EXHIBIT 99(c)(1)
STOCK PURCHASE AGREEMENT
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BETWEEN
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GO2NET, INC.
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AND
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VULCAN VENTURES INCORPORATED
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MARCH 15, 1999
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STOCK PURCHASE AGREEMENT
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This STOCK PURCHASE AGREEMENT is made as of March 15, 1999 between GO2NET,
INC. (the "Company"), a corporation organized under the laws of the State of
Delaware, and VULCAN VENTURES INCORPORATED, a corporation organized under the
laws of the State of Washington ("Purchaser").
WHEREAS, the Company wishes to sell to Purchaser 300,000 shares of the
Company's Series A Convertible Preferred Stock, $.01 par value (the "Series A
Preferred Stock"), on the terms and conditions hereinafter provided;
WHEREAS, as an inducement to Purchaser to enter into this Agreement,
certain executive officers and directors of the Company (the "Management
Stockholders") have entered into agreements with Purchaser (the "Management
Agreements") pursuant to which, among other things (i) each Management
Stockholder has agreed to sell to Purchaser, and Purchaser has agreed to
purchase from him, certain of his shares of the Company's Common Stock, $.01 par
value (the "Common Stock") (including certain shares of Common Stock issuable
pursuant to the exercise of vested stock options) aggregating a total of
1,403,312 shares of Common Stock under all the Management Agreements taken
together, at $90 per share, and (ii) each Management Stockholder has agreed to
vote all of his shares of Common Stock in favor of the issuance to Purchaser of
the Series A Preferred Stock to be issued at the Second Closing (as defined
below), in each case upon the terms and subject to the conditions set forth
therein; and
WHEREAS, Purchaser will commence, within five (5) business days of the date
hereof, at a price of $90 per share net to the seller in cash, a tender offer
(the "Offer") for up to 3,596,688 shares of Common Stock (the "Offer Shares"),
which shares, together with the maximum number of shares of Series A Preferred
Stock that may be purchased by Purchaser under this Agreement, would equal at
least 51% of the outstanding shares of Common Stock (assuming conversion into
Common Stock, at the initial conversion rate, of all such shares of Series A
Preferred Stock).
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained in this Agreement, the Company and Purchaser agree as follows:
1. Purchase and Sale of Shares. On the terms and subject to the
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conditions set forth herein, the Company agrees to issue and sell to Purchaser,
and Purchaser agrees to purchase from the Company, (a) at the First Closing (as
defined below), 167,507 shares (the "First Issuance Shares") of Series A
Preferred Stock, and (b) at the Second Closing (as defined below), an additional
132,493 shares of Series A Preferred Stock (the "Second Issuance Shares," and
collectively with the First Issuance Shares, the "Shares"), in each case for a
purchase price of One Thousand Dollars ($1,000) per share. The Series A
Preferred Stock shall have the terms designated in the Certificate of
Designation of Series A Convertible Preferred Stock attached hereto as Exhibit A
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(the "Certificate of Designation").
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2. Closing; Deliveries.
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2.1. First Closing. The closing of the purchase and sale of the
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First Issuance Shares (the "First Closing") shall occur at the offices of Irell
& Xxxxxxx LLP ("I&M"), 0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000, Xxx Xxxxxxx,
Xxxxxxxxxx 00000, concurrently with the execution of this Agreement. At the
First Closing, the Company shall deliver to Purchaser one or more stock
certificates evidencing the First Issuance Shares registered in the name of
Purchaser and Purchaser shall pay to the Company the purchase price for the
First Issuance Shares $25,000 by check or wire transfer and the balance in the
form of a promissory note in the form of Exhibit B hereto. At the First Closing,
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the parties will also duly execute and deliver the Registration Rights Agreement
in the form of Exhibit C hereto (the "Registration Rights Agreement") and the
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Purchaser shall receive an opinion from Xxxxxxxx, Xxxxxxx & Xxxxxxx as to
certain matters. The date on which the First Closing occurs is hereinafter
referred to as the "First Closing Date." The First Closing shall occur prior to
any public announcement of the tender offer contemplated hereby.
2.2. Second Closing. The closing of the purchase and sale
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of the Second Issuance Shares (the "Second Closing") shall occur at the offices
of I&M as soon as practicable (but not more than three (3) business days) after
the satisfaction or waiver of all of the conditions to the Second Closing set
forth herein, or at such other place and time as the Company and Purchaser may
agree. At the Second Closing, the Company shall deliver to Purchaser one or more
stock certificates evidencing the Second Issuance Shares registered in the name
of Purchaser and Purchaser shall pay to the Company the purchase price for the
Second Issuance Shares by check or wire transfer. The date on which the Second
Closing occurs is hereinafter referred to as the "Second Closing Date."
3. Representations and Warranties of the Company. The Company hereby
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represents and warrants to Purchaser as follows (it being agreed that for
purposes of the representations and warranties set forth in this Section 3, the
term the "Company" shall be deemed to refer to the Company and each of its
subsidiaries on a consolidated basis, except where the context reasonably
indicates otherwise):
3.1. Organization and Qualification. The Company is a corporation
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duly organized, validly existing and in good standing under the laws of its
state of incorporation, has all requisite corporate power and authority to
conduct its business as currently conducted and to enter into and to carry out
and perform its obligations under the Transaction Documents. For purposes of
this Agreement, "Transaction Documents" shall mean (a) this Agreement, (b) the
Registration Rights Agreement, and (c) the Certificate of Designation. The
Company is duly qualified as a foreign corporation and is in good standing in
each jurisdiction in which the failure to be so qualified or in good standing
could reasonably be expected to have a material adverse effect on the business,
properties, results of operations or financial condition of the Company and its
subsidiaries taken as a whole, other than any adverse effect following the date
of this Agreement that the Company shall have demonstrated is substantially
attributable to (i) the transactions contemplated by this Agreement or the
announcement of the transactions contemplated by this Agreement or (ii) any
material economic downturn in the Internet industry generally or any material
national economic downturn (a "Material Adverse Effect").
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3.2. Authorized Capital Stock. As of the date hereof, the
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authorized capital stock of the Company consists of (a) 50,000,000 shares of
Common Stock, and (b) 1,000,000 shares of Preferred Stock, $.01 par value per
share, 300,000 shares of which are designated as Series A Preferred Stock. As of
March 11, 1999, there were 12,732,545 shares of Common Stock outstanding and no
shares of Preferred Stock outstanding. All of the outstanding shares of Common
Stock have been duly authorized and validly issued and are fully paid and
nonassessable. The Company has reserved for issuance upon conversion of the
Series A Preferred Stock 4,537,891 shares of Common Stock. The Company has
reserved for issuance upon exercise of options granted under its 1996 Stock
Option Plan ("Company Option Plan") and outside such plan an aggregate of
5,182,293 shares of Common Stock. The Company's Board of Directors has
authorized an increase in the number of shares of Common Stock reserved for
issuance under the Company Option Plan from 5,000,000 to 8,000,000 shares of
Common Stock, subject to stockholder approval. The Company also assumed the
outstanding options under the former Silicon Investor and Web21 stock option
plans (the "Assumed Option Plans"), the shares under which are in addition to
the shares available under the Company Option Plan. An aggregate of 121,944
shares of Common Stock are reserved for issuance upon exercise of options
pursuant to the Assumed Option Plans. As of March 11, 1999, there were not
outstanding or existing any options, warrants, rights (including conversion or
preemptive rights) or agreements for the purchase or acquisition from the
Company of any shares of its capital stock or any securities exercisable for or
convertible into shares of its capital stock, except for options to purchase an
aggregate of 5,304,237 shares of Common Stock outstanding under the Company
Option Plan and the Assumed Option Plans.
3.3. Subsidiaries. Except as set forth in Schedule 3.3, the
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Company (a) owns no equity securities of any other corporation, limited
partnership or similar entity, and (b) is not a participant in any joint
venture, partnership or similar arrangement.
3.4. Due Execution, Delivery and Performance of the Agreement;
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No Conflict.
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3.4.1. Subject only to approval of the issuance and sale to
Purchaser of the Second Issuance Shares by the holders of the Common Stock, the
execution, delivery and performance of the Transaction Documents have been duly
authorized by all necessary corporate action on the part of the Company. The
Company's Board of Directors has approved the Certificate of Designation. This
Agreement has been, and when executed and delivered at the First Closing or the
Second Closing (as the case may be) the other Transaction Documents will be,
duly executed and delivered by the Company and constitutes, or when executed and
delivered at the First Closing or the Second Closing (as the case may be) will
constitute, valid and binding obligations of the Company, enforceable against it
in accordance with their respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws and
equitable principles relating to or limiting creditors' rights generally.
3.4.2. The execution, delivery and, subject to obtaining the
consents set forth in Schedule 3.4, performance by the Company of the
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Transaction Documents and the consummation of the transactions contemplated
thereby will not, except in each case where the effect of non-compliance could
not, individually or in the aggregate, reasonably
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be expected to have a Material Adverse Effect, (i) modify, breach or constitute
grounds for the occurrence or declaration of a default under or give rise to a
right to terminate any agreement, license, indenture, undertaking or other
instrument to which the Company is a party or by which it or any of its assets
may be bound or affected, (ii) violate any provision of law or any regulation or
any order, judgment, or decree of any court or other agency of government to
which the Company is subject, (iii) violate any provision of the Restated
Certificate of Incorporation (the "Certificate of Incorporation") or By-Laws of
the Company, or (iv) result in the creation or imposition of (or the obligation
to create or impose) any liens, mortgages, pledges, charges, claims or other
encumbrances (collectively, "Liens") on any of the Company's properties.
3.5. State Takeover Statutes. The Board, at a meeting duly called (or
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for which notice was duly waived by all directors of the Company) and held on
March 14, 1999, has unanimously approved the terms of this Agreement and the
other Transaction Documents and the consummation of the transactions
contemplated hereby and thereby (including without limitation the sale and
issuance to Purchaser of the Shares pursuant to this Agreement, and Purchaser's
acquisition of shares of Common Stock pursuant to the Management Agreements and
the Offer) and such approval constitutes approval of such transactions by the
Board under the provisions of Section 203 of the Delaware General Corporation
Law (the "DGCL") and Chapter 23B.19 of the Washington Business Corporation Act
(the "WBCA"), and constitutes all actions necessary to ensure that the
restrictions contained in Section 203 of the DGCL and Chapter 23B.19 of the WBCA
will not apply to Purchaser in connection with or following such transactions.
To its knowledge, no other state takeover statute is applicable to the
transactions contemplated by this Agreement and the other Transaction Documents.
3.6. Issuance, Sale and Delivery of the Shares.
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3.6.1. When issued in compliance with the provisions of this
Agreement, the Shares will be validly issued, fully paid and nonassessable, and
will be free of any Liens, other than restrictions on transfer under state
and/or federal securities laws. The sale of the Shares is not subject to any
preemptive rights or rights of first refusal that have not been properly waived
or complied with. Upon the filing with the Delaware Secretary of State and
effectiveness of the Certificate of Designation, the rights, privileges and
preferences of the Series A Preferred Stock set forth in the Certificate of
Designation will constitute the valid and binding obligations of the Company,
enforceable against it in accordance with their respective terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws and equitable principles relating to or limiting creditors' rights
generally.
3.6.2. The shares of Common Stock that are issuable upon
conversion of the Series A Preferred, when so issued, will be validly issued,
fully paid and nonassessable, and will be free of any Liens, other than
restrictions on transfer under state and/or federal securities laws. Issuance of
such shares of Common Stock is not subject to any preemptive rights or rights of
first refusal that have not been properly waived or complied with.
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3.7. Governmental Consent. No consent, approval or authorization of,
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or declaration or filing with, any governmental authority on the part of the
Company is required for the execution and delivery of the Transaction Documents
or the sale of the Shares to Purchaser pursuant to this Agreement, except for
the filing of the Certificate of Designation and, to the extent applicable, the
required filing under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), and the expiration or early termination of the
waiting period thereunder.
3.8. SEC Reports; Financial Statements.
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3.8.1. The Company has filed all forms, reports and documents
(except for employment agreements with certain executive officers of the
Company, copies of which have been provided to Purchaser (the "Executive
Employment Agreements")) required to be filed by it with the Securities and
Exchange Commission (the "SEC") since and including the filing date of the
Registration Statement with respect to the Company's initial public offering
(the "SEC Reports"). The SEC Reports (x) were prepared in accordance with the
requirements of the Securities Act of 1933, as amended (the "Securities Act")
and the Exchange Act, as the case may be, and the rules and regulations
thereunder and (y) did not at the time they were filed, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
3.8.2. Each of the financial statements (including, in each
case, any notes thereto) of the Company included in the SEC Reports (the
"Financial Statements"), was prepared in accordance with GAAP (subject, in the
case of unaudited statements, to the absence of footnotes thereto and to normal
and recurring year-end adjustments which were not and are not expected to be
material in amount) and each fairly presented the financial position, results of
operations and cash flows of the Company as at the respective dates thereof and
for the respective periods indicated therein (except as may be indicated in the
notes thereto) in all material respects.
3.8.3. Except as set forth in Schedule 3.8 hereto, to the
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Company's knowledge, the Company has no liability or obligation (whether
accrued, absolute, contingent or otherwise) other than (a) liabilities and
obligations reflected on the unaudited balance sheet of the Company as of
December 31, 1998 contained in the Financial Statements (the "Unaudited Balance
Sheet"), and (b) liabilities or obligations incurred since December 31, 1998 in
the ordinary course of business consistent with past practice or that,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
3.9. Proxy Statement; Offer Documents. The Proxy Statement
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described in Section 5.3, including any amendments or supplements thereto, shall
not, at the time filed with the SEC, as of the date mailed to the Company's
stockholders or at the time of the Stockholders Meeting (as defined in Section
5.2), contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. Neither the Schedule 14D-9 (as defined in Section 7.8), nor any of
the
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information supplied by the Company for inclusion in the Offer Documents (as
defined in Section 7.7), shall, at the respective times such Schedule 14D-9, the
Offer Documents or any amendments or supplements thereto are filed with the SEC
or are first published, sent or given to shareholders, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing, the Company makes no representation
or warranty with respect to any information provided by Purchaser specifically
for use in the Proxy Statement or the Schedule 14D-9. The Proxy Statement and
the Schedule 14D-9 will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder.
3.10. Absence of Litigation. Except as set forth on Schedule 3.10
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hereto, there is no claim, action, proceeding or investigation pending or, to
the knowledge of the Company, threatened against the Company, any director or
officer of the Company or any property or asset of the Company, before any
court, arbitrator or administrative, governmental or regulatory authority or
body, domestic or foreign that individually or in the aggregate could reasonably
be expected to have a Material Adverse Effect on the Company. Except as set
forth on Schedule 3.10 hereto, neither the Company nor any of its properties or
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assets is subject to any order, writ, judgment, injunction, decree,
determination or award that individually or in the aggregate could reasonably be
expected to have a Material Adverse Effect on the Company.
3.11. Absence of Certain Changes or Events. Except as disclosed in
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the Company's Annual Report on Form 10-K for the fiscal year ending September
30, 1998, the Quarterly Report on Form 10-Q for the period ending December 31,
1998 or in Schedule 3.11, or as specifically contemplated by this Agreement,
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since September 30, 1998 there has not been (i) any transaction, commitment,
dispute or other event or condition (financial or otherwise) of any character
(whether or not in the ordinary course of business) individually or in the
aggregate which has had or could reasonably be expected to have a Material
Adverse Effect; (ii) any damage, destruction or loss, whether or not covered by
insurance, which, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect; (iii) any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to the capital stock of the Company; (iv) except for
normal increases in the ordinary course of business and except for the execution
of amended and restated employment agreements entered into with certain
executive officers (copies of which have been provided to Purchaser), any
increases by the Company in the wages, salaries, compensation, pension or other
fringe benefits or perquisites payable to any executive officer or director,
grants by the Company of any severance or termination pay, execution by the
Company of any contract to make or grant any severance or termination pay, or
payments by the Company of any bonus, in each case with respect to any such
executive officer or director, other than pursuant to preexisting agreements or
arrangements; or (v) entry into any commitment or transaction material to the
Company (including, without limitation, any borrowing or sale of assets) except
in the ordinary course of business consistent with past practice.
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3.12. Compliance with Laws; Permits. The Company has at all times
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complied, and it currently in compliance, with all applicable statutes, rules,
regulations and orders of the United States or any state in which the Company is
engaged in business and has obtained all required licenses, permits and other
approvals of any governmental authority, except where a failure to comply or
obtain such approvals, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
3.13. Material Contracts. Each of the contracts required to be filed
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as contracts as exhibits to the SEC Reports (the "Material Contracts")
(including all amendments, modifications and waivers) (a) except for the
Executive Employment Agreements, has been filed with the SEC, (b) has been duly
authorized, executed and delivered by the parties thereto, (c) remains in full
force and effect to the extent of its terms without any amendment, modification
or waiver not reflected in the Material Contracts, (d) is binding on the parties
thereto in accordance with and to the extent of its terms and applicable laws,
and (e) is not subject to, and the Company has not received any written notice
threatening or declaring, termination as a result of any alleged uncured breach
or default. The Company has performed all material obligations required to be
performed by it to date under each Material Contract, and the Company is not in
material breach or default under any Material Contract. To the Company's
knowledge, without a specific review having been conducted by the Company, no
other party to any Material Contract is in material breach or default thereunder
or in material violation thereof, and no condition exists that with notice or
lapse of time or both would constitute a material violation thereof or a
material default thereunder.
3.14. Intellectual Property Rights.
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3.14.1. The Company owns or has licenses to use registered
copyrights, copyright registration and copyright applications, trademark
registrations and applications for registration, patents and patent
applications, trademarks, service marks, trade names, Internet domain names and
other intellectual property rights (collectively, "Intellectual Property
Rights") which are sufficient to carry on the business of the Company as
presently conducted, except where a failure to own or license Intellectual
Property Rights could not, either individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on the Company.
3.14.2. To the Company's knowledge, the operation of the
business of the Company does not, and except as identified on Schedule 3.14, the
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Company has not received any notice from any person claiming that the business
of the Company does infringe or misappropriate the Intellectual Property Rights
of any person, violate any export control law or regulation, violate the rights
of any person (including rights to privacy or publicity), or constitute unfair
competition or trade practices under any applicable laws.
3.14.3. Except as set forth on Schedule 3.14, to the
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knowledge of the Company, no person is infringing or misappropriating any
Intellectual Property Rights owned or licensed by the Company or engaging in
other conduct that may diminish or undermine such Intellectual Property Rights,
such as the disclosure of Company confidential information, except for any such
infringements that, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
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3.14.4. The Company has taken all reasonable steps to protect
the Company's rights in confidential information and trade secrets of the
Company or provided by any other person to the Company subject to a duty of
confidentiality. Without limiting the foregoing, the Company has, and enforces,
a policy requiring each of its executive officers and research and development
personnel to execute proprietary information, confidentiality and invention and
copyright assignment agreements, and all such individuals have executed such an
agreement.
3.15. Certain Matters Regarding Employees. To the best knowledge of
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the Company, no officer or key employee of the Company is subject to any
contract, agreement, undertaking, commitment or instrument (including any no
hire or non-competition agreements) which would impair his or her ability to
perform the services on behalf of Company contemplated to be performed by such
officers or key employee.
3.16. Tax Matters.
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3.16.1. The Company (i) has timely filed all material Tax
Returns required to be filed by it as of the date hereof, (ii) has used its
commercially reasonable efforts to maintain all required records with respect to
any liability for Taxes for taxable years with respect to which the statute of
limitations has not yet expired, regardless of whether such liability has been
previously assessed in whole or in part or is assessed in whole or in part after
the date of this Agreement, and (iii) has timely paid, or has made appropriate
provision on its balance sheet (in accordance with GAAP) for, all Taxes due or
claimed to be due from it by any Governmental Body with respect to any liability
for Taxes except where such failure, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on the Company. All Tax
Returns described in clause (i) are true, correct and complete in all material
respects. With respect to periods commencing on or after September 30, 1996, the
Company has not incurred any liability for Taxes which could reasonably be
expected to have a Material Adverse Effect other than (i) as set forth on
Schedule 3.16, (ii) as reflected on the audited balance sheet of the Company as
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of September 30, 1998 contained in the Financial Statements (the "Audited
Balance Sheet") or the Unaudited Balance Sheet, or (iii) federal and state
income taxes payable on the Company's income after December 31, 1998. There are
no material Liens with respect to Taxes upon any of the Company's properties or
assets, except for current Taxes not yet due.
3.16.2. Except as set forth in Schedule 3.16, to the Company's
knowledge, none of the Tax Returns of the Company have been or is currently
being audited or examined by the Internal Revenue Service (the "IRS"). Except to
the extent reserved for in the Audited Balance Sheet, no material issue of which
the Company has received notice has been raised by a Governmental Body in any
audit or examination which reasonably could be expected to result in a proposed
deficiency, penalty or interest for any other period, which could reasonably be
expected to have a Material Adverse Effect on the Company.
3.16.3. There are no outstanding agreements or waivers
extending the statutory period of limitation applicable to any Tax Returns
required to be filed by, or which include or are treated as including, the
Company.
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3.16.4. The Company is not involved in or subject to any joint
venture, partnership or other arrangement or contract which is treated as a
partnership for federal, state, local or foreign income tax purposes.
3.16.5. All material elections with respect to Taxes affecting
the Company as of the date hereof are set forth in Schedule 3.16. No consent to
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the application of section 341(f)(2) of the Code (as defined below) has been
filed with respect to any property or assets held, acquired, or to be acquired
by the Company.
3.16.6. There are no tax sharing agreements or similar
arrangements with respect to or involving the Company.
3.16.7. The Company was not included and is not includible in
any consolidated or unitary Tax Return with any corporation other than such a
return of which the Company is the common parent corporation.
3.16.8. The Company has not agreed to and is not required to
make any material adjustment under section 481(a) of the Internal Revenue Code
of 1986, as amended (the "Code").
3.16.9. "Tax" or "Taxes", as the context may require, include:
(i) any income, alternative or add-on minimum tax, gross income, gross receipts,
franchise, profits, sales, use, ad valorem, business license, withholding,
payroll, employment, excise, stamp, transfer, recording, occupation, premium,
property, value added, custom duty, severance, windfall profit or license tax,
including estimated taxes relating to any of the foregoing, or other similar tax
or other like assessment or charge of similar kind whatsoever together with any
interest and any penalty, addition to tax or additional amount imposed by any
Governmental Body responsible for the imposition of any such Tax; or (ii) any
liability of a Person for the payment of any taxes, interest, penalty, addition
to tax or like additional amount resulting from the application of Treas. Reg.
(S) 1.1502-6 or comparable provisions of any Governmental Body in respect of a
consolidated or combined return.
3.16.10. "Tax Return" means any return (including any
information return), report, statement, schedule, notice, form, or other
document or information filed with or submitted to, or required to be filed with
or submitted to, any Governmental Body in connection with the determination,
assessment, collection, or payment of any Tax or in connection with the
administration, implementation, or enforcement of or compliance with any Law
relating to any Tax.
3.17. Title to Properties; Liens and Encumbrances. The Company has
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good and marketable title to all of its material owned properties and assets and
such properties and assets are not subject to any Liens, except for (a) Liens
under the line of credit between the Company and Imperial Bank, (b) immaterial
Liens which arise in the ordinary course of business (including without
limitation Liens from current taxes not yet due and payable), and (c) Liens
which individually or in the aggregate could not reasonably be expected to have
a Material Adverse Effect on the Company or its material properties. All
material leases, subleases, conditional sale contracts and other agreements
pursuant to which the Company leases or otherwise uses real or personal property
(collectively, "Leases") are in
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good standing and are valid and effective in accordance with their respective
terms. The Company has performed its obligations in all material respects to
date under all such Leases.
3.18. Employee Benefit Plans. Except as listed in Schedule 3.18
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or as described in the SEC Reports or as could not, either individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect, the
Company does not maintain, sponsor, or contribute to any program or arrangement
that is an "employee welfare benefit plan," as that term is defined in Section
3(1) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or any similar employment, severance or other arrangement or policy
of the Company (whether written or oral) providing for insurance coverage
(including self-insured arrangements), workers' compensation, disability
benefits, supplemental unemployment benefits, vacation benefits, fringe benefits
or for deferred compensation, bonuses, stock options, stock appreciation or
other forms of incentive compensation or post-retirement insurance, compensation
or benefits (a "Plan"). Neither the Company nor or any member of the same
controlled group of businesses as the Company within the meaning of Section
4001(a)(14) of ERISA (an "ERISA Affiliate") maintains or is obligated to
contribute to, or has ever maintained or been obligated to contribute to, any
"pension plan" within the meaning of Section 3(2) of ERISA, or any
"multiemployer plan" within the meaning of Section 3(37) of ERISA (a "Pension
Plan"). Each Plan which is subject to ERISA is in substantial compliance with
ERISA. None of the Plans provides or provided post-retirement medical or health
benefits. None of the Plans is or was a "welfare benefit fund," as defined in
Section 419(e) of the Code, or an organization described in Sections 501(c)(9)
or 501(c)(20) of the Code. The Company is not and never has been a party to any
collective bargaining agreement. Except as disclosed in the SEC Reports, the
Company has not announced or otherwise made any commitment to create or amend
any Plan, and neither the Company nor any ERISA Affiliate has announced or
otherwise made any commitment to create or begin contributing to any Pension
Plan. All contributions required to be made under the terms of each Plan have
been timely made. Each Plan which is required to comply with the provisions of
Sections 4980B and 4980C of the Code, or with the requirements referred to in
Section 4980D(a) of the Code, has complied in all material respects. Each Plan
intended to meet the requirements for tax-favored treatment under Subchapter B
of Chapter 1 of the Code meets such requirements. Except as provided in Section
5.4(e), the execution and performance of this Agreement will not (i) result in
any obligation or liability (with respect to accrued benefits or otherwise) of
the Company to any Plan, or any present or former employee of the Company, (ii)
be a trigger event under any Plan that will result in any payment (whether of
severance pay or otherwise) becoming due to any present or former employee,
officer, director, stockholder, contractor, or consultant, or any of their
dependents, or (iii) except as otherwise expressly contemplated by this
Agreement, accelerate the time of payment or vesting, or increase the amount, of
compensation due to any employee, officer, director, stockholder, contractor, or
consultant of the Company.
3.19. Year 2000 Compliance. The Company has completed its assessment
--------------------
of all current versions (including products and services currently operating or
under development) of its information technology systems (including systems
utilized in the operation of its Internet sites) and believes they are year 2000
compliant. The Company has made appropriate inquiries of its key vendors and
suppliers and has been assured that such
-10-
persons have also taken appropriate actions to assure that there shall be no
material adverse change to its business and electronic systems related to year
2000 issues. Based upon the information provided to the Company and its own
internal assessment, the Company does not believe that its year 2000 issues will
have a Material Adverse Effect on the Company.
3.20. Fairness Opinion. The Company has received the opinion of
----------------
Broadview International LLC (the "Company Financial Advisor") that the
transactions contemplated hereby, including the issuance of the Class A
Preferred Stock [and the acquisition by Purchaser of shares of Common Stock
pursuant to the Offer,] are fair to the Company's stockholders from a financial
point of view.
3.21. Finders' Fees. There is no investment banker, broker, finder or
-------------
other intermediary that has been retained by or is authorized to act on behalf
of Company who might be entitled to any fee or commission upon consummation of
the transactions contemplated by this Agreement and each of the other
Transaction Documents other than the Company Financial Advisor.
4. Representations and Warranties of Purchaser. Purchaser hereby
-------------------------------------------
represents and warrants to the Company as follows:
4.1. Organization and Qualification. Purchaser is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Washington. Purchaser has all requisite corporate power and authority to
conduct its business as currently conducted and to enter into and to carry out
and perform its obligations under the Transaction Documents.
4.2. Due Execution, Delivery and Performance of the Agreement. The
--------------------------------------------------------
execution, delivery and performance of the Transaction Documents have been duly
authorized by all necessary corporate action on the part of Purchaser. This
Agreement has been, and when executed and delivered at the First Closing or the
Second Closing (as the case may be) the other Transaction Documents will be,
duly executed and delivered by Purchaser and constitutes, or when executed and
delivered at the First Closing or the Second Closing (as the case may be) will
constitute, valid and binding obligations of Purchaser, enforceable against it
in accordance with their respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws and
equitable principles relating to or limiting creditors' rights generally.
4.3. Evaluation; Purchase for Investment, Illiquid Investment.
-----------------------------------
Purchaser has been furnished any and all materials relating to the Company and
its Affiliates (as defined below) and the offering of the Shares that Purchaser
has requested and Purchaser has been afforded the opportunity to obtain any
additional information necessary to verify the accuracy of any such information.
Purchaser is a sophisticated investor capable of evaluating the merits and risks
of the purchase of the Shares. Purchaser is purchasing the Shares for its own
account as principal, for investment and not with a view to the resale or
distribution of all or any part thereof. Purchaser recognizes that the Shares
being purchased pursuant to this Agreement have not been registered under
applicable Federal or State securities laws, and that such Shares are being
offered and sold in reliance upon the exemptions from registration provided in
the Securities Act and applicable exemptions
-11-
under State securities laws. Purchaser is an accredited investor (as that term
is defined in Regulation D under the Securities Act) and has the economic
ability to maintain its investment in such Shares for an indefinite period of
time. For purposes of this Agreement, "Affiliate" shall have the meaning set
forth in Rule 501(d) under the Securities Act.
4.4. Proxy Statement; Offer Documents. All information included in
--------------------------------
the Proxy Statement (as defined in Section 5.3) furnished by Purchaser will not,
at the date of mailing of the Proxy Statement to the stockholders of the
Company, contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in light of the
circumstances under which made, not misleading. Neither the Offer Documents (as
defined in Section 7.7)nor any of the information supplied by Purchaser for
inclusion in the Schedule 14D-9 shall, at the respective times such Offer
Documents and Schedule 14D-9 are filed with the SEC or are first published, sent
or given to shareholders, as the case may be, contain any untrue statement of a
material fact or omit to state any material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing, Purchaser makes no representation or
warranty with respect to any information supplied by the Company or any of its
representatives which is contained in the Offer Documents. The Schedule 14D-1
will comply in all material respects as to form with the requirements of the
Exchange Act and the rules and regulations promulgated thereunder.
4.5. Finders' Fees. Except for NationsBanc Xxxxxxxxxx Securities LLC,
-------------
there is no investment banker, broker, finder or other intermediary that has
been retained by or is authorized to act on behalf of Purchaser who might be
entitled to any fee or commission upon consummation of the transactions
contemplated by this Agreement and each of the other Transaction Documents.
4.6. Financial Condition. As of the date hereof, Purchaser has
-------------------
sufficient resources to fulfill its financial obligations under this
Agreement and the transactions contemplated hereby.
4.7. Cable Subscribers. As of the date hereof, Purchaser controls,
-----------------
directly or indirectly, cable television companies which have an aggregate
number of subscribers of not less than 2,000,000.
4.8. Ownership. As of the date hereof, Purchaser and its Affiliates
---------
are the record and beneficial owner of not more than 40,000 shares of Common
Stock in the aggregate.
4.9. Interested Stockholder. In each case within the meaning of
----------------------
Section 203 of the Delaware General Corporation Law:
(a) at no time since immediately prior to the time the
Company's Board of Directors approved the transactions contemplated by this
Agreement through the time of the signing hereof, has Purchaser or any
"affiliate" or "associate" of Purchaser "owned" fifteen percent (15%) or
more of the Company's "voting stock"; and
-12-
(b) there are no facts known to Purchaser or any
"affiliate" or "associate" of Purchaser, that have not been disclosed to
the Company that relate to whether Purchaser or any "affiliate" or
"associate" of Purchaser, directly or indirectly, through one or more
intermediaries, "controls" or "controlled" or is or was "controlled by" or
is or was "under common control with" the Company.
4.10. Acquiring Person. At no time since immediately prior to the
----------------
time the Company's Board of Directors approved the transactions contemplated by
this Agreement through the time of the signing hereof, has Purchaser or any
group of which Purchaser is a part become an "acquiring person" under Section
23B.19 of the Washington Business Corporation Act.
5. Covenants of the Company. The Company hereby covenants and agrees with
------------------------
Purchaser as follows:
5.1. Access. At all times through the Second Closing, the Company
------
will permit Purchaser and its authorized representatives, at reasonable times
during ordinary business hours and upon reasonable advance notice, access to all
of the books, records, personnel and properties of the Company and its
subsidiaries for the purpose of verifying the accuracy of the Company's
representations and warranties contained herein and the satisfaction of
Purchaser's conditions to the Second Closing and the Offer contained in Section
8.1 and Annex A, respectively.
5.2. Stockholders Meeting. The Company shall cause a meeting of its
--------------------
stockholders to be duly called and held as soon as reasonably practicable for
the purpose of voting on the approval of the issuance and sale to Purchaser of
the Second Issuance Shares and the acquisition of Common Stock pursuant to the
Management Agreements and the election of directors pursuant to this Agreement (
the "Stockholders Meeting"). The proxy materials relating to such meeting shall
(i) contain the recommendation of the Board that the stockholders approve the
issuance and sale to Purchaser of the Second Issuance Shares pursuant to this
Agreement and Purchaser's acquisition of Common Stock pursuant to the Management
Agreement (collectively, the "Purchaser Acquisitions"), and (ii) state that the
Company is neutral with respect to or recommends the Offer.
5.3. Proxy Statement. As promptly as practicable after the date of
---------------
this Agreement, the Company shall prepare and cause to be filed with the SEC a
Proxy Statement in connection with the transactions contemplated hereby (the
"Proxy Statement"), and the Company shall respond promptly to any comments of
the SEC or its staff with respect thereto. The Company will afford Purchaser a
reasonable opportunity to review and comment on the proposed form of Proxy
Statement prior to its filing with the SEC. Purchaser shall promptly furnish to
the Company all information concerning Purchaser and its stockholders as may be
required or reasonably requested in connection with any action contemplated by
this Section 5.3. The Company shall (a) notify Purchaser promptly of the receipt
of any comments from the SEC or its staff and of any request by the SEC or its
staff for amendments or supplements to the Proxy Statement or for additional
information and (b) supply Purchaser with copies of all correspondence with the
SEC or its staff with respect to the Proxy Statement. Whenever any event occurs
that should be set forth in an amendment or supplement to the Proxy Statement,
Purchaser or the Company, as
-13-
the case may be, shall promptly inform the other of such occurrence and shall
cooperate in filing with the SEC or its staff, and, if appropriate, mailing to
stockholders of the Company, such amendment or supplement.
5.4. Conduct of Business. From the date hereof through the Second
-------------------
Closing, the Company shall and shall cause each of its subsidiaries to, as
contemplated by this Agreement, or as consented to by Purchaser in writing,
operate its businesses in the ordinary course of business and in accordance with
past practice and not take any action inconsistent with this Agreement or with
the consummation of the Second Closing. Without limiting the generality of the
foregoing, the Company shall not and shall cause each of its subsidiaries not
to, except as specifically contemplated by this Agreement or as consented to by
Purchaser in writing :
(a) change or amend the Certificate of Incorporation
or By-Laws of the Company;
(b) enter into, extend, materially modify, terminate
or renew any Material Contract, except in the ordinary course of business;
(c) sell, assign, transfer, convey, lease, mortgage,
pledge dispose of or encumber any assets, or any interests therein,
except in the ordinary course of business;
(d) make new commitments for capital expenditures in
excess of $2,000,000 in any one quarter;
(e) take any action with respect to the grant of any
bonus, severance or termination pay or with respect to any increase of
benefits payable (including the grant of stock options) under its
severance or termination pay policies or agreements in effect on the date
hereof or increase in any manner the compensation or benefits of any
executive officer except in the ordinary course of business consistent
with past practice or pay any benefit not required by any existing
employee benefit plan or policy (except that the Company shall not be
permitted to grant stock options or accelerate the vesting of stock
options except as permitted by the following proviso); provided, however,
that the Company shall be permitted (i) to accelerate, effective on the
Second Closing, the vesting of up to 35% of the unvested portion
(determined as of the Second Closing) of the shares issuable upon exercise
of all outstanding options; provided that (a) the Company accelerates the
vesting of the options that would otherwise vest closest in time to the
date of the Second Closing and (b) the Company receives written waivers
prior to any such acceleration from any officer or employee (including the
Company's Chief Executive Officer, President and Chief Operating Officer)
of any right they may have under any agreement or arrangement with the
Company which would otherwise require that, as a result of such
acceleration, a greater percentage of their unvested options be
accelerated than the percentage of options that the Company proposes to
accelerate for other employees generally, (ii) grant options to bona fide
new employees hired after the date hereof (provided that the Company shall
consult with Purchaser regarding the hiring or appointment of any
executive officer of the Company who would have the
-14-
title of Vice President or higher) in the ordinary course of business, but
in no event covering more than the number of shares of Common Stock set
forth in Schedule 5.3(e) hereto for the position of such new employee,
--------------
(iii) grant options covering up to 5,000 shares of Common Stock to an
employee as part of his or her normal review, (iv) adopt the 1999 Employee
Stock Purchase Plan as described in the Proxy Statement for the annual
meeting of Stockholders dated February 22, 1999, (v) to pay to and hold
harmless its officers, on an after-tax basis, for any excise taxes
(including any "gross-up" payments) in an aggregate amount not to exceed
$3,000,000 incurred by them in connection with the acceleration of options
under (i) above (which amount the Company represents is based on the stock
price of the Company's Common Stock as of March 12, 1999, and which amount
the parties understand may increase due to increases in the Common Stock
price), so long as such payments are not made prior to the time such tax
payments are actually due; and (vi) the Company will be permitted to enter
into severance agreements with certain key employees (not to exceed 10
persons) providing for six months severance and the acceleration of all
options currently held by such a key employee in the event of a
termination of such key employee's employment by the Company "without
cause" or by the employee for "good reason" (as such terms are defined in
the Company's currently existing employment agreements with its executive
officers);
(f) make any change in the key management structure,
including, without limitation, the hiring of additional executive officers
or the termination of existing executive officers;
(g) acquire by merger or consolidation with, or merge
or consolidate with, or purchase substantially all of the assets of, or
otherwise acquire any material assets or business of any corporation,
partnership, association or other business organization or division
thereof; provided, however, that the Company shall be permitted to
consummate any such transaction involving the payment by the Company of
cash or the issuance by the Company of shares of Common Stock with an
aggregate value per transaction not to exceed $10,000,000 and on an
aggregate basis not to exceed $100,000,000;
(h) declare, set aside, make or pay any dividend or
other distribution in respect of its capital stock, other than a split of
the Common Stock or a dividend payable in shares of Common Stock pro rata
to all holders of the Common Stock;
(i) fail to comply in all material respects with all
legal requirements applicable to it, its assets and its business;
(j) intentionally do any other act which would cause
any representation or warranty of the Company in this Agreement to be or
become untrue in any material respect;
(k) issue, repurchase or redeem or commit to issue,
repurchase or redeem, any shares of its capital stock, any options or other
rights to acquire such stock or any securities convertible into or
exchangeable for such stock,
-15-
other than the following: (i) issuance of shares in connection with the
consummation of a Superior Proposal (as defined in Section 5.5.2) or in
connection with stock issuances permitted under Section 5.4(g) (subject to
the provisions of Section 5.6), (ii) issuance of shares by employees,
consultants and directors of the Company pursuant to stock options existing
as of the date hereof and those permitted to be granted by Section 5.4(e)
above, (iii) repurchases of shares from employees or consultants in
connection with the termination of their employment or consultancy with the
Company, and (iv) the issuance of up to an aggregate of $10,000,000 in
value of shares of the Company's capital stock (subject to the provisions
of Section 5.6);
(l) fail to use its reasonable best efforts to (i)
retain its key employees and (ii) maintain existing relationships with
material suppliers, customers and others having business dealings with it
and (iii) otherwise preserve the goodwill of its business so that such
relationships and goodwill will be preserved on and after the Second
Closing Date; or
(m) enter into any agreement, or otherwise become
obligated, to do any action prohibited under this Section 5.4.
5.5. No Solicitation.
---------------
5.5.1. Subject to Section 5.5.3 the Company shall not, and the
Company shall cause its Affiliates and the respective officers, directors,
employees, investment bankers, attorneys, accountants and other representatives
and agents (collectively, "Representatives") of the Company and its Affiliates
not to, directly or indirectly, initiate, solicit, encourage or participate in
negotiations or discussions relating to, or provide any information to any
person concerning, or take any action to facilitate the making of, any offer or
proposal which constitutes or is reasonably likely to lead to any Transaction
Proposal (as defined below), or any inquiry with respect thereto, or agree to
approve or recommend any Transaction Proposal. The Company shall, and shall
cause its Affiliates and the respective Representatives of the Company and its
Affiliates to, immediately cease and cause to be terminated all existing
activities, discussions and negotiations, if any, with any parties conducted
heretofore with respect to any of the foregoing.
5.5.2. For purposes of this Agreement, "Transaction Proposal"
shall mean any proposal (other than any proposal by Purchaser or its Affiliates)
regarding (i) any merger, consolidation, share exchange, business combination or
other similar transaction or series of related transactions involving the
Company or a subsidiary of the Company (other than a merger involving a newly-
formed subsidiary of the Company in order to effect an acquisition permitted
under Section 5.4(g)); (ii) any sale, lease, exchange, transfer or other
disposition of more than twenty percent (20%) of the assets of the Company or
any subsidiary of the Company; (iii) any acquisition of a substantial equity
interest in the Company or any equity interest in any of its subsidiaries (with
"substantial equity interest" meaning (a) in the case of an institutional
investor acquiring such interest for investment purposes only, equity interests
representing at least 20% of the Company's outstanding capital stock (by voting
power or otherwise) prior to such investment and (b) in any other
-16-
case, at least 10% of the Company's outstanding capital stock (by voting power
or otherwise) prior to such investment); (iv) any offer to purchase (whether
from the Company or otherwise), tender offer, exchange offer or similar
transaction involving the capital stock of the Company or any subsidiary of the
Company; and (v) a liquidation or dissolution of the Company.
5.5.3. Notwithstanding anything to the contrary contained in
this Section 5.5 or elsewhere in this Agreement, the Company may, in response to
an unsolicited bona fide Transaction Proposal from an unaffiliated third party,
participate in discussions or negotiations with or furnish information to the
third party making such Transaction Proposal, if all of the following events
have occurred: (a) such third party has made a written proposal to the Board of
Directors of the Company to consummate a Transaction Proposal which proposal
identifies a price to be paid for the capital stock or assets of the Company
that the Board has determined, after consultation with the investment bankers
for the Company, if such transaction is consummated, would be financially more
favorable than the Offer (assuming for these purposes that the Offer is for
5,000,000 shares of Common Stock) to the stockholders of the Company (a
"Superior Proposal"); (b) the Board has determined, after consultation with the
Company's investment bankers, that such third party is financially capable of
consummating such Superior Proposal and that such Superior Proposal is at least
as likely to be consummated, and is not subject to materially greater
conditions, than the transactions contemplated by this Agreement; (c) the Board
shall have determined, after consultation with its outside legal counsel, that
the failure to participate in discussions or negotiations with or furnish
information to such third party would result in a substantial risk of liability
for a breach of the fiduciary duties of the members of such Board under
applicable Delaware law; and (d) Purchaser shall have been notified in writing
of such Transaction Proposal, including its principal financial and other
material terms and conditions, including the identity of the person and its
Affiliates (if relevant) making such Transaction Proposal.
Notwithstanding the foregoing, the Company shall not provide any non-public
information to such third party unless (a) it has prior to the date thereof
provided such information to Purchaser or its Representatives, and (b) it has
provided such non-public information pursuant to a non-disclosure agreement with
terms which are at least as restrictive as the nondisclosure agreement
heretofore entered into between the Company and Purchaser. In addition to the
foregoing, the Company shall not accept or enter into any agreement concerning a
Superior Proposal nor issue any securities or agree to pay a termination or
break-up fee in connection with a Superior Proposal for a period of not less
than 36 hours after Purchaser's receipt of the notification in clause (d) of the
preceding paragraph, and the Company will afford Purchaser an opportunity to
discuss with the Company what, if any, response Purchaser may desire to make
with to such Transaction Proposal. Upon the occurrence of all of the events in
the preceding paragraph and this paragraph, the Company shall be entitled to (1)
change its recommendations concerning the Purchaser Acquisitions, (2) accept
such Superior Proposal, and (3) enter into an agreement with such third party
concerning a Superior Proposal provided that the Company shall immediately make
payment in full to Purchaser of the cash fee provided for in Section 10.2.
Company will promptly communicate to Purchaser the principal terms of any
proposal or inquiry, including the identity of the person and its Affiliates
making the same, that it may
-17-
receive in respect of any such Transaction Proposal, or of any such information
requested from it or of any such negotiations or discussions being sought to be
initiated with it regarding a Transaction Proposal.
5.5.4. Notwithstanding anything to the contrary
contained in this Section 5.4.3 or elsewhere in the Agreement, at any time after
the date hereof, the Company may file with the Commission a Current Report on
Form 8-K with respect to this Agreement and may file a copy of this Agreement
and any related agreement as an exhibit to such Report.
5.6. Additional Issuances.
--------------------
5.6.1. At any time after the date hereof, so long as
Purchaser (together with its Affiliates) holds of record or beneficially owns at
least fifteen percent (15%) of the outstanding Common Stock of the Company
(measured as of the date of this Agreement if the Additional Issuance is prior
to the Second Closing and measured as of the date of the Additional Issuance if
occurring after the Second Closing) (the "Minimum Percentage") (assuming
conversion into Common Stock, at the conversion rate then in effect, of all
shares of Series A Preferred Stock held of record or beneficially owned by
Purchaser and its Affiliates), in the event the Company shall issue (an
"Additional Issuance") any capital stock, including securities of any type that
are, or may become, convertible into or exercisable or exchangeable for capital
stock of the Company (the "Additional Securities"), Purchaser shall have the
right to subscribe for and to purchase that number of Additional Securities such
that Purchaser holds the same percentage of the Company's outstanding capital
stock immediately prior to and immediately following the Additional Issuance
(the "Pro Rata Share"); provided, however, that this Section 5.6 shall not apply
-------- -------
to shares issued:
(a) to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary, pursuant to stock
purchase, Company Option Plans, Assumed Option Plans or other option plans
or arrangements approved by the Board;
(b) pursuant to any options, warrants, conversion
rights or other rights or agreements outstanding as of the date of this
Agreement or pursuant to the conversion of the shares of Series A Preferred
Stock contemplated to be issued pursuant to this Agreement;
(c) in connection with any stock split, stock dividend
or recapitalization by the Company;
(d) pursuant to a Superior Proposal if this Agreement
is terminated in connection therewith;
(e) in any Additional Issuance that reduces the
Purchaser's equity percentage by less than 10% of its holdings, so long as
at the time of an Additional Issuance which either solely or considered
together with prior Additional Issuances that reduced the Purchaser's
equity percentage by less than 10% is an
-18-
Additional Issuance of greater than 10%, the Purchaser has the right to
purchase common stock in order to retain the percentage ownership it had at
the time of the first Additional Issuance which did not exceed 10%; or
(f) pursuant to any equipment leasing arrangement or
debt financing from a bank or similar financial institution, not to exceed
100,000 shares of Common Stock in the aggregate;
provided further, Purchaser's rights under this Section 5.6 shall
-------- -------
terminate if the Second Closing is not consummated.
5.6.2. If the Company proposes an Additional Issuance, the
Company shall, at least five (5) business days prior to the proposed closing
date of such issuance, give written notice to Purchaser and offer to sell to
Purchaser its Pro Rata Share of the Additional Securities at the lowest price
per share, and otherwise on the same terms and conditions (or, if the nature of
the transaction involves an exchange of assets or securities which cannot be
delivered by Purchaser, then for cash on the same economic terms), offered to
other investors. Such notice shall describe the type of Additional Securities
which the Company is offering to Purchaser, the price of the Additional
Securities and the general terms upon which the Company will issue same.
Purchaser shall have five (5) business days from the date of mailing of any such
notice to agree to purchase its Pro Rata Share of such Additional Securities for
the price and upon the general terms specified in the notice by giving written
notice to the Company and stating therein the quantity of Additional Securities
to be purchased. Sale and issuance of the Additional Securities which Purchaser
has elected to purchase shall be effected concurrently with the closing of the
issuance of securities which gave rise to Purchaser's right to buy such
securities, but only after compliance with all governmental regulations,
including but not limited to the expiration or early termination of the
applicable waiting periods under the HSR Act, if applicable.
5.6.3. In the event that, at any time, the percentage of the
outstanding Common Stock held of record or beneficially owned by Purchaser and
its affiliates (assuming conversion into Common Stock, at the conversion rate
then in effect, of all shares of Series A Preferred Stock held of record or
beneficially owned by Purchaser and its affiliates) shall be decreased as a
result of (i) any transfer by Purchaser or any of its affiliates to one or more
transferees that are not affiliates of Purchaser of any Shares or other
securities held of record or beneficially owned by Purchaser or its affiliates,
or (ii) Purchaser's not purchasing the full amount of Additional Securities
offered for purchase pursuant to this Section 5.6, a new percentage ownership
level shall be established based on the percentage ownership of Purchaser and
its affiliates in effect immediately following such transfer or Additional
Issuance (the "Reduced Percentage Ownership"), and thereafter the Company shall
be required to offer to Purchaser only such number of Additional Securities
pursuant to this Section 5.6 as would permit Purchaser to maintain the Reduced
Percentage Ownership.
5.7. Tag Along. From and after the Second Closing, Purchaser shall
---------
not consummate a Tag-Along Sale (as defined below) unless, in connection
therewith, the buying parties in such Tag-Along Sale shall have agreed to make,
as soon as practicable after the closing of the Tag-Along Sale, an offer to
purchase from each other stockholder of
-19-
the Company (by merger, tender offer or otherwise) an Equivalent Percentage (as
defined below) of the shares of Common Stock held by such other stockholder
(including, in the case of Company employees, shares of Common Stock purchasable
upon exercise of vested employee stock options), on terms no less favorable than
those received by Purchaser in the Tag-Along Sale. "Tag-Along Sale" shall mean a
sale for cash by Purchaser, in a privately negotiated transaction (other than to
an Affiliate of Purchaser (with a person or entity to be deemed to be an
Affiliate of Purchaser for purposes of this Section 5.7, Section 7.9 and Section
12.4 only if the control relationship involves direct or indirect ownership of
at least a majority of the outstanding voting interests of the applicable
entity, it being understood that any entity that is majority owned (directly or
indirectly) by a person or entity that directly or indirectly owns a majority of
the outstanding voting interests of Purchaser shall be an Affiliate of Purchaser
for these purposes)), in which (a) Purchaser's sale price per share of Common
Stock (assuming conversion into Common Stock of any Series A Preferred Stock
included in the Tag-Along Sale) exceeds the average closing trading price of the
Common Stock for the ten consecutive trading days prior to the date of
announcement of the proposed Tag-Along Sale, and (b) the number of shares of
Common Stock sold by Purchaser (assuming conversion into Common Stock of any
Series A Preferred Stock included in the Tag-Along Sale) represents greater than
twenty-five percent (25%) of the sum of (i) the total number of shares of Common
Stock acquired by Purchaser pursuant to the Management Agreements and the Offer
and (ii) the total number of shares of Common Stock underlying the shares of
Series A Preferred Stock that is purchased by Purchaser in the First Closing and
the Second Closing. "Equivalent Percentage" shall mean the percentage the number
of shares of Common Stock sold by Purchaser in the Tag-Along Sale bears to
Purchaser's total holdings of Common Stock immediately prior to such sale
(assuming conversion into Common Stock, prior to the Tag-Along Sale, of the
Series A Preferred Stock).
6. Covenants of Purchaser. Purchaser hereby covenants and agrees with the
----------------------
Company as follows:
6.1. Transfer Restrictions. Purchaser agrees that it will not sell or
---------------------
otherwise transfer any Shares unless such sale or transfer is made under an
effective Securities Act registration statement or pursuant to an available
exemption from the registration requirements of the Securities Act and Purchaser
shall have delivered to the Company an opinion of securities counsel to
Purchaser, in form and substance reasonably satisfactory to the Company, to the
forgoing effect. Each certificate representing any Shares shall contain a
legend to the following effect:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
UNLESS SUCH SALE OR TRANSFER IS MADE UNDER AN EFFECTIVE
SECURITIES ACT REGISTRATION STATEMENT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT.
-20-
Notwithstanding the foregoing, certificates issued after the date hereof
and representing Shares shall not contain the foregoing legend to the extent
that Purchaser shall have delivered to the Company an opinion of securities
counsel to Purchaser, in form and substance reasonably satisfactory to the
Company, to the effect that the statements made in such legend are no longer
relevant.
6.2. Distribution Arrangement. The Company and Purchaser acknowledge
------------------------
that an important consideration for the Company entering into this Agreement is
the fact that the Purchaser, through its affiliated entities Marcus Cable and
Charter Communications (the "Cable Companies"), operates cable systems that
serve over 2 million cable subscribers and that such Cable Companies will
provide an opportunity for the Company to establish a distribution or other
relationship with them. Accordingly, after the consummation of the transactions
contemplated by this Agreement, the Company shall promptly commence negotiations
with the Cable Companies, and Purchaser shall cause the Cable Companies to
commence such negotiations, with respect to the establishment of a distribution
or other relationship to offer the Company's content to their subscribers. The
parties will negotiate in good faith and use reasonable efforts to establish
such distribution or other relationship, but neither Purchaser nor the Cable
Companies, on the one hand, or the Company, on the other hand, shall have any
legal obligation to the other if such a relationship is not established.
7. Additional Covenants of the Parties.
-----------------------------------
7.1. Conditions to the Second Closing. The Company and Purchaser agree
--------------------------------
to use their respective best efforts to ensure that the conditions set forth in
Section 8 are satisfied, insofar as such matters are within their respective
control.
7.2. Board Composition.
-----------------
7.2.1. Immediately upon expiration or early termination of the
waiting period under the HSR Act applicable to the transactions contemplated
hereby, Purchaser shall be entitled to designate two (2) directors to serve on
the Board of Directors of the Company. The Company shall, as soon as practicable
after such time, take all action necessary to cause such individuals to be
appointed to the Board and to have at least one such individual on each
committee of the Board, including either increasing the size of the Board or
securing the resignations of incumbent directors or both.
7.2.2. In connection with the Stockholders Meeting, the Company
shall (i) set the size of its Board at five directors and (ii) nominate for
election at the Stockholders Meeting a slate of director candidates reasonably
acceptable to Purchaser, which shall include three candidates designated by
Purchaser ("Purchaser Designees"), the existing Chief Executive Officer (the
"Management Designee") and one candidate selected by the Purchaser and the
Company who shall not be an Affiliate or employee of either the Purchaser or the
Company and shall otherwise constitute an "independent director" under the rules
of the The Nasdaq Stock Market (the "Outside Designee"), and the Company shall,
at such time, promptly take all action necessary to cause the Purchaser
Designees, the Management Designee and the Outside Designee to be so elected,
including either increasing the size of the Board or securing the resignations
of incumbent directors or both.
-21-
To the extent that Purchaser is otherwise permitted to vote in the election of
directors at the Stockholders Meeting, Purchaser agrees to vote any shares of
the Series A Preferred Stock or Common Stock it owns in favor of the election of
the Outside Designee and the Management Designee at the Stockholders Meeting. To
the extent that the Purchaser Designees and the Management Designee are elected
as directors, the Company will use its reasonable best efforts to cause the
number of Purchaser Designees and Management Designee, respectively, to
constitute the same percentage as they represent on the Board of each committee
of the Board. Nothing in this Section 7.2.2 shall be deemed to constitute an
admission that any of the Purchaser Designees are not "independent directors"
for purposes of the rules of The Nasdaq Stock Market. In connection with the
Stockholders Meeting, Purchaser agrees to vote all shares of the Series A
Preferred Stock and Common Stock owned by it in favor of the Purchaser
Acquisitions.
7.2.3. If the Company terminates the Second Issuance Agreements
pursuant to Section 9.1.4, then to the extent that three Purchaser Designees
have been elected to the Company's Board of Directors at the Stockholders
Meeting, then Purchaser agrees to cause such number of Purchaser Designees to
resign from the Company's Board of Directors so as to reflect a reallocation of
board seats (based on a five-person Board of Directors) proportionate to
Purchaser's economic interest in the Company, rounded down to the nearest whole
number of directors; provided however, that in no event shall Purchaser have
----------------
fewer than two Purchaser Designees on the Company's Board of the Directors
following such reallocation.
7.2.4. At each annual or other meeting after the Stockholders
Meeting at which the election of directors is considered, so long as Purchaser
owns not less than one-half of the aggregate shares of Common Stock (including
those issuable upon conversion of the Series A Preferred Stock) purchased in the
Offer and in the First Closing, the Board of Directors of the Company, subject
to its fiduciary duties, shall continue to nominate at least two representatives
of Purchaser for election to the Board. Purchaser agrees that, so long as the
current Management Designee is the Chief Executive Officer, Purchaser will vote
its shares in favor of such person's election at each annual or other meeting
after the Stockholders Meeting at which the election of directors is considered.
7.3. Transaction Documents. At the Second Closing, each party
---------------------
shall, and shall cause each of its Affiliates to, execute and deliver to the
other party the Transaction Documents that are to be delivered at the Second
Closing.
7.4. Regulatory Approval. The Company and Purchaser shall use
-------------------
commercially reasonable efforts to file, as soon as practicable after the date
of this Agreement, all notices, reports and other documents required to be filed
with any federal, state, local, municipal, foreign or other governmental body
("Governmental Body") with respect to the transactions contemplated by this
Agreement, and to submit promptly any additional information requested by any
such Governmental Body. Without limiting the generality of the foregoing, the
Company and Purchaser shall, promptly after the date of this Agreement, prepare
and file the notifications required under the HSR Act in connection with the
transactions contemplated by this Agreement. The Company and Purchaser shall
respond as promptly as practicable to (i) any inquiries or requests received
from the Federal Trade Commission or the Department of Justice for additional
information or documentation
-22-
and (ii) any inquiries or requests received from any state attorney general or
other Governmental Body in connection with antitrust or related matters. Each of
the Company and Purchaser shall (A) give the other party prompt notice of the
commencement of any action, suit, litigation, arbitration, preceding or
investigation ("Legal Proceeding") by or before any Governmental Body with
respect to the transactions contemplated by this Agreement, (B) keep the other
party informed as to the status of any such Legal Proceeding, and (C) promptly
inform the other party of any communication to or from the Federal Trade
Commission, the Department of Justice or any other Governmental Body regarding
the transactions contemplated by this Agreement.
7.5. Amendment of Certificate of Incorporation or By-Laws. The
----------------------------------------------------
Company shall take all steps reasonably necessary to amend the Certificate of
Incorporation and By-Laws to implement the rights and obligations of the parties
contained herein to the extent necessary or appropriate under Delaware law.
7.6. Disclosure; Public Announcements. At all times at or before
--------------------------------
the Second Closing, no party hereto will issue or make any reports, statements
or releases to the public with respect to this Agreement or the transactions
contemplated hereby without the consent of the other party hereto, which consent
shall not be unreasonably withheld. If either party hereto is unable to obtain,
after reasonable effort, the approval of its public report, statement or release
from the other party hereto and such report, statement or release is, in the
opinion of legal counsel to such party, required by law in order to discharge
such party's disclosure obligations, then such party may make or issue the
legally required report, statement or release and promptly furnish the other
parties with a copy thereof. Each party hereto will also obtain the prior
approval of the other party hereto of any press release to be issued announcing
the consummation of the transactions contemplated by this Agreement; provided,
however, no such press release shall be issued prior to consummation of the
First Closing.
7.7. Tender Offer.
------------
7.7.1. Within five (5) business days after the date
hereof, Purchaser shall commence the Offer to purchase up to 3,596,688 shares of
the Company's Common Stock (the "Maximum Tender Number") at $90 per share in
cash (the "Offer Price"), subject only to the conditions set forth in Annex A
-------
hereto.
7.7.2. On the date of commencement of the Offer, Purchaser
shall file with the SEC a Tender Offer Statement on Schedule 14D-1 (together
with all amendments and supplements thereto, the "Schedule 14D-1") with respect
to the Offer. The Schedule 14D-1 shall contain or shall incorporate by reference
an offer to purchase (the "Offer to Purchase") and forms of the related letter
of transmittal and any related summary advertisement (the Schedule 14D-1, the
Offer to Purchase and such other documents, together with all supplements and
amendments thereto, being referred to herein collectively as the "Offer
Documents"). Purchaser and the Company agree to promptly correct any information
provided by either of them for use in the Offer Documents which shall have
become false or misleading, and Purchaser further agrees to take all steps
necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC
and the other Offer Documents as so corrected to be disseminated to holders of
shares of Common Stock, in each case as
-23-
and to the extent required by applicable federal securities laws. Purchaser
agrees to provide the Company with a written copy of any comments it or its
counsel may receive from time to time from the SEC or its staff with respect to
the Schedule 14D-1 promptly after receipt of such comments.
7.7.3. Purchaser shall not, without the prior written
consent of the Company, (i) terminate the Offer other than in accordance with
its terms, (ii) extend the Expiration Date to a date later than August 31, 1999,
or (iii) amend the Offer, other than as permitted in Annex A; provided, however,
------- -------- -------
it is understood that i) Purchaser shall have the right to close the Offer and
accept and pay for tendered shares of Common Stock at any time it may be
permitted to under applicable law, (ii) Purchaser is not obligated to keep the
Offer open until the Stockholders Meeting occurs and (iii) in the event that the
Second Issuance Agreements are terminated, Purchaser may elect, in its sole
discretion, to continue to conduct the Offer and may increase the Maximum Tender
Number to 5,000,000 shares of Common Stock.
7.7.4. The Company's obligations hereunder shall not be
conditioned on the number of shares tendered to Purchaser. Purchaser shall
purchase all shares of Common Stock tendered pursuant to the Offer up to the
Maximum Tender Number. Purchaser shall not have any right hereunder to acquire
the Second Issuance Shares if Purchaser fails to acquire in contravention of the
terms of Annex A all shares of Common Stock tendered pursuant to the Offer up to
-------
the Maximum Tender Number.
7.8. Company Action.
--------------
7.8.1. The Company shall use its reasonable best efforts
to cause the Company Financial Adviser to permit the inclusion of the fairness
opinion referred to in Section 3.21 (or a reference thereto) in the Schedule
14D-9 referred to below and the Proxy Statement referred to in Section 5.3 and a
reference to such opinion in the Offer Documents. The Company hereby consents to
the inclusion in the Offer Documents of the recommendations of the Board
described in Section 5.2.
7.8.2. The Company shall file with the SEC,
contemporaneously with the commencement of the Offer pursuant to Section 7.7, a
Solicitation/ Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, the "Schedule 14D-9") containing the
statements of the Board described in Section 5.2, and shall promptly mail the
Schedule 14D-9 to the shareholders of the Company. The Schedule 14D-9 and all
amendments thereto will comply in all material respects with the Exchange Act
and the rules and regulations promulgated thereunder. The Company and Purchaser
each agrees promptly to correct any information provided by it for use in the
Schedule 14D-9 that shall have become false or misleading in any material
respect, and the Company further agrees to take all steps necessary to cause the
Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to
holders of shares of Common Stock, in each case as and to the extent required by
applicable federal securities laws.
7.8.3. In connection with the Offer, the Company shall
promptly furnish Purchaser with mailing labels, security position listings, any
non-objecting beneficial
-24-
owner lists and any available listings or computer files containing the names
and addresses of the record holders of shares of Common Stock, each as of a
recent date, and shall promptly furnish Purchaser with such additional
information (including but not limited to updated lists of shareholders, mailing
labels, security position listings and non-objecting beneficial owner lists) and
such other assistance as Parent, Purchaser or their agents may reasonably
require in communicating the Offer to the record and beneficial holders of
shares of Common Stock. Subject to the requirements of applicable law, and
except for such steps as are appropriate to disseminate the Offer Documents and
any other documents necessary to consummate the Preferred Stock Sale, Purchaser
and its affiliates, associates, agents and advisors shall use the information
contained in any such labels, listings and files only in connection with the
Offer and the Preferred Stock Sale, and, if this Agreement shall be terminated,
will deliver to the Company all copies of such information then in their
possession.
7.9. Advertising. As an inducement to Purchaser to enter into this
-----------
Agreement, the Company agrees that, Purchaser shall have the right to use up to
ten percent of the Company's unsold advertising inventory in existence from time
to time. Purchaser shall have such right for a period of five years from the
date hereof , provided that, following the first anniversary of the date hereof,
Purchaser shall have such right for the balance of such five-year period only so
long as Purchaser (together with its Affiliates) holds of record or beneficially
owns at least ten percent (10%) of the outstanding Common Stock of the Company
(assuming conversion into Common Stock, at the conversion rate then in effect,
of all shares of Series A Preferred Stock held of record or beneficially by
Purchaser and its Affiliates). The Company and Purchaser shall cooperate in
establishing procedures to implement this agreement, including the provision of
reasonable advance notice by the Company to Purchaser of the advertising space
available. Purchaser agrees to comply with all of the Company's generally-
applicable advertising guidelines, as they may be in effect from time to time.
The Company agrees that Purchaser may allocate some or all of the advertising
space to which it may become entitled to any entity in which it or an Affiliate
(as defined in Section 5.7) has at least a five percent voting or economic
equity interest, provided that neither Purchaser nor any such entity may
commercially resell any of such advertising space. The parties agree that
advertising space that the Company trades for goods and services or other
promotions in "barter" transactions shall not be deemed to be unsold for
purposes of this Section. Notwithstanding any provision to the contrary in this
Agreement, this covenant will survive any termination of this Agreement or the
Second Issuance Agreements. In no event will Purchaser or any other entity that
is permitted to use advertising under this Section 7.9 be entitled to use
advertising that the Company reasonably determines conflicts or competes with
the Company's products or services or the Company's contractual arrangements
with third parties.
8. Conditions to the Second Closing.
--------------------------------
8.1. Conditions to Purchaser's Obligations at the Second Closing.
-----------------------------------------------------------
Purchaser's obligations to purchase the Second Issuance Shares at the Second
Closing are subject to the satisfaction (or waiver by Purchaser), at or prior to
the Second Closing, of the following conditions:
-25-
8.1.1. Representations and Warranties True. The representations
-----------------------------------
and warranties of the Company set forth in Section 3 hereof shall be true and
correct (determined without regard to any materiality qualifiers, including
without limitation "Material Adverse Effect," contained in the specific
representation or warranty) (i) as of the date hereof and (ii) as of the Second
Closing Date as if made on such date (provided that in the cases of clauses (i)
and (ii) any such representation and warranty made as of a specific date shall
be true and correct as of such specific date), except for such inaccuracies in
the cases of clauses (i) and (ii) that individually or in the aggregate could
not reasonably be expected to have a Material Adverse Effect.
8.1.2. Performance of Obligations. The Company shall have
--------------------------
performed in all material respects all covenants and obligations herein required
to be performed or observed by it on or prior to the Second Closing.
8.1.3. Consents, Permits, and Waivers. On or prior to the Second
------------------------------
Closing Date, Purchaser and the Company shall have obtained any and all
consents, permits and waivers necessary for consummation of the transactions
contemplated by this Agreement and the other Transaction Documents (except for
such as may be properly obtained subsequent to the Second Closing) unless the
failure to obtain such consents, permits or waivers is a result of a breach by
Purchaser or would not have a Material Adverse Effect. All waiting periods under
the HSR Act shall have expired or terminated.
8.1.4. Absence of Restraint. No order to restrain, enjoin or
--------------------
otherwise prevent the consummation of the transactions contemplated hereby shall
have been entered by any court or other governmental authority and not rescinded
or overturned. No litigation instituted by any governmental body or other
regulatory authority shall be pending to restrain or invalidate any material
part of the transactions contemplated by this Agreement.
8.1.5. Absence of Material Adverse Change. There shall not have
----------------------------------
occurred after the date hereof any material adverse change in the business,
properties, results of operation or financial condition of the Company and its
subsidiaries taken as a whole, other than any adverse change following the date
of this Agreement that the Company shall have demonstrated is substantially
attributable to (i) the transactions contemplated by this Agreement or the
announcement of the transactions contemplated by this Agreement or (ii) any
material economic downturn in the Internet industry generally or any material
national economic downturn.
8.1.6. Stockholder Approval. On or prior to the Second Closing
--------------------
Date, the Purchaser Acquisitions shall have been approved by the affirmative
vote of the holders of a majority of the capital stock of the Company
represented and voting on such matters (the "Requisite Vote").
8.1.7. Board of Directors. As of the Second Closing, all of the
------------------
Purchaser Designees shall have been duly elected to the Board by a vote of the
Company's stockholders and shall constitute a majority of the entire Board.
-26-
8.1.8. Compliance Certificate. The Company shall have delivered
----------------------
to Purchaser or its counsel a Compliance Certificate, executed by the President
and the Chief Financial Officer of the Company, dated as of the Closing Date, to
the effect that the conditions specified in Sections 8.1.1 through 8.1.7 have
been satisfied.
8.1.9. Legal Opinion. Purchaser shall have received from
-------------
Xxxxxxxx, Xxxxxxx & Xxxxxxx an opinion addressed to it, dated as of the Second
Closing date, covering the matters set forth in Exhibit D and otherwise in form
and substance satisfactory to Purchaser.
8.1.10. Management Agreements. Each Management Agreement
---------------------
executed as of the date hereof shall be in full force and effect and no breach
shall have occurred on the part of any Management Stockholder under such
agreement.
8.2. Conditions to Obligations of the Company. The Company's
----------------------------------------
obligation to issue and sell the Second Issuance Shares at the Second Closing is
subject to the satisfaction (or waiver by the Company), on or prior to the
Second Closing, of the following conditions:
8.2.1. Representations and Warranties True. The representations
-----------------------------------
and warranties of Purchaser set forth in Section 4 hereof shall be true and
correct in all material respects (i) as of the date hereof and (ii) as of the
Second Closing Date as if made on such date (provided that in the cases of
clauses (i) and (ii) any such representation and warranty made as of a specific
date shall be true and correct in all material respects as of such specific
date).
8.2.2. Performance of Obligations. Purchaser shall have
--------------------------
performed in all material respects all covenants and obligations herein required
to be performed or observed by it on or prior to the Second Closing.
8.2.3. Consents, Permits, and Waivers. On or prior to the Second
------------------------------
Closing Date, Purchaser and the Company shall have obtained any and all
consents, permits and waivers necessary or appropriate for consummation of the
transactions contemplated by this Agreement and the other Transaction Documents
(except for such as may be properly obtained subsequent to the Second Closing)
unless the failure to obtain such consents, permits or waivers is a result of a
breach by the Company. All waiting periods under the HSR Act shall have expired
or terminated.
8.2.4. Absence of Restraint. No order to restrain, enjoin or
--------------------
otherwise prevent the consummation of the transactions contemplated hereby shall
have been entered by any court or other governmental authority.
8.2.5. Stockholder Approval. On or prior to the Second Closing
--------------------
Date, the issuance and sale to Purchaser of the Second Issuance Shares and the
purchase of Common Stock pursuant to the Management Agreements shall have been
approved by the Requisite Vote of the Company's stockholders.
-27-
8.2.6. Tender Offer. The Purchaser shall have made the Offer and
------------
shall not have terminated such Offer except in accordance with its terms, and
shall have purchased all shares tendered thereby in accordance with the Offer up
to the Maximum Tender Number.
8.2.7. Legal Opinion. The Company shall have received from Irell
-------------
& Xxxxxxx LLP an opinion addressed to it, dated as of the Second Closing
date, covering the matters set forth in Exhibit E and otherwise in form
and substance satisfactory to the Company.
9. Termination.
-----------
9.1. Termination. The obligations of the parties contained herein
-----------
relating to the sale and purchase of the Second Issuance Shares (including
without limitation the agreements contained in Sections 1(b), 2.2, 5.1, 5.2,
5.3, 5.4, 5.5, 7.3, 7.4 (relating to the Second Issuance only, but not to
approvals under the HSR Act and other regulatory approvals in connection with
the First Issuance, the Offer or the Management Agreements), 7.7 (relating to
Purchaser's obligation to conduct the Offer only, but not its right to conduct
the Offer) and 7.8 (the "Second Issuance Agreements") may be terminated at any
time prior to the Second Closing Date:
9.1.1. By mutual agreement of the Company and Purchaser;
9.1.2. By either the Company or Purchaser if :
(a) this Agreement shall not have been consummated by August
31, 1999, unless extended by mutual agreement or unless the failure to
consummate the Agreement is attributable to a failure on the part of the
party seeking to terminate this Agreement to perform any obligation
required to be performed by such party at or prior to the Closing Date;
(b) the Requisite Vote of the Company's stockholders shall not
have been obtained at the Stockholders Meeting duly convened and finally
adjourned;
(c) any Governmental Body shall have issued an injunction,
order or decree (a "Restraint") or taken any other action permanently
enjoining, restraining or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement and such Restraint or other
action shall become final and non-appealable, provided the party seeking
to terminate this Agreement shall have used its best efforts to prevent
entry of and to remove such Restraint.
9.1.3. By Purchaser if:
(a) the Board (i) shall have failed to recommend, or shall have
withdrawn, modified or changed in a manner adverse to Purchaser its
approval or recommendation, of the Transaction Documents, the Purchaser
Acquisitions or the other transactions contemplated thereby, or the Board
or any committee thereof shall
-28-
have resolved to take any of the foregoing actions, (ii) shall have
submitted or recommended to the stockholders of the Company or shall have
approved a Transaction Proposal, (iii) shall have accepted or recommended
to its stockholders a Superior Proposal, or (iv) shall have publicly
announced its intention to do any of the foregoing;
(b) the Company shall have breached or failed to perform in any
material respect any of its representations or warranties (with respect to
materiality, in a manner such that the condition in Section 8.1.1 would
not be satisfied), or covenants or other agreements contained in this
Agreement, which breach or failure to perform cannot be or has not been
cured within five days after the giving of written notice to the Company
of such breach and which, as a result of such breach, considered either
individually or in the aggregate, any condition to Purchaser's obligations
to consummate the Second Closing set forth in Section 8.1 would not at
that time be satisfied (a "Company Material Breach") (provided that
Purchaser is not then in Purchaser Material Breach (as defined below) of
any representation, warranty, covenant or other agreement contained in
this Agreement); or
(c) the Company shall have breached or failed to perform in any
respect any of its obligations under Section 5.5; provided the Company
--------
shall be deemed to have breached its obligations under Section 5.5 if any
Affiliate of the Company, or any Representative of the Company and its
Affiliates, shall have engaged in any activities prohibited by Section
5.5.
9.1.4. By the Company, if (i) Purchaser shall have breached or failed
to perform in any material respect any of its representations or warranties
(with respect to materiality, in a manner such that the condition in Section
8.2.1 would not be satisfied), or covenants or other agreements contained in
this Agreement, which breach or failure to perform cannot be or has not been
cured within five days after the giving of written notice to Purchaser of such
breach and which, as a result of such breach, considered either individually or
in the aggregate, any condition to the Company's obligations to consummate the
Second Closing set forth in Section 8.2 would not at that time be satisfied (a
"Parent Material Breach") (provided that the Company is not then in Company
Material Breach of any representation, warranty, covenant or other agreement
contained in this Agreement), (ii) Purchaser has failed to commence the Offer
within five (5) business days following the date hereof, (iii) any change is
made to the Offer in contravention of Section 7.7.3 or the provisions of
Annex A, (iv) the Board of Directors shall have withdrawn or modified in a
-------
manner adverse to Purchaser the Board's approval of the Transaction Documents or
(v) the Board has accepted a Superior Proposal in accordance with the provisions
of Section 5.5 hereof. Notwithstanding anything in this Agreement to the
contrary, following any such termination by the Company hereunder Purchaser may
continue to pursue the Offer in accordance with Section 7.7.3.
9.2. Effect of Termination. In the event of the termination of the Second
---------------------
Issuance Agreements pursuant to Section 9.1, the Second Issuance Agreements
shall become void and have no effect, without any liability on the part of any
party or its directors, officers or stockholders, except as set forth in Section
10. Notwithstanding the foregoing, nothing in
-29-
this Section 9.2 or in Section 10 shall relieve any party to this Agreement of
liability for fraud in connection with this Agreement.
10. Fees and Expenses.
-----------------
10.1. Except as contemplated by Sections 10.2 or 10.3, all costs
and expenses incurred in connection with this Agreement and the consummation of
the transactions contemplated hereby shall be paid by the party incurring such
expenses.
10.2. The Company shall pay or cause to be paid to Purchaser a cash
fee in an amount equal to $17,500,000 if:
(a) the Company or Purchaser shall terminate the Second
Issuance Agreements pursuant to Section 9.1.2(b) hereof and prior to the
Stockholders Meeting, a Transaction Proposal shall have been made known to
the Company or shall have been made directly to its stockholders or any
person shall have publicly announced an intention (whether or not
conditional) to make a Transaction Proposal;
(b) Purchaser shall terminate the Second Issuance
Agreements pursuant to Section 9.1.3(a) or (c) or the Company shall
terminate the Second Issuance Agreements pursuant to clauses (iv) or (v) of
Section 9.1.4; or
(c) Purchaser shall terminate the Second Issuance
Agreements pursuant to Section 9.1.3(b) for a Company Material Breach.
10.3. Upon the Second Closing, the Company will pay to Purchaser the
sum of $8,000,000 on account of Purchaser's fees and expenses in connection with
the transactions contemplated by this Agreement.
10.4. Except as provided in Section 5.5.3, any payments to which
Purchaser may become entitled pursuant to this Section 10 shall be payable by
the Company within two (2) business days after the relevant triggering event.
10.5. The parties agree that it would be speculative, impractical and
extremely difficult to determine or estimate the damages that would be suffered
by Purchaser in the event the Second Closing is not consummated. The parties
hereby agree that the cash fee specified in Section 10.2 is a reasonable
estimate of the total net detriment that Purchaser would suffer as a result of
any failure to consummate the Second Closing. Such fee shall constitute
liquidated damages and, except for fraud in connection with this Agreement,
shall constitute Purchaser's sole and exclusive remedy hereunder. This
liquidated damages provision shall not limit and shall be in addition to
Purchaser's rights to obtain injunctive and other equitable relief against the
Company.
11. [Intentionally Omitted.]
-30-
12. Miscellaneous.
-------------
12.1. Survival of Representations, Warranties and Agreement.
-----------------------------------------------------
Notwithstanding any investigation made by any party to this Agreement, the
representations and warranties made by the Company and Purchaser in connection
with the First Closing and the Second Closing shall not survive the First
Closing and Second Closing, respectively (other than the representations and
warranties of the Company set forth in Sections 3.4.1, 3.4.2(iii), 3.5 and 3.6,
which shall survive indefinitely), and shall thereafter be of no further force
or effect, except in the case of fraud in connection with this Agreement. All
covenants and agreements contained in this Agreement (except to the extent the
Second Issuance Agreements are terminated pursuant to Section 10) shall survive
the First Closing Date and Second Closing Date in accordance with their terms.
12.2. Notices. All notices, requests, consents and other
-------
communications hereunder shall be in writing, shall be in writing, shall be
mailed by first-class registered or certified airmail, or nationally recognized
overnight express courier postage prepaid, and shall be deemed given when so
mailed and shall be delivered as follows:
if to the Company, to:
Go2Net, Inc.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx
with a copy so mailed to:
Xxxxxxxx Xxxxxxx & Xxxxxxx, A Professional Corporation
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxx, Esq.
if to Purchaser,
Vulcan Ventures Incorporated
000 000xx Xxxxxx, X.X., Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
with a copy so mailed to:
Irell & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attention: Xx Xxxxx, Esq.
12.3. Adjustments. In the event of any change in the Common Stock by
-----------
reason of a stock dividend, split-up, recapitalization, combination, conversion,
exchange of shares or other similar change in the corporate or capital structure
of the Company, the type
-31-
and number of shares or securities subject to various provisions of this
Agreement (and the per share price of such shares or securities) shall, where
applicable, be adjusted appropriately, so that Purchaser's rights under this
Agreement shall be preserved as nearly as practicable. Without limiting the
generality of the foregoing, any such change in the Common Stock shall cause a
proportionate change in the Maximum Tender Number and the Offer Price.
12.4. Assignability and Enforceability. This Agreement shall be
--------------------------------
binding on and enforceable by the parties and their respective successors and
permitted assigns. No party may assign any of its rights, benefits or
obligations under this Agreement to any person without the prior written consent
of the other party; provided, however, that Purchaser may assign its rights,
------------------
benefits or obligations under this Agreement, without the prior consent of the
Company, to an Affiliate (as defined in Section 5.7). No such assignment shall
relieve the Purchaser of its obligations under this Agreement.
12.5. Amendments and Waivers. No amendment or waiver of any
----------------------
provision of this Agreement shall be binding on any party unless consented to in
writing by such party. No waiver of any provision of this Agreement shall be
construed as a waiver of any other provision nor shall any waiver constitute a
continuing waiver unless otherwise expressly provided. No provision of this
Agreement shall be deemed waived by a course of conduct including the act of
Closing unless such waiver is in writing signed by all parties and stating
specifically that it was intended to modify this Agreement.
12.6. Entire Agreement. This Agreement and the other Transaction
----------------
Documents, including the Schedules and Exhibits and any agreements or documents
referred to herein or therein or executed contemporaneously herewith or
therewith, constitutes the entire agreement among the parties with respect to
the subject matter hereof and supersedes all prior agreements, understandings,
negotiations and discussions, whether written or oral. There are no conditions,
covenants, agreements, representations, warranties or other provisions, express
or implied, collateral, statutory or otherwise, relating to the subject matter
hereof except as herein provided.
12.7. Headings. The headings of the various sections of this
--------
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
12.8. Severability. In case any provision contained in this
------------
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
12.9. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware as to matters
between the Company and its stockholders and other matters of corporate
governance and, as to all other matters, with the laws of the State of
Washington, without regard to the choice of law provisions thereof, and the
federal law of the United States of America.
-32-
12.10. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.
[Remainder of Page Intentionally Left Blank]
-33-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
GO2NET, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------------------------
Xxxxxxx X. Xxxxxxxx, Chief Executive Officer
VULCAN VENTURES INCORPORATED
By: /s/ Xxxxxxx X. Xxxxx
---------------------------------------------
Xxxxxxx X. Xxxxx, Vice President
-34-
ANNEX A
CONDITIONS TO THE TENDER OFFER
Notwithstanding any other provision of the Offer or the Stock Purchase
Agreement, and in addition to (and not in limitation of) Purchaser's rights to
extend and amend the Offer at any time in its sole discretion (subject to the
provisions of the Agreement and this Annex A), and subject to any applicable
rules and regulations of the SEC, including Rule 14e-1(c) relating to the
Purchaser's obligation to pay for or return tendered shares of Common Stock
("Offer Shares") after termination of the Offer, the Purchaser's obligation to
accept for payment or pay for any Common Shares tendered pursuant to the Offer
is subject to the condition that the Second Issuance Agreements (as defined in
the Stock Purchase Agreement) shall not have been terminated and to the
satisfaction of the following conditions (together, the "Offer Conditions"):
(a) there shall not have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on The Nasdaq Stock Market for
at least one full trading day, (ii) any decline, measured from the close of
business on March 12, 1999, in the Nasdaq Composite Index by an amount in excess
of 15% at any time during any three trading days in a ten consecutive trading
day period, (iii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States (whether or not mandatory),
(iv) a declaration of a war or other international or national calamity directly
or indirectly involving the United States, or (v) in the case of any of the
foregoing matters described in clauses (iii) through (v) existing at the time of
commencement of the Offer, a material acceleration or worsening thereof;
(b) no statute, rule, regulation, judgment, order, decree, ruling,
injunction, litigation or other action shall have been entered, promulgated,
enforced, initiated or threatened by any governmental, quasi-governmental,
judicial, or regulatory agency or entity or subdivision thereof with
jurisdiction over the Company or the Purchaser or any of their subsidiaries or
the purchase and sale of the Offer Shares or Second Issuance Shares or any of
the other transactions contemplated by the Stock Purchase Agreement that
purports, seeks, or threatens to (i) prohibit, restrain, enjoin, or restrict in
a material manner, the purchase and sale of any Offer Shares or the Second
Issuance Shares as contemplated by the Stock Purchase Agreement, or (ii) impose
material adverse terms or conditions (not set forth in the Stock Purchase
Agreement) upon the purchase and sale of any Second Issuance Shares or the Offer
Shares as contemplated by the Stock Purchase Agreement;
(c) the Purchaser and the Company shall have obtained any and all consents,
permits and waivers necessary for consummation of the transactions contemplated
by the Stock Purchase Agreement and the other Transaction Documents (except for
such as may be properly obtained subsequent to the consummation of the Offer)
unless the failure to obtain such consents, permits or waivers is a result of a
breach by the Purchaser or would not have a Material Adverse Effect; all waiting
periods under the HSR Act shall have expired or terminated;
(d) the representations and warranties of the Company set forth in the
Agreement hereof shall be true and correct (determined without regard to any
materiality qualifiers,
-35-
including without limitation "Material Adverse Effect," contained in the
specific representation or warranty) (i) as of the date hereof and (ii) as of
the date of consummation of the Offer if made on such date (provided that in the
cases of clauses (i) and (ii) any such representation and warranty made as of a
specific date shall be true and correct as of such specific date), except in the
case of clauses (i) and (ii), for such inaccuracies that individually or in the
aggregate would not reasonably be expected to have a Material Adverse Effect;
(e) the Company shall have performed in all material respects all covenants
and obligations herein required to be performed or observed by it on or prior to
the Second Closing;
(f) There shall not have occurred after the date hereof any material
adverse change in the business, properties, results of operation or financial
condition of the Company and its subsidiaries taken as a whole, other than any
adverse change following the date of the Stock Purchase Agreement that the
Company shall have demonstrated is substantially attributable to (i) the
transactions contemplated by the Stock Purchase Agreement or the announcement of
the transactions contemplated by the Stock Purchase Agreement or (ii) any
material economic downturn in the Internet industry generally or any material
national economic downturn;
(g) the Company shall have appointed to its Board of Directors two persons
designated by the Purchaser in accordance with Section 7.2.1 of the Stock
Purchase Agreement, and the Company shall have complied with all of its other
obligations under Section 7.2 of the Stock Purchase Agreement;
(h) the Company shall have delivered to the Purchaser or its counsel a
Compliance Certificate, executed by the President and the Chief Financial
Officer of the Company, dated as of the consummation of the Offer, to the effect
that the conditions specified in clauses (c) through (h) have been satisfied;
(i) the Purchaser shall have received from Xxxxxxxx, Xxxxxxx & Xxxxxxx, A
Professional Corporation, an opinion addressed to it, dated as of the
consummation of the Offer, covering the items listed in Exhibit D in form and
---------
substance satisfactory to the Purchaser;
(j) Each Management Agreement executed as of the date of the Agreement
shall be in full force and effect and no breach shall have occurred on the part
of any Management Stockholder under such agreement.
The Purchaser may delay acceptance for payment of or, subject to the
restrictions referred to above, the payment for, any tendered Shares, and may
terminate the Offer as to any Shares not then paid for, if such Offer Conditions
are not satisfied.
The foregoing conditions are for the sole benefit of the Purchaser and may
be asserted by the Purchaser regardless of the circumstances giving rise to any
such condition (including without limitation any action or inaction by the
Purchaser, other than actions Purchaser is required to take under Section 7.1 of
the Stock Purchase Agreement), or may be
-36-
waived by the Purchaser, in whole or in part at any time and from time to time,
in the Purchaser's sole discretion. The Purchaser is not obligated to keep the
Offer open until the Stockholders Meeting occurs. In the event that the Second
Issuance Agreements are terminated, the Purchaser may elect, in its sole
discretion, to continue to conduct the Offer.
The failure by the Purchaser at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such rights and each such right shall
be deemed an ongoing right which may be asserted at any time and from time to
time. Any determination (which shall be made in good faith) by the Purchaser
with respect to any of the foregoing conditions (including without limitation
the satisfaction of such conditions) will be final and binding on all parties.
The Purchaser may increase the Offer Price and may make any other changes
in the terms and conditions of the Offer; provided, however, that, except as
permitted under Section 7.7.3 of this Agreement or unless previously approved by
the Company in writing, the Purchaser may not (i) decrease the Offer Price, (ii)
change the form of consideration payable in the Offer, (iii) increase or
decrease the maximum number of Shares sought pursuant to the Offer, (iv) add to
or modify the Offer Conditions, or (v) otherwise amend the Offer in any manner
adverse to the Company's stockholders.
The Purchaser may, without the Company's consent, (i) extend the Offer if
at the scheduled Expiration Date of the Offer if any of the conditions to the
Purchaser's obligation to accept for payment, and pay for, the Offer Shares
shall not have been satisfied or waived, until such time as such conditions are
satisfied or waived, (ii) extend the Offer for any period required by any rule,
regulation, interpretation or position of the SEC or the staff thereof
applicable to the Offer and (iii) extend the Offer for any reason on one or more
occasions for an aggregate period of not more than ten business days beyond the
latest Expiration Date that would otherwise be permitted under clauses (i) or
(ii) of this sentence. As used herein, "business day" means any day other than
a Saturday, Sunday or United States federal holiday and consists of the time
period from 12:01 a.m. through 12:00 midnight, New York City time.
-37-
EXHIBIT A
---------
CERTIFICATE OF DESIGNATION OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
GO2NET, INC.
Go2Net, Inc., (hereinafter called the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, does hereby certify:
1. The name of the Corporation is Go2Net, Inc.
2. The certificate of incorporation of the Corporation authorizes the
issuance of 1,000,000 shares of Preferred Stock, $.01 par value, and expressly
vests in the Board of Directors of the Corporation the authority provided
therein to provide for the issuance of said shares in series and by filing a
certificate pursuant to the applicable law of the State of Delaware, to
establish from time to time the numbers of shares to be included in each such
series, and to fix the designation, powers, preferences and rights of the shares
of each such series and the qualifications, limitations, or restrictions
thereof.
3. The Board of Directors of the Corporation, pursuant to the authority
expressly vested in it as aforesaid, has adopted the following resolutions
creating a "Series A Convertible" issue of Preferred Stock:
RESOLVED, that a series of the class of authorized Preferred Stock of the
Corporation be and hereby is created, and that the designation and amount
thereof and the voting powers, preferences and relative participating, optional
and other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof as follows:
SERIES A CONVERTIBLE PREFERRED STOCK
------------------------------------
1. Designation And Amount. The shares of such series shall be designated
----------------------
"Series A Convertible Preferred Stock" (the "Series A Preferred Stock") and the
number of shares constituting such series shall be 300,000.
2. Dividends.
---------
(a) The Series A Preferred Stock shall not be entitled to receive
dividends unless and until the Board of Directors declares a dividend in respect
of the Common Stock out of legally available funds therefor; provided, however,
-------- -------
that no dividends shall be declared or paid upon the Common Stock (other than
dividends payable upon the Common Stock solely in additional shares of Common
Stock, provided that an appropriate adjustment in the Conversion Price is made
under Section 6(a) hereof) or any other stock ranking on liquidation junior to
the Series A Preferred Stock (such stock being referred to hereinafter
collectively as "Junior Stock") unless (i) after the payment of the dividend on
the Common Stock and Junior Stock (and the simultaneous dividend on the Series A
Preferred Stock) the Corporation's net worth exceeds the aggregate liquidation
preference of the Series A Preferred Stock (provided that this clause (i) shall
not apply if the dividend is approved by the holders of a majority of the
outstanding shares of Series A Preferred Stock) and (ii) there
shall be simultaneous declaration or payment, as applicable, of a dividend upon
the Series A Preferred Stock.
(b) In the case of any dividend being declared upon the Common Stock, the
dividend which shall be declared upon each share of Series A Preferred Stock as
a condition to such dividend upon the Common Stock shall be equal in amount to
the dividend payable upon that number of shares of Common Stock acquirable upon
conversion of a share of Series A Preferred Stock immediately before the
declaration of such dividend, with such conversion being based on the then
applicable Conversion Price determined in accordance with Section 6 as of the
record date for the declaration of such dividend on the Common Stock.
(c) In the case of any dividend being declared upon any class of Junior
Stock that is convertible into Common Stock, the amount of the dividend which
shall be declared upon each share of Series A Preferred Stock as a condition to
such dividend on Junior Stock, divided by the number of shares of Common Stock
acquirable upon conversion of a share of Series A Preferred Stock, shall equal
the amount of the dividend declared upon each share of such class of Junior
Stock, divided by the number of shares of Common Stock acquirable upon
conversion of a share of such class of Junior Stock, in each case assuming such
conversion occurred immediately before the declaration of such dividend.
(d) No dividend shall be declared or paid upon any class of Junior Stock
(other than Common Stock) that is not convertible into Common Stock without the
consent of holders of at least a majority of the outstanding shares of Series A
Preferred Stock.
(e) Holders of shares of Series A Preferred Stock shall be entitled to
share equally, share for share, in all such dividends declared upon the Series A
Preferred Stock.
3. Liquidation, Dissolution Or Winding Up.
---------------------------------------
(a) In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, the holders of shares of Series A Preferred
Stock then outstanding shall be entitled to be paid out of the assets of the
Corporation available for distribution to its stockholders, after and subject to
the payment in full of all amounts required to be distributed to the holders of
any Preferred Stock of the Corporation ranking on liquidation prior and in
preference to the Series A Preferred Stock (such Preferred Stock that is senior
to the Series A Preferred Stock being referred to hereinafter as "Senior Stock")
upon such liquidation, dissolution or winding up, but before any payment shall
be made to the holders of Common Stock or other Junior Stock, an amount equal to
the sum of (i) $1,000 per share (the "Liquidation Preference") (subject to
adjustment in the event of any stock dividend, stock split, stock distribution
or combination with respect to such shares), and (ii) the amount of all declared
but unpaid dividends on the Series A Preferred Stock. If upon any such
liquidation, dissolution or winding up of the Corporation, the remaining assets
of the Corporation available for the distribution to its stockholders after
payment in full of amounts required to be paid or distributed to holders of any
other Senior Stock shall be insufficient to pay the holders of shares of Series
A Preferred Stock the full amount to
which they shall be entitled, the holders of shares of Series A Preferred Stock,
and any class of stock ranking on liquidation on a parity with the Series A
Preferred Stock (such Preferred Stock ranking on liquidation on parity with the
Series A Preferred Stock being referred to as "Parity Stock"), shall share
ratably in any distribution of the remaining assets and funds of the Corporation
in proportion to the respective amounts which would otherwise be payable with
respect to the shares held by them upon such distribution if all amounts payable
on or with respect to said shares were paid in full. Except as set forth in this
clause (a), holders of shares of Series A Preferred Stock shall not be entitled
to any distribution in the event of liquidation, dissolution or winding up of
the Corporation.
(b) The merger or consolidation of the Corporation with or
into any other corporation or entity, or the sale or conveyance of all or
substantially all the assets of the Corporation, shall not be deemed to be a
liquidation, dissolution or winding up of the Corporation for purposes of this
Section 3.
4. Voting.
------
(a) Each holder of shares of Series A Preferred Stock shall
have the right to one vote for each share of Common Stock into which such
holder's shares of Series A Preferred Stock could then be converted, and with
respect to such vote, such holder shall have full voting rights and powers equal
to the voting rights and powers of the holders of Common Stock, except as
otherwise provided in Sections 4(b) and 4(c) hereof, or as required by law, and
shall be entitled, notwithstanding any provision hereof, to notice of any
shareholders' meeting in accordance with the Bylaws of the Corporation, and
shall be entitled to vote, together with holders of Common Stock, with respect
to any question upon which holders of Common Stock have the right to vote;
provided, however, that the shares of Series A Preferred Stock shall not have
-------- -------
any voting power with respect to the election of directors unless and until the
making of any necessary filings required by, and the expiration or termination
of any applicable waiting periods under, the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act").
(b) The consent of holders of at least a majority of the
outstanding shares of Series A Preferred Stock, voting separately as a single
class, in person or by proxy, either in writing without a meeting or at a
special or annual meeting of stockholders called for such purpose, shall be
necessary to amend, modify or repeal any provision of the Certificate of
Incorporation (including any provision of the Certificate of Designation of
Series A Convertible Preferred Stock) or Bylaws of the Corporation in any manner
which would adversely affect the powers, preferences or special rights of the
Series A Preferred Stock. The authorization or creation of any shares of any
class or series of Senior Stock or Parity Stock of the Corporation or the
reclassification of any authorized stock of the Corporation or security
convertible into or evidencing the right to purchase shares of any such Senior
Stock or Parity Stock shall be deemed to adversely affect the Series A Preferred
Stock. The authorization or creation of any shares of any class or series of
Junior Stock of the Corporation or the reclassification of any authorized stock
of the Corporation into any such Junior Stock, or the creation or authorization
of any obligation or security convertible into or evidencing the right to
purchase shares of any such Junior Stock shall be deemed not to adversely affect
the powers, preferences or special rights of the Series A Preferred Stock.
(c) Unless the vote or consent of the holders of a greater number of
shares shall then be required by law and so long as there is outstanding at
least 50% of the Series A Preferred Stock, the consent of the holders of at
least a majority of the outstanding shares of Series A Preferred Stock, voting
together as a separate class, in person or proxy, either in writing without a
meeting or at a special or annual meeting of stockholders called for such
purpose, shall be necessary to authorize or effect (i) any sale, lease, transfer
or other disposition of assets (including without limitation by merger) having a
fair market value of at least 30% of the fair market value of the assets of the
Corporation and its subsidiaries on a consolidated basis; (ii) any merger or
consolidation or other reorganization of the Corporation with or into another
corporation in one transaction or a series of related transactions pursuant to
which the stockholders of the Corporation immediately prior to consummation of
such transaction would hold less than 66-2/3% of the voting securities of the
entity surviving the transaction; (iii) the acquisition by the Corporation or
any subsidiary thereof of another entity or business whether by means of a
purchase of equity interests or the purchase of all or substantially all of the
assets of such entity or merger, consolidation, reorganization, issuance or
exchange of securities or otherwise where the consideration involved (including
non-cash consideration) has a value of at least $100,000,000; (iv) a
liquidation, winding up or dissolution of the corporation or adoption of any
plan of the same; (v) the commencement by the Corporation of a voluntary case or
proceeding under applicable bankruptcy laws or any other insolvency,
receivership, reorganization, moratorium or similar laws providing relief to
debtors; and (vi) any redemption or repurchase by the Corporation of any Junior
Stock or Parity Stock or any securities convertible into Junior Stock or Parity
Stock, other than the repurchase of shares in connection with the termination of
employees of the Corporation pursuant to rights under written agreements:
provided, however, except to the extent provided by law, the holders of the
-----------------
Series A Preferred Stock shall not have any consent rights under this Section
4(c) until the Second Closing (as defined in that certain Stock Purchase
Agreement dated March 15, 1999, between this Corporation and Vulcan Ventures
Incorporated) shall have occurred, but this proviso shall not in any way impair
or restrict the voting rights of the holders of the Series A Preferred Stock in
any other respect, including without limitation, the right to vote together with
the holders of the Common Stock pursuant to Section 4(a) or the voting right
under Section 4(b).
5. Conversion Rights.
-----------------
(a) Exercise of Conversion Rights. Subject to Compliance with
-----------------------------
the HSR Act, each holder of Series A Preferred Stock shall have the right, at
its option, at any time, to convert, subject to the terms and provisions of this
Section 5, all or any portion of its Series A Preferred Stock then outstanding
into such number of fully paid and non-assessable shares of Common Stock as
results from dividing (i) the sum of (A) the aggregate Liquidation Preference of
all shares of Series A Preferred Stock to be converted plus (B) any declared but
unpaid dividends on such shares, by (ii) the applicable Conversion Price (as
defined in Section 6 below) on the Conversion Date (as defined below). Such
conversion shall be deemed to have been made at the close of business on the
date that the certificate or certificates for shares of Series A Preferred Stock
shall have been surrendered for conversion and written notice shall have been
received as provided in Section 5(b) (the "Conversion Date"), so that the person
or persons entitled to receive the shares of Common
Stock upon conversion of such shares of Series A Preferred Stock shall be
treated for all purposes as having become the record holder or holders of such
shares of Common Stock at such time and such conversion shall be at the
Conversion Price in effect at such time. Upon conversion of any shares of Series
A Preferred Stock pursuant to this Section 5, the rights of the holder of such
shares upon the Conversion Date shall be the rights of a holder of Common Stock
only, and each such holder shall not have any rights in its former capacity as a
holder of shares of Series A Preferred Stock.
(b) Notice to the Corporation. In order to convert all or any
-------------------------
portion of its outstanding Series A Preferred Stock into shares of Common Stock,
the holder of such Series A Preferred Stock shall deliver the shares of Series A
Preferred Stock to be converted to the Corporation at its principal office,
together with written notice that it elects to convert those shares of Series A
Preferred Stock in to shares of Common Stock in accordance with the provisions
of this Section 5. Such notice shall specify the number of shares of Series A
Preferred Stock to be converted and the name or names in which the holder wishes
the certificates for shares of Common Stock to be registered, together with the
address or addresses of the person or persons so named , and, if so required by
the Corporation, shall be accompanied by a written instrument or instruments of
transfer in form reasonably satisfactory to the Corporation, duly executed by
the registered holder of the shares of Series A Preferred Stock to be converted
or by its attorney duly authorized in writing.
(c) Delivery of Certificate. As promptly as practicable after the
-----------------------
surrender as hereinabove provided of shares of Series A Preferred Stock for
conversion into shares of Common Stock, the Corporation shall deliver or cause
to be delivered to the holder, or the holder's designees, certificates
representing the number of fully paid and non-assessable shares of Common Stock
into which the shares of Series A Preferred Stock are entitled to be converted,
together with a cash adjustment in respect of any fraction of a share to which
the holder shall be entitled as provided in Section 5(d), and, if less than the
entire number of shares of Series A Preferred Stock represented by the
certificate or certificates surrendered is to be converted, a new certificate
for the number of shares of Series A Preferred Stock not so converted. So long
as any shares of Series A Preferred Stock remain outstanding, the Corporation
shall not close its Common Stock transfer books. The issuance of certificates
for shares of Common Stock upon the conversion of shares of Series A Preferred
Stock shall be made without charge to the holder for any tax in respect of the
issuance of such certificates (other than any transfer, withholding or other tax
if the shares of Common Stock are to be registered in a name different from that
of the registered holder of Series A Preferred Stock).
(d) Fractional Shares. No fractional shares of Common Stock or
-----------------
scrip representing fractional shares of Common Stock shall be issued upon any
conversion of any shares of Series A Preferred Stock, but, in lieu thereof,
there shall be paid an amount in cash equal to the same fraction of the Market
Price of a whole share of Common Stock as of the Conversion Date. The "Market
Price" of a share of Common Stock on or with respect to any day shall mean (i)
the closing sales price on the immediately preceding trading day of a share of
Common Stock on the principal national securities exchange or automated
quotation system on which the shares of Common Stock are listed or admitted to
trading or, if not listed or admitted to trading on any national securities
exchange or automated
quotation system, the average of the last reported bid and asked prices on such
immediately preceding trading day in the over-the-counter market as furnished
by the National Association of Securities Dealers, Inc., or, if such firm is
not then engaged in the business of reporting such prices, as furnished by any
similar firm then engaged in such business selected in good faith by the Company
or, if there is no such firm, as furnished by any member of the National
Association of Securities Dealers, Inc., selected in good faith by the Company,
or (ii) if the shares of Common Stock are not then traded on any such exchange
or system, the amount determined in good faith by the Board to represent the
fair value of a share of Common Stock.
(e) Reservation of Shares. The Corporation shall at all times
---------------------
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of shares of Series A
Preferred Stock, the full number of whole shares of Common Stock then
deliverable upon the conversion of all shares of Series A Preferred Stock then
outstanding. The Corporation shall take at all times such corporate action as
shall be necessary in order that the Corporation may validly and legally issue
fully paid and non-assessable shares of Common Stock upon the conversion of
shares of Series A Preferred Stock in accordance with the provisions of this
Section 5.
(f) Registration. If any shares of Common Stock to be reserved for
------------
the purpose of conversion of Series A Preferred Stock require registration or
listing with, or approval of, any governmental authority, stock exchange or
other regulatory body under any federal or state law or regulation or otherwise,
before such shares may be validly issued or delivered upon conversion, the
Corporation shall, in good faith and as expeditiously as possible, endeavor to
secure such registration, listing or approval, as the case may be.
(g) Shares Validly Issued and Non-Assessable. All shares of Common
----------------------------------------
Stock that may be issued, fully paid and nonassessable and free from all taxes,
liens and charges with respect to the issuance thereof.
(h) Retirement of Shares. Any shares of Series A Preferred Stock
--------------------
converted pursuant to the provisions of this Section 6 shall be retired and
given the status of authorized and unissued Preferred Stock, undesignated as to
series, subject to reissuance by the Corporation as shares of Preferred Stock of
one or more series, as may be determined from time to time by the Board.
(i) Automatic Conversion.
--------------------
(i) Transfer of Shares. In the event that a holder of shares of
------------------
Series A Preferred Stock desires to transfer some or all of such shares to an
unaffiliated party, each share of Series A Preferred Stock so transferred shall
be converted into the number of fully paid and non-assessable shares of Common
Stock into which such share is then convertible pursuant to Section 5 hereof
automatically and without further action, immediately upon the transfer of such
shares.
(ii) Transaction. In the event that the Corporation enters into
a transaction which will result in the transfer of 50% or greater of the voting
securities of the
Company to an unrelated party, then each share of Series A Preferred Stock
outstanding shall be converted into the number of fully paid and non-assessable
shares of Common Stock into which such share is then convertible pursuant to
Section 6 hereof automatically and without further action, immediately upon the
transfer of such shares.
(iii) Mechanics of Automatic Conversion. Upon any automatic
---------------------------------
conversion of shares of Series A Preferred Stock into shares of Common Stock
pursuant to this Section 5(i), the holders of such converted shares shall
surrender the certificates formerly representing such shares at the office of
the Corporation or of any transfer agent for Common Stock. Thereupon, there
shall be issued and delivered to each such holder, promptly at such office and
in his, her or its name as shown on such surrendered certificate or
certificates, a certificate or certificates for the number of shares of Common
Stock into which such shares of Series A Preferred Stock were so converted and
cash as provided in Section 5(d) above in respect of any fraction of a share of
Common Stock issuable upon such conversion. The Corporation shall not be
obligated to issue certificates evidencing the shares of Common Stock issuable
upon such conversion unless and until certificates formerly evidencing the
converted shares of Series A Preferred Stock are either delivered to the
Corporation or its transfer agent, as hereinafter provided, or the holder
thereof notifies the Corporation or such transfer agent that such certificates
have been lost, stolen, or destroyed and executes and delivers an agreement to
indemnity the Corporation from any loss incurred by it in connection therewith.
6. Conversion Price. As used herein, the "Conversion Price" shall
----------------
initially be $66.11 per share of Common Stock, subject to adjustment as set
forth below. The Conversion Price shall be subject to adjustment from time to
time as follows:
(a) Stock Dividends, Subdivisions, Reclassifications or
--------------------------------------------------
Combinations. If the Corporation shall (i) declare a dividend or make a
------------
distribution on its Common Stock in shares of its Common Stock, (ii) subdivide
or reclassify the outstanding shares of Common Stock into a greater number of
shares, or (iii) combine or reclassify the outstanding Common Stock into a
smaller number of shares, the Conversion Price in effect at the time of the
record date for such dividend or distribution or the effective date of such
subdivision, combination or reclassification shall be proportionately adjusted
so that the holder of any shares of Series A Preferred Stock surrendered for
conversion after such date shall be entitled to receive the number of shares of
Common Stock which he would have owned or been entitled to receive had such
shares of Series A Preferred Stock been converted immediately prior to such
date. Successive adjustment in the Conversion Price shall be made whenever
any event specified above shall occur.
(b) Other Distributions. In case the Corporation shall fix a record
-------------------
date for the making of a distribution to all holders of shares of its Common
Stock (i) of shares of any class other than its Common Stock, (ii) of evidence
of indebtedness of the Corporation or any subsidiary of the Corporation (iii) of
assets, or (iv) of rights or warrants, in each such case all holders of shares
of its Series A Preferred Stock shall receive a distribution (i) of shares of
any class other than its Common Stock, (ii) of evidence of indebtedness of the
Corporation or any subsidiary of the Corporation, (iii) of assets, or (iv) of
rights or warrants, as applicable, equal in amount to the distribution which
they would have received had such
holders converted their shares of Series A Preferred Stock into Common Stock
immediately prior to the distribution.
(c) Consolidation, Merger, Sale, Lease or Conveyance or
---------------------------------------------------
Reclassifications or Reorganizations. In case of any consolidation with or
------------------------------------
merger of the Corporation with or into another corporation or other entity, or
in case of any sale, lease or conveyance to another entity of the assets of the
Corporation as an entirety or substantially as an entirety, or in the event of
any reclassification, recapitalization or other change of the Common Stock in
which the Common Stock is changed into the same or a different number of shares
of any class or classes of stock, then each share of Series A Preferred Stock
shall after the date of such consolidation, merger, sale, lease or conveyance or
such reclassification, reorganization or other change be convertible into the
number of shares of stock or other securities or property (including cash) to
which the Common Stock issuable (at the time of such consolidation, merger,
sale, lease or conveyance or such reclassification, recapitalization or other
change) upon conversion of such share of Series A Preferred Stock would have
been entitled upon such consolidation, merger, sale, lease or conveyance or
such reclassification, recapitalization or other change; and in any case, if
necessary, the provisions set forth herein with respect to the rights and
interests thereafter of the holders of the shares of Series A Preferred Stock
shall be appropriately adjusted so as to be applicable, as nearly as may
reasonably be, to any shares of stock or other securities or property
thereafter deliverable on the conversion of the shares of Series A Preferred
Stock.
(d) Notice to Holders. In the event the Corporation shall propose
-----------------
to take any action of the type described in subsections (a), (b) and (c) of
this Section 6, the Corporation shall give notice to each holder of shares of
Series A Preferred Stock, which notice shall specify the record date, if any,
with respect to any such action and the approximate date on which such action
is to take place. Such notice shall also set forth such facts with respect
thereto as shall be reasonably necessary to indicate the effect of such action
on the Conversion Price and the number, kind or class of shares or other
securities or property which shall be deliverable upon conversion of shares of
Series A Preferred Stock. In the case of any action which would require the
fixing of a record date, such notice shall be given at least 15 days prior to
the date so fixed, and in the case of all other action, such notice shall be
given at least 20 days prior to the taking of such proposed action.
(e) Statement Regarding Adjustments. Upon the occurrence of each
-------------------------------
adjustment or readjustment of the Conversion Price of the Series A Preferred
Stock pursuant to this Section 6, the Corporation shall compute such adjustment
or readjustment in accordance with the terms hereof and prepare and furnish to
each holder a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is
based. Each such statement shall be signed by the Corporation's public
accountants.
(f) Treasury Stock. For the purposes of this Section 6, the sale or
--------------
other disposition of any Common Stock theretofore held in the Corporation's
treasury shall be deemed to be an issuance thereof.
(g) Good Faith. The Corporation shall not, by amendment of its
----------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation,
merger, dissolution, issuance or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
to be observed or performed hereunder by the Corporation, but shall at all times
in good faith assist in the carrying out of all the provisions of this Section 6
and in the taking of all such action as may be necessary or appropriate in order
to protect the conversion rights of the holders of the shares of Series A
Preferred Stock shares against impairment of any kind.
7. No Redemption Rights. The Series A Preferred Stock shall not be
--------------------
subject to redemption, whether at the option of either the Corporation or any
holder of the Series A Preferred Stock.
FURTHER RESOLVED, that the statements contained in the foregoing resolutions
creating and designating the said Series A Convertible issue of Preferred Shares
and fixing the number, powers, preferences and relative, optional,
participating, and other special rights and the qualifications, limitations,
restrictions, and other distinguishing characteristics thereof shall, upon the
effective date of said series, be deemed to be included in and be a part of the
certificate of incorporation of the Corporation pursuant to the provisions of
Sections 104 and 151 of the General Corporation Law of the State of Delaware.
[The remainder of this page is intentionally left blank.]
IN WITNESS WHEREOF, said Corporation has caused this Certificate to be
signed by its Chief Executive Officer, this 15th day of March, 1999. The
signature below shall constitute the affirmation or acknowledgment of the
signatory, under penalties of perjury, that the instrument is the act and deed
of the Corporation and that the facts stated herein are true.
---------------------------
Xxxxxxx X. Xxxxxxxx
Chief Executive Officer
EXHIBIT B
---------
PROMISSORY NOTE
$167,482,000.00 Bellevue, Washington
March 15, 1999
FOR VALUE RECEIVED, the undersigned, VULCAN VENTURES INCORPORATED, a
Washington corporation ("Maker"), hereby promises to pay to the order of GO2NET,
INC., a Delaware corporation ("Holder"), the principal sum of One Hundred Sixty-
Seven Million Four Hundred Eighty-Two Thousand Dollars ($167,482,000.00), plus
interest on the unpaid principal balance from time to time after the date hereof
at the rate of 8% per annum.
The entire outstanding principal amount of this Note and all accrued but
unpaid interest thereon shall be due and payable on March 22, 1999.
All payments hereunder shall be made in lawful money of the United States
of America to Holder at 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxxxx 00000,
or at such other address as shall be designated in writing from time to time by
Holder.
Interest shall be computed on the actual number of days in a year, for the
number of days actually elapsed.
If Maker fails to make any payment of principal or interest when required
under this Note, then Holder may, at its sole option with notice to Maker,
declare immediately due and payable the entire unpaid principal balance of this
Note.
This Note may be prepaid in whole or in part at any time, without penalty
or fee of any kind.
If this Note is not paid when due, Maker promises to pay all reasonable
costs of collection incurred by Holder.
All persons or entities now or at any time liable for payment of the
indebtedness evidenced by this Note, expressly waive presentment for payment,
notice of dishonor, protest, notice of protest and diligence in collection and
consent that the time of the payments or any part of the payments may be
extended by Holder.
This Note shall be governed by and construed under the laws of the State of
Delaware.
"Maker"
VULCAN VENTURES INCORPORATED
By:
---------------------------------
Xxxxxxx X. Xxxxx, Vice President
EXHIBIT C
---------
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into this
15th day of March, 1999, by and among GO2NET, INC., a Delaware corporation (the
"Company"), and VULCAN VENTURES INCORPORATED, a Washington corporation
("Vulcan").
A. Concurrently with the execution of this Agreement, Vulcan is purchasing
167,507 shares of the Company's Series A Convertible Preferred Stock, $.01 par
value (the "Series A Preferred Stock"), pursuant to that certain Stock Purchase
Agreement dated March 15, 1999, between the Company and Vulcan (the "Stock
Purchase Agreement"). The Stock Purchase Agreement also contemplates Vulcan's
acquisition of additional shares of the Series A Preferred Stock and certain
shares of the Company's Common Stock, $.01 par value (the "Common Stock").
B. The parties hereto desire to set forth the respective rights of the
Company and Vulcan with respect to the registration of the shares of the
Company's Common Stock that Vulcan may acquire.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises contained herein, the parties hereto agree as follows:
1. Definitions.
-----------
1.1 As used in this Agreement, the following capitalized terms shall
have the following meanings:
Affiliate: A Person that directly, or indirectly through one or more
---------
intermediaries, controls or is controlled by, or is under common control with,
Vulcan; provided that such control relationship involves direct or indirect
ownership of at least a majority of the outstanding voting interests of the
applicable Person. Without limiting the generality of the foregoing, it is
understood that any entity that is majority owned (directly or indirectly) by a
Person that directly or indirectly owns a majority of the outstanding voting
interests of Vulcan shall be an Affiliate of Vulcan.
Common Stock: All shares now or hereafter authorized of any class of
------------
common stock of the Company, and any other equity securities of the Company,
howsoever designated, which have the right (subject always to prior rights of
any class or series of preferred shares) to participate in the distribution of
the assets and the earnings of the Company without limit as to per share amount.
Exchange Act: The Securities Exchange Act of 1934, as amended from
------------
time to time.
Holders: Vulcan, all of its Affiliates (including without limitation
-------
Xxxx X. Xxxxx), any Person to which Common Stock is transferred by Vulcan and
its Affiliates for purposes of Xxxx X. Xxxxx'x estate planning, and any Person
to which Common Stock is
transferred by Vulcan and its Affiliates that has registration rights pursuant
to Section 10 below.
Majority Holders: Holders of a majority of the Registrable Securities
----------------
held by all Holders at the time of any request for registration pursuant to
Section 2.1(a).
Person: An individual, corporation, partnership, limited liability
------
company, trust, unincorporated organization or a government or any agency or
political subdivision thereof.
Prospectus: The definitive prospectus included in any Registration
----------
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Securities
covered by the Registration Statement and by all other amendments and
supplements to the prospectus, including post-effective amendments and all
material incorporated by reference in such prospectus.
Registrable Securities: Those shares of Common Stock now or hereafter
----------------------
owned of record or beneficially by the Holders (including, without limitation,
any shares of Common Stock acquired by the Holders upon conversion of the Series
A Preferred Stock) plus any shares received from the Company with respect to or
in replacement of such shares by reason of splits, dividends and
recapitalizations and other changes in the Company's capital structure , but
excluding any shares which may be then immediately sold to the public without
registration pursuant to Rule 144 under the Securities Act.
Registration Expenses: See Section 6 hereof.
---------------------
Registration Statement: Any registration statement of the Company
----------------------
filed under the Securities Act which covers Registrable Securities pursuant to
the provisions of this Agreement, including the Prospectus, amendments and
supplements to such Registration Statement, including post-effective amendments,
all exhibits and all material incorporated by reference in such Registration
Statement.
SEC: The Securities and Exchange Commission.
---
Securities Act: The Securities Act of 1933, as amended from time to
--------------
time.
Selling Holders: Holders of Registrable Securities who seek to sell
---------------
such securities under any Registration Statement.
2. Registration Rights.
-------------------
2.1 Registration Upon Request.
-------------------------
(a) At any time beginning 180 days after the date hereof, the
Majority Holders may request by written notice (a "Demand Notice") to the
Company that the Company effect the registration under the Securities Act of a
number of Registrable Securities at least equal to 5% of the shares of the
Common Stock then outstanding, stating the intended method of disposition of
such shares. The registration rights contemplated by this Section 2.1 may be
exercised only three (3) times by the Majority Holders during the
-2-
term of this Agreement; provided, however, the request for registration shall
-------- -------
not be deemed made if either (i) the Registration Statement does not become
effective under the Securities Act (including without limitation if the Selling
Holders withdraw the Registration Statement, provided in case of such withdrawal
the request for registration will be deemed made unless the Selling Holders
reimburse the Company for its reasonable expenses in connection with such
Registration Statement) or a stop order, injunction or other order interferes or
prevents the contemplated method of distribution or (ii) the number of
Registrable Securities requested to be included in the registration is reduced
by 15% or more pursuant to Section 2.1(c). Within five (5) business days after
receipt of a Demand Notice, the Company shall notify all other Holders and offer
to them the opportunity to include their Registrable Securities in such
registration.
(b) Upon receipt of such request, the Company shall, as soon as
practicable, prepare and file a Registration Statement with the SEC on an
appropriate form under the Securities Act with respect to all of the Registrable
Securities that Holders of such securities have requested that the Company
register, and use its best efforts to cause such Registration Statement to
become effective.
(c) In connection with any Registration Statement filed in
response to such request, the Company, at its option, may include a primary
offering of additional shares of Common Stock and/or may include shares to be
sold by other stockholders of the Company; provided, however, that if the
-------- -------
managing underwriter of such offering reasonably determines in good faith and
delivers to the Selling Holders a written opinion that the number of shares
otherwise to be included in the Registration Statement is such that the success
of the underwritten offering would be materially and adversely affected and,
accordingly, the total number of shares to be included in the Registration
Statement is reduced to the amount recommended by such underwriter, then (i)
unless the Registration Statement includes all of the Registrable Securities
designated for sale by all Selling Holders participating in the demand
registration pursuant to Section 2.1(a), the Registration Statement shall not
include any shares to be offered by the Company or sold by other stockholders
(including other Holders exercising incidental registration rights pursuant to
Section 2.2), and (ii) if the Registration Statement does not include all of the
Registrable Securities designated for sale by such Selling Holders, the number
of Registrable Securities included in the Registration Statement shall be
allocated among such Selling Holders pro rata (based on the number of
Registrable Securities held by each).
(d) Notwithstanding the foregoing, upon delivery of written
notice (deliverable no later than 10 days after delivery of the Demand Notice)
to the person(s) who delivered the Demand Notice, the Company shall be entitled
to postpone filing of the Registration Statement, and may withhold efforts to
cause the Registration Statement to become effective, for a reasonable period of
time (not to exceed the shorter of 90 days or the Company's termination of
consideration of a Company Offering (as defined below) or completion of any
Transaction (as defined below), as the case may be) if (i) the Company is
contemplating filing a registration statement in connection with the offering of
its securities (a "Company Offering") within 90 days of delivery of the Demand
Notice, or (ii) the Company determines in good faith that a registration
pursuant to the Demand Notice might interfere with or adversely affect the
negotiations or completion of any transaction that is
-3-
being contemplated by the Company at the time the right to delay is exercised (a
"Transaction").
2.2 Incidental Registration.
-----------------------
(a) If at any time after the date hereof the Company proposes to
register any shares of Common Stock under the Securities Act (except pursuant to
a registration statement filed on Form S-8 or Form S-4 or such other form as
shall be prescribed under the Securities Act for the same purposes, or a
registration statement filed on Form S-3 covering exclusively shares issued in
acquisitions pursuant to Section 4(2) under the Securities Act), or if any other
stockholder is being afforded an opportunity to register shares of Common Stock
(including pursuant to Section 2.1(a)), the Company will at each such time give
written notice to the Holders (other than Holders participating in a demand
registration pursuant to Section 2.1(a)) as provided in Section 11.4 hereof of
its intention to do so. Within twenty (20) days after receipt of such notice,
such Holders may request that the Company register all or part of the
Registrable Securities, stating in such request the intended method of
distribution of such securities (the "Designated Securities"). Upon receipt of
such request, the Company shall use its best efforts to effect the registration
of the Designated Securities by including the Designated Securities in such
Registration Statement.
(b) In the event that securities of the same class as the
Registrable Securities are being registered by the Company in such Registration
Statement and such securities as well as any of the Designated Securities are to
be distributed in an underwritten offering, such Designated Securities shall be
included in such underwritten offering on the same terms and conditions as the
securities being issued by the Company for distribution pursuant to such
underwritten offering; provided, however, that if the managing underwriter of
-------- -------
such underwritten offering reasonably determines in good faith and advises the
parties that the inclusion in such underwritten offering of all the Designated
Securities would materially and adversely affect the success of the underwritten
offering, then the number of Designated Securities to be included in the
Registration Statement shall be reduced to the amount recommended in good faith
by and set forth in the opinion of such managing underwriter; provided, further,
-------- -------
that as to the Selling Holders exercising incidental registration rights
pursuant to this Section 2.2, such reduction shall be pro rata (based on the
number of shares held by each) with respect to the Designated Securities with
other Persons holding contractual incidental or "piggy-back" registration rights
in such underwritten offering.
(c) No registration effected under this Section 2.2 shall
relieve the Company of its obligations to effect registrations at the request of
the Holders under Section 2.1.
3. Hold-Back Agreements.
--------------------
3.1 Restrictions on Public Sale by Holders. Each Selling Holder whose
--------------------------------------
Registrable Securities are covered by a Registration Statement filed pursuant to
Section 2 hereof agrees, if requested by the managing underwriters in an
underwritten offering, not to effect any public sale or distribution of
securities of the Company of the same class as the
-4-
securities included in such Registration Statement during a period, not to
exceed 90 days, beginning on the closing date of each underwritten offering made
pursuant to such Registration Statement, to the extent timely notified in
writing by the managing underwriters.
3.2 Restrictions on Public Sale by the Company and Others. The
-----------------------------------------------------
Company agrees not to effect any public sale or distribution of its Common
Stock, during a period, not to exceed 45 days, beginning on the closing date of
an underwritten offering made pursuant to a Registration Statement filed under
Section 2 hereof to the extent timely notified in writing by the managing
underwriters (except as part of such underwritten registration or pursuant to
registrations on Forms S-4 or S-8 or any successor form to such Forms).
4. Registration Procedures. In connection with the Company's registration
-----------------------
obligations pursuant to Section 2 hereof, the Company will use its best efforts
to effect such registration to permit the sale of such Registrable Securities in
accordance with the intended method or methods of disposition thereof, and
pursuant thereto the Company will:
4.1 Preparation of Registration Statement. Prepare and file with the
-------------------------------------
SEC, within the time periods specified in Section 2, a Registration Statement on
such form as may be appropriate under the Securities Act, and use its best
efforts to cause such registration Statement to become effective.
4.2 Maintaining Effectiveness. Promptly prepare and file with the
-------------------------
SEC such amendments to the Registration Statement as may be necessary to keep
such Registration Statement effective for a period of not more than 180 days
(or, in the case of an underwritten offering, no more than 5 business days), or
such shorter period which will terminate when all Registrable Securities covered
by such Registration Statement have been sold.
4.3 Notification. Immediately notify the Selling Holders and the
------------
managing underwriters, if any, and (if requested by any such Person) confirm
such advice in writing, (i) when a Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to a Registration
Statement or any post-effective amendment, when the same has become effective,
(ii) of the issuance by the SEC of any stop order suspending the effectiveness
of the Registration Statement or the initiation of any proceeding for that
purpose, (iii) of the receipt by the Company of any notification with respect to
the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction or the initiation or threatening of any proceeding for
such purpose, and (iv) of the happening of any event which makes any statement
made in the Registration Statement, the Prospectus or any document incorporated
therein by reference untrue or which requires the making of any changes in the
Registration Statement, the Prospectus, or any document incorporated therein by
reference so that they will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statement therein not misleading.
-5-
4.4 Stop Orders. Make every reasonable effort to obtain the
-----------
withdrawal of any order suspending the effectiveness of a Registration Statement
or the qualification of any Registrable Securities for sale in any jurisdiction
at the earliest possible moment.
4.5 Consultation with Holders. Prior to the filing of any
-------------------------
Registration Statement or amendment thereto, provide copies of such document to
the Selling Holders and to the managing underwriters, if any, make the Company's
representatives and the Company's counsel available for discussion of such
document and make such changes in such document relating to the Selling Holders
prior to the filing thereof as such Selling Holders, counsel for such Selling
Holders, or underwriters may reasonably request.
4.6 Copies of Registration Statements. Furnish to each Selling Holder
---------------------------------
and each managing underwriter, if any, without charge, at least one originally
executed copy of the Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those incorporated
by reference).
4.7 Prospectuses. Deliver to each Selling Holder and the
------------
underwriters, if any, without charge, as many copies of the Prospectus (and each
preliminary prospectus) and any amendment or supplement thereto as such Persons
may reasonably request so long as the Registration Statement to which such
Prospectus or any amendment or supplement thereto relates is effective.
4.8 Blue Sky Laws. Prior to any public offering of Registrable
-------------
Securities, use its best efforts to register or qualify or cooperate with the
Selling Holders, the underwriters, if any, and their respective counsel in
connection with the registration or qualification of such Registrable Securities
for offer and sale under the securities or blue sky laws of such jurisdictions
within the United States as any Selling Holder or underwriter reasonably
requests, and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by the Registration Statement; provided, however, that the Company will
-------- -------
not be required to qualify generally to do business in any jurisdiction where it
is not then so qualified or to take any action which would subject it to general
service of process or taxation in any such jurisdiction where it is not then so
subject.
4.9 Amendments Upon Changes. Upon the occurrence of any event
-----------------------
contemplated by Sections 4.3(ii), (iii) or (iv) or 4.4 above, prepare, as
promptly as practicable, a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document incorporated
therein by reference, or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities being sold thereunder,
such Prospectus will not contain an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein not
misleading.
4.10 Underwriting Agreements. Enter into such customary agreements
-----------------------
(including an underwriting agreement) and take all such other actions reasonably
required in connection therewith in order to expedite or facilitate the
disposition of such Registrable Securities.
-6-
4.11 Compliance with Laws; Section 11(a). Otherwise use its best
-----------------------------------
efforts to comply with all applicable federal and state securities laws
(including without limitation the rules and regulations of the SEC), and make
generally available to its security holders earning statements satisfying the
provisions of Section 11(a) of the Securities Act no later than 45 days after
the end of each 12-month period (or within 90 days after the end of a fiscal
year).
4.12 Opinions. At the request of any Selling Holder, use its best
--------
efforts to furnish on the date that the Registrable Securities are delivered to
that Holder and any underwriter for sale in connection with a registration
pursuant to this Agreement (i) an opinion of the counsel representing the
Company for the purposes of such registration, and (ii) a letter from the
independent certified public accountants of the Company, each dated such date
and in form and substance as is customarily given by counsel and independent
certified public accountants to underwriters in an underwritten public offering,
addressed to any Selling Holders' underwriter and to the Selling Holders.
5. Selling Holders' Obligations.
----------------------------
5.1 Provision of Information. The Company may require each Selling
------------------------
Holder of Registrable Securities as to which any registration is being effected
to furnish to the Company such information regarding the distribution of such
securities by, and such other information relevant to, the Selling Holder for
inclusion in such Registration Statement, as the Company may from time to time
reasonably request in writing.
5.2 Discontinued Use of Prospectus. Each Holder of Registrable
------------------------------
Securities agrees by execution of this Agreement that, upon receipt of any
written notice from the Company of the happening of any event of the kind
described in clauses (ii), (iii) or (iv) of Section 4.3 or Section 4.4 hereof,
such Holder will forthwith discontinue disposition of Registrable Securities
until such Holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 4.9 hereof, or until it is advised in writing
(the "Advice") by the Company that the use of the Prospectus may be resumed, and
has received copies of any additional or supplemental filings which are
incorporated by reference in such Prospectus, and, if so directed by the Company
such Holder will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies then in such Holder's possession, of the
Prospectus covering such Registrable Securities current at the time of receipt
of such notice. In the event the Company shall give any such notice, the time
period mentioned in Section 4.2 hereof shall be extended by the number of days
during the period from and including the date of the giving of such notice to
and including the date when each Selling Holder shall have received the copies
of the supplemental or amended Prospectus contemplated by Section 4.9 hereof or
the Advice.
5.3 Underwriting Agreement. Each Selling Holder participating in an
----------------------
underwritten offering pursuant to Section 2.1 or 2.2 will enter into a customary
underwriting agreement on terms reasonably satisfactory to the managing
underwriter.
-7-
6. Registration Expenses. The Company shall bear all expenses other than
---------------------
Selling Holder Expenses (defined below) incurred in connection with any
Registration Statement, including without limitation all registration and filing
fees, fees with respect to any filings required to be made with the National
Association of Securities Dealers, listing fees relative to any stock exchange
or national market system, fees and expenses of compliance with state securities
or blue sky laws (including reasonable fees and expenses of counsel for the
underwriters in connection therewith), printing expenses, fees and disbursements
of counsel for the Company, and fees and disbursements of all independent public
accountants of the Company. Each Selling Holder shall bear his or its pro rata
share of any Selling Holder Expenses. "Selling Holder Expenses" shall consist
of and be limited to (i) the Selling Holder's legal costs, including the fees
and expenses of any counsel selected by the Selling Holder to represent him or
it, and (ii) the proportionate share of brokerage or underwriting commissions
attributable to the Selling Holder's shares.
7. Indemnification.
---------------
7.1 Indemnification by the Company. The Company agrees to indemnify
------------------------------
and hold harmless each Holder of Registrable Securities, each Person who
controls such Holder (within the meaning of the Securities Act or the Exchange
Act) (a "controlling person"), and each officer, director, employee and agent of
such Holder and each controlling person and each underwriter or selling agent
(the "indemnified parties") from and against all losses, claims, damages,
liabilities and expenses caused by any untrue or alleged untrue statement of a
material fact contained in any Registration Statement, Prospectus or preliminary
prospectus or any amendment or supplement thereto or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as (i)
the Company has demonstrated that the same are caused by or contained in any
information furnished to the Company by such Holder, expressly for use therein,
or (ii) the Company has advised such Holders' Representative in writing of a
Section 4.3(iv) event and the Holder has sold Registrable Securities
notwithstanding receipt of such notice prior to receipt of a supplement or
amended Prospectus pursuant to Section 4.9 herein; provided, however, that the
-------- -------
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, liability or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any preliminary prospectus if (i) such Holder failed to send or deliver a copy
of the Prospectus with or prior to the delivery of written confirmation of the
sale of Registrable Securities and (ii) the Prospectus would have corrected such
untrue statement or omission; provided, further, that the Company shall not be
-------- -------
liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission in the Prospectus, if
such untrue statement or alleged untrue statement, omission or alleged omission
is corrected in an amendment or supplement to the Prospectus and if, having
previously been furnished by or on behalf of the Company with copies of the
Prospectus as so amended or supplemented, such Holder thereafter fails to
deliver such Prospectus as so amended or supplemented, prior to or concurrently
with the sale of a Registrable Security to the Person asserting such loss,
claim, damage, liability or expense who purchased such Registrable Security
which is the subject thereof from such Holder. The indemnity provided herein
shall remain in full force and effect regardless of any investigation made by or
on
-8-
behalf of an indemnified party and shall survive the transfer of Registrable
Securities by the Selling Holder.
7.2 Indemnification by Holders. In connection with the Registration
--------------------------
Statements hereunder, each Selling Holder agrees to indemnify, to the full
extent permitted by law, the Company, and each Person who controls the Company
(within the meaning of the Securities Act or the Exchange Act) and each
director, officer, employee and agent of each such Person from and against any
losses, claims, damages, liabilities and expenses caused by any untrue statement
of a material fact or any omission of a material fact required to be stated in
any Registration Statement or Prospectus or preliminary prospectus or necessary
to make the statements therein not misleading, to the extent, but only to the
extent, that the Company has demonstrated that such untrue statement or omission
is contained in any information or affidavit so furnished by such Holder to the
Company specifically for inclusion in such Registration Statement or Prospectus.
In no event, however, shall the liability of any Selling Holder hereunder be
greater in amount than the dollar amount of the proceeds (net of underwriters'
discounts and commissions) received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation. The
Company shall be obligated to give to, and shall be entitled to receive from,
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution customary indemnities.
7.3 Conduct of Indemnification Proceedings. Any Person entitled to
--------------------------------------
indemnification hereunder will (i) give prompt notice to the indemnifying party
of any claim with respect to which it seeks indemnification and (ii) permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided, however, that any person
-------- -------
entitled to indemnification hereunder shall have the right to employ separate
counsel and to participate in the defense of such claim, but the fees and
expenses of such counsel shall be at the expense of such Person unless (a) the
indemnifying party has agreed to pay such fees or expenses, or (b) the
indemnifying party shall have failed to assume within a reasonable period of
time the defense of such claim and employ counsel reasonably satisfactory to
such person or (c) in the reasonable judgment of any such Person, based upon
written advice of its counsel, a conflict of interest may exist between such
Person and the indemnifying party with respect to such claims or such Person may
have separate or additional defenses (in which case, if the Person notifies the
indemnifying party in writing that such Person elects to employ separate counsel
at the expense of the indemnifying party, the indemnifying party shall not have
the right to assume the defense of such claim on behalf of such Person). If
such defense is not assumed by the indemnifying party, the indemnifying party
will not be subject to any liability for any settlement made without its consent
(but such consent will not be unreasonably withheld). No indemnifying party
will consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation. An indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim will not be obligated to pay the
fees and expenses of more than one principal and one local counsel for all
parties indemnified by such indemnifying party with respect to such claim.
-9-
7.4 Contribution. If the indemnification provided for in Sections
------------
7.1 or 7.2 is unavailable to the indemnified parties in respect of any losses,
claims, damages or liabilities referred to herein, then each such indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (i) as between the Company and the Selling
Holders on the one hand and the underwriters on the other hand, in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Selling Holders on the one hand and the underwriters on the
other hand from the offering of all of the securities sold in the offering, or
if such allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits but also the relative
fault of the Company and the Selling Holders on the one hand and of the
underwriters on the other hand in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations and (ii) as between the Company on the
one hand and each Selling Holder on the other hand, in such proportion as is
appropriate to reflect the relative fault of the Company and of each Selling
Holder in connection with such statements or omissions, as well as any other
relevant equitable considerations. The relative benefits received by the Company
and the Selling Holders on the one hand and the underwriters on the other hand
shall be deemed to be in the same proportion as the total proceeds from the
offering (net of underwriting discounts and commissions but before deducting
expenses) received by the Company and the Selling Holders bear to the total
underwriting discounts and commissions received by the underwriters, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault of the Company and the Selling Holders on the one hand and of the
underwriters on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company and the Selling Holders or by the underwriters. The
relative fault of the Company on the one hand and of each Selling Holder on the
other hand shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by such party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Selling Holders agree that it would not be just and
equitable if contribution pursuant to this Section 7.4 were determined by pro
rata allocation (even if the underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7.4, no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Common Stock underwritten by it and distributed to the public
was offered to the public exceeds the amount of any damages which such
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no Selling Holder
shall be required to
-10-
contribute any amount in excess of the amount by which the total price at which
the securities of such Selling Holder were offered to the public exceeds the
amount of any damages which such Selling Holder has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The Selling
Holders' obligations to contribute pursuant to this Section 7.4 are several in
proportion to the proceeds of the offering received by each Selling Holder bears
to the total proceeds of the offering received by all the Selling Holders and
not joint.
8. Selection of Underwriters. In connection with any request for
-------------------------
registration under Section 2.1 hereof, the Company shall be entitled to select
the managing underwriter if it is also registering shares on its own behalf. The
Selling Holders, however, shall be entitled to select the co-managing
underwriter. If the Registration Statement covers only shares being sold by the
Selling Holders, then the Selling Holders shall be entitled to select the
managing underwriter, subject to approval by the Company, which approval shall
not be unreasonably withheld. In connection with any registration under Section
2.2, the Selling Holders shall have no right to select underwriters.
9. Rule 144 The Company covenants that, after it has filed a registration
--------
pursuant to Section 12 of the Exchange Act or a registration statement under the
Securities Act becomes effective, it will file the reports required to be filed
by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder, and it will take such further action
as may be reasonably and customarily requested by any Holder of Registrable
Securities, all to the extent required from time to time to enable such Holder
to sell Registrable Securities without registration under the Securities Act
within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the SEC. Upon the request of
any Holder of Registrable Securities, the Company will deliver to such Holder a
written statement as to whether it has complied with such information and
requirements.
10. Transfer of Registration Rights. The registration rights granted
-------------------------------
pursuant to this Agreement shall be available to a transferee of any Registrable
Securities if (i) the transferring Holder gives the Company written notice of
such transfer, identifying the name and address of the transferee and the
securities involved; (ii) the transferee agrees in writing to be bound by the
provisions of this Agreement; and (iii) as a result of such transfer, the
transferee holds at least 5% (or, if the "Second Closing" under the Stock
Purchase Agreement shall have been consummated, 10%) of the shares of Common
Stock outstanding as of the date of the transfer.
11. Miscellaneous.
-------------
11.1 Remedies. In the event of a breach by the Company of its
--------
obligations under this Agreement, each Holder of Registrable Securities, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by
-11-
it of any of the provisions of this Agreement and hereby waives the defense in
any action for specific performance that a remedy at law would be adequate.
11.2 No Inconsistent Agreements. The Company will not on or after the
--------------------------
date of this Agreement enter into any agreement with respect to its securities
which is inconsistent with or limits or impairs the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions hereof.
11.3 Adjustments Affecting Registrable Securities. The Company will not
--------------------------------------------
take any action, or permit any change to occur, with respect to the Registrable
Securities which would adversely affect the ability of the Holders of
Registrable Securities to include such Registrable Securities in a registration
undertaken pursuant to this Agreement.
11.4 Notices. All notices or other communications hereunder shall be in
-------
writing and shall be given by (i) personal delivery, (ii) courier or other
delivery service which obtains a receipt evidencing delivery, (iii) registered
or certified mail (postage prepaid and return receipt requested), or (iv)
facsimile or similar electronic device, to such address as may be designated
from time to time by the relevant party, and which shall initially be: (i) in
the case of the Company, 000 Xxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx 00000, Attention:
Xxxxxxx X. Xxxxxxxx, facsimile (000) 000-0000, with a copy to Xxxxxxxx, Xxxxxxx
& Xxxxxxx, A Professional Corporation, 000 Xxxxxxx Xxxxxx, Xxxxxx, XX 00000,
Attn: Xxxxxx X. Xxxx, Esq., facsimile (000) 000-0000; and (ii) in the case of
Vulcan, 000 000xx Xxxxxx X.X., Xxxxx 000, Xxxxxxxx, Xxxxxxxxxx 00000, attention:
Xxxxxxx X. Xxxxx, facsimile (000) 000-0000, with a copy to Irell & Xxxxxxx LLP,
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000, Xxx Xxxxxxx, XX 00000, Attn: Xxxxx X.
Xxxxx, Esq., facsimile (000) 000-0000. All notices and other communications
shall be deemed to have been given (i) if delivered by the United States mail,
three business days after mailing (five business days if delivered to an address
outside of the United States), (ii) if delivered by a courier or other delivery
service, one business day after dispatch (two business days if delivered to an
address outside of the United States), and (iii) if personally delivered or sent
by facsimile or similar electronic device, upon receipt by the recipient or its
agent or employee (which, in the case of a notice sent by facsimile or similar
electronic device, shall be the time and date indicated on the transmission
confirmation receipt). No objection may be made by a party to the manner of
delivery of any notice actually received in writing by an authorized agent of
such party.
11.5 Complete Agreement; Modifications. This Agreement and any documents
---------------------------------
referred to herein or executed contemporaneously herewith constitute the
parties' entire agreement with respect to the subject matter hereof and
supersede all agreements, representations, warranties, statements, promises and
understandings, whether oral or written, with respect to the subject matter
hereof. This Agreement may be amended, altered or modified only by a writing
signed by the Company, the Majority Holders.
11.6 Successors and Assigns. Except as provided herein to the contrary,
----------------------
this Agreement shall be binding upon and inure to the benefit of the parties,
their respective successors and permitted assigns, including without limitation
and without the need for an express assignment, subsequent Holders of
Registrable Securities.
-12-
11.7 Governing Law. All questions with respect to the Agreement and the
-------------
rights and liabilities of the parties shall be governed by the laws of the State
of Delaware, regardless of the choice of laws provisions of Delaware or any
other jurisdiction.
11.8 Attorneys' Fees. Should any litigation be commenced (including any
---------------
proceedings in a bankruptcy court) between the parties hereto or their
representatives concerning any provision of this Agreement or the rights and
duties of any Person or entity hereunder, the party or parties prevailing in
such proceeding shall be entitled, in addition to such other relief as may be
granted, to the reasonable attorneys' fees and court costs incurred by reason of
such litigation.
11.9 Headings. The Article and Section headings in this Agreement are
--------
inserted only as a matter of convenience, and in no way define, limit, extend or
interpret the scope of this Agreement or of any particular Article or Section.
11.10 Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
11.11 Gender. Throughout this Agreement, as the context may require, the
------
masculine gender includes the feminine and neuter; and the neuter gender
includes the masculine and feminine.
11.12 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
[Remainder of this page intentionally left blank.]
-13-
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth hereinabove.
GO2NET, INC.
By:______________________________
Its:______________________________
VULCAN VENTURES INCORPORATED
By:______________________________
Its:______________________________
-14-
EXHIBIT D
[XXXXXXXX, XXXXXXX & XXXXXXX, A PROFESSIONAL CORPORATION LETTERHEAD]
March 15, 1999
Vulcan Ventures Incorporated
000xx Xxxxxx X.X., Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Re: Stock Purchase Agreement dated as of March 15, 1999
---------------------------------------------------
Ladies and Gentlemen:
This opinion is furnished to you in connection with the execution and
delivery by Go2Net, Inc., a Delaware corporation (the "Company") of the Stock
Purchase Agreement dated as of March 15, 1999 (the "Purchase Agreement") by and
between the Company and Vulcan Ventures Incorporated (the "Purchaser"). This
opinion is rendered to you, at the request of the Company, pursuant to Section
2.1 of the Purchase Agreement. Capitalized terms not otherwise defined herein
shall have the meanings set forth in the Purchase Agreement.
We have acted as counsel to the Company in connection with the preparation,
execution and delivery of the Purchase Agreement and the transactions
contemplated therein. In connection with such representation, we have examined
originals, or copies identified to our satisfaction as being true copies, of the
following:
(1) The Purchase Agreement;
(2) The Registration Rights Agreement;
(3) The Certificate of Designation;
(4) The Officer's Certificate attached hereto as Exhibit A;
---------
(5) The By-laws of the Company, as amended to date, certified by its
Secretary;
(6) The Restated Certificate of Incorporation of the Company, as amended
to date, certified by its Secretary;
(7) Resolutions of the directors of the Company certified by its
Secretary, approving
XXXXXXXX, XXXXXXX & XXXXXXX
Vulcan Ventures Incorporated
March 15, 1999
Page 2
the transactions contemplated by the Transaction Documents (as
hereinafter defined) to which it is a party; and
(8) Certificates of the Secretary of State of the State of Delaware
regarding the legal existence and corporate good standing of the
Company dated as of March 15, 1999.
The agreements, documents and instruments referred to in clauses (1)
through (3) above are referred to in this letter as the "Transaction Documents."
We have also examined originals or copies, certified or otherwise
identified to our satisfaction, of such agreements and instruments, corporate
records, certificates of public officials and of officers of the Company,
including the Officer's Certificate attached hereto as Exhibit A, and such other
---------
documents and records and such matters of law as we have deemed necessary as a
basis for the opinions set forth below. As to questions of fact material to
such opinions, we have relied, without independent verification, upon
certificates of public officials and of officers of the Company, copies of which
have been delivered to you, and the factual accuracy and completeness of all the
representations and warranties made by the parties to the Company and the other
documents executed by the Company in connection with the transactions
contemplated by the Transaction Documents. The opinions expressed herein as to
the valid existence and good standing of the Company are as of the date of the
certificate referred to in clause (8) above and are based solely on such
certificate.
As used in this opinion and unless otherwise specified herein, the phrases
"to our knowledge," "known to us" and the like refer to the actual present
knowledge of lawyers currently in this firm who have performed substantive legal
services on behalf of the Company in connection with the transactions referred
to herein, without any independent investigation or file or docket review.
For purposes of this opinion, we have assumed, with your permission and
without independent verification, (a) the genuineness of all signatures, (b) the
legal capacity of all natural persons who have signed documents examined by us,
(c) the authenticity of all documents submitted to us as originals and the
conformity to original documents of all documents submitted to us as certified
or photostatic copies, (d) that the parties to the Transaction Documents other
than the Company have each duly authorized, executed and delivered such
Transaction Documents and all other relevant documents and instruments, and (e)
that each of the parties to the Transaction Documents other than the Company has
all requisite power and authority to enter into and perform its respective
obligations in connection with the transactions described in the Transaction
Documents to which it is a party.
We express no opinion as to the laws of any jurisdiction other than the
federal laws of the
XXXXXXXX, XXXXXXX & XXXXXXX
Vulcan Ventures Incorporated
March 15, 1999
Page 0
Xxxxxx Xxxxxx xx Xxxxxxx, the laws of The Commonwealth of Massachusetts, and the
General Corporation Law of the State of Delaware. Accordingly, to the extent
that any laws of any jurisdiction other than any of the foregoing govern any of
the matters as to which we express an opinion below, we have assumed, with your
permission and without independent investigation, that the law of such
jurisdiction is the same as the substantive state laws of the Commonwealth of
Massachusetts (and we express no opinion as to whether such assumption is
reasonable or correct). We note that the Transaction Documents are governed by
Delaware law and Washington law. We express no opinion regarding the effect of
federal or state antitrust laws, including, without limitation, the Xxxx-Xxxxx-
Xxxxxx Antitrust Improvements Act of 1976, as amended.
Based upon the foregoing and in reliance thereon and subject to the
assumptions, limitations, qualifications and exceptions set forth below, we are
of the opinion that:
1. The Company is duly incorporated and validly existing under the laws
of the State of Delaware.
2. Each of the Transaction Documents to which the Company is a party has
been duly and validly authorized by all necessary corporate action, and has been
duly and validly executed and delivered by the Company.
3. The Certificate of Designation has been duly authorized by all
necessary corporate action and has been filed with the Secretary of State of the
State of Delaware.
4. The Shares have been duly and validly authorized for issuance and sale
to Purchaser by the Company, and the First Issuance Shares have been validly
issued and are outstanding. Assuming delivery of the cash and promissory note
contemplated by the Purchase Agreement concurrently with the execution of the
Purchase Agreement, the First Issuance Shares will be fully paid and non-
assessable and will be entitled to the rights, preferences and privileges set
forth in the Certificate of Designation.
5. The shares of Common Stock issuable upon conversion of the First
Issuance Shares have been duly and validly authorized for issuance and, when
issued upon conversion of Shares in accordance with the Certificate of
Designation, will be validly issued, fully paid and non-assessable, free of any
preemptive rights.
6. Each of the Transaction Documents to which the Company is a party is a
valid and legally binding obligation of the Company, enforceable against the
Company in accordance with its terms.
7. Prior to the execution and delivery of the Purchase Agreement, the
Board of
XXXXXXXX, XXXXXXX & XXXXXXX
Vulcan Ventures Incorporated
March 15, 1999
Page 4
Directors of the Company took all action necessary under the provisions of
Section 203 of the Delaware General Corporation Law and such action constitutes
all action necessary to ensure that the restrictions contained in Section 203 of
the Delaware General Corporation Law will not apply to Purchaser in connection
with or following the consummation of the First Closing, the Second Closing or
the other transactions contemplated by the Transaction Documents.
8. The execution, delivery and, subject to obtaining the consents set
forth in Schedule 3.4 of the Purchase Agreement, performance by the Company of
------------
the Transaction Documents and the consummation of the transaction contemplated
thereby will not, except in each case where the effect of non-compliance could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, (i) violate any provision of law or any regulation customarily
applicable to transactions of the type contemplated by the Purchase Agreement
or, to the extent actually known to such counsel, any order, judgment, or decree
of any court or other agency of government to which the Company is subject, or
(ii) violate any provision of the Restated Certificate of Incorporation or By-
Laws of the Company.
The opinions contained herein are subject to the following conditions and
qualifications:
(A) We have not been requested to render, and with your permission we do
not express, an opinion as to the application of any fraudulent conveyance,
fraudulent transfer, fraudulent obligation or similar laws.
(B) Our opinions in paragraph 6 above, with respect to the validity,
binding effect and enforceability of the agreements or provisions thereof
referred to in such paragraph, are subject to the following: (i) bankruptcy,
insolvency, reorganization, moratorium, receivership and other laws now or
hereafter in effect relating to or affecting the enforcement of creditors'
rights, (ii) the effect of general principles of equity, including, without
limitation, concepts of materiality, reasonableness, good faith and fair
dealing, and the possible unavailability of specific performance or injunctive
relief, whether considered in a proceeding in equity or at law, and to the
discretion of the court before which any such proceeding may be brought and
(iii) public policy considerations or court decisions which may limit the rights
of any party to obtain certain remedies and to indemnification, including
indemnification for tortious or criminal acts or violations of law.
The opinions set forth in this letter are limited to the specific issues
addressed herein and to statutes, regulations, rules, decisions, decrees and
facts existing on the date hereof. In rendering such opinions, we disclaim any
obligation to advise any party to whom this opinion is addressed of any change
in any of these sources of law or of any subsequent legal or factual
developments which might affect any matters addressed or opinions set forth
herein.
The opinions set forth herein are rendered solely to the parties to whom
this letter is
XXXXXXXX, XXXXXXX & XXXXXXX
Vulcan Ventures Incorporated
March 15, 1999
Page 5
addressed, are solely for the benefit of such parties in connection with the
transactions contemplated by the Purchase Agreement, and may not be relied upon
by them for any other purpose. This letter is not to be quoted in whole or in
part or otherwise referred to in any financial statements or other public
releases, nor is it to be filed with any governmental agency or other person or
entity, without the prior written consent of this firm. This letter may not be
delivered to or relied upon by any other person or entity for any purpose
without the prior written consent of this firm.
Very truly yours,
Xxxxxxxx, Xxxxxxx & Xxxxxxx
A Professional Corporation
EXHIBIT E
---------
[IRELL & XXXXXXX LLP XXXXXXXXXX]
Xxxxx 00, 0000
Xx0Xxx, Inc.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000
Re: Stock Purchase Agreement, dated March 15, 1999, between Go2Net, Inc.
--------------------------------------------------------------------
and Vulcan Ventures Incorporated (the "Agreement")
--------------------------------------------------
Gentlemen:
We have acted as legal counsel to Vulcan Ventures Incorporated, a
Washington corporation (the "Purchaser"), in connection with the transactions
contemplated by the Agreement, and we are rendering this opinion pursuant to the
Agreement.
For the purposes of rendering this opinion, in addition to the Agreement,
we have reviewed the following documents, each dated the date hereof:
(a) Registration Rights Agreement between Purchaser and Go2Net, Inc. (the
"Company");
(b) Promissory Note in the principal amount of $167,482,000, executed by
Purchaser in the Company's favor (the "Note");
(c) Stock Purchase and Voting Agreement between Purchaser and Xxxxxxx
Xxxxxxxx;
(d) Stock Purchase and Voting Agreement between Purchaser and Xxxx
Xxxxxxx;
(e) Stock Purchase and Voting Agreement between Purchaser and Xxxxxxx
Xxxxxx;
(f) Stock Purchase and Voting Agreement between Purchaser and Xxxxxx
Xxxxx;
(g) Stock Purchase and Voting Agreement between Purchaser and Xxxxxx
Xxxxxxxxxxx; and
(h) Stock Purchase and Voting Agreement between Purchaser and Xxxx
Xxxxxxx.
For purposes of this opinion, the Agreement and the documents listed in
clauses (a) through (h) above shall hereinafter be referred to collectively as
the "Transaction Documents" and each as a "Transaction Document."
Go2Net, Inc.
March 15, 1999
Page 2
We have reviewed such matters of fact and law and documents as we have
deemed necessary or relevant as a basis for this opinion. In our review, we
have assumed, without investigation, the legal capacity of all natural persons
signing documents in their respective individual capacities, the genuineness of
all signatures not witnessed by us, the authenticity of all documents submitted
to us as originals, the lack of any undisclosed modifications, waivers or
amendments to any agreements reviewed by us, the conformity to original
documents of all documents submitted to us as certified, photostatic or
telecopied copies, and the authenticity of the originals of such copies. In
addition, we have obtained and relied upon such certificates and assurances from
public officials as we have deemed necessary. We have also assumed that the
execution, delivery and performance of any agreements or consents are within the
powers of each signatory (other than Purchaser) and have been duly authorized
and validly carried out by each such signatory. Furthermore, we have examined,
relied upon and assumed to be complete and correct the representations and
warranties contained in the Transaction Documents as to matters of fact (other
than facts constituting conclusions of law).
Based upon and subject to the foregoing, and subject to the qualifications
set forth herein, we are of the opinion that:
1. Purchaser is a corporation validly existing and in good standing under
the laws of the State of Washington.
2. The Transaction Documents have been duly authorized, executed and
delivered by Purchaser.
3. Assuming due authorization, execution and delivery of the Transaction
Documents by the other parties thereto, the Transaction Documents (including,
without limitation, the Note) constitute the legal, valid and binding
obligations of Purchaser, enforceable against Purchaser in accordance with their
respective terms.
4. Neither the execution and delivery of the Transaction Documents, nor
the consummation of the transactions contemplated thereby, violates (i) any
provision of the articles of incorporation or bylaws of Purchaser, or (ii) any
federal or California statute, ordinance or regulation applicable to Purchaser
that, in our experience, is normally applicable to Purchaser in transactions of
the nature contemplated by the Transaction Documents.
The opinions expressed above are subject to and limited by the following
qualifications:
Go2Net, Inc.
March 15, 1999
Page 3
(a) the effect of bankruptcy, insolvency, reorganization, moratorium and
other similar laws and legal and equitable principles relating to, limiting or
affecting the enforcement of creditors' rights generally;
(b) the effect of general principles of equity including, without
limitation, concepts of materiality, reasonableness, good faith and fair dealing
and the possible unavailability of specific performance or injunctive relief
regardless of whether considered in a proceeding in equity or at law;
(c) the unenforceability under certain circumstances of provisions waiving
vaguely or broadly stated rights or unknown future rights and of provisions
stating that rights or remedies are not exclusive, that every right or remedy is
cumulative and may be exercised in addition to or with any other right or
remedy, or that the election of some particular remedy or remedies does not
preclude recourse to one or more others;
(d) the effect of (i) any federal or state securities laws, or (ii)
federal or state antitrust laws, including, without limitation, the Xxxx-Xxxxx-
Xxxxxx Antitrust Improvements Act of 1976, as amended; and
(e) we express no opinion as to the effect on rights to indemnification and
contribution to the extent such rights may be limited by federal or state
securities laws or public policy relating thereto.
Our opinions expressed herein are limited to the laws of the State of
California and the federal law of the United States, in each case to the extent
not specifically excluded herein and as in effect on the date hereof, and we do
not express herein any opinion as to any other laws. In this regard, we note
that the Transaction Documents and certain other agreements and instruments to
be executed and delivered by Purchaser purport to be governed by the laws of the
State of Delaware or the State of Washington. For purposes of this opinion, we
have assumed, without investigation, that the governing law of the Transaction
Documents and such other agreements and instruments is in all material respects
identical to the laws of the State of California although the results might
differ from those that would be obtained by applying Delaware or Washington law
or the law of any jurisdiction other than California, and we express no opinion
as to the similarity of Delaware, Washington and California law or the law of
any other jurisdiction. No opinion is expressed as to whether a court would
recognize and enforce the provisions of the Transaction Documents and such other
agreements and instruments providing that the laws of a particular state shall
govern.
Go2Net, Inc.
March 15, 1999
Page 4
This opinion is solely for your benefit pursuant to the Agreement and is
not to be made available to or relied upon by any other person or entity or by
you for any other purpose or in any other context without our express prior
written consent.
Very truly yours,
IRELL & XXXXXXX LLP
