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EXHIBIT 10.23
ROYALTY AND SERVICES AGREEMENT
This Royalty and Services Agreement (the "AGREEMENT") is entered into as
of this 1st day of January, 2000 (the "EFFECTIVE DATE"), by and between The Good
Guys-California, Inc., a California corporation ("GOOD GUYS") and xxxxxxxx.xxx,
inc., a Delaware corporation ("DOTCOM").
PRELIMINARY STATEMENTS
A. In consideration for the fulfillment of the various obligations and
services contemplated by this Agreement, Dotcom and Good Guys desire to enter
into an arrangement whereby Dotcom shall pay a recurring royalty to Good Guys
(the "ROYALTY") and certain other amounts and undertakings, all upon and subject
to the terms and conditions set forth herein;
B. To enable Dotcom to obtain the benefits of purchasing discounts
available to Good Guys and to secure for Good Guys the benefit of discounts for
increased volumes of purchases Good Guys desires to supply Products (as defined
below) to Dotcom, upon and subject to the terms and conditions set forth herein;
C. Good Guys desires to facilitate certain fulfillment functions of
Dotcom, upon and subject to the terms and conditions set forth herein;
D. Good Guys and Dotcom desire to engage in certain co-marketing and
crosspromotion of their respective businesses, upon and subject to the terms and
conditions set forth herein; and
E. Dotcom and Good Guys desire to share certain database information upon
and subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and for other good, valuable and binding consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
STATEMENT OF AGREEMENT
I. ROYALTY OBLIGATION
1.1. Royalty. In consideration of the various obligations and services
contemplated by this Agreement, Dotcom shall pay to Good Guys a Royalty on
Dotcom's actual net sales exclusive of bad debt allowance, chargebacks, customer
credits, returns, shipping, sales tax (and other transaction related taxes) and
other direct costs of sales ("NET SALES"). Prior to the occurrence of a
Liquidity Event, the Royalty shall be three percent (3%) of Net Sales. After a
Liquidity Event, the Royalty shall be one percent (1%) of Net Sales. The term
"LIQUIDITY EVENT" shall mean: (i) a sale of all or substantially all of the
assets or business of Dotcom, (ii) a merger of Dotcom with or into another
entity (or corporate reorganization of similar effect), or (iii) an underwritten
initial public offering of Dotcom's common stock registered under the Securities
Act of 1933.
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1.2. Payments. Royalty payments calculated as provided above ("ROYALTY
PAYMENTS") shall be due and payable monthly within thirty (30) days after the
end of each calendar month.
II. SUPPLY AND FULFILLMENT OBLIGATION
2.1. Purchase of Products.
(a) Good Guys shall provide Dotcom with a list (the "GOOD GUYS
PRODUCT LIST") of all products offered for sale from time to time by Good Guys
through Good Guys' retail stores and/or available from Good Guys' suppliers (the
"GOOD GUYS PRODUCTS") and shall keep such list current. In addition, Good Guys
shall make available to Dotcom all copy, photos and other print and electronic
material related to Good Guys Products as Dotcom may reasonably request. Subject
to the terms and conditions hereof, Good Guys shall sell to Dotcom, and Dotcom
shall purchase from Good Guys, substantially all of Dotcom's requirements for
Good Guys Products. Upon the request of Dotcom, Good Guys agrees to use
commercially reasonable efforts to assist Dotcom in obtaining the right to sell
Product Protection Guarantee service contracts provided by Good Guys' vendors of
such services.
(b) Dotcom may at any time elect to cease purchasing all or any
part of Good Guys Products hereunder upon thirty (30) days prior written notice
to Good Guys. Thereafter, the royalty payment shall continue at three percent
(3%) pre-Liquidity Event and one percent (1%) post-Liquidity Event. Good Guys
shall use reasonable efforts to facilitate Dotcom's purchasing, merchandising,
executive management and product development services with respect to Good Guys
Products.
(c) The parties acknowledge that Dotcom may market and sell
products that are not Good Guys Products (the "OTHER PRODUCTS"). Subject to the
terms and conditions of this Agreement, Good Guys shall have the right, but not
the obligation, to supply Other Products to Dotcom upon the same terms and
conditions as apply to Good Guys Products. Prior to marketing or selling any
Other Products, Dotcom shall notify Good Guys in writing of the anticipated
quantities of such Other Products that it requires. Within two (2) business days
after receipt of Dotcom's notice, Good Guys shall notify Dotcom in writing if it
wishes to supply such Other Products, which notice shall confirm Good Guy's
ability to deliver such Other Products to the schedule and specifications
required by Dotcom and upon the terms set forth herein. If Good Guys does not so
elect within such two (2) business day period, then Dotcom may enter into such
contractual or other relationships to purchase such Other Products from persons
or entities other than Good Guys.
(d) Dotcom shall not commence or continue to market or sell any
Other Product that, in the reasonable judgment of Good Guys, is of lower quality
than Good Guys Products generally or does not comply with applicable government
regulations (an "OBJECTIONABLE PRODUCT"). Good Guys shall promptly notify Dotcom
in writing of any Other Products that are or become an Objectionable Product in
Good Guys' reasonable judgment, and Dotcom shall cease to market or sell such
Objectionable Product promptly upon receipt of such notice.
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(e) Dotcom shall distribute all Good Guys Products and Other
Products that are not Objectionable Products (collectively, the "PRODUCTS") only
through channels of distribution that constitute the Business (as defined
below). Good Guys shall not sell Products to any person or entity other than
Dotcom through channels of distribution that constitute the Business. The term
"BUSINESS" shall mean the sale and offer of sale of consumer electronics
products through one or more Internet websites operated by Dotcom, toll-free
numbers owned by Dotcom (not involving toll-free numbers owned by Good Guys),
and other electronic media and other non-bricks and mortar modalities (whether
now existing or hereafter created) operated by Dotcom. In no event shall
"Business" be deemed to include (i) the retail sale of consumer electronics
products through traditional bricks and mortar retail stores, (ii) mail-order
operations involving catalogs as the seller's primary means of marketing or
(iii) wholesale distribution and resale of entertainment electronics products.
(f) Good Guys hereby assigns to Dotcom all vendor warranties with
respect to Products purchased by Dotcom to the full extent permitted by such
warranties. If any such vendor warranty may not be assigned by its terms, then
Good Guys shall use commercially reasonable efforts to cause Dotcom to obtain
the benefits of such warranty. In addition, Dotcom shall have the right to
return any Products acquired by Dotcom from Good Guys (or any of its affiliates)
at any time during the first forty-five (45) days after purchase thereof and
receive a credit equal to one hundred percent (100%) of the purchase price
thereof, provided that the supplier agrees to accept the return of such Product
by Good Guys. All other returns shall be subject to a ten percent (10%)
restocking charge.
(g) Good Guys shall use commercially reasonable efforts to: (i)
facilitate all vendor relationships reasonably required to conduct the Business
and (ii) ensure that all required vendor consents are secured.
(h) Dotcom agrees to abide in all respects with the terms and
conditions of Good Guys' various vendor agreements, and to the extent required
or requested by such vendors, to enter into such other and further agreements as
those vendors may reasonably require.
2.2. Fulfillment Facilitation Services.
(a) Dotcom shall be solely and exclusively responsible for all
Product fulfillment related to its customer orders.
(b) Upon placement of a Product order by Dotcom, Good Guys shall
fill that order in accordance with the following guidelines:
(i) To the extent such Product is in stock at an
immediately adjacent or adjoining facility, then the order shall be filled as
soon as possible, and in any event, on a "same-day" basis.
(ii) To the extent such Product is in stock at a Good Guys
location other than an adjacent facility, then the order shall be filled as soon
as practicable, applying commercially reasonable standards to that
determination.
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(iii) To the extent the Product is not in stock, then the
order shall be filled as soon as the Product can be sourced from a third party
and delivered to Dotcom.
(iv) Good Guys acknowledges that for all purposes of this
Section 2, time is of the essence.
(c) Upon delivery of the Product to Dotcom by Good Guys, Dotcom
shall thereupon take immediate title to such Product and shall assume all risk
of loss associated therewith. Dotcom shall cooperate with Good Guys in
connection with the completion and filing of any resale exemption or other
certificates.
(d) Without the consent of Good Guys, which consent shall not be
unreasonably withheld or delayed, Dotcom shall not enter into any contractual
relationship with any person or entity other than Good Guys for the supply of
any then in stock Good Guys Products or Other Products that Good Guys has
elected to supply. Notwithstanding the foregoing, if at any time Dotcom
determines in its reasonable discretion that the quality of supply and
fulfillment facilitation services then provided by Good Guys hereunder fails to
meet the standards that it requires in order to remain competitive in its
business, Dotcom shall have the right to terminate this Agreement and to source
Products and fulfillment facilitation from any other party. In such event, the
Royalty Payment obligation shall continue but shall be reduced to (or, if
post-Liquidity Event, maintained at) one percent (1%).
(e) Notwithstanding the foregoing, Good Guys shall continue to
provide the Good Guys Product List and updates.
2.3. No Customer Returns or Warranty Service.
(a) Good Guys shall have no obligation to accept exchanges,
customer satisfaction returns, or warranty or guarantee returns of Products sold
by Dotcom.
(b) Good Guys shall have no obligation to provide repair
and warranty services to purchasers of Products from Dotcom. Good Guys shall
have no obligation to provide services to purchasers of Product Protection
Guarantee contracts sold by Dotcom, including but not limited to exchanges of
Products where authorized under such contracts.
2.4. Pricing and Compensation.
(a) Product Cost. For all Products purchased by Dotcom under this
Agreement, Good Guys shall charge Dotcom and Dotcom shall pay the Actual Net
Cost (as defined below) to Good Guys for such Products plus Incremental Cost (as
defined below). The term "ACTUAL NET COST" shall mean the actual cost paid by
Good Guys to the suppliers of such Products net of any and all allowances,
rebates, credits, discounts or similar arrangements (other than early or prompt
payment discounts) that have the effect of reducing the stated cost of such
Products (collectively, "DISCOUNTS"). The term "INCREMENTAL COST" shall mean the
direct cost, if any, reasonably incurred by Good Guys to third parties, in
excess of the cost that would have been incurred in the absence of the
performance by Good Guys of its product supply and fulfillment facilitation
obligations hereunder. The parties acknowledge that in order to facilitate Good
Guys' cash management program, Dotcom will be invoiced and will pay an amount
equal
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to Good Guys' actual cost (not reflecting any adjustment for trailing
Discounts). Within thirty (30) days after the end of each fiscal quarter, Good
Guys shall calculate total Discounts allocable to Dotcom during the prior
quarter and shall immediately issue to Dotcom a credit equal to such amount.
(b) Payment. Payment for Products supplied by Good Guys shall be
made within five (5) business days of delivery of such Products to Dotcom.
(c) Books and Records. Good Guys shall maintain accurate books and
records which reflect Actual Net Costs and all other relevant costs including
Incremental Cost. At its own expense, Dotcom or its representatives may examine
and copy such books and records. Dotcom and its representatives may make
examinations only during usual business hours and at the place at which Good
Guys usually keeps its books and records. Dotcom shall be required to notify
Good Guys at least ten (10) days before the date of planned examination. If an
examination has not been completed within two months after commencement, Good
Guys may require Dotcom to terminate the examination on seven (7) days notice to
Dotcom, so long as Good Guys has cooperated in full with Dotcom in the
examination of such books and records.
III. CO-MARKETING OBLIGATION
3.1. Retail Store References. Good Guys shall provide the following
promotional references to an Internet website URL designated by Dotcom (the
"WEBSITE URL") in each retail store that it owns or operates during the Term:
(a) all shopping bags, business cards, printed cash register
receipts, in-store signage and other in-store items bearing Good Guys signage
shall contain a reference to the Website URL; and
(b) subject to any landlord restrictions, the display windows of
each Good Guys retail store shall include a reference to the Website URL which
is not less than 2 1/2 inches in height. Good Guys agrees to use commercially
reasonable efforts to promptly secure any required landlord consents.
3.2. Other Promotional References. Good Guys shall provide the following
additional promotional references to the Website URL during the Term:
(a) all packaging and shipping materials, packing slips and
invoices, and transmittal advices used by Good Guys shall contain a reference to
the Website URL;
(b) each vehicle owned by Good Guys that is marked with the Good
Guys logo or tradename shall include a reference to the Website URL;
(c) each print advertisement and print promotional piece produced
by Good Guys or purchased by Good Guys from third parties shall contain a
reference to the Website URL;
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(d) all radio and television advertisements of Good Guys shall
contain a reference to the Website URL; and
(e) Dotcom may include additional references in Good Guys' radio
and television advertisements (beyond those required by Section 3.2(d) above),
provided that Dotcom pays its proportional share of the direct costs thereof.
3.3. Website References. During the Term, Dotcom's Website (i) shall
contain functionality to enable customers to request the Good Guys toll-free
telephone number from one or more of its pages, including the Dotcom home page,
and (ii) shall contain on one or more of its pages a store locator for Good
Guys' retail locations, which locator shall be directly accessible from the
Dotcom home page. Dotcom shall update such store locator from time to time at
the request of Good Guys. In addition, Dotcom's Website will display a link to
the Good Guys corporate website.
3.4. Negative Covenants. During the Term, Good Guys will not publish any
advertisement in any media or in any retail store that promotes any other online
seller offering any consumer electronics.
IV. DATABASE OBLIGATION
4.1. Grant of License.
(a) Subject to any restrictions contained in any agreements with
third parties and to the terms and conditions hereof, Dotcom and Good Guys
hereby grant to, each other a non-exclusive, royalty-free right and license (the
"LICENSE") to use the following database and informational materials, including
without limitation any additions, revisions and modifications made thereto by
the owner of such materials during the Term (collectively, the "LICENSED
MATERIALS"):
(i) Good Guys' product information regarding each Product
that Good Guys is then supplying to Dotcom, as such information may exist from
time to time; and
(ii) each party's lists regarding its customers, including
their transactional histories and demographic information (collectively, the
"CUSTOMER LISTS"), as such information may exist from time to time.
(b) The Licensed Materials shall be made available at such times
and in such format as the parties shall mutually agree. Each party shall use
commercially reasonable efforts to keep the Licensed Materials current and
accurate in all material respects.
(c) Neither party shall disclose, sell, lease or rent the Licensed
Materials to any third party without the other party's prior written consent.
(d) To the extent that Dotcom acquires any information regarding
Retail Customers (as defined below) through its own sales, such information
shall be provided to Good
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Guys periodically, but in no event less frequently than quarterly. To the extent
that Good Guys acquires any information regarding Internet Customers (as defined
below) through its own sales, such information shall be provided to Dotcom
periodically, but in no event less frequently than quarterly. Except as
expressly provided in this Agreement to the contrary, either party may use the
information provided to it hereunder for any purpose, in its sole discretion.
The term "INTERNET CUSTOMER" shall mean any customer who purchased from Dotcom
during the 12-month period ending immediately prior to the date of
determination. The term "RETAIL CUSTOMER" shall mean any customer who purchased
from Good Guys during the 12-month period ending immediately prior to the date
of determination. The parties expressly acknowledge that a person may be both an
Internet Customer and a Retail Customer.
4.2. Limited Warranty. Each party hereby represents and warrants to the
other that (a) it owns or otherwise has the right to use the Licensed Materials
as to which it grants the License, (b) it has the right and power to grant the
License as provided herein and (c) the grant of the License as provided herein
does not require the consent of any third party.
EXCEPT AS EXPRESSLY PROVIDED IN THE FOREGOING SENTENCE, NEITHER PARTY
MAKES ANY REPRESENTATION OR WARRANTY WHATSOEVER, WHETHER EXPRESS OR IMPLIED,
WITH RESPECT TO ANY OF THE LICENSED MATERIALS OR ANY INFORMATION, REPORTS OR
OUTPUT GENERATED THEREBY. EACH PARTY HEREBY DISCLAIMS ANY IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. IN NO EVENT SHALL EITHER
PARTY BE LIABLE TO THE OTHER HEREUNDER FOR ANY CONSEQUENTIAL, PUNITIVE OR
INCIDENTAL DAMAGES.
4.3. Ownership of Licensed Materials. All Licensed Materials, including
any copies, translations or compilations of all or any part thereof, and any
revisions, modifications or additions thereto made by Good Guys or Dotcom, as
the case may be, are and shall remain the sole exclusive property of their
respective owner, except for any revisions, modifications or additions thereto
which were made solely by the party granted a License to use such Licensed
Materials hereunder. Any such revisions, modifications or additions shall be
owned by the party that made them, but the owner of the Licensed Materials shall
hereby be granted a non-exclusive, perpetual, non-revocable, non-transferable
license to use the same.
4.4. Confidentiality. Each party acknowledges that the Licensed Materials
constitute valuable, confidential and proprietary information and trade secrets
of the other. Accordingly, neither party shall, directly or indirectly, during
or after the term of this Agreement, disclose or divulge to any third party, or
permit any third party to use or have access to, any of the Licensed Materials,
without the prior written consent of the other.
4.5. Effect of Termination. Upon termination of this Agreement: (i) the
License granted hereunder shall terminate; (ii) each party shall cease to use
the Licensed Materials; (iii) each party shall promptly return to the other or
destroy all copies of the Licensed Materials; and (iv) each party shall execute
and deliver to the other any documents reasonably requested by the other to
confirm the other's ownership of the Licensed Materials.
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V. TERM AND TERMINATION
5.1. The term of this Agreement (the "TERM") shall commence on the date
hereof and continue in full force and effect until the thirtieth (30th)
anniversary of the Effective Date or until otherwise terminated in accordance
with this Agreement.
5.2. Either party shall have the right, but not the obligation, to
terminate this Agreement immediately if at any time:
(a) the other party shall be in material breach of any of its
obligations hereunder or under any other material agreement between the parties,
and such breach shall not be cured within thirty (30) days after receipt of
written notice thereof;
(b) the other party shall be the subject of a voluntary petition
in bankruptcy or any voluntary proceeding relating to insolvency, receivership,
liquidation or assignment for the benefit of creditors;
(c) the other party shall become the subject of any involuntary
petition in bankruptcy or any involuntary proceeding relating to insolvency,
receivership, liquidation or assignment for the benefit of creditors, and such
petition or proceeding shall not be dismissed within 60 days of filing;
(d) the business of the other party shall be liquidated or
otherwise terminated on any basis; or
(e) Dotcom or its successor ceases to be actively and continuously
engaged in activities constituting the Business.
5.3. Dotcom shall have the right to terminate this Agreement as
contemplated by Section 2.2(d).
5.4. A party may exercise its right to terminate pursuant to this
Agreement by written notice to the other party. No exercise by a party of its
rights hereunder shall limit its remedies by reason of the other party's
default, the party's rights to exercise any other rights under this section or
any other rights of that party.
5.5. This Agreement will automatically and without necessity of notice
terminate upon the effective date of termination of that certain Trademark
License Agreement between the parties of even date herewith.
VI. MISCELLANEOUS
6.1. Assignment. Neither party may assign this Agreement or its rights
and obligations hereunder in whole or in part without the other party's prior
written consent which consent may not be unreasonably withheld or delayed. Any
attempt to assign this Agreement without such consent shall be void and of no
effect. Notwithstanding the foregoing, either party
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may assign this Agreement or its rights and obligations hereunder to any entity
controlled by it or to any entity by which it is acquired by merger, purchase of
capital stock, transfer of substantially all assets or otherwise; provided that
such entity shall thereafter succeed to all obligations of such party under this
Agreement; and provided further, that no such assignment will be effective
unless the assignee succeeds to the assigning party's interest in the Trademark
License Agreement and Assignment of Domain Name Agreement, of even date
herewith.
6.2. Amendment. No modification or amendment hereof shall be valid and
binding, unless it be in writing and signed by the parties hereto.
6.3. Relationship of the Parties. The parties intend to create a
relationship of independent contractors, and not of partnership, co-venture,
joint venture, or agency. Neither party shall have the power to bind the other
or to incur obligations on behalf of the other without the other's prior written
consent. Under no circumstances is either party intended to be, nor shall it be
deemed to be, an agent of the other.
6.4. Governing Law. This Agreement shall be governed by the internal laws
of the State of Delaware without giving effect to the conflict of law principles
thereof.
6.5. Entire Agreement. This Agreement sets forth the entire agreement
between the parties hereto with respect to the subject matter hereof and is
intended to supersede all prior negotiations, understandings and agreements.
6.6. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and together which shall
constitute one and the same instrument.
6.7. Waiver. The failure of any party to exercise any right or remedy
provided for herein shall not be deemed a waiver of any right or remedy
hereunder.
6.8. Severability. If any provision of this Agreement is determined by a
court of competent jurisdiction to be invalid or otherwise unenforceable, such
determination shall not affect the validity or enforceability of any remaining
provisions of this Agreement. If any provision of this Agreement is invalid
under any applicable statute or rule of law, it shall be enforced to the maximum
extent possible so as to effect the intent of the parties, and the remainder of
this Agreement shall continue in full force and effect.
6.9. Survival. The provisions of Section 4.4 and this Section 6 shall
survive any termination of this Agreement.
6.10. Headings. The section headings used herein are for the convenience
of the parties only, are not substantive and shall not be used to interpret or
construe any of the provisions contained herein.
6.11. Successors and Assigns. This Agreement and the undertakings and
representations herein contained shall inure to the benefit of and bind the
parties and their respective successors and assigns.
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6.12. Notice. Any and all notices or other communications hereunder shall
be sufficiently given if in writing and sent by hand, telecopier, reputable
overnight courier or by certified mail, return receipt requested, postage
prepaid, addressed to the party to receive the same at its address as set forth
below, or to such other address as the party to receive the same shall have
specified by written notice given in the manner provided for herein. Such
notices or other communications shall be deemed to have been given on the date
of such delivery. Any party may change its address for the purpose of this
Agreement by notice to the other parties given as aforesaid.
Notice to Good Guys: Notice to Dotcom:
The Good Guys-California, Inc. xxxxxxxx.xxx, inc.
0000 Xxxxxx Xxxx. 0000 X.X. Xxxx Xxxx.
Xxxxxxxx, XX 00000 Second Floor
Attn: Chief Executive Officer Xxxxxx, XX 00000
Attn: Chief Executive Officer
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.
THE GOOD GUYS-CALIFORNIA, INC. XXXXXXXX.XXX, INC.
By: /s/ XXXXXX XXXXXXX By: /s/ XXXXXX X. XXXXXXX
------------------------- ---------------------------
Name: XXXXXX XXXXXXX Name: XXXXXX X. XXXXXXX
------------------------- ---------------------------
Title: Title:
------------------------- ---------------------------
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TRADEMARK LICENSE AGREEMENT
This Trademark License Agreement (the "AGREEMENT") is entered into as of
this 1st day of January, 2000 (the "EFFECTIVE DATE"), by and between The Good
Guys-California, Inc., a California corporation ("LICENSOR"), and xxxxxxxx.xxx,
inc., a Delaware corporation ("LICENSEE").
PRELIMINARY STATEMENTS
A. Licensor is the owner of the Marks listed in Schedule A (collectively,
the "EXISTING MARKS"), including any federal or state registrations or
applications pertaining thereto.
B. Licensee wishes to establish an internet-based retail business branded
with new marks formed by combining the Existing Marks with a high level Internet
domain names (for instance, without limitation, "xxxxxxxx.xxx," "xxxxxxxx.xxx,"
and "xxxxxxxx.xxx") (collectively, the "NEW MARKS") and in connection therewith
wishes to obtain a license to use the Existing Marks as a component of the New
Marks.
C. In furtherance of their respective strategic goals, Licensor and
Licensee have determined that it is in their mutual best interests to enter into
a contractual arrangement whereby Licensor grants to Licensee a license to use
the Existing Marks as described below.
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and for other good, valuable and binding consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
STATEMENT OF AGREEMENT
1. Grant of License.
a. Licensor hereby grants to Licensee during the Term hereof a
nontransferable, worldwide right and license (the "LICENSE") to use, display,
and reproduce the Existing Marks as part of the New Marks, solely for use in
connection with Licensee's activities constituting the Business (as defined
below). Licensee is not licensed to use the Existing Marks in connection with
any business or activities other than the Business. Except as expressly
permitted by this Agreement or as otherwise agreed in writing between the
parties, Licensee is not licensed to use the Existing Marks standing alone and
not as part of the New Marks. The term "Business" shall mean the sale and offer
of sale of consumer electronics products through one or more Internet websites
operated by Licensee, toll-free numbers owned by Licensee (not involving
toll-free numbers owned by Licensor), and other electronic media and other
non-bricks and mortar modalities (whether now existing or hereafter created)
operated by Licensee. In no event shall "BUSINESS" be deemed to include (i) the
retail sale of consumer electronics products through traditional bricks and
mortar retail stores, (ii) mail-order operations involving catalogs as the
seller's primary means of marketing and (iii) wholesale distribution and resale
of entertainment electronics products.
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b. Licensee shall have the right to use the Existing Marks in
combination with any top-level Internet domain name (including without
limitation ".com", ".net", or ".org"). Licensee shall automatically have the
right, on the terms and conditions set forth herein, to use any.
c. In addition, Licensor hereby grants to Licensee the right to
authorize third parties to use, display, and reproduce the Existing Marks as
part of the New Marks for the purpose of marketing of Licensee's products and
services as Licensee shall deem necessary or appropriate in the conduct of the
Business.
d. During the Term of this Agreement, Licensor will not license
any other person to use the Existing Marks in connection with activities
constituting the Business, nor will Licensor itself use the Existing Marks in
connection with any of Licensor's own activities constituting the Business
without the consent of Licensee.
e. Nothing in this Agreement is intended to nor shall it limit or
impair Licensor's rights, during the Term, to (i) use or otherwise license the
Existing Marks to the extent not licensed to Licensee hereunder; or (ii) use or
license the Existing Marks to promote and advertise the sale of consumer
electronics and other items customarily sold by Licensor in its retail consumer
electronics stores.
2. Restrictions on Use and Quality Control.
a. Licensee shall use the Existing Marks as part of the New Marks
only in a manner and form (i) designed to maintain the high quality of the
Existing Marks; (ii) consistent with the use of the Existing Marks by Licensor
and its other licensees; (iii) that protects Licensor's ownership interest
therein; and (iv) that complies will all applicable federal, state, local and
foreign laws, rules and regulations, including, without limitation, all
applicable trademark laws, rules and regulations.
b. Licensee represents and warrants that all products or services
placed in commerce and identified with the New Marks will meet all applicable
legal standards for health and safety and shall be in compliance with all
Federal, State, and local laws, rules and regulations.
c. Licensee will, upon request by Licensor, deliver to Licensor at
the address listed below a copy of the pages comprising the Website and any
other use of the New Marks for the purpose of allowing Licensor to monitor the
quality of the use of the Marks.
d. Licensee will upon request made from time to time, provide to
Licensor a list of third parties that Licensee has authorized to use, display,
and reproduce the New Marks.
3. Protection of the Existing Marks and the New Marks.
a. Licensee will at its expense take action that is necessary and
appropriate, including without limitation the commencement of litigation or
other legal proceedings, to protect the New Marks from infringement by any
person or party, and Licensee shall be entitled to all amounts received in
connection therewith. Licensor will have the right to intervene in any
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such proceeding in order to protect the Existing Marks from infringement by any
person or party. Licensee shall promptly notify Licensor in writing of any
infringement or suspected infringement involving the Marks.
b. Licensee expressly acknowledges that its use of the Existing
Marks hereunder inures to the benefit of Licensor and shall not confer on
Licensee any proprietary rights to the Existing Marks, which shall at all times
remain with Licensor and its assignees.
c. Licensee shall not question, contest or challenge, either
during or after the Term, Licensor's ownership of the Existing Marks, and
Licensee shall claim no interest therein, except the right to use the Existing
Marks as part of the New Marks on the terms and conditions set forth herein.
Licensee shall not attempt to register the Existing Marks, or any of them.
4. Consideration. In consideration for the License, Licensor shall pay to
Licensee the Royalty Payment described in the Royalty and Services Agreement of
even date herewith by and between Licensor and Licensee, calculated as provided
therein.
5. Term.
a. This term of this Agreement (the "TERM") shall commence on the
date hereof and continue in full force and effect until the thirtieth (30th)
anniversary of the Effective Date or until otherwise terminated in accordance
with the provisions hereof.
b. Either party shall have the right, but not the obligation, to
terminate this Agreement immediately if at any time:
(1) the other party shall be in material breach of any of
its obligations hereunder, or under any other material agreement between the
parties or between Licensee and The Good Guys, Inc., a Delaware Corporation, and
such breach shall not be cured within thirty (30) days after receipt of written
notice thereof;
(2) the other party shall be the subject of a voluntary
petition in bankruptcy or any voluntary proceeding relating to insolvency,
receivership, liquidation or assignment for the benefit of creditors;
(3) the other party shall become the subject of any
involuntary petition in bankruptcy or any involuntary proceeding relating to
insolvency, receivership, liquidation or assignment for the benefit of
creditors, and such petition or proceeding shall not be dismissed within 60 days
of filing;
(4) the business of the other party shall be liquidated or
otherwise terminated on any basis;
(5) Licensee ceases to be actively and continuously engaged
in activities constituting the Business; or
(7) the other party performs any illegal acts;
3
15
c. Licensee shall have the right, but not the obligation, to
terminate this Agreement at any time upon 180 days prior notice to Licensor.
d. Licensor will have the right, but not the obligation, to
terminate This Agreement if Licensee is in material breach of its obligations
under that certain subscription and Royalty Agreement of even date herewith.
e. A party may exercise its right to terminate pursuant to this
section 4 by written notice to the other party. No exercise by a party of its
rights under this section 4 shall limit its remedies by reason of the other
party's default, the party's rights to exercise any other rights under this
section 4 or any other rights of that party.
f. Upon the termination of this Agreement, Licensee will assign
back to Licensor for no additional consideration all of Licensee's right, title,
and interest anywhere in the world in and to the New Marks, along with the
goodwill symbolized by the New Marks, and all registrations and applications for
registration with respect thereto.
6. Representations and Warranties; Indemnity.
a. Licensor represents and warrants to Licensee that: (i) it is
the owner of the Existing Marks; (ii) it has the right and power to grant the
License to Licensee as provided herein; and (iii) the grant of the License to
Licensee as provided herein does not require the consent of any third party.
b. Licensor will indemnify and hold Licensee harmless from and
against any and all claims, judgments, damages, losses, costs and expenses
(including attorneys' fees and costs) arising out of a proceeding in which it is
asserted that Licensee's use of the Existing Marks as part of the New Marks
infringes the statutory or common law trademark rights of any third party.
Licensor will, at its sole cost and expense, defend all such claims, actions,
suits and proceedings on behalf of Licensee, with counsel of Licensor's choice,
provided that Licensee promptly notifies Licensor of such claims, actions suits,
or proceedings.
7. Injunctive Relief. Licensee and Licensor acknowledge that money
damages would not adequately compensate either of them in the event of a breach
hereunder, and that injunctive relief would be essential for each party to
adequately protect itself hereunder. Accordingly, the parties agree that, in
addition to any other remedies available at law or in equity, each shall be
entitled to injunctive relief in the event of a breach of any covenant or
agreement contained herein.
8. Miscellaneous.
a. Assignment. Neither party may assign this Agreement or its
rights and obligations hereunder in whole or in part without the other party's
prior written consent which consent may not be unreasonably withheld or delayed.
Any attempt to assign this Agreement without such consent shall be void and of
no effect. Notwithstanding the foregoing, either party may assign this Agreement
or its rights and obligations hereunder to any entity controlled by it or to any
entity by which it is acquired by merger, purchase of capital stock, transfer of
substantially all assets or otherwise; provided that such entity shall
thereafter succeed to all
4
16
obligations of such party under this Agreement; and provided further, that no
such assignment will be effective unless the assignee succeeds to the assigning
party's interest in the Royalty and Services Agreement and Assignment of Domain
Name Agreement, of even date herewith.
b. Amendment. No modification or amendment hereof shall be valid
and binding, unless it be in writing and signed by the parties hereto.
c. Governing Law. This Agreement shall be governed by the internal
laws of the State of Delaware without giving effect to the conflict of law
principles thereof.
d. Entire Agreement. This Agreement sets forth the entire
agreement between the parties hereto with respect to the subject matter hereof
and is intended to supersede all prior negotiations, understandings and
agreements.
e. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and together which shall
constitute one and the same instrument.
f. Waiver. The failure of any party to exercise any right or
remedy provided for herein shall not be deemed a waiver of any right or remedy
hereunder.
g. Severability. If any provision of this Agreement is determined
by a court of competent jurisdiction to be invalid or otherwise unenforceable,
such determination shall not affect the validity or enforceability of any
remaining provisions of this Agreement. If any provision of this Agreement is
invalid under any applicable statute or rule of law, it shall be enforced to the
maximum extent possible so as to effect the intent of the parties, and the
remainder of this Agreement shall continue in full force and effect.
h. Headings. The section headings used herein are for the
convenience of the parties only, are not substantive and shall not be used to
interpret or construe any of the provisions contained herein.
i. Successors and Assigns. This Agreement and the undertakings and
representations herein contained shall inure to the benefit of and bind the
parties and their respective successors and assigns.
j. Notice. Any and all notices or other communications hereunder
shall be sufficiently given if in writing and sent by hand, telecopier,
reputable overnight courier or by certified mail, return receipt requested,
postage prepaid, addressed to the party to receive the same at its address as
set forth below, or to such other address as the party to receive the same shall
have specified by written notice given in the manner provided herein. Such
notices or other communications shall be deemed to have been given on the date
of such delivery. Any party may change its address for the purpose of this
Agreement by notice to the other parties given as aforesaid.
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17
Notice to Licensor: Notice to Licensee:
The Good Guys-California, Inc. xxxxxxxx.xxx, inc.
0000 Xxxxxx Xxxx. 0000 X.X. Xxxx Xxxx.
Xxxxxxxx, XX 00000 Second Floor
Attn: Chief Executive Officer Xxxxxx, XX 00000
Attn: Chief Executive Officer
[SIGNATURE PAGE FOLLOWS]
6
18
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first set forth above.
THE GOOD GUYS-CALIFORNIA, INC. XXXXXXXX.XXX, INC.
By: /s/ XXXXXX XXXXXXX By: /s/ XXXXXX X. XXXXXXX
------------------------- ----------------------------
Name: XXXXXX XXXXXXX Name: XXXXXX X. XXXXXXX
------------------------- ----------------------------
Title: Title:
------------------------- ----------------------------
19
SCHEDULE A
The Good Guys
The Good Guys!
The Good Guys (Stylized Letters)
Good Guys
Good Guys (Stylized Letters)
The Good Guys Logo
20
EXHIBIT D
Form of Tigard Sublease
21
ASSIGNMENT OF DOMAIN NAME AGREEMENT
This Assignment of Domain Name Agreement (the "AGREEMENT") is entered
into as of this 1st day of January, 2000 (the "EFFECTIVE DATE"), by and between
The Good Guys-California, Inc., a California corporation and The Goods Guys,
Inc., a Delaware corporation (collectively "ASSIGNORS"), and xxxxxxxx.xxx, inc.,
a Delaware corporation ("ASSIGNEE").
PRELIMINARY STATEMENTS
A. Either or both of the Assignors is the registered owner of the domain
names listed in Schedule A which constitutes all of the domain names owned by
either the Assignor (the "DOMAIN NAMES"); and
B. Assignee desires to acquire the Domain Names.
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and for other good, valuable and binding consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
STATEMENT OF AGREEMENT
1. Each Assignor hereby assigns to Assignee all of its right,
title and interest, throughout the world, in and to the Domain Names.
2. Each Assignor and Assignee agree to execute whatever additional
instruments either party may reasonably request to effectuate or evidence any of
the transactions intended under this Agreement, including such documentation as
Network Solutions, Inc. or any other relevant entity may require to transfer
ownership of the Domain Names from the relevant Assignor to Assignee.
3. Each Assignor acknowledges that Assignee shall have the right
to register in Assignee's name any derivation of domain names, including those
using different suffixes.
4. The Domain Names are assigned to Assignee pursuant to on an "AS
IS" basis, without any representations or warranties whatsoever, except that
Assignee represents and warrants that it has not heretofore assigned the Domain
Names to any person or entity. Without limiting the generality of the foregoing,
EACH PARTY DISCLAIMS ANY AND ALL OTHER WARRANTIES OR REPRESENTATIONS, EXPRESS OR
IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY, TITLE, NON-INFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE.
5. Upon termination of that certain Trademark License Agreement
between the parties of even date herewith, Assignee shall have a right to
acquire all of Assignee's right, title, and interest in and to the Domain Names
for an amount equal to the then fair market value thereof. The closing of any
such acquisition shall occur on the ninth (9th) month anniversary of the
termination of the Trademark License Agreement.
22
6. Miscellaneous.
a. This Agreement shall be governed by the internal laws of the
State of Delaware without giving effect to the conflict of law principles
thereof.
b. This Agreement sets forth the entire agreement between the
parties hereto with respect to the subject matter hereof and is intended to
supersede all prior negotiations, understandings and agreements. No provision of
this Agreement may be waived or amended, except by a writing signed by Assignor
and Assignee.
c. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and together which shall constitute
one and the same instrument.
d. The failure of any party to exercise any right or remedy
provided for herein shall not be deemed a waiver of any right or remedy
hereunder.
e. If any provision of this Agreement is determined by a court of
competent jurisdiction to be invalid or otherwise unenforceable, such
determination shall not affect the validity or enforceability of any remaining
provisions of this Agreement. If any provision of this Agreement is invalid
under any applicable statute or rule of law, it shall be enforced to the maximum
extent possible so as to effect the intent of the parties, and the remainder of
this Agreement shall continue in full force and effect.
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f. Any and all notices or other communications hereunder shall be
sufficiently given if in writing and sent by hand, telecopier, reputable
overnight courier or by certified mail, return receipt requested, postage
prepaid, addressed to the party to receive the same at its address as set forth
below, or to such other address as the party to receive the same shall have
specified by written notice given in the manner provided for herein. Such
notices or other communications shall be deemed to have been given on the date
of such delivery. Any party may change its address for the purpose of this
Agreement by notice to the other parties given as aforesaid.
Notice to Assignor: Notice to Assignee:
The Good Guys-California, Inc. xxxxxxxx.xxx, inc.
0000 Xxxxxx Xxxx. 0000 X.X. Xxxx Xxxx.
Xxxxxxxx, XX 00000 Second Floor
Attn: Chief Executive Officer Xxxxxx, XX 00000
Attn: Chief Executive Officer
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.
THE GOOD GUYS-CALIFORNIA; INC. XXXXXXXX.XXX, INC.
By: /s/ XXXXXX XXXXXXX By: /s/ XXXXXX X. XXXXXXX
--------------------------- --------------------------------
Name: XXXXXX XXXXXXX Name: XXXXXX X. XXXXXXX
------------------------- ------------------------------
Title: Title:
------------------------ -----------------------------
Date: Date:
------------------------- ------------------------------
THE GOOD GUYS, INC.
By: /s/ XXXXXX XXXXXXX
---------------------------
Name: XXXXXX XXXXXXX
-------------------------
Title:
------------------------
Date:
-------------------------
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SCHEDULE A
EACH OF THE FOLLOWING*
xxxxxxxxxxx.xxx
xxxxxxxxxxx.xxx
xxxxxxxxxxx.xxx
xxxxxxxx.xxx
xxxxxxxx.xxx
xxxxxxxxx.xxx
xx-xxxxxxxx.xxx
And all other domain names owned by The Good Guys-California, Inc. and/or by The
Good Guys, Inc.
*And any other names that differ from the following only with respect to
capitalization of certain letters.
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25
EXHIBIT C
Trademark License Agreement
26
STOCK AND WARRANT SUBSCRIPTION AGREEMENT
This Stock and Warrant Subscription Agreement (the "AGREEMENT") is made
and entered into as of the 1st day of January, 2000 (the "EFFECTIVE DATE"), by
and between xxxxxxxx.xxx, inc., a Delaware corporation ("DOTCOM"), and The Good
Guys-California, Inc., a California corporation ("GOOD GUYS").
PRELIMINARY STATEMENTS
A. Dotcom desires to issue to Good Guys and Good Guys desires to
subscribe for and purchase from Dotcom, One Million One Hundred Forty Thousand
Seven Hundred Ninety Five (1,140,795) shares of Common Stock, par value $0.001,
of Dotcom (the "COMMON SHARES").
B. Dotcom desires to issue to Good Guys and Good Guys desires to
subscribe for and purchase from Dotcom the stock purchase warrant described
herein (the "WARRANT").
NOW, THEREFORE, for good, valuable and binding consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto, intending
to be legally bound hereby, now agree as follows:
STATEMENT OF AGREEMENT
1. Subscription.
(a) Common Shares. Good Guys hereby subscribes for the Common
Shares, which shares equal nineteen and eighty seven one-hundredths
percent (19.87%) of the issued and outstanding shares of Dotcom's common
stock on and as of the date hereof. Dotcom hereby issues to and registers
in the name of Good Guys one or more certificates evidencing the Common
Shares.
(b) Warrant. Good Guys hereby purchases and subscribes for the
Dotcom Warrant attached hereto as Exhibit A.
2. Consideration. In consideration for the subscription of the Common
Shares and the Warrant, Good Guys has entered into each of the Assignment of
Domain Name Agreement attached hereto as Exhibit B and the Trademark License
Agreement attached hereto as Exhibit C; and sublease space to Dotcom
substantially upon the terms and conditions set forth on Exhibit D. Concurrently
herewith, certain investors have subscribed for not less than $2.25MM of the
common stock of Dotcom.
3. Anti-Dilution Protection. Notwithstanding any other provision hereof,
Dotcom agrees that the Common Shares shall be protected from dilution resulting
from any issuance of capital stock by Dotcom after the date hereof up to the
"Anti-Dilution Threshold." For purposes
27
hereof, the Anti-Dilution Threshold shall mean, in the aggregate, issuances of
shares equal to fifteen percent (15%) of Dotcom's issued and outstanding shares
as of the date hereof.
4. Representations and Warranties of Good Guys. Good Guys hereby
represents and warrants to Dotcom as follows:
(a) Authorization. This Agreement constitutes Good Guys's valid
and legally binding obligation, enforceable in accordance with its terms
except as may be limited by applicable bankruptcy, insolvency,
reorganization or other laws of general application relating to or
affecting the enforcement of creditors' rights generally, and the effect
of rules of law governing the availability of equitable remedies. Good
Guys represents that it has full power and authority to enter into this
Agreement.
(b) Access to Information. Good Guys has had an opportunity to
receive and review all documents and information that it considers
material to its purchase of the Common Shares and to ask questions of and
receive satisfactory answers from Dotcom, concerning Dotcom and the terms
and conditions of the purchase of the Common Shares and the Warrant, and
all such questions have been answered to the full satisfaction of Good
Guys.
(c) Knowledgeable Investor. Good Guys has such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of purchasing the Common Shares.
(d) Accredited Investor. Good Guys is an "accredited investor"
within the meaning of Regulation D promulgated under the Securities Act.
(e) Investment Intent. Good Guys understands that neither the
Common Shares nor the Warrant have been registered under the Securities
Act of 1933 (the "SECURITIES ACT"), or any other applicable state or
federal securities statutes (collectively, the "ACTS"). Good Guys is
purchasing the Common Shares and the Warrant for investment, for its own
account, and with no present intention of reselling, directly or
indirectly participating in any distribution of or otherwise disposing of
the Common Shares. Good Guys understands that the Common Shares are
subject to restrictions on transfer and that Good Guys may bear the
economic risk of purchasing the Common Shares for an indefinite period of
time.
(f) No Brokers. Good Guys has not authorized any broker, dealer,
agent or finder to act on its behalf nor does Good Guys have any
knowledge of any broker; dealer, agent or finder purporting to act on its
behalf with respect to this transaction.
(g) Legend. Good Guys acknowledges that a legend substantially as
follows will be placed on the certificates representing the Common Shares
and the Warrant:
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER EITHER THE
SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN
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28
EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THE SECURITIES
UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED.
(h) Reliance. Good Guys understands that the Common Shares and the
Warrant are being offered and sold to it in reliance on specific
provisions of federal and state securities laws and that Dotcom is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgements and understandings of Good Guys set forth
herein in order to determine the applicability of such provisions;
5. Representations and Warranties of Dotcom. Dotcom hereby represents and
warrants to Good Guys as follows:
(a) Organization. Dotcom has been duly incorporated and is validly
existing and in good standing under the laws of the State of Delaware,
with full corporate power and authority to own, lease and operate its
properties and to conduct its business as currently conducted, and is
duly registered and qualified to conduct its business and is in good
standing in each jurisdiction or place where the nature of its properties
or the conduct of its business requires such registration or
qualification, except where the failure to register or qualify is not
reasonably anticipated to have a material adverse effect on the condition
(financial or otherwise), business, properties, net worth or results of
operations of Dotcom;
(b) Shares. The Common Shares are duly authorized and validly
issued, and when issued and delivered, shall be fully paid and
non-assessable;
(c) Authorization. This Agreement has been duly authorized,
validly executed and delivered on behalf of Dotcom and is a valid and
binding agreement of Dotcom enforceable in accordance with its terms,
subject to general principles of equity and bankruptcy or other laws
affecting the enforcement of creditors' rights generally, and Dotcom has
full power and authority to execute and deliver this Agreement and the
other agreements and documents contemplated hereby and to perform its
obligations hereunder and thereunder;
(d) No Conflict. The execution and delivery of this Agreement, the
issuance of the Common Shares and the consummation of the transactions
contemplated by this Agreement, will not conflict with or result in a
breach of or a default under any of the terms or provisions of Dotcom's
certificate of incorporation or by-laws, or of any material provision of
any indenture, mortgage, deed of trust or other material agreement or
instrument to which Dotcom is a party or by which it or any of its
properties or assets is bound, any provision of any law, statute, rule,
regulation, or any existing applicable decree, judgment or order by any
court, federal or state regulatory body, administrative agency, or other
governmental body having jurisdiction over Dotcom, or any of its
properties or assets or will result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of Dotcom
pursuant to the terms of any
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29
agreement or instrument to which Dotcom is a party or by which Dotcom may
be bound or to which any of Dotcom's property or Dotcom is subject; and
(e) No Proceedings. There is no action, suit or proceeding before
or by any court or governmental agency or body, domestic or foreign, now
pending, or to Dotcom's knowledge, threatened, against or affecting
Dotcom, or any of its properties, which would reasonably be anticipated
to result in any material adverse change in the condition (financial or
otherwise) or in the earnings, business affairs, business prospects,
properties or assets of Dotcom.
6. Miscellaneous.
(a) Restrictions. Neither the Common Shares nor the Warrant may be
offered for sale, sold or transferred except pursuant to (i) an effective
registration under the Securities Act or in a transaction which is
otherwise in compliance with the Securities Act, (ii) an effective
registration under any applicable state securities statute or in a
transaction otherwise in compliance with any applicable state securities
statute, and (iii) evidence of compliance with the applicable securities
laws of other jurisdictions. Good Guys shall furnish to Dotcom and Dotcom
shall be entitled to rely upon an opinion of competent securities counsel
acceptable to Dotcom with respect to compliance with the above laws.
(b) Integration. This Agreement, together with the Exhibits
hereto, sets forth the entire agreement between the parties hereto with
respect to the subject matter hereof and is intended to supersede all
prior negotiations, understandings and agreements.
(c) Amendment. No modification or amendment hereof shall be valid
and binding, unless it be in writing and signed by the parties hereto.
(d) Successors and Assigns. This Agreement and the undertakings
and representations herein contained shall inure to the benefit of and
bind the parties and their respective successors and assigns.
(e) Survival of Representations, Warranties and Covenants. The
representations, warranties and covenants contained in this Agreement
shall survive the issuance of the Common Shares to Good Guys and its
payment therefor, and shall remain effective.
(f) Headings. The section headings used herein are for the
convenience of the parties only, are not substantive and shall not be
used to interpret or construe any of the provisions herein.
(g) Governing Law. This Agreement shall be governed by the
internal laws of the state of Delaware without giving effect to the
conflict of law principles thereof.
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30
(h) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and together
which shall constitute one and the same instrument.
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31
IN WITNESS WHEREOF, this Agreement was duly executed on the date first
above written.
GOOD XXXX.XXX, INC.
By: /s/ XXXXXX X. XXXXXXX
-------------------------------------
Name: XXXXXX X. XXXXXXX
-----------------------------------
Title:
----------------------------------
THE GOOD GUYS-CALIFORNIA, INC.
By: /s/ XXXXXX XXXXXXX
-------------------------------------
Name: XXXXXX XXXXXXX
-----------------------------------
Title:
----------------------------------
32
EXHIBIT A
Warrant to Purchase Common Stock of xxxxxxxx.xxx, inc.
33
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, OR ANY
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF REGISTRATION UNDER SUCH ACT AND APPLICABLE
LAWS, OR THE AVAILABILITY OF AN EXEMPTION FROM SUCH REGISTRATION, OR AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT LEGALLY
REQUIRED.
No. 001
WARRANT TO PURCHASE COMMON STOCK
OF
XXXXXXXX.XXX, INC.
This certifies that, beginning on the date of this Warrant, for value
received, The Good Guys-California, Inc., a California corporation ("GOOD
GUYS"), or registered assigns (the "HOLDER"), is entitled to purchase from
xxxxxxxx.xxx, inc., a Delaware corporation (the "COMPANY"), shares of the Common
Stock of the Company, $.001 par value (the "COMMON STOCK"), in the amount set
forth in Section 2, upon surrender hereof, at the principal office of the
Company referred to below, with a duly executed Notice of Exercise in the form
attached, and simultaneous payment therefor in lawful money of the United States
or otherwise as hereinafter provided, at the Exercise Price as set forth in
Section 3. The number, character and Exercise Price of such shares of Common
Stock are subject to adjustment as provided below. The term "WARRANT" as used
herein shall include this Warrant, and any warrants delivered in substitution or
exchange therefor as provided herein.
1. Term of Warrant. Subject to the terms and conditions set forth herein,
this Warrant shall be exercisable, in whole or in part, beginning upon the
occurrence of a Liquidity Event (as defined below) and ending ten (10) business
days thereafter. Subject to the notice requirements of Section 10 hereof, after
such date, this Warrant shall be void. The term "LIQUIDITY EVENT" shall mean:
(i) a sale of all or substantially all of the assets of the Company, (ii) a
merger of the Company with or into another entity (or corporate reorganization
of similar effect), or (iii) an initial public offering of shares of the
Company's common stock.
2. Number of Shares Which May Be Purchased. The total number of shares of
Common Stock purchasable pursuant to this Warrant is equal to the number of
shares that, when added to the number of shares issued to Good Guys under the
Stock and Warrant Subscription Agreement dated January 1, 2000 by and between
the Company and Good Guys, equals forty-nine and nine-tenths percent (49.9%) of
the Company's issued and outstanding Common Stock as of the date hereof, as
calculated on a fully
34
diluted basis (including all options, warrants, securities convertible into
Common Stock, and other rights to acquire Common Stock, and assuming for
purposes of such calculation employee options equal to fifteen percent (15%) of
the Common Stock as of the date hereof).
3. Exercise Price. The purchase price per share for the Common Stock
purchased under this Warrant (the "EXERCISE PRICE") shall be one cent ($.01) per
share, as adjusted from time to time pursuant to Section 12 hereof.
4. Exercise of Warrant.
(a) Method of Exercise. The purchase rights represented by this
Warrant are exercisable by the Holder in whole or in part, at any time, or from
time to time, during the term hereof as described in Section 1 above, by the
surrender of this Warrant and the Notice of Exercise annexed hereto duly
completed and executed on behalf of the Holder, at the office of the Company,
and upon payment equal to the aggregate Exercise Price of the Common Stock being
purchased in cash or by check payable to the Company.
(b) Other Matters. This Warrant shall be deemed to have been
exercised immediately prior to the close of business on the date of its
surrender for exercise as provided above, and the person entitled to receive the
shares of Common Stock issuable upon such exercise shall be treated for all
purposes as the holder of record of such shares as of the close of business on
such date. As promptly as practicable on or after such date and in any event
within ten (10) days thereafter, the Company at its expense shall issue and
deliver to the person or persons entitled to receive the same a certificate or
certificates for the number of shares issuable upon such exercise. In the event
that this Warrant is exercised in part, the Company at its expense will execute
and deliver a new Warrant of like tenor exercisable for the remaining number of
shares for which this Warrant may then be exercised.
5. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional share to which the Holder would otherwise be
entitled, the Company shall make a cash payment equal to the Exercise Price
multiplied by such fraction.
6. Replacement of Warrant. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of loss, theft or destruction, on delivery of an indemnity
agreement reasonably satisfactory in form and substance to the Company or, in
the case of mutilation, on surrender and cancellation of this Warrant, the
Company at its expense shall execute and deliver, in lieu of this Warrant, a new
warrant of like tenor and amount.
7. No Rights as Stockholder. This Warrant shall not entitle its Holder,
as such, to any of the rights of a stockholder of the Company.
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8. Transfer of Warrant.
(a) Warrant Register. The Company will maintain a register (the
"Warrant Register") containing the names and addresses of the Holder or Holders.
Any Holder of this Warrant or any portion thereof may change his or her address
as shown on the Warrant Register by written notice to the Company requesting
such change. Any notice or written communication required or permitted to be
given to the Holder may be delivered or given by mail to such Holder as shown on
the Warrant Register and at the address shown on the Warrant Register. Until
this Warrant is transferred on the Warrant Register of the Company, the Company
may treat the Holder as shown on the Warrant Register as the absolute owner of
this Warrant for all purposes, notwithstanding any notice to the contrary.
(b) Transferability and Nonnegotiability of Warrant. This Warrant
may not be transferred or assigned in whole or in part without compliance with
all applicable federal and state securities laws by the transferor and the
transferee (including the delivery of investment representation letters and
legal opinions reasonably satisfactory to the Company, if such are requested by
the Company). Subject to compliance with the Securities Act of 1933 (the "ACT"),
and applicable state securities laws, title to this Warrant may be transferred
by endorsement (by the Holder executing the Assignment Form annexed hereto) and
delivery in the same manner as a negotiable instrument transferable by
endorsement and delivery.
(c) Exchange of Warrant Upon a Transfer. On surrender of this
Warrant for exchange, properly endorsed on the Assignment Form and subject to
the provisions of this Warrant with respect to compliance with the Act and
with the limitations on assignments and transfers contained in this Section 8,
the Company at its expense shall issue to or on the order of the Holder a new
warrant or warrants of like tenor, in the name of the Holder or as the Holder
(on payment by the Holder of any applicable transfer taxes) may direct, for the
number of shares issuable upon exercise hereof.
(d) Compliance with Securities Laws.
(i) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the shares of Common Stock to be issued upon
exercise hereof are being acquired solely for the Holder's own account for
investment, and that the Holder will not offer, sell or otherwise dispose of
this Warrant or any shares of Common Stock to be issued upon exercise hereof
except under circumstances that will not result in a violation of the Act or any
state securities laws. Upon exercise of this Warrant, the Holder shall, if
requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the shares of Common Stock so purchased are being acquired for
investment, and not with a view toward distribution or resale in violation of
applicable securities laws.
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(ii) All shares, of Common Stock issued upon exercise
hereof shall be stamped or imprinted with a legend in substantially the
following form (in addition to any legend required by state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
APPLICABLE STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM
UNDER SAID ACT AND APPLICABLE LAWS.
9. Reservation of Stock. The Company covenants that during the term this
Warrant is exercisable, the Company will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the exercise of this Warrant and, from time to time, will
take all steps necessary to amend its corporate charter to provide sufficient
reserves of shares of Common Stock issuable upon exercise of the Warrant. The
Company further covenants that all shares that may be issued upon the exercise
of rights represented by this Warrant and payment of the Exercise Price, all as
set forth herein, will be free from all taxes, liens and charges in respect of
the issue thereof.
10. Notices.
(a) Holder shall notify the Company of its intent to exercise the
Warrant within ten (10) business days of receipt of notice of a pending
Liquidation Event.
(b) Whenever the Exercise Price or number of shares purchasable
hereunder shall be adjusted pursuant to Section 12 hereof, the Company shall
issue a certificate signed by its Chief Financial Officer setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the Exercise
Price and number of shares purchasable hereunder after giving effect to such
adjustment, and shall cause a copy of such certificate to be mailed (by
first-class mail, postage prepaid) to the Holder of this Warrant.
(c) In case:
(i) the Company shall take a record of the holders of its
Common Stock (or other stock or securities at the time receivable upon the
exercise of this Warrant) for the purpose of entitling them to receive any
dividend or other distribution, or any right to subscribe for or purchase any
shares of stock of any class or any other securities, or to receive any other
right, or
(ii) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation, or any conveyance of all
or substantially all of the assets of the Company to another corporation, or
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37
(iii) of any voluntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Holder or Holders a notice specifying, as the case may be, (A) the date on which
a record is to be taken for the purpose of such dividend, distribution or right,
and stating the amount and character of such dividend, distribution or right, or
(B) the date on which such reorganization, reclassification, consolidation,
merger, conveyance, dissolution, liquidation or winding-up is to take place, and
the time, if any is to be fixed, as of which the holders of record of Common
Stock (or such stock or securities at the time receivable upon the exercise of
this Warrant) shall be entitled to exchange their shares of Common Stock (or
such other stock or securities) for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be mailed at least 15
days prior to the date therein specified.
(d) All such notices, advices and communications shall be deemed
to have been received (i) in the case of personal delivery, on the date of such
delivery and (ii) in the case of mailing, on the third business day following
the date of such mailing.
11. Amendments. Any term of this Warrant may be amended with the written
consent of the Company and all of the Holders of this Warrant.
12. Adjustments. The Exercise Price and the number of shares purchasable
hereunder are subject to adjustment from time to time as follows:
(a) Merger, Sale of Assets, etc. If at any time while this
Warrant, or any portion thereof, is outstanding and unexpired there shall be (i)
a reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (ii) a merger of
consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a reverse triangular merger in which the
Company is the surviving entity but the shares of the Company's capital stock
outstanding immediately prior to the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash, or
otherwise, or (iii) a sale or transfer of the Company's properties and assets
as, or substantially as, an entirety to any other person, then, as a part of
such reorganization, merger, consolidation, sale or transfer, provision shall be
made so that the holder of this Warrant shall thereafter be entitled to receive
upon exercise of this Warrant, during the period specified herein and upon
payment of the Exercise Price then in effect, the number of shares of stock or
other securities or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer that a holder of the
shares deliverable upon exercise of this Warrant would have been entitled to
receive in such reorganization, merger, consolidation, sale or transfer if this
Warrant had been exercised immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as provided
in this Section 12. The foregoing provisions of this Section 12(a)
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shall similarly apply to successive reorganizations, consolidations, mergers,
sales and transfers and to the stock or securities of any other corporation that
are at the time receivable upon the exercise of this Warrant. If the per-share
consideration payable to the holder hereof for shares in connection with any
such transaction is in a form other than cash or marketable securities, then the
value of such consideration shall be determined in good faith by the Company's
Board of Directors. In all events, appropriate adjustment (as determined in good
faith by the Company's Board of Directors) shall be made in the application of
the provisions of this Warrant with respect to the rights and interests of the
Holder after the transaction, to the end that the provisions of this Warrant
shall be applicable after that event, as near as reasonably may be, in relation
to any shares or other property deliverable after that event upon exercise of
this Warrant.
(b) Reclassification, etc. If the Company, at any time while this
Warrant, or any portion hereof, remains outstanding and unexpired, by
reclassification of securities or otherwise, shall change any of the securities
as to which purchase rights under this Warrant exist into the same or a
different number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change, and the Exercise
Price therefor shall be appropriately adjusted, all subject to further
adjustment as provided in this Section 12.
(c) Split, Subdivision or Combination of Shares. If the Company at
any time while this Warrant, or any portion hereof, remains outstanding and
unexpired shall split, subdivide or combine the securities as to which purchase
rights under this Warrant exist, into a different number of securities of the
same class, the Exercise Price for such securities shall be proportionately
decreased in the case of a split or subdivision or proportionately increased in
the case of a combination.
(d) Adjustments for Dividends in Stock or Other Securities or
Property. If while this Warrant, or any portion hereof, remains outstanding and
unexpired the holders of the securities as to which purchase rights under this
Warrant exist at the time shall have received, or, on or after the record date
fixed for the determination of eligible stockholders, shall have become entitled
to receive, without payment therefor, other or additional stock or other
securities or property (other than cash) of the Company by way of dividend, then
and in each case, this Warrant shall represent the right to acquire, in addition
to the number of shares of the security receivable upon exercise of this
Warrant, and without payment of any additional consideration therefor, the
amount of such other or additional stock or other securities or property (other
than cash) of the Company that such holder would hold on the date of such
exercise had it been the holder of record of the security receivable upon
exercise of this Warrant on the date hereof and had thereafter, during the
period from the date hereof to and including the date of such exercise, retained
such shares and/or all other additional stock available by it as aforesaid
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39
during such period, giving effect to all adjustments called for during such
period by the provisions of this Section 12.
(e) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment pursuant to this Section 12, the Company at its
expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to each Holder of this Warrant a Certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Company shall, upon the
written request, at any time, of any such Holder, furnish or cause to be
furnished to such Holder a like certificate setting forth: (i) such adjustments
and readjustments; (ii) the Exercise Price at the time in effect; and (iii) the
number of shares and the amount, if any, of other property that at the time
would be received upon the exercise of the Warrant.
(f) No Impairment. The Company will not, by any voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 12 and in
the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder of this Warrant against impairment.
13. Miscellaneous.
(a) Successors and Assigns. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors of the
Company and the Holder and their respective permitted assigns. The provisions of
this Warrant are intended to be for the benefit of all Holders from time to time
of this Warrant, and shall be enforceable by any such Holder.
(b) Headings. The headings of the Sections of this Warrant are for
the convenience of reference only and shall not, for any purpose, be deemed a
part of this Warrant.
(c) Governing Law. This Warrant shall be governed by the laws of
the State of Delaware, excluding that body of law relating to conflicts of laws.
(d) Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when personally delivered or mailed, by registered or certified mail
as follows:
if to Holder: The Good Guys-California, Inc.
0000 Xxxxxx Xxxx.
Xxxxxxxx, XX 00000
Attn: Chief Executive Officer
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if to Company: xxxxxxxx.xxx, inc.
0000 X.X. Xxxx Xxxx., Xxxxxx Xxxxx
Xxxxxx, XX 00000
Attn: Chief Executive Officer
Such addresses may be changed from time to time by written notice to the other
party.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the undersigned has caused this Warrant to be
executed by its officers thereunto duly authorized.
Dated: January 1, 2000. The Company:
XXXXXXXX.XXX, INC.
By: /s/ XXXXXX X. XXXXXXX
---------------------------------
Name: XXXXXX X. XXXXXXX
---------------------------------
Title:
---------------------------------
42
NOTICE OF EXERCISE
(1) The undersigned hereby elects to purchase ___________ shares of
Common Stock of xxxxxxxx.xxx, inc., pursuant to the provisions of Section 4(a)
of the attached Warrant, and tenders herewith payment of the purchase price for
such shares in full.
(2) In exercising this Warrant, the undersign hereby confirms and
acknowledges that the shares of Common Stock are being acquired solely for
investment, and that the undersigned will not offer, sell or otherwise dispose
of any such shares of Common Stock except in compliance with the Securities Act
of 1933 or any applicable state securities laws.
(3) Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in the following name:
___________________.
(4) Please issue a new Warrant for the unexercised portion of the
attached Warrant in the name of the undersigned or in the following name:
___________________.
Dated:
-------------------------- ---------------------------------------
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
43
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under the within Warrant, with respect to the number
of shares of Common Stock set forth below:
NAME OF ASSIGNEE ADDRESS NO. OF SHARES
and does hereby irrevocably constitute and appoint _____________ to make such
transfer on the books of xxxxxxxx.xxx, inc., maintained for the purpose, with
full power of substitution in the premises.
The undersigned also represents that, by assignment hereof, the Assignee
acknowledges that this Warrant and the shares of stock to be issued upon
exercise hereof are being acquired for investment and that the Assignee will not
offer, sell or otherwise dispose of this Warrant or any shares of stock to be
issued upon exercise hereof except in compliance with the Securities Act of 1933
or any state securities laws. Further, the Assignee has acknowledge that upon
exercise of this Warrant, the Assignee shall, if requested by the Company,
confirm in writing, in a form satisfactory to the Company, that the shares of
stock so purchased are being acquired for investment and not with a view toward
distribution or resale.
Dated:
-------------------------- ---------------------------------------
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
44
EXHIBIT B
Assignment of Domain Name Agreement
