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EXHIBIT 2
AGREEMENT PROVIDING RIGHT OF
LAST REFUSAL
This Agreement is entered into effective as of December 4, 1997, by and between
XXXXXX GREETINGS, INC. ("Xxxxxx"), THE VIRTUAL MALL INC., a California
corporation doing business as "Greet Street" (the "Corporation") and the other
persons and entities set forth on the signature page hereof (the
"Shareholders"). (Xxxxxx, the Corporation and the Shareholders are collectively
referred to herein as the "Parties").
All capitalized terms utilized within this Agreement shall have the same
definition as in the Series D Preferred Stock Purchase Agreement between Xxxxxx
and the Corporation dated even herewith (including Exhibits attached thereto,
the "Purchase Agreement").
For and in consideration of Xxxxxx and the Corporation entering into the
Purchase Agreement and the Content Agreement (as defined below), the Parties
hereby agree as follows:
1. LAST REFUSAL; EFFECTIVENESS. Subject to Section 5 below, Xxxxxx shall have a
right of last refusal to match the terms of any offer (a "Purchase Offer") made
by either Hallmark or American Greetings (or one of their Affiliates, as those
terms are defined in the Purchase Agreement) in connection with a sale of any
equity interest in the Corporation to such entity or the issuance of any debt
instrument to such entity (a "Proposed Sale Transaction"). Notwithstanding
anything contained herein, this Agreement shall become effective only in the
event that (i) the Corporation issues and sells the Preferred Shares to Xxxxxx
pursuant to the terms of the Purchase Agreement, and (ii) the Corporation and
Xxxxxx each execute and deliver to the other that certain Content Provider and
Distribution Agreement dated even herewith (the "Content Agreement").
2. NOTICE OF PROPOSED SALE TRANSACTION.
(a) Prior to entering into any binding commitment with Hallmark or American
Greetings, or one of their Affiliates, (the "Proposed Purchaser" in connection
with a Proposed Sale Transaction, the Corporation and/or the Shareholders who
would be party to such Proposed Sale Transaction shall deliver to Xxxxxx written
notice (a "Sale Notice") setting forth the name of the Proposed Purchaser and
the specific terms of the Purchase Offer (including, without limitation, the
offering price and the proposed terms of payments). A copy of any written
Purchase Offer or any agreement executed in connection with such Proposed Sale
Transaction shall be attached to such Sale Notice, provided that Xxxxxx shall,
if requested, agree in writing to maintain the confidentiality thereof pursuant
to the terms of a non-disclosure agreement in a form substantially similar to
the Mutual Nondisclosure Agreement dated October 20, 1997 between Xxxxxx and the
Corporation, provided that Xxxxxx may disclose the terms of the Purchase Offer
or Proposed Sale Transaction to its employees, attorneys, or advisers on a
"need-to-know" basis for the purposes of evaluating and responding to the
Purchase Offer or Proposed Sale Transaction.
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(b) Xxxxxx shall have the right to elect to cause the Corporation and/or
the relevant Shareholders to enter into a binding transaction with Xxxxxx on the
terms of the Proposed Sale Transaction specified in such Purchase Offer by
giving written notice of its binding election to the Corporation and/or the
relevant Shareholders within 14 days from the date Xxxxxx received the Sale
Notice pursuant to Section 2(a) above (the "Election Period").
(c) If the terms of a proposed Sale Transaction include consideration to be
paid in whole or in part in capital stock of the proposed purchaser, Xxxxxx
shall have the right to substitute therefor substantially equivalent voting
stock of Xxxxxx with the same "fair market value," provided that if the Proposed
Purchaser would be required by the terms of the Proposed Sale Transaction to
file a registration statement with the Securities and Exchange Commission on
Form S-4 or otherwise, then Xxxxxx must register the shares of its voting stock
that it elects to deliver as part of the consideration to be paid to the
Corporation and/or the relevant Shareholders. For purposes of this Section 2(c),
the "fair market value" of the relevant capital stock shall be an amount agreed
upon between Xxxxxx and the Corporation (or, if the Proposed Sale Transaction is
with the Shareholders rather than the Corporation, then between Xxxxxx and the
Shareholders holding a majority of the shares of capital stock of the
Corporation held by the Shareholders, referred to as the "Majority
Shareholders"). If the relevant Parties fail to agree, then "fair market value"
shall be determined by an investment bank firm chosen and in the manner as
follows: Xxxxxx shall choose one, the Corporation (or the Majority Shareholders,
as applicable) shall choose one, and those two investment banking firms shall
choose a third, which third firm shall then determine "fair market value," but
such determination shall be strictly limited to selecting from either Xxxxxx'x
or the Corporation's (or the Majority Shareholders', as applicable) written
proposal as to the "fair market value" of the relevant capital stock, which
shall be provided to the third firm, and the other Party, within five (5)
business days of the selection of the third firm, whichever proposal the third
firm believes most closely approximates its own determination of "fair market
value." Such determination shall be final and binding. The fees and expenses of
the third investment banking firm shall be paid equally by Xxxxxx and the
Corporation (or the Majority Shareholders, as applicable).
3. ELECTION TO MATCH PURCHASE OFFER. If Xxxxxx elects to match the terms of any
such Purchase Offer as provided in Section 2 above, then the Corporation and/or
such Shareholders shall consummate the Proposed Sale Transaction with Xxxxxx
pursuant to the terms of the Purchase Offer. Xxxxxx'x notice of said election
shall specify a date for the closing of the Transaction, which shall not be more
than 60 days after the date Xxxxxx gave such notice and shall take place at such
place as Xxxxxx specifies in its notice.
4. NO ELECTION TO MATCH PURCHASE OFFER. If Xxxxxx elects not to match the terms
of any such Purchase Offer as provided in Section 2 above, or the Election
Period expires without Xxxxxx making such election, then the Corporation and/or
the relevant Shareholders, as the case may be, may consummate the Proposed Sale
Transaction with the Proposed Purchaser pursuant to the terms of the Purchase
Offer, within a period of 120 days after the expiration of the Election Period.
5. TERMINATION. This Agreement shall terminate, and be of not further force or
effect, immediately (and without notice) upon the earliest of the following
events to occur: (a) if at any time prior to the effective date of the first
registration statement filed by the Corporation
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covering an underwritten offering of any of its securities to the general public
(an "Initial Public Offering"), Xxxxxx no longer holds, or has the right to
convert Preferred Shares or Series E Shares into, at least 15% of the
Fully-Diluted Outstanding Stock of the Corporation, other than Excluded Shares
(as those terms are defined in the Corporation's Restated Articles) issued after
the effective date of this Agreement; (b) if at any time during the one-year
period following an Initial Public Offering, Xxxxxx has sold or otherwise
disposed of, in the aggregate during such period, more than ten percent (10%) of
the number of shares of capital stock of the Corporation held by Xxxxxx
(determined on an as-converted-into common stock basis) as of the date of the
Initial Public Offering ("Xxxxxx'x IPO Shareholdings"); (c) if at any time after
the one-year period following an Initial Public Offering, Xxxxxx has sold or
otherwise disposed of, in the aggregate at any time since the Initial Public
Offering, more than twenty-five percent (25%) of Xxxxxx'x IPO Shareholdings; (d)
if Xxxxxx is in material breach or material violations of its obligations set
forth in the Content Agreement, has had its "Anchor Tenancy" revoked in
accordance with Section 9.2 of the Content Agreement, or fails to renew the
Content Agreement at any time after the initial term or any renewal period a
provided in Section 11.1 thereof, unless the Corporation rejected a firm written
offer made by Xxxxxx to renew the Content Agreement, which offer otherwise fully
satisfied the requirements for renewal set forth in Section 11.1(b) thereof; or
(e) upon the consummation of a Proposed Sale Transaction pursuant to Section 4
above which results in an effective change of control of the Corporation.
6. GENERAL.
(a) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, United States of America,
as applied to agreements signed and performed entirely in California.
(b) NOTICE. Any notice required to be given by either Party to the other
shall be deemed given: (i) five (5) business days after being deposited in the
postal system in registered or certified form with return receipt requested,
postage paid, addressed to the notified Party at the address for notices set
forth in the Purchase Agreement for Xxxxxx or the Corporation, or in the case of
a Shareholder, the last address provided to the Corporation, but only if the
Party giving notice receives a return receipt within 10 business days after the
notice is mailed; (ii) on the next business day if dispatched to the notified
Party at the address specified in clause (i) above via a courier service that
guarantees next business day delivery, but only if the records of such courier
service confirm that such delivery was in fact made the next business day; or
(iii) immediately upon dispatch if dispatched by facsimile transmission to the
notified Party at the facsimile telephone number set forth in the Purchase
Agreement for Xxxxxx or the Corporation, or in the case of a Shareholder, the
last facsimile telephone number provided to the Corporation, and the dispatching
Party receives an electronic confirmation of receipt, and the dispatching Party
also promptly gives notice as provided in clause (i) or (ii) of this Section
7(b). Xxxxxx may change the postal address or facsimile telephone number to
which notice is sent by written notice to the Corporation and the Shareholders;
the Corporation may change the postal address or facsimile telephone number to
which notice is sent by written notice to Xxxxxx; any Shareholder may change the
postal address or facsimile telephone number to which notice is sent by written
notice to the Corporation, and the Corporation shall promptly forward such
change to Xxxxxx.
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(c) BINDING OBLIGATION. This Agreement is binding upon the Parties, their
representatives, successors and assigns (including, for any Party who is an
individual, their heirs, administrators and executors). This Agreement is not
assignable by Xxxxxx or the Corporation without the prior written consent of the
other (which consent may be withheld in such party's sole and absolute
discretion), and may only be assigned by a Shareholder in connection with the
sale or transfer of his or its shares of capital stock in the Corporation and
only then if the transferee of such shares agrees in a writing delivered to
Xxxxxx and the Corporation to be bound by the terms of this Agreement as a
"Shareholder" hereunder.
(d) SEVERABILITY. If any provision of this Agreement is determined by a
court of competent jurisdiction to be invalid or unenforceable, such
determination shall not affect the validity or enforceability of any other part
or provision of this Agreement unless as a result the rights of either party are
materially diminished or the obligations and burdens of either party are
materially increased so as to be unjust or inequitable.
(e) WAIVER. No waiver by any party of any breach of any provision hereof
shall constitute a waiver of any other breach of that or any other provision
hereof.
(f) ENTIRE AGREEMENT; HEADINGS. This Agreement, as well as the Purchase
Agreement (including all of the agreements referred to therein to which the
Corporation and Xxxxxx are both parties) constitutes the entire agreement
between Xxxxxx and the Corporation, and this Agreement constitutes the entire
agreement between Xxxxxx and each Shareholder, with respect to the subject
Agreement (including all of the agreements referred to therein to which the
Corporation and Xxxxxx are both parties) constitutes the entire agreement
between Xxxxxx and the Corporation, and this Agreement constitutes the entire
agreement between Xxxxxx and each Shareholder, with respect to the subject
matter hereof and supersedes all previous proposals, both oral and written,
negotiations, representations, commitments, writings and other communications
between the parties. This Agreement may not be modified except by an instrument
in writing signed by a duly authorized representative of each of the Parties.
The section headings and captions in this Agreement are for convenience of
reference only and shall not be considered in interpreting this Agreement.
(g) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first set forth above.
XXXXXX GREETINGS, INC. THE VIRTUAL MALL, INC.
By: /s/ Xxx Xxxxxx By: /s/ Xxxxxxxx X. Xxxxxxxx
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Title: Chief Financial Officer Title: CEO
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SHAREHOLDERS:
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ALTOS VENTURES I, L.P.
By: Altos Management Partners I, L.P.,
Its General Partner
By /s/ [signature]
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Title: General Partner
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ROSEWOOD STONE GROUP, INC. BAYVIEW INVESTORS, LTD.
By: Xxxxxxxxx Xxxxxxxx & Company
Private Equity Group, L.L.C.
By: /s/ [signature] By /s/ [signature]
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Title: President Title: Managing Director
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PORTAL PUBLICATIONS, LTD. NEW WORLD EQUITIES
By: /s/ Xxxxxxx X. Xxxxxxx By: /s/ [signature]
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Title: VP-CFO Title: Jr. Managing Partner
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E-COMMERCE PARTNERS, L.P.
By /s/ [signature]
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Title: General Partner
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/s/ Xxx Xxxxxxxxx
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XXXX XXXXX XXX XXXXXXXXX
an individual an individual
/s/ Xxxxxx Grestoni
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XXXXXX GRESTONI
an individual
/s/ Xxxxxxx Xxxxxxx /s/ Xxxxxxxx Xxxxxxxx
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XXXXXXX XXXXXXX XXXXXXXX XXXXXXXX
an individual an individual
