligations of the parties contained
herein relating to the sale and purchase of the Second Issuance Shares
(including without limitation the agreements contained in Sections 1(b), 2.2,
5.1, 5.2, 5.3, 5.4, 5.5, 7.3, 7.4 (relating to the Second Issuance only, but not
to approvals under the HSR Act and other regulatory approvals in connection with
the First Issuance, the Offer or the Management Agreements), 7.7 (relating to
Purchaser's obligation to conduct the Offer only, but not its right to conduct
the Offer) and 7.8 (the "Second Issuance Agreements") may be terminated at any
time prior to the Second Closing Date:
9.1.1. By mutual agreement of the Company and
Purchaser;
41
9.1.2. By either the Company or Purchaser if :
(a) this Agreement shall not have been
consummated by August 31, 1999, unless extended by mutual agreement or
unless the failure to consummate the Agreement is attributable to a failure
on the part of the party seeking to terminate this Agreement to perform any
obligation required to be performed by such party at or prior to the Closing
Date;
(b) the Requisite Vote of the Company's
stockholders shall not have been obtained at the Stockholders Meeting duly
convened and finally adjourned;
(c) any Governmental Body shall have issued
an injunction, order or decree (a "Restraint") or taken any other action
permanently enjoining, restraining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement and such
Restraint or other action shall become final and non-appealable, provided the
party seeking to terminate this Agreement shall have used its best efforts
to prevent entry of and to remove such
Restraint.
9.1.3. By Purchaser if: (a) the Board (i) shall
have failed to recommend, or shall have withdrawn, modified or changed in a
manner adverse to Purchaser its approval or recommendation, of the
Transaction Documents, the Purchaser Acquisitions or the other transactions
contemplated thereby, or the Board or any committee thereof shall have resolved
to take any of the foregoing actions, (ii) shall have submitted or recommended
to the stockholders of the Company or shall have approved a Transaction
Proposal, (iii) shall have accepted or recommended to its stockholders a
Superior Proposal, or (iv) shall have publicly announced its intention to do
any of the foregoing;
(b) the Company shall have breached or failed to
perform in any material respect any of its representations or warranties
(with respect to materiality, in a manner such that the condition in Section
8.1.1 would not be satisfied), or covenants or other agreements contained in
this Agreement, which breach or failure to perform cannot be or has not been
cured within five days after the giving of written notice to the Company of
such breach and which, as a result of such breach, considered either
individually or in the aggregate, any condition to Purchaser's obligations to
consummate the Second Closing set forth in Section 8.1 would not at that time be
satisfied (a "Company Material Breach")(provided that Purchaser is not then in
Purchaser Material Breach (as defined below) of any representation, warranty,
covenant or other agreement contained in this Agreement); or
(c) the Company shall have breached or failed to
perform in any respect any of its obligations under Section 5.5; provided the
Company shall be deemed to have breached its obligations under Section 5.5 if
any Affiliate of the Company, or any Representative of the Company and its
Affiliates, shall have engaged in any activities prohibited by Section 5.5.
42
9.1.4. By the Company, if (i) Purchaser shall have
breached or failed to perform in any material respect any of its representations
or warranties (with respect to materiality, in a manner such that the
condition in Section 8.2.1 would not be satisfied), or covenants or other
agreements contained in this Agreement, which breach or failure to perform
cannot be or has not been cured within five days after the giving of written
notice to Purchaser of such breach and which, as a result of such breach,
considered either individually or in the aggregate, any condition to the
Company's obligations to consummate the Second Closing set forth in Section 8.2
would not at that time be satisfied (a "Parent Material Breach") (provided
that the Company is not then in Company Material Breach of any representation,
warranty, covenant or other agreement contained in this Agreement), (ii)
Purchaser has failed to commence the Offer within five (5) business days
following the date hereof, (iii) any change is made to the Offer
in contravention of Section 7.7.3 or the provisions of Annex A, (iv) the Board
of Directors shall have withdrawn or modified in a manner adverse to Purchaser
the Board's approval of the Transaction Documents or (v) the Board has accepted
a Superior Proposal in accordance with the provisions of Section 5.5 hereof.
Notwithstanding anything in this Agreement to the contrary, following any such
termination by the Company hereunder Purchaser may continue to pursue the Offer
in accordance with Section 7.7.3.
9.2. Effect of Termination. In the event of the termination of
the Second Issuance Agreements pursuant to Section 9.1, the Second Issuance
Agreements shall become void and have no effect, without any liability on the
part of any party or its directors, officers or stockholders, except as set
forth in Section 10. Notwithstanding the foregoing, nothing in this Section 9.2
or in Section 10 shall relieve any party to this Agreement of liability for
fraud in connection with this Agreement.
10. Fees and Expenses.
10.1. Except as contemplated by Sections 10.2 or 10.3, all
costs and expenses incurred in connection with this Agreement and the
consummation of the transactions contemplated hereby shall be paid by the party
incurring such expenses.
10.2. The Company shall pay or cause to be paid to Purchaser a
cash fee in an amount equal to $17,500,000 if:
(a) the Company or Purchaser shall terminate the
Second Issuance Agreements pursuant to Section 9.1.2(b) hereof and prior to
the Stockholders Meeting, a Transaction Proposal shall have been made known
to the Company or shall have been made directly to its stockholders or any
person shall have publicly announced an intention (whether or not
conditional) to make a Transaction Proposal;
(b) Purchaser shall terminate the Second Issuance
Agreements pursuant to
Section 9.1.3(a) or (c) or the Company shall terminate the Second Issuance
Agreements pursuant to clauses (iv) or (v) of Section 9.1.4; or
43
(c) Purchaser shall terminate the Second Issuance
Agreements pursuant to
Section 9.1.3(b) for a Company Material Breach.
10.3. Upon the Second Closing, the Company will pay to
Purchaser the sum of $8,000,000 on account of Purchaser's fees and expenses in
connection with the transactions contemplated by this Agreement.
10.4. Except as provided in Section 5.5.3, any payments to
which Purchaser may become entitled pursuant to this Section 10 shall be payable
by the Company within two (2) business days after the relevant triggering event.
10.5. The parties agree that it would be speculative,
impractical and extremely difficult to determine or estimate the damages that
would be suffered by Purchaser in the event the Second Closing is not
consummated. The parties hereby agree that the cash fee specified in Section
10.2 is a reasonable estimate of the total net detriment that Purchaser would
suffer as a result of any failure to consummate the Second Closing. Such fee
shall constitute liquidated damages and, except for fraud in connection with
this Agreement, shall constitute Purchaser's sole and exclusive remedy
hereunder. This liquidated damages provision shall not limit and shall be in
addition to Purchaser's rights to obtain injunctive and other equitable relief
against the Company.
11. [Intentionally Omitted.]
12. Miscellaneous.
12.1. Survival of Representations, Warranties and Agreement.
Notwithstanding any investigation made by any party to this Agreement, the
representations and warranties made by the Company and Purchaser in connection
with the First Closing and the Second Closing shall not survive the First
Closing and Second Closing, respectively (other than the representations and
warranties of the Company set forth in Sections 3.4.1, 3.4.2(iii), 3.5 and 3.6,
which shall survive indefinitely), and shall thereafter be of no further force
or effect, except in the case of fraud in connection with this Agreement. All
covenants and agreements contained in this Agreement (except to the extent the
Second Issuance Agreements are terminated pursuant to Section 10) shall survive
the First Closing Date and Second Closing Date in accordance with their terms.
12.2. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be in writing, shall be
mailed by first-class registered or certified airmail, or nationally recognized
overnight express courier postage prepaid, and shall be deemed given when so
mailed and shall be delivered as follows:
if to the Company, to:
44
Go2Net, Inc.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx
with a copy so mailed to:
Xxxxxxxx Xxxxxxx & Xxxxxxx,
A Professional Corporation
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxx, Esq.
if to Purchaser,
Vulcan Ventures Incorporated
000 000xx Xxxxxx, X.X., Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
with a copy so mailed to:
Irell & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attention: Xx Xxxxx, Esq.
12.3. Adjustments. In the event of any change in the
Common Stock by reason of a stock dividend, split-up, recapitalization,
combination, conversion, exchange of shares or other similar change in the
corporate or capital structure of the Company, the type and number of
shares or securities subject to various provisions of this Agreement (and the
per share price of such shares or securities) shall, where applicable, be
adjusted appropriately, so that Purchaser's rights under this Agreement shall
be preserved as nearly as practicable. Without limiting the generality of the
foregoing, any such change in the Common Stock shall cause a proportionate
change in the Maximum Tender Number and the Offer Price.
12.4. Assignability and Enforceability. This Agreement shall
be binding on and enforceable by the parties and their respective successors and
permitted assigns. No party may assign any of its rights, benefits or
obligations under this Agreement to any person without the prior written consent
of the other party; provided, however, that Purchaser may assign its rights,
benefits or obligations under this Agreement, without the prior consent of the
Company, to an Affiliate (as defined in Section 5.7). No such assignment shall
relieve the Purchaser of its obligations under this Agreement.
45
12.5. Amendments and Waivers. No amendment or waiver of any
provision of this Agreement shall be binding on any party unless consented to in
writing by such party. No waiver of any provision of this Agreement shall be
construed as a waiver of any other provision nor shall any waiver constitute a
continuing waiver unless otherwise expressly provided. No provision of this
Agreement shall be deemed waived by a course of conduct including the act of
Closing unless such waiver is in writing signed by all parties and stating
specifically that it was intended to modify this Agreement.
12.6. Entire Agreement. This Agreement and the other
Transaction Documents, including the Schedules and Exhibits and any agreements
or documents referred to herein or therein or executed contemporaneously
herewith or therewith, constitutes the entire agreement among the parties with
respect to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether written or oral. There are
no conditions, covenants, agreements, representations, warranties or other
provisions, express or implied, collateral, statutory or otherwise, relating to
the subject matter hereof except as herein provided.
12.7. Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
12.8. Severability. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
12.9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware as to matters
between the Company and its stockholders and other matters of corporate
governance and, as to all other matters, with the laws of the State of
Washington, without regard to the choice of law provisions thereof, and the
federal law of the United States of America.
12.10. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument, and shall become
effective when one or more counterparts have been signed by each party hereto
and delivered to the other parties.
[Remainder of Page Intentionally Left Blank]
46
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
GO2NET, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx, Chief Executive Officer
VULCAN VENTURES INCORPORATED
By: /s/ Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxx, Vice President
47
ANNEX A
CONDITIONS TO THE TENDER OFFER
Notwithstanding any other provision of the Offer or the Stock Purchase
Agreement, and in addition to (and not in limitation of) Purchaser's rights to
extend and amend the Offer at any time in its sole discretion (subject to the
provisions of the Agreement and this Annex A), and subject to any applicable
rules and regulations of the SEC, including Rule 14e-1(c) relating to the
Purchaser's obligation to pay for or return tendered shares of Common Stock
("Offer Shares") after termination of the Offer, the Purchaser's obligation to
accept for payment or pay for any Common Shares tendered pursuant to the Offer
is subject to the condition that the Second Issuance Agreements (as defined in
the Stock Purchase Agreement) shall not have been terminated and to the
satisfaction of the following conditions (together, the "Offer Conditions"):
(a) there shall not have occurred (i) any general suspension of, or limitation
on prices for, trading in securities on The Nasdaq Stock Market for at
least one full trading day, (ii) any decline, measured from the close of
business on March 12, 1999, in the Nasdaq Composite Index by an amount in
excess of 15% at any time during any three trading days in a ten
consecutive trading day period, (iii) a declaration of a banking moratorium
or any suspension of payments in respect of banks in the United States
(whether or not mandatory), (iv) a declaration of a war or other
international or national calamity directly or indirectly involving the
United States, or (v) in the case of any of the foregoing matters described
in clauses (iii) through (v) existing at the time of commencement of the
Offer, a material acceleration or worsening thereof;
(b) no statute, rule, regulation, judgment, order, decree, ruling, injunction,
litigation or other action shall have been entered, promulgated, enforced,
initiated or threatened by any governmental, quasi-governmental, judicial,
or regulatory agency or entity or subdivision thereof with jurisdiction
over the Company or the Purchaser or any of their subsidiaries or the
purchase and sale of the Offer Shares or Second Issuance Shares or any of
the other transactions contemplated by the Stock Purchase Agreement that
purports, seeks, or threatens to (i) prohibit, restrain, enjoin, or
restrict in a material manner, the purchase and sale of any Offer Shares or
the Second Issuance Shares as contemplated by the Stock Purchase Agreement,
or (ii) impose material adverse terms or conditions (not set forth in the
Stock Purchase Agreement) upon the purchase and sale of any Second Issuance
Shares or the Offer Shares as contemplated by the Stock Purchase Agreement;
(c) the Purchaser and the Company shall have obtained any and all consents,
permits and waivers necessary for consummation of the transactions
contemplated by the Stock Purchase Agreement and the other Transaction
Documents (except for such
48
as may be properly obtained subsequent to the consummation of
the Offer) unless the failure to obtain such consents, permits
or waivers is a result of a breach by the Purchaser or would
not have a Material Adverse Effect; all waiting periods under
the HSR Act shall have expired or terminated;
(d) the representations and warranties of the Company set forth in the
Agreement hereof shall be true and correct (determined without regard to
any materiality qualifiers, including without limitation "Material Adverse
Effect," contained in the specific representation or warranty) (i) as of
the date hereof and (ii) as of the date of consummation of the Offer if
made on such date (provided that in the cases of clauses (i) and (ii) any
such representation and warranty made as of a specific date shall be true
and correct as of such specific date), except in the case of clauses (i)
and (ii), for such inaccuracies that individually or in the aggregate would
not reasonably be expected to have a Material Adverse Effect;
(e) the Company shall have performed in all material respects all covenants and
obligations herein required to be performed or observed by it on or prior
to the Second Closing;
(f) There shall not have occurred after the date hereof any material adverse
change in the business, properties, results of operation or financial
condition of the Company and its subsidiaries taken as a whole, other than
any adverse change following the date of the Stock Purchase Agreement that
the Company shall have demonstrated is substantially attributable to (i)
the transactions contemplated by the Stock Purchase Agreement or the
announcement of the transactions contemplated by the Stock Purchase
Agreement or (ii) any material economic downturn in the Internet industry
generally or any material national economic downturn;
(g) the Company shall have appointed to its Board of Directors two persons
designated by the Purchaser in accordance with Section 7.2.1 of the Stock
Purchase Agreement, and the Company shall have complied with all of its
other obligations under Section 7.2 of the Stock Purchase Agreement;
(h) the Company shall have delivered to the Purchaser or its counsel a
Compliance Certificate, executed by the President and the Chief Financial
Officer of the Company, dated as of the consummation of the Offer, to the
effect that the conditions specified in clauses (c) through (h) have been
satisfied;
(i) the Purchaser shall have received from Xxxxxxxx, Xxxxxxx & Xxxxxxx, A
Professional Corporation, an opinion addressed to it, dated as of the
consummation of the Offer, covering the items listed in Exhibit D in form
and substance satisfactory to the Purchaser;
49
(j) Each Management Agreement executed as of the date of the Agreement shall be
in full force and effect and no breach shall have occurred on the part of
any Management Stockholder under such agreement.
The Purchaser may delay acceptance for payment of or, subject to the
restrictions referred to above, the payment for, any tendered Shares, and may
terminate the Offer as to any Shares not then paid for, if such Offer Conditions
are not satisfied.
The foregoing conditions are for the sole benefit of the Purchaser and
may be asserted by the Purchaser regardless of the circumstances giving rise to
any such condition (including without limitation any action or inaction by the
Purchaser, other than actions Purchaser is required to take under Section 7.1 of
the Stock Purchase Agreement), or may be waived by the Purchaser, in whole or in
part at any time and from time to time, in the Purchaser's sole discretion. The
Purchaser is not obligated to keep the Offer open until the Stockholders Meeting
occurs. In the event that the Second Issuance Agreements are terminated, the
Purchaser may elect, in its sole discretion, to continue to conduct the Offer.
The failure by the Purchaser at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such rights and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time. Any determination (which shall be made in good faith) by the
Purchaser with respect to any of the foregoing conditions (including without
limitation the satisfaction of such conditions) will be final and binding on all
parties.
The Purchaser may increase the Offer Price and may make any other
changes in the terms and conditions of the Offer; provided, however, that,
except as permitted under Section 7.7.3 of this Agreement or unless previously
approved by the Company in writing, the Purchaser may not (i) decrease the Offer
Price, (ii) change the form of consideration payable in the Offer, (iii)
increase or decrease the maximum number of Shares sought pursuant to the Offer,
(iv) add to or modify the Offer Conditions, or (v) otherwise amend the Offer in
any manner adverse to the Company's stockholders.
The Purchaser may, without the Company's consent, (i) extend the Offer
if at the scheduled Expiration Date of the Offer if any of the conditions to the
Purchaser's obligation to accept for payment, and pay for, the Offer Shares
shall not have been satisfied or waived, until such time as such conditions are
satisfied or waived, (ii) extend the Offer for any period required by any rule,
regulation, interpretation or position of the SEC or the staff thereof
applicable to the Offer and (iii) extend the Offer for any reason on one or more
occasions for an aggregate period of not more than ten business days beyond the
latest Expiration Date that would otherwise be permitted under clauses (i) or
(ii) of this sentence. As used herein, "business day" means any day other than a
Saturday, Sunday or United States federal holiday and consists of the time
period from 12:01 a.m. through 12:00 midnight, New York City time.
50
EXHIBIT A
CERTIFICATE OF DESIGNATION OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
GO2NET, INC.
Go2Net, Inc., (hereinafter called the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, does hereby certify:
1. The name of the Corporation is Go2Net, Inc.
2. The certificate of incorporation of the Corporation authorizes the
issuance of 1,000,000 shares of Preferred Stock, $.01 par value, and expressly
vests in the Board of Directors of the Corporation the authority provided
therein to provide for the issuance of said shares in series and by filing a
certificate pursuant to the applicable law of the State of Delaware, to
establish from time to time the numbers of shares to be included in each such
series, and to fix the designation, powers, preferences and rights of the shares
of each such series and the qualifications, limitations, or restrictions
thereof.
3. The Board of Directors of the Corporation, pursuant to the authority
expressly vested in it as aforesaid, has adopted the following resolutions
creating a "Series A Convertible" issue of Preferred Stock:
RESOLVED, that a series of the class of authorized Preferred Stock of
the Corporation be and hereby is created, and that the
designation and amount thereof and the voting powers,
preferences and relative participating, optional and other
special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof as
follows:
SERIES A CONVERTIBLE PREFERRED STOCK
1. Designation And Amount. The shares of such series shall be
designated "Series A Convertible Preferred Stock" (the "Series A Preferred
Stock") and the number of shares constituting such series shall be 300,000.
2. Dividends.
(a) The Series A Preferred Stock shall not be entitled to
receive dividends unless and until the Board of Directors declares a dividend in
respect of the Common Stock out of legally available funds therefor; provided,
however, that no dividends shall be declared or paid upon the Common Stock
(other than dividends payable upon the Common Stock solely in
51
additional shares of Common Stock, provided that an appropriate adjustment in
the Conversion Price is made under Section 6(a) hereof) or any other stock
ranking on liquidation junior to the Series A Preferred Stock (such stock being
referred to hereinafter collectively as "Junior Stock") unless (i) after the
payment of the dividend on the Common Stock and Junior Stock (and the
simultaneous dividend on the Series A Preferred Stock) the Corporation's net
worth exceeds the aggregate liquidation preference of the Series A Preferred
Stock (provided that this clause (i) shall not apply if the dividend is approved
by the holders of a majority of the outstanding shares of Series A Preferred
Stock) and (ii) there shall be simultaneous declaration or payment, as
applicable, of a dividend upon the Series A Preferred Stock.
(b) In the case of any dividend being declared upon the Common
Stock, the dividend which shall be declared upon each share of Series A
Preferred Stock as a condition to such dividend upon the Common Stock shall be
equal in amount to the dividend payable upon that number of shares of Common
Stock acquirable upon conversion of a share of Series A Preferred Stock
immediately before the declaration of such dividend, with such conversion being
based on the then applicable Conversion Price determined in accordance with
Section 6 as of the record date for the declaration of such dividend on the
Common Stock.
(c) In the case of any dividend being declared upon any class
of Junior Stock that is convertible into Common Stock, the amount of the
dividend which shall be declared upon each share of Series A Preferred Stock as
a condition to such dividend on Junior Stock, divided by the number of shares of
Common Stock acquirable upon conversion of a share of Series A Preferred Stock,
shall equal the amount of the dividend declared upon each share of such class of
Junior Stock, divided by the number of shares of Common Stock acquirable upon
conversion of a share of such class of Junior Stock, in each case assuming such
conversion occurred immediately before the declaration of such dividend.
(d) No dividend shall be declared or paid upon any class of
Junior Stock (other than Common Stock) that is not convertible into Common Stock
without the consent of holders of at least a majority of the outstanding shares
of Series A Preferred Stock.
(e) Holders of shares of Series A Preferred Stock shall be
entitled to share equally, share for share, in all such dividends declared upon
the Series A Preferred Stock.
3. Liquidation, Dissolution Or Winding Up.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series A
Preferred Stock then outstanding shall be entitled to be paid out of the assets
of the Corporation available for distribution to its stockholders, after and
subject to the payment in full of all amounts required to be distributed to the
holders of any Preferred Stock of the Corporation ranking on liquidation prior
and in preference to the Series A Preferred Stock (such Preferred Stock that is
senior to the Series A Preferred Stock being referred to hereinafter as "Senior
Stock") upon such liquidation,
52
dissolution or winding up, but before any payment shall be made to the holders
of Common Stock or other Junior Stock, an amount equal to the sum of (i) $1,000
per share (the "Liquidation Preference") (subject to adjustment in the event of
any stock dividend, stock split, stock distribution or combination with respect
to such shares), and (ii) the amount of all declared but unpaid dividends on the
Series A Preferred Stock. If upon any such liquidation, dissolution or winding
up of the Corporation, the remaining assets of the Corporation available for the
distribution to its stockholders after payment in full of amounts required to be
paid or distributed to holders of any other Senior Stock shall be insufficient
to pay the holders of shares of Series A Preferred Stock the full amount to
which they shall be entitled, the holders of shares of Series A Preferred Stock,
and any class of stock ranking on liquidation on a parity with the Series A
Preferred Stock (such Preferred Stock ranking on liquidation on parity with the
Series A Preferred Stock being referred to as "Parity Stock"), shall share
ratably in any distribution of the remaining assets and funds of the Corporation
in proportion to the respective amounts which would otherwise be payable with
respect to the shares held by them upon such distribution if all amounts payable
on or with respect to said shares were paid in full. Except as set forth in this
clause (a), holders of shares of Series A Preferred Stock shall not be entitled
to any distribution in the event of liquidation, dissolution or winding up of
the Corporation.
(b) The merger or consolidation of the Corporation with or
into any other corporation or entity, or the sale or conveyance of all or
substantially all the assets of the Corporation, shall not be deemed to be a
liquidation, dissolution or winding up of the Corporation for purposes of this
Section 3.
4. Voting.
(a) Each holder of shares of Series A Preferred Stock shall
have the right to one vote for each share of Common Stock into which such
holder's shares of Series A Preferred Stock could then be converted, and with
respect to such vote, such holder shall have full voting rights and powers equal
to the voting rights and powers of the holders of Common Stock, except as
otherwise provided in Sections 4(b) and 4(c) hereof, or as required by law, and
shall be entitled, notwithstanding any provision hereof, to notice of any
shareholders' meeting in accordance with the Bylaws of the Corporation, and
shall be entitled to vote, together with holders of Common Stock, with respect
to any question upon which holders of Common Stock have the right to vote;
provided, however, that the shares of Series A Preferred Stock shall not have
any voting power with respect to the election of directors unless and until the
making of any necessary filings required by, and the expiration or termination
of any applicable waiting periods under, the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act").
(b) The consent of holders of at least a majority of the
outstanding shares of Series A Preferred Stock, voting separately as a single
class, in person or by proxy, either in writing without a meeting or at a
special or annual meeting of stockholders called for such purpose, shall be
necessary to amend, modify or repeal any provision of the Certificate of
Incorporation (including any provision of the Certificate of Designation of
Series A Convertible
53
Preferred Stock) or Bylaws of the Corporation in any manner which would
adversely affect the powers, preferences or special rights of the Series A
Preferred Stock. The authorization or creation of any shares of any class or
series of Senior Stock or Parity Stock of the Corporation or the
reclassification of any authorized stock of the Corporation or security
convertible into or evidencing the right to purchase shares of any such Senior
Stock or Parity Stock shall be deemed to adversely affect the Series A Preferred
Stock. The authorization or creation of any shares of any class or series of
Junior Stock of the Corporation or the reclassification of any authorized stock
of the Corporation into any such Junior Stock, or the creation or authorization
of any obligation or security convertible into or evidencing the right to
purchase shares of any such Junior Stock shall be deemed not to adversely affect
the powers, preferences or special rights of the Series A Preferred Stock.
(c) Unless the vote or consent of the holders of a greater
number of shares shall then be required by law and so long as there is
outstanding at least 50% of the Series A Preferred Stock, the consent of the
holders of at least a majority of the outstanding shares of Series A Preferred
Stock, voting together as a separate class, in person or proxy, either in
writing without a meeting or at a special or annual meeting of stockholders
called for such purpose, shall be necessary to authorize or effect (i) any sale,
lease, transfer or other disposition of assets (including without limitation by
merger) having a fair market value of at least 30% of the fair market value of
the assets of the Corporation and its subsidiaries on a consolidated basis; (ii)
any merger or consolidation or other reorganization of the Corporation with or
into another corporation in one transaction or a series of related transactions
pursuant to which the stockholders of the Corporation immediately prior to
consummation of such transaction would hold less than 66-2/3% of the voting
securities of the entity surviving the transaction; (iii) the acquisition by the
Corporation or any subsidiary thereof of another entity or business whether by
means of a purchase of equity interests or the purchase of all or substantially
all of the assets of such entity or merger, consolidation, reorganization,
issuance or exchange of securities or otherwise where the consideration involved
(including non-cash consideration) has a value of at least $100,000,000; (iv) a
liquidation, winding up or dissolution of the corporation or adoption of any
plan of the same; (v) the commencement by the Corporation of a voluntary case or
proceeding under applicable bankruptcy laws or any other insolvency,
receivership, reorganization, moratorium or similar laws providing relief to
debtors; and (vi) any redemption or repurchase by the Corporation of any Junior
Stock or Parity Stock or any securities convertible into Junior Stock or Parity
Stock, other than the repurchase of shares in connection with the termination of
employees of the Corporation pursuant to rights under written agreements;
provided, however, except to the extent provided by law, the holders of the
Series A Preferred Stock shall not have any consent rights under this Section
4(c) until the Second Closing (as defined in that certain Stock Purchase
Agreement dated March 15, 1999, between this Corporation and Vulcan Ventures
Incorporated) shall have occurred, but this proviso shall not in any way impair
or restrict the voting rights of the holders of the Series A Preferred Stock in
any other respect, including without limitation, the right to vote together with
the holders of the Common Stock pursuant to Section 4(a) or the voting right
under Section 4(b).
54
5. Conversion Rights.
(a) Exercise of Conversion Rights. Subject to Compliance with
the HSR Act, each holder of Series A Preferred Stock shall have the right, at
its option, at any time, to convert, subject to the terms and provisions of this
Section 5, all or any portion of its Series A Preferred Stock then outstanding
into such number of fully paid and non-assessable shares of Common Stock as
results from dividing (i) the sum of (A) the aggregate Liquidation Preference of
all shares of Series A Preferred Stock to be converted plus (B) any declared but
unpaid dividends on such shares, by (ii) the applicable Conversion Price (as
defined in Section 6 below) on the Conversion Date (as defined below). Such
conversion shall be deemed to have been made at the close of business on the
date that the certificate or certificates for shares of Series A Preferred Stock
shall have been surrendered for conversion and written notice shall have been
received as provided in Section 5(b) (the "Conversion Date"), so that the person
or persons entitled to receive the shares of Common Stock upon conversion of
such shares of Series A Preferred Stock shall be treated for all purposes as
having become the record holder or holders of such shares of Common Stock at
such time and such conversion shall be at the Conversion Price in effect at such
time. Upon conversion of any shares of Series A Preferred Stock pursuant to this
Section 5, the rights of the holder of such shares upon the Conversion Date
shall be the rights of a holder of Common Stock only, and each such holder shall
not have any rights in its former capacity as a holder of shares of Series A
Preferred Stock.
(b) Notice to the Corporation. In order to convert all or any
portion of its outstanding Series A Preferred Stock into shares of Common Stock,
the holder of such Series A Preferred Stock shall deliver the shares of Series A
Preferred Stock to be converted to the Corporation at its principal office,
together with written notice that it elects to convert those shares of Series A
Preferred Stock in to shares of Common Stock in accordance with the provisions
of this Section 5. Such notice shall specify the number of shares of Series A
Preferred Stock to be converted and the name or names in which the holder wishes
the certificates for shares of Common Stock to be registered, together with the
address or addresses of the person or persons so named , and, if so required by
the Corporation, shall be accompanied by a written instrument or instruments of
transfer in form reasonably satisfactory to the Corporation, duly executed by
the registered holder of the shares of Series A Preferred Stock to be converted
or by its attorney duly authorized in writing.
(c) Delivery of Certificate. As promptly as practicable after
the surrender as hereinabove provided of shares of Series A Preferred Stock for
conversion into shares of Common Stock, the Corporation shall deliver or cause
to be delivered to the holder, or the holder's designees, certificates
representing the number of fully paid and non-assessable shares of Common Stock
into which the shares of Series A Preferred Stock are entitled to be converted,
together with a cash adjustment in respect of any fraction of a share to which
the holder shall be entitled as provided in Section 5(d), and, if less than the
entire number of shares of Series A Preferred Stock represented by the
certificate or certificates surrendered is to be converted, a new
55
certificate for the number of shares of Series A Preferred Stock not so
converted. So long as any shares of Series A Preferred Stock remain outstanding,
the Corporation shall not close its Common Stock transfer books. The issuance of
certificates for shares of Common Stock upon the conversion of shares of Series
A Preferred Stock shall be made without charge to the holder for any tax in
respect of the issuance of such certificates (other than any transfer,
withholding or other tax if the shares of Common Stock are to be registered in a
name different from that of the registered holder of Series A Preferred Stock).
(d) Fractional Shares. No fractional shares of Common Stock or
scrip representing fractional shares of Common Stock shall be issued upon any
conversion of any shares of Series A Preferred Stock, but, in lieu thereof,
there shall be paid an amount in cash equal to the same fraction of the Market
Price of a whole share of Common Stock as of the Conversion Date. The "Market
Price" of a share of Common Stock on or with respect to any day shall mean (i)
the closing sales price on the immediately preceding trading day of a share of
Common Stock on the principal national securities exchange or automated
quotation system on which the shares of Common Stock are listed or admitted to
trading or, if not listed or admitted to trading on any national securities
exchange or automated quotation system, the average of the last reported bid and
asked prices on such immediately preceding trading day in the over-the-counter
market as furnished by the National Association of Securities Dealers, Inc., or,
if such firm is not then engaged in the business of reporting such prices, as
furnished by any similar firm then engaged in such business selected in good
faith by the Company or, if there is no such firm, as furnished by any member of
the National Association of Securities Dealers, Inc., selected in good faith by
the Company, or (ii) if the shares of Common Stock are not then traded on any
such exchange or system, the amount determined in good faith by the Board to
represent the fair value of a share of Common Stock.
(e) Reservation of Shares. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of shares of Series A
Preferred Stock, the full number of whole shares of Common Stock then
deliverable upon the conversion of all shares of Series A Preferred Stock then
outstanding. The Corporation shall take at all times such corporate action as
shall be necessary in order that the Corporation may validly and legally issue
fully paid and non-assessable shares of Common Stock upon the conversion of
shares of Series A Preferred Stock in accordance with the provisions of this
Section 5.
(f) Registration. If any shares of Common Stock to be reserved
for the purpose of conversion of Series A Preferred Stock require registration
or listing with, or approval of, any governmental authority, stock exchange or
other regulatory body under any federal or state law or regulation or otherwise,
before such shares may be validly issued or delivered upon conversion, the
Corporation shall, in good faith and as expeditiously as possible, endeavor to
secure such registration, listing or approval, as the case may be.
56
(g) Shares Validly Issued and Non-Assessable. All shares of
Common Stock that may be issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issuance thereof.
(h) Retirement of Shares. Any shares of Series A Preferred
Stock converted pursuant to the provisions of this Section 6 shall be retired
and given the status of authorized and unissued Preferred Stock, undesignated as
to series, subject to reissuance by the Corporation as shares of Preferred Stock
of one or more series, as may be determined from time to time by the Board.
(i) Automatic Conversion.
(i) Transfer of Shares. In the event that a holder of shares
of Series A Preferred Stock desires to transfer some or all of such shares to an
unaffiliated party, each share of Series A Preferred Stock so transferred shall
be converted into the number of fully paid and non-assessable shares of Common
Stock into which such share is then convertible pursuant to Section 5 hereof
automatically and without further action, immediately upon the transfer of such
shares.
(ii) Transaction. In the event that the Corporation enters
into a transaction which will result in the transfer of 50% or greater of the
voting securities of the Company to an unrelated party, then each share of
Series A Preferred Stock outstanding shall be converted into the number of fully
paid and non-assessable shares of Common Stock into which such share is then
convertible pursuant to Section 6 hereof automatically and without further
action, immediately upon the transfer of such shares.
(iii) Mechanics of Automatic Conversion. Upon any automatic
conversion of shares of Series A Preferred Stock into shares of Common Stock
pursuant to this Section 5(i), the holders of such converted shares shall
surrender the certificates formerly representing such shares at the office of
the Corporation or of any transfer agent for Common Stock. Thereupon, there
shall be issued and delivered to each such holder, promptly at such office and
in his, her or its name as shown on such surrendered certificate or
certificates, a certificate or certificates for the number of shares of Common
Stock into which such shares of Series A Preferred Stock were so converted and
cash as provided in Section 5(d) above in respect of any fraction of a share of
Common Stock issuable upon such conversion. The Corporation shall not be
obligated to issue certificates evidencing the shares of Common Stock issuable
upon such conversion unless and until certificates formerly evidencing the
converted shares of Series A Preferred Stock are either delivered to the
Corporation or its transfer agent, as hereinafter provided, or the holder
thereof notifies the Corporation or such transfer agent that such certificates
have been lost, stolen, or destroyed and executes and delivers an agreement to
indemnity the Corporation from any loss incurred by it in connection therewith.
57
6. Conversion Price. As used herein, the "Conversion Price" shall
initially be $66.11 per share of Common Stock, subject to adjustment as set
forth below. The Conversion Price shall be subject to adjustment from time to
time as follows:
(a) Stock Dividends, Subdivisions, Reclassifications or
Combinations. If the Corporation shall (i) declare a dividend or make a
distribution on its Common Stock in shares of its Common Stock, (ii) subdivide
or reclassify the outstanding shares of Common Stock into a greater number of
shares, or (iii) combine or reclassify the outstanding Common Stock into a
smaller number of shares, the Conversion Price in effect at the time of the
record date for such dividend or distribution or the effective date of such
subdivision, combination or reclassification shall be proportionately adjusted
so that the holder of any shares of Series A Preferred Stock surrendered for
conversion after such date shall be entitled to receive the number of shares of
Common Stock which he would have owned or been entitled to receive had such
shares of Series A Preferred Stock been converted immediately prior to such
date. Successive adjustment in the Conversion Price shall be made whenever any
event specified above shall occur.
(b) Other Distributions. In case the Corporation shall fix a
record date for the making of a distribution to all holders of shares of its
Common Stock (i) of shares of any class other than its Common Stock, (ii) of
evidence of indebtedness of the Corporation or any subsidiary of the Corporation
(iii) of assets, or (iv) of rights or warrants, in each such case all holders of
shares of its Series A Preferred Stock shall receive a distribution (i) of
shares of any class other than its Common Stock, (ii) of evidence of
indebtedness of the Corporation or any subsidiary of the Corporation, (iii) of
assets, or (iv) of rights or warrants, as applicable, equal in amount to the
distribution which they would have received had such holders converted their
shares of Series A Preferred Stock into Common Stock immediately prior to the
distribution.
(c) Consolidation, Merger, Sale, Lease or Conveyance or
Reclassifications or Reorganizations. In case of any consolidation with or
merger of the Corporation with or into another corporation or other entity, or
in case of any sale, lease or conveyance to another entity of the assets of the
Corporation as an entirety or substantially as an entirety, or in the event of
any reclassification, recapitalization or other change of the Common Stock in
which the Common Stock is changed into the same or a different number of shares
of any class or classes of stock, then each share of Series A Preferred Stock
shall after the date of such consolidation, merger, sale, lease or conveyance or
such reclassification, reorganization or other change be convertible into the
number of shares of stock or other securities or property (including cash) to
which the Common Stock issuable (at the time of such consolidation, merger,
sale, lease or conveyance or such reclassification, recapitalization or other
change) upon conversion of such share of Series A Preferred Stock would have
been entitled upon such consolidation, merger, sale, lease or conveyance or such
reclassification, recapitalization or other change; and in any case, if
necessary, the provisions set forth herein with respect to the rights and
interests thereafter of the holders of the shares of Series A Preferred Stock
shall be appropriately adjusted so as to be applicable, as nearly as may
reasonably be, to any shares of stock or other securities or property thereafter
deliverable on the conversion of the shares of Series A Preferred Stock.
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(d) Notice to Holders. In the event the Corporation shall
propose to take any action of the type described in subsections (a), (b) and (c)
of this Section 6, the Corporation shall give notice to each holder of shares of
Series A Preferred Stock, which notice shall specify the record date, if any,
with respect to any such action and the approximate date on which such action is
to take place. Such notice shall also set forth such facts with respect thereto
as shall be reasonably necessary to indicate the effect of such action on the
Conversion Price and the number, kind or class of shares or other securities or
property which shall be deliverable upon conversion of shares of Series A
Preferred Stock. In the case of any action which would require the fixing of a
record date, such notice shall be given at least 15 days prior to the date so
fixed, and in the case of all other action, such notice shall be given at least
20 days prior to the taking of such proposed action.
(e) Statement Regarding Adjustments. Upon the occurrence of
each adjustment or readjustment of the Conversion Price of the Series A
Preferred Stock pursuant to this Section 6, the Corporation shall compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. Each such statement shall be signed by the Corporation's
public accountants.
(f) Treasury Stock. For the purposes of this Section 6, the
sale or other disposition of any Common Stock theretofore held in the
Corporation's treasury shall be deemed to be an issuance thereof.
(g) Good Faith. The Corporation shall not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issuance or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but shall at
all times in good faith assist in the carrying out of all the provisions of this
Section 6 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of the
shares of Series A Preferred Stock shares against impairment of any kind.
7. No Redemption Rights. The Series A Preferred Stock shall not be
subject to redemption, whether at the option of either the Corporation or any
holder of the Series A Preferred Stock.
FURTHER RESOLVED, that the statements contained in
the foregoing resolutions creating and
designating the said Series A Convertible
issue of Preferred Shares and fixing the
number, powers, preferences and relative,
optional, participating, and other special
rights and the qualifications, limitations,
restrictions, and other distinguishing
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characteristics thereof shall, upon the
effective date of said series, be deemed to
be included in and be a part of the
certificate of incorporation of the
Corporation pursuant to the provisions of
Sections 104 and 151 of the General
Corporation Law of the State of Delaware.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, said Corporation has caused this Certificate to be
signed by its Chief Executive Officer, this 15th day of March, 1999. The
signature below shall constitute the affirmation or acknowledgment of the
signatory, under penalties of perjury, that the instrument is the act and deed
of the Corporation and that the facts stated herein are true.
Xxxxxxx X. Xxxxxxxx
Chief Executive Officer
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EXHIBIT B
PROMISSORY NOTE
$167,482,000.00
Bellevue, Washington
March 15, 1999
FOR VALUE RECEIVED, the undersigned, VULCAN VENTURES INCORPORATED, a
Washington corporation ("Maker"), hereby promises to pay to the order of GO2NET,
INC., a Delaware corporation ("Holder"), the principal sum of One Hundred Sixty-
Seven Million Four Hundred Eighty-Two Thousand Dollars ($167,482,000.00), plus
interest on the unpaid principal balance from time to time after the date hereof
at the rate of 8% per annum.
The entire outstanding principal amount of this Note and all accrued
but unpaid interest thereon shall be due and payable on March 22, 1999.
All payments hereunder shall be made in lawful money of the United
States of America to Holder at 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxxxx
00000, or at such other address as shall be designated in writing from time to
time by Holder.
Interest shall be computed on the actual number of days in a year, for
the number of days actually elapsed.
If Maker fails to make any payment of principal or interest when
required under this Note, then Holder may, at its sole option with notice to
Maker, declare immediately due and payable the entire unpaid principal balance
of this Note.
This Note may be prepaid in whole or in part at any time, without
penalty or fee of any kind.
If this Note is not paid when due, Maker promises to pay all reasonable
costs of collection incurred by Holder.
All persons or entities now or at any time liable for payment of the
indebtedness evidenced by this Note, expressly waive presentment for payment,
notice of dishonor, protest, notice of protest and diligence in collection and
consent that the time of the payments or any part of the payments may be
extended by Holder.
This Note shall be governed by and construed under the laws of the
State of Delaware.
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"Maker"
VULCAN VENTURES INCORPORATED
By:______________________________
Xxxxxxx X. Xxxxx, Vice President
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EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into
this 15th day of March, 1999, by and among GO2NET, INC., a Delaware corporation
(the "Company"), and VULCAN VENTURES INCORPORATED, a Washington corporation
("Vulcan").
A. Concurrently with the execution of this Agreement, Vulcan is
purchasing 167,507 shares of the Company's Series A
Convertible Preferred Stock, $.01 par value (the "Series A
Preferred Stock"), pursuant to that certain Stock Purchase
Agreement dated March 15, 1999, between the Company and Vulcan
(the "Stock Purchase Agreement"). The Stock Purchase Agreement
also contemplates Vulcan's acquisition of additional shares of
the Series A Preferred Stock and certain shares of the
Company's Common Stock, $.01 par value (the "Common Stock").
B. The parties hereto desire to set forth the respective rights
of the Company and Vulcan with respect to the registration of
the shares of the Company's Common Stock that Vulcan may
acquire.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises contained herein, the parties hereto agree as follows:
1. Definitions.
1.1 As used in this Agreement, the following capitalized terms
shall have the following meanings:
Affiliate: A Person that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with, Vulcan;
provided that such control relationship involves direct or indirect
ownership of at least a majority of the outstanding voting interests of the
applicable Person. Without limiting the generality of the foregoing, it is
understood that any entity that is majority owned (directly or indirectly)
by a Person that directly or indirectly owns a majority of the outstanding
voting interests of Vulcan shall be an Affiliate of Vulcan.
Common Stock: All shares now or hereafter authorized of any class of common stock of
the Company, and any other equity securities of the Company,
howsoever designated, which have the right (subject always to prior
rights of any class or series of preferred shares) to participate in the
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distribution of the assets and the earnings of the Company without limit
as to per share amount.
Exchange Act: The Securities Exchange Act of 1934, as amended from time to time.
Holders: Vulcan, all of its Affiliates (including without
limitation Xxxx X. Xxxxx), any Person to which
Common Stock is transferred by Vulcan and its
Affiliates for purposes of Xxxx X. Xxxxx'x estate
planning, and any Person to which Common Stock is
transferred by Vulcan and its Affiliates that has
registration rights pursuant to Section 10 below.
Majority Holders: Holders of a majority of the Registrable Securities held by all Holders at
the time of any request for registration pursuant to Section 2.1(a).
Person: An individual, corporation, partnership, limited liability company, trust,
unincorporated organization or a government or any agency or political
subdivision thereof.
Prospectus: The definitive prospectus included in any
Registration Statement, as amended or supplemented
by any prospectus supplement with respect to the
terms of the offering of any portion of the
Registrable Securities covered by the Registration
Statement and by all other amendments and
supplements to the prospectus, including
post-effective amendments and all material
incorporated by reference in such prospectus.
Registrable Securities: Those shares of Common Stock now or hereafter owned of record or
beneficially by the Holders (including, without limitation, any shares of
Common Stock acquired by the Holders upon conversion of the Series A
Preferred Stock) plus any shares received from the Company with
respect to or in replacement of such shares by reason of splits, dividends
and recapitalizations and other changes in the Company's capital
structure , but excluding any shares which may be then immediately sold
to the public without registration pursuant to Rule 144 under the
Securities Act.
Registration Expenses: See Section 6 hereof.
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Registration Statement: Any registration statement of the Company filed under the Securities Act
which covers Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to
such Registration Statement, including post-effective amendments, all
exhibits and all material incorporated by reference in such Registration
Statement.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended from time to time.
Selling Holders: Holders of Registrable Securities who seek to sell such securities under
any Registration Statement.
2. Registration Rights.
2.1 Registration Upon Request.
(a) At any time beginning 180 days after the date hereof,
the Majority Holders may request by written notice (a "Demand Notice") to the
Company that the Company effect the registration under the Securities Act
of a number of Registrable Securities at least equal to 5% of the shares of the
Common Stock then outstanding, stating the intended method of disposition of
such shares. The registration rights contemplated by this Section 2.1 may be
exercised only three (3) times by the Majority Holders during the term of this
Agreement; provided, however, the request for registration shall not be deemed
made if either (i) the Registration Statement does not become effective
under the Securities Act (including without limitation if the Selling
Holders withdraw the Registration Statement, provided in case of such withdrawal
the request for registration will be deemed made unless the Selling Holders
reimburse the Company for its reasonable expenses in connection with such
Registration Statement) or a stop order, injunction or other order interferes
or prevents the contemplated method of distribution or (ii) the number of
Registrable Securities requested to be included in the registration is
reduced by 15% or more pursuant to Section 2.1(c). Within five (5) business
days after receipt of a Demand Notice, the Company shall notify all other
Holders and offer to them the opportunity to include their Registrable
Securities in such registration.
(b) Upon receipt of such request, the Company shall, as soon
as practicable, prepare and file a Registration Statement with the SEC on an
appropriate form under the Securities Act with respect to all of the Registrable
Securities that Holders of such securities have requested that the Company
register, and use its best efforts to cause such Registration Statement to
become effective.
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(c) In connection with any Registration Statement filed in
response to such request, the Company, at its option, may include a primary
offering of additional shares of Common Stock and/or may include shares to be
sold by other stockholders of the Company; provided, however, that if the
managing underwriter of such offering reasonably determines in good faith and
delivers to the Selling Holders a written opinion that the number of shares
otherwise to be included in the Registration Statement is such that the success
of the underwritten offering would be materially and adversely affected and,
accordingly, the total number of shares to be included in the Registration
Statement is reduced to the amount recommended by such underwriter, then (i)
unless the Registration Statement includes all of the Registrable Securities
designated for sale by all Selling Holders participating in the demand
registration pursuant to Section 2.1(a), the Registration Statement shall not
include any shares to be offered by the Company or sold by other stockholders
(including other Holders exercising incidental registration rights pursuant to
Section 2.2), and (ii) if the Registration Statement does not include all of the
Registrable Securities designated for sale by such Selling Holders, the number
of Registrable Securities included in the Registration Statement shall be
allocated among such Selling Holders pro rata (based on the number of
Registrable Securities held by each).
(d) Notwithstanding the foregoing, upon delivery of written
notice (deliverable no later than 10 days after delivery of the Demand Notice)
to the person(s) who delivered the Demand Notice, the Company shall be entitled
to postpone filing of the Registration Statement, and may withhold efforts to
cause the Registration Statement to become effective, for a reasonable period of
time (not to exceed the shorter of 90 days or the Company's termination of
consideration of a Company Offering (as defined below) or completion of any
Transaction (as defined below), as the case may be) if (i) the Company is
contemplating filing a registration statement in connection with the offering of
its securities (a "Company Offering") within 90 days of delivery of the Demand
Notice, or (ii) the Company determines in good faith that a registration
pursuant to the Demand Notice might interfere with or adversely affect the
negotiations or completion of any transaction that is being contemplated by the
Company at the time the right to delay is exercised (a "Transaction").
2.2 Incidental Registration.
(a) If at any time after the date hereof the Company
proposes to register any shares of Common Stock under the Securities Act
(except pursuant to
a registration statement filed on Form S-8 or Form S-4 or such other form as
shall be prescribed under the Securities Act for the same purposes, or a
registration statement filed on Form S-3 covering exclusively shares issued in
acquisitions pursuant to Section 4(2) under the Securities Act), or if any other
stockholder is being afforded an opportunity to register shares of Common Stock
(including pursuant to Section 2.1(a)), the Company will at each such time give
written notice to the Holders (other than Holders participating in a demand
registration pursuant to Section 2.1(a)) as provided in Section 11.4 hereof of
its intention to do so. Within twenty (20) days after receipt of such notice,
such Holders may request that the Company register all or part of the
Registrable Securities, stating in such request the intended method of
distribution of such securities (the
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"Designated Securities"). Upon receipt of such request, the Company shall use
its best efforts to effect the registration of the Designated Securities by
including the Designated Securities in such Registration Statement.
(b) In the event that securities of the same class as the
Registrable Securities are being registered by the Company in such
Registration Statement and such securities as well as any of the
Designated Securities are to be distributed in an underwritten offering,
such Designated Securities shall be included in such underwritten offering
on the same terms and conditions as the securities being issued by the
Company for distribution pursuant to such underwritten offering; provided,
however, that if the managing underwriter of such underwritten offering
reasonably determines in good faith and advises the parties that the inclusion
in such underwritten offering of all the Designated Securities would
materially and adversely affect the success of the underwritten
offering, then the number of Designated Securities to be included in the
Registration Statement shall be reduced to the amount recommended in good faith
by and set forth in the opinion of such managing underwriter; provided, further,
that as to the Selling Holders exercising incidental registration rights
pursuant to this Section 2.2, such reduction shall be pro rata (based on the
number of shares held by each) with respect to the Designated Securities with
other Persons holding contractual incidental or "piggy-back" registration rights
in such underwritten offering.
(c) No registration effected under this Section 2.2
shall relieve the
Company of its obligations to effect registrations at the request of the Holders
under Section 2.1.
3. Hold-Back Agreements.
3.1 Restrictions on Public Sale by Holders. Each Selling
Holder whose Registrable Securities are covered by a Registration Statement
filed pursuant to Section 2 hereof agrees, if requested by the managing
underwriters in an underwritten offering, not to effect any public sale or
distribution of securities of the Company of the same class as the securities
included in such Registration Statement during a period, not to exceed 90 days,
beginning on the closing date of each underwritten offering made pursuant to
such Registration Statement, to the extent timely notified in writing by the
managing underwriters.
3.2 Restrictions on Public Sale by the Company and Others. The
Company agrees not to effect any public sale or distribution of its Common
Stock, during a period, not to exceed 45 days, beginning on the closing date of
an underwritten offering made pursuant to a Registration Statement filed under
Section 2 hereof to the extent timely notified in writing by the managing
underwriters (except as part of such underwritten registration or pursuant to
registrations on Forms S-4 or S-8 or any successor form to such Forms).
4. Registration Procedures. In connection with the Company's
registration obligations pursuant to Section 2 hereof, the Company will use its
best efforts to effect such
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registration to permit the sale of such Registrable Securities in accordance
with the intended method or methods of disposition thereof, and pursuant thereto
the Company will:
4.1 Preparation of Registration Statement. Prepare and file
with the SEC, within the time periods specified in Section 2, a Registration
Statement on such form as may be appropriate under the Securities Act, and use
its best efforts to cause such registration Statement to become effective.
4.2 Maintaining Effectiveness. Promptly prepare and file with
the SEC such amendments to the Registration Statement as may be necessary to
keep such Registration Statement effective for a period of not more than 180
days (or, in the case of an underwritten offering, no more than 5 business
days), or such shorter period which will terminate when all Registrable
Securities covered by such Registration Statement have been sold.
4.3 Notification. Immediately notify the Selling Holders and
the managing underwriters, if any, and (if requested by any such Person) confirm
such advice in writing, (i) when a Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to a Registration
Statement or any post-effective amendment, when the same has become effective,
(ii) of the issuance by the SEC of any stop order suspending the effectiveness
of the Registration Statement or the initiation of any proceeding for that
purpose, (iii) of the receipt by the Company of any notification with respect to
the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction or the initiation or threatening of any proceeding for
such purpose, and (iv) of the happening of any event which makes any statement
made in the Registration Statement, the Prospectus or any document incorporated
therein by reference untrue or which requires the making of any changes in the
Registration Statement, the Prospectus, or any document incorporated therein by
reference so that they will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statement therein not misleading.
4.4 Stop Orders. Make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of a Registration Statement
or the qualification of any Registrable Securities for sale in any jurisdiction
at the earliest possible moment.
4.5 Consultation with Holders. Prior to the filing of any
Registration Statement or amendment thereto, provide copies of such document to
the Selling Holders and to the managing underwriters, if any, make the Company's
representatives and the Company's counsel available for discussion of such
document and make such changes in such document relating to the Selling Holders
prior to the filing thereof as such Selling Holders, counsel for such Selling
Holders, or underwriters may reasonably request.
4.6 Copies of Registration Statements. Furnish to each
Selling Holder and each managing underwriter, if any, without charge, at least
one originally executed copy of the
69
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference).
4.7 Prospectuses. Deliver to each Selling Holder and the
underwriters, if any, without charge, as many copies of the Prospectus (and each
preliminary prospectus) and any amendment or supplement thereto as such Persons
may reasonably request so long as the Registration Statement to which such
Prospectus or any amendment or supplement thereto relates is effective.
4.8 Blue Sky Laws. Prior to any public offering of Registrable
Securities, use its best efforts to register or qualify or cooperate with the
Selling Holders, the underwriters, if any, and their respective counsel in
connection with the registration or qualification of such Registrable Securities
for offer and sale under the securities or blue sky laws of such jurisdictions
within the United States as any Selling Holder or underwriter reasonably
requests, and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by the Registration Statement; provided, however, that the Company will
not be required to qualify generally to do business in any jurisdiction where it
is not then so qualified or to take any action which would subject it to general
service of process or taxation in any such jurisdiction where it is not then so
subject.
4.9 Amendments Upon Changes. Upon the occurrence of any event
contemplated by Sections 4.3(ii), (iii) or (iv) or 4.4 above, prepare, as
promptly as practicable, a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document incorporated
therein by reference, or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities being sold thereunder,
such Prospectus will not contain an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein not
misleading.
4.10 Underwriting Agreements. Enter into such customary
agreements (including an underwriting agreement) and take all such other actions
reasonably required in connection therewith in order to expedite or facilitate
the disposition of such Registrable Securities.
4.11 Compliance with Laws; Section 11(a). Otherwise use its
best efforts to comply with all applicable federal and state securities laws
(including without limitation the rules and regulations of the SEC), and make
generally available to its security holders earning statements satisfying the
provisions of Section 11(a) of the Securities Act no later than 45 days after
the end of each 12-month period (or within 90 days after the end of a fiscal
year).
4.12 Opinions. At the request of any Selling Holder, use its
best efforts to furnish on the date that the Registrable Securities are
delivered to that Holder and any underwriter for sale in connection with a
registration pursuant to this Agreement (i) an opinion of
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the counsel representing the Company for the purposes of such registration, and
(ii) a letter from the independent certified public accountants of the Company,
each dated such date and in form and substance as is customarily given by
counsel and independent certified public accountants to underwriters in an
underwritten public offering, addressed to any Selling Holders' underwriter and
to the Selling Holders.
5. Selling Holders' Obligations.
5.1 Provision of Information. The Company may require each
Selling Holder of Registrable Securities as to which any registration is being
effected to furnish to the Company such information regarding the distribution
of such securities by, and such other information relevant to, the Selling
Holder for inclusion in such Registration Statement, as the Company may from
time to time reasonably request in writing.
5.2 Discontinued Use of Prospectus. Each Holder of Registrable
Securities agrees by execution of this Agreement that, upon receipt of any
written notice from the Company of the happening of any event of the kind
described in clauses (ii), (iii) or (iv) of Section 4.3 or Section 4.4 hereof,
such Holder will forthwith discontinue disposition of Registrable Securities
until such Holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 4.9 hereof, or until it is advised in writing
(the "Advice") by the Company that the use of the Prospectus may be resumed, and
has received copies of any additional or supplemental filings which are
incorporated by reference in such Prospectus, and, if so directed by the Company
such Holder will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies then in such Holder's possession, of the
Prospectus covering such Registrable Securities current at the time of receipt
of such notice. In the event the Company shall give any such notice, the time
period mentioned in Section 4.2 hereof shall be extended by the number of days
during the period from and including the date of the giving of such notice to
and including the date when each Selling Holder shall have received the copies
of the supplemental or amended Prospectus contemplated by Section 4.9 hereof or
the Advice.
5.3 Underwriting Agreement. Each Selling Holder participating
in an underwritten offering pursuant to Section 2.1 or 2.2 will enter into a
customary underwriting agreement on terms reasonably satisfactory to the
managing underwriter.
6. Registration Expenses. The Company shall bear all expenses other
than Selling Holder Expenses (defined below) incurred in connection with any
Registration Statement, including without limitation all registration and filing
fees, fees with respect to any filings required to be made with the National
Association of Securities Dealers, listing fees relative to any stock exchange
or national market system, fees and expenses of compliance with state securities
or blue sky laws (including reasonable fees and expenses of counsel for the
underwriters in connection therewith), printing expenses, fees and disbursements
of counsel for the Company, and fees and disbursements of all independent public
accountants of the Company.
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Each Selling Holder shall bear his or its pro rata share of any Selling Holder
Expenses. "Selling Holder Expenses" shall consist of and be limited to (i) the
Selling Holder's legal costs, including the fees and expenses of any counsel
selected by the Selling Holder to represent him or it, and (ii) the
proportionate share of brokerage or underwriting commissions attributable to the
Selling Holder's shares.
7. Indemnification.
7.1 Indemnification by the Company. The Company agrees to
indemnify and hold harmless each Holder of Registrable Securities, each Person
who controls such Holder (within the meaning of the Securities Act or the
Exchange Act) (a "controlling person"), and each officer, director, employee and
agent of such Holder and each controlling person and each underwriter or selling
agent (the "indemnified parties") from and against all losses, claims, damages,
liabilities and expenses caused by any untrue or alleged untrue statement of a
material fact contained in any Registration Statement, Prospectus or preliminary
prospectus or any amendment or supplement thereto or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as (i)
the Company has demonstrated that the same are caused by or contained in any
information furnished to the Company by such Holder, expressly for use therein,
or (ii) the Company has advised such Holders' Representative in writing of a
Section 4.3(iv) event and the Holder has sold Registrable Securities
notwithstanding receipt of such notice prior to receipt of a supplement or
amended Prospectus pursuant to Section 4.9 herein; provided, however, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, liability or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any preliminary prospectus if (i) such Holder failed to send or deliver a copy
of the Prospectus with or prior to the delivery of written confirmation of the
sale of Registrable Securities and (ii) the Prospectus would have corrected such
untrue statement or omission; provided, further, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission in the Prospectus, if
such untrue statement or alleged untrue statement, omission or alleged omission
is corrected in an amendment or supplement to the Prospectus and if, having
previously been furnished by or on behalf of the Company with copies of the
Prospectus as so amended or supplemented, such Holder thereafter fails to
deliver such Prospectus as so amended or supplemented, prior to or concurrently
with the sale of a Registrable Security to the Person asserting such loss,
claim, damage, liability or expense who purchased such Registrable Security
which is the subject thereof from such Holder. The indemnity provided herein
shall remain in full force and effect regardless of any investigation made by or
on behalf of an indemnified party and shall survive the transfer of Registrable
Securities by the Selling Holder.
7.2 Indemnification by Holders. In connection with the Registration
Statements hereunder, each Selling Holder agrees to indemnify, to the full
extent permitted by law, the Company, and each Person who controls the Company
(within the meaning of the Securities Act
72
or the Exchange Act) and each director, officer, employee and agent of each such
Person from and against any losses, claims, damages, liabilities and expenses
caused by any untrue statement of a material fact or any omission of a material
fact required to be stated in any Registration Statement or Prospectus or
preliminary prospectus or necessary to make the statements therein not
misleading, to the extent, but only to the extent, that the Company has
demonstrated that such untrue statement or omission is contained in any
information or affidavit so furnished by such Holder to the Company specifically
for inclusion in such Registration Statement or Prospectus. In no event,
however, shall the liability of any Selling Holder hereunder be greater in
amount than the dollar amount of the proceeds (net of underwriters' discounts
and commissions) received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation. The Company shall be
obligated to give to, and shall be entitled to receive from, underwriters,
selling brokers, dealer managers and similar securities industry professionals
participating in the distribution customary indemnities.
7.3 Conduct of Indemnification Proceedings. Any Person entitled to
indemnification hereunder will (i) give prompt notice to the indemnifying party
of any claim with respect to which it seeks indemnification and (ii) permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided, however, that any person
entitled to indemnification hereunder shall have the right to employ separate
counsel and to participate in the defense of such claim, but the fees and
expenses of such counsel shall be at the expense of such Person unless (a) the
indemnifying party has agreed to pay such fees or expenses, or (b) the
indemnifying party shall have failed to assume within a reasonable period of
time the defense of such claim and employ counsel reasonably satisfactory to
such person or (c) in the reasonable judgment of any such Person, based upon
written advice of its counsel, a conflict of interest may exist between such
Person and the indemnifying party with respect to such claims or such Person may
have separate or additional defenses (in which case, if the Person notifies the
indemnifying party in writing that such Person elects to employ separate counsel
at the expense of the indemnifying party, the indemnifying party shall not have
the right to assume the defense of such claim on behalf of such Person). If such
defense is not assumed by the indemnifying party, the indemnifying party will
not be subject to any liability for any settlement made without its consent (but
such consent will not be unreasonably withheld). No indemnifying party will
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect to such
claim or litigation. An indemnifying party who is not entitled to, or elects not
to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one principal and one local counsel for all parties
indemnified by such indemnifying party with respect to such claim.
7.4 Contribution. If the indemnification provided for in Sections 7.1
or 7.2 is unavailable to the indemnified parties in respect of any losses,
claims, damages or liabilities referred to herein, then each such indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such
73
losses, claims, damages or liabilities (i) as between the Company and the
Selling Holders on the one hand and the underwriters on the other hand, in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Selling Holders on the one hand and the underwriters on the
other hand from the offering of all of the securities sold in the offering, or
if such allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits but also the relative
fault of the Company and the Selling Holders on the one hand and of the
underwriters on the other hand in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations and (ii) as between the Company on the
one hand and each Selling Holder on the other hand, in such proportion as is
appropriate to reflect the relative fault of the Company and of each Selling
Holder in connection with such statements or omissions, as well as any other
relevant equitable considerations. The relative benefits received by the Company
and the Selling Holders on the one hand and the underwriters on the other hand
shall be deemed to be in the same proportion as the total proceeds from the
offering (net of underwriting discounts and commissions but before deducting
expenses) received by the Company and the Selling Holders bear to the total
underwriting discounts and commissions received by the underwriters, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault of the Company and the Selling Holders on the one hand and of the
underwriters on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company and the Selling Holders or by the underwriters. The
relative fault of the Company on the one hand and of each Selling Holder on the
other hand shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by such party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Selling Holders agree that it would not be just and
equitable if contribution pursuant to this Section 7.4 were determined by pro
rata allocation (even if the underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7.4, no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Common Stock underwritten by it and distributed to the public
was offered to the public exceeds the amount of any damages which such
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no Selling Holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the securities of such Selling Holder were offered to the
public exceeds the
74
amount of any damages which such Selling Holder has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The Selling
Holders' obligations to contribute pursuant to this Section 7.4 are several in
proportion to the proceeds of the offering received by each Selling Holder bears
to the total proceeds of the offering received by all the Selling Holders and
not joint.
8. Selection of Underwriters. In connection with any request for
registration under Section 2.1 hereof, the Company shall be entitled to select
the managing underwriter if it is also registering shares on its own behalf. The
Selling Holders, however, shall be entitled to select the co-managing
underwriter. If the Registration Statement covers only shares being sold by the
Selling Holders, then the Selling Holders shall be entitled to select the
managing underwriter, subject to approval by the Company, which approval shall
not be unreasonably withheld. In connection with any registration under Section
2.2, the Selling Holders shall have no right to select underwriters.
9. Rule 144. The Company covenants that, after it has filed a
registration pursuant to Section 12 of the Exchange Act or a registration
statement under the Securities Act becomes effective, it will file the reports
required to be filed by it under the Securities Act and the Exchange Act and the
rules and regulations adopted by the SEC thereunder, and it will take such
further action as may be reasonably and customarily requested by any Holder of
Registrable Securities, all to the extent required from time to time to enable
such Holder to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule 144
under the Securities Act, as such Rule may be amended from time to time, or (b)
any similar rule or regulation hereafter adopted by the SEC. Upon the request of
any Holder of Registrable Securities, the Company will deliver to such Holder a
written statement as to whether it has complied with such information and
requirements.
10. Transfer of Registration Rights. The registration rights granted
pursuant to this Agreement shall be available to a transferee of any Registrable
Securities if (i) the transferring Holder gives the Company written notice of
such transfer, identifying the name and address of the transferee and the
securities involved; (ii) the transferee agrees in writing to be bound by the
provisions of this Agreement; and (iii) as a result of such transfer, the
transferee holds at least 5% (or, if the "Second Closing" under the Stock
Purchase Agreement shall have been consummated, 10%) of the shares of Common
Stock outstanding as of the date of the transfer.
11. Miscellaneous.
11.1 Remedies. In the event of a breach by the Company of its
obligations under this Agreement, each Holder of Registrable Securities, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. The Company agrees that monetary damages
75
would not be adequate compensation for any loss incurred by reason of a breach
by it of any of the provisions of this Agreement and hereby waives the defense
in any action for specific performance that a remedy at law would be adequate.
11.2 No Inconsistent Agreements. The Company will not on or
after the date of this Agreement enter into any agreement with respect to its
securities which is inconsistent with or limits or impairs the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
11.3 Adjustments Affecting Registrable Securities. The Company
will not take any action, or permit any change to occur, with respect to the
Registrable Securities which would adversely affect the ability of the Holders
of Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement.
11.4 Notices. All notices or other communications hereunder
shall be in writing and shall be given by (i) personal delivery, (ii) courier or
other delivery service which obtains a receipt evidencing delivery, (iii)
registered or certified mail (postage prepaid and return receipt requested), or
(iv) facsimile or similar electronic device, to such address as may be
designated from time to time by the relevant party, and which shall initially
be: (i) in the case of the Company, 000 Xxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx 00000,
Attention: Xxxxxxx X. Xxxxxxxx, facsimile (000) 000-0000, with a copy to
Xxxxxxxx, Xxxxxxx & Xxxxxxx, A Professional Corporation, 000 Xxxxxxx Xxxxxx,
Xxxxxx, XX 00000, Attn: Xxxxxx X. Xxxx, Esq., facsimile (000) 000-0000; and (ii)
in the case of Vulcan, 000 000xx Xxxxxx X.X., Xxxxx 000, Xxxxxxxx, Xxxxxxxxxx
00000, attention: Xxxxxxx X. Xxxxx, facsimile (000) 000-0000, with a copy to
Irell & Xxxxxxx LLP, 0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000, Xxx Xxxxxxx, XX 00000,
Attn: Xxxxx X. Xxxxx, Esq., facsimile (000) 000-0000. All notices and other
communications shall be deemed to have been given (i) if delivered by the United
States mail, three business days after mailing (five business days if delivered
to an address outside of the United States), (ii) if delivered by a courier or
other delivery service, one business day after dispatch (two business days if
delivered to an address outside of the United States), and (iii) if personally
delivered or sent by facsimile or similar electronic device, upon receipt by the
recipient or its agent or employee (which, in the case of a notice sent by
facsimile or similar electronic device, shall be the time and date indicated on
the transmission confirmation receipt). No objection may be made by a party to
the manner of delivery of any notice actually received in writing by an
authorized agent of such party.
11.5 Complete Agreement; Modifications. This Agreement and any
documents referred to herein or executed contemporaneously herewith constitute
the parties' entire agreement with respect to the subject matter hereof and
supersede all agreements, representations, warranties, statements, promises and
understandings, whether oral or written, with respect to the subject matter
hereof. This Agreement may be amended, altered or modified only by a writing
signed by the Company, the Majority Holders.
76
11.6 Successors and Assigns. Except as provided herein to the
contrary, this Agreement shall be binding upon and inure to the benefit of the
parties, their respective successors and permitted assigns, including without
limitation and without the need for an express assignment, subsequent Holders of
Registrable Securities.
11.7 Governing Law. All questions with respect to the
Agreement and the rights and liabilities of the parties shall be governed by the
laws of the State of Delaware, regardless of the choice of laws provisions of
Delaware or any other jurisdiction.
11.8 Attorneys' Fees. Should any litigation be commenced
(including any proceedings in a bankruptcy court) between the parties hereto or
their representatives concerning any provision of this Agreement or the rights
and duties of any Person or entity hereunder, the party or parties prevailing in
such proceeding shall be entitled, in addition to such other relief as may be
granted, to the reasonable attorneys' fees and court costs incurred by reason of
such litigation.
11.9 Headings. The Article and Section headings in this
Agreement are inserted only as a matter of convenience, and in no way define,
limit, extend or interpret the scope of this Agreement or of any particular
Article or Section.
11.10 Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
11.11 Gender. Throughout this Agreement, as the context may
require, the masculine gender includes the feminine and neuter; and the neuter
gender includes the masculine and feminine.
11.12 Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
[Remainder of this page intentionally left blank.]
77
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth hereinabove.
GO2NET, INC.
By:______________________________
Its:______________________________
VULCAN VENTURES INCORPORATED
By:______________________________
Its:______________________________
78
EXHIBIT D
[XXXXXXXX, XXXXXXX & XXXXXXX, A PROFESSIONAL CORPORATION
LETTERHEAD]
March 15, 1999
Vulcan Ventures Incorporated
000xx Xxxxxx X.X., Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Re: Stock Purchase Agreement dated as of March 15, 1999
Ladies and Gentlemen:
This opinion is furnished to you in connection with the execution and
delivery by Go2Net, Inc., a Delaware corporation (the "Company") of the Stock
Purchase Agreement dated as of March 15, 1999 (the "Purchase Agreement") by and
between the Company and Vulcan Ventures Incorporated (the "Purchaser"). This
opinion is rendered to you, at the request of the Company, pursuant to Section
2.1 of the Purchase Agreement. Capitalized terms not otherwise defined herein
shall have the meanings set forth in the Purchase Agreement.
We have acted as counsel to the Company in connection with the
preparation, execution and delivery of the Purchase Agreement and the
transactions contemplated therein. In connection with such representation, we
have examined originals, or copies identified to our satisfaction as being true
copies, of the following:
(1) The Purchase Agreement;
(2) The Registration Rights Agreement;
(3) The Certificate of Designation;
(4) The Officer's Certificate attached hereto as Exhibit A;
(5) The By-laws of the Company, as amended to date, certified by
its Secretary;
(6) The Restated Certificate of Incorporation of the Company, as
amended to date, certified by its Secretary;
79
XXXXXXXX, XXXXXXX & XXXXXXX
Vulcan Ventures Incorporated
March 15, 1999
Page 4
(7) Resolutions of the directors of the Company certified by its
Secretary, approving the transactions contemplated by the
Transaction Documents (as hereinafter defined) to which it is
a party; and
(8) Certificates of the Secretary of State of the State of
Delaware regarding the legal existence and corporate good
standing of the Company dated as of March 15, 1999.
The agreements, documents and instruments referred to in clauses (1)
through (3) above are referred to in this letter as the "Transaction Documents."
We have also examined originals or copies, certified or otherwise
identified to our satisfaction, of such agreements and instruments, corporate
records, certificates of public officials and of officers of the Company,
including the Officer's Certificate attached hereto as Exhibit A, and such other
documents and records and such matters of law as we have deemed necessary as a
basis for the opinions set forth below. As to questions of fact material to such
opinions, we have relied, without independent verification, upon certificates of
public officials and of officers of the Company, copies of which have been
delivered to you, and the factual accuracy and completeness of all the
representations and warranties made by the parties to the Company and the other
documents executed by the Company in connection with the transactions
contemplated by the Transaction Documents. The opinions expressed herein as to
the valid existence and good standing of the Company are as of the date of the
certificate referred to in clause (8) above and are based solely on such
certificate.
As used in this opinion and unless otherwise specified herein, the
phrases "to our knowledge," "known to us" and the like refer to the actual
present knowledge of lawyers currently in this firm who have performed
substantive legal services on behalf of the Company in connection with the
transactions referred to herein, without any independent investigation or file
or docket review.
For purposes of this opinion, we have assumed, with your permission and
without independent verification, (a) the genuineness of all signatures, (b) the
legal capacity of all natural persons who have signed documents examined by us,
(c) the authenticity of all documents submitted to us as originals and the
conformity to original documents of all documents submitted to us as certified
or photostatic copies, (d) that the parties to the Transaction Documents other
than the Company have each duly authorized, executed and delivered such
Transaction
80
XXXXXXXX, XXXXXXX & XXXXXXX
Vulcan Ventures Incorporated
March 15, 1999
Page 4
Documents and all other relevant documents and instruments, and (e) that each of
the parties to the Transaction Documents other than the Company has all
requisite power and authority to enter into and perform its respective
obligations in connection with the transactions described in the Transaction
Documents to which it is a party.
We express no opinion as to the laws of any jurisdiction other than the federal
laws of the United States of America, the laws of The Commonwealth of
Massachusetts, and the General Corporation Law of the State of Delaware.
Accordingly, to the extent that any laws of any jurisdiction other than any of
the foregoing govern any of the matters as to which we express an opinion below,
we have assumed, with your permission and without independent investigation,
that the law of such jurisdiction is the same as the substantive state laws of
the Commonwealth of Massachusetts (and we express no opinion as to whether such
assumption is reasonable or correct). We note that the Transaction Documents are
governed by Delaware law and Washington law. We express no opinion regarding the
effect of federal or state antitrust laws, including, without limitation, the
Xxxx-Xxxxx- Xxxxxx Antitrust Improvements Act of 1976, as amended.
Based upon the foregoing and in reliance thereon and subject to the assumptions,
limitations, qualifications and exceptions set forth below, we are of the
opinion that:
1. The Company is duly incorporated and validly existing under the laws of the
State of Delaware.
2. Each of the Transaction Documents to which the Company is a party has been
duly and validly authorized by all necessary corporate action, and has been duly
and validly executed and delivered by the Company.
3. The Certificate of Designation has been duly authorized by all necessary
corporate action and has been filed with the Secretary of State of the State of
Delaware.
4. The Shares have been duly and validly authorized for issuance and sale to
Purchaser by the Company, and the First Issuance Shares have been validly issued
and are outstanding. Assuming delivery of the cash and promissory note
contemplated by the Purchase Agreement concurrently with the execution of the
Purchase Agreement, the First Issuance Shares will be fully paid and non-
assessable and will be entitled to the rights, preferences and privileges set
forth in the Certificate of Designation.
81
XXXXXXXX, XXXXXXX & XXXXXXX
Vulcan Ventures Incorporated
March 15, 1999
Page 4
5. The shares of Common Stock issuable upon conversion of the First Issuance
Shares have been duly and validly authorized for issuance and, when issued upon
conversion of Shares in accordance with the Certificate of Designation, will be
validly issued, fully paid and non-assessable, free of any preemptive rights.
6. Each of the Transaction Documents to which the Company is a party is a valid
and legally binding obligation of the Company, enforceable against the Company
in accordance with its terms.
7. Prior to the execution and delivery of the Purchase Agreement, the Board of
Directors of the Company took all action necessary under the provisions of
Section 203 of the Delaware General Corporation Law and such action constitutes
all action necessary to ensure that the restrictions contained in Section 203 of
the Delaware General Corporation Law will not apply to Purchaser in connection
with or following the consummation of the First Closing, the Second Closing or
the other transactions contemplated by the Transaction Documents.
8. The execution, delivery and, subject to obtaining the consents set forth in
Schedule 3.4 of the Purchase Agreement, performance by the Company of the
Transaction Documents and the consummation of the transaction contemplated
thereby will not, except in each case where the effect of non-compliance could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, (i) violate any provision of law or any regulation customarily
applicable to transactions of the type contemplated by the Purchase Agreement
or, to the extent actually known to such counsel, any order, judgment, or decree
of any court or other agency of government to which the Company is subject, or
(ii) violate any provision of the Restated Certificate of Incorporation or By-
Laws of the Company.
The opinions contained herein are subject to the following conditions and
qualifications:
(A) We have not been requested to render, and with your permission we do not
express, an opinion as to the application of any fraudulent conveyance,
fraudulent transfer, fraudulent obligation or similar laws.
(B) Our opinions in paragraph 6 above, with respect to the validity, binding
effect and enforceability of the agreements or provisions thereof referred to in
such paragraph, are subject to the following: (i) bankruptcy, insolvency,
reorganization, moratorium, receivership and other laws now or hereafter in
effect relating to or affecting the enforcement of creditors' rights, (ii) the
82
effect of general principles of equity, including, without limitation, concepts
of materiality, reasonableness, good faith and fair dealing, and the possible
unavailability of specific performance or injunctive relief, whether considered
in a proceeding in equity or at law, and to the discretion of the court before
which any such proceeding may be brought and (iii) public policy considerations
or court decisions which may limit the rights of any party to obtain certain
remedies and to indemnification, including indemnification for tortious or
criminal acts or violations of law.
The opinions set forth in this letter are limited to the specific issues
addressed herein and to statutes, regulations, rules, decisions, decrees and
facts existing on the date hereof. In rendering such opinions, we disclaim any
obligation to advise any party to whom this opinion is addressed of any change
in any of these sources of law or of any subsequent legal or factual
developments which might affect any matters addressed or opinions set forth
herein.
The opinions set forth herein are rendered solely to the parties to whom this
letter is addressed, are solely for the benefit of such parties in connection
with the transactions contemplated by the Purchase Agreement, and may not be
relied upon by them for any other purpose. This letter is not to be quoted in
whole or in part or otherwise referred to in any financial statements or other
public releases, nor is it to be filed with any governmental agency or other
person or entity, without the prior written consent of this firm. This letter
may not be delivered to or relied upon by any other person or entity for any
purpose without the prior written consent of this firm.
Very truly yours,
Xxxxxxxx, Xxxxxxx & Xxxxxxx
A Professional Corporation
83
EXHIBIT E
[IRELL & XXXXXXX LLP XXXXXXXXXX]
Xxxxx 00, 0000
Xx0Xxx, Inc.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000
Re: Stock Purchase Agreement, dated March 15, 1999, between Go2Net, Inc.
and Vulcan Ventures Incorporated (the "Agreement")
Gentlemen:
We have acted as legal counsel to Vulcan Ventures Incorporated, a
Washington corporation (the "Purchaser"), in connection with the transactions
contemplated by the Agreement, and we are rendering this opinion pursuant to the
Agreement.
For the purposes of rendering this opinion, in addition to the
Agreement, we have reviewed the following documents, each dated the date hereof:
(a) Registration Rights Agreement between Purchaser and Go2Net, Inc.
(the "Company"); (b) Promissory Note in the principal amount of $167,482,000,
executed by Purchaser in the Company's favor (the "Note"); (c) Stock Purchase
and Voting Agreement between Purchaser and Xxxxxxx Xxxxxxxx; (d) Stock Purchase
and Voting Agreement between Purchaser and Xxxx Xxxxxxx; (e) Stock Purchase and
Voting Agreement between Purchaser and Xxxxxxx Xxxxxx; (f) Stock Purchase and
Voting Agreement between Purchaser and Xxxxxx Xxxxx; (g) Stock Purchase and
Voting Agreement between Purchaser and Xxxxxx Xxxxxxxxxxx; and (h) Stock
Purchase and Voting Agreement between Purchaser and Xxxx Xxxxxxx.
For purposes of this opinion, the Agreement and the documents listed in
clauses (a) through (h) above shall hereinafter be referred to collectively as
the "Transaction Documents" and each as a "Transaction Document."
We have reviewed such matters of fact and law and documents as we have deemed
necessary or relevant as a basis for this opinion. In our review, we have
assumed, without investigation, the legal capacity of all natural persons
signing documents in their respective individual capacities, the genuineness of
all signatures not witnessed by us, the authenticity of all documents submitted
to us as originals, the lack of any undisclosed modifications, waivers or
amendments to any agreements reviewed by us, the conformity to original
documents of all documents submitted to us as certified, photostatic or
telecopied copies, and the authenticity of the originals of such
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Go2Net, Inc.
March 15, 1999
Page 3
copies. In addition, we have obtained and relied upon such certificates and
assurances from public officials as we have deemed necessary. We have also
assumed that the execution, delivery and performance of any agreements or
consents are within the powers of each signatory (other than Purchaser) and have
been duly authorized and validly carried out by each such signatory.
Furthermore, we have examined, relied upon and assumed to be complete and
correct the representations and warranties contained in the Transaction
Documents as to matters of fact (other than facts constituting conclusions of
law).
Based upon and subject to the foregoing, and subject to the
qualifications set forth herein, we are of the opinion that:
1. Purchaser is a corporation validly existing and in good standing
under the laws of the State of Washington.
2. The Transaction Documents have been duly authorized, executed and
delivered by Purchaser.
3. Assuming due authorization, execution and delivery of the
Transaction Documents by the other parties thereto, the Transaction Documents
(including, without limitation, the Note) constitute the legal, valid and
binding obligations of Purchaser, enforceable against Purchaser in accordance
with their respective terms.
4. Neither the execution and delivery of the Transaction Documents, nor
the consummation of the transactions contemplated thereby, violates (i) any
provision of the articles of incorporation or bylaws of Purchaser, or (ii) any
federal or California statute, ordinance or regulation applicable to Purchaser
that, in our experience, is normally applicable to Purchaser in transactions of
the nature contemplated by the Transaction Documents.
The opinions expressed above are subject to and limited by the
following qualifications:
(a) the effect of bankruptcy, insolvency, reorganization, moratorium
and other similar laws and legal and equitable principles relating to, limiting
or affecting the enforcement of creditors' rights generally;
(b) the effect of general principles of equity including, without
limitation, concepts of materiality, reasonableness, good faith and fair dealing
and the possible unavailability of specific performance or injunctive relief
regardless of whether considered in a proceeding in equity or at law;
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Go2Net, Inc.
March 15, 1999
Page 3
(c) the unenforceability under certain circumstances of provisions
waiving vaguely or broadly stated rights or unknown future rights and of
provisions stating that rights or remedies are not exclusive, that every right
or remedy is cumulative and may be exercised in addition to or with any other
right or remedy, or that the election of some particular remedy or remedies does
not preclude recourse to one or more others;
(d) the effect of (i) any federal or state securities laws, or (ii)
federal or state antitrust laws, including, without limitation, the Xxxx-Xxxxx-
Xxxxxx Antitrust Improvements Act of 1976, as amended; and
(e) we express no opinion as to the effect on rights to indemnification
and contribution to the extent such rights may be limited by federal or state
securities laws or public policy relating thereto.
Our opinions expressed herein are limited to the laws of the State of
California and the federal law of the United States, in each case to the extent
not specifically excluded herein and as in effect on the date hereof, and we do
not express herein any opinion as to any other laws. In this regard, we note
that the Transaction Documents and certain other agreements and instruments to
be executed and delivered by Purchaser purport to be governed by the laws of the
State of Delaware or the State of Washington. For purposes of this opinion, we
have assumed, without investigation, that the governing law of the Transaction
Documents and such other agreements and instruments is in all material respects
identical to the laws of the State of California although the results might
differ from those that would be obtained by applying Delaware or Washington law
or the law of any jurisdiction other than California, and we express no opinion
as to the similarity of Delaware, Washington and California law or the law of
any other jurisdiction. No opinion is expressed as to whether a court would
recognize and enforce the provisions of the Transaction Documents and such other
agreements and instruments providing that the laws of a particular state shall
govern.
This opinion is solely for your benefit pursuant to the Agreement and
is not to be made available to or relied upon by any other person or entity or
by you for any other purpose or in any other context without our express prior
written consent.
Very truly yours,
IRELL & XXXXXXX LLP
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