EXHIBIT 10.13
MERCATA, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
Table Of Contents
Page
1. Agreement To Sell And Purchase........................................ 1
1.1 Authorization of Shares......................................... 1
1.2 Sale and Purchase............................................... 1
2. Closing, Delivery And Payment......................................... 2
2.1 Closing......................................................... 2
2.2 Delivery........................................................ 2
2.3 Subsequent Sales of Shares...................................... 2
3. Representations And Warranties Of The Company......................... 2
3.1 Organization, Good Standing and Qualification................... 2
3.2 Subsidiaries.................................................... 3
3.3 Capitalization; Voting Rights................................... 3
3.4 Authorization; Binding Obligations.............................. 3
3.5 Financial Statements............................................ 4
3.6 Liabilities..................................................... 4
3.7 Agreements; Action.............................................. 4
3.8 Obligations to Related Parties.................................. 5
3.9 Changes......................................................... 5
3.10 Title to Properties and Assets; Liens, Etc...................... 6
3.11 Patents and Trademarks.......................................... 6
3.12 Compliance with Other Instruments............................... 7
3.13 Litigation...................................................... 7
3.14 Tax Returns and Payments........................................ 8
3.15 Employees....................................................... 8
3.16 Proprietary Information and Inventions Agreements............... 8
3.17 Registration Rights and Voting Rights........................... 8
3.18 Compliance with Laws; Permits................................... 9
3.19 Offering Valid.................................................. 9
3.20 Full Disclosure................................................. 9
3.21 Insurance....................................................... 10
i.
Table Of Contents
(continued)
Page
4. Representations And Warranties Of The Purchasers...................... 10
4.1 Requisite Power and Authority................................... 10
4.2 Investment Representations...................................... 10
4.3 Transfer Restrictions........................................... 11
5. Conditions To Closing................................................. 11
5.1 Conditions to Purchasers' Obligations at the Closing............ 11
5.2 Conditions to Obligations of the Company........................ 13
6. Miscellaneous......................................................... 13
6.1 Governing Law................................................... 13
6.2 Survival........................................................ 13
6.3 Successors and Assigns.......................................... 14
6.4 Entire Agreement................................................ 14
6.5 Severability.................................................... 14
6.6 Amendment and Waiver............................................ 14
6.7 Delays or Omissions............................................. 14
6.8 Waiver of Conflicts............................................. 15
6.9 Notices......................................................... 15
6.10 Expenses........................................................ 15
6.11 Attorneys' Fees................................................. 15
6.12 Titles and Subtitles............................................ 16
6.13 Counterparts.................................................... 16
6.14 Broker's Fees................................................... 16
6.15 Exculpation Among Purchasers.................................... 16
6.16 Confidentiality................................................. 16
6.17 Pronouns........................................................ 16
6.18 California Corporate Securities Law............................. 16
ii.
List Of Exhibits
Exhibit A Schedule of Purchasers
Exhibit B Form of Convertible Promissory Note
Exhibit C Amended and Restated Certificate of Incorporation
Exhibit D Investor Rights Agreement
Exhibit E Co-Sale Agreement
Exhibit F Voting Agreement
Exhibit G Financial Statements
Exhibit H Proprietary Information and Inventions Agreement
Exhibit I Form of Legal Opinion
iii.
MERCATA, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
This Series B Preferred Stock Purchase Agreement (this "Agreement") is
entered into as of September 30, 1999, by and among Mercata, Inc., a Delaware
corporation (the "Company") and each of those persons and entities, severally
and not jointly, whose names are set forth on the Schedule of Purchasers
attached hereto as Exhibit A (which persons and entities are hereinafter
collectively referred to as "Purchasers" and each individually as a
"Purchaser").
Recitals
Whereas, the Company has authorized the sale and issuance of an aggregate
of eleven million two hundred thousand (11,200,000) shares of its Series B
Preferred Stock (the "Shares") and the sale and issuance of Convertible
Promissory Notes in the aggregate principle amount of Two Million Three Hundred
Ninety-five Thousand Eight Hundred Thirty-four and 38/100 ($2,395,834.38) and
convertible into 766,667 shares of the Shares in substantially the form attached
hereto as Exhibit B (each a "Note" and collectively the "Notes");
Whereas, Purchasers desire to purchase the Shares and/or the Notes on the
terms and conditions set forth herein; and
Whereas, the Company desires to issue and sell the Shares and the Notes to
Purchasers on the terms and conditions set forth herein;
Now, Therefore, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
1. Agreement To Sell And Purchase.
1.1 Authorization of Shares. On or prior to the Closing (as defined
in Section 2 below), the Company shall have authorized (a) the sale and issuance
to Purchasers of the Shares; (b) the issuance of such shares of Common Stock to
be issued upon conversion of the Shares (the "Conversion Shares") and the
issuance of such shares of Preferred Stock to be issued upon conversion of the
Notes. The Shares and the Conversion Shares shall have the rights, preferences,
privileges and restrictions set forth in the Amended and Restated Certificate of
Incorporation of the Company, in the form attached hereto as Exhibit C (the
"Restated Charter"). The shares of Series B Preferred Stock issued upon
conversion of the Notes shall be deemed "Shares" for all purposes under this
Agreement.
1.2 Sale and Purchase. Subject to the terms and conditions hereof, at
the Closing (as defined in Section 2 below) the Company hereby agrees to issue
and sell to each Purchaser, severally and not jointly, and each Purchaser agrees
to purchase from the Company, severally and not jointly, the number of Shares
set forth opposite such Purchaser's name on
1.
Exhibit A, at a purchase price of three dollars and twelve and one-half cents
($3.125) per share and the Note in the principal amount, if any, specified for
such Purchaser on Exhibit A.
2. Closing, Delivery And Payment.
2.1 Closing. The closing of the sale and purchase of the Shares and
the Notes under this Agreement (the "Closing") shall take place at 5:00 p.m. on
the date hereof, at the offices of Xxxxxx Godward LLP, 0000 Xxxxxxxx Xxxxx,
Xxxxxxxx, XX 00000 or at such other time or place as the Company and Purchasers
may mutually agree (such date is hereinafter referred to as the "Closing Date").
2.2 Delivery. At the Closing, subject to the terms and conditions
hereof, the Company will deliver to each Purchaser a certificate representing
the number of Shares and, if applicable, the Note to be purchased at the Closing
by such Purchaser, against payment of the purchase price therefor by check, wire
transfer made payable to the order of the Company, cancellation of indebtedness
or any combination of the foregoing.
2.3 Subsequent Sales of Shares. At any time on or before October 15,
1999, the Company may sell up to the balance of the authorized shares of Series
B Preferred Stock not sold at the Closing to such persons as may be approved by
the Board of Directors of the Company. All such sales shall be made on the
terms and conditions set forth in this Agreement, including, without limitation,
the representations and warranties by such Purchasers as set forth in Section 4.
Any Shares of Series A Preferred Stock sold pursuant to this Section 2.3 shall
be deemed to be "Shares" for all purposes under this Agreement and any
purchasers thereof shall be deemed to be "Purchasers" for all purposes under
this Agreement.
3. Representations And Warranties Of The Company.
Except as set forth on a Schedule of Exceptions delivered by the
Company to the Purchasers at the Closing, the Company hereby represents and
warrants to each Purchaser as of the date of this Agreement as follows:
3.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement, the Investor Rights Agreement in the form attached hereto as
Exhibit D (the "Investor Rights Agreement"), the Co-Sale Agreement in the form
attached hereto as Exhibit E (the "Co-Sale Agreement") and the Voting Agreement
in the form attached hereto as Exhibit F (the "Voting Agreement') (collectively,
the "Related Agreements"), to issue and sell the Shares and the Conversion
Shares, and to carry out the provisions of this Agreement, the Related
Agreements and the Restated Charter and to carry on its business as presently
conducted and as presently proposed to be conducted. The Company is duly
qualified and is authorized to do business and is in good standing as a foreign
corporation in all jurisdictions in which the nature of its activities and of
its properties (both owned and leased) makes such qualification necessary,
except for those jurisdictions in which failure to do so would not have a
material adverse effect on the Company or its business.
2.
3.2 Subsidiaries. The Company does not own or control any equity
security or other interest of any other corporation, limited partnership or
other business entity. The Company is not a participant in any joint venture,
partnership or similar arrangement.
3.3 Capitalization; Voting Rights. The authorized capital stock of
the Company, immediately prior to the Closing, will consist of 40,000,000 shares
of Common Stock, (par value $0.001 per share), 1,444,058 shares of which are
issued and outstanding and 30,000,000 shares of Preferred Stock (par value
$0.001 per share), 14,000,000 of which are designated Series A Preferred Stock,
all of which are issued and outstanding, 12,000,000 of which are designated
Series B Preferred Stock, none of which are issued and outstanding. All issued
and outstanding shares of the Company's Common Stock and Preferred Stock (a)
have been duly authorized and validly issued, and (b) are fully paid and non-
assessable. The rights, preferences, privileges and restrictions of the Shares
are as stated in the Restated Charter. Each series of Preferred Stock is
convertible into Common Stock on a one-for-one basis. The Conversion Shares
have been duly and validly reserved for issuance. Other than the 7,400,000
shares reserved for issuance under the Company's 1999 Equity Incentive Plan, and
except as may be granted pursuant to the Related Agreements, there are no
outstanding options, warrants, rights (including conversion or preemptive rights
and rights of first refusal), proxy or shareholder agreements, or agreements of
any kind for the purchase or acquisition from the Company of any of its
securities. Of such reserved shares of Common Stock, (i) 444,058 shares have
been issued pursuant to the exercise of options, (ii) options to purchase
3,665,063 shares have been granted and are currently outstanding, and (iii)
3,290,879 shares of Common Stock remain available for issuance to officers,
directors, employees and consultants pursuant to such Equity Incentive Plan.
When issued in compliance with the provisions of this Agreement and the Restated
Charter, the Shares and the Conversion Shares will be validly issued, fully paid
and non-assessable, and will be free of any liens or encumbrances; provided,
however, that the Shares and the Conversion Shares may be subject to
restrictions on transfer under state and/or federal securities laws as set forth
herein or as otherwise required by such laws at the time a transfer is proposed.
3.4 Authorization; Binding Obligations. All corporate action on the
part of the Company, its officers, directors and shareholders necessary for the
authorization of this Agreement and the Related Agreements, the performance of
all obligations of the Company hereunder and thereunder at the Closing and the
authorization, sale, issuance and delivery of the Shares pursuant hereto, the
Notes pursuant hereto and the Conversion Shares pursuant to the Notes and the
Restated Charter has been taken or will be taken prior to the Closing. The
Agreement, the Notes and the Related Agreements, when executed and delivered,
will be valid and binding obligations of the Company enforceable in accordance
with their terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights, (b) general principles of equity that restrict
the availability of equitable remedies, and (c) to the extent that the
enforceability of the indemnification provisions in Section 2.9 of the Investor
Rights Agreement may be limited by applicable laws. The sale of the Shares and
the Notes and the subsequent conversion of the Shares and the Notes into
Conversion Shares are not and will not be subject to any preemptive rights or
rights of first refusal that have not been properly waived or complied with.
3.
3.5 Financial Statements. The Company has made available to each
Purchaser its unaudited balance sheet as at August 31, 1999 (the "Statement
Date") and unaudited consolidated statement of income and cash flows for the
eight month period ending on the Statement Date (collectively, the "Financial
Statements"), copies of which are attached hereto as Exhibit G. The Financial
Statements, together with the notes thereto have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods indicated, except as disclosed therein, and present
fairly the financial condition and position of the Company as of the Statement
Date; provided, however, that the unaudited financial statements are subject to
normal recurring year-end audit adjustments (which are not expected to be
material), and do not contain all footnotes required under generally accepted
accounting principles.
3.6 Liabilities. The Company has no material liabilities and, to the
best of its knowledge, knows of no material contingent liabilities not disclosed
in the Financial Statements, except current liabilities incurred in the ordinary
course of business subsequent to the Statement Date which have not been, either
in any individual case or in the aggregate, materially adverse.
3.7 Agreements; Action.
(a) Except for agreements explicitly contemplated hereby and
agreements between the Company and its employees with respect to the sale of the
Company's Common Stock, there are no agreements, understandings or proposed
transactions between the Company and any of its officers, directors, affiliates
or any affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or to its knowledge by which it is bound which may
involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $50,000 (other than obligations of, or payments to, the
Company arising from purchase or sale agreements entered into in the ordinary
course of business), or (ii) the transfer or license of any patent, copyright,
trade secret or other proprietary right to or from the Company (other than
licenses arising from the purchase of "off the shelf" or other standard
products), or (iii) indemnification by the Company with respect to infringements
of proprietary rights (other than indemnification obligations arising from
purchase, sale or license agreements entered into in the ordinary course of
business).
(c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or any
other liabilities (other than with respect to dividend obligations,
distributions, indebtedness and other obligations incurred in the ordinary
course of business or as disclosed in the Financial Statements) individually in
excess of $50,000 or, in the case of indebtedness and/or liabilities
individually less than $50,000, in excess of $100,000 in the aggregate, (iii)
made any loans or advances to any person, other than ordinary advances for
travel expenses, or (iv) sold, exchanged or otherwise disposed of any of its
assets or rights, other than the sale of its inventory in the ordinary course of
business.
4.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
3.8 Obligations to Related Parties. There are no obligations of the
Company to officers, directors, greater than 5% shareholders, or employees of
the Company other than (a) for payment of salary for services rendered, (b)
reimbursement for reasonable expenses incurred on behalf of the Company and (c)
for other standard employee benefits made generally available to all employees
(including stock option agreements outstanding under any stock option plan
approved by the Board of Directors of the Company). None of the officers,
directors or greater than 5% shareholders of the Company, or any members of
their immediate families, are indebted to the Company or have any direct or
indirect ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation which competes with the Company, except that officers, directors
and/or greater than 5% shareholders of the Company may own stock in publicly
traded companies which may compete with the Company. No officer, director or
greater than 5% shareholder, or any member of their immediate families, is,
directly or indirectly, interested in any material contract with the Company
(other than such contracts as relate to any such person's ownership of capital
stock or other securities of the Company). Except as may be disclosed in the
Financial Statements, the Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
3.9 Changes. Since the Statement Date, there has not been:
(a) Any change in the assets, liabilities, financial condition
or operations of the Company from that reflected in the Financial Statements,
other than changes in the ordinary course of business, none of which
individually or in the aggregate has had or is expected to have a material
adverse effect on such assets, liabilities, financial condition, operations or
prospects of the Company;
(b) Any resignation or termination of any officer or key
employee of the Company; and the Company, to the best of its knowledge, does not
know of the impending resignation or termination of employment of any such
officer or key employee;
(c) Any material change, except in the ordinary course of
business, in the contingent obligations of the Company by way of guaranty,
endorsement, indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, business or
prospects or financial condition of the Company;
(e) Any waiver by the Company of a valuable right or of a
material debt owed to it;
5.
(f) Any direct or indirect loans made by the Company to any
shareholder, employee, officer or director of the Company, other than advances
made in the ordinary course of business;
(g) Any material change in any compensation arrangement or
agreement with any employee, officer, director or shareholder;
(h) Any declaration or payment of any dividend or other
distribution of the assets of the Company;
(i) Any labor organization activity;
(j) Any debt, obligation or liability incurred, assumed or
guaranteed by the Company, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business;
(k) Any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(l) Any change in any material agreement to which the Company is
a party or by which it is bound which materially and adversely affects the
business, assets, liabilities, financial condition, operations or prospects of
the Company;
(m) Any other event or condition of any character that, either
individually or cumulatively, has materially and adversely affected the
business, assets, liabilities, financial condition, operations or prospects of
the Company; or
(n) Any arrangement or commitment by the Company to do any of
the acts described in subsection (a) through (m) above.
3.10 Title to Properties and Assets; Liens, Etc. The Company has good
and marketable title to its properties and assets, including the properties and
assets reflected in the most recent balance sheet included in the Financial
Statements, and good title to its leasehold estates, in each case subject to no
mortgage, pledge, lien, lease, encumbrance or charge, other than (a) those
resulting from taxes which have not yet become delinquent, (b) minor liens and
encumbrances which do not materially detract from the value of the property
subject thereto or materially impair the operations of the Company, and (c)
those that have otherwise arisen in the ordinary course of business. All
facilities, machinery, equipment, fixtures, vehicles and other properties owned,
leased or used by the Company are in good operating condition and repair and are
reasonably fit and usable for the purposes for which they are being used. The
Company is in compliance with all material terms of each lease to which it is a
party or is otherwise bound.
3.11 Patents and Trademarks. To the best of its knowledge, the
Company owns or possesses sufficient legal rights to all patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information and
other proprietary rights and processes necessary for its business as now
conducted and as presently proposed to be conducted, without any known
infringement of the rights of others. There are no outstanding options,
licenses or
6.
agreements of any kind relating to the foregoing, nor is the Company bound by or
a party to any options, licenses or agreements of any kind with respect to the
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information and other proprietary rights and processes of any other
person or entity other than such licenses or agreements arising from the
purchase of "off the shelf" or standard products. The Company has not received
any communications alleging that the Company has violated or, by conducting its
business as presently proposed, would violate any of the patents, trademarks,
service marks, trade names, copyrights or trade secrets or other proprietary
rights of any other person or entity. The Company is not aware that any of its
employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
their duties to the Company or that would conflict with the Company's business
as presently proposed to be conducted. Neither the execution nor delivery of
this Agreement or the Related Agreements, nor the carrying on of the Company's
business by the employees of the Company, nor the conduct of the Company's
business as presently proposed, will, to the Company's knowledge, conflict with
or result in a breach of the terms, conditions or provisions of, or constitute a
default under, any contract, covenant or instrument under which any employee is
now obligated. The Company does not believe it is or will be necessary to
utilize any inventions, trade secrets or proprietary information of any of its
employees made prior to their employment by the Company, except for inventions,
trade secrets or proprietary information that have been assigned to the Company.
3.12 Compliance with Other Instruments. The Company is not in
violation or default of any term of its Restated Charter or Bylaws, or, to the
Company's knowledge, of any provision of any mortgage, indenture, contract,
agreement, instrument or contract to which it is party or by which it is bound
or of any judgment, decree, order, or writ. The execution, delivery, and
performance of and compliance with this Agreement, the Notes and the Related
Agreements, and the issuance and sale of the Shares pursuant hereto and of the
Conversion Shares and the Notes pursuant to the Notes and Restated Charter, will
not, with or without the passage of time or giving of notice, result in any such
material violation, or be in conflict with or constitute a default under any
such term, or result in the creation of any mortgage, pledge, lien, encumbrance
or charge upon any of the properties or assets of the Company or the suspension,
revocation, impairment, forfeiture or non-renewal of any permit, license,
authorization or approval applicable to the Company, its business or operations
or any of its assets or properties.
3.13 Litigation. There is no action, suit, proceeding or investigation
pending or to the Company's knowledge currently threatened in writing against
the Company that questions the validity of this Agreement, the Notes or the
Related Agreements or the right of the Company to enter into any of such
agreements, or to consummate the transactions contemplated hereby or thereby, or
which might result, either individually or in the aggregate, in any material
adverse change in the assets, condition, affairs or prospects of the Company,
financially or otherwise, or any change in the current equity ownership of the
Company, nor is the Company aware that there is any basis for any of the
foregoing. The foregoing includes, without limitation, actions pending or
threatened in writing (or any basis therefor known to the Company) involving the
prior employment of any of the Company's employees, their use in connection with
the Company's business of any information or techniques allegedly proprietary to
any of their former employers, or their obligations under any agreements with
prior employers. The Company is not a party or
7.
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
3.14 Tax Returns and Payments. The Company has filed all tax returns
(federal, state and local) required to be filed by it. All taxes shown to be
due and payable on such returns, any assessments imposed, and all other taxes
due and payable by the Company on or before the Closing, have been paid or will
be paid prior to the time they become delinquent. The Company has not been
advised (a) that any of its returns, federal, state or other, have been or are
being audited as of the date hereof, or (b) of any deficiency in assessment or
proposed judgment to its federal, state or other taxes. The Company has no
knowledge of any liability for any tax to be imposed upon its properties or
assets as of the date of this Agreement that is not adequately provided for.
3.15 Employees. The Company has no collective bargaining agreements
with any of its employees. There is no labor union organizing activity pending
or, to the Company's knowledge, threatened with respect to the Company. To the
Company's knowledge, no employee of the Company, nor any consultant with whom
the Company has contracted, is in violation of any term of any employment
contract, proprietary information agreement or any other agreement relating to
the right of any such individual to be employed by, or to contract with, the
Company because of the nature of the business to be conducted by the Company;
and to the Company's knowledge the continued employment by the Company of its
present employees, and the performance of the Company's contracts with its
independent contractors, will not result in any such violation. The Company has
not received any notice alleging that any such violation has occurred. No
employee of the Company has been granted the right to continued employment by
the Company or to any material compensation following termination of employment
with the Company. The Company is not aware that any officer or key employee, or
that any group of key employees, intends to terminate his, her or their
employment with the Company, nor does the Company have a present intention to
terminate the employment of any officer, key employee or group of key employees.
3.16 Proprietary Information and Inventions Agreements. Each employee,
officer and consultant of the Company has executed a Proprietary Information and
Inventions Agreement in the form of Exhibit H attached hereto. No current
employee, officer or consultant of the Company has excluded works or inventions
made prior to his or her employment with the Company from his or her assignment
of inventions pursuant to such employee, officer or consultant's Proprietary
Information and Inventions Agreement.
3.17 Registration Rights and Voting Rights.
(a) Except as required pursuant to the Investor Rights
Agreement, the Company is presently not under any obligation, and has not
granted any rights, to register (as defined in Section 1.1 of the Investor
Rights Agreement) any of the Company's presently outstanding securities or any
of its securities that may hereafter be issued.
8.
(b) Except as provided for in the Voting Agreement, to the
Company's knowledge, no shareholder of the Company has entered into any
agreement with respect to the voting of equity securities of the Company.
3.18 Compliance with Laws; Permits. To its knowledge, the Company is
not in violation of any applicable statute, rule, regulation, order or
restriction of any domestic or foreign government or any instrumentality or
agency thereof in respect of the conduct of its business or the ownership of its
properties which violation would materially and adversely affect the business,
assets, liabilities, financial condition, operations or prospects of the
Company. No governmental orders, permissions, consents, approvals or
authorizations are required to be obtained and no registrations or declarations
are required to be filed in connection with the execution and delivery of this
Agreement and the issuance of the Shares, the Notes or the Conversion Shares,
except such as has been duly and validly obtained or filed, or with respect to
any filings that must be made after the Closing, as will be filed in a timely
manner. The Company has all franchises, permits, licenses and any similar
authority necessary for the conduct of its business as now being conducted by
it, the lack of which could materially and adversely affect the business,
properties, prospects or financial condition of the Company and believes it can
obtain, without undue burden or expense, any similar authority for the conduct
of its business as planned to be conducted.
3.19 Offering Valid. Assuming the accuracy of the representations and
warranties of the Purchasers contained in Section 4.2 hereof, the offer, sale
and issuance of the Shares, the Notes and the Conversion Shares will be exempt
from the registration requirements of the Securities Act of 1933, as amended
(the "Securities Act"), and will have been registered or qualified (or are
exempt from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws. Neither the
Company nor any agent on its behalf has solicited or will solicit any offers to
sell or has offered to sell or will offer to sell all or any part of the Shares
or the Notes to any person or persons so as to bring the sale of such Shares by
the Company within the registration provisions of the Securities Act or any
state securities laws.
3.20 Full Disclosure. The Company has provided the Purchasers with all
information requested by the Purchasers in connection with their decision to
purchase the Shares and/or the Notes, including all information the Company
believes is reasonably necessary to make such investment decision. To the
Company's knowledge, neither this Agreement, the Exhibits hereto, the Related
Agreements nor any other document delivered by the Company to Purchasers or
their attorneys or agents in connection herewith or therewith or with the
transactions contemplated hereby or thereby, contain any untrue statement of a
material fact nor, to the Company's knowledge, omit to state a material fact
necessary in order to make the statements contained herein or therein not
misleading.
3.21 Insurance. The Company has fire and casualty insurance policies
with coverage customary for companies similarly situated to the Company.
9.
4. Representations And Warranties Of The Purchasers.
Each Purchaser hereby represents and warrants to the Company as
follows (such representations and warranties do not lessen or obviate the
representations and warranties of the Company set forth in this Agreement):
4.1 Requisite Power and Authority. Purchaser has all necessary power
and authority under all applicable provisions of law to execute and deliver this
Agreement, the Notes (if applicable) and the Related Agreements and to carry out
their provisions. All action on Purchaser's part required for the lawful
execution and delivery of this Agreement, the Notes (if applicable) and the
Related Agreements have been or will be effectively taken prior to the Closing.
Upon their execution and delivery, this Agreement, the Notes (if applicable) and
the Related Agreements will be valid and binding obligations of Purchaser,
enforceable in accordance with their terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights, (b) general principles
of equity that restrict the availability of equitable remedies, and (c) to the
extent that the enforceability of the indemnification provisions of Section 2.9
of the Investor Rights Agreement may be limited by applicable laws.
4.2 Investment Representations. Purchaser understands that neither
the Shares, the Notes nor the Conversion Shares have been registered under the
Securities Act. Purchaser also understands that the Shares and the Notes are
being offered and sold pursuant to an exemption from registration contained in
the Securities Act based in part upon Purchaser's representations contained in
this Agreement. Purchaser hereby represents and warrants as follows:
(a) Purchaser Bears Economic Risk. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk of
this investment indefinitely unless the Shares (or the Notes or the Conversion
Shares) are registered pursuant to the Securities Act, or an exemption from
registration is available. Purchaser understands that the Company has no present
intention of registering the Shares, the Notes, the Conversion Shares or any
shares of its Common Stock. Purchaser also understands that there is no
assurance that any exemption from registration under the Securities Act will be
available and that, even if available, such exemption may not allow Purchaser to
transfer all or any portion of the Shares, the Notes or the Conversion Shares
under the circumstances, in the amounts or at the times Purchaser might propose.
(b) Acquisition for Own Account. Purchaser is acquiring the
Shares, the Notes (if applicable) and the Conversion Shares for Purchaser's own
account for investment only, and not with a view towards their distribution.
(c) Purchaser Can Protect Its Interest. Purchaser represents
that by reason of its, or of its management's, business or financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement,
10.
and the Related Agreements. Further, Purchaser is aware of no publication of any
advertisement in connection with the transactions contemplated in the Agreement.
(d) Accredited Investor. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
(e) Company Information. Purchaser has received and read the
Financial Statements and has had an opportunity to discuss the Company's
business, management and financial affairs with directors, officers and
management of the Company and has had the opportunity to review the Company's
operations and facilities. Purchaser has also had the opportunity to ask
questions of and receive answers from, the Company and its management regarding
the terms and conditions of this investment.
(f) Rule 144. Purchaser acknowledges and agrees that the Shares,
the Notes and, if issued, the Conversion Shares must be held indefinitely unless
they are subsequently registered under the Securities Act or an exemption from
such registration is available. Purchaser has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act as in effect from
time to time, which permits limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things: the availability of certain current public information about the
Company, the resale occurring following the required holding period under Rule
144 and the number of shares being sold during any three-month period not
exceeding specified limitations.
(g) Residence. If the Purchaser is an individual, then the
Purchaser resides in the state or province identified in the address of the
Purchaser set forth on Exhibit A; if the Purchaser is a partnership,
corporation, limited liability company or other entity, then the office or
offices of the Purchaser in which its investment decision was made is located at
the address or addresses of the Purchaser set forth on Exhibit A.
4.3 Transfer Restrictions. Each Purchaser acknowledges and agrees
that the Shares and, if issued, the Conversion Shares are subject to
restrictions on transfer as set forth in the Investor Rights Agreement.
5. Conditions To Closing.
5.1 Conditions to Purchasers' Obligations at the Closing. Purchasers'
obligations to purchase the Shares and/or the Notes at the Closing are subject
to the satisfaction, at or prior to the Closing Date, of the following
conditions:
(a) Representations and Warranties True; Performance of
Obligations. The representations and warranties made by the Company in Section 3
hereof shall be true and correct in all material respects as of the Closing Date
with the same force and effect as if they had been made as of the Closing Date,
and the Company shall have performed all obligations and conditions herein
required to be performed or observed by it on or prior to the Closing.
11.
(b) Consents, Permits, and Waivers. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement and the Related
Agreements (except for such as may be properly obtained subsequent to the
Closing).
(c) Filing of Restated Charter. The Restated Charter shall have
been filed with the Secretary of State of the State of Delaware and shall
continue to be in full force and effect as of the Closing Date.
(d) Corporate Documents. The Company shall have delivered to
Purchasers or their counsel, copies of all corporate documents of the Company as
Purchasers shall reasonably request.
(e) Reservation of Conversion Shares. The Conversion Shares
issuable upon conversion of the Shares and the Notes shall have been duly
authorized and reserved for issuance upon such conversion.
(f) Compliance Certificate. The Company shall have delivered to
Purchasers a Compliance Certificate, executed by the President of the Company,
dated the Closing Date, to the effect that the conditions specified in
subsections (a), (b), (c) and (e) of this Section 5.1 have been satisfied.
(g) Investor Rights Agreement. An Investor Rights Agreement
substantially in the form attached hereto as Exhibit D shall have been executed
and delivered by the parties thereto.
(h) Co-Sale Agreement. The Co-Sale Agreement substantially in
the form attached hereto as Exhibit E shall have been executed and delivered by
the parties thereto. The stock certificates representing the shares subject to
the Co-Sale Agreement shall have been delivered to the Secretary of the Company
and shall have had appropriate legends placed upon them to reflect the
restrictions on transfer set forth on the Co-Sale Agreement.
(i) Board of Directors. Upon the Closing, the authorized size of
the Board of Directors of the Company shall be seven members and the Board shall
consist of Xxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxxx Xxxxxxx, Xxx Xxx Xxxx, Xxxxx
Xxxxxxx and the nominee of the Series B Preferred.
(j) Voting Agreement. The Voting Agreement substantially in the
form attached hereto as Exhibit F shall have been executed and delivered by the
parties thereto.
(k) Legal Opinion. The Purchasers shall have received from legal
counsel to the Company an opinion addressed to them, dated as of the Closing
Date, in substantially the form attached hereto as Exhibit I.
(l) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
hereby and all documents and instruments incident to such transactions shall be
reasonably satisfactory in
12.
substance and form to the Purchasers and their special counsel, and the
Purchasers and their special counsel shall have received all such counterpart
originals or certified or other copies of such documents as they may reasonably
request.
5.2 Conditions to Obligations of the Company. The Company's
obligation to issue and sell the Shares and the Notes at each Closing is subject
to the satisfaction, on or prior to such Closing, of the following conditions:
(a) Representations and Warranties True. The representations and
warranties in Section 4 made by those Purchasers acquiring Shares and the Notes
hereof shall be true and correct in all material respects at the date of the
Closing, with the same force and effect as if they had been made on and as of
said date.
(b) Performance of Obligations. Such Purchasers shall have
performed and complied with all agreements and conditions herein required to be
performed or complied with by such Purchasers on or before the Closing.
(c) Filing of Restated Charter. The Restated Charter shall have
been filed with the Secretary of State of the State of Delaware.
(d) Investor Rights Agreement. An Investor Rights Agreement
substantially in the form attached hereto as Exhibit D shall have been executed
and delivered by the Purchasers.
(e) Co-Sale Agreement. The Co-Sale Agreement substantially in
the form attached hereto as Exhibit E shall have been executed and delivered by
the parties thereto.
(f) Voting Agreement. The Voting Agreement substantially in the
form attached hereto as Exhibit F shall have been executed and delivered by the
parties thereto.
(g) Consents, Permits, and Waivers. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement and the Related
Agreements (except for such as may be properly obtained subsequent to the
Closing).
6. Miscellaneous.
6.1 Governing Law. This Agreement shall be governed in all respects
by the laws of the State of Washington as such laws are applied to agreements
between Washington residents entered into and performed entirely in Washington.
6.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
13.
6.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.
6.4 Entire Agreement. This Agreement, the Exhibits and Schedules
hereto, the Related Agreements and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
6.5 Severability. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
6.6 Amendment and Waiver.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and holders of at least a majority of the Shares
(treated as if converted and including any Conversion Shares into which the
Shares have been converted that have not been sold to the public).
(b) The obligations of the Company and the rights of the holders
of the Shares and the Conversion Shares under the Agreement may be waived only
with the written consent of the holders of at least a majority of the Shares
(treated as if converted and including any Conversion Shares into which the
Shares have been converted that have not been sold to the public).
(c) Notwithstanding the foregoing, this Agreement may be amended
with only the written consent of the Company to include additional purchasers of
the Shares at subsequent sales pursuant to Section 2.3.
6.7 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement, the Related
Agreements or the Restated Charter, shall impair any such right, power or
remedy, nor shall it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of or in any similar breach,
default or noncompliance thereafter occurring. It is further agreed that any
waiver, permit, consent or approval of any kind or character on any Purchaser's
part of any breach, default or noncompliance under this Agreement, the Related
Agreements or under the Restated Charter or any waiver on such party's part of
any provisions or conditions of the Agreement, the Related Agreements, or the
Restated Charter must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, the Related Agreements, the Restated Charter, by law, or otherwise
afforded to any party, shall be cumulative and not alternative.
14.
6.8 Waiver of Conflicts. Each party to this Agreement acknowledges
that Xxxxxx Godward LLP ("Xxxxxx Godward"), outside general counsel to the
Company, has in the past performed and is or may now or in the future represent
one or more of the Purchasers or their affiliates in matters unrelated to the
transactions contemplated by this Agreement (the "Financing"), including
representation of such Purchasers or their affiliates in matters of a similar
nature to the Financing. The applicable rules of professional conduct require
that Xxxxxx Godward inform the parties hereunder of this representation and
obtain their consent. Xxxxxx Godward has served as outside general counsel to
the Company and has negotiated the terms of the Financing solely on behalf of
the Company. It is the belief of Xxxxxx Godward that these terms and conditions
represent an arm's length transaction between the Company and the Purchasers.
Purchasers have been represented by independent legal counsel regarding the
terms of the Financing. The Company and each Purchaser hereby (a) acknowledge
that they have had an opportunity to ask for and have obtained information
relevant to such representation, including disclosure of the reasonably
foreseeable adverse consequences of such representation; (b) acknowledge that
with respect to the Financing, Xxxxxx Godward has represented solely the
Company, and not any Purchaser or any stockholder, director or employee of the
Company or any Purchaser; and (c) gives its informed consent to Xxxxxx Godward's
representation the Company in the Financing.
6.9 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the
Company at the address as set forth on the signature page hereof and to
Purchaser at the address set forth on Exhibit A attached hereto or at such other
address as the Company or Purchaser may designate by ten (10) days advance
written notice to the other parties hereto.
6.10 Expenses. The Company shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
the Agreement. The Company shall, at the Closing, reimburse the reasonable fees
of and expenses of one special counsel for the Purchasers, not to exceed
$15,000, incurred in connection with the negotiation, execution, delivery and
performance of this Agreement.
6.11 Attorneys' Fees. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
6.12 Titles and Subtitles. The titles of the sections and subsections
of the Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
15.
6.13 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
6.14 Broker's Fees. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 6.14 being untrue.
6.15 Exculpation Among Purchasers. Each Purchaser acknowledges that it
is not relying upon any person, firm, or corporation, other than the Company and
its officers and directors, in making its investment or decision to invest in
the Company. Each Purchaser agrees that no Purchaser nor the respective
controlling persons, officers, directors, partners, agents, or employees of any
Purchaser shall be liable to any other Purchaser for any action heretofore or
hereafter taken or omitted to be taken by any of them in connection with the
Shares and Conversion Shares.
6.16 Confidentiality. Each party hereto agrees that, except with the
prior written consent of the other party, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone any
confidential information, knowledge or data concerning or relating to the
business or financial affairs of the other parties to which such party has been
or shall become privy by reason of this Agreement or the Related Agreements,
discussions or negotiations relating to this Agreement or the Related
Agreements, the performance of its obligations hereunder or the ownership of the
Shares purchased hereunder. The provisions of this Section 6.16 shall be in
addition to, and not in substitution for, the provisions of any separate
nondisclosure agreement executed by the parties hereto.
6.17 Pronouns. All pronouns contained herein, and any variations
thereof, shall be deemed to refer to the masculine, feminine or neutral,
singular or plural, as to the identity of the parties hereto may require.
6.18 California Corporate Securities Law. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION OR IN THE ABSENCE OF AN EXEMPTION FROM SUCH
QUALIFICATION IS UNLAWFUL. PRIOR TO ACCEPTANCE OF SUCH CONSIDERATION BY THE
COMPANY, THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION FROM SUCH QUALIFICATION
BEING AVAILABLE.
[The Remainder Of This Page Intentionally Left Blank]
16.
In Witness Whereof, the parties hereto have executed the Series B Preferred
Stock Purchase Agreement as of the date set forth in the first paragraph hereof.
COMPANY:
Mercata, Inc.
By: /s/ Xxx Xxx Xxxx
------------------
President
SIGNATURE PAGE TO SERIES B PREFERRED
STOCK PURCHASE AGREEMENT
INVESTOR(S)
Vulcan Ventures Incorporated
By: /s/ Xxxxxxx X. Xxxxx
--------------------
Xxxxxxx X. Xxxxx
Vice President
SIGNATURE PAGE TO SERIES B PREFERRED
STOCK PURCHASE AGREEMENT
INVESTORS(S)
Highland Capital Partners IV Limited Partnership
By: Highland Management Partners IV LLC
Its: General Partner
By: /s/ Xxxxxx Nova
------------------
Member
Highland Entrepreneurs' Fund IV Limited Partnership
By: Highland Management Partners IV LLC
Its: General Partner
By: /s/ Xxxxxx Nova
------------------
Member
SIGNATURE PAGE TO SERIES B PREFERRED
STOCK PURCHASE AGREEMENT
NOTE: THIS PAGE, DATED AS OF 11th Oct, 1999, IS A COUNTERPART SIGNATURE
PAGE TO THAT CERTAIN SERIES B PREFERRED STOCK PURCHASE AGREEMENT, DATED AS OF
SEPTEMBER 30, 1999 (THE "PURCHASE AGREEMENT"), BY AND AMONG MERCATA, INC., A
DELAWARE CORPORATION, AND EACH OF THOSE PERSONS AND ENTITIES WHOSE NAMES ARE SET
FORTH ON THE SCHEDULE OF PURCHASERS ATTACHED THERETO AS EXHIBIT A. EXECUTION AND
DELIVERY OF THIS SIGNATURE PAGE BY EACH UNDERSIGNED REPRESENTS EACH
UNDERSIGNED'S AGREEMENT TO BECOME A PARTY TO THE PURCHASE AGREEMENT AND TO
PURCHASE SHARES OF SERIES B PREFERRED STOCK PURSUANT TO THE TERMS THEREOF, IN
THE NUMBER SET FORTH OPPOSITE ITS NAME ON THE SCHEDULE OF PURCHASERS ATTACHED
THERETO AS EXHIBIT A.
ATGF II
By: /s/ Xxxx X. Xxxxxx
---------------------
Name: Xxxx X. Xxxxxx
-------------------
Title: Director
------------------
NOTE: THIS PAGE, DATED AS OF October 11, 1999, IS A COUNTERPART SIGNATURE
PAGE TO THAT CERTAIN SERIES B PREFERRED STOCK PURCHASE AGREEMENT, DATED AS OF
SEPTEMBER 30, 1999 (THE "PURCHASE AGREEMENT"), BY AND AMONG MERCATA, INC., A
DELAWARE CORPORATION, AND EACH OF THOSE PERSONS AND ENTITIES WHOSE NAMES ARE SET
FORTH ON THE SCHEDULE OF PURCHASERS ATTACHED THERETO AS EXHIBIT A. EXECUTION AND
DELIVERY OF THIS SIGNATURE PAGE BY EACH UNDERSIGNED REPRESENTS EACH
UNDERSIGNED'S AGREEMENT TO BECOME A PARTY TO THE PURCHASE AGREEMENT AND TO
PURCHASE SHARES OF SERIES B PREFERRED STOCK PURSUANT TO THE TERMS THEREOF, IN
THE NUMBER SET FORTH OPPOSITE ITS NAME ON THE SCHEDULE OF PURCHASERS ATTACHED
THERETO AS EXHIBIT A.
Beagle Limited
By: /s/ Xxxxxxx Xxxxx
--------------------
Name: Xxxxxxx Xxxxx
------------------
Title: President
-----------------
NOTE: THIS PAGE, DATED AS OF October 14, 1999, IS A COUNTERPART SIGNATURE
PAGE TO THAT CERTAIN SERIES B PREFERRED STOCK PURCHASE AGREEMENT, DATED AS OF
SEPTEMBER 30, 1999 (THE "PURCHASE AGREEMENT"), BY AND AMONG MERCATA, INC., A
DELAWARE CORPORATION, AND EACH OF THOSE PERSONS AND ENTITIES WHOSE NAMES ARE SET
FORTH ON THE SCHEDULE OF PURCHASERS ATTACHED THERETO AS EXHIBIT A. EXECUTION AND
DELIVERY OF THIS SIGNATURE PAGE BY EACH UNDERSIGNED REPRESENTS EACH
UNDERSIGNED'S AGREEMENT TO BECOME A PARTY TO THE PURCHASE AGREEMENT AND TO
PURCHASE SHARES OF SERIES B PREFERRED STOCK PURSUANT TO THE TERMS THEREOF, IN
THE NUMBER SET FORTH OPPOSITE ITS NAME ON THE SCHEDULE OF PURCHASERS ATTACHED
THERETO AS EXHIBIT A.
Global Retail Partners, L.P.
By: /s/ Xxxxx X. Xxxxxxxx
------------------------
Name: Xxxxx X. Xxxxxxxx
----------------------
Title: Vice President
---------------------
DLJ Diversified Partners, L.P.
By: /s/ Xxxxx X. Xxxxxxxx
------------------------
Name: Xxxxx X. Xxxxxxxx
----------------------
Title: Vice President
---------------------
DLJ Diversified Partners-A, L.P.
By: /s/ Xxxxx X. Xxxxxxxx
------------------------
Name: Xxxxx X. Xxxxxxxx
----------------------
Title: Vice President
---------------------
GRP Partners, L.P.
By: /s/ Xxxxx X. Xxxxxxxx
------------------------
Name: Xxxxx X. Xxxxxxxx
----------------------
Title: Vice President
---------------------
Global Retail Partners Funding, Inc.
By: /s/ Xxxxx X. Xxxxxxxx
------------------------
Name: Xxxxx X. Xxxxxxxx
----------------------
Title: Vice President
---------------------
DLJ ESC II, L.P.
By: /s/ Xxxxx X. Xxxxxxxx
------------------------
Name: Xxxxx X. Xxxxxxxx
----------------------
Title: Vice President
---------------------
Waelinvest
By: /s/ Xxxxxx XxXxxxx
------------------------
Name: Xxxxxx XxXxxxx
----------------------
Title: C.E.O.
---------------------
Watershed Capital I, L.P.
By: Watershed Capital G.P. I, L.P.
Its General Partner
By: Watershed Capital G.P. I, L.L.C.
Its General Partner
By: /s/ Xxxxx X. Xxxxxxxxxx
---------------------------
Xxxxx X. Xxxxxxxxxx
Managing Member
Dated: As of October 14, 1999
----------
/s/ Xxxxx X. Xxxxxxx
-----------------------
Xxxxx X. Xxxxxxx
/s/ Xxxx Xxxxx
-----------------
Xxxx Xxxxx
Agreed to and Accepted By:
Mercata, Inc.
000 000xx Xxxxxx XX, Xxxxx 000
Xxxxxxxx, XX 00000
/s/ Xxxxxx Xxx Xxxx
----------------------
Xxxxxx Xxx Xxxx
President
EXHIBIT A
SCHEDULE OF PURCHASERS
AGGREGATE SHARE
NAME AND ADDRESS SHARES PURCHASE PRICE
First Closing:
--------------
Vulcan Ventures Incorporated 1,888,000 $ 5,900,000.00
000 - 000xx Xxxxxx X.X., Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Highland Capital Partners IV Limited Partnership 4,640,000* $14,500,000.00*
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Highland Entrepreneurs' Fund IV Limited Partnership 193,333* $ 604,165.63*
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
First Closing Total: 6,721,333 $21,004,165.63
========= ==============
Second Closing:
--------------
ATGF II 320,000 $ 1,000,000.00
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Beagle Limited 160,000 $ 500,000.00
c/o Hecht and Company
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Global Retail Partners, L.P. 1,436,153 $ 4,487,978.12
0000 Xxxxxx xx xxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
DLJ Diversified Partners, L.P. 427,953 $ 1,337,353.12
0000 Xxxxxx xx xxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
DLJ Diversified Partners - A, L.P. 158,920 $ 496,625.00
0000 Xxxxxx xx xxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
GRP Partners, L.P. 93,363 $ 291,759.38
0000 Xxxxxx xx xxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Global Retail Partners Funding, Inc. 98,890 $ 309,031.25
0000 Xxxxxx xx xxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
DLJ ESC II L.P. 24,721 $ 77,253.13
0000 Xxxxxx xx xxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Waelinvest 800,000 $ 2,500,000.00
000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Watershed Capital I, L.P. 160,000 $ 500,000.00
Two Union Square
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Xxxxx X. Xxxxxxx 16,000 $ 50,000.00
000 - 000xx Xxxxxx XX, Xxxxx 000
Xxxxxxxx, XX 00000-0000
Xxxx Xxxxx 16,000 $ 50,000.00
000 - 000xx Xxxxxx XX, Xxxxx 000
Xxxxxxxx, XX 00000-0000
Second Closing Total: 3,712,000 $11,600,000.00
========= ==============
Total 10,433,333 $32,604,165.63
========== ==============
Total (including the Notes and assuming conversion 11,200,000 $35,000,000.01
========== ==============
of the Notes)
* Highland Capital Partners IV Limited Partnership and Highland Entrepreneurs'
Fund IV Limited Partnership will also be purchasing Notes in the amount of
$2,300,000 and $95,834.38, respectively, that will be convertible into 736,000
shares and 30,667 shares of the Shares, respectively.
EXHIBIT B
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND
HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933.
CONVERTIBLE PROMISSORY NOTE
$_________.00 __________ ___, 1999
Bellevue, Washington
For value received, Mercata, Inc., a Delaware corporation (the "Company"),
promises to pay to __________________________ (the "Holder"), the principal sum
of __________________ dollars ($________.00). No interest shall accrue or be
paid on this Note; provided, that if this Note shall not have converted in
accordance with Section 2 below on or before November 30, 1999, this Note shall
bear interest accruing from the date hereof on the unpaid principal amount at a
rate equal to the lower of (a) 7.00% per annum, compounded annually or (b) the
highest rate permitted by law. This Note is one of a series of Convertible
Promissory Notes containing substantially identical terms and conditions issued
pursuant to that certain Series B Preferred Stock Purchase Agreement, dated
September ____, 1999 (the "Purchase Agreement"). Such Notes are referred to
herein as the "Notes," and the holders thereof are referred to herein as the
"Holders." This Note is subject to the following terms and conditions.
1. Maturity. Unless converted as provided in Section 2, this Note will
automatically mature and be due and payable on November 30, 1999 (the "Maturity
Date"). Subject to Section 2 below, any interest shall accrue on this Note but
shall not be due and payable until the Maturity Date.
2. Conversion
(a) HSR Clearance. As soon as practicable after the Closing (as
defined in the Purchase Agreement), the Company and the Holder hereby agree to
file or to cause to be filed with the United States Federal Trade Commission
(the "FTC") and the Antitrust Division of the United States Department of
Justice (the "DOJ") pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended (the "HSR Act") all requisite documents and notifications in
order to provide for the conversion of this Note into shares of the Company's
Series B Preferred Stock. Upon the earlier of one business day after (i) the
date all required clearances or pre-termination notices under the HSR Act have
been received from the FTC and the DOJ (or all applicable waiting periods have
expired) or (ii) the date the Holder and the Company are no longer required by
law to make filings under the HSR to convert this Note into capital stock, the
entire principal amount of this Note shall automatically convert into fully-paid
and non-assessable shares of the Company's Series B Preferred Stock (the
"Stock"); provided,
1.
however, the automatic conversion of such principal amount into shares of the
Company's Series B Preferred Stock shall be conditioned upon (A) the Company
having provided to the Holder a compliance certificate in the form attached
hereto as Exhibit A or (B) the Holder having waived such applicable terms,
conditions or certifications included in such certificate, either individually
or in the aggregate. The number of shares of Stock to be issued upon such
conversion shall be equal to the quotient obtained by dividing (i) the entire
outstanding principal amount of this Note by (ii) $3.125 (as adjusted for any
future stock splits, stock dividends, recapitalizations or the like to the
Stock), provided that no fractional shares shall be issued. In the event that
the required clearances from the FTC and the DOJ are not obtained, this Note
shall not be convertible into the Stock.
(b) Redemption. In the event the Company consummates a Liquidity
Event (as defined below) prior to the conversion of this note pursuant to
Section 2(a), then the Company shall redeem this Note for an aggregate
consideration substantially equivalent to the consideration which would have
been received by the Holder had the Note been converted into Series B Preferred
Stock immediately prior to the consummation of such Liquidity Event, as
determined in the reasonable and good faith judgement of the Board of Directors
of the Company. For the Purposes of hereof "Liquidity Event" shall mean (i) any
consolidation or merger of the Company with or into any other corporation or
other entity or person, or any other corporate reorganization, in which the
stockholders of the Company immediately prior to such consolidation, merger or
reorganization, own less than 50% of the Company's voting power immediately
after such consolidation, merger or reorganization, or any transaction or series
of related transactions to which the Company is a party in which in excess of
50% of the Company's voting power is transferred (ii) any voluntary or
involuntary liquidation or dissolution of the Company, or (iii) the sale of all
or substantially all the assets of the Company.
(c) Mechanics and Effect of Conversion. No fractional shares of the
Company's capital stock will be issued upon conversion of this Note. In lieu of
any fractional share to which the Holder would otherwise be entitled, the
Company will pay to the Holder in cash the amount of the unconverted principal
and interest balance of this Note that would otherwise be converted into such
fractional share. Upon conversion of this Note pursuant to this Section 2, the
Holder shall surrender this Note, duly endorsed, at the principal offices of the
Company or any transfer agent of the Company. At its expense, the Company will,
as soon as practicable thereafter, issue and deliver to such Holder, at such
principal office, a certificate or certificates for the number of shares to
which such Holder is entitled upon such conversion, together with any other
securities and property to which the Holder is entitled upon such conversion
under the terms of this Note, including a check payable to the Holder for any
cash amounts payable as described herein. Upon conversion of this Note, the
Company will be forever released from all of its obligations and liabilities
under this Note with regard to that portion of the principal amount and accrued
interest being converted including without limitation the obligation to pay such
portion of the principal amount and accrued interest.
3. Payment. All payments shall be made in lawful money of the United
States of America at such place as the Holder hereof may from time to time
designate in writing to the Company. Payment shall be credited first to the
accrued interest then due and payable and the
2.
remainder applied to principal. Prepayment of this Note may be made without
penalty, if the Company's Board of Directors has determined, in consultation
with legal counsel, and with the consent of the Holders of a majority of the
outstanding principal amount of the Notes, that the required clearances or pre-
termination notices under the HSR Act specified in Section 2(a) are not likely
to be obtained, otherwise this note made not prepaid without the consent of the
Holders of a majority of the outstanding principal amount of the Notes;
provided, however, that the Company may repay the Note on or after November 30,
1999 in the event the conditions to conversion set forth in Section 2 hereof
have not occurred.
4. Transfer; Successors and Assigns. The terms and conditions of this
Note shall inure to the benefit of and be binding upon the respective successors
and assigns of the parties. Notwithstanding the foregoing, the Company may not
assign, pledge or otherwise transfer this Note without the prior written consent
of the Holder, which shall not be unreasonably withheld, and the Holder may not
assign, pledge, or otherwise transfer this Note without the prior written
consent of the Company, which shall not be unreasonably withheld. Subject to the
preceding sentence, this Note may be transferred only upon surrender of the
original Note for registration of transfer, duly endorsed, or accompanied by a
duly executed written instrument of transfer in form satisfactory to the Holder.
Thereupon, a new note for the same principal amount and interest will be issued
to, and registered in the name of, the transferee. Interest and principal are
payable only to the registered holder of this Note.
5. Governing Law. This Note and all acts and transactions pursuant
hereto and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of
Washington, without giving effect to principles of conflicts of law.
6. Notices. Any notice required or permitted by this Note shall be in
writing and shall be deemed sufficient upon delivery, when delivered personally
or one business day after being sent by a nationally-recognized overnight
delivery service (such as Federal Express or UPS), or forty-eight (48) hours
after being deposited in the U.S. mail, as certified or registered mail, with
postage prepaid, addressed to the party to be notified at such party's address
as set forth below or as subsequently modified by written notice.
7. Amendments and Waivers. Any term of this Note may be amended only
with the written consent of the Company and at least a majority in interest of
the Holders. Any amendment or waiver effected in accordance with this Section 7
shall be binding upon the Company, the Holders and each transferee of the Notes.
8. Waiver. The Company waives presentment and demand for payment, notice
of dishonor, protest and notice of protest of this Note, and shall pay all costs
of collection when incurred, including, without limitation, reasonable
attorneys' fees, costs and other expenses.
The right to plead any and all statutes of limitations as a defense to any
demands hereunder is hereby waived to the full extent permitted by law.
3.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
COMPANY:
Mercata, Inc.
By:_______________________________
Name:_____________________________
(print)
Title:____________________________
Address: 000 000xx Xxxxxx Xxxxxxxxx, Xxxxx
Xxxxxxxx, XX 00000
AGREED TO AND ACCEPTED:
___________________
By:
Its:
Name:___________________________
(print)
Address:
Exhibit A to the Form of Promissory Note
COMPLIANCE CERTIFICATE
The undersigned, _______________, the President and Chief Executive Officer
of Mercata, Inc., a Delaware corporation (the "Company"), certifies that he is
authorized to execute this Compliance Certificate for and on behalf of the
Company, and further certifies that:
1. The representations and warranties of the Company contained in Section
3.19 of the Series B Preferred Stock Purchase Agreement, dated September ____,
1999 (the "Purchase Agreement"), are true and correct as though made on and as
of the date hereof.
2. The Company has performed or fulfilled all covenants, agreements and
conditions contained in the Purchase Agreement and that certain Convertible
Promissory Note, dated September ___, 1999, in the amount of $__________.00 of
the Company in favor of ___________________ to be performed or fulfilled by the
Company on or prior to the date hereof.
In Witness Whereof, the undersigned has hereunto set his hand this _______
day of _________________, 1999.
_______________________________________
Name
Title
EXHIBIT C
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
MERCATA, INC.
(Incorporated September 23, 1998)
Xxx Xxx Xxxx and Xxx X. Xxxxxx hereby certify that:
ONE: They are the duly elected and acting President and Secretary,
respectively, of Mercata, Inc., a Delaware corporation.
TWO: The Certificate of Incorporation of this corporation is hereby
amended and restated to read as follows:
I.
The name of the corporation is Mercata, Inc. (the "Corporation" or the
"Company").
II.
The address of the registered office of the Corporation in the State of
Delaware is:
CorpAmerica, Inc.
00 Xxx Xxxxxxx Xxxx
Xxxxx, XX 00000
County of Kent
The name of the Corporation's registered agent at said address is
CorpAmerica, Inc.
III.
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
IV.
A. This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the Corporation is authorized to issue is seventy million
(70,000,000) shares, forty million (40,000,000) shares of which shall be Common
Stock (the "Common Stock") and thirty million (30,000,000) shares of which shall
be Preferred Stock (the "Preferred Stock"). The Preferred Stock shall have a
par value of one tenth of a cent ($0.001) per share and the Common Stock shall
have a par value of one tenth of a cent ($0.001) per share.
1.
B. The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares of Common Stock then outstanding)
by the affirmative vote of the holders of a majority of the stock of the
Corporation (voting together on an as-if-converted basis).
C. Fourteen million (14,000,000) of the authorized shares of Preferred
Stock are hereby designated "Series A Preferred Stock" and twelve million
(12,000,000) of the authorized shares of Preferred Stock are hereby designated
"Series B Preferred Stock" (collectively, the "Series Preferred").
D. The rights, preferences, privileges, restrictions and other matters
relating to the Series Preferred are as follows:
1. Dividend Rights.
(a) Holders of Series Preferred, in preference to the holders of
any other stock of the Company ("Junior Stock"), shall be entitled to receive,
when and as declared by the Board of Directors, but only out of funds that are
legally available therefor, cash dividends at the rate of eight percent (8%) of
the Original Issue Price (as defined below) per annum on each outstanding share
of Series Preferred (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares). The "Original Issue
Price" of the Series A Preferred Stock and the Series B Preferred Stock shall be
one dollar and five cents ($1.05) per share and three dollars twelve and one-
half cents per share ($3.125), respectively. Such dividends shall be payable
only when, as and if declared by the Board of Directors and shall be non-
cumulative.
(b) So long as any shares of Series Preferred shall be
outstanding, no dividend, whether in cash or property, shall be paid or
declared, nor shall any other distribution be made, on any Junior Stock, nor
shall any shares of any Junior Stock of the Company be purchased, redeemed, or
otherwise acquired for value by the Company (except for acquisitions of Common
Stock by the Company pursuant to agreements which permit the Company to
repurchase such shares upon termination of services to the Company or in
exercise of the Company's right of first refusal upon a proposed transfer) until
all dividends (set forth in Section 1(a) above) on the Series Preferred shall
have been paid or declared and set apart. In the event dividends are paid on any
share of Common Stock, an additional dividend shall be paid with respect to all
outstanding shares of Series Preferred in an amount equal per share (on an as-
if-converted to Common Stock basis) to the amount paid or set aside for each
share of Common Stock. The provisions of this Section 1(b) shall not, however,
apply to (i) a dividend payable in Common Stock, (ii) the acquisition of shares
of any Junior Stock in exchange for shares of any other Junior Stock, or (iii)
any repurchase of any outstanding securities of the Company that is unanimously
approved by the Company's Board of Directors.
2. Voting Rights.
(a) General Rights. Except as otherwise provided herein or as
required by law, the Series Preferred shall be voted equally with the shares of
the Common Stock
2.
of the Company and not as a separate class, at any annual or special meeting of
stockholders of the Company, and may act by written consent in the same manner
as the Common Stock, in either case upon the following basis: each holder of
shares of Series Preferred shall be entitled to such number of votes as shall be
equal to the whole number of shares of Common Stock into which such holder's
aggregate number of shares of Series Preferred are convertible (pursuant to
Section 4 hereof) immediately after the close of business on the record date
fixed for such meeting or the effective date of such written consent.
(b) Separate Vote of Series Preferred. For so long as at least
ten million (10,000,000) shares of Series Preferred (subject to adjustment for
any stock split, reverse stock split or other similar event affecting the Series
Preferred) remain outstanding, in addition to any other vote or consent required
herein or by law, the vote or written consent of the holders of at least a
majority of the outstanding Series Preferred shall be necessary for effecting or
validating the following actions:
(i) Any amendment, alteration, or repeal of any
provision of the Certificate of Incorporation or Bylaws of the Company
(including any filing of a Certificate of Designation), that alters or changes
the voting powers, preferences, or other special rights or privileges, or
restrictions of the Series Preferred (including by way of a merger or
consolidation).
(ii) Any increase or decrease (other than by redemption
or conversion) in the authorized number of shares of Common Stock or Preferred
Stock;
(iii) Any authorization or any designation, whether by
reclassification or otherwise, of any new class or series of stock or any other
securities convertible into equity securities of the Company ranking on a parity
with or senior to the Series Preferred in right of redemption, liquidation
preference, voting or dividends or any increase in the authorized or designated
number of any such new class or series;
(iv) Any redemption, repurchase, payment of dividends or
other distributions with respect to Junior Stock (except for acquisitions of
Common Stock by the Company pursuant to agreements which permit the Company to
repurchase such shares upon termination of services to the Company or in
exercise of the Company's right of first refusal upon a proposed transfer);
(v) Any agreement by the Company or its stockholders
regarding an Asset Transfer or Acquisition (each as defined in Section 3(c));
(vi) Any action that results in the payment or
declaration of a dividend on any shares of Common Stock or Preferred Stock;
(vii) Any voluntary dissolution or liquidation of the
Company; or
(viii) Any increase or decrease in the authorized number of
members of the Company's Board of Directors.
3.
(C) Separate Votes of Series B Preferred Stock. For so long as
at least five million (5,000,000) shares of Series B Preferred Stock (subject to
adjustment for any stock split, reverse stock split or other similar event
affecting the Series B Preferred Stock) remain outstanding, in addition to any
other vote or consent required herein or by law, the vote or written consent of
the holders of at least a majority of the outstanding Series B Preferred Stock
shall be necessary for effecting or validating the following actions:
(i) Any amendment, alteration, or repeal of any provision
of the Certificate of Incorporation or Bylaws of the Company (including any
filing of a Certificate of Designation), that alters or changes the voting
powers, preferences, or other special rights or privileges, or restrictions of
the Series B Preferred Stock (including by way of a merger or consolidation).
(ii) Any authorization or any designation, whether by
reclassification or otherwise, of any new class or series of stock or any other
securities convertible into equity securities of the Company ranking on a parity
with or senior to the Series B Preferred in right of redemption, liquidation
preference, voting or dividends or any increase in the authorized or designated
number of any such new class or series;
(iii) Any redemption, repurchase, payment of dividends or
other distributions with respect to Junior Stock (except for acquisitions of
Common Stock by the Company pursuant to agreements which permit the Company to
repurchase such shares upon termination of services to the Company or in
exercise of the Company's right of first refusal upon a proposed transfer);
(iv) Any agreement by the Company or its stockholders
regarding an Asset Transfer or Acquisition (each as defined in Section 3(c)).
(d) Election of Board of Directors. For so long as at least ten
million (10,000,000) shares of Series Preferred remain outstanding (subject to
adjustment for any stock split, reverse stock split or similar event affecting
the Series Preferred) (i) the holders of Series A Preferred Stock, voting as a
separate class, shall be entitled to elect two (2) members of the Company's
Board of Directors at each meeting or pursuant to each consent of the Company's
stockholders for the election of directors, and to remove from office such
directors and to fill any vacancy caused by the resignation, death or removal of
such directors; (ii) the holders of Series B Preferred Stock, voting as a
separate class, shall be entitled to elect one (1) member of the Company's Board
of Directors at each meeting or pursuant to each consent of the Company's
stockholders for the election of directors, and to remove from office such
director and to fill any vacancy caused by the registration, death or removal of
such director; (iii) the holders of Common Stock, voting as a separate class,
shall be entitled to elect two (2) members of the Board of Directors at each
meeting or pursuant to each consent of the Company's stockholders for the
election of directors, and to remove from office such directors and to fill any
vacancy caused by the resignation, death or removal of such directors; and (iv)
the holders of Common Stock and Series Preferred, voting together as a single
class on an as-if-converted basis, shall be entitled to elect all remaining
members of the Board of Directors at each meeting or pursuant to each consent of
the Company's stockholders for the election of directors, and to remove from
4.
office such directors and to fill any vacancy caused by the resignation, death
or removal of such directors.
3. Liquidation Rights.
(a) Upon any liquidation, dissolution, or winding up of the
Company, whether voluntary or involuntary, before any distribution or payment
shall be made to the holders of any Junior Stock, the holders of Series
Preferred shall be entitled to be paid out of the assets of the Company an
amount per share of Series Preferred equal to the Original Issue Price plus all
declared and unpaid dividends on the Series Preferred (as adjusted for any stock
dividends, combinations, splits, recapitalizations and the like with respect to
such shares) for each share of Series Preferred held by them. If, upon any such
liquidation, distribution, or winding up, the assets of the Company shall be
insufficient to make payment in full to all holders of Series Preferred of the
liquidation preference set forth in this Section 3(a), then such assets shall be
distributed among the holders of Series Preferred at the time outstanding,
ratably in proportion to the full amounts to which they would otherwise be
respectively entitled.
(b) After the payment of the full liquidation preference of the
Series Preferred as set forth in Section 3(a) above, the assets of the Company
legally available for distribution, if any, shall be distributed ratably to the
holders of the Common Stock and Series Preferred on an as-if-converted to Common
Stock basis until such time as the holders of Series Preferred have received
pursuant to Section 3(a) above and this Section 3(b) in aggregate an amount per
share of Series Preferred equal to three (3) times the Original Issue Price (as
adjusted for any stock, dividends, combinations, splits, recapitalizations and
the like with respect to such shares); thereafter the remaining assets of the
Company legally available for distribution, if any, shall be distributed ratably
to the holders of the Common Stock.
(c) The following events shall be considered a liquidation under
this Section:
(i) any consolidation or merger of the Company with or
into any other corporation or other entity or person, or any other corporate
reorganization, in which the stockholders of the Company immediately prior to
such consolidation, merger or reorganization, own less than 50% of the Company's
voting power immediately after such consolidation, merger or reorganization, or
any transaction or series of related transactions to which the Company is a
party in which in excess of fifty percent (50%) of the Company's voting power is
transferred, excluding any consolidation or merger effected exclusively to
change the domicile of the Company (an "Acquisition"); or
(ii) a sale, lease or other disposition of all or
substantially all of the assets of the Company (an "Asset Transfer").
(iii) In any of such events, if the consideration received
by this corporation is other than cash, its value will be deemed its fair market
value as determined in good faith by the Board of Directors. Any securities
shall be valued as follows:
5.
(A) Securities not subject to investment letter or
other similar restrictions on free marketability covered by (B) below:
(1) If traded on a securities exchange or
through the Nasdaq National Market, the value shall be deemed to be the average
of the closing prices of the securities on such quotation system over the thirty
(30) day period ending three (3) days prior to the closing;
(2) If actively traded over-the-counter, the
value shall be deemed to be the average of the closing bid or sale prices
(whichever is applicable) over the thirty (30) day period ending three (3) days
prior to the closing; and
(3) If there is no active public market, the
value shall be the fair market value thereof, as determined by the Board of
Directors.
(B) The method of valuation of securities subject
to investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a shareholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as above in (A) (1), (2) or (3) to reflect the approximate fair
market value thereof, as determined by the Board of Directors.
4. Conversion Rights.
The holders of the Series Preferred shall have the following
rights with respect to the conversion of the Series Preferred into shares of
Common Stock (the "Conversion Rights"):
(a) Optional Conversion. Subject to and in compliance with the
provisions of this Section 4, any shares of Series Preferred may, at the option
of the holder, be converted at any time into fully-paid and nonassessable shares
of Common Stock. The number of shares of Common Stock to which a holder of
Series Preferred shall be entitled upon conversion shall be the product obtained
by multiplying the "Series Preferred Conversion Rate" then in effect (determined
as provided in Section 4(b)) by the number of shares of Series Preferred being
converted.
(b) Series Preferred Conversion Rate. The conversion rate in
effect at any time for conversion of the Series Preferred (the "Series Preferred
Conversion Rate") shall be the quotient obtained by dividing the Original Issue
Price of the Series Preferred by the "Series Preferred Conversion Price,"
calculated as provided in Section 4(c).
(c) Series Preferred Conversion Price. The conversion price for
the Series Preferred shall initially be the Original Issue Price of the Series
Preferred (the "Series Preferred Conversion Price"). Such initial Series
Preferred Conversion Price shall be adjusted from time to time in accordance
with this Section 4. All references to the Series Preferred Conversion Price
herein shall mean the Series Preferred Conversion Price as so adjusted.
6.
(d) Mechanics of Conversion. Each holder of Series Preferred
who desires to convert the same into shares of Common Stock pursuant to this
Section 4 shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Company or any transfer agent for the Series
Preferred, and shall give written notice to the Company at such office that such
holder elects to convert the same. Such notice shall state the number of shares
of Series Preferred being converted. Thereupon, the Company shall promptly issue
and deliver at such office to such holder a certificate or certificates for the
number of shares of Common Stock to which such holder is entitled and shall
promptly pay (i) in cash or, to the extent sufficient funds are not then legally
available therefor, in Common Stock (at the Common Stock's fair market value
determined by the Board of Directors as of the date of such conversion), any
declared and unpaid dividends on the shares of Series Preferred being converted
and (ii) in cash (at the Common Stock's fair market value determined by the
Board of Directors as of the date of conversion) the value of any fractional
share of Common Stock otherwise issuable to any holder of Series Preferred. Such
conversion shall be deemed to have been made at the close of business on the
date of such surrender of the certificates representing the shares of Series
Preferred to be converted, and the person entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder of such shares of Common Stock on such date.
(e) Adjustment for Stock Splits and Combinations. If the Company
shall at any time or from time to time after the date that the first share of
Series Preferred is issued (the "Original Issue Date") effect a subdivision of
the outstanding Common Stock without a corresponding subdivision of the
Preferred Stock, the Series Preferred Conversion Price in effect immediately
before that subdivision shall be proportionately decreased. Conversely, if the
Company shall at any time or from time to time after the Original Issue Date
combine the outstanding shares of Common Stock into a smaller number of shares
without a corresponding combination of the Preferred Stock, the Series Preferred
Conversion Price in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Section 4(e) shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
(f) Adjustment for Common Stock Dividends and Distributions. If
the Company at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock, in each such event the Series Preferred Conversion Price
that is then in effect shall be decreased as of the time of such issuance or, in
the event such record date is fixed, as of the close of business on such record
date, by multiplying the Series Preferred Conversion Price then in effect by a
fraction (i) the numerator of which is the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance or
the close of business on such record date, and (ii) the denominator of which is
the total number of shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business on such record date
plus the number of shares of Common Stock issuable in payment of such dividend
or distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Series Preferred Conversion Price shall be recomputed
accordingly as of the close of business on such record date and thereafter the
7.
Series Preferred Conversion Price shall be adjusted pursuant to this Section
4(f) to reflect the actual payment of such dividend or distribution.
(g) Adjustment for Reclassification, Exchange and Substitution.
If at any time or from time to time after the Original Issue Date, the Common
Stock issuable upon the conversion of the Series Preferred is changed into the
same or a different number of shares of any class or classes of stock, whether
by recapitalization, reclassification or otherwise (other than an Acquisition or
Asset Transfer as defined in Section 3(c) or a subdivision or combination of
shares or stock dividend or a reorganization, merger, consolidation or sale of
assets provided for elsewhere in this Section 4), in any such event each holder
of Series Preferred shall have the right thereafter to convert such stock into
the kind and amount of stock and other securities and property receivable upon
such recapitalization, reclassification or other change by holders of the
maximum number of shares of Common Stock into which such shares of Series
Preferred could have been converted immediately prior to such recapitalization,
reclassification or change, all subject to further adjustment as provided herein
or with respect to such other securities or property by the terms thereof.
(h) Reorganizations, Mergers, Consolidations or Sales of Assets.
If at any time or from time to time after the Original Issue Date, there is a
capital reorganization of the Common Stock (other than an Acquisition or Asset
Transfer as defined in Section 3(c) or a recapitalization, subdivision,
combination, reclassification, exchange or substitution of shares provided for
elsewhere in this Section 4), as a part of such capital reorganization,
provision shall be made so that the holders of the Series Preferred shall
thereafter be entitled to receive upon conversion of the Series Preferred the
number of shares of stock or other securities or property of the Company to
which a holder of the number of shares of Common Stock deliverable upon
conversion would have been entitled on such capital reorganization, subject to
adjustment in respect of such stock or securities by the terms thereof. In any
such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4 with respect to the rights of the holders of Series
Preferred after the capital reorganization to the end that the provisions of
this Section 4 (including adjustment of the Series Preferred Conversion Price
then in effect and the number of shares issuable upon conversion of the Series
Preferred) shall be applicable after that event and be as nearly equivalent as
practicable.
(i) Sale of Shares Below Series Preferred Conversion Price.
(i) If at any time or from time to time after the
Original Issue Date, the Company issues or sells, or is deemed by the express
provisions of this subsection (i) to have issued or sold, Additional Shares of
Common Stock (as defined in subsection (i)(iv) below), other than as a dividend
or other distribution on any class of stock as provided in Section 4(f) above,
and other than a subdivision or combination of shares of Common Stock as
provided in Section 4(e) above, for an Effective Price (as defined in subsection
(i)(iv) below) less than the then effective Series Preferred Conversion Price,
then and in each such case the then existing Series Preferred Conversion Price
shall be reduced, as of the opening of business on the date of such issue or
sale, to a price determined by multiplying the Series Preferred Conversion Price
by a fraction (i) the numerator of which shall be (A) the number of shares of
Common Stock deemed outstanding (as defined below) immediately prior to such
issue or sale, plus (B) the
8.
number of shares of Common Stock which the aggregate consideration received (as
defined in subsection (i)(ii) by the Company for the total number of Additional
Shares of Common Stock so issued would purchase at such Series Preferred
Conversion Price, and (ii) the denominator of which shall be the number of
shares of Common Stock deemed outstanding (as defined below) immediately prior
to such issue or sale plus the total number of Additional Shares of Common Stock
so issued. For the purposes of the preceding sentence, the number of shares of
Common Stock deemed to be outstanding as of a given date shall be the sum of (A)
the number of shares of Common Stock actually outstanding, (B) the number of
shares of Common Stock into which the then outstanding shares of Series
Preferred could be converted if fully converted on the day immediately preceding
the given date, and (C) the number of shares of Common Stock which could be
obtained through the exercise or conversion of all other rights, options and
convertible securities outstanding on the day immediately preceding the given
date.
(ii) For the purpose of making any adjustment required
under this Section 4(i), the consideration received by the Company for any issue
or sale of securities shall (A) to the extent it consists of cash, be computed
at the net amount of cash received by the Company after deduction of any
underwriting or similar commissions, compensation or concessions paid or allowed
by the Company in connection with such issue or sale but without deduction of
any expenses payable by the Company, (B) to the extent it consists of property
other than cash, be computed at the fair value of that property as determined in
good faith by the Board of Directors, and (C) if Additional Shares of Common
Stock, Convertible Securities (as defined in subsection (i)(iii)) or rights or
options to purchase either Additional Shares of Common Stock or Convertible
Securities are issued or sold together with other stock or securities or other
assets of the Company for a consideration which covers both, be computed as the
portion of the consideration so received that may be reasonably determined in
good faith by the Board of Directors to be allocable to such Additional Shares
of Common Stock, Convertible Securities or rights or options.
(iii) For the purpose of the adjustment required under this
Section 4(i), if the Company issues or sells (i) stock or other securities
convertible into, Additional Shares of Common Stock (such convertible stock or
securities being herein referred to as "Convertible Securities") or (ii) rights
or options for the purchase of Additional Shares of Common Stock or Convertible
Securities and if the Effective Price of such Additional Shares of Common Stock
is less than the Series Preferred Conversion Price, in each case the Company
shall be deemed to have issued at the time of the issuance of such rights or
options or Convertible Securities the maximum number of Additional Shares of
Common Stock issuable upon exercise or conversion thereof and to have received
as consideration for the issuance of such shares an amount equal to the total
amount of the consideration, if any, received by the Company for the issuance of
such rights or options or Convertible Securities, plus, in the case of such
rights or options, the minimum amounts of consideration, if any, payable to the
Company upon the exercise of such rights or options, plus, in the case of
Convertible Securities, the minimum amounts of consideration, if any, payable to
the Company (other than by cancellation of liabilities or obligations evidenced
by such Convertible Securities) upon the conversion thereof; provided that if in
the case of Convertible Securities the minimum amounts of such consideration
cannot be ascertained, but are a function of antidilution or similar protective
clauses, the Company shall be deemed to have received the minimum amounts of
consideration without reference to such
9.
clauses; provided further that if the minimum amount of consideration payable to
the Company upon the exercise or conversion of rights, options or Convertible
Securities is reduced over time or on the occurrence or non-occurrence of
specified events other than by reason of antidilution adjustments, the Effective
Price shall be recalculated using the figure to which such minimum amount of
consideration is reduced; provided further that if the minimum amount of
consideration payable to the Company upon the exercise or conversion of such
rights, options or Convertible Securities is subsequently increased, the
Effective Price shall be again recalculated using the increased minimum amount
of consideration payable to the Company upon the exercise or conversion of such
rights, options or Convertible Securities. No further adjustment of the Series
Preferred Conversion Price, as adjusted upon the issuance of such rights,
options or Convertible Securities, shall be made as a result of the actual
issuance of Additional Shares of Common Stock on the exercise of any such rights
or options or the conversion of any such Convertible Securities. If any such
rights or options or the conversion privilege represented by any such
Convertible Securities shall expire without having been exercised, the Series
Preferred Conversion Price as adjusted upon the issuance of such rights, options
or Convertible Securities shall be readjusted to the Series Preferred Conversion
Price which would have been in effect had an adjustment been made on the basis
that the only Additional Shares of Common Stock so issued were the Additional
Shares of Common Stock, if any, actually issued or sold on the exercise of such
rights or options or rights of conversion of such Convertible Securities, and
such Additional Shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise, plus the
consideration, if any, actually received by the Company for the granting of all
such rights or options, whether or not exercised, plus the consideration
received for issuing or selling the Convertible Securities actually converted,
plus the consideration, if any, actually received by the Company (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the conversion of such Convertible Securities, provided that such
readjustment shall not apply to prior conversions of Series Preferred.
(IV) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued by the Company or deemed to be issued pursuant to
this Section 4(i), other than (A) shares of Common Stock issued upon conversion
of the Series Preferred; (B) shares of Common Stock and/or options, warrants or
other Common Stock purchase rights, and the Common Stock issued pursuant to such
options, warrants or other rights (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like) after the Original Issue
Date to employees, officers or directors of, or consultants or advisors to the
Company or any subsidiary pursuant to stock purchase or stock option plans or
other arrangements that are approved by the Board; (C) shares of Common Stock
issued pursuant to the exercise of options, warrants or convertible securities
outstanding as of the Original Issue Date, (D) shares of Common Stock and/or
options, warrants or other Common Stock purchase rights, and the Common Stock
issued pursuant to such options, warrants or other rights issued for
consideration other than cash pursuant to a merger, consolidation, acquisition
or similar business combination approved by the Board and (E) shares of Common
Stock issued pursuant to any equipment leasing arrangement, or debt financing
from a bank or similar financial institution approved by the Board. References
to Common Stock in the subsections of this clause (iv) above shall mean all
shares of Common Stock issued by the Company or deemed to be issued pursuant
10.
to this Section 4(i). The "Effective Price" of Additional Shares of Common Stock
shall mean the quotient determined by dividing the total number of Additional
Shares of Common Stock issued or sold, or deemed to have been issued or sold by
the Company under this Section 4(i), into the aggregate consideration received,
or deemed to have been received by the Company for such issue under this Section
4(i), for such Additional Shares of Common Stock.
(j) Certificate of Adjustment. In each case of an adjustment or
readjustment of the Series Preferred Conversion Price for the number of shares
of Common Stock or other securities issuable upon conversion of the Series
Preferred, if the Series Preferred is then convertible pursuant to this Section
4, the Company, at its expense, shall compute such adjustment or readjustment in
accordance with the provisions hereof and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate, by first class
mail, postage prepaid, to each registered holder of Series Preferred at the
holder's address as shown in the Company's books. The certificate shall set
forth such adjustment or readjustment, showing in detail the facts upon which
such adjustment or readjustment is based, including a statement of (i) the
consideration received or deemed to be received by the Company for any
Additional Shares of Common Stock issued or sold or deemed to have been issued
or sold, (ii) the Series Preferred Conversion Price at the time in effect, (iii)
the number of Additional Shares of Common Stock and (iv) the type and amount, if
any, of other property which at the time would be received upon conversion of
the Series Preferred.
(k) Notices of Record Date. Upon (i) any taking by the Company
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or (ii) any Acquisition (as defined in Section 3(c)) or
other capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any merger or
consolidation of the Company with or into any other corporation, or any Asset
Transfer (as defined in Section 3(c)), or any voluntary or involuntary
dissolution, liquidation or winding up of the Company, the Company shall mail to
each holder of Series Preferred at least ten (10) days prior to the record date
specified therein (or such shorter period approved by a majority of the
outstanding Series Preferred) a notice specifying (A) the date on which any such
record is to be taken for the purpose of such dividend or distribution and a
description of such dividend or distribution, (B) the date on which any such
Acquisition, reorganization, reclassification, transfer, consolidation, merger,
Asset Transfer, dissolution, liquidation or winding up is expected to become
effective, and (C) the date, if any, that is to be fixed as to when the holders
of record of Common Stock (or other securities) shall be entitled to exchange
their shares of Common Stock (or other securities) for securities or other
property deliverable upon such Acquisition, reorganization, reclassification,
transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or
winding up.
(l) Automatic Conversion.
(i) Each share of Series Preferred shall automatically be
converted into shares of Common Stock, based on the then-effective Series
Preferred Conversion Price, (A) at any time upon the affirmative election of the
holders of at least a majority of the
11.
outstanding shares of the Series A Preferred Stock and of the holders of at
least a majority of the outstanding shares of the Series B Preferred Stock, or
(B) immediately upon the closing of a firmly underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale of Common Stock for the account of
the Company in which (i) the per share price is at least $9.375 (as adjusted for
stock splits, dividends, recapitalizations and the like), and (ii) the gross
cash proceeds to the Company (before underwriting discounts, commissions and
fees) are at least $10,000,000. Upon such automatic conversion, any declared and
unpaid dividends shall be paid in accordance with the provisions of Section
4(d).
(ii) Upon the occurrence of either of the events specified
in Section 4(l)(i) above, the outstanding shares of Series Preferred shall be
converted automatically without any further action by the holders of such shares
and whether or not the certificates representing such shares are surrendered to
the Company or its transfer agent; provided, however, that the Company shall not
be obligated to issue certificates evidencing the shares of Common Stock
issuable upon such conversion unless the certificates evidencing such shares of
Series Preferred are either delivered to the Company or its transfer agent as
provided below, or the holder notifies the Company or its transfer agent that
such certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with such certificates. Upon the occurrence of such automatic
conversion of the Series Preferred, the holders of Series Preferred shall
surrender the certificates representing such shares at the office of the Company
or any transfer agent for the Series Preferred. Thereupon, there shall be issued
and delivered to such holder promptly at such office and in its name as shown on
such surrendered certificate or certificates, a certificate or certificates for
the number of shares of Common Stock into which the shares of Series Preferred
surrendered were convertible on the date on which such automatic conversion
occurred, and any declared and unpaid dividends shall be paid in accordance with
the provisions of Section 4(d).
(m) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of Series Preferred. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series Preferred by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of any fractional share, the Company shall, in lieu of
issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the Common Stock's fair market value (as determined by the Board
of Directors) on the date of conversion.
(n) Reservation of Stock Issuable Upon Conversion. The Company
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
the shares of the Series Preferred, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series Preferred. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series Preferred, the
Company will take such corporate action as may, in the opinion of its counsel,
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
12.
(o) Notices. Any notice required by the provisions of this
Section 4 shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed telex
or facsimile if sent during normal business hours of the recipient; if not, then
on the next business day, (iii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (iv)
one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All notices
shall be addressed to each holder of record at the address of such holder
appearing on the books of the Company.
(p) Payment of Taxes. The Company will pay all taxes (other
than taxes based upon income) and other governmental charges that may be imposed
with respect to the issue or delivery of shares of Common Stock upon conversion
of shares of Series Preferred, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the shares of Series Preferred
so converted were registered.
(q) No Dilution or Impairment. Without the consent of the
holders of then outstanding Series Preferred as required under Section 2(b), the
Company shall not amend its Restated Certificate of Incorporation or participate
in any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or take any other voluntary action, for the purpose
of avoiding or seeking to avoid the observance or performance of any of the
terms to be observed or performed hereunder by the Company, but shall at all
times in good faith assist in carrying out all such action as may be reasonably
necessary or appropriate in order to protect the conversion rights of the
holders of the Series Preferred against dilution or other impairment.
5. No Reissuance of Series Preferred.
No share or shares of Series Preferred acquired by the
Corporation by reason of redemption, purchase, conversion or otherwise shall be
reissued.
V.
A. The liability of the directors for monetary damages shall be
eliminated to the fullest extent under applicable law.
B. Any repeal or modification of this Article V shall only be prospective
and shall not effect the rights under this Article V in effect at the time of
the alleged occurrence of any action or omission to act giving rise to
liability.
VI.
For the management of the business and for the conduct of the affairs of
the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
13.
A. The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be fixed by the Board
of Directors in the manner provided in the Bylaws.
B. Subject to the indemnification provisions in the Bylaws, the Board of
Directors may from time to time make, amend, supplement or repeal the Bylaws;
provided, however, that the stockholders may change or repeal any Bylaw adopted
by the Board of Directors by the affirmative vote of the percentage of holders
of capital stock as provided therein; and, provided further, that no amendment
or supplement to the Bylaws adopted by the Board of Directors shall vary or
conflict with any amendment or supplement thus adopted by the stockholders.
C. The directors of the Corporation need not be elected by written ballot
unless the Bylaws so provide.
* * * *
THREE: This Restated Certificate of Incorporation has been duly approved
by the Board of Directors of this Corporation.
FOUR: This Restated Certificate of Incorporation has been duly adopted in
accordance with the provisions of Sections 228, 242 and 245 of the General
Corporation Law of the State of Delaware by the Board of Directors and the
stockholders of the Corporation. The total number of outstanding shares entitled
to vote or act by written consent was one million four hundred forty-four
thousand fifty-eight (1,444,058) shares of Common Stock and fourteen million
(14,000,000) shares of Series A Preferred Stock. A majority of the outstanding
shares of Common Stock and all of the outstanding shares of Series A Preferred
Stock approved this Restated Certificate of Incorporation by written consent in
accordance with Section 228 of the General Corporation Law of the State of
Delaware and written notice of such was given by the Corporation in accordance
with said Section 228.
14.
In Witness Whereof, Mercata, Inc. has caused this Restated Certificate of
Incorporation to be signed by the President and the Secretary in Bellevue,
Washington, this 30th day of September 1999.
Mercata, Inc.
By: /s/ Xxx Xxx Xxxx
--------------------------
President
Attest:
By: /s/ Xxx Xxxxxx
----------------------
Secretary
15.
Exhibit D
INVESTORS RIGHTS AGREEMENT
TABLE OF CONTENTS
Page
SECTION 1. GENERAL......................................................... 1
1.1 Definitions..................................................... 1
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER.......................... 3
2.1 Restrictions on Transfer........................................ 3
2.2 Demand Registration............................................. 4
2.3 Piggyback Registrations......................................... 5
2.4 Form S-3 Registration........................................... 6
2.5 Expenses of Registration........................................ 7
2.6 Obligations of the Company...................................... 8
2.7 Termination of Registration Rights.............................. 9
2.8 Delay of Registration; Furnishing Information................... 9
2.9 Indemnification................................................. 9
2.10 Assignment of Registration Rights............................... 11
2.11 Amendment of Registration Rights................................ 11
2.12 Limitation on Subsequent Registration Rights.................... 12
2.13 "Market Stand-Off" Agreement; Agreement to Furnish Information.. 12
2.14 Rule 144 Reporting.............................................. 12
SECTION 3. COVENANTS OF THE COMPANY........................................ 13
3.1 Basic Financial Information and Reporting....................... 13
3.2 Inspection Rights............................................... 14
3.3 Confidentiality of Records...................................... 14
3.4 Reservation of Common Stock..................................... 14
3.5 Stock Vesting................................................... 14
3.6 Proprietary Information and Inventions Agreement................ 14
3.7 Assignment of Right of First Refusal............................ 14
3.8 Termination of Covenants........................................ 15
SECTION 4. RIGHTS OF FIRST REFUSAL......................................... 15
4.1 Subsequent Offerings............................................ 15
4.2 Exercise of Rights.............................................. 15
4.3 Issuance of Equity Securities to Other Persons.................. 16
i.
TABLE OF CONTENTS
(CONTINUED)
PAGE
4.4 Sale Without Notice............................................. 16
4.5 Termination and Waiver of Rights of First Refusal............... 16
4.6 Transfer of Rights of First Refusal............................. 16
4.7 Excluded Securities............................................. 16
SECTION 5. MISCELLANEOUS................................................... 17
5.1 Governing Law................................................... 17
5.2 Survival........................................................ 17
5.3 Successors and Assigns.......................................... 17
5.4 Entire Agreement................................................ 18
5.5 Severability.................................................... 18
5.6 Amendment and Waiver............................................ 18
5.7 Delays or Omissions............................................. 18
5.8 Notices......................................................... 18
5.9 Attorneys' Fees................................................. 19
5.10 Titles and Subtitles............................................ 19
5.11 Additional Investors............................................ 19
5.12 Counterparts.................................................... 19
ii.
MERCATA, INC.
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (the "Agreement") is entered into as of the
30th day of September, 1999, by and among Mercata, Inc., a Delaware corporation
(the "Company"), the holders of the Company's Series A Preferred Stock (the
"Series A Holders") and the purchasers of the Company's Series B Preferred Stock
("Series B Stock") set forth on Exhibit A of that certain Series B Preferred
Stock Purchase Agreement of even date herewith (the "Purchase Agreement") and
Exhibit A hereto. The Series A Holders and the purchasers of the Series B Stock
shall be referred to hereinafter as the "Investors" and each individually as an
"Investor."
Recitals
Whereas, the Company proposes to sell and issue up to eleven million two
hundred thousand (11,200,000) shares of its Series B Stock pursuant to the
Purchase Agreement; and
Whereas, as a condition of entering into the Purchase Agreement, the
Investors have requested that the Company extend to them registration rights,
information rights and other rights as set forth below.
Now, Therefore, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement and in the
Purchase Agreement, the parties mutually agree as follows:
SECTION 1. GENERAL
1.1 Definitions. As used in this Agreement the following terms shall have
the following respective meanings:
"Affiliate" of a person or entity means any person or entity who
controls, is controlled by or under common control with such person or entity.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Form S-3" means such form under the Securities Act as in effect on
the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"Holder" means any person owning of record Registrable Securities that
have not been sold to the public or any assignee of record of such Registrable
Securities in accordance with Section 2.10 hereof.
1.
"Initial Offering" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
"Register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"Registrable Securities" means (a) Common Stock of the Company issued
or issuable upon conversion of the Shares; and (b) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such above-described
securities. Notwithstanding the foregoing, Registrable Securities shall not
include any securities sold by a person to the public either pursuant to a
registration statement or Rule 144 or sold in a private transaction in which the
transferor's rights under Section 2 of this Agreement are not assigned.
"Registrable Securities then outstanding" shall be the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (a) are then issued and
outstanding or (b) are issuable pursuant to then exercisable or convertible
securities.
"Registration Expenses" shall mean all expenses incurred by the
Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements not
to exceed twenty-five thousand dollars ($25,000) of a single special counsel for
the Holders, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
"SEC" or "Commission" means the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale.
"Shares" shall mean the one million (1,000,000) shares of Common Stock
currently held by Vulcan Ventures Incorporated, the Company's Series A Preferred
Stock issued pursuant to that certain Series A Preferred Stock Purchase
Agreement, dated March 17, 1999, and the Company's Series B Stock issued
pursuant to the Purchase Agreement and held by the Investors listed on Exhibit A
hereto and their permitted assigns.
2.
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER
2.1 Restrictions on Transfer.
(a) Each Holder agrees not to make any disposition of all or any
portion of the Shares or Registrable Securities unless and until:
(i) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be bound by the
terms of this Agreement, (B) such Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (C) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(iii) Notwithstanding the provisions of paragraphs (i) and (ii)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by a Holder which is (A) a partnership to its partners or former
partners in accordance with partnership interests, (B) a corporation to its
shareholders in accordance with their interest in the corporation, (C) a limited
liability company to its members or former members in accordance with their
interest in the limited liability company, or (D) to the Holder's family member
or trust for the benefit of an individual Holder; provided that in each case the
transferee will be subject to the terms of this Agreement to the same extent as
if he were an original Holder hereunder.
(b) Each certificate representing Shares or Registrable Securities
shall (unless otherwise permitted by the provisions of the Agreement) be stamped
or otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR
UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
(c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
3.
(d) Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
2.2 Demand Registration.
(a) Subject to the conditions of this Section 2.2, if the Company
shall receive a written request from the Holders (the "Initiating Holders")
proposing to sell Registrable Securities at an anticipated aggregate offering
price, net of underwriting discounts and commissions, exceeding ten million
dollars ($10,000,000) (a "Qualified Public Offering")), then the Company shall,
within thirty (30) days of the receipt thereof, give written notice of such
request to all Holders, and subject to the limitations of this Section 2.2, use
its best efforts to effect, as soon as practicable, the registration under the
Securities Act of all Registrable Securities that the Holders request to be
registered.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 2.2
or any request pursuant to Section 2.4 and the Company shall include such
information in the written notice referred to in Section 2.2(a) or Section
2.4(a), as applicable. In such event, the right of any Holder to include its
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by a majority in interest of the
Initiating Holders (which underwriter or underwriters shall be reasonably
acceptable to the Company). Notwithstanding any other provision of this Section
2.2 or Section 2.4, if the underwriter advises the Company that marketing
factors require a limitation of the number of securities to be underwritten
(including Registrable Securities) then the Company shall so advise all Holders
of Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares that may be included in the underwriting shall be
allocated to the Holders of such Registrable Securities on a pro rata basis
based on the number of Registrable Securities held by all such Holders
(including the Initiating Holders); provided, however, that the number of shares
of Registrable Securities to be included in such underwriting and registration
shall not be reduced unless all other securities of the Company are first
entirely excluded from the underwriting and registration. Any Registrable
Securities excluded or withdrawn from such underwriting shall be withdrawn from
the registration.
(c) The Company shall not be required to effect a registration
pursuant to this Section 2.2:
(i) prior to one hundred eighty (180) days following the
effective date of the registration statement pertaining to the Initial Offering;
(ii) after the Company has effected two (2) registrations
pursuant to this Section 2.2, and such registrations have been declared or
ordered effective;
4.
(iii) if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 2.2, a certificate signed by the
Chairman of the Board stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its shareholders for such registration statement to be effected at such time, in
which event the Company shall have the right to defer such filing for a period
of not more than ninety (90) days after receipt of the request of the Initiating
Holders; provided that such right to delay a request shall be exercised by the
Company not more than once in any twelve (12) month period; or
(iv) if the Initiating Holders propose to dispose of shares of
Registrable Securities that may be immediately registered on Form S-3 pursuant
to a request made pursuant to Section 2.4 below.
2.3 Piggyback Registrations. The Company shall notify all Holders of
Registrable Securities in writing at least fifteen (15) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans or with respect to corporate reorganizations or other transactions under
Rule 145 of the Securities Act) and will afford each such Holder an opportunity
to include in such registration statement all or part of such Registrable
Securities held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
shall, within ten (10) days after the above-described notice from the Company,
so notify the Company in writing. Such notice shall state the intended method
of disposition of the Registrable Securities by such Holder. If a Holder
decides not to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, such Holder shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
(a) Underwriting. If the registration statement under which the
Company gives notice under this Section 2.3 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
Section 2.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; second, to the Holders on a pro rata
basis based on the total number of Registrable Securities held by the Holders;
and third, to any shareholder of the Company (other than a Holder) on a pro rata
basis. No such reduction shall (i) reduce the securities being offered by the
Company for its own account to be included in the registration and underwriting,
or (ii) reduce the amount of securities of the selling Holders included in the
registration below twenty-five percent (25%) of the total amount of securities
included in such registration, unless
5.
such offering is the Initial Offering and such registration does not include
shares of any other selling shareholders, in which event any or all of the
Registrable Securities of the Holders may be excluded in accordance with the
immediately preceding sentence. In no event will shares of any other selling
shareholder be included in such registration which would reduce the number of
shares which may be included by Holders without the written consent of Holders
of not less than a majority of the Registrable Securities proposed to be sold in
the offering. If any Holder disapproves of the terms of any such underwriting,
such Holder may elect to withdraw therefrom by written notice to the Company and
the underwriter, delivered at least ten (10) business days prior to the
effective date of the registration statement. Any Registrable Securities
excluded or withdrawn from such underwriting shall be excluded and withdrawn
from the registration. For any Holder which is a partnership or corporation, the
partners, retired partners and shareholders of such Holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing person shall be deemed to be a single "Holder",
and any pro rata reduction with respect to such "Holder" shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such "Holder," as defined in this sentence.
(b) Right to Terminate Registration. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 2.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration shall be borne by the Company in
accordance with Section 2.5 hereof.
2.4 Form S-3 Registration. In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests that
the Company effect a registration on Form S-3 (or any successor to Form S-3) or
any similar short-form registration statement and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.4:
(i) if Form S-3 (or any successor or similar form) is not
available for such offering by the Holders, or
(ii) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and
6.
such other securities (if any) at an aggregate price to the public of less than
two million dollars ($2,000,000), or
(iii) if within thirty (30) days of receipt of a written request
from any Holder or Holders pursuant to this Section 2.4, the Company gives
notice to such Holder or Holders of the Company's intention to make a public
offering within ninety (90) days;
(iv) if the Company shall furnish to the Holders a certificate
signed by the Chairman of the Board of Directors of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such Form S-3
registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration statement for a
period of not more than ninety (90) days after receipt of the request of the
Holder or Holders under this Section 2.4; provided, that such right to delay a
request shall be exercised by the Company not more than once in any twelve (12)
month period, or
(v) in any particular jurisdiction in which the Company would
be required to qualify to do business or to execute a general consent to service
of process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. Registrations effected pursuant to this
Section 2.4 shall not be counted as demands for registration or registrations
effected pursuant to Sections 2.2 or 2.3, respectively.
2.5 Expenses of Registration. Except as specifically provided herein, all
Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 or any registration under
Section 2.3 or Section 2.4 herein shall be borne by the Company. All Selling
Expenses incurred in connection with any registrations hereunder, shall be borne
by the holders of the securities so registered pro rata on the basis of the
number of shares so registered. The Company shall not, however, be required to
pay for expenses of any registration proceeding begun pursuant to Section 2.2 or
2.4, the request of which has been subsequently withdrawn by the Initiating
Holders unless (a) the withdrawal is based upon material adverse information
concerning the Company of which the Initiating Holders were not aware at the
time of such request or (b) the Holders of a majority of Registrable Securities
agree to forfeit their right to one requested registration pursuant to Section
2.2 or Section 2.4, as applicable, in which event such right shall be forfeited
by all Holders. If the Holders are required to pay the Registration Expenses,
such expenses shall be borne by the holders of securities (including Registrable
Securities) requesting such registration in proportion to the number of shares
for which registration was requested. If the Company is required to pay the
Registration Expenses of a withdrawn offering pursuant to clause (a) above, then
the Holders shall not forfeit their rights pursuant to Section 2.2 or Section
2.4 to a demand registration.
7.
2.6 Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for up to thirty (30) days or, if earlier,
until the Holder or Holders have completed the distribution related thereto. The
Company shall not be required to file, cause to become effective or maintain the
effectiveness of any registration statement that contemplates a distribution of
securities on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement for the period set forth in paragraph (a) above.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use its reasonable best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Use its best efforts to furnish, on the date that such
Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters, (i) an opinion, dated as of such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and (ii)
a letter dated as of such date, from the independent certified public
accountants of the Company, in form and
8.
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering addressed to the underwriters.
2.7 Termination of Registration Rights. All registration rights granted
under this Section 2 shall terminate and be of no further force and effect three
(3) years after the date of the Company's Initial Offering. In addition, a
Holder's registration rights shall expire if all Registrable Securities held by
and issuable to such Holder (and its affiliates, partners, former partners,
members and former members) may be sold under Rule 144 during any ninety (90)
day period.
2.8 Delay of Registration; Furnishing Information.
(a) No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the selling
Holders shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as shall be required to effect the registration of their
Registrable Securities.
(c) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.2 or Section 2.4 if, due to the
operation of subsection 2.2(b), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in Section 2.2 or Section 2.4,
whichever is applicable.
2.9 Indemnification. In the event any Registrable Securities are included
in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, officers and directors of each Holder,
any underwriter (as defined in the Securities Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of
the Securities Act or the Exchange Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or violations
(collectively a "Violation") by the Company: (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by
9.
such registration statement; and the Company will pay as incurred to each such
Holder, partner, officer, director, underwriter or controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided however, that the indemnity agreement contained in this Section 2.9(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, which consent shall not be unreasonably withheld, nor shall the Company
be liable in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by such Holder, partner, officer,
director, underwriter or controlling person of such Holder.
(b) To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration qualifications or compliance is being effected, indemnify and hold
harmless the Company, each of its directors, its officers and each person, if
any, who controls the Company within the meaning of the Securities Act, any
underwriter and any other Holder selling securities under such registration
statement or any of such other Holder's partners, directors or officers or any
person who controls such Holder, against any losses, claims, damages or
liabilities (joint or several) to which the Company or any such director,
officer, controlling person, underwriter or other such Holder, or partner,
director, officer or controlling person of such other Holder may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder under an
instrument duly executed by such Holder and stated to be specifically for use in
connection with such registration; and each such Holder will pay as incurred any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or other Holder, or partner, officer,
director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; provided, however,
that the indemnity agreement contained in this Section 2.9(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 2.9 exceed the proceeds from the offering received
by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
2.9 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 2.9, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such
10.
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 2.9, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by a
Holder hereunder exceed the proceeds from the offering received by such Holder.
(e) The obligations of the Company and Holders under this Section 2.9
shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this agreement. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, 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.
2.10 Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 2 may be assigned by a
Holder to a transferee or assignee of Registrable Securities which (a) is an
Affiliate, general partner, limited partner, retired partner, member or retired
member of a Holder, (b) is a Holder's family member or trust for the benefit of
an individual Holder, or (c) acquires at least one hundred thousand (100,000)
shares of Registrable Securities (as adjusted for stock splits and
combinations); provided, however, (i) the transferor shall, within ten (10) days
after such transfer, furnish to the Company written notice of the name and
address of such transferee or assignee and the securities with respect to which
such registration rights are being assigned and (ii) such transferee shall agree
to be subject to all restrictions set forth in this Agreement.
2.11 Amendment of Registration Rights. Any provision of this Section 2 may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of at least a majority of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this Section 2.11 shall be binding upon each Holder and the
11.
Company. By acceptance of any benefits under this Section 2, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.
2.12 Limitation on Subsequent Registration Rights. After the date of this
Agreement, the Company shall not, without the prior written consent of the
Holders of a majority of the Registrable Securities then outstanding, enter into
any agreement with any holder or prospective holder of any securities of the
Company that would grant such holder registration rights pari passu or senior to
those granted to the Holders hereunder.
2.13 "Market Stand-Off" Agreement; Agreement to Furnish Information. Each
Holder hereby agrees that such Holder shall not sell, transfer, make any short
sale of, grant any option for the purchase of, or enter into any hedging or
similar transaction with the same economic effect as a sale, any Common Stock
(or other securities) of the Company held by such Holder (other than those
included in the registration) for a period specified by the representative of
the underwriters of Common Stock (or other securities) of the Company not to
exceed one hundred eighty (180) days following the effective date of a
registration statement of the Company filed under the Securities Act; provided
that:
(a) such agreement shall apply only to the Company's Initial
Offering;
(b) all officers and directors of the Company enter into similar
agreements;
(c) such agreement shall not apply to the purchase or sale of
Common Stock (or other securities registered by the Company) acquired in the
Company's Initial Offering (other than any shares that are purchased in the
Initial Offering as part of a directed share program) or on the open market
after the Company's Initial Offering by ATGF II.
Each Holder agrees to execute and deliver such other agreements as
may be reasonably requested by the Company or the underwriter which are
consistent with the foregoing or which are necessary to give further effect
thereto. In addition, if requested by the Company or the representative of the
underwriters of Common Stock (or other securities) of the Company, each Holder
shall provide, within ten (10) days of such request, such information as may be
required by the Company or such representative in connection with the completion
of any public offering of the Company's securities pursuant to a registration
statement filed under the Securities Act. The obligations described in this
Section 2.13 shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated
in the future, or a registration relating solely to a Commission Rule 145
transaction on Form S-4 or similar forms that may be promulgated in the future.
The Company may impose stop-transfer instructions with respect to the shares of
Common Stock (or other securities) subject to the foregoing restriction until
the end of said one hundred eighty (180) day period.
2.14 Rule 144 Reporting. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the
12.
Securities Act, at all times after the effective date of the first registration
filed by the Company for an offering of its securities to the general public;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act; and
(c) So long as a Holder owns any Registrable Securities, furnish to
such Holder forthwith upon request: a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 of the Securities
Act, and of the Exchange Act (at any time after it has become subject to such
reporting requirements); a copy of the most recent annual or quarterly report of
the Company; and such other reports and documents as a Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing it to
sell any such securities without registration.
SECTION 3. COVENANTS OF THE COMPANY
3.1 Basic Financial Information and Reporting.
(a) The Company will maintain true books and records of account in
which full and correct entries will be made of all its business transactions
pursuant to a system of accounting established and administered in accordance
with generally accepted accounting principles consistently applied, and will set
aside on its books all such proper accruals and reserves as shall be required
under generally accepted accounting principles consistently applied.
(b) As soon as practicable after the end of each fiscal year of the
Company, and in any event within one hundred twenty (120) days thereafter, the
Company will furnish to each Investor a balance sheet of the Company, as at the
end of such fiscal year, and a statement of income and a statement of cash flows
of the Company, for such year, all prepared in accordance with generally
accepted accounting principles consistently applied and setting forth in each
case in comparative form the figures for the previous fiscal year, all in
reasonable detail. Such financial statements shall be accompanied by a report
and opinion thereon by independent public accountants of national standing
selected by the Company's Board of Directors.
(c) The Company will furnish each Investor, as soon as practicable
after the end of the first, second and third quarterly accounting periods in
each fiscal year of the Company, and in any event within forty-five (45) days
thereafter, a balance sheet of the Company as of the end of each such quarterly
period, and a statement of income and a statement of cash flows of the Company
for such period and for the current fiscal year to date, prepared in accordance
with generally accepted accounting principles, with the exception that no notes
need be attached to such statements and year-end audit adjustments may not have
been made.
(d) So long as an Investor (with its Affiliates) shall own not less
than one million (1,000,000) shares of Registrable Securities (as adjusted for
stock splits, combinations and the like) (a "Major Investor"), the Company will
furnish each such Major Investor requesting such information as soon as
practicable after the end of each month, and in any event within twenty-one (21)
days thereafter, a balance sheet of the Company as of the end of each such month
and a statement of income and a statement of cash flows of the Company for such
month and for the current fiscal year to date prepared in accordance with
generally accepted
13.
accounting principles consistently applied, with the exception that no notes
need be attached to such statements and year-end audit adjustments may not have
been made.
3.2 Inspection Rights. Each Major Investor shall have the right to visit
and inspect any of the properties of the Company or any of its subsidiaries, and
to discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, and to review such information as is reasonably
requested all at such reasonable times and as often as may be reasonably
requested; provided, however, that the Company shall not be obligated under this
Section 3.2 with respect to a competitor of the Company or with respect to
information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed.
3.3 Confidentiality of Records. Each Investor agrees to use, and to use
its best efforts to insure that its authorized representatives use, the same
degree of care as such Investor uses to protect its own confidential information
to keep confidential any information furnished to it which the Company
identifies as being confidential or proprietary (so long as such information is
not in the public domain), except that such Investor may disclose such
proprietary or confidential information to any partner, subsidiary or parent of
such Investor for the purpose of evaluating its investment in the Company as
long as such partner, subsidiary or parent is advised of the confidentiality
provisions of this Section 3.3.
3.4 Reservation of Common Stock. The Company will at all times reserve
and keep available, solely for issuance and delivery upon the conversion of the
Preferred Stock, all Common Stock issuable from time to time upon such
conversion.
3.5 Stock Vesting. Unless otherwise approved by the Board of Directors,
all stock options and other stock equivalents issued after the date of this
Agreement to employees, directors, consultants and other service providers shall
be subject to vesting as follows: (a) twenty-five percent (25%) of such stock
shall vest at the end of the first year following the earlier of the date of
issuance or such person's services commencement date with the company, and (b)
seventy-five percent (75%) of such stock shall vest over the remaining three (3)
years. With respect to any shares of stock purchased by any such person, the
Company's repurchase option shall provide that upon such person's termination of
employment or service with the Company, with or without cause, the Company or
its assignee (to the extent permissible under applicable securities laws and
other laws) shall have the option to purchase at cost any unvested shares of
stock held by such person.
3.6 Proprietary Information and Inventions Agreement. The Company shall
require all employees to execute and deliver a Proprietary Information and
Inventions Agreement in the form attached to the Purchase Agreement. The Company
shall require all consultants to execute and deliver an agreement containing
confidentiality and other reasonably protective provisions for the Company under
the circumstances.
3.7 Assignment of Right of First Refusal. In the event the Company
elects not to exercise any right of first refusal or right of first offer the
Company may have on a proposed transfer of any of the Company's outstanding
capital stock pursuant to the Company's charter documents, by contract or
otherwise, the Company shall, to the extent it may do so, assign such
14.
right of first refusal or right of first offer to each Major Investor. In the
event of such assignment, each Major Investor shall have a right to purchase its
pro rata portion (as defined in Section 4.1) of the capital stock proposed to be
transferred.
3.8 Termination of Covenants. All covenants of the Company contained in
Section 3 of this Agreement shall expire and terminate as to each Investor upon
the earlier of (i) the effective date of the registration statement pertaining
to the Initial Offering or (ii) upon (a) the sale, lease or other disposition of
all or substantially all of the assets of the Company or (b) an acquisition of
the Company by another corporation or entity by consolidation, merger or other
reorganization in which the holders of the Company's outstanding voting stock
immediately prior to such transaction own, immediately after such transaction,
securities representing less than fifty percent (50%) of the voting power of the
corporation or other entity surviving such transaction, provided that this
Section 3.8(ii)(b) shall not apply to a merger effected exclusively for the
purpose of changing the domicile of the Company (a "Change in Control").
SECTION 4. RIGHTS OF FIRST REFUSAL
4.1 Subsequent Offerings. So long as an Investor (with its Affiliates)
shall own not less than three hundred thousand (300,000) shares of Registrable
Securities (as adjusted for stock splits and combinations and the like) (a
"Significant Investor"), each such Significant Investor shall have a right of
first refusal to purchase its pro rata share of all Equity Securities, as
defined below, that the Company may, from time to time, propose to sell and
issue after the date of this Agreement, other than the Equity Securities
excluded by Section 4.7 hereof. Each Investor's pro rata share is equal to the
ratio of (a) the number of shares of the Company's Common Stock (including all
shares of Common Stock issued or issuable upon conversion of the Shares) which
such Investor is deemed to be a holder immediately prior to the issuance of such
Equity Securities to (b) the total number of shares of the Company's outstanding
Common Stock (including all shares of Common Stock issued or issuable upon
conversion of the Shares or upon the exercise of any outstanding warrants or
options) immediately prior to the issuance of the Equity Securities. The term
"Equity Securities" shall mean (i) any Common Stock, Preferred Stock or other
security of the Company, (ii) any security convertible, with or without
consideration, into any Common Stock, Preferred Stock or other security
(including any option to purchase such a convertible security), (iii) any
security carrying any warrant or right to subscribe to or purchase any Common
Stock, Preferred Stock or other security or (iv) any such warrant or right.
4.2 Exercise of Rights. If the Company proposes to issue any Equity
Securities, it shall give each Significant Investor written notice of its
intention, describing the Equity Securities, the price and the terms and
conditions upon which the Company proposes to issue the same. Each Significant
Investor shall have fifteen (15) days from the giving of such notice to agree to
purchase its pro rata share of the Equity Securities for the price and upon the
terms and conditions specified in the notice by giving written notice to the
Company and stating therein the quantity of Equity Securities to be purchased.
Notwithstanding the foregoing, the Company shall not be required to offer or
sell such Equity Securities to any Significant Investor who would cause the
Company to be in violation of applicable federal securities laws by virtue of
such offer or sale.
15.
4.3 Issuance of Equity Securities to Other Persons. If not all of the
Significant Investors elect to purchase their pro rata share of the Equity
Securities, then the Company shall promptly notify in writing the Significant
Investors who do so elect and shall offer such Significant Investors the right
to acquire such unsubscribed shares. The Significant Investors shall have five
(5) days after receipt of such notice to notify the Company of its election to
purchase all or a portion thereof of the unsubscribed shares. If the Significant
Investors fail to exercise in full the rights of first refusal, the Company
shall have ninety (90) days thereafter to sell the Equity Securities in respect
of which the Significant Investor's rights were not exercised, at a price and
upon general terms and conditions materially no more favorable to the purchasers
thereof than specified in the Company's notice to the Significant Investors
pursuant to Section 4.2 hereof. If the Company has not sold such Equity
Securities within ninety (90) days of the notice provided pursuant to Section
4.2, the Company shall not thereafter issue or sell any Equity Securities,
without first offering such securities to the Significant Investors in the
manner provided above.
4.4 Sale Without Notice. In lieu of giving notice to the Significant
Investors prior to the issuance of Equity Securities as provided in Section 4.2,
the Company may elect to give notice to the Significant Investors within thirty
(30) days after the issuance of Equity Securities. Such notice shall describe
the type, price and terms of the Equity Securities. Each Significant Investor
shall have twenty (20) days from the date of receipt of such notice to elect to
purchase its pro rata share of Equity Securities (as defined in Section 4.1, and
calculated before giving effect to the sale of the Equity Securities to the
purchasers thereof). The closing of such sale shall occur within sixty (60) days
of the date of notice to the Significant Investors.
4.5 Termination and Waiver of Rights of First Refusal. The rights of
first refusal established by this Section 4 shall not apply to, and shall
terminate upon the earlier of (i) the effective date of the registration
statement pertaining to the Company's Initial Offering or (ii) a Change in
Control. The rights of first refusal established by this Section 4 may be
amended, or any provision waived with the written consent of Significant
Investors holding a majority of the Registrable Securities held by all
Significant Investors, or as permitted by Section 5.6.
4.6 Transfer of Rights of First Refusal. The rights of first refusal of
each Significant Investor under this Section 4 may be transferred to the same
parties, subject to the same restrictions as any transfer of registration rights
pursuant to Section 2.10.
4.7 Excluded Securities. The rights of first refusal established by this
Section 4 shall have no application to any of the following Equity Securities:
(a) shares of Common Stock (and/or options, warrants or other
Common Stock purchase rights issued pursuant to such options, warrants or other
rights) issued or to be issued after the Original Issue Date (as defined in the
Company's Certificates of Incorporation) to employees, officers or directors of,
or consultants or advisors to the Company or any subsidiary, pursuant to stock
purchase or stock option plans or other arrangements that are approved by the
Board of Directors;
(b) stock issued pursuant to any rights or agreements outstanding
as of the date of this Agreement, options and warrants outstanding as of the
date of this Agreement, and
16.
stock issued pursuant to any such rights or agreements granted after the date of
this Agreement; provided that the rights of first refusal established by this
Section 4 applied with respect to the initial sale or grant by the Company of
such rights or agreements;
(c) any Equity Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business
combination;
(d) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
(e) shares of Common Stock issued upon conversion of the Shares;
(f) any Equity Securities issued pursuant to any equipment leasing
or loan arrangement, or debt financing from a bank or similar financial or
lending institution;
(g) any Equity Securities that are issued by the Company pursuant
to a registration statement filed under the Securities Act; and
(h) shares of the Company's Common Stock or Preferred Stock issued
in connection with strategic transactions involving the Company and other
entities, including (i) joint ventures, manufacturing, marketing or distribution
arrangements or (ii) technology transfer or development arrangements; provided
that such strategic transactions and the issuance of shares therein, has been
approved by the Company's Board of Directors.
SECTION 5. MISCELLANEOUS
5.1 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Washington as applied to agreements among
Washington residents entered into and to be performed entirely within
Washington.
5.2 Survival. The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by any Holder and the closing
of the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
5.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.
17.
5.4 Entire Agreement. This Agreement, the Exhibits and Schedules hereto,
the Purchase Agreement and the other documents delivered pursuant thereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
5.5 Severability. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
5.6 Amendment and Waiver.
(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of at least seventy percent (70%) of the Registrable Securities.
(b) Except as otherwise expressly provided, the obligations of the
Company and the rights of the Holders under this Agreement may be waived only
with the written consent of the holders of at least a majority of the
Registrable Securities.
(c) Notwithstanding the foregoing, this Agreement may be amended
with only the written consent of the Company to include additional purchasers of
Shares as "Investors," "Holders" and parties hereto.
5.7 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
5.8 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the party
to be notified at the address as set forth on the signature pages hereof or
Exhibit A hereto or at such other address as such party may designate by ten
(10) days advance written notice to the other parties hereto.
18.
5.9 Attorneys' Fees. In the event that any suit or action is instituted
to enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
5.10 Titles and Subtitles. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
5.11 Additional Investors. Notwithstanding anything to the contrary
contained herein, if the Company shall issue additional shares of its Preferred
Stock pursuant to the Purchase Agreement, any purchaser of such shares of
Preferred Stock may become a party to this Agreement by executing and delivering
an additional counterpart signature page to this Agreement and shall be deemed
an "Investor" hereunder.
5.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
[THIS SPACE INTENTIONALLY LEFT BLANK]
19.
In Witness Whereof, the parties hereto have executed this Investor Rights
Agreement as of the date set forth in the first paragraph hereof.
COMPANY:
Mercata, Inc.
By: _______________________________
President
SIGNATURE PAGE TO INVESTORS RIGHTS AGREEMENT
FOUNDER:
Vulcan Ventures Incorporated
By: _______________________________
Xxxxxxx X. Xxxxx
Vice President
SIGNATURE PAGE TO INVESTORS RIGHTS AGREEMENT
INVESTORS(S):
Highland Capital Partners IV Limited
Partnership
By: Highland Management Partners
IV LLC
Its: General Partner
By: ______________________
Member
Highland Entrepreneurs' Fund IV
Limited Partnership
By: Highland Management Partners
IV LLC
Its: General Partner
By: ______________________
Member
SIGNATURE PAGE TO INVESTORS RIGHTS AGREEMENT
NOTE: THIS PAGE, DATED AS OF __________________, 1999, IS A COUNTERPART
SIGNATURE PAGE TO THAT CERTAIN INVESTOR RIGHTS AGREEMENT, DATED AS OF SEPTEMBER
30, 1999 (THE "RIGHTS AGREEMENT"), BY AND AMONG MERCATA, INC., A DELAWARE
CORPORATION, AND EACH OF THOSE PERSONS AND ENTITIES WHOSE NAMES ARE SET FORTH ON
THE SCHEDULE OF INVESTORS ATTACHED THERETO AS EXHIBIT A. EXECUTION AND DELIVERY
OF THIS SIGNATURE PAGE BY THE UNDERSIGNED REPRESENTS THE UNDERSIGNED'S AGREEMENT
TO BECOME A PARTY TO THE RIGHTS AGREEMENT AS AN "INVESTOR."
ATGF II
By: _________________________
Name: _______________________
Title: ______________________
Beagle Limited
By: _________________________
Name: _______________________
Title: ______________________
Global Retail Partners, L.P.
By: _________________________
Name: _______________________
Title: ______________________
SIGNATURE PAGE TO INVESTORS RIGHTS AGREEMENT
DLJ Diversified Partners, L.P.
By: _________________________________
Name: _______________________________
Title: ______________________________
DLJ Diversified Partners-A, L.P.
By: _________________________________
Name: _______________________________
Title: ______________________________
GRP Partners, L.P.
By: _________________________________
Name: _______________________________
Title: ______________________________
Global Retail Partners Funding, Inc.
By: _________________________________
Name: _______________________________
Title: ______________________________
2.
DLJ ESC II, L.P.
By: ____________________________________
Name: __________________________________
Title: _________________________________
Waelinvest
By: ____________________________________
Name: __________________________________
Title: _________________________________
Watershed Capital I, L.P.
By: Watershed Capital G.P. I, L.P.
Its General Partner
By: Watershed Capital G.P. I, L.L.C.
Its General Partner
By: ____________________________
Xxxxx X. Xxxxxxxxxx
Managing Member
Dated: As of ______________, 1999
________________________________________
Xxxxx X. Xxxxxxx
________________________________________
Xxxx Xxxxx
3.
Agreed to and Accepted By:
Mercata, Inc.
000 000xx Xxxxxx XX, Xxxxx 000
Xxxxxxxx, XX 00000
_______________________________
Xxxxxx Xxx Xxxx
President
4.
Exhibit A
SCHEDULE OF INVESTORS
Name and Address
Vulcan Ventures Incorporated
000 - 000xx Xxxxxx X.X., Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Highland Capital Partners IV Limited Partnership
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Highland Entrepreneurs' Fund IV Limited Partnership
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
ATGF II
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Beagle Limited
c/o Hecht and Company
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Global Retail Partners, L.P.
0000 Xxxxxx xx xxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
DLJ Diversified Partners, L.P.
0000 Xxxxxx xx xxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
DLJ Diversified Partners - A, L.P.
0000 Xxxxxx xx xxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
GRP Partners, L.P.
0000 Xxxxxx xx xxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
INVESTORS RIGHTS AGREEMENT
A-1
Global Retail Partners Funding, Inc.
0000 Xxxxxx xx xxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
XXX XXX XX X.X.
0000 Xxxxxx of the Stars, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Waelinvest
000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Watershed Capital I, L.P.
Two Union Square
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Xxxxx X. Xxxxxxx
000 - 000xx Xxxxxx XX, Xxxxx 000
Xxxxxxxx, XX 00000-0000
Xxxx Xxxxx
000 - 000xx Xxxxxx XX, Xxxxx 000
Xxxxxxxx, XX 00000-0000
2.
EXHIBIT E
MERCATA, INC.
CO-SALE AGREEMENT
This Co-Sale Agreement (the "Agreement") is made and entered into as of
this 30th day of September, 1999, by and among Mercata, Inc., a Delaware
corporation (the "Company"), each of the persons and entities listed on Exhibit
A hereto (the "Investors"), and Vulcan Ventures Incorporated (referred to herein
as the "Founder").
Recitals
Whereas, the Founder is the beneficial owner of an aggregate of one million
(1,000,000) shares of Common Stock of the Company, fourteen million (14,000,000)
shares of Series A Preferred Stock of the Company and one million eight hundred
eighty-eight thousand (1,888,000) shares of Series B Preferred Stock of the
Company;
Whereas, Investors are purchasing shares of the Company's Series B
Preferred Stock (the "Series B Preferred Stock") pursuant to that certain Series
B Preferred Stock Purchase Agreement (the "Purchase Agreement") of even date
herewith;
Whereas, such Investors were induced by the Company to purchase the Series
B Preferred Stock in part by the Company's and the Founder's agreement to enter
into this Agreement; and
Whereas, the parties desire to enter into this Agreement in order to grant
rights of co-sale to each Investor.
Now, Therefore, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement and the
Purchase Agreement and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree hereto as
follows:
1. Definitions.
(a) "Co-Sale Stock" shall mean shares of the Company's Common Stock
and Preferred Stock now owned or subsequently acquired by the Founder by gift,
purchase, dividend, option exercise or any other means whether or not such
securities are only registered in a Founder's name or beneficially or legally
owned by Founder, including any interest of a spouse in any of the Co-Sale
Stock, whether that interest is asserted pursuant to marital property laws or
otherwise. The number of shares of Co-Sale Stock owned by the Founder as of the
date hereof are set forth on Exhibit B, which Exhibit may be amended from time
to time by the Company to reflect changes in the number of shares owned by the
Founder, but the failure to so amend shall have no effect on such Co-Sale Stock
being subject to this Agreement.
(b) "Common Stock" shall mean the Company's Common Stock and shares
of Common Stock issued or issuable upon exercise of any option, warrant or other
security or right of any kind convertible into or exchangeable for Common Stock.
1.
(c) "Preferred Stock" shall mean the Company's Preferred Stock and
shares of Preferred Stock issued or issuable upon exercise of any option,
warrant or other security or right of any kind convertible into or exchangeable
for Preferred Stock.
(d) For the purpose of this Agreement, the term "Transfer" shall
include any sale, assignment, encumbrance, hypothecation, pledge, conveyance in
trust, gift, transfer by request, devise or descent, or other transfer or
disposition of any kind, including, but not limited to, transfers to receivers,
levying creditors, trustees or receivers in bankruptcy proceedings or general
assignees for the benefit of creditors, whether voluntary or by operation of
law, directly or indirectly, of any of the Co-Sale Stock.
(e) "Affiliate" of a person or entity means any person or entity who
controls, is controlled by or under common control with such person or entity.
2. Transfers by a Founder.
(a) If the Founder proposes to Transfer any shares of Co-Sale Stock
then the Founder shall promptly give written notice (the "Notice")
simultaneously to the Company and to each of the Investors at least thirty (30)
days prior to the closing of such Transfer. The Notice shall describe in
reasonable detail the proposed Transfer including, without limitation, the
number of shares of Co-Sale Stock to be transferred, the nature of such
Transfer, the consideration to be paid, and the name and address of each
prospective purchaser or transferee. In the event that the Transfer is being
made pursuant to the provisions of Section 3(a), the Notice shall state under
which section the Transfer is being made.
(b) Each Investor shall have the right, exercisable upon written
notice to the Founder within fifteen (15) days after the Notice, to participate
in such Transfer of Co-Sale Stock on the same terms and conditions. Such notice
shall indicate the number of shares of Common Stock and/or Preferred Stock such
Investor wishes to sell under his or her right to participate. To the extent one
or more of the Investors exercise such right of participation in accordance with
the terms and conditions set forth below, the number of shares of Co-Sale Stock
that the Founder may sell in the transaction shall be correspondingly reduced.
(c) Each Investor may sell all or any part of that number of shares
equal to the product obtained by multiplying (i) the aggregate number of shares
of Co-Sale Stock covered by the Notice by (ii) a fraction the numerator of which
is the number of shares of Common Stock (including shares of Preferred Stock on
an as converted basis) owned by such Investor at the time of the Transfer and
the denominator of which is the total number of shares of Common Stock
(including shares of Preferred Stock on an as converted basis) owned by Founder
and the Investors at the time of the Transfer.
(d) Each Investor who elects to participate in the Transfer pursuant
to this Section 2 (a "Participant") shall effect its participation in the
Transfer by promptly delivering to Founder for transfer to the prospective
purchaser one or more certificates, properly endorsed for transfer, which
represent:
(i) the type and number of shares of Common Stock and/or
Preferred Stock which such Participant elects to sell; or
2.
(ii) that number of shares of Preferred Stock which is at such
time convertible into the number of shares of Common Stock which such
Participant elects to sell; provided, however, that if the prospective purchaser
objects to the delivery of Preferred Stock in lieu of Common Stock, such
Participant shall convert such Preferred Stock into Common Stock and deliver
Common Stock as provided in Section 2(d)(i) above. The Company agrees to make
any such conversion concurrent with the actual transfer of such shares to the
purchaser.
(e) The stock certificate or certificates that the Participant
delivers to Founder pursuant to Section 2(d) shall be transferred to the
prospective purchaser in consummation of the sale of the Common Stock pursuant
to the terms and conditions specified in the Notice, and the Founder shall
concurrently therewith remit to such Participant that portion of the sale
proceeds to which such Participant is entitled by reason of its participation in
such sale. To the extent that any prospective purchaser or purchasers prohibits
such assignment or otherwise refuses to purchase shares or other securities from
a Participant exercising its rights of co-sale hereunder, the Founder shall not
sell to such prospective purchaser or purchasers any Co-Sale Stock unless and
until, simultaneously with such sale, the Founder shall purchase such shares or
other securities from such Participant on the same terms and conditions
specified in the Notice.
(f) The exercise or non-exercise of the rights of the Investors
hereunder to participate in one or more Transfers of Co-Sale Stock made by the
Founder shall not adversely affect their rights to participate in subsequent
Transfers of Co-Sale Stock subject to Section 2(a).
(g) If none of the Investors elect to participate in the sale of the
Co-Sale Stock subject to the Notice, the Founder may, not later than sixty (60)
days following delivery to the Company of the Notice, enter into an agreement
providing for the closing of the Transfer of the Co-Sale Stock covered by the
Notice within thirty (30) days of such agreement on terms and conditions not
more materially favorable to the transferor than those described in the Notice.
Any proposed transfer on terms and conditions materially more favorable than
those described in the Notice, as well as any subsequent proposed transfer of
any of the Co-Sale Stock by Founder, shall again be subject to the co-sale
rights of the Investors and shall require compliance by Founder with the
procedures described in this Section 2.
3. Exempt Transfers.
(a) Notwithstanding the foregoing, the co-sale rights of the
Investors shall not apply to (i) any transfer to the ancestors, descendants or
spouse or to trusts for the benefit of such persons or the Founder, (ii) any
transfer or transfers by a Founder to another Founder (the "Transferee-Founder")
so long as the Transferee-Founder is, at the time of the transfer, employed by
or acting as a consultant or director of the Company, (iii) any pledge of Co-
Sale Stock made pursuant to a bona fide loan transaction that creates a mere
security interest, (iv) any bona fide gift, or (v) any transfer to an Affiliate;
provided that in the event of any transfer made pursuant to one of the
exemptions provided above, (A) the Founder shall inform the Investors of such
pledge, transfer or gift prior to effecting it and (B) the pledgee, transferee
or donee shall furnish the Investors with a written agreement to be bound by and
comply with all provisions of Section 2. Except with respect to Co-Sale Stock
transferred under clause (i) above (which Co-Sale Stock shall no longer be
subject to the co-sale rights of the Investors), such transferred Co-
3.
Sale Stock shall remain "Co-Sale Stock" hereunder, and such pledgee, transferee
or donee shall be treated as the "Founder" for purposes of this Agreement.
(b) Notwithstanding the foregoing, the provisions of Section 2 shall
not apply to the sale of any Co-Sale Stock to the public pursuant to a
registration statement filed with, and declared effective by, the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act").
(c) This Agreement is subject to, and shall in no manner limit the
right which the Company may have to repurchase securities from the Founder
pursuant to (i) a stock restriction agreement or other agreement between the
Company and the Founder and (ii) any right of first refusal set forth in the
Bylaws of the Company.
4. Prohibited Transfers.
(a) In the event that Founder should Transfer any Co-Sale Stock in
contravention of the co-sale rights of each Investor under this Agreement (a
"Prohibited Transfer"), each Investor, in addition to such other remedies as may
be available at law, in equity or hereunder, shall have the put option provided
below, and the Founder shall be bound by the applicable provisions of such
option.
(b) In the event of a Prohibited Transfer, each Investor shall have
the right to sell to Founder the type and number of shares of Common Stock equal
to the number of shares each Investor would have been entitled to transfer to
the purchaser under Section 2(c) hereof had the Prohibited Transfer been
effected pursuant to and in compliance with the terms hereof. Such sale shall be
made on the following terms and conditions:
(i) The price per share at which the shares are to be sold to
the Founder shall be equal to the price per share paid by the purchaser to the
Founder in such Prohibited Transfer. The Founder shall also reimburse each
Investor for any and all fees and expenses, including legal fees and expenses,
incurred pursuant to the exercise or the attempted exercise of the Investor's
rights under Section 2.
(ii) Within ninety (90) days after the date on which an
Investor received notice of the Prohibited Transfer or otherwise became aware of
the Prohibited Transfer, such Investor shall, if exercising the option created
hereby, deliver to the Founder the certificate or certificates representing
shares to be sold, each certificate to be properly endorsed for transfer.
(iii) The Founder shall, upon receipt of the certificate or
certificates for the shares to be sold by an Investor, pursuant to this Section
4(b), pay the aggregate purchase price therefor and the amount of reimbursable
fees and expenses, as specified in Section 4(b)(i), in cash or by other means
acceptable to the Investor.
(iv) Notwithstanding the foregoing, any attempt by a Founder to
transfer Co-Sale Stock in violation of Section 2 hereof shall be voidable at the
option of a majority in interest of the Investors if the Investors do not elect
to exercise the put option set forth in this Section 4, and the Company agrees
it will not effect such a transfer nor will it treat
4.
any alleged transferee as the holder of such shares without the written consent
of a majority in interest of the Investors.
5. Legend.
(a) Each certificate representing shares of Co-Sale Stock now or
hereafter owned by the Founder or issued to any person in connection with a
transfer pursuant to Section 3(a) hereof shall be endorsed with the following
legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN CO-SALE AGREEMENT BY AND BETWEEN THE SHAREHOLDER, THE COMPANY AND
CERTAIN HOLDERS OF STOCK OF THE COMPANY. COPIES OF SUCH AGREEMENT MAY BE
OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY."
(b) The Founder agrees that the Company may instruct its transfer
agent to impose transfer restrictions on the shares represented by certificates
bearing the legend referred to in Section 5(a) above to enforce the provisions
of this Agreement and the Company agrees to promptly do so. The legend shall be
removed upon termination of this Agreement.
6. Miscellaneous.
(a) Conditions to Exercise of Rights. Exercise of the Investors'
rights under this Agreement shall be subject to and conditioned upon, and the
Founder and the Company shall use their best efforts to assist each Investor in,
compliance with applicable laws.
(b) Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Washington as applied to agreements among
Washington residents entered into and to be performed entirely within
Washington.
(c) Amendment. Any provision of this Agreement may be amended and
the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only by the written consent
of (i) as to the Company, only the Company, (ii) as to the Investors, persons
holding more than a majority in interest of the Common Stock (including shares
of Preferred Stock on an as converted basis) held by the Investors and their
assignees, pursuant to Section 6(d) hereof, and (iii) as to the Founder, only
the Founder; provided, that no consent of the Founder shall be necessary for any
amendment and/or restatement which includes additional holders of Preferred
Stock or other preferred stock of the Company as "Investors" and parties hereto.
Any amendment or waiver effected in accordance with clauses (i), (ii), and (iii)
of this Section 6(c) shall be binding upon each Investor, its successors and
assigns, the Company and the Founder.
(d) Assignment of Rights. This Agreement constitutes the entire
agreement between the parties relative to the specific subject matter hereof.
Any previous agreement among the parties relative to the specific subject matter
hereof is superseded by this Agreement. This Agreement and the rights and
obligations of the parties hereunder shall inure to the benefit
5.
of, and be binding upon, their respective successors, assigns and legal
representatives. Each Investor may transfer or assign its rights hereunder only
along with the corresponding shares of Common Stock or Preferred Stock and any
purported transfer in violation of the foregoing shall be void and of no effect.
(e) Term. This Agreement shall continue in full force and effect
from the date hereof through the earliest of the following dates, on which date
it shall terminate in its entirety:
(i) the date of the closing of a firmly underwritten public
offering of the Common Stock pursuant to a registration statement filed with the
Securities and Exchange Commission, and declared effective under the Securities
Act of 1933, as amended;
(ii) the date of the closing of a sale, lease, or other
disposition of all or substantially all of the Company's assets or the Company's
merger into or consolidation with any other corporation or other entity, or any
other corporate reorganization, in which the holders of the Company's
outstanding voting stock immediately prior to such transaction own, immediately
after such transaction, securities representing less than fifty percent (50%) of
the voting power of the corporation or other entity surviving such transaction,
provided, that this Section 6(e)(ii) shall not apply to a merger effected
exclusively for the purpose of changing the domicile of the Company; or
(f) the date as of which the parties hereto terminate this Agreement
by written consent of a majority in interest of the Investors (excluding Vulcan)
and a majority in interest of the Founder.
(g) Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (iv) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
party to be notified at the address as set forth on the signature page hereof or
at such other address as such party may designate by ten (10) days advance
written notice to the other parties hereto.
(h) Severability. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
(i) Attorneys' Fees. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation, such
6.
reasonable fees and expenses of attorneys and accountants, which shall include,
without limitation, all fees, costs and expenses of appeals.
(j) Entire Agreement. This Agreement and the Exhibits hereto, along
with the Purchase Agreement and each of the Exhibits thereto, constitute the
full and entire understanding and agreement between the parties with regard to
the subjects hereof and thereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
(k) Additional Investors. Notwithstanding anything to the contrary
contained herein, if the Company shall issue additional shares of its Series B
Preferred Stock pursuant to the Purchase Agreement, any purchaser of such shares
of Series B Preferred Stock may become a party to this Agreement by executing
and delivering an additional counterpart signature page to this Agreement and
shall be deemed an "Investor" hereunder.
(l) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[THIS SPACE INTENTIONALLY LEFT BLANK]
7.
The foregoing Co-Sale Agreement is hereby executed as of the date first
above written.
COMPANY:
Mercata, Inc.
By:________________________________
President
SIGNATURE PAGE TO CO-SALE AGREEMENT
FOUNDER:
Vulcan Ventures Incorporated
By:___________________________________
Name:_________________________________
Title:________________________________
SIGNATURE PAGE TO CO-SALE AGREEMENT
INVESTORS(S):
Highland Capital Partners IV Limited
Partnership
By: Highland Management Partners IV LLC
Its: General Partner
By:________________________________
Member
Highland Entrepreneurs' Fund IV Limited
Partnership
By: Highland Management Partners IV LLC
Its: General Partner
By:________________________________
Member
SIGNATURE PAGE TO CO-SALE AGREEMENT
NOTE: THIS PAGE, DATED AS OF ____________________, 1999, IS A COUNTERPART
SIGNATURE PAGE TO THAT CERTAIN CO-SALE AGREEMENT, DATED AS OF SEPTEMBER 30,
1999, BY AND AMONG MERCATA, INC., A DELAWARE CORPORATION, VULCAN VENTURES
INCORPORATED, A WASHINGTON CORPORATION, AND EACH OF THOSE PERSONS AND ENTITIES
WHOSE NAMES ARE SET FORTH ON THE SCHEDULE OF INVESTORS ATTACHED THERETO AS
EXHIBIT A. EXECUTION AND DELIVERY OF THIS SIGNATURE PAGE BY THE UNDERSIGNED
REPRESENTS THE UNDERSIGNED'S AGREEMENT TO BECOME A PARTY TO THE CO-SALE
AGREEMENT AS AN "INVESTOR."
ATGF II
By:______________________________
Name:____________________________
Title:___________________________
Beagle Limited
By:______________________________
Name:____________________________
Title:___________________________
Global Retail Partners, L.P.
By:______________________________
Name:____________________________
Title:___________________________
SIGNATURE PAGE TO CO-SALE AGREEMENT
DLJ Diversified Partners, L.P.
By:___________________________________
Name:_________________________________
Title:________________________________
DLJ Diversified Partners-A, L.P.
By:___________________________________
Name:_________________________________
Title:________________________________
GRP Partners, L.P.
By:___________________________________
Name:_________________________________
Title:________________________________
Global Retail Partners Funding, Inc.
By:___________________________________
Name:_________________________________
Title:________________________________
2.
DLJ ESC II, L.P.
By:________________________________________
Name:______________________________________
Title:_____________________________________
Waelinvest
By:________________________________________
Name:______________________________________
Title:_____________________________________
Watershed Capital I, L.P.
By: Watershed Capital G.P. I, L.P.
Its General Partner
By: Watershed Capital G.P. I, L.L.C.
Its General Partner
By:_______________________________
Xxxxx X. Xxxxxxxxxx
Managing Member
Dated: As of_________________________, 1999
___________________________________________
Xxxxx X. Xxxxxxx
___________________________________________
Xxxx Xxxxx
3.
Agreed to and Accepted By:
Mercata, Inc.
000 000xx Xxxxxx XX, Xxxxx 000
Xxxxxxxx, XX 00000
______________________________________
Xxxxxx Xxx Xxxx
President
4.
Exhibit A
LIST OF INVESTORS
Highland Capital Partners IV Limited Partnership
Highland Entrepreneurs' Fund IV Limited Partnership
ATGF II
Beagle Limited
Global Retail Partners, L.P.
DLJ Diversified Partners, L.P.
DLJ Diversified Partners - A, L.P.
GRP Partners, L.P.
Global Retail Partners Funding, Inc.
DLJ ESC II L.P.
Waelinvest
Watershed Capital I, L.P.
Xxxxx X. Xxxxxxx
Xxxx Xxxxx
CO-SALE AGREEMENT
Exhibit B
CO-SALE STOCK OWNERSHIP
Name of Founder Co-Sale Stock
Vulcan Ventures Incorporated 1,000,000 shares of Common Stock
14,000,000 shares of Series A Preferred Stock
1,888,000 shares of Series B Preferred Stock
CO-SALE AGREEMENT
EXHIBIT F
MERCATA, INC.
VOTING AGREEMENT
This Voting Agreement (this "Agreement") is made and entered into as of
this 30th day of September, 1999, by and among Mercata, Inc., a Delaware
corporation (the "Company"), the persons and entities listed on Exhibit A hereto
(the "Investors").
Witnesseth
Whereas, the Investors are purchasing shares of the Company's Series B
Preferred Stock (the "Series B Preferred Stock"), pursuant to that certain
Series B Preferred Stock Purchase Agreement (the "Purchase Agreement") of even
date herewith (the "Financing"); and
Whereas, in connection with the consummation of the Financing, the Company
and the Investors have agreed to provide for the future voting of their shares
of the Company's capital stock as set forth below.
Now, Therefore, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Agreement
1. Voting
1.1 Investor Shares. The Investors each agree to hold all shares of
voting capital stock of the Company registered in their respective names or
beneficially owned by them as of the date hereof and any and all other
securities of the Company legally or beneficially acquired by each of the
Investors after the date hereof (hereinafter collectively referred to as the
"Investor Shares") subject to, and to vote the Investor Shares in accordance
with, the provisions of this Agreement.
1.2 Election of Directors. For so long as at least 10,000,000 shares of
Preferred Stock remain outstanding (subject to adjustment for stock splits,
dividends or the like) and the authorized size of the Company's Board of
Directors is seven (7) or more, on all matters relating to the election of
directors of the Company, the Investors agree to vote all Investor Shares held
by them (or the holders thereof shall consent pursuant to an action by written
consent of the holders of capital stock of the Company) so as to elect a member
of the Company's Board of Directors as follows:
(a) At each election of directors in which the holders of Common
Stock and holders of Preferred Stock, voting together as a single class, are
entitled to elect directors of the Company, the Investors shall vote all of
their respective Investor Shares so as to elect: one (1) representative of
Global Retail Partners Funding, Inc. so long as it or its affiliates hold not
less than 1,792,000 shares of Preferred Stock (as adjusted for stock splits,
dividends and the like); provided, that in no event will this provision require
the Investors to vote any shares so as to
1.
elect more than one (1) representative of Global Retail Partners Funding, Inc.
to the Company's Board of Directors at any one time. Any vote taken to remove
any director elected pursuant to this Section 1.2(a), or to fill any vacancy
created by the resignation or death of a director elected pursuant to this
Section 1.2(a), shall also be subject to the provisions of this Section 1.2(a).
(b) At each election of directors in which the holders of Series A
Preferred Stock, voting as a separate class, are entitled to elect directors of
the Company, the Investors shall vote all of their respective Investor Shares so
as to elect two (2) representatives of Vulcan Ventures Incorporated so long as
it holds not less than 11,200,000 shares of Series A Preferred Stock (as
adjusted for stock splits, dividends and the like). Any vote taken to remove
any director elected pursuant to this Section 1.2(b), or to fill any vacancy
created by the resignation or death of a director elected pursuant to this
Section 1.2(b), shall also be subject to the provisions of this Section 1.2(b);
(c) At each election of directors in which the holders of Series B
Preferred Stock, voting as a separate class, are entitled to elect directors of
the Company, the Investors shall vote all of their respective Investor Shares so
as to elect one designee of Highland Capital Partners IV Limited Partnership so
long as it holds not less than 4,480,000 shares of Series B Preferred Stock (as
adjusted for stock splits, dividends and the like). Any vote taken to remove
any director elected pursuant to this Section 1.2(c), or to fill any vacancy
created by the resignation or death of a director elected pursuant to this
Section 1.2(c), shall also be subject to the provisions of this Section 1.2(c).
(d) At each election of directors in which the holders of Common
Stock, voting as a separate class, are entitled to elect directors of the
Company, the Investors shall vote all of their respective Investor Shares so as
to elect: (i) the person serving as Chief Executive Officer of the Company, or
if there is no duly elected Chief Executive Officer, one (1) individual
nominated by the holders of a majority in interest of the Common Stock and (ii)
one (1) individual nominated by the holders of a majority in interest of the
Common Stock. Any vote taken to remove any director elected pursuant to this
Section 1.2(d), or to fill any vacancy created by the resignation or death of a
director elected pursuant to this Section 1.2(d), shall also be subject to the
provisions of this Section 1.2(d).
1.3 Legend
(a) Concurrently with the execution of this Agreement, there shall be
imprinted or otherwise placed, on certificates representing the Investor Shares
the following restrictive legend (the "Legend"):
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS AND CONDITIONS OF A VOTING AGREEMENT WHICH PLACES CERTAIN
RESTRICTIONS ON THE VOTING OF THE SHARES REPRESENTED HEREBY. ANY PERSON
ACCEPTING ANY INTEREST IN SUCH SHARES SHALL BE DEEMED TO AGREE TO AND SHALL
BECOME BOUND BY ALL THE PROVISIONS OF SUCH AGREEMENT. A COPY OF SUCH VOTING
AGREEMENT WILL BE FURNISHED TO THE RECORD HOLDER OF THIS CERTIFICATE
2.
WITHOUT CHARGE UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE
OF BUSINESS."
(b) The Company agrees that, during the term of this Agreement, it
will not remove, and will not permit to be removed (upon registration of
transfer, reissuance of otherwise), the Legend from any such certificate and
will place or cause to be placed the Legend on any new certificate issued to
represent Investor Shares theretofore represented by a certificate carrying the
Legend.
1.4 Successors. The provisions of this Agreement shall be binding upon
the successors in interest to any of the Investor Shares. The Company shall not
permit the transfer of any of the Investor Shares on its books or issue a new
certificate representing any of the Investor Shares unless and until the person
to whom such security is to be transferred shall have executed a written
agreement, substantially in the form of this Agreement, pursuant to which such
person becomes a party to this Agreement and agrees to be bound by all the
provisions hereof as if such person were an Investor.
1.5 Other Rights. Except as provided by this Agreement or any other
agreement entered into in connection with the Financing, each Investor shall
exercise the full rights of a holder of capital stock of the Company with
respect to the Investor Shares.
2. Termination
2.1 This Agreement shall become effective upon the consummation of the
sale of at least 1,792,000 shares of Preferred Stock to Global Retail Partners
Funding, Inc. and continue in full force and effect from the date hereof through
the earliest of the following dates, on which date it shall terminate in its
entirety:
(a) the date of the closing of a firmly underwritten public offering
of the Common Stock pursuant to a registration statement filed with the
Securities and Exchange Commission, and declared effective under the Securities
Act of 1933, as amended;
(b) at such time as less than 10,000,000 shares of Preferred Stock
remain outstanding (as adjusted for stock splits, dividends or the like);
(c) ten (10) years from the date of this Agreement;
(d) the date of the closing of a sale, lease, or other disposition of
all or substantially all of the Company's assets or the Company's merger into or
consolidation with any other corporation or other entity, or any other corporate
reorganization, in which the holders of the Company's outstanding voting stock
immediately prior to such transaction own, immediately after such transaction,
securities representing less than fifty percent (50%) of the voting power of the
corporation or other entity surviving such transaction, provided that this
Section 2.1(d) shall not apply to a merger effected exclusively for the purpose
of changing the domicile of the Company; or
(e) the date as of which the parties hereto terminate this Agreement
by written consent of a seventy percent (70%) in interest of the Investors.
3.
3. Miscellaneous
3.1 Specific Performance. The parties hereto hereby declare that it is
impossible to measure in money the damages which will accrue to a party hereto
or to their heirs, personal representatives, or assigns by reason of a failure
to perform any of the obligations under this Agreement and agree that the terms
of this Agreement shall be specifically enforceable. If any party hereto or his
heirs, personal representatives, or assigns institutes any action or proceeding
to specifically enforce the provisions hereof, any person against whom such
action or proceeding is brought hereby waives the claim or defense therein that
such party or such personal representative has an adequate remedy at law, and
such person shall not offer in any such action or proceeding the claim or
defense that such remedy at law exists.
3.2 Governing Law. This Agreement, and the rights of the parties hereto,
shall be governed by and construed in accordance with the laws of the State of
Washington as such laws apply to agreements among Washington residents made and
to be performed entirely within the State of Washington.
3.3 Amendment or Waiver. This Agreement may be amended (or provisions of
this Agreement waived) only by an instrument in writing signed by (a) the
Company and (b) seventy percent (70%) in interest of the Investors. Any
amendment or waiver so effected shall be binding upon the Company, each of the
parties hereto and any assignee of any such party.
3.4 Severability. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
3.5 Successors. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, successors, assigns,
administrators, executors and other legal representatives.
3.6 Additional Shares. In the event that subsequent to the date of this
Agreement any shares or other securities are issued on, or in exchange for, any
of the Investor Shares by reason of any stock dividend, stock split, combination
of shares, reclassification or the like, such shares or securities shall be
deemed to be Investor Shares for purposes of this Agreement.
3.7 Addition of Investors. Notwithstanding anything to the contrary
contained herein, if the Company shall issue additional shares of its Preferred
Stock pursuant to the Purchase Agreement, any purchaser of such shares of
Preferred Stock may become a party to this Agreement by executing and delivering
an additional counterpart signature page to this Agreement and shall be deemed
an "Investor" hereunder.
3.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together
shall constitute one and the same agreement.
4.
3.9 Waiver. No waivers of any breach of this Agreement extended by any
party hereto to any other party shall be construed as a waiver of any rights or
remedies of any other party hereto or with respect to any subsequent breach.
3.10 Attorney's Fees. In the event that any suit or action is instituted
to enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
3.11 Notices. Any notices required in connection with this Agreement
shall be in writing and shall be deemed effectively given: (a) upon personal
delivery to the party to be notified, (b) when sent by confirmed facsimile if
sent during normal business hours of the recipient; if not, then on the next
business day, (c) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (d) one (1) day
after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written notification of receipt. All notices shall be
addressed to the holder appearing on the books of the Company or at such address
as such party may designate by ten (10) days advance written notice to the other
parties hereto.
3.12 Entire Agreement. This Agreement and the Exhibits hereto, along with
the Purchase Agreement and each of the Exhibits thereto, constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof and no party shall be liable or bound to any other
in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
[This Space Intentionally Left Blank]
5.
In Witness Whereof, the parties hereto have executed this Voting Agreement
as of the date first above written to become effective as provided in Section
2.1.
COMPANY:
Mercata, Inc.
By:_________________________________
President
SIGNATURE PAGE TO VOTING AGREEMENT
Vulcan Ventures Incorporated
By:_________________________________
Xxxxxxx X. Xxxxx
Vice President
SIGNATURE PAGE TO VOTING AGREEMENT
INVESTORS(S):
Highland Capital Partners IV Limited
Partnership
By: Highland Management Partners IV LLC
Its: General Partner
By:________________________________
Member
Highland Entrepreneurs' Fund IV Limited
Partnership
By: Highland Management Partners IV LLC
Its: General Partner
By:________________________________
Member
SIGNATURE PAGE TO VOTING AGREEMENT
NOTE: THIS PAGE, DATED AS OF ___________________, 1999, IS A COUNTERPART
SIGNATURE PAGE TO THAT CERTAIN VOTING AGREEMENT, DATED AS OF SEPTEMBER 30, 1999,
BY AND AMONG MERCATA, INC., A DELAWARE CORPORATION, AND EACH OF THOSE PERSONS
AND ENTITIES WHOSE NAMES ARE SET FORTH ON THE SCHEDULE OF INVESTORS ATTACHED
THERETO AS EXHIBIT A. EXECUTION AND DELIVERY OF THIS SIGNATURE PAGE BY THE
UNDERSIGNED REPRESENTS THE UNDERSIGNED'S AGREEMENT TO BECOME A PARTY TO THE
VOTING AGREEMENT AS AN "INVESTOR."
ATGF II
By:_____________________________
Name:___________________________
Title:__________________________
Beagle Limited
By:_____________________________
Name:___________________________
Title:__________________________
Global Retail Partners, L.P.
By:_____________________________
Name:___________________________
Title:__________________________
SIGNATURE PAGE TO VOTING AGREEMENT
DLJ Diversified Partners, L.P.
By:_____________________________
Name:___________________________
Title:__________________________
DLJ Diversified Partners-A, L.P.
By:_____________________________
Name:___________________________
Title:__________________________
GRP Partners, L.P.
By:_____________________________
Name:___________________________
Title:__________________________
Global Retail Partners Funding, Inc.
By:_____________________________
Name:___________________________
Title:__________________________
2.
DLJ ESC II, L.P.
By:_____________________________
Name:___________________________
Title:__________________________
Waelinvest
By:_____________________________
Name:___________________________
Title:__________________________
Watershed Capital I, L.P.
By: Watershed Capital G.P. I, L.P.
Its General Partner
By: Watershed Capital G.P. I, L.L.C.
Its General Partner
By:____________________
Xxxxx X. Xxxxxxxxxx
Managing Member
Dated: As of _______________, 1999
--------------------------------
Xxxxx X. Xxxxxxx
--------------------------------
Xxxx Xxxxx
3.
Agreed to and Accepted By:
Mercata, Inc.
000 000xx Xxxxxx XX, Xxxxx 000
Xxxxxxxx, XX 00000
--------------------------------
Xxxxxx Xxx Xxxx
President
4.
Exhibit A
LIST OF INVESTORS
Investor
Vulcan Ventures Incorporated
Highland Capital Partners IV Limited Partnership
Highland Entrepreneurs' Fund IV Limited Partnership
ATGF II
Beagle Limited
Global Retail Partners, L.P.
DLJ Diversified Partners, L.P.
DLJ Diversified Partners - A, L.P.
GRP Partners, L.P.
Global Retail Partners Funding, Inc.
DLJ ESC II L.P.
Waelinvest
Watershed Capital I, L.P.
Xxxxx X. Xxxxxxx
Xxxx Xxxxx
VOTING AGREEMENT
Exhibit G
FINANCIAL STATEMENTS
Mercata, Inc.
Balance Sheet
(in thousands)
Dec - 98 Aug - 99
Actual Actual
---------- ----------
Cash 813 1,905
Accounts Receivable 0 44
Reserve for Bad Debts 0 0
---------- ----------
Net Trade Receivables 0 44
Inventory 0 830
Prepaid Expenses 112 1,175
Other Current Assets 51 7
---------- ----------
Total Current Assets 976 3,962
Fixed Assets, Net 844 3,043
Long-Term Assets 38 44
---------- ----------
TOTAL ASSETS 1,859 7,049
========== ==========
Accounts Payable 605 2,026
Accrued Payroll & Payroll Taxes 170 424
Other Liabilities 0 64
Intercompany Payable 184 1
Accrued Interest Payable 18 0
Current Portion of Long-Term Debt 2,402 3
---------- ----------
Total Current Liabilities 3,379 2,518
Loan Payable - Vulcan, less current 0 0
Capital Lease Payable, less current 15 13
---------- ----------
Total Liabilities 3,394 2,531
Paid-In Capital - Common Stock 400 103
Paid-In Capital - Preferred Stock 0 14,700
Accumulated Deficit (1,935) (10,285)
---------- ----------
Total Equity (1,535) 4,517
---------- ----------
TOTAL LIABILITIES & EQUITY 1,859 7,049
========== ==========
Mercata, Inc. Confidential
Mercata, Inc.
Statement of Cash Flows
(in thousands)
Aug - 99 Q3 - 1999 1999 YTD
Actual QTD Actual Actual
------------ ------------- ------------
Cash provided (used) by operating activities:
Net income (loss) for the period (2,440) (3,586) (8,350)
Adjustments:
Depreciation and amortization 95 188 402
(Increase) decrease in assets:
Net Trade Receivables (28) (37) (44)
Inventory (40) (81) (830)
Prepaid Expenses 168 (1,046) (1,063)
Other Current Assets (3) 1 43
Long-term Assets 1 1 (6)
Increase (decrease) in liabilities:
Accounts Payable 1,265 634 1,421
Accrued Payroll & Payroll Taxes 91 (71) 254
Other Liabilities 50 (265) 64
Intercompany Payable 0 0 (182)
Accrued Interest Payable 0 0 (16)
------------ ------------- ------------
Net cash provided by (used in) operating activities (843) (4,261) (8,308)
Investing Activities:
Fixed asset additions (30) (125) (2,601)
Financing activities:
Proceeds from issuance of stock 0 (0) 14,400
Proceeds from exercise of stock options 0 1 3
Proceeds from debt and capital leases 0 0 1,200
Principal payments on debt and leases (0) (0) (3,602)
------------ ------------- ------------
Net cash provided by (used in) financing activities (0) 1 12,001
Net increase (decrease) in cash (873) (4,386) 1,091
Cash, beginning of period 2,778 6,290 813
------------ ------------- ------------
Cash, end of period 1,905 1,905 1,905
============ ============= ============
Mercata, Inc. Confidential
EXHIBIT H
MERCATA, INC.
EMPLOYEE PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
In consideration of my employment or continued employment by Mercata, Inc.
(the "Company"), and the compensation now and hereafter paid to me, I hereby
agree as follows:
1. Nondisclosure
1.1 Recognition of Company's Rights; Nondisclosure. At all times during my
employment and thereafter, I will hold in strictest confidence and will not
disclose, use, lecture upon or publish any of the Company's Proprietary
Information (defined below), except as such disclosure, use or publication may
be required in connection with my work for the Company, or unless an officer of
the Company expressly authorizes such in writing. I will obtain Company's
written approval before publishing or submitting for publication any material
(written, verbal, or otherwise) that relates to my work at Company and/or
incorporates any Proprietary Information. I hereby assign to the Company any
rights I may have or acquire in such Proprietary Information and recognize that
all Proprietary Information shall be the sole property of the Company and its
assigns.
1.2 Proprietary Information. The term "Proprietary Information" shall mean
any and all confidential and/or proprietary knowledge, data or information of
the Company. By way of illustration but not limitation, "Proprietary
Information" includes (a) trade secrets, inventions, mask works, ideas,
processes, formulas, source and object codes, data, programs, other works of
authorship, know-how, improvements, discoveries, developments, designs and
techniques (hereinafter collectively referred to as "Inventions"); and (b)
information regarding plans for research, development, new products, marketing
and selling, business plans, budgets and unpublished financial statements,
licenses, prices and costs, suppliers and customers; and (c) information
regarding the skills and compensation of other employees of the Company.
Notwithstanding the foregoing, it is understood that, at all such times, I am
free to use information which is generally known in the trade or industry, which
is not gained as result of a breach of this Agreement, and my own, skill,
knowledge, know-how and experience to whatever extent and in whichever way I
wish.
1.3 Third Party Information. I understand, in addition, that the Company
has received and in the future will receive from third parties confidential or
proprietary information ("Third Party Information") subject to a duty on the
Company's part to maintain the confidentiality of such information and to use it
only for certain limited purposes. During the term of my employment and
thereafter, I will hold Third Party Information in the strictest confidence and
will not disclose to anyone (other than Company personnel who need to know such
information in connection with their work for the Company) or use, except in
connection with my work for the Company, Third Party Information unless
expressly authorized by an officer of the Company in writing.
1.4 No Improper Use of Information of Prior Employers and Others. During
my employment by the Company I will not improperly use or disclose any
confidential information or trade secrets, if any, of any former employer or any
other person to whom I have an obligation of confidentiality, and I will not
bring onto the premises of the Company any unpublished documents or any property
belonging to any former employer or any other person to whom I have an
obligation of confidentiality unless consented to in writing by that former
employer or person. I will use in the performance of my duties only information
which is generally known and used by persons with training and experience
comparable to my own, which is common knowledge in the industry or otherwise
legally in the public domain, or which is otherwise provided or developed by the
Company.
2. Assignment of Inventions.
2.1 Proprietary Rights. The term "Proprietary Rights" shall mean all trade
secret, patent, copyright, mask work and other intellectual property rights
throughout the world.
2.2 Prior Inventions. Inventions, if any, patented or unpatented, which I
made prior to the commencement of my employment with the Company are excluded
from the scope of this Agreement. To preclude any possible uncertainty, I have
set forth on Exhibit A (Previous Inventions) attached hereto a complete list of
all Inventions that I have, alone or jointly with others, conceived, developed
or reduced
1.
to practice or caused to be conceived, developed or reduced to practice prior to
the commencement of my employment with the Company, that I consider to be my
property or the property of third parties and that I wish to have excluded from
the scope of this Agreement (collectively referred to as "Prior Inventions"). If
disclosure of any such Prior Invention would cause me to violate any prior
confidentiality agreement, I understand that I am not to list such Prior
Inventions in Exhibit A but am only to disclose a cursory name for each such
invention, a listing of the party(ies) to whom it belongs and the fact that full
disclosure as to such inventions has not been made for that reason. A space is
provided on Exhibit A for such purpose. If no such disclosure is attached, I
represent that there are no Prior Inventions. If, in the course of my employment
with the Company, I incorporate a Prior Invention into a Company product,
process or machine, the Company is hereby granted and shall have a nonexclusive,
royalty-free, irrevocable, perpetual, worldwide license (with rights to
sublicense through multiple tiers of sublicensees) to make, have made, modify,
use and sell such Prior Invention. Notwithstanding the foregoing, I agree that I
will not incorporate, or permit to be incorporated, Prior Inventions in any
Company Inventions without the Company's prior written consent.
2.3 Assignment of Inventions. Subject to Sections 2.4, and 2.6, I hereby
assign and agree to assign in the future (when any such Inventions or
Proprietary Rights are first reduced to practice or first fixed in a tangible
medium, as applicable) to the Company all my right, title and interest in and to
any and all Inventions (and all Proprietary Rights with respect thereto) whether
or not patentable or registrable under copyright or similar statutes, made or
conceived or reduced to practice or learned by me, either alone or jointly with
others, during the period of my employment with the Company. Inventions
assigned to the Company, or to a third party as directed by the Company pursuant
to this Section 2, are hereinafter referred to as "Company Inventions."
2.4 Nonassignable Inventions. I recognize that, my obligation to assign
shall not apply to any Invention about which I can prove that: (i) it was
developed entirely on my own time; and (ii) no equipment, supplies, facility,
services, or trade secret information of the Company was used in its
development; and (iii) it does not relate (a) directly to the business of the
Company or (b) to the actual or demonstrably anticipated research or development
of the Company; and (iv) it does not result from any work performed by me for
the Company (a "Nonassignable Invention").
2.5 Obligation to Keep Company Informed. During the period of my
employment and for six (6) months after termination of my employment with the
Company, I will promptly disclose to the Company fully and in writing all
Inventions authored, conceived or reduced to practice by me, either alone or
jointly with others. In addition, I will promptly disclose to the Company all
patent applications filed by me or on my behalf within a year after termination
of employment. At the time of each such disclosure, I will advise the Company in
writing of any Inventions that I believe fully qualify as a Nonassignable
Invention; and I will at that time provide to the Company in writing all
evidence necessary to substantiate that belief. The Company will keep in
confidence and will not use for any purpose or disclose to third parties without
my consent any confidential information disclosed in writing to the Company
pursuant to this Agreement relating to Nonassignable Inventions. I will preserve
the confidentiality of any Invention that does not fully qualify as a
Nonassignable Invention.
2.6 Government or Third Party. I also agree to assign all my right, title
and interest in and to any particular Company Invention to a third party,
including without limitation the United States, as directed by the Company.
2.7 Works for Hire. I acknowledge that all original works of authorship
which are made by me (solely or jointly with others) within the scope of my
employment and which are protectable by copyright are "works made for hire,"
pursuant to United States Copyright Act (17 U.S.C., Section 101).
2.8 Enforcement of Proprietary Rights. I will assist the Company in every
proper way to obtain, and from time to time enforce, United States and foreign
Proprietary Rights relating to Company Inventions in any and all countries. To
that end I will execute, verify and deliver such documents and perform such
other acts (including appearances as a witness) as the Company may reasonably
request for use in applying for, obtaining, perfecting, evidencing, sustaining
and enforcing such Proprietary Rights and the assignment thereof. In addition,
I will execute, verify and deliver assignments of such Proprietary Rights to the
Company or its designee. My obligation to assist the Company with respect to
Proprietary Rights relating to such Company Inventions in any and all countries
shall continue beyond the termination of my employment, but the Company shall
compensate me at a reasonable rate after my termination for the time actually
spent by me at the Company's request on such assistance.
2.
In the event the Company is unable for any reason, after reasonable effort, to
secure my signature on any document needed in connection with the actions
specified in the preceding paragraph, I hereby irrevocably designate and appoint
the Company and its duly authorized officers and agents as my agent and attorney
in fact, which appointment is coupled with an interest, to act for and in my
behalf to execute, verify and file any such documents and to do all other
lawfully permitted acts to further the purposes of the preceding paragraph with
the same legal force and effect as if executed by me. I hereby waive and
quitclaim to the Company any and all claims, of any nature whatsoever, which I
now or may hereafter have for infringement of any Proprietary Rights assigned
hereunder to the Company.
3. Records. I agree to keep and maintain adequate and current records (in the
form of notes, sketches, drawings and in any other form that may be required by
the Company) of all Proprietary Information developed by me and all Inventions
made by me during the period of my employment at the Company, which records
shall be available to and remain the sole property of the Company at all times.
4. Additional Activities. I agree that during the period of my employment by
the Company I will not, without the Company's express written consent, engage in
any employment or business activity which is competitive with, or would
otherwise conflict with, my employment by the Company. I agree further that for
the period of my employment by the Company and for one (l) year after the date
of termination of my employment by the Company I will not induce any employee of
the Company to leave the employ of the Company.
5. No Conflicting Obligation. I represent that my performance of all the terms
of this Agreement and as an employee of the Company does not and will not breach
any agreement to keep in confidence information acquired by me in confidence or
in trust prior to my employment by the Company. I have not entered into, and I
agree I will not enter into, any agreement either written or oral in conflict
herewith.
6. Return of Company Documents. When I leave the employ of the Company, I will
deliver to the Company any and all drawings, notes, memoranda, specifications,
devices, formulas, and documents, together with all copies thereof, and any
other material containing or disclosing any Company Inventions, Third Party
Information or Proprietary Information of the Company. I further agree that any
property situated on the Company's premises and owned by the Company, including
disks and other storage media, filing cabinets or other work areas, is subject
to inspection by Company personnel at any time with or without notice. Prior to
leaving, I will cooperate with the Company in completing and signing the
Company's termination statement.
7. Legal and Equitable Remedies. Because my services are personal and unique
and because I may have access to and become acquainted with the Proprietary
Information of the Company, the Company shall have the right to enforce this
Agreement and any of its provisions by injunction, specific performance or other
equitable relief, without bond and without prejudice to any other rights and
remedies that the Company may have for a breach of this Agreement.
8. Notices. Any notices required or permitted hereunder shall be given to the
appropriate party at the address specified below or at such other address as the
party shall specify in writing. Such notice shall be deemed given upon personal
delivery to the appropriate address or if sent by certified or registered mail,
three (3) days after the date of mailing.
9. Notification of New Employer. In the event that I leave the employ of the
Company, I hereby consent to the notification of my new employer of my rights
and obligations under this Agreement.
10. General Provisions.
10.1 Governing Law; Consent to Personal Jurisdiction. This Agreement will
be governed by and construed according to the laws of the State of Washington,
as such laws are applied to agreements entered into and to be performed entirely
within Washington between Washington residents. I hereby expressly consent to
the personal jurisdiction of the state and federal courts located in King
County, Washington for any lawsuit filed there against me by Company arising
from or related to this Agreement.
10.2 Severability. In case any one or more of the provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect the other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein. If moreover, any one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad
as to duration, geographical scope, activity or subject, it shall be construed
by limiting and
3.
reducing it, so as to be enforceable to the extent compatible with the
applicable law as it shall then appear.
10.3 Successors and Assigns. This Agreement will be binding upon my heirs,
executors, administrators and other legal representatives and will be for the
benefit of the Company, its successors, and its assigns.
10.4 Survival. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by the Company
to any successor in interest or other assignee.
10.5 Employment. I agree and understand that nothing in this Agreement
shall confer any right with respect to continuation of employment by the
Company, nor shall it interfere in any way with my right or the Company's right
to terminate my employment at any time, with or without cause.
10.6 Waiver. No waiver by the Company of any breach of this Agreement
shall be a waiver of any preceding or succeeding breach. No waiver by the
Company of any right under this Agreement shall be construed as a waiver of any
other right. The Company shall not be required to give notice to enforce strict
adherence to all terms of this Agreement.
10.7 Entire Agreement. The obligations pursuant to Sections 1 and 2 of
this Agreement shall apply to any time during which I was previously employed,
or am in the future employed, by the Company as a consultant if no other
agreement governs nondisclosure and assignment of inventions during such period.
This Agreement is the final, complete and exclusive agreement of the parties
with respect to the subject matter hereof and supersedes and merges all prior
discussions between us. No modification of or amendment to this Agreement, nor
any waiver of any rights under this Agreement, will be effective unless in
writing and signed by the party to be charged. Any subsequent change or changes
in my duties, salary or compensation will not affect the validity or scope of
this Agreement.
This Agreement shall be effective as of the first day of my employment with
the Company, namely: _______________, 19__.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE
COMPLETELY FILLED OUT EXHIBIT A TO THIS AGREEMENT.
Dated:______________________________________
--------------------------------------------
(Signature)
--------------------------------------------
(Printed Name)
ACCEPTED AND AGREED TO:
MERCATA, INC.
By:_________________________________________
Title:______________________________________
--------------------------------------------
(Address)
--------------------------------------------
Dated:______________________________________
4.
Exhibit A
TO: Mercata, Inc.
FROM: __________________
DATE: __________________
SUBJECT: Previous Inventions
1. Except as listed in Section 2 below, the following is a complete list of
all inventions or improvements relevant to the subject matter of my employment
by Mercata, Inc. (the "Company") that have been made or conceived or first
reduced to practice by me alone or jointly with others prior to my engagement by
the Company:
[_] No inventions or improvements.
[_] See below:
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
[_] Additional sheets attached.
2. Due to a prior confidentiality agreement, I cannot complete the
disclosure under Section 1 above with respect to inventions or improvements
generally listed below, the proprietary rights and duty of confidentiality with
respect to which I owe to the following party(ies):
Invention or Improvement Party(ies) Relationship
1. ________________________ ________________ _________________________
2. ________________________ ________________ _________________________
3. ________________________ ________________ _________________________
[_] Additional sheets attached.
Exhibit I
FORM OF LEGAL OPINION
Ladies and Gentlemen:
We have acted as counsel for Mercata, Inc., a Delaware corporation (the
"Company"), in connection with the issuance and sale of ________ shares of the
Company's Series B Preferred Stock ("Shares") to the Purchasers under the Series
B Preferred Stock Purchase Agreement dated as of _____________ (the
"Agreement"). We are rendering this opinion pursuant to Section 5.1(j) of the
Agreement. Except as otherwise defined herein, capitalized terms used but not
defined herein have the respective meanings given to them in the Agreement.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters contained in and made
pursuant to the Agreement by the various parties and originals or copies
certified to our satisfaction, of such records, documents, certificates,
opinions, memoranda and other instruments as in our judgment are necessary or
appropriate to enable us to render the opinion expressed below. Where we render
an opinion "to the best of our knowledge" or concerning an item "known to us" or
our opinion otherwise refers to our knowledge, it is based solely upon (i) an
inquiry of attorneys within this firm who perform legal services for the
Company, (ii) receipt of a certificate executed by an officer of the Company
covering such matters, and (iii) such other investigation, if any, that we
specifically set forth herein.
In rendering this opinion, we have assumed: the genuineness and authenticity of
all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents (except the due authorization, execution and delivery
by the Company of the Agreement, the Investor Rights Agreement, the Co-Sale
Agreement and the Voting Agreement (the "Transaction Agreements")), where
authorization, execution and delivery are prerequisites to the effectiveness of
such documents. We have also assumed: that all individuals executing and
delivering documents had the legal capacity to so execute and deliver; that you
have received all documents you were to receive under the Agreement; that the
Transaction Agreements are obligations binding upon you; and that there are no
extrinsic agreements or understandings among the parties to the Transaction
Agreements that would modify or interpret the terms of the Transaction
Agreements or the respective rights or obligations of the parties thereunder.
Our opinion is expressed only with respect to the federal laws of the United
States of America, the laws of the State of Washington and the General
Corporation Law of the State of Delaware. We express no opinion as to whether
the laws of any particular jurisdiction apply, and no opinion to the extent that
the laws of any jurisdiction other than those identified above are applicable to
the subject matter hereof. We are not rendering any opinion as to compliance
with any antifraud law, rule or regulation relating to securities, or to the
sale or issuance thereof, or as to reportability of the sale of the Shares under
the Xxxx Xxxxx Xxxxxx Antitrust Improvements Act of 1976, as amended.
With regard to our opinion in paragraph 2 below, we express no opinion as to the
obligation of the Company to qualify as a foreign corporation to do business in
the State of Pennsylvania.
With regard to our opinion in paragraph 4 below, we have examined and relied
upon a certificate executed by an officer of the Company, to the effect that the
consideration for all outstanding shares of capital stock of the Company was
received by the Company in accordance with the provisions of the applicable
Board of Directors resolutions and any plan or agreement relating to the
issuance of such shares, and we have undertaken no independent verification with
respect thereto.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
1. The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of Delaware.
2. The Company has the requisite corporate power to own its property and
assets and to conduct its business as it is currently being conducted and,
to the best of our knowledge, is qualified as a foreign corporation to do
business and is in good standing in each jurisdiction in the United States
in which the ownership of its property or the conduct of its business
requires such qualification and where any statutory fines or penalties or
any corporate disability imposed for the failure to qualify would
materially and adversely affect the Company, its assets, financial
condition or operations.
3. The Transaction Agreements have been duly and validly authorized, executed
and delivered by the Company and constitute valid and binding agreements of
the Company enforceable against the Company in accordance with their terms,
except as rights to indemnity under Section 2.9 of the Investor Rights
Agreement may be limited by applicable laws and except as enforcement may
be limited by applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar laws affecting creditors' rights,
and subject to general equity principles and to limitations on availability
of equitable relief, including specific performance.
4. The Company's authorized capital stock consists of (a) forty million
(40,000,000) shares of Common Stock, par value $0.001 per share, of which
one million four hundred forty-four thousand fifty-eight (1,444,058) shares
are issued and outstanding, and (b) thirty million (30,000,000) shares of
Preferred Stock, par value $0.001 per share, fourteen million (14,000,000)
of which have been designated Series A Preferred Stock, all of which are
issued and outstanding, and twelve million (12,000,000) of which have been
designated Series B Preferred Stock, none of which are issued and
outstanding (excluding the Shares). The outstanding shares of Common Stock
and of Preferred Stock have been duly authorized and validly issued and are
fully paid and non-assessable. The rights, preferences and privileges of
the Series A Preferred Stock and the Series B Preferred Stock are as stated
in the Restated Certificate of Incorporation. The Shares have been duly
authorized, and upon issuance and delivery against payment therefor in
accordance with the terms of the Agreement, the Shares will be validly
issued, outstanding, fully paid
and non-assessable. The shares of Common Stock issuable upon conversion of
the Shares have been duly authorized, and upon issuance and delivery upon
conversion of the Shares, will be validly issued, outstanding, fully paid
and non-assessable. To the best of our knowledge, there are no options,
warrants, conversion privileges, preemptive rights or other rights
presently outstanding to purchase any of the authorized but unissued
capital stock of the Company, other than the conversion privileges of the
Series A Preferred Stock, rights created in connection with the
transactions contemplated by the Agreement, and seven million four hundred
thousand (7,400,000) shares reserved for issuance under the Company's 1999
Equity Incentive Plan.
5. The execution and delivery of the Agreement by the Company and the issuance
of the Shares pursuant thereto do not violate any provision of the
Company's Certificate of Incorporation or Bylaws.
6. To the best of our knowledge, there is no action, proceeding or
investigation pending or overtly threatened against the Company before any
court or administrative agency that questions the validity of the
Transaction Agreements or might result, either individually or in the
aggregate, in any material adverse change in the assets, financial
condition, or operations of the Company that has not been disclosed in
writing to the Investors.
7. All consents, approvals, authorizations, or orders of, and filings,
registrations, and qualifications with any regulatory authority or
governmental body in the United States required for the consummation by the
Company of the transactions contemplated by the Agreement, have been made
or obtained, except for the filing of a Form D pursuant to Securities and
Exchange Commission Regulation D and the filings required by the securities
laws of the state of Washington.
8. The offer and sale of the Shares are exempt from the registration
requirements of the Securities Act of 1933, as amended.
This opinion is intended solely for your benefit and is not to be made available
to or be relied upon by any other person, firm, or entity without our prior
written consent.
Very truly yours,
Xxxxxx Godward llp
By:___________________________
Xxxxxxxxxxx X. Xxxxxx
