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EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
BETWEEN
XXX.XXX, INC.
AND
VULCAN VENTURES INCORPORATED
June 8, 2000
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT is made as of June 8, 2000 between
XXX.XXX, 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 27,437 shares of the
Company's Series A Convertible Preferred Stock, $.001 par value (the "SERIES A
PREFERRED STOCK"), on the terms and conditions hereinafter provided; and
WHEREAS, as an inducement to Purchaser to enter into this Agreement, the
Company is willing to issue to Purchaser the Vulcan Warrant (as defined below).
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained in this Agreement, the Company and Purchaser agree as
follows:
1. Purchase and Sale of Shares. On the terms and subject to the
conditions set forth herein, the Company agrees to issue and sell to Purchaser,
and Purchaser agrees to purchase from the Company, (i) 27,437 shares (the
"SHARES") of Series A Preferred Stock and (ii) a warrant covering 850,000 shares
of Common Stock, exercisable at any time prior to the fifth anniversary of the
date of this Agreement at a purchase price of $7.00 per share, pursuant to the
terms of the warrant attached hereto as Exhibit A (the "VULCAN WARRANT"), for an
aggregate purchase price of $27,437,000. 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 B (the "CERTIFICATE OF DESIGNATION").
The Shares shall be shares of Series A Preferred Stock designated "Series A
Convertible Preferred Stock."
2. Closing; Deliveries. The closing of the purchase and sale of the
Shares (the "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 Closing, the Company
shall deliver to Purchaser (a) one or more stock certificates evidencing the
Shares registered in the name of Purchaser and (b) the Vulcan Warrant and
Purchaser shall pay to the Company the purchase price for the Shares and the
Vulcan Warrant of $27,437,000 by check or wire transfer. At the Closing, (i) the
parties will also duly execute and deliver the Registration Rights Agreement in
the form of Exhibit C hereto (the "REGISTRATION RIGHTS AGREEMENT"); (ii)
Purchaser shall receive an opinion from Xxxxxx Godward LLP as to certain
matters, substantially in the form of Exhibit D hereto; and (iii) the Company
shall receive an opinion from I&M as to certain matters, substantially in the
form of Exhibit E hereto. The date on which the Closing occurs is hereinafter
referred to as the "CLOSING DATE."
3. Representations and Warranties of the Company. The Company hereby
represents and warrants to Purchaser as follows (it being agreed that for
purposes of the representations and warranties set forth in this Section 3, the
term the "COMPANY" shall be deemed to refer to the Company and each of its
subsidiaries on a consolidated basis, except where the context reasonably
indicates otherwise):
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3.1 Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of its
state or other jurisdiction 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 Vulcan Warrant, (c) the Registration Rights Agreement, and
(d) 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").
3.2 Authorized Capital Stock. As of the date hereof, the
authorized capital stock of the Company consists of (a) 35,000,000 shares of
Common Stock, $.001 par value per share, and (b) 5,000,000 shares of Preferred
Stock, $.001 par value per share, 27,437 shares of which are designated as
Series A Convertible Preferred Stock. As of May 30, 2000, there were 17,234,325
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 3,446,740 shares of
Common Stock. As of May 17, 2000, the Company had reserved and available for
stock options to be granted and issued under its 1997 Equity Incentive Plan (the
"1997 EQUITY INCENTIVE PLAN") and its 1999 Equity Incentive Plan (the "1999
EQUITY INCENTIVE PLAN" and together with the 1997 Equity Incentive Plan, the
"COMPANY EQUITY INCENTIVE PLANS"), 1,661,219 (500,000 of which are subject to
stockholder approval) and 275,517 shares of Common Stock, respectively, and
235,563 shares of Common Stock under its 1997 Employee Stock Purchase Plan. As
of May 17, 2000, the Company had reserved and available for stock options to be
granted and issued under its 1997 Non-Employee Director Stock Option Plan (the
"DIRECTOR OPTION PLAN") 208,653 (100,000 of which are subject to stockholder
approval) shares of Common Stock. The Company has reserved for issuance 165,736
shares of Common Stock issuable upon the exercise of the warrants set forth on
Schedule 3.2 hereto (the "EXISTING WARRANTS") and 850,000 shares of Common Stock
issuable upon the exercise of the Vulcan Warrant (the "WARRANT SHARES"). Other
than as set forth on Schedule 3.2 hereof, as of May 17, 2000, 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 (a) options to purchase
an aggregate of 3,288,845, 1,686,356 and 141,347 shares of Common Stock
outstanding under the 1997 Equity Incentive Plan, the 1999 Equity Incentive Plan
and the Director Option Plan, respectively, and (b) an aggregate of 165,736
shares issuable upon the exercise of the Existing Warrants.
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3.3 Subsidiaries. Except as set forth in Schedule 3.3, the
Company (a) owns no equity securities of any other corporation, limited
partnership or similar entity, and (b) is not a participant in any joint
venture, partnership or similar arrangement.
3.4 Due Execution, Delivery and Performance of the Agreement; No
Conflict.
3.4.1 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 Closing the other Transaction Documents will be, duly executed
and delivered by the Company and constitutes, or when executed and delivered at
the Closing will constitute, valid and binding obligations of the Company,
enforceable against it in accordance with their respective terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws and equitable principles relating to or limiting creditors' rights
generally.
3.4.2 The execution, delivery and, subject to obtaining
the consents set forth in Schedule 3.4, performance by the Company of the
Transaction Documents and the consummation of the transactions contemplated
thereby will not, except in each case where the effect of non-compliance could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, (i) modify, breach or constitute grounds for the occurrence or
declaration of a default under or give rise to a right to terminate any
agreement, license, indenture, undertaking or other instrument to which the
Company is a party or by which it or any of its assets may be bound or affected,
(ii) violate any provision of law or any regulation or any order, judgment, or
decree of any court or other agency of government to which the Company is
subject, (iii) violate any provision of the Amended and Restated Certificate of
Incorporation (the "CERTIFICATE OF INCORPORATION") or Bylaws 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 Strategic Investment Committee
of the Board, by a unanimous written consent dated June 2, 2000, 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 and the
Vulcan Warrant pursuant to this Agreement) and such approval constitutes
approval of such transactions by the Board under the provisions of Section 203
of the Delaware General Corporation Law, as amended (the "DGCL"), and
constitutes all actions necessary to ensure that the restrictions contained in
Section 203 of the DGCL 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.
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3.6 Issuance, Sale and Delivery of the Shares; Warrant Shares and
Common Stock.
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 created by or through the Company, 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 Stock and the Warrant Shares that are
issuable upon exercise of the Vulcan Warrant against payment therefore, when so
issued, will be validly issued, fully paid and nonassessable, and will be free
of any Liens created by or through the Company, other than restrictions on
transfer under state and/or federal securities laws. Issuance of such shares of
Common Stock is not subject to any preemptive rights or rights of first refusal
that have not been properly waived or complied with.
3.7 Governmental Consent. No consent, approval or authorization
of, or declaration or filing with, any governmental authority on the part of the
Company is required for the execution and delivery of the Transaction Documents
or the sale of the Shares and the Vulcan Warrant to Purchaser pursuant to this
Agreement, except for the filing of the Certificate of Designation, with the
Secretary of State of the State of Delaware; to the extent applicable, the
required filings 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; any notice of sale required to be filed with the
Securities and Exchange Commission (the "SEC") under Regulation D of the
Securities Act of 1933, as amended (the "SECURITIES ACT"); such post-closing
filings as may be required under applicable state securities laws; and any
notices required to be filed with The Nasdaq Stock Market.
3.8 SEC Reports; Financial Statements.
3.8.1 The Company has filed all forms, reports and
documents required to be filed by it with 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 and the Exchange Act of 1934, as
amended (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.
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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 To the 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 March 31, 2000 contained in the Financial Statements
and in the footnotes thereto (the "UNAUDITED BALANCE SHEET"), and (b)
liabilities or obligations incurred since March 31, 2000 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 Absence of Litigation. Except as set forth on Schedule 3.9
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 3.9 hereto, neither the Company nor any of its properties or
assets is subject to any order, writ, judgment, injunction, decree,
determination or award that individually or in the aggregate could reasonably be
expected to have a Material Adverse Effect on the Company.
3.10 Absence of Certain Changes or Events. Except as disclosed in
the Company's Annual Report on Form 10-K for the fiscal year ending December 31,
1999, the Company's Quarterly Report on Form 10-Q for the period ending March
31, 2000, or in Schedule 3.10, or as specifically contemplated by this
Agreement, since December 31, 1999 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, 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
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Company (including, without limitation, any borrowing or sale of assets) except
in the ordinary course of business consistent with past practice.
3.11 Compliance with Laws; Permits. The Company has at all times
complied, and it is currently in compliance, with all applicable statutes,
rules, regulations and orders of the United States or any state or foreign
country 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.
3.12 Material Contracts. Each of the contracts required to be
filed as material contracts as exhibits to the SEC Reports and those contracts
(the "EXISTING SEC CONTRACTS") which have been entered into and will be required
to be filed as exhibits to SEC Reports upon the filing deadline for such SEC
Reports (the "MATERIAL CONTRACTS") (including all amendments, modifications and
waivers) (a) has been filed with the SEC or are set forth on Schedule 3.12(a),
(b) has been duly authorized, executed and delivered by the parties thereto, (c)
except as set forth in Schedule 3.12(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.
3.13 Intellectual Property Rights.
3.13.1 The Company owns or has licenses to use registered
copyrights, copyright registrations 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.
3.13.2 To the Company's knowledge, the operation of the
business of the Company does not, and except as identified on Schedule 3.13, the
Company has not received any notice from any person or entity within the past
three (3) years claiming that the business of the Company does infringe or
misappropriate the Intellectual Property Rights of any person or entity, violate
any export control law or regulation, violate the rights of any person or entity
(including rights to privacy or publicity), or constitute unfair competition or
trade practices under any applicable laws.
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3.13.3 To the Company's knowledge, no person or entity is
infringing or misappropriating any Intellectual Property Rights owned or
licensed by the Company or engaging in other conduct other than in the ordinary
course of business that may diminish or undermine such Intellectual Property
Rights, such as the disclosure of Company confidential information, except for
any such infringements that, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
3.13.4 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.
3.14 Certain Matters Regarding Employees. To the Company's
knowledge, 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 officer or
key employee.
3.15 Tax Matters.
3.15.1 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 (as defined in Section 7.3)
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 December 31, 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 3.15, (ii) as reflected on the audited balance
sheet of the Company as of December 31, 1999 contained in the Financial
Statements and in the footnotes thereto (the "AUDITED BALANCE SHEET") or the
Unaudited Balance Sheet, or (iii) federal, state and foreign income taxes
payable on the Company's income after March 31, 2000. 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.
3.15.2 Except as set forth in Schedule 3.15, to the
Company's knowledge, none of the Tax Returns of the Company has been or is
currently being audited or examined by the Internal Revenue Service (the "IRS")
or any other Governmental Body (as defined in Section 7.3). Except to the extent
reserved for in the Unaudited Balance Sheet, no material issue of which the
Company has received notice has been raised by a
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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.
3.15.3 There are no outstanding agreements or waivers
extending the statutory period of limitation applicable to any Tax Returns
required to be filed by, or which include or are treated as including, the
Company.
3.15.4 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.
3.15.5 All material elections with respect to Taxes
affecting the Company as of the date hereof are set forth in Schedule 3.15. No
consent to the application of section 341(f)(2) of the Code (as defined below)
has been filed with respect to any property or assets held, acquired or to be
acquired by the Company.
3.15.6 There are no tax sharing agreements or similar
arrangements with respect to or involving the Company.
3.15.7 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.
3.15.8 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").
3.15.9 "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. Section 1.1502-6 or comparable
provisions of any Governmental Body in respect of a consolidated or combined
return.
3.15.10 "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.
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3.16 Title to Properties; Liens and Encumbrances. Except as
listed in Schedule 3.16, the Company has good and marketable title to all of its
material owned properties and assets and such properties and assets are not
subject to any Liens, except for (a) immaterial Liens which arise in the
ordinary course of business (including without limitation Liens from current
taxes not yet due and payable), and (b) Liens which individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect on
the Company or its material properties. All material leases, subleases,
conditional sale contracts and other agreements pursuant to which the Company
leases or otherwise uses real or personal property (collectively, "LEASES") are
in good standing and are valid and effective in accordance with their respective
terms. The Company has performed its obligations in all material respects to
date under all such Leases.
3.17 Employee Benefit Plans. Except as listed in Schedule 3.17 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
qualified deferred compensation, bonuses, stock options, stock appreciation or
other forms of incentive compensation or post-retirement insurance, compensation
or benefits (a "PLAN"). Except as listed in Schedule 3.17, neither the Company
nor 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 compliance with
ERISA, except where the failure to so comply would not reasonably be expected to
have a Material Adverse Effect. None of the Plans provides or provided
post-retirement medical or health benefits, except as required by the health
care continuation requirements of the Consolidated Omnibus Reconciliation Act of
1985, as amended, or other applicable legal requirement and except for coverage
the full cost of which is paid by the participant or beneficiary. 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 would not reasonably be expected to have a Material Adverse
Effect and except as set forth on Schedule 3.17, the Company has not announced
or otherwise made any commitment to create any new Plan or amend any existing
Plan, and neither the Company nor any ERISA Affiliate has announced or otherwise
made any commitment to create or begin contributing to any Plan or Pension Plan
or amend any existing Plan or Pension Plan, except for amendments to existing
Plans and Pension Plans that are required by applicable law (including
provisions of the Code relating to the intended tax treatment of any such Plan
or 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
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Section 4980D(a) of the Code, has complied in all material respects. Each Plan
intended to meet the requirements for tax-favored treatment under Part III of
Subchapter B of Chapter 1 of the Code meets such requirements. Except as
described in Schedule 3.17, 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 from the Company to any employee, officer, director,
stockholder, contractor, or consultant of the Company.
3.18 Year 2000 Compliance. The Company has completed its
assessment of all current versions (including products and services currently
operating or under development) of its information technology systems (including
systems utilized in the operation of its Internet sites) and believes they are
year 2000 compliant. The Company has made appropriate inquiries of its key
vendors and suppliers and has been assured that such persons have also taken
appropriate actions to assure that there shall be no material adverse change to
its business and electronic systems related to year 2000 issues. Based upon the
information provided to the Company and its own internal assessment, the Company
does not believe that its year 2000 issues will have a Material Adverse Effect
on the Company.
3.19 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 Credit Suisse First Boston Corporation.
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 Closing the other
Transaction Documents will be, duly executed and delivered by Purchaser and
constitutes, or when executed and delivered at the Closing 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.
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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 and the Vulcan
Warrant, and the shares of Common Stock issuable upon conversion of the Shares
and upon exercise of the Vulcan Warrant (collectively, the "COMMON 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, the Vulcan Warrant and the
Common Shares. Purchaser is purchasing the Shares and the Vulcan Warrant 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,
the Vulcan Warrant and the Common Shares have not been registered under
applicable Federal or State securities laws, and that such Shares, the Vulcan
Warrant and the Common Shares are being offered and sold in reliance upon the
exemptions from registration provided in the Securities Act and applicable
exemptions under State securities laws. Purchaser is an accredited investor (as
that term is defined in Regulation D under the Securities Act) and has the
economic ability to maintain its investment in such Shares, the Vulcan Warrant
and the Common Shares for an indefinite period of time. For purposes of this
Agreement, "AFFILIATE" shall have the meaning set forth in Rule 501(b) under the
Securities Act.
4.4 Finders' Fees. Except for Yagemann & Co. 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.
4.5 Financial Condition. As of the date hereof, Purchaser has
sufficient resources to fulfill its financial obligations under this Agreement
and the transactions contemplated hereby.
4.6 Interested Stockholder. In each case within the meaning of
Section 203 of the DGCL:
(a) at no time since immediately prior to the time the
Company's Board of Directors approved the transactions contemplated by this
Agreement through the time of the signing hereof, has Purchaser or any
"affiliate" or "associate" of Purchaser "owned" fifteen percent (15%) or more of
the Company's "voting stock"; and
(b) there are no facts known to Purchaser or any
"affiliate" or "associate" of Purchaser, that have not been disclosed to the
Company that relate to whether Purchaser or any "affiliate" or "associate" of
Purchaser, directly or indirectly, through one or more intermediaries,
"controls" or "controlled" or is or was "controlled by" or is or was "under
common control with" the Company.
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13
5. COVENANTS OF THE COMPANY. The Company hereby covenants and agrees
with Purchaser as follows:
5.1 Additional Issuances; Subscription Right.
5.1.1 At any time after the date of the Closing, so long
as Purchaser (together with its Affiliates) holds of record or beneficially owns
at least fifty percent (50%) of the Shares issued in the Closing (the "AGREED
PERCENTAGE"), 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 (the "SUBSCRIPTION RIGHT") 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 5.1 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, the
Company Equity Incentive Plans, the Director Option Plan, the 1997 Employee
Stock Purchase Plan or other equity 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 or pursuant
to the exercise of the Vulcan Warrant;
(c) in connection with any stock split, stock dividend or
recapitalization by the Company; or
(d) 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.
5.1.2 Notwithstanding anything to the contrary contained
herein, in the event Purchaser elects to exercise its Subscription Right as a
result of (i) an underwritten public offering of Additional Securities, (ii) the
offering of Additional Securities to the Company's joint venture partners in
exchange for interests in the relevant joint venture, or (iii) the offering of
Additional Securities in connection with an acquisition of a business or assets
or a strategic alliance, then (x) the number of shares of the Company's capital
stock to be purchased by Purchaser shall not reduce the number of shares of
capital stock to be sold by the Company in such transaction and (y) Purchaser's
Pro Rata Share shall be determined based on the number of shares of the
Company's outstanding capital stock as would be outstanding after giving effect
to the proposed transactions.
5.1.3 If the Company proposes an Additional Issuance, the
Company shall, at least ten (10) 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
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conditions (or, if the nature of the transaction involves an exchange of assets
or securities which cannot be delivered by Purchaser, then for cash with an
equivalent fair market value (as agreed upon by the Company and Purchaser, and
if they cannot agree, as determined by an independent investment banking firm
mutually agreeable to both parties)), offered (or proposed to be 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 receipt 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 (except with
respect to Subscription Rights in connection with an underwritten public
offering, in which case Purchaser's shares will be issued in a simultaneous
private placement at a purchase price net of the underwriting commission) by
giving written notice to the Company and stating whether it will exercise the
Subscription Right and in the case the Subscription Right is exercised,
specifying the quantity of Additional Securities to be purchased. If Purchaser
elects to exercise its Subscription Right, the 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. Notwithstanding the foregoing, in the
event of an exercise of the Subscription Right, such purchase by Purchaser may
only occur 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, which may be subsequent to the consummation of
the transaction which gave rise to the Subscription Right.
5.2 Most Favored Nation. So long as Purchaser (together with its
Affiliates) holds the Agreed Percentage, the Company shall offer and make
available to Purchaser and its Affiliates licensing and business arrangements
relating to the Company's technologies, products and services, or any
combination thereof, on a "most favored nation" basis (i.e., on terms and
conditions at least as favorable as those agreed to with any third party for
similar technologies, products and services at substantially the same level of
purchase or other financial commitment). From time to time upon Purchaser's
request, the Company shall provide Purchaser or its Affiliates with information
regarding such technologies, products and services and the terms and conditions
on which they are being offered or have been made available to any third party.
Within sixty days after the end of each calendar year, the Company shall provide
a certificate to Purchaser, signed by the Company's Chief Financial Officer,
certifying that the Company has complied with its obligations under this Section
5.2. Purchaser shall have the right, no more than twice each calendar year, to
request any certified public accountant, during normal business hours, to
examine, audit and reproduce all or part of the books of account and all other
records, documents and materials in the possession or under the control of the
Company with respect to this Section 5.2. Such materials will be provided to the
designated certified public accountant under a non-disclosure agreement for the
sole purpose of verifying that the Company has complied with its obligations
under this Section 5.2. The costs and expenses of the certified public
accountant shall be paid by Purchaser; provided, however, that if the certified
public accountant determines that the Company has not complied with its
obligations under this Section 5.2, such costs and expenses will be paid by the
Company.
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5.3 Board Size. So long as Purchaser (together with its
Affiliates) holds the Agreed Percentage, the Company shall not increase the size
of the Board of Directors of the Company to greater than seven (7) members
without the written consent of Purchaser.
6. Covenants of Purchaser. Purchaser hereby covenants and agrees with
the Company that Purchaser 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.
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.
7. Additional Covenants of the Parties.
7.1 Board Composition.
7.1.1 The Company shall set the number of the members of
the Board of Directors at seven. The Purchaser Director (as defined below) shall
be entitled to serve on the Executive Committee (if any), the Planning Committee
(if any), the Steering Committee (if any), the Nominating Committee (if any) or
any other committee of the Board of Directors that is similar to any of the
foregoing and, upon election of the Purchaser Director, the Company shall take
all action necessary to cause the Purchaser Director to be on any such
committees of the Board of Directors.
7.1.2 Pursuant to the Certificate of Designation,
immediately upon expiration or early termination of the waiting period under the
HSR Act applicable to the transactions contemplated hereby, holders of a
majority of the outstanding shares of Series A Preferred Stock shall be entitled
to elect one (1) director to serve on the Board of Directors of the Company. The
Company shall, as soon as practicable after such time, take all such action as
may be required to cause the Purchaser Director to be appointed or elected to
the Board of Directors, whether by appointment by the Board of Directors of a
nominee designated by Purchaser, through calling a special meeting of the
holders of shares of the Series A Preferred Stock to elect such director to the
Board or otherwise, and shall take all
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action necessary to cause such individual to be elected, including either
increasing the size of the Board or securing the resignation of an incumbent
director or both. The member of the Board of Directors elected by the holders of
the Series A Preferred Stock is referred to as the "PURCHASER DIRECTOR".
7.2 Annual Operating and Capital Expenditure Budgets;
Consultation.
7.2.1 After the Closing and for so long as Purchaser
(together with its Affiliates) holds the Agreed Percentage, (i) the Company
shall not operate without or approve any Annual Budget without the consent of
the Board of Directors, and (ii) on an annual basis, the management of the
Company shall prepare and submit to the Board of Directors, an Annual Budget. As
defined herein the "ANNUAL BUDGET" refers to the annual operating budget
(comprised of quarterly projected statements of revenue and expenses (including
capital expenditures) for the current calendar year and projected statements of
revenues and expenses for the following two (2) calendar years). On or about the
end of each quarter, the management of the Company shall prepare an updated
version of the Annual Budget, covering the remaining quarters of the year for
such Annual Budget. In addition to the foregoing, the management of the Company
may not, without the approval of the Board of Directors, issue any debt or
equity securities of the Company; provided, however, that the foregoing approval
requirement shall not apply to the issuances of securities set forth in the
proviso to Section 5.1.1.
7.2.2 (a) After the Closing and for so long as Purchaser
(together with its Affiliates) holds the Agreed Percentage, the Company shall
consult in good faith with Purchaser with respect to each of the following
(each, a "PROPOSAL"): (i) the Annual Budget; (ii) any proposed 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 Company and its subsidiaries on a consolidated basis (other
than a Takeover Proposal (as defined below)); (iii) any Takeover Proposal; (iv)
any proposed acquisition by the Company 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 business or
by merger, consolidation, reorganization, issuance or exchange of securities or
otherwise where the consideration involved (including, without limitation,
non-cash consideration) has a value of at least $50,000,000; and (v) any
proposed issuance of any debt or equity securities of the Company (other than
the issuances of securities set forth in the proviso to Section 5.1.1). The
Company shall provide Purchaser with written notice (a "CONSULTATION NOTICE") of
each Proposal, which Consultation Notice shall, (a) in the case of any Proposal
described in clause (ii), (iv) or (v) above, describe in reasonable detail the
terms and conditions of the transaction, including the identity of the person or
entity and its Affiliates that will be a party to the proposed transaction and
the consideration that the Company may receive in respect of such transaction,
and shall include copies of the material documents and agreements relating
thereto, (b) in the case of the Annual Budget, shall include a copy of the
proposed Annual Budget, and (c) in the case of any proposal described in clause
(iii) above, notify Purchaser that (i) the Company has received or proposes to
enter into negotiations or discussions with respect to a Takeover Proposal, (x)
the type of Takeover Proposal, (y) if the person or entity making the Takeover
Proposal or with which the Company proposes to enter into negotiations or
discussions is
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proposing a transaction involving the use by such person or entity of cash
consideration, (A) whether the Takeover Proposal will be Fully Financed (as
defined below) at the time the Board of Directors may approve the Takeover
Proposal or (B) if the Takeover Proposal will not be Fully Financed, the
identity of such person or entity and (z) if the person or entity making the
Takeover Proposal or with which the Company proposes to enter negotiations or
discussions is proposing a transaction involving the use by such person or
entity of non-cash consideration, the identity of such person or entity and the
form of consideration proposed to be used. The cash consideration to be
delivered under a Takeover Proposal will be "FULLY FINANCED" for purposes hereof
if either (i) the person or entity making the Takeover Proposal has committed
financing for such Takeover Proposal or (ii) such person or entity is a publicly
traded entity with an equity market capitalization of at least 300% of the
equity market capitalization of the Company. Purchaser shall have a period of
five (5) business days following receipt of a Consultation Notice (the
"CONSULTATION PERIOD") to review and consider the Proposal described therein and
to consult with the Company with respect thereto. In addition to the
Consultation Notice, the Company shall promptly provide to Purchaser such
additional information regarding the Proposal (other than a Takeover Proposal)
as Purchaser may reasonably request. The Company shall not approve or consummate
any Proposal without first having consulted with Purchaser regarding the same in
accordance with this Section 7.2. "TAKEOVER PROPOSAL" shall mean that the
Company proposes to enter into negotiations or discussions with any person or
entity (other than an Affiliate of Purchaser) regarding (i) a proposed sale of
all or substantially all of the Company's assets, (ii) a proposed sale or
issuance of the Company's equity securities resulting in any person or group (as
defined in Section 13(d)(3) of the Exchange Act) owning a majority of the
outstanding shares of Common Stock of the Company, or (iii) a proposed merger,
consolidation, business combination or other similar transaction.
(b) Without limiting the generality of the foregoing, in
connection with any Proposal that constitutes a Takeover Proposal, the Company
shall not accept or enter into or agree to accept or enter into any agreement
concerning such Proposal nor issue any securities or agree to pay a termination
or break-up fee in connection with such Proposal during the Consultation Period,
and the Company will afford Purchaser an opportunity to discuss with the Company
what, if any, response Purchaser may desire to make with respect to such
Proposal. If after the delivery of the Consultation Notice, the person or entity
making the Takeover Proposal and the Company determine to change the form of
consideration or the Fully Financed status of the Takeover Proposal changes, the
Company will provide Purchaser with another Consultation Notice (which will
commence a new Consultation Period (as defined above)). The Company shall not
provide any non-public information to any person or entity making a Proposal
that constitutes a Takeover Proposal unless (a) the Company shall simultaneously
provide such information to Purchaser and (b) the Company 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.
(c) Any information provided to Purchaser pursuant to this
Section 7.2.2 shall be treated as confidential information of the Company.
Purchaser shall not disclose any such information to any other person or entity
except as otherwise permitted pursuant to that certain Confidentiality Agreement
between Purchaser and the
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Company dated as of March 20, 2000 and shall not use any such confidential
information for any purpose other than for the purposes set forth in this
Section 7.2.2 and for the purposes of formulating any response or proposal that
Purchaser may desire to make in response thereto.
7.3 Regulatory Approval; HSR Filings. The Company and Purchaser
shall use commercially reasonable efforts to file, as soon as practicable after
the date of this Agreement, all notices, reports and other documents required to
be filed with any federal, state, local, municipal, foreign or other
governmental body ("GOVERNMENTAL BODY") with respect to the transactions
contemplated by this Agreement, and to submit promptly any additional
information requested by any such Governmental Body. Without limiting the
generality of the foregoing, the Company and Purchaser shall, promptly after the
date of this Agreement, prepare and file the notifications required under the
HSR Act in connection with the transactions contemplated by this Agreement. The
Company and Purchaser shall respond as promptly as practicable to (i) any
inquiries or requests received from the Federal Trade Commission or the
Department of Justice for additional information or documentation and (ii) any
inquiries or requests received from any state attorney general or other
Governmental Body in connection with antitrust or related matters. Each of the
Company and Purchaser shall (a) give the other party prompt notice of the
commencement of any action, suit, litigation, arbitration, preceding or
investigation ("LEGAL PROCEEDING") by or before any Governmental Body with
respect to the transactions contemplated by this Agreement, (b) keep the other
party informed as to the status of any such Legal Proceeding, and (c) promptly
inform the other party of any communication to or from the Federal Trade
Commission, the Department of Justice or any other Governmental Body regarding
the transactions contemplated by this Agreement.
7.4 Amendment of Certificate of Incorporation or Bylaws. The
Company shall take all steps reasonably necessary to amend the Certificate of
Incorporation and Bylaws to implement the rights and obligations of the parties
contained herein to the extent necessary or appropriate under Delaware law.
7.5 Authorization and Issuance of Series A Preferred Stock. The
Company agrees that from the date hereof it shall not increase the authorized
number of shares of Series A Preferred Stock set forth in the Certificate of
Designation and shall not issue any shares of Series A Preferred Stock to any
party other than Purchaser or its designee, without the prior written consent of
Purchaser.
7.6 Public Announcements. Each party hereto will 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.
7.7 Standstill. Purchaser agrees that until the first anniversary
of the date of this Agreement (the "STANDSTILL EXPIRATION DATE"), and except as
otherwise contemplated by this Agreement, it will not directly or indirectly, or
authorize or permit any of its Affiliates to directly or indirectly (i)
initiate, effect or participate in (a) any acquisition of any securities (or
beneficial ownership thereof) or assets of the Company, any of its subsidiaries
or other Affiliates or any division of the Company, or any successor to the
Company and any rights or options to acquire the same (other than pursuant to
this
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Agreement or the conversion or exercise of any of the securities to be acquired
by Purchaser pursuant to this Agreement), (b) any acquisition of any assets
(other than acquisitions in the ordinary course of business) of the Company, any
of its subsidiaries or other Affiliates or any division of the Company, or any
successor to the Company, (c) any tender or exchange offer, merger or business
combination involving the Company or any of its subsidiaries or other
Affiliates, or involving any securities of the Company or any securities of any
subsidiary or other Affiliate of the Company, (d) any recapitalization,
restructuring, liquidation, dissolution or other extraordinary transaction with
respect to the Company or any of its subsidiaries or other Affiliates, or
involving any securities of the Company or any securities of any subsidiary or
other Affiliate of the Company, or (e) any "solicitation" of "proxies" (as such
terms are used in the proxy rules of the SEC) or consents to vote any voting
securities of the Company; (ii) form, join or in any way participate in a
"group" (as defined under the Exchange Act and the rules promulgated thereunder)
with respect to the Company or the beneficial ownership of any securities of the
Company; (iii) otherwise act, alone or in concert with others, to seek to
control or influence the management, board of directors or policies of the
Company; (iv) take any action that would be expected to require the Company to
make a public announcement regarding any of the matters set forth in clause (i)
of this sentence; (v) agree or offer to take or knowingly encourage or propose
(publicly or otherwise) the taking of, any action referred to in clauses (i),
(ii), (iii) or (iv) of this sentence; or (vi) enter into any discussions or
arrangements with any third party with respect to any of the foregoing;
provided, however, that notwithstanding the foregoing, Purchaser may acquire
beneficial ownership of up to forty percent (40%) of the Common Stock of the
Company outstanding on a fully diluted basis (the "PERMITTED PERCENTAGE").
Notwithstanding the foregoing, in the event that:
(a) any person or entity that is not an Affiliate of
Purchaser has commenced a hostile tender or exchange offer
(without the support or encouragement of Purchaser or any
Affiliate of Purchaser) for at least a majority of the
outstanding shares of Common Stock of the Company;
(b) any person or entity that is not an Affiliate of
Purchaser has publicly announced that it has purchased or intends
to purchase (in the open market, by agreement or otherwise)
shares of the equity securities of the Company constituting at
least a majority of the outstanding voting securities of the
Company with respect to the election of directors, and in the
case of purchases in the open market, Purchaser has a good faith
belief that such purchases have commenced;
(c) any person or entity (other than the Company) that is
not an Affiliate of Purchaser has publicly announced that it
intends to solicit, or has commenced solicitation of, proxies or
consents to elect (or remove) a majority of the members of the
Board of Directors of the Company;
(d) the Board of Directors of the Company formally
approves any transaction or definitive agreement with respect to
a transaction that would upon consummation constitute a change of
control of the Company; or
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(e) the Board of Directors of the Company adopts
resolutions approving the disposition of all or substantially all
of the assets of the Company (an event described in (a) through
(e) of this sentence shall be an "EXCEPTION EVENT");
then the Permitted Percentage shall toll and have no force or effect beginning
immediately upon the occurrence of such Exception Event and ending on the
Standstill Resumption Date (provided such Standstill Resumption Date is prior to
the Standstill Expiration Date). The "STANDSTILL RESUMPTION DATE" shall be (y)
with respect to any Exception Event described in clause (a), (b) or (c) above,
the date the applicable third party publicly announces that it has abandoned
such transaction and (z) with respect to any Exception Event described in clause
(d) or (e) above, the date the Company notifies the Purchaser in writing that
such Exception Event has been terminated or abandoned or is no longer
applicable, which written notice shall be accompanied by evidence reasonably
satisfactory to Purchaser of the termination or abandonment of (A) such
Exception Event or (B) the resolution of the Board of Directors of the Company
which originally approved such Exception Event. On the Standstill Resumption
Date (provided it is prior to the Standstill Expiration Date), the provisions of
this Section 7.7 would immediately apply to Purchaser with full force and
effect, except that the Permitted Percentage would be increased, but in no event
decreased, to equal Purchaser's beneficial ownership interest as of the
Standstill Resumption Date. The Company confirms to Purchaser that, as of the
date of this Agreement, Purchaser is not in possession of any material
non-public information about the Company as a result of the due diligence
materials or other information provided by the Company to Purchaser on or prior
to the date of this Agreement that would prohibit Purchaser from trading in the
Company's securities.
7.8 Shareholder Rights Plan. The Company shall not adopt a
shareholder rights plan or similar defensive measure unless, in connection with
such adoption, Purchaser is made exempt from such plan up to the Permitted
Percentage (as it may be adjusted from time to time under Section 7.7), whether
or not the provisions of Section 7.7 are in effect or have terminated.
8. Fees and Expenses. 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; provided, however, that the
Company shall pay to the Purchaser, the Purchaser's fees and expenses incurred
in connection with the transactions contemplated by this Agreement not to exceed
$1,000,000; and provided, further that the Company shall pay such fees and
expenses within two (2) business days of the Closing.
9. Miscellaneous.
9.1 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 Closing shall not survive the Closing (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
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Agreement. All covenants and agreements contained in this Agreement shall
survive the Closing Date in accordance with their terms.
9.2 Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first-class
registered or certified airmail, or nationally recognized overnight express
courier postage prepaid, or by facsimile transmission and shall be deemed given
when so mailed (or upon facsimile confirmation) and shall be delivered as
follows:
if to the Company, to:
XXX.XXX, Inc.
0000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxx Xxxxx, XX 00000
Attention: Chief Financial Officer
Facsimile: (000) 000-0000
with a copy so mailed to:
Xxxxxx Godward LLP
0000 Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
if to Purchaser,
Vulcan Ventures Incorporated
000 000xx Xxxxxx, X.X., Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
with a copy so mailed to:
Irell & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
9.3 Adjustments. In the event of any change in the Common Stock
by reason of a stock dividend, split-up, recapitalization, combination,
conversion, exchange of shares or other similar change in the corporate or
capital structure of the Company, the type and number of shares or securities
subject to various provisions of this Agreement (and the per share price of such
shares or securities) shall, where applicable, be adjusted appropriately, so
that Purchaser's rights under this Agreement shall be preserved as nearly as
practicable.
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9.4 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 or entity 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 of Purchaser (for purposes of this
Section and Section 7.7, a person or entity shall be deemed to be an Affiliate
of Purchaser or the Company 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). No such assignment shall relieve the
Purchaser of its obligations under this Agreement.
9.5 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. Notwithstanding the
foregoing, any term of this Agreement which applies to the rights applicable to
the holders of the Series A Preferred Stock may be amended and the observance of
any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) only with the written
consent of the Company and the holders of more than 50% of the outstanding
shares of Series A Preferred Stock. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of Series A
Preferred Stock.
9.6 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.
9.7 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.
9.8 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.
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9.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, except as to
matters which are subject to the Delaware General Corporation Law, which shall
be governed by such law, in each case without regard to the choice of law
provisions thereof.
9.10 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]
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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.
XXX.XXX, INC.
By: /s/ XXXXXX XXXX
-------------------------------------
Xxxxxx Xxxx, Chief Financial Officer
VULCAN VENTURES INCORPORATED
By: /s/ XXXXXXX X. XXXXX
-------------------------------------
Xxxxxxx X. Xxxxx, President
-23-
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EXHIBIT A
FORM OF WARRANT
-24-
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NO. CSW-7
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT TO PURCHASE 850,000 SHARES
OF COMMON STOCK OF
XXX.XXX, INC.
(VOID AFTER JUNE 8, 2005)
This certifies that VULCAN VENTURES INCORPORATED or its assigns (the
"HOLDER"), for value received, is entitled to purchase from XXX.XXX, INC., a
Delaware corporation (the "COMPANY"), having a place of business at 0000
Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxx Xxxxx, XX 00000, a maximum of 850,000 fully
paid and nonassessable shares of the Company's Common Stock ("COMMON STOCK") for
cash at a price of $7.00 per share (the "STOCK PURCHASE PRICE") at any time or
from time to time up to and including 5:00 p.m. (Pacific time) on June 8, 2005
(the "EXPIRATION DATE"), upon surrender to the Company at its principal office
(or at such other location as the Company may advise the Holder in writing) of
this Warrant properly endorsed with the Form of Subscription attached hereto
duly filled in and signed and, if applicable, upon payment in cash or by check
of the aggregate Stock Purchase Price for the number of shares for which this
Warrant is being exercised determined in accordance with the provisions hereof.
The Stock Purchase Price and the number of shares purchasable hereunder are
subject to adjustment as provided in Section 3 of this Warrant. This Warrant is
issued pursuant to that certain Stock Purchase Agreement dated as of June 8,
2000 by and between the Holder and the Company (the "STOCK PURCHASE AGREEMENT").
This Warrant is subject to the following terms and conditions:
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
1.1 GENERAL. This Warrant is exercisable at the option of the
holder of record hereof, at any time or from time to time, up to the Expiration
Date for all or any part of the shares of Common Stock (but not for a fraction
of a share) which may be purchased hereunder. The Company agrees that the shares
of Common Stock purchased under this Warrant shall be and are deemed to be
issued to the Holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered,
properly endorsed, the completed, executed Form of Subscription delivered and
payment made for such shares. Certificates for the shares of Common Stock so
purchased, together with any other securities or property to which the Holder
hereof is entitled upon such exercise, shall be delivered to the Holder hereof
by the Company at the Company's expense within a reasonable time after the
rights represented by this Warrant have been so exercised. In case of a purchase
of less than all
27
the shares which may be purchased under this Warrant, the Company shall cancel
this Warrant and execute and deliver a new Warrant or Warrants of like tenor for
the balance of the shares purchasable under the Warrant surrendered upon such
purchase to the Holder hereof within a reasonable time. Each stock certificate
so delivered shall be in such denominations of Common Stock as may be requested
by the Holder hereof and shall be registered in the name of such Holder.
2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company covenants
and agrees that all shares of Common Stock or any other securities which may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance, be duly authorized, validly issued, fully paid and nonassessable and
free from all preemptive rights of any stockholder and free of all taxes, liens
and charges with respect to the issue thereof. The Company further covenants and
agrees that, during the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved, for the purpose of issue or transfer upon exercise of the subscription
rights evidenced by this Warrant, a sufficient number of shares of authorized
but unissued Common Stock, or other securities and property, when and as
required to provide for the exercise of the rights represented by this Warrant.
The Company will take all such action as may be necessary to assure that such
shares of Common Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange upon which the Common Stock may be listed; provided, however, subject
to the Company's obligations pursuant to that certain Registration Rights
Agreement, dated as of June 8, 2000, between the Company and Holder that the
Company shall not be required to effect a registration under Federal or State
securities laws with respect to such exercise. The Company will not take any
action which would result in any adjustment of the Stock Purchase Price (as set
forth in Section 3 hereof) if the total number of shares of Common Stock
issuable after such action upon exercise of all outstanding warrants, together
with all shares of Common Stock then outstanding and all shares of Common Stock
then issuable upon exercise of all options and upon the conversion of all
convertible securities then outstanding, would exceed the total number of shares
of Common Stock then authorized by the Company's Amended and Restated
Certificate of Incorporation.
3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events described in this Section 3. Upon each adjustment of the Stock
Purchase Price, the Holder of this Warrant shall thereafter be entitled to
purchase, at the Stock Purchase Price resulting from such adjustment, the number
of shares obtained by multiplying the Stock Purchase Price in effect immediately
prior to such adjustment by the number of shares purchasable pursuant hereto
immediately prior to such adjustment, and dividing the product thereof by the
Stock Purchase Price resulting from such adjustment.
3.1 SUBDIVISION OR COMBINATION OF STOCK. In case the Company
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Stock Purchase Price in effect immediately prior
to such subdivision shall be proportionately
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reduced, and conversely, in case the outstanding shares of Common Stock of the
Company shall be combined into a smaller number of shares, the Stock Purchase
Price in effect immediately prior to such combination shall be proportionately
increased.
3.2 DIVIDENDS IN COMMON STOCK, OTHER STOCK, PROPERTY,
RECLASSIFICATION. If at any time or from time to time the holders of Common
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,
(a) Common Stock or any shares of stock or other
securities which are at any time directly or indirectly convertible into or
exchangeable for Common Stock, or any rights or options to subscribe for,
purchase or otherwise acquire any of the foregoing by way of dividend or other
distribution,
(b) any cash paid or payable otherwise than as a cash
dividend, or
(c) Common Stock or additional stock or other securities
or property (including cash) by way of spinoff, split-up, reclassification,
combination of shares or similar corporate rearrangement (other than shares of
Common Stock issued as a stock split or adjustments in respect of which shall be
covered by the terms of Section 3.1 above), then and in each such case, the
Holder hereof shall, upon the exercise of this Warrant, be entitled to receive,
in addition to the number of shares of Common Stock receivable thereupon, and
without payment of any additional consideration therefor, the amount of stock
and other securities and property (including cash in the cases referred to in
clause (b) above and this clause (c)) which such Holder would hold on the date
of such exercise had the Holder been the holder of record of such Common Stock
as of the date on which holders of Common Stock received or became entitled to
receive such shares or all other additional stock and other securities and
property.
3.3 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. If any recapitalization, reclassification or reorganization of the capital
stock of the Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets or other
transaction shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities, or other assets or property (a
"CHANGE"), then, as a condition of such Change, lawful and adequate provisions
shall be made by the Company whereby the Holder hereof shall thereafter have the
right to purchase and receive (in lieu of the shares of the Common Stock of the
Company immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby) such shares of stock, securities or other assets
or property as may be issued or payable with respect to or in exchange for a
number of outstanding shares of such Common Stock equal to the number of shares
of such stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby.
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29
3.4 ADJUSTMENTS OF PURCHASE PRICE FOR CERTAIN DILUTING ISSUES.
(a) Special Definitions. For purposes of this Section 3.4, the
following definitions apply:
(i) "OPTIONS" shall mean rights, options, or warrants to
subscribe for, purchase or otherwise acquire either Common
Stock or Convertible Securities.
(ii) "ORIGINAL ISSUE DATE" shall mean the date on which
this Warrant was issued.
(ii) "CONVERTIBLE SECURITIES" shall mean any evidences of
indebtedness, shares (other than Common Stock) or other
securities convertible into or exchangeable for Common
Stock.
(iii) "ADDITIONAL SHARES OF COMMON STOCK" shall mean all
shares of Common Stock issued (or, pursuant to Section
3.4(c) deemed to be issued) by the Company after the
Original Issue Date, other than shares of Common Stock:
(A) issued or issuable to officers, directors,
employees or advisors of, or consultants or
independent contractors to, the Company, pursuant
to options, warrants or other Common Stock purchase
rights granted in accordance with plans or other
arrangements approved by the Board of Directors of
the Company and, as required by law, the Company's
stockholders;
(B) issued in connection with any merger,
consolidation or similar transaction, or any
acquisition of assets or a business, in accordance
with agreements or other arrangements approved by
the Board of Directors of the Company;
(C) issued or issuable upon conversion of shares of
Series A Preferred Stock;
(D) issued or issuable as a dividend or
distribution on the Series A Preferred Stock;
(E) for which adjustment of the Stock Purchase
Price and the number of shares of Common Stock into
which this Warrant is exercisable is made pursuant
to Section 3.1 or for which a distribution with
respect to this Warrant is provided for pursuant to
Section 3.2;
-4-
30
(F) issued pursuant to any equipment leasing
arrangement or debt financing from a bank or
similar financial institution approved by the Board
of Directors of the Company not to exceed 100,000
shares of Common Stock in the aggregate;
(G) issued or issuable pursuant to Options
outstanding as of the Original Issuance Date; and
(H) issued or issuable upon exercise of this
Warrant.
(iv) "SERIES A PREFERRED STOCK" shall mean the Series A
Convertible Preferred Stock, $.001 par value per share, of
the Company.
(b) No Adjustment of Stock Purchase Price. No adjustment in the
Stock Purchase Price of this Warrant shall be made in respect of the issuance of
Additional Shares of Common Stock unless the consideration per share for an
Additional Share of Common Stock issued or deemed to be issued by the Company is
less than the Stock Purchase Price in effect on the date of, and immediately
prior to such issue, for this Warrant.
(c) Deemed Issue of Additional Shares of Common Stock. In the
event the Company at any time or from time to time after the Original Issue Date
shall issue any Options or Convertible Securities, then the maximum number of
shares (as set forth in the instrument relating thereto without regard to any
provisions contained therein designed to protect against dilution) of Common
Stock issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issuance of Options or Convertible Securities; provided,
however, that Additional Shares of Common Stock shall not be deemed to have been
issued unless the consideration per share (determined pursuant to Section 3.4(e)
hereof) of such Additional Shares of Common Stock would be less than the Stock
Purchase Price in effect on the date of and immediately prior to such issuance
of Options or Convertible Securities, or such record date, as the case may be;
and provided further that in any such case in which Additional Shares of Common
Stock are deemed to be issued:
(i) no further adjustments in the Stock Purchase Price
shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise of
such Options or conversion or exchange of such Convertible
Securities;
(ii) if such Options or Convertible Securities by their
terms provided, with the passage of time or otherwise, for
any increase in the consideration payable to the Company,
or decrease in the number of shares of Common Stock
issuable, upon the exercise, conversion or exchange
thereof, the Stock Purchase Price computed upon the
original issue thereof (or upon
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the occurrence of a record date with respect thereto), and
any subsequent adjustments based thereon, shall, upon any
such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease insofar as
it affects such Options or the rights of conversion or
exchange under such Convertible Securities; provided,
however, that no such adjustment of the Stock Purchase
Price shall affect Common Stock previously issued upon
exercise of this Warrant;
(iii) Upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the Stock
Purchase Price computed upon the original issue thereof
(or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon,
shall, upon such expiration, be recomputed as if:
(A) in the case of Convertible Securities or
Options for Common Stock, the only Additional
Shares of Common Stock issued were the shares of
Common Stock, if any, actually issued upon the
exercise of such Options or the conversion or
exchange of such Convertible Securities and the
consideration received therefor was the
consideration actually received by the Company for
the issue of all such Options, whether or not
exercised, plus the consideration actually received
by the Company upon such exercise, or for the issue
of all such Convertible Securities which were
actually converted or exchanged, plus additional
consideration, if any, actually received by the
Company upon such conversion or exchange, and
(B) in the case of Options for Convertible
Securities, only the Convertible Securities, if
any, actually issued upon the exercise thereof were
issued at the time of issue of such Options and the
consideration received by the Company for
Additional Shares of Common Stock deemed to have
been then issued was the consideration actually
received by the Company for the issue of all such
Options, whether or not exercised, plus the
consideration deemed to have been received by the
Company (determined pursuant to Section 3.4(e))
upon the issue of the Convertible Securities with
respect to which such Options were actually
exercised;
(iv) no readjustment pursuant to Sections 3.4(c)(ii) or
(iii) above shall have the effect of increasing the Stock
Purchase Price to an amount which exceeds the lower of (1)
the Stock Purchase Price on the original adjustment date,
or (2) the Stock Purchase Price that would have resulted
from any issuance of
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32
Additional Shares of Common Stock between the original
adjustment date and such readjustment date;
(v) in the case of any Options which expire by their terms
not more than sixty (60) days after the date of issue
thereof, no adjustment of the Stock Purchase Price shall
be made, except to the extent this Warrant is exercised in
such period, until the expiration or exercise of all such
Options, whereupon such adjustment shall be made in the
same manner provided in Section 3.4(c)(iii) above; and
(vi) if any such record date shall have been fixed and
such Options or Convertible Securities are not issued on
the date fixed therefor, the adjustment previously made in
the Stock Purchase Price which became effective on such
record date shall be canceled as of the close of business
on such record date, and shall instead be made on the
actual date of issuance, if any, of such Options or
Convertible Securities.
(d) Adjustment of Purchase Price Upon Issuance of Additional
Shares of Common Stock. In the event the Company shall issue Additional Shares
of Common Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Section 3.4(c)) without consideration or for a consideration per
share less than the Stock Purchase Price in effect on the date of and
immediately prior to such issue, then and in such event, the Stock Purchase
Price shall be reduced, concurrently with such issue, to a price (calculated to
the nearest cent) determined by multiplying the Stock Purchase Price then in
effect by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding (determined on a fully diluted basis, as described
below) immediately prior to such issue plus the number of shares of Common Stock
which the aggregate consideration received by the Company for the total number
of Additional Shares of Common Stock so issued would purchase at the Stock
Purchase Price then in effect, and the denominator of which shall be the number
of shares of Common Stock outstanding (determined on a fully diluted basis, as
described below) immediately prior to such issue plus the number of such
Additional Shares of Common Stock so issued. For the purposes of the above
calculation, the number of shares of Common Stock outstanding immediately prior
to such issuance shall be calculated on a fully diluted basis, as if all shares
of Convertible Securities had been fully converted into shares of Common Stock
immediately prior to such issuance and this Warrant and any outstanding Options
had been fully exercised immediately prior to such issuance (and the resulting
securities fully converted into shares of Common Stock, if so convertible) as of
such date but not including in such calculation any additional shares of Common
Stock issuable with respect to this Warrant, Convertible Securities or
outstanding Options solely as a result of the adjustment of the Stock Purchase
Price (or other conversion ratios) resulting from the issuance of Additional
Shares of Common Stock causing such adjustment. For the purposes of the
foregoing, outstanding Options shall be deemed to include (without
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33
duplication) any Options issued to directors, officers, employees or advisors
of, or consultants to, the Company in accordance with plans or other
arrangements approved by the Board of Directors of the Company.
(e) Determination of Consideration. For purposes of this Section
3.4, the consideration received by the Company for the issuance of any
Additional Shares of Common Stock shall be computed as follows:
(i) Cash and Property. Such consideration shall:
(A) insofar as it consists of cash, be computed at
the aggregate amount of cash received by the
Company, excluding amounts paid or payable for
accrued interest or accrued dividends;
(B) insofar as it consists of services, goods or
other property other than cash, be computed at the
fair value thereof at the time of such issue, as
determined in good faith by the Board of Directors
of the Company; and
(C) in the event Additional Shares of Common Stock
are issued together with other shares or securities
or other assets of the Company for consideration
which covers both cash and services, goods or other
property other than cash, be in the proportion of
such consideration so received, computed as
provided in clauses (A) and (B) above, as
determined in good faith by the Board of Directors
of the Company.
(ii) Options and Convertible Securities. The consideration
per share received by the Company for Additional Shares of
Common Stock deemed to have been issued pursuant to
Section 3.4(c) relating to Options and Convertible
Securities, shall be determined by dividing:
(A) the total amount, if any, received or
receivable by the Company as consideration for the
issue of such Options or Convertible Securities,
plus the maximum aggregate amount of additional
consideration (as set forth in the instruments
relating thereto, without regard to any provision
contained therein designed to protect against
dilution) payable to the Company upon the exercise
of such Options or the conversion or exchange of
such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of
such Options for Convertible
-8-
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Securities and the conversion or exchange of such
Convertible Securities by
(B) the maximum number of shares of Common Stock
(as set forth in the instruments relating thereto,
without regard to any provision contained therein
designed to protect against dilution) issuable upon
the exercise of such Options or the conversion or
exchange of such Convertible Securities.
3.5 NOTICES OF ADJUSTMENT.
(a) Immediately upon any adjustment in the number or class
of shares subject to this Warrant and of the Stock Purchase Price, the Company
shall give written notice thereof to the Holder, setting forth in reasonable
detail and certifying the calculation of such adjustment.
(b) The Company shall give written notice to the Holder at
least 10 business days prior to the date on which the Company closes its books
or takes a record for determining rights to receive any dividends or
distributions.
(c) The Company shall also give written notice to the
Holder at least 20 business days prior to the date on which a Change shall take
place.
4. ISSUE TAX. The issuance of certificates for shares of Common Stock
upon the exercise of this Warrant shall be made without charge to the Holder of
this Warrant for any issue tax (other than any applicable income taxes) in
respect thereof; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the Holder
of the Warrant being exercised.
5. CLOSING OF BOOKS. The Company will at no time close its transfer
books against the transfer of any warrant or of any shares of Common Stock
issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant.
6. NO DIMINUTION OF VALUE. The Company will not take any action to
terminate this Warrant or to diminish it in value.
7. FURNISH INFORMATION. The Company will promptly deliver to the Holder
upon request copies of all financial statements, reports and proxy statements
which the Company shall have sent to its stockholders generally.
8. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a stockholder of
the Company or any other matters or any rights whatsoever as a stockholder of
the Company. No dividends or interest shall be payable or
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35
accrued in respect of this Warrant or the interest represented hereby or the
shares purchasable hereunder until, and only to the extent that, this Warrant
shall have been exercised. No provisions hereof, in the absence of affirmative
action by the Holder to purchase shares of Common Stock, and no mere enumeration
herein of the rights or privileges of the Holder hereof, shall give rise to any
liability of such Holder for the Stock Purchase Price or as a stockholder of the
Company, whether such liability is asserted by the Company or by its creditors.
9. WARRANTS TRANSFERABLE. Subject to compliance with applicable federal
and state securities laws, this Warrant and all rights hereunder are
transferable to any affiliate of Holder, in whole or in part, without charge to
the holder hereof (except for transfer taxes), upon surrender of this Warrant
properly endorsed. Each taker and holder of this Warrant, by taking or holding
the same, consents and agrees that this Warrant, when endorsed in blank, shall
be deemed negotiable, and that the holder hereof, when this Warrant shall have
been so endorsed, may be treated by the Company, at the Company's option, and
all other persons dealing with this Warrant as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented by this
Warrant, or to the transfer hereof on the books of the Company any notice to the
contrary notwithstanding; but until such transfer on such books, the Company may
treat the registered owner hereof as the owner for all purposes.
10. [INTENTIONALLY OMITTED.]
11. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the Holder and of the holder of shares of Common
Stock issued upon exercise of this Warrant, shall survive the exercise of this
Warrant.
12. COMPLETE AGREEMENT, MODIFICATION AND WAIVER. This Warrant 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 Warrant and any provision hereof may be changed, waived, discharged
or terminated only by an instrument in writing signed by the party against which
enforcement of the same is sought.
13. ADDITIONAL DOCUMENTS. Each party hereto agrees to execute any and
all further documents and writings and to perform such other actions which may
be or become necessary or expedient to effectuate and carry out this Warrant.
14. NOTICES. All notices, requests and approvals required by this
Warrant (i) shall be in writing, (ii) shall be addressed to the parties as
indicated below unless notified in writing of a change in address and (iii)
shall be deemed to have been given, made and received only (a) upon delivery, if
personally delivered to a party, (b) one business day after the date of
dispatch, if by facsimile transfer, (c) one business day after deposit, if
delivered by a nationally recognized courier service offering guaranteed
overnight delivery, (d) three business days after deposit in the U.S. First
Class Mail, or certified mail, postage prepaid, at the addresses appearing below
or (e) one business day after electronic transmission.
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36
15. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets. All of the obligations of the
Company relating to the Common Stock issuable upon the exercise of this Warrant
shall survive the exercise and termination of this Warrant. All of the covenants
and agreements of the Company shall inure to the benefit of the successors and
assigns of the holder hereof.
16. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of
the several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of Delaware.
17. LOST WARRANTS. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.
18. FRACTIONAL SHARES. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any fractional
share, pay the holder entitled to such fraction a sum in cash equal to such
fraction multiplied by the then effective Stock Purchase Price. However, the
fractional amount shall be used in calculating any future adjustments pursuant
to Section 3 hereof. The Company shall, in the case of the final exercise under
this Warrant, make a cash payment for any fractional shares based on the closing
price on the date of exercise of a share of Common Stock on the principal
exchange or system on which the Common Stock is then listed or traded, or, if
not then listed or traded on such exchange or system, the mean of the closing
bid and asked prices on an automated quotation system, or, if such quotations
are not available, such value as may be determined in good faith by the
Company's Board of Directors, which determination shall be conclusively binding
on the parties. Notwithstanding any changes in the Stock Purchase Price or the
number of shares issuable upon exercise of this Warrant, this Warrant, and any
Warrants issued in replacement or upon transfer thereof, may continue to state
the initial Stock Purchase Price and the initial number of shares issuable upon
exercise of this Warrant. Alternatively, the Company may elect to issue a new
Warrant or Warrants of like tenor for the additional shares of Common Stock
purchasable hereunder or, upon surrender of the existing Warrant, to issue a
replacement Warrant evidencing all the shares to which the Holder is entitled
after such adjustments.
19. SEVERABILITY. The validity, legality or enforceability of the
remainder of this Warrant shall not be affected even if one or more of its
provisions shall be held to be invalid, illegal or unenforceable in any respect.
20. ATTORNEYS' FEES. Should any litigation or arbitration be commenced
(including any proceedings in a bankruptcy court) between the parties hereto or
their representatives concerning any provision of this Warrant or the rights and
duties of any person or entity
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37
hereunder, the party or parties prevailing in such proceeding shall be entitled,
in addition to such other relief as may be granted, to the attorneys' fees and
court costs incurred by reason of such litigation or arbitration.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this ____ day of June, 2000.
XXX.XXX, INC.
a Delaware corporation
By:
--------------------------------
Title: Chief Financial Officer
ATTEST:
-----------------------------------
Secretary
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EXHIBIT A
SUBSCRIPTION FORM
Date: _________________, 2000
XXX.XXX, INC.
0000 XXXXXXXX XXXXX, XXXXX 000
XXXXX XXXXX, XX 00000
Attn: President
Ladies and Gentlemen:
The undersigned hereby elects to exercise the warrant issued to it by
XXX.XXX, Inc. (the "COMPANY") and dated June 8, 2000, Warrant No. CSW-7 (the
"WARRANT") and to purchase thereunder __________________________________ shares
of the Common Stock of the Company (the "SHARES") at a purchase price of
___________________________________________ Dollars ($__________) per Share or
an aggregate purchase price of __________________________________ Dollars
($__________) (the "PURCHASE PRICE").
Pursuant to the terms of the Warrant the undersigned has delivered the
Stock Purchase Price herewith in full in cash or by certified check or wire
transfer.
Very truly yours,
-----------------------------------
By:
--------------------------------
Title:
-----------------------------
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40
EXHIBIT B
CERTIFICATE OF DESIGNATION
-25-
41
CERTIFICATE OF DESIGNATION OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
XXX.XXX, INC.
XXX.XXX, 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 XXX.XXX, Inc.
2. The certificate of incorporation of the Corporation authorizes the
issuance of 5,000,000 shares of Preferred Stock, $.001 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 number 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" series of Preferred Stock:
RESOLVED, that one 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 are as follows:
SERIES A CONVERTIBLE PREFERRED STOCK
1. Designation and Amount. There is hereby designated a series of shares
of Preferred Stock consisting of 27,437 shares designated "Series A Convertible
Preferred Stock" (the "SERIES A PREFERRED STOCK").
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
42
shall be a 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 (on an as converted basis) 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
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43
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) through 4(d) hereof, or as required by law, and shall
be entitled, notwithstanding any provision hereof, to notice of any
stockholders' 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 the directors unless and until
the making of any necessary filings required by Vulcan Ventures Incorporated
("VULCAN") and the Corporation, 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"), required in connection with that
certain Stock Purchase Agreement (the "STOCK PURCHASE AGREEMENT") dated June 8,
2000, as it may be amended from time to time, between the Corporation and
Vulcan. A copy of the Stock Purchase Agreement shall be provided to any
stockholder upon written request.
(b) Unless the vote or consent of a greater number of shares
shall then be required by law and so long as there is outstanding at least a
majority of the Series A Preferred Stock issued at the Closing (as defined in
the Stock Purchase Agreement), 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 (if
such an action is at such time permitted under the Corporation's Certificate of
Incorporation) or at a special or annual meeting of stockholders called for such
purpose, shall be necessary to (i) 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 (including by merger, consolidation, operation of law
or otherwise) which would adversely affect the
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44
powers, preferences or special rights of the Series A Preferred Stock; provided,
however, that the holders of Series A Preferred Stock shall not be entitled to
vote as a class on any merger or consolidation that constitutes a Change in
Control (as defined in Section 6(i)(2) below) or any merger or consolidation
that does not constitute a Change in Control if the Certificate of Incorporation
is not amended in such merger or consolidation and the Series A Preferred Stock
is not converted in such merger or consolidation, it being understood that the
holders of Series A Preferred Stock will be entitled to vote as a separate class
pursuant to this clause (i) in any merger or consolidation in which Series A
Preferred Stock is converted that is not a Change in Control, or (ii) authorize
or create any shares of any class or series of Senior Stock or Parity Stock of
the Corporation or reclassify any authorized stock of the Corporation into any
such Senior Stock or Parity Stock, or create or authorize any obligation or
security convertible into or evidencing the right to purchase shares of any such
Senior Stock or Parity 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 a majority of the Series A Preferred Stock issued at the Closing, 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 (if such an action is at such time
permitted under the Corporation's Certificate of Incorporation) or at a special
or annual meeting of stockholders called for such purpose, shall be necessary to
authorize or effect (i) a liquidation, winding up or dissolution of the
Corporation or adoption of any plan of the same; (ii) 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 (iii) any redemption or repurchase or
other acquisition by the Corporation or subsidiary of 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, consultants, directors or advisors of the Corporation
pursuant to rights under written agreements.
(d) In addition to the voting rights set forth above, after the
Closing, and so long as Vulcan together with any Affiliate (as defined in
Section 9.4 of the Stock Purchase Agreement), owns not less than 50% of the
Series A Preferred Stock issued in the Closing, the holders of the shares of
Series A Preferred Stock, voting as a single class, shall be entitled to
nominate and elect one (1) director to serve on the Board of Directors at any
annual meeting of stockholders or any special meeting held in place thereof, or
at a special meeting of the holders of the Series A Preferred Stock as
hereinafter specified to serve until the next annual meeting and until such
director's successor is elected and qualified; provided, however, that the
shares of Series A Preferred Stock shall not have any voting power with respect
to the election of the directors unless and until the making of any necessary
filings by Vulcan and the Corporation required by, and the expiration or
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45
termination of any applicable waiting periods under, the HSR Act required in
connection with the Stock Purchase Agreement.
As used herein "SERIES A PREFERRED DIRECTOR" shall mean the
director of the Corporation elected as a matter of right by the holders of the
Series A Preferred Stock pursuant to Section 4(d) above. Nothing in this Section
shall be deemed to constitute an admission that the Series A Preferred Director
is not an "independent director" for purposes of the rules of The Nasdaq Stock
Market.
At any time a vote of the holders of the Series A Preferred Stock
shall be necessary pursuant to this Section, a proper officer of the Corporation
may, and upon the written request of the holders of record of at least
twenty-five percent (25%) of the shares of the Series A Preferred Stock then
outstanding addressed to the Secretary of the Corporation shall, call a special
meeting of the holders of the Series A Preferred Stock, for the purpose of
electing the director which such holders are entitled to elect. If such meeting
shall not be called by a proper officer of the Corporation within twenty (20)
days after personal service of such written request upon the Secretary of the
Corporation, or personal service of said written request upon the Secretary of
the Corporation at its principal executive offices, the holders of at least
twenty-five percent (25%) of the outstanding shares of Series A Preferred Stock
may designate in writing one of their number to call such meeting at the expense
of the Corporation, and such meeting may be called by the persons so designated
upon the notice required for the annual meeting of stockholders of the
Corporation. Any holder of the Series A Preferred Stock so designated shall
have, and the Corporation shall provide access to the lists of stockholders to
be called pursuant to the provisions hereof.
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.
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(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 into 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
-6-
47
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 upon conversion of the Series A Preferred Stock
shall upon issuance by the Corporation be validly 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 5 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.
(1) 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 other than to an Affiliate, each share of Series A Preferred Stock so
transferred shall automatically convert 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; provided that the mortgage, pledge
or other encumbrance of shares of the Series A Preferred Stock by a holder
thereof to one or more banks, insurance companies or other financial
institutions (each, a "LENDER") shall not trigger the conversion of such shares
until such Lender forecloses on such shares, if ever.
(2) Change in Control. In the event of a Change in Control
(as defined below) of the Corporation, then each share of Series A Preferred
Stock 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 prior to the Change
in Control. For purposes of this Certificate
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of Designation, "Change in Control" means the merger or consolidation (including
a reverse merger) of the Corporation unless immediately following such merger or
consolidation, the owners of the outstanding capital stock of the Corporation
immediately prior to such merger or consolidation would own at least fifty
percent (50%) of the combined power to vote in the election of directors of the
surviving corporation or the owner of such surviving corporation.
(3) Mechanics of Conversion. Upon the occurrence of the
events specified in Sections (1) or (2) above, the outstanding shares of Series
A Preferred Stock shall automatically convert without any further action by the
holders of such shares or the Corporation whether the certificates evidencing
such shares are surrendered to the Corporation or its transfer agent. Upon the
occurrence of the event set forth in Section (1) above, 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
evidencing such 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
indemnify the Corporation from any loss incurred by it in connection therewith.
6. Conversion Price. As used herein, the "CONVERSION PRICE" for the
Series A Preferred Stock shall initially be $8.00 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 such holder would have owned or been entitled to receive had
such shares of Series A Preferred Stock been converted immediately prior to such
date. Successive adjustments 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
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49
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 the Corporation shall at any time
after the date of issuance of the Series A Preferred Stock consolidate with, or
merge with or into, any other corporation or entity or engage in any
reorganization, recapitalization, sale of all or substantially all of the
Corporation's assets to any entity or any other transaction which is effected in
such a manner that the holders of Common Stock or Series A Preferred Stock are
entitled to receive stock, securities or assets with respect to or in exchange
for the Common Stock or Series A Preferred 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 if the applicable event does not constitute a Change in Control, the
provisions set forth in this Section 6 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) Adjustments of Conversion Price for Certain Diluting Issues.
(1) Special Definitions. For purposes of this Section
6(d), the following definitions apply:
(i) "Options" shall mean rights, options, or
warrants to subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities.
(ii) "Original Issue Date" shall mean the date on
which a share of Series A Preferred Stock was first issued.
(iii) "Convertible Securities" shall mean any
evidences of indebtedness, shares (other than Common Stock and Series A
Preferred Stock) or other securities convertible into or exchangeable for Common
Stock.
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(iv) "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued (or, pursuant to Section 6(d)(3) deemed to be
issued) by the Corporation after the Original Issue Date, other than shares of
Common Stock:
(A) issued or issuable to officers,
directors, employees or advisors of, or consultants or independent
contractors to, the Corporation, pursuant to options, warrants or other
Common Stock purchase rights granted in accordance with plans or other
arrangements approved by the Board of Directors of the Corporation and,
as required by law, the Corporation's stockholders;
(B) issued in connection with any merger,
consolidation or similar transaction, or any acquisition of assets or a
business, in accordance with agreements or other arrangements approved
by the Board of Directors of the Corporation;
(C) issued or issuable upon conversion of
shares of Series A Preferred Stock;
(D) issued or issuable as a dividend or
distribution on the Series A Preferred Stock; or
(E) for which adjustment of the Conversion
Price for the Series A Preferred Stock is made pursuant to Section 6(a)
or for which a distribution with respect to the Series A Preferred Stock
is made pursuant to Section 6(b);
(F) issued pursuant to any equipment
leasing arrangement or debt financing from a bank or similar financial
institution approved by the Board of Directors of the Corporation not to
exceed 100,000 shares of Common Stock in the aggregate;
(G) issued or issuable pursuant to Options
outstanding as of the Original Issuance Date; or
(H) issued upon exercise of that certain
warrant issued to Vulcan pursuant to the Stock Purchase Agreement.
(2) No Adjustment of Conversion Price. No adjustment in
the Conversion Price of a particular share of Series A Preferred Stock shall be
made in respect of the issuance of Additional Shares of Common Stock unless the
consideration per share for an Additional Share of Common Stock issued or deemed
to be issued by the Corporation is less than the Conversion Price in effect on
the date of, and immediately prior to such issue, for such share of Series A
Preferred Stock.
(3) Deemed Issue of Additional Shares of Common Stock. In
the event the Corporation at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities, then the maximum
number of shares (as set forth in the instrument relating thereto without regard
to any provisions contained therein
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designed to protect against dilution) of Common Stock issuable upon the exercise
of such Options or, in the case of Convertible Securities and Options therefor,
the conversion or exchange of such Convertible Securities, shall be deemed to be
Additional Shares of Common Stock issued as of the time of such issuance of
Options or Convertible Securities; provided, however, that Additional Shares of
Common Stock shall not be deemed to have been issued unless the consideration
per share (determined pursuant to Section 6(d)(5) hereof) of such Additional
Shares of Common Stock would be less than the Conversion Price in effect on the
date of and immediately prior to such issuance of Options or Convertible
Securities, or such record date, as the case may be; and provided further that
in any such case in which Additional Shares of Common Stock are deemed to be
issued:
(i) no further adjustments in the Conversion Price
shall be made upon the subsequent issue of Convertible Securities or shares of
Common Stock upon the exercise of such Options or conversion or exchange of such
Convertible Securities;
(ii) if such Options or Convertible Securities by
their terms provided, with the passage of time or otherwise, for any increase in
the consideration payable to the Corporation, or decrease in the number of
shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof, the Conversion Price computed upon the original issue thereof (or upon
the occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange under such
Convertible Securities; provided, however, that no such adjustment of the
Conversion Price shall affect Common Stock previously issued upon conversion of
Series A Preferred Stock;
(iii) Upon the expiration of any such Options or
any rights of conversion or exchange under such Convertible Securities which
shall not have been exercised, the Conversion Price computed upon the original
issue thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon such expiration, be
recomputed as if:
(A) in the case of Convertible Securities
or Options for Common Stock, the only Additional Shares of Common Stock
issued were the shares of Common Stock, if any, actually issued upon the
exercise of such Options or the conversion or exchange of such
Convertible Securities and the consideration received therefor was the
consideration actually received by the Corporation for the issue of all
such Options, whether or not exercised, plus the consideration actually
received by the Corporation upon such exercise, or for the issue of all
such Convertible Securities which were actually converted or exchanged,
plus additional consideration, if any, actually received by the
Corporation upon such conversion or exchange, and
(B) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually issued
upon the exercise thereof were issued at the time of issue of such
Options and the consideration received by the Corporation for Additional
Shares of Common Stock deemed to have
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been then issued was the consideration actually received by the
Corporation for the issue of all such Options, whether or not exercised,
plus the consideration deemed to have been received by the Corporation
(determined pursuant to Section 6(d)(5)) upon the issue of the
Convertible Securities with respect to which such Options were actually
exercised;
(iv) no readjustment pursuant to Sections
6(d)(2)(ii) or (iii) above shall have the effect of increasing the Conversion
Price to an amount which exceeds the lower of (1) the Conversion Price on the
original adjustment date, or (2) the Conversion Price that would have resulted
from any issuance of Additional Shares of Common Stock between the original
adjustment date and such readjustment date;
(v) in the case of any Options which expire by
their terms not more than sixty (60) days after the date of issue thereof, no
adjustment of the Conversion Price shall be made, except as to shares of Series
A Preferred Stock converted in such period, until the expiration or exercise of
all such Options, whereupon such adjustment shall be made in the same manner
provided in Section 6(d)(3)(iii) above; and
(vi) if any such record date shall have been fixed
and such Options or Convertible Securities are not issued on the date fixed
therefor, the adjustment previously made in the Conversion Price which became
effective on such record date shall be canceled as of the close of business on
such record date, and shall instead be made on the actual date of issuance, if
any, of such Options or Convertible Securities.
(4) Adjustment of Conversion Price Upon Issuance of
Additional Shares of Common Stock. In the event the Corporation shall issue
Additional Shares of Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to Section 6(d)(3)) without consideration or for a
consideration per share less than the Conversion Price in effect on the date of
and immediately prior to such issue, then and in such event, the Conversion
Price shall be reduced, concurrently with such issue, to a price (calculated to
the nearest cent) determined by multiplying the Conversion Price then in effect
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding (determined on a fully diluted basis, as described below)
immediately prior to such issue plus the number of shares of Common Stock which
the aggregate consideration received by the Corporation for the total number of
Additional Shares of Common Stock so issued would purchase at the Conversion
Price then in effect, and the denominator of which shall be the number of shares
of Common Stock outstanding (determined on a fully diluted basis, as described
below) immediately prior to such issue plus the number of such Additional Shares
of Common Stock so issued. For the purposes of the above calculation, the number
of shares of Common Stock outstanding immediately prior to such issuance shall
be calculated on a fully diluted basis, as if all shares of Series A Preferred
Stock and all Convertible Securities had been fully converted into shares of
Common Stock immediately prior to such issuance and any outstanding Options had
been fully exercised immediately prior to such issuance (and the resulting
securities fully converted into shares of Common Stock, if so convertible) as of
such date but not including in such calculation any additional shares of Common
Stock issuable with respect to shares of Series A Preferred Stock, Convertible
Securities or outstanding Options solely as a result of the adjustment of
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the Conversion Price (or other conversion ratios) resulting from the issuance of
Additional Shares of Common Stock causing such adjustment. For the purposes of
the foregoing, outstanding Options shall be deemed to include (without
duplication) any Options issued to directors, officers, employees or advisors
of, or consultants to, the Corporation in accordance with plans or other
arrangements approved by the Board of Directors of the Corporation.
(5) Determination of Consideration. For purposes of this
Section 6(d), the consideration received by the Corporation for the issuance of
any Additional Shares of Common Stock shall be computed as follows:
(i) Cash and Property. Such consideration shall:
(A) insofar as it consists of cash, be
computed at the aggregate amount of cash received by the Corporation,
excluding amounts paid or payable for accrued interest or accrued
dividends;
(B) insofar as it consists of services,
goods or other property other than cash, be computed at the fair value
thereof at the time of such issue, as determined in good faith by the
Board of Directors of the Corporation; and
(C) in the event Additional Shares of
Common Stock are issued together with other shares or securities or
other assets of the corporation for consideration which covers both cash
and services, goods or other property other than cash, be in the
proportion of such consideration so received, computed as provided in
clauses (A) and (B) above, as determined in good faith by the Board of
Directors of the Corporation.
(ii) Options and Convertible Securities. The
consideration per share received by the corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Section 6(d)(3) relating to
Options and Convertible Securities, shall be determined by dividing
(A) the total amount, if any, received or
receivable by the Corporation as consideration for the issue of such
Options or Convertible Securities, plus the maximum aggregate amount of
additional consideration (as set forth in the instruments relating
thereto, without regard to any provision contained therein designed to
protect against dilution) payable to the Corporation upon the exercise
of such Options or the conversion or exchange of such Convertible
Securities, or in the case of Options for Convertible Securities, the
exercise of such Options for Convertible Securities and the conversion
or exchange of such Convertible Securities by
(B) the maximum number of shares of Common
Stock (as set forth in the instruments relating thereto, without regard
to any provision contained therein designed to protect against dilution)
issuable upon the exercise of such Options or the conversion or exchange
of such Convertible Securities.
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54
(e) Notice to Holders. In the event the Corporation shall propose
to take any action of the type described in subsections (a), (b), (c) and (d) 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.
(f) 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 Chief Financial
Officer.
(g) 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.
(h) Stockholder Approval. Notwithstanding any other provision in
this Section 6 to the contrary, no adjustment (other than as set forth in this
Section 6(h)) shall be made in the Conversion Price prior to the receipt by the
Corporation of any requisite stockholder approval required by the rules of the
National Association of Securities Dealers, Inc., if such rules are applicable
to such adjustment. If such rules are applicable, (i) the Conversion Price shall
immediately be adjusted to the maximum extent as would not require stockholder
approval under such rules and (ii) the Corporation shall use its commercially
reasonable efforts to obtain such stockholder approval as soon as reasonably
practicable, including by calling a special meeting of stockholders to vote on
such Conversion Price adjustment.
7. 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
Certificate of Designation and in the taking of all such action as may be
necessary or appropriate in order to protect the conversion and other rights of
the holders of the shares of Series A Preferred Stock against impairment of any
kind.
8. 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.
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FURTHER RESOLVED, that the statements contained in the foregoing
resolutions creating and designating the said Series A Convertible issue of
Preferred Stock 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.]
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IN WITNESS WHEREOF, said Corporation has caused this Certificate to be
signed by its Chief Financial Officer, this ____ day of June, 2000. 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.
-----------------------------------
Xxxxxx Xxxx
Chief Financial Officer
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EXHIBIT C
FORM OF REGISTRATION RIGHTS AGREEMENT
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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") is entered into
this 8th day of June, 2000, by and among XXX.XXX, 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 27,437 shares of the Company's Series A Convertible Preferred Stock,
$.001 par value (the "SERIES A PREFERRED STOCK"), convertible into shares of the
Company's Common Stock, $.001 par value (the "COMMON STOCK"), pursuant to that
certain Stock Purchase Agreement dated June 8, 2000, between the Company and
Vulcan (the "STOCK PURCHASE AGREEMENT"). Pursuant to the Stock Purchase
Agreement, the Company is also issuing to Vulcan a warrant (the "VULCAN
WARRANT") to purchase additional shares of the Company's Common Stock.
Capitalized terms used herein but not defined shall have the meanings set forth
for such terms in the Stock Purchase Agreement.
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.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended
from time to time.
FORM S-3 means such form under the Securities Act as in effect on
the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
HOLDERS: Vulcan, all of its Affiliates (including without
limitation Xxxx X. Xxxxx), any Person to which Registrable Securities are
transferred by Vulcan and its Affiliates for purposes of Xxxx X. Xxxxx'x estate
planning, and any Person to whom
59
Registrable Securities are 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 or upon exercise of the Vulcan Warrant) plus any
shares received 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 on the later of the date that is
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
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registration rights contemplated by this Section 2.1 may be exercised only three
(3) times by the Majority Holders during the term of this Agreement; provided,
however, the request for registration shall not be deemed made if either (i) the
Registration Statement does not become effective under the Securities Act
(including without limitation if the Selling Holders withdraw the Registration
Statement, provided in case of such withdrawal the request for registration will
be deemed made by the Majority Holders 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); and provided further that such a demand may not be exercised
more than once in any twelve-month period (subject to the same exception set
forth in the previous proviso). 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 commercially reasonable 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
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contemplating filing a registration statement in connection with the offering of
its securities (a "COMPANY OFFERING") within 90 days of delivery of the Demand
Notice, or (ii) the Company determines in good faith that a registration
pursuant to the Demand Notice might interfere with or adversely affect the
negotiations or completion of any transaction that is being contemplated by the
Company at the time the right to delay is exercised (a "TRANSACTION"); provided,
however, that such deferral may not be utilized more than once in any twelve
(12) month period.
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 (i) on Form X-0, Xxxx X-0 or comparable
forms, or (ii) with respect to an employee benefit plan, or (iii) solely in
connection with a Rule 145 transaction 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 commercially reasonable 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.
2.3 Form S-3 Registration. In case the Company shall receive from
any Holder or Holders a written request or requests that the Company effect a
registration on
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Form S-3 and any related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such Holder or Holders, the Company
will:
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, use all commercially reasonable efforts
to effect such registration and all such qualifications and compliances as may
be so requested and as would permit or facilitate the sale and distribution of
all or such portion of such Holder's or Holders' Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any other Holder or Holders joining in such request as are
specified in a written request given within twenty (20) days after receipt of
such written notice from the Company; provided, however, that the Company shall
not be obligated to take any action to effect any such registration,
qualification or compliance pursuant to this Section 2.3:
(i) If the Company is not qualified as a registrant entitled to
use Form S-3;
(ii) If the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than $2,500,000;
(iii) For the reasons, and under the circumstances described, in
Section 2.1(d), in which event the Company shall have the right to defer the
filing of the Form S-3 registration statement for a period of not more than 90
days after receipt of the request of the Holder or Holders under this Section
2.3; provided, however, that such deferral may not be utilized more than once in
any twelve (12) month period;
(iv) If the Company has, within the six (6) month period
preceding the date of such request, previously effected a registration pursuant
to Section 2.1 or on Form S-3 pursuant to this Section 2.3; or
(v) Within 180 days after the effective date of any registration
statement filed by the Company in connection with a registered public offering
of the Company's securities solely for cash, other than a registration (i) on
Form X-0, X-0 or comparable forms, or (ii) with respect to an employee benefit
plan, or (iii) solely in connection with a Rule 145 transaction under the
Securities Act.
3. Hold-Back Agreements.
3.1 Restrictions on Public Sale by Holders. Each Selling Holder
whose Registrable Securities are covered by a Registration Statement filed
pursuant to Section 2 hereof agrees, if requested by the managing underwriters
in an underwritten offering, not to effect any public sale or distribution of
securities of the Company of the same class as the securities included in such
Registration Statement during a period, not to exceed 90 days, beginning on the
closing date of each underwritten offering made pursuant to such
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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
commercially reasonable 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 five (5) business
days), or such shorter period which will terminate when all Registrable
Securities covered by such Registration Statement have been sold.
4.3 Notification. Immediately notify the Selling Holders and the
managing underwriters, if any, and (if requested by any such Person) confirm
such advice in writing, (i) when a Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to a Registration
Statement or any post-effective amendment, when the same has become effective,
(ii) of the issuance by the SEC of any stop order suspending the effectiveness
of the Registration Statement or the initiation of any proceeding for that
purpose, (iii) of the receipt by the Company of any notification with respect to
the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction or the initiation or threatening of any proceeding for
such purpose, and (iv) of the happening of any event which makes any statement
made in the Registration Statement, the Prospectus or any document incorporated
therein by reference untrue or which requires the making of any changes in the
Registration Statement, the Prospectus, or any document incorporated therein by
reference so that they will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statement therein not misleading.
4.4 Stop Orders. Make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of a Registration Statement
or the qualification of any Registrable Securities for sale in any jurisdiction
at the earliest possible moment.
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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 commercially reasonable efforts to register or qualify or
cooperate with the Selling Holders, the underwriters, if any, and their
respective counsel in connection with the registration or qualification of such
Registrable Securities for offer and sale under the securities or blue sky laws
of such jurisdictions within the United States as any Selling Holder or
underwriter reasonably requests, and do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by the Registration Statement; provided, however,
that the Company will not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which would
subject it to general service of process or taxation in any such jurisdiction
where it is not then so subject.
4.9 Amendments Upon Changes. Upon the occurrence of any event
contemplated by Sections 4.3(ii), (iii) or (iv) or 4.4 above, prepare, as
promptly as practicable, a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document incorporated
therein by reference, or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities being sold thereunder,
such Prospectus will not contain an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein not
misleading.
4.10 Underwriting Agreements. Enter into such customary
agreements (including an underwriting agreement) and take all such other actions
reasonably required in connection therewith in order to expedite or facilitate
the disposition of such Registrable Securities.
4.11 Compliance with Laws; Section 11(a). Otherwise use its best
efforts to comply with all applicable federal and state securities laws
(including without limitation the rules and regulations of the SEC), and make
generally available to its security holders
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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
commercially reasonable 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.
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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, to the full extent permitted by law, 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
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and effect regardless of any investigation made by or on behalf of an
indemnified party and shall survive the transfer of Registrable Securities by
the Selling Holder.
7.2 Indemnification by Holders. In connection with the
Registration Statements hereunder, each Selling Holder agrees to indemnify and
hold harmless, 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.
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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
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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 it will timely 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. The Company also
agrees that it will take commercially reasonable efforts to enable the Holders
to utilize Form S-3 for the sale of their Registrable Securities. 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 and such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the SEC or any
state securities authorities which permits the selling of any such securities
without registration or pursuant to such form.
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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) (A) the transferee is a Vulcan
Affiliate, (B) as a result of such transfer, the transferee holds at least
250,000 shares of Common Stock (assuming conversion into or exercise for Common
Stock, at the conversion rate or exercise price then in effect, if the transfer
is of Series A Preferred Stock or the Vulcan Warrant (in whole or in part), as
applicable) or (C) such transferee is a bank, insurance company or other
financial institution or any assignee of the same that has received shares of
Common Stock as a result of its foreclosure on any shares of Series A Preferred
Stock or Common Stock, that were pledged, mortgaged or otherwise encumbered by
Holder for financing purposes.
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 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, 0000 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxx Xxxxx, XX 00000,
Attention: Chief Financial Officer, facsimile (000) 000-0000, with a copy to
Xxxxxx Godward LLP, 0000 Xxxxxxxxx Xxxxx, Xxxxx 0000, Xxx Xxxxx, XX 00000,
Attention: Xxxxx X. Xxxxxxxx, Esq.; 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
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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.
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
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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.]
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SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth hereinabove.
XXX.XXX, INC.
By:
---------------------------------
Xxxxxx Xxxx
Chief Financial Officer
VULCAN VENTURES INCORPORATED
By:
---------------------------------
Xxxxxxx X. Xxxxx
President
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EXHIBIT D
FORM OF OPINION FROM XXXXXX GODWARD LLP
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[XXXXXX GODWARD LLP LETTERHEAD]
June 8, 2000
Vulcan Ventures Incorporated
000xx Xxxxxx X.X., Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
RE: STOCK PURCHASE AGREEMENT DATED AS OF JUNE 8, 2000
We have acted as counsel for XXX.XXX, Inc., a Delaware corporation (the
"COMPANY"), in connection with the issuance and sale of 27,437 shares of the
Company's Series A Convertible Preferred Stock (the "SHARES") to Vulcan Ventures
Incorporated, a Washington corporation (the "PURCHASER") under the Stock
Purchase Agreement dated as of June 8, 2000 (the "AGREEMENT"). We are rendering
this opinion pursuant to Section 2(ii) of the Agreement. Except as otherwise
defined herein, capitalized terms used herein have the respective meanings given
to them in the Agreement.
In connection with this opinion, we have examined and relied upon the Agreement,
the Registration Rights Agreement dated as of June 8, 2000 by and between the
Company and the Purchaser (the "REGISTRATION RIGHTS AGREEMENT"), the Certificate
of Designation and the warrant to purchase shares of the Company's Common Stock
(the "VULCAN WARRANT") issued to the Purchaser (collectively, the "TRANSACTION
DOCUMENTS"). We also have examined and relied upon the representations and
warranties as to factual matters contained in and made pursuant to the
Transaction Documents by the various parties and originals or copies certified
to our satisfaction, of such records, documents, certificates, opinions,
memoranda and other instruments as in our judgment are necessary or appropriate
to enable us to render the opinion expressed below. Where we render an opinion
"to the best of our knowledge" or concerning an item "known to us" or our
opinion otherwise refers to our knowledge, it is based solely upon (i) an
inquiry of attorneys within this firm who perform legal services for the
Company, (ii) receipt of a certificate executed by an officer of the Company
covering such matters, and (iii) such other investigation, if any, that we
specifically set forth herein.
In rendering this opinion, we have assumed: the genuineness and authenticity of
all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents (except the due authorization, execution and delivery
by the Company of the Transaction Documents), where authorization, execution and
delivery are prerequisites to the effectiveness of such documents. We also have
assumed: that all individuals executing and delivering documents had the legal
capacity to so execute and deliver; that you have received all
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Vulcan Ventures Incorporated
June 8, 2000
Page Two
documents you were to receive under the Agreement; that each of the Transaction
Documents is an obligation binding upon you; that you have filed any required
California franchise or income tax returns and have paid any required California
franchise or income taxes; and that there are no extrinsic agreements or
understandings among the parties to any of the Transaction Documents that would
modify or interpret the terms of the Agreement or the respective rights or
obligations of the parties thereunder.
Our opinion is expressed only with respect to the federal laws of the United
States of America, the laws of the State of California and the General
Corporation Law of the State of Delaware. We express no opinion as to whether
the laws of any particular jurisdiction apply, and no opinion to the extent that
the laws of any jurisdiction other than those identified above are applicable to
the subject matter hereof. We note that the parties to the Registration Rights
Agreement and the Vulcan Warrant have designated the laws of the State of
Delaware as the laws governing such agreements. Our opinion in paragraph 5 below
as to the validity, binding effect and enforceability of the Registration Rights
Agreement and the Vulcan Warrant is premised upon the result that would be
obtained if a California court were to apply the internal laws of the State of
California (notwithstanding the designation of the laws of the State of Delaware
to the interpretation and enforcement of the Registration Rights Agreement and
the Vulcan Warrant). This opinion is subject to, and we render no opinion as to,
the limitations and exceptions applicable to the enforceability of contracts and
obligations generally, including, without limitation, the following: (a) the
effect of the laws of bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws now or hereinafter in effect
generally relating to or affecting the rights and remedies of creditors; (b) the
effect of general principles of equity, including, without limitation, concepts
of materiality, reasonableness, good faith and fair dealing; (c) the
availability of specific performance, injunctive relief and other equitable
remedies (regardless of whether any such remedy is considered in a proceeding at
law or in equity); (d) the enforceability of the indemnification provisions
contained in the Registration Rights Agreement; and (e) the enforceability of
any of the agreements (other than the other Transaction Documents) attached as
exhibits to the Agreement or executed pursuant to covenants contained in the
Agreement. In addition, we have not considered and express no opinion as to the
possible outcome of any attack on the transactions contemplated by the Agreement
based upon equitable considerations, as to which we have no information. We are
not rendering any opinion as to compliance with any antifraud law, rule or
regulation relating to securities, or to the sale or issuance thereof.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
1. The Company has been duly incorporated and is a validly existing
corporation under the laws of the State of Delaware.
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Vulcan Ventures Incorporated
June 8, 2000
Page Three
2. Each of the Transaction Documents to which the Company is a party has
been duly and validly authorized, executed and delivered by the Company.
3. The Certificate of Designation has been filed with the Secretary of
State of the State of Delaware.
4. The rights, preferences and privileges of the Series A Convertible
Preferred Stock are as stated in the Certificate of Designation. The
Shares have been duly authorized and, upon issuance and delivery against
payment therefor in accordance with the terms of the Agreement, will be
validly issued, fully paid and nonassessable. The shares of Common Stock
issuable upon conversion of the Shares have been duly authorized and,
upon issuance in accordance with the terms of the Certificate of
Designation, will be validly issued, fully paid and nonassessable. Upon
issuance following exercise and payment of the exercise price of the
Vulcan Warrant, the shares of Common Stock issuable upon exercise of the
Vulcan Warrant (the "WARRANT SHARES") will be validly issued, fully paid
and nonassessable. The issuance of the Shares and Warrant Shares, in
accordance with the terms of the Certificate of Designation and the
Vulcan Warrant, respectively, will not entitle the stockholders of the
Company to exercise any preemptive rights or similar rights pursuant to
the Company's Amended and Restated Certificate of Incorporation or
Bylaws, or to our knowledge, by statute or pursuant to any agreement by
which the Company is bound.
5. Each of the Transaction Documents is a valid and legally binding
obligation of the Company, enforceable against the Company in accordance
with its terms.
6. Prior to the execution and delivery of the Agreement, the Board of
Directors of the Company took 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 the
consummation of the Closing or the other transactions contemplated by
the Transaction Documents.
7. The execution and delivery of the Transaction Documents do not, and,
subject to obtaining the consents set forth in Schedule 3.4 of the
Agreement, the performance by the Company of its obligations under the
Transaction Documents and the consummation of the transactions
contemplated thereby do not violate any provision of the Company's
Amended and Restated Certificate of Incorporation or Bylaws, and do not
violate or contravene (a) any material governmental statute, rule or
regulation applicable to the transactions contemplated by the Agreement,
or (b) any order, writ, judgment, injunction, decree, determination or
award which has been entered against the Company and of which we are
aware, the violation or contravention of which would have a Material
Adverse Effect.
78
Vulcan Ventures Incorporated
June 8, 2000
Page Four
This opinion is intended solely for your benefit and is not to be made available
to or be relied upon by any other person, firm, or entity without our prior
written consent.
Very truly yours,
COOLEY GODWARD LLP
79
EXHIBIT E
FORM OF OPINION FROM IRELL & XXXXXXX LLP
-28-
80
[IRELL & XXXXXXX LLP LETTERHEAD]
June 8, 2000
XXX.XXX, Inc.
0000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Re: Stock Purchase Agreement, dated as of June 8, 2000, between
XXX.XXX, Inc. and Vulcan Ventures Incorporated (the "Agreement")
Ladies and 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 Registration Rights Agreement, dated as of June
8, 2000, between Purchaser and XXX.XXX, Inc. (the "Company").
For purposes of this opinion, the Agreement and the Registration Rights
Agreement referred to above shall hereinafter be referred to collectively as the
"Transaction Documents" and each as a "Transaction Document."
We have reviewed such matters of fact and law and documents as we have
deemed necessary or relevant as a basis for this opinion. In our review, we have
assumed, without investigation, the legal capacity of all natural persons
signing documents in their respective individual capacities, the genuineness of
all signatures not witnessed by us, the authenticity of all documents submitted
to us as originals, the lack of any undisclosed modifications, waivers or
amendments to any agreements reviewed by us, the conformity to original
documents of all documents submitted to us as certified, photostatic or
telecopied copies, and the authenticity of the originals of such 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).
81
XXX.XXX, Inc.
June 8, 2000
Page 2
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 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 performance by Purchaser of the Transaction Documents or the consummation of
the transactions contemplated thereby, violates (i) any provision of the
articles of incorporation or bylaws of Purchaser, (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, or (iii) any order, writ, judgment,
injunction, decree, determination or award which has been entered against
Purchaser and of which we are aware.
The opinions expressed above are subject to and limited by the
limitations and exceptions applicable to the enforceability of contracts and
obligations generally, including, but not limited to, the following:
(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;
82
XXX.XXX, Inc.
June 8, 2000
Page 3
(d) the effect of (i) any antifraud law, rule or regulation relating to
securities, or to the sale or issuance thereof, 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.
For the purposes of our opinion expressed in paragraph 1 above, we have
relied solely upon a good standing certificate issued by the Secretary of State
of the State of Washington.
In addition, for purposes of our opinion expressed in paragraph 3 above
as it applies to the various restrictive covenants in the Agreement applicable
to Purchaser during the period from the closing to the Standstill Expiration
Date, we have assumed that the directors of the Company properly exercised their
fiduciary duties in requesting such restrictive covenants and will properly
exercise their fiduciary duties in enforcing them.
Our opinions expressed herein are limited to the laws of the State of
California, the federal law of the United States and the Delaware General
Corporation Law, 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 Registration Rights Agreement
purports to be governed by the laws of the State of Delaware. For purposes of
this opinion, we have assumed, without investigation, that the governing law of
the Transaction Documents (except as to those portions of the Transaction
Documents as to which the Delaware General Corporation Law would be applicable)
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 law or the law of any jurisdiction other than California, and we
express no opinion as to the similarity of Delaware and California law or the
law of any other jurisdiction. No opinion is expressed as to whether a court
would recognize and enforce the provisions of the Transaction Documents and such
other agreements and instruments providing that the laws of a particular state
shall govern.
This opinion is solely for your benefit pursuant to the Agreement and is
not to be made available to or relied upon by any other person or entity or by
you for any other purpose or in any other context without our express prior
written consent.
Very truly yours,
IRELL & XXXXXXX LLP
