EXHIBIT 1.01
COMMON STOCK PURCHASE AGREEMENT
Dated as of February 17, 2000
by and between
▇▇▇▇▇▇▇.▇▇▇, INC.
and
ACQUA WELLINGTON
NORTH AMERICAN EQUITIES FUND, LTD.
TABLE OF CONTENTS
Page
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ARTICLE I Definitions..................................................... 1
Section 1.1 Definitions..................................................... 1
ARTICLE II Purchase and Sale of Common Stock............................... 2
Section 2.1 Purchase and Sale of Stock...................................... 2
Section 2.2 The Shares...................................................... 3
Section 2.3 Registration Statement and Prospectus........................... 3
Section 2.4 Purchase Price and Closing...................................... 3
ARTICLE III Representations and Warranties.................................. 3
Section 3.1 Representation and Warranties of the Company.................... 3
Section 3.2 Representation and Warranties of the Purchaser.................. 10
ARTICLE IV Covenants....................................................... 12
Section 4.1 Securities...................................................... 12
Section 4.2 Registration and Listing........................................ 12
Section 4.3 Registration Statement.......................................... 12
Section 4.4 Compliance with Laws............................................ 12
Section 4.5 Keeping of Records and Books of Account......................... 13
Section 4.6 Reporting Requirements.......................................... 13
Section 4.7 Other Financing Agreements...................................... 13
Section 4.8 Non-public Information.......................................... 14
Section 4.9 No Stop Orders.................................................. 14
Section 4.10 Amendments to the Registration Statement........................ 14
Section 4.11 Prospectus Delivery............................................. 14
ARTICLE V Conditions to Closing and Draw Downs............................ 15
Section 5.1 Conditions Precedent to the Obligation of
the Company to Sell the Shares.................................. 15
Section 5.2 Conditions Precedent to the Obligation of the Purchaser to Close 16
Section 5.3 Conditions Precedent to the Obligation of the Purchaser
to Accept a Draw Down and Purchase the Shares................... 17
ARTICLE VI Draw Down Terms; Call Option.................................... 17
Section 6.1 Drawn Down Terms................................................ 17
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ARTICLE VII Termination..................................................... 20
Section 7.1 Termination by Mutual Consent................................... 20
Section 7.2 Other Termination............................................... 20
Section 7.3 Effect of Termination........................................... 21
ARTICLE VIII Indemnification................................................. 21
Section 8.1 General Indemnity............................................... 21
Section 8.2 Indemnification Procedures...................................... 22
ARTICLE IX Miscellaneous................................................... 23
Section 9.1 Fees and Expenses............................................... 23
Section 9.2 Specific Enforcement, Consent to Jurisdiction................... 23
Section 9.3 Entire Agreement; Amendment..................................... 24
Section 9.4 Notices......................................................... 24
Section 9.5 Waivers......................................................... 25
Section 9.6 Headings........................................................ 25
Section 9.7 Successors and Assigns.......................................... 25
Section 9.8 Governing Law................................................... 26
Section 9.9 Survival........................................................ 26
Section 9.10 Counterparts.................................................... 26
Section 9.11 Publicity....................................................... 26
Section 9.12 Severability.................................................... 26
Section 9.13 Further Assurances.............................................. 26
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COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
February 17, 2000 by and between ▇▇▇▇▇▇▇.▇▇▇, Inc., a Delaware corporation (the
"Company") and Acqua Wellington North American Equities Fund, Ltd., a company
organized under the laws of the Commonwealth of The Bahamas (the "Purchaser").
The parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1 Definitions.
(a) "Call Option" shall have the meaning assigned to such term in
Section 6.2 hereof.
(b) "Commission" shall have the meaning assigned to such term in
Section 2.3 hereof.
(c) "Commission Documents" shall have the meaning assigned to such
term in Section 3.1(f) hereof.
(d) "Commission Filings" means the Company's Form 10-K for the fiscal
year ended December 31, 1998, its Registration Statement on Form S-3 No. 333-
91553, and all other filings made by the Company after the date hereof pursuant
to the Securities Exchange Act of 1934.
(e) "Draw Down" shall have the meaning assigned to such term in
Section 6.1(a) hereof.
(f) "Draw Down Amount" means the actual amount of a Draw Down up to
$30,000,000.
(g) "Draw Down Discount Percentage" means (i) 95.75% if the Threshold
Price is equal to or exceeds $22.00; (ii) 95.2% if the Threshold Price is equal
to or exceeds $18.00 but is less than $22.00; (iii) 94.8% if the Threshold Price
is equal to or exceeds $14.00 but is less than $18.00; and (iv) 94.4% if the
Threshold Price is equal to or exceeds $10.00 but is less than $14.00.
(h) "Draw Down Notice" shall have the meaning assigned to such term
in Section 6.1(j) hereof.
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(i) "Draw Down Pricing Period" shall mean a period of eighteen (18)
consecutive trading days starting with the first trading day specified in Draw
Down Notice.
(j) "Effective Date" shall mean the date the Registration Statement
is declared effective.
(k) "Material Adverse Effect" shall mean any effect on the business,
results of operations, prospects, assets or financial condition of the Company
that is material and adverse to the Company and its subsidiaries, taken as a
whole and/or any condition, circumstance, or situation that would prohibit the
Company from entering into and performing any of its obligations under this
Agreement in any material respect.
(l) "Material Change in Ownership" shall mean that, as of a
particular measurements date, the officers and directors of the Company shall
beneficially own in the aggregate less than 2% of the outstanding Common Stock
of the Company that those officers and directors beneficially own as of the date
hereof.
(m) "Prospectus" as used in this Agreement means the prospectus in
the form included in the Registration Statement, as supplemented from time to
time pursuant to Rule 424(b) of the Securities Act of 1933, as amended (the
"Securities Act").
(n) "Registration Statement" shall mean the registration statement on
Form S-3, Commission File Number 333-91553 under the Securities Act, filed with
the Securities and Exchange Commission for the registration of the Shares, as
such Registration Statement may be amended from time to time.
(o) "Settlement Date" shall have the meaning assigned to such term in
Section 6.1(d) hereof.
(p) "Shares" shall mean the shares of Common Stock of the Company
that may be purchased hereunder.
(q) "Threshold Price" is the lowest VWAP at which the Company will
sell Shares during each Draw Down Pricing Period.
(r) "VWAP" shall mean the daily volume weighted average price (based
on a trading day from 9:30 a.m. to 4:00 p.m., E.S.T.) of the Company on NASDAQ
(or any successor thereto) as reported by Bloomberg Financial LP using the AQR
function.
ARTICLE II
Purchase and Sale of Common Stock
Section 2.1 Purchase and Sale of Stock. Subject to the terms and
conditions of this Agreement, the Company shall issue and sell to the Purchaser
and the Purchaser shall purchase from the Company up to $100,000,000 of the
Company's common stock, $.001 par value per share (the "Common Stock"), based on
Draw Downs in accordance with Section 6.1
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and a Call Option in accordance with Section 6.2. In no event shall the amount
of Common Stock purchased by the Purchaser exceed $30,000,000 per Draw Down.
Section 2.2 The Shares. The Company has authorized and has reserved
and covenants to continue to reserve, subject to Section 4.4(b) hereof, free of
preemptive rights and other similar contractual rights of stockholders,
5,000,000 shares of its Common Stock to cover the Shares to be issued in
connection with all Draw Downs.
Section 2.3 Registration Statement and Prospectus. The Company has
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act, the
Registration Statement, including a prospectus subject to completion relating to
the Shares. The Registration Statement was declared effective on February 3,
2000.
Section 2.4 Purchase Price and Closing. In consideration of and in
express reliance upon the representations, warranties, covenants, terms and
conditions of this Agreement, the Company agrees to issue and sell to the
Purchaser and the Purchaser, agrees to purchase from the Company, that number of
the Shares to be issued in connection with each Draw Down. The closing of the
execution and delivery of this Agreement (the "Closing") shall take place at the
offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP, The Chrysler Building, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇ at 5:00 p.m. Eastern Time on (i) February 17, 2000, or (ii) such
other time and place or on such date as the Purchaser and the Company may agree
upon (the "Closing Date"). Each party shall deliver all documents, instruments
and writings required to be delivered by such party pursuant to this Agreement
at or prior to the Closing.
ARTICLE III
Representations and Warranties
Section 3.1 Representation and Warranties of the Company. The
Company hereby makes the following representations and warranties to the
Purchaser:
(a) Organization, Good Standing and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of [Delaware] and has the requisite corporate power to own, lease and
operate its properties and assets and to conduct its business as it is now being
conducted. As of the date hereof, the Company does not have any subsidiaries (as
defined in Section 3.1(g)) except as set forth in the Registration Statement and
in the Company's most recent Form 10-K, including the accompanying financial
statements (the "Form 10-K"), or in the Company's most recent Form 10-Q (the
"Form 10-Q"), or on Schedule 3.1(g) attached hereto. The Company and each such
subsidiary is duly qualified to do business as a foreign corporation and is in
good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary except for
any jurisdiction in which the failure to be so qualified will not have a
Material Adverse Effect.
(b) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and perform this Agreement and to issue and
sell the Shares in
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accordance with the terms hereof. The execution, delivery and performance of
this Agreement by the Company and the consummation by it of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action, and, except as contemplated by Section 4.5(b), no further
consent or authorization of the Company or its Board of Directors or
stockholders is required. This Agreement has been duly executed and delivered by
the Company. This Agreement constitutes, or when executed and delivered shall
constitute, a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor's rights and remedies or by
other equitable principles of general application.
(c) Capitalization. The authorized capital stock of the Company and
the shares thereof issued and outstanding as of the date hereof are set forth in
the Registration Statement or on Schedule 3.1(c) attached hereto. All of the
outstanding shares of the Company's Common Stock have been duly and validly
authorized, and are fully paid and non-assessable. Except as set forth in this
Agreement or as set forth in the Registration Statement, the Commission
Documents, the Commission Filings or on Schedule 3.1(c) attached hereto, as of
the date hereof, no shares of Common Stock are entitled to preemptive rights or
registration rights and there are no outstanding options, warrants, scrip,
rights to subscribe to, call or commitments of any character whatsoever relating
to, or securities or rights convertible into, any shares of capital stock of the
Company. Furthermore, except as set forth in this Agreement, the Registration
Statement, the Commission Documents or the Commission Filings or on Schedule
3.1(c) attached hereto, as of the date hereof, there are no contracts,
commitments, understandings, or arrangements by which the Company is or may
become bound to issue additional shares of the capital stock of the Company or
options, securities or rights convertible into shares of capital stock of the
Company. Except for customary transfer restrictions contained in agreements
entered into by the Company in order to sell restricted securities or as
described in the Registration Statement, the Commission Documents or the
Commission Filings, or on Schedule 3.1(c) attached hereto, as of the date
hereof, the Company is not a party to any agreement granting registration rights
to any person with respect to any of its equity or debt securities. Except as
set forth in the Registration Statement, the Commission Documents or the
Commission Filings or on Schedule 3.1(c) attached hereto, as of the date hereof,
the Company is not a party to, and it has no knowledge of, any agreement
restricting the voting or transfer of any shares of the capital stock of the
Company. Except as set forth in the Registration Statement, the Commission
Documents or the Commission Filings or on Schedule 3.1(c) attached hereto, the
offer and sale of all capital stock, convertible securities, rights, warrants,
or options of the Company issued prior to the Closing complied with all
applicable federal and state securities laws, and no stockholder has a right of
rescission or damages with respect thereto which would have a Material Adverse
Effect. The Company has furnished or made available to the Purchaser true and
correct copies of the Company's Certificate of Incorporation as in effect on the
date hereof (the "Articles"), and the Company's Bylaws as in effect on the date
hereof (the "Bylaws").
(d) Issuance of Shares. The Shares have been duly authorized by all
necessary corporate action and, when paid for or issued in accordance with the
terms hereof, the Shares shall be validly issued and outstanding, fully paid and
non-assessable, and the Purchaser shall be entitled to all rights accorded to a
holder of Common Stock.
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(e) No Conflicts. Except as disclosed on Schedule 3.1(e) attached
hereto, the execution, delivery and performance of this Agreement by the Company
and the consummation by the Company of the transactions contemplated therein do
not (i) violate any provision of the Company's Articles or Bylaws, (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Company is a party, (iii) create or impose a lien,
charge or encumbrance on any property of the Company under any agreement or any
commitment to which the Company is a party or by which the Company is bound or
by which any of its respective properties or assets are bound, or (iv) result in
a violation of any federal, state, local or foreign statute, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or any of its subsidiaries or by which
any property or asset of the Company or any of its subsidiaries are bound or
affected, except, in all cases, for such conflicts, defaults, terminations,
amendments, acceleration, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect. The Company is
not required under federal, state or local law, rule or regulation to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under this Agreement, or issue and sell the Shares in
accordance with the terms hereof (other than any filings which may be required
to be made by the Company with the Commission, or Nasdaq subsequent to the
Closing, and, any registration statement which may be filed pursuant hereto);
provided that, for purpose of the representation made in this sentence, the
Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Purchaser herein.
(f) Commission Documents, Financial Statements. The Common Stock of
the Company is registered pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, except as disclosed
in the Registration Statement, or the Commission Documents or the Commission
Filings or on Schedule 3.1(f) attached hereto, as of the date hereof, the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the Commission pursuant to the
reporting requirements of the Exchange Act, including material filed pursuant to
Section 13(a) or 15(d) of the Exchange Act (all of the foregoing including
filings incorporated by reference therein being referred to herein as the
"Commission Documents"). The Company has delivered or made available to the
Purchaser true and complete copies of the Commission Documents filed with the
Commission since December 31, 1998 and prior to the Closing Date. The Company
has not provided to the Purchaser any information which, according to applicable
law, rule or regulation, should have been disclosed publicly by the Company but
which has not been so disclosed, other than with respect to the transactions
contemplated by this Agreement. The Form 10-K for the year ended December 31,
1998 complied in all material respects with the requirements of the Exchange Act
and the rules and regulations of the Commission promulgated thereunder and other
federal, state and local laws, rules and regulations applicable to such
document, and, as of its date, such Form 10-K did not 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 therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of the Company included in the Commission Documents complied as to
form in all material respects with applicable accounting requirements and the
published rules and
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regulations of the Commission or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements), and fairly present in all material respects
the financial position of the Company and its subsidiaries as of the dates
thereof and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(g) Subsidiaries. The Commission Documents or Schedule 3.1(g)
attached hereto set forth each subsidiary of the Company as of the date hereof,
showing the jurisdiction of its incorporation or organization and showing the
percentage of each person's ownership of the outstanding stock or other
interests of such subsidiary. For the purposes of this Agreement, "subsidiary"
shall mean any corporation or other entity of which at least a majority of the
securities or other ownership interest having ordinary voting power (absolutely
or contingently) for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by the Company
and/or any of its other subsidiaries. Except as set forth in the Commission
Documents or the Commission Filings, none of such subsidiaries is a "significant
subsidiary" as defined in Regulation S-X.
(h) No Material Adverse Change. Since September 30, 1999, the
Company has not experienced or suffered any Material Adverse Effect.
(i) No Undisclosed Liabilities. Except as disclosed in the
Commission Documents or the Commission Filings or on Schedule 3.1(i) attached
hereto, neither the Company nor any of its subsidiaries has any liabilities,
obligations, claims or losses (whether liquidated or unliquidated, secured or
unsecured, absolute, accrued, contingent or otherwise) that would be required to
be disclosed on a balance sheet of the Company or any subsidiary (including the
notes thereto) in conformity with GAAP and are not disclosed in the Commission
Documents, other than those incurred in the ordinary course of the Company's or
its subsidiaries' respective businesses since December 31, 1998 and which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect.
(j) No Undisclosed Events or Circumstances. No event or circumstance
has occurred or exists with respect to the Company or its subsidiaries or their
respective businesses, properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed and which, individually or in the aggregate, do not or would not have
a Material Adverse Effect.
(k) Indebtedness. Schedule 3.1(k) sets forth as of December 31, 1999
all outstanding secured and unsecured Indebtedness of the Company or any
subsidiary, or for which the Company or any subsidiary has commitments. For the
purposes of this Agreement, "Indebtedness" shall mean (a) any liabilities for
borrowed money or amounts owed in excess of $250,000 (other than accounts
payable and liabilities incurred in the ordinary course of business), (b) all
guaranties, endorsements and other contingent obligations in respect of
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Indebtedness of others, whether or not the same are or should be reflected in
the Company's balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value of
any lease payments in excess of $100,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any subsidiary is
in default with respect to any Indebtedness.
(l) Title to Assets. Each of the Company and the subsidiaries has
good and marketable title to all of its real and personal property reflected in
the Commission Documents, free of any mortgages, pledges, charges, liens,
security interests or other encumbrances, except for those indicated in the
Commission Documents, the Commission Filings or on Schedule 3.1(l) attached
hereto or such that could not reasonably be expected to cause a Material Adverse
Effect. All leases of the Company and each of its subsidiaries are valid and
subsisting and in full force and effect in all material respects.
(m) Actions Pending. There is no action, suit, claim, investigation
or proceeding pending or, to the knowledge of the Company, threatened against
the Company or any subsidiary which questions the validity of this Agreement or
the transactions contemplated hereby or any action taken or to be taken pursuant
hereto or thereto. Except as set forth in the Commission Documents or the
Commission Filings or on Schedule 3.1(m) attached hereto, there is no action,
suit, claim, investigation or proceeding pending or, to the knowledge of the
Company, threatened, against or involving the Company, any subsidiary or any of
their respective properties or assets and which, if adversely determined, is
reasonably likely to result in a Material Adverse Effect.
(n) Compliance with Law. The business of the Company and the
subsidiaries has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, except as set forth in the Commission Documents or the Commission
Filings or on Schedule 3.1(n) attached hereto or such that do not cause a
Material Adverse Effect. The Company and each of its subsidiaries have all
franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals necessary for the conduct of its business as now
being conducted by it, except for such franchises, permits, licenses, consents
and other governmental or regulatory authorizations and approvals, the failure
to possess which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
(o) Certain Fees. Except as set forth on Schedule 3.1(o) attached
hereto, no brokers, finders or financial advisory fees or commissions will be
payable by the Company or any subsidiary with respect to the transactions
contemplated by this Agreement.
(p) Disclosure. To the best of the Company's knowledge, neither this
Agreement or the Schedules hereto nor any other documents, certificates or
instruments furnished to the Purchaser by or on behalf of the Company or any
subsidiary in connection with the transactions contemplated by this Agreement
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made herein or therein, in the light
of the circumstances under which they were made herein or therein, not
misleading.
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(q) Operation of Business. The Company or one of the subsidiaries
owns or possesses all patents, trademarks, service marks, trade names,
copyrights, licenses and authorizations as set forth in the Commission Documents
or the Commission Filings or on Schedule 3.1(q) attached hereto and all rights
with respect to the foregoing, which are necessary for the conduct of its
business as now conducted without any conflict with the rights of others, except
to the extent set forth in the Commission Documents or that a Material Adverse
Effect could not reasonably be expected to result from such conflict.
(r) Environmental Compliance. Except as disclosed in the
Commission Filings or on Schedule 3.1(r) attached hereto, the Company and each
of its subsidiaries have obtained all material approvals, authorization,
certificates, consents, licenses, orders and permits or other similar
authorizations of all governmental authorities, or from any other person, that
are required under any Environmental Laws. "Environmental Laws" shall mean all
applicable laws relating to the protection of the environment including, without
limitation, all requirements pertaining to reporting, licensing, permitting,
controlling, investigating or remediating emissions, discharges, releases or
threatened releases of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, materials or wastes, whether solid, liquid or
gaseous in nature, into the air, surface water, groundwater or land, or relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, material or wastes, whether solid, liquid or
gaseous in nature. Except for such instances as would not individually or in the
aggregate have a Material Adverse Effect, to the best of the Company's
knowledge, there are no past or present events, conditions, circumstances,
incidents, actions or omissions relating to or in any way affecting the Company
or its subsidiaries that violate or could reasonably be expected to violate any
Environmental Law after the Closing or that could reasonably be expected to give
rise to any environmental liability, or otherwise form the basis of any claim,
action, demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law, or (ii) based on or related to the manufacture, processing,
distribution, use, treatment, storage (including without limitation underground
storage tanks), disposal, transport or handling, or the emission, discharge,
release or threatened release of any hazardous substance.
(s) Material Agreements. Except as set forth in the Commission
Documents or on Schedule 3.1(s) attached hereto, neither the Company nor any
subsidiary is a party to any written or oral contract, instrument, agreement,
commitment, obligation, plan or arrangement, a copy of which would be required
to be filed with the Commission as an exhibit to a registration statement on
Form S-3 (collectively, "Material Agreements") if the Company or any subsidiary
were registering securities under the Securities Act. The Company and each of
its subsidiaries has in all material respects performed all the obligations
required to be performed by them to date under the foregoing agreements, have
received no notice of default and, to the best of the Company's knowledge are
not in default under any Material Agreement now in effect, the result of which
could reasonably be expected to cause a Material Adverse Effect.
(t) Transactions with Affiliates. Except as set forth in the
Commission Documents or the Commission Filings or on Schedule 3.1(t) attached
hereto, there are no loans, leases, agreements, contracts, royalty agreements,
management contracts or arrangements or other continuing transactions exceeding
$100,000 between (a) the Company, any subsidiary or any of their respective
customers (excluding agreements related to the purchase or lease of the
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Company's products) or suppliers on the one hand, and (b) on the other hand, any
officer or director of the Company, or any of its subsidiaries, or any person
who would be covered by Item 404(a) of Regulation S-K or any corporation or
other entity controlled by such officer or director.
(u) Securities Act of 1933. The Company has complied in all
material respects with all applicable federal and state securities laws in
connection with the offer, issuance and sale of the Shares hereunder.
(i) Each Prospectus included as part of the Registration
Statement as originally filed or as part of any amendment or
supplement thereto, or filed pursuant to Rule 424 under the Securities
Act, complied when so filed in all material respects with the
provisions of the Securities Act. The Commission has not issued any
order preventing or suspending the use of any Prospectus.
(ii) The Company meets the requirements for the use of Form S-3
under the Securities Act. The Registration Statement in the form in
which it became effective and also in such form as it may be when any
post-effective amendment thereto became effective and the Prospectus
and any supplement or amendment thereto when filed with the Commission
under Rule 424(b) under the Securities Act, complied in all material
respects with the provisions of the Securities Act and did not at any
such times contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein (in the case of the Prospectus, in the
light of the circumstances under which they were made) not misleading,
except that this representation and warranty does not apply to
statements in or omissions from the Registration Statement or the
Prospectus made in reliance upon and in conformity with information
relating to the Purchaser furnished to the Company in writing by or on
behalf of the Purchaser through you expressly for use therein.
(iii) The Company has not distributed and, prior to the
completion of the sale of the Shares to the Purchaser, will not
distribute any offering material in connection with the offer and sale
of the Shares other than the Registration Statement, the Prospectus or
other materials, if any, permitted by the Securities Act.
(v) Employees. As of the date hereof, neither the Company nor any
subsidiary has any collective bargaining arrangements or agreements covering any
of its employees, except as set forth in the Commission Documents or the
Commission Filings or on Schedule 3.1(v) attached hereto. As of the date hereof,
except as set forth in the Commission Documents or the Commission Filings or on
Schedule 3.1(v) attached hereto, neither the Company nor any subsidiary has any
employment contract, agreement regarding proprietary information, noncompetition
agreement, nonsolicitation agreement, confidentiality agreement, or any other
similar contract or restrictive covenant, relating to the right of any officer,
employee or consultant to be employed or engaged by the Company or such
subsidiary. As of the date hereof, since December 31, 1998, except as disclosed
in the Registration Statement, the Commission Documents, the Commission Filings
or Schedule 3.1(v), no officer, consultant or key employee of the Company or any
subsidiary whose termination, either individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect, has terminated or, to
the
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knowledge of the Company, has any present intention of terminating his or her
employment or engagement with the Company or any subsidiary.
(w) Use of Proceeds. The proceeds from the sale of the Shares will
be used by the Company and its subsidiaries for the purposes set forth in the
Prospectus under "Use of Proceeds".
(x) Public Utility Holding Company Act and Investment Company Act
Status. The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
(y) ERISA. No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan by the Company or any of
its subsidiaries which is or would have a Material Adverse Effect. The execution
and delivery of this Agreement and the issue and sale of the Shares will not
involve any transaction which is subject to the prohibitions of Section 406 of
ERISA or in connection with which a tax could be imposed pursuant to Section
4975 of the Internal Revenue Code of 1986, as amended, provided that, if any of
the Purchaser, or any person or entity that owns a beneficial interest in any of
the Purchaser, is an "employee pension benefit plan" (within the meaning of
Section 3(2) of ERISA) with respect to which the Company is a "party in
interest" (within the meaning of Section 3(14) of ERISA), the requirements of
Sections 407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in this
Section 2.1(ac), the term "Plan" shall mean an "employee pension benefit plan"
(as defined in Section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by the Company or
any subsidiary or by any trade or business, whether or not incorporated, which,
together with the Company or any subsidiary, is under common control, as
described in Section 414(b) or (c) of the Code.
(z) Acknowledgment Regarding Purchaser's Purchase of Shares. The
Company acknowledges and agrees that the Purchaser is acting solely in the
capacity of arm's length purchaser with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges that the
Purchaser is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement and the transactions
contemplated hereunder and any advice given by the Purchaser or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereunder is merely incidental to the Purchaser's purchase of the
Shares.
Section 3.2 Representation and Warranties of the Purchaser. The
Purchaser hereby makes the following representations and warranties to the
Company:
(a) Organization and Standing of the Purchaser. The Purchaser is a
limited liability company duly organized, validly existing and in good standing
under the laws of the Commonwealth of The Bahamas.
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(b) Authorization and Power. The Purchaser has the requisite
corporate power and authority to enter into and perform this Agreement and to
purchase the Shares in accordance with the terms hereof. The execution, delivery
and performance of this Agreement by Purchaser and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Purchaser, its
Board of Directors or stockholders is required. This Agreement constitutes, or
when executed and delivered shall constitute, a valid and binding obligation of
the Purchaser enforceable against the Purchaser in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, conservatorship,
receivership, or similar laws relating to, or affecting generally the
enforcement of, creditor's rights and remedies or by other equitable principles
of general application.
(c) No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by the Purchaser of the transactions contemplated
hereby and thereby or relating hereto do not and will not (i) result in a
violation of such Purchaser's charter documents or bylaws or (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Purchaser is a party, (iii) create or impose or lien,
charge or encumbrance on any property of the Purchaser under any agreement or
any commitment to which the Purchaser is party or by which the Purchaser is on
or by which any of its respective properties or assets are bound or (iv) result
in a violation of any law, rule or regulation, or any order, judgment or decree
of any court or governmental agency applicable to the Purchaser or its
properties, except for such conflicts, defaults and violations as would not,
individually or in the aggregate, prohibit or otherwise interfere with the
ability of the Purchaser to enter into and perform its obligations under this
Agreement in any material respect. The Purchaser is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under this Agreement or to purchase the Shares in accordance
with the terms hereof, provided that for purposes of the representation made in
this sentence, the Purchaser is assuming and relying upon the accuracy of the
relevant representations and agreements of the Company herein.
(d) Information. The Purchaser and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Shares which
have been requested by the Purchaser. The Purchaser and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. The
Purchaser has sought such accounting, legal and tax advice as it has considered
necessary to make an informed investment decision with respect to its
acquisition of the Shares. Purchaser understands that it (and not the Company)
shall be responsible for its own tax liabilities that may arise as a result of
this investment or the transactions contemplated by this Agreement.
(e) No Shorting. The Purchaser has the right to sell shares of the
Company's Common Stock equal in number to the number of the Shares required
pursuant to this Agreement to be purchased during the Draw Down Pricing Period.
The Purchaser covenants, however, that prior to and during the term of the Draw
Down Pricing Period, neither the Purchaser nor any of
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its affiliates nor any entity managed by the Purchaser will ever be in a net
short position with respect to shares of the Common Stock of the Company in any
accounts directly or indirectly managed by the Purchaser or any affiliate of the
Purchaser or any entity managed by the Purchaser.
ARTICLE IV
Covenants
The Company covenants with the Purchaser as follows, which covenants are
for the benefit of the Purchaser and its permitted assignees (as defined
herein).
Section 4.1 Securities. The Company shall notify the Commission and
Nasdaq, if applicable, in accordance with their rules and regulations, of the
transactions contemplated by this Agreement, and shall take all other necessary
action and proceedings as may be required and permitted by applicable law, rule
and regulation, for the legal and valid issuance of the Shares to the Purchaser
or subsequent holders.
Section 4.2 Registration and Listing. The Company will take all
action necessary to cause its Common Stock to continue to be registered under
Sections 12(b) or 12(g) of the Exchange Act, will comply in all respects with
its reporting and filing obligations under the Exchange Act, and will not take
any action or file any document (whether or not permitted by the Securities Act
or the rules promulgated thereunder) to terminate or suspend such registration
or to terminate or suspend its reporting and filing obligations under the
Exchange Act or Securities Act, except as permitted herein. The Company will
take all action necessary to continue the listing or trading of its Common Stock
and the listing of the Shares purchased by Purchaser hereunder on the NASDAQ or
any relevant market or system, if applicable, and will comply in all respects
with the Company's reporting, filing and other obligations under the bylaws or
rules of the NASD or any relevant market or system.
Section 4.3 Registration Statement. Before the Purchaser shall be
obligated to accept a Draw Down request from the Company, the Company shall have
caused a sufficient number of shares of Common Stock to be registered to cover
the Shares to be issued in connection with this Agreement.
Section 4.4 Compliance with Laws.
(a) The Company shall comply, and cause each subsidiary to comply,
with all applicable laws, rules, regulations and orders, noncompliance with
which could reasonably be expected to have a Material Adverse Effect.
(b) The Company will not be obligated to issue and the Purchaser
will not be obligated to purchase any shares of the Company's Common Stock which
would result in the issuance under this Agreement of Shares representing more
than nineteen and nine-tenths percent (19.9%) of the issued and outstanding
shares of the Company's Common Stock.
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Section 4.5 Keeping of Records and Books of Account. The Company
shall keep and cause each subsidiary to keep adequate records and books of
account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Company and
its subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section 4.6 Reporting Requirements. Upon request, the Company shall
furnish the following to the Purchaser so long as such Purchaser shall be
obligated hereunder to purchase Shares:
(a) Quarterly Reports filed with the Commission on Form 10-Q as soon
as available, and in any event within 45 days after the end of each of the first
three fiscal quarters of the Company; and
(b) Annual Reports filed with the Commission on Form 10-K as soon
as available, and in any event within 90 days after the end of each fiscal year
of the Company.
Section 4.7 Other Financing Agreements.
The Company is restricted from entering into any agreement with a
third party, the principal purpose of which is to secure debt or equity
financing for the Company ("Other Financing") without the prior consent of the
Purchaser, which consent will not be unreasonably withheld or delayed, or
without terminating its agreement with the Purchaser, except that the Company
may (i) enter into any loan, credit or lease facility with a bank or financing
institution, (ii) establish an employee stock option plan or agreement or
finance the acquisition of other companies, equipment, technologies or lines of
business and/or (iii) issue shares of Common Stock in connection with the
Company's current option plans and agreements or stock purchase plans and
agreements and, currently outstanding warrants, and (iv) issue its debt or
equity securities to one or more companies the principal business of which is
not the investment in the securities of other entities, or to Softbank, ▇▇▇▇
▇▇▇▇▇, Idealab or any entity affiliated with any such person, or to any person
or entity specifically identified by the board of directors of the Company as a
strategic partner of the Company, or in connection with the acquisition of other
companies, equipment, technologies or lines of business (each a "Permitted
Transaction"). If the Purchaser consents to the Company entering into an Other
Financing, the Purchaser shall have the option, which option shall be exercised
within ten (10) calendar days of its consent, to purchase all or a portion of
the Other Financing on the same, absolute terms and conditions contemplated
therein. If the Purchaser does not exercise its purchase option, the Company
shall have the right to close the Other Financing on the scheduled closing date
with a third party; provided that all of the terms and conditions of such
closing are substantially the same as those provided to the Purchaser.
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Section 4.8 Non-public Information. Neither the Company nor any of
its officers or agents shall disclose any material non-public information about
the Company to the Purchaser.
Section 4.9 No Stop Orders. The Company will advise the Purchaser
promptly and, if requested by the Purchaser, will confirm such advice in
writing: (i) of its receipt of notice of any request by the Commission for
amendment of or a supplement to the Registration Statement, any Prospectus or
for additional information; (ii) of its receipt of notice of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of the suspension of qualification of the Shares for offering or
sale in any jurisdiction or the initiation of any proceeding for such purpose;
and (iii) of its becoming aware of the happening of any event, which makes any
statement of a material fact made in the Registration Statement or the
Prospectus (as then amended or supplemented) untrue or which requires the making
of any additions to or changes in the Registration Statement or the Prospectus
(as then amended or supplemented) in order to state a material fact required by
the Securities Act or the regulations thereunder to be stated therein or
necessary in order to make the statements therein not misleading, or of the
necessity to amend or supplement the Prospectus (as then amended or
supplemented) to comply with the Securities Act or any other law. If at any time
the Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company will make commercially reasonable efforts to
obtain the withdrawal of such order at the earliest possible time.
Section 4.10 Amendments to the Registration Statement. The Company
will not (i) file any amendment to the Registration Statement or make any
amendment or supplement to the Prospectus of which the Purchaser shall not
previously have been advised or to which the Purchaser shall reasonably object
after being so advised or (ii) so long as, in the reasonable opinion of counsel
for the Purchaser, a Prospectus is required to be delivered in connection with
sales by any Purchaser or dealer, file any information, documents or reports
pursuant to the Exchange Act without delivering a copy of such information,
documents or reports to the Purchaser promptly following such filing.
Section 4.11 Prospectus Delivery. Prior to the execution and
delivery of this Agreement, the Company will deliver to the Purchaser, without
charge, in such quantities as reasonably requested by the Purchaser, copies of
each form of Prospectus. As soon after the execution and delivery of this
Agreement as possible and thereafter from time to time for such period as in the
opinion of counsel for the Purchasers a prospectus is required by the Securities
Act to be delivered in connection with sales by the Purchaser, the Company will
expeditiously deliver to the Purchaser, without charge, as many copies of the
Prospectus (and of any amendment or supplement thereto) as the Purchaser may
reasonably request. The Company consents to the use of the Prospectus (and of
any amendment or supplement thereto) in accordance with the provisions of the
Securities Act and with the securities or Blue Sky laws of the jurisdictions in
which the Shares may be sold by the Purchaser, in connection with the offering
and sale of the Shares and for such period of time thereafter as the Prospectus
is required by the Securities Act to be delivered in connection with sales of
the Shares. If during such period of time any event shall occur that in the
judgment of the Company or in the opinion of counsel for the Purchaser is
required to be set forth in the Prospectus (as then amended or
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supplemented) or should be set forth therein in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or if it is necessary to supplement or amend the Prospectus to
comply with the Securities Act or any other law, the Company will forthwith
prepare and, subject to the provisions of Section 4.10 above, file with the
Commission an appropriate supplement or amendment thereto, and will
expeditiously furnish to the Purchaser a reasonable number of copies thereof.
ARTICLE V
Conditions to Closing and Draw Downs
Section 5.1 Conditions Precedent to the Obligation of the Company to
Close this Agreement and to Sell the Shares. The obligation hereunder of the
Company to issue and sell the Shares to the Purchaser is subject to the
satisfaction or waiver, at or before each Draw Down, of each of the conditions
set forth below. These conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion.
(a) Accuracy of the Purchaser's Representations and Warranties. The
representations and warranties of the Purchaser shall be true and correct in all
material respects as of the date when made and as of the date of each Draw Down
request (the "Draw Down Exercise Date") as though made at that time, except for
representations and warranties that are expressly made as of a particular date.
(b) Effective Registration Statement. The Registration Statement
registering the offer and sale of the Shares shall have been declared effective
by the Commission and shall have been amended or supplemented, as required, to
disclose the sale of the Shares prior to each Settlement Date, as applicable.
(c) Performance by the Purchaser. The Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Purchaser at or prior to each Settlement Date.
(d) No Injunction. No statute, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.
(e) No Suspension, Etc. Trading in the Company's Common Stock shall
not be suspended by the Commission or the NASD (except for any suspension of
trading of limited duration agreed to by the Company, which suspension shall be
terminated prior to Closing), and, at any time prior to each Draw Down request,
trading in securities generally as reported on NASDAQ shall not have been
suspended or limited, or minimum prices shall not have been established on
securities whose trades are reported by American Stock Exchange, or on the New
York Stock Exchange, nor shall a banking moratorium have been declared either by
the United States or New York State authorities, nor shall there have occurred
any material outbreak or escalation of hostilities or other national or
international calamity or crisis of such magnitude in
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its effect on, or any material adverse change in any financial market which, in
each case, in the judgment of the Company, makes it impracticable or inadvisable
to issue the Shares.
(f) No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company or any subsidiary, or any of the officers, directors or
affiliates of the Company or any subsidiary seeking to restrain, prevent or
change the transactions contemplated by this Agreement, or seeking damages in
connection with such transactions.
Section 5.2 Conditions Precedent to the Obligation of the Purchaser
to Close this Agreement. The obligation hereunder of the Purchaser to enter this
Agreement is subject to the satisfaction or waiver, at or before the Closing, of
each of the conditions set forth below. These conditions are for the Purchaser's
sole benefit and may be waived by the Purchaser at any time in its sole
discretion.
(a) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing.
(b) No Suspension, Etc. Trading in the Company's Common Stock shall
not be suspended by the Commission or the NASD (except for any suspension of
trading of limited duration agreed to by the Company, which suspension shall be
terminated prior to Closing), and, at any time prior to the Closing, trading in
securities generally as reported on NASDAQ shall not have been suspended or
limited, or minimum prices shall not have been established on securities whose
trades are reported by the American Stock Exchange, or on the New York Stock
Exchange, nor shall a banking moratorium have been declared either by the United
States or New York State authorities, nor shall there have occurred any material
outbreak or escalation of hostilities or other national or international
calamity or crisis of such magnitude in its effect on, or any material adverse
change in any financial market which, in each case, in the judgment of the
Purchaser, makes it impracticable or inadvisable to purchase the Shares.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(d) No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company or any subsidiary, or any of the officers, directors or
affiliates of the Company or any subsidiary seeking to restrain, prevent or
change the transactions contemplated by this Agreement, or seeking damages in
connection with such transactions.
(e) Opinion of Counsel, Etc. At the Closing, the Purchaser shall
have received an opinion of counsel to the Company, dated the date of Closing,
in the form of Exhibit A hereto,
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and such other certificates and documents as the Purchaser or its counsel shall
reasonably require incident to the Closing.
Section 5.3 Conditions Precedent to the Obligation of the Purchaser
to Accept a Draw Down and Purchase the Shares. The obligation hereunder of the
Purchaser to accept a Draw Down request and to acquire and pay for the Shares is
subject to the satisfaction or waiver, at or before each Draw Down Exercise
Date, of each of the conditions set forth below. The conditions are for the
Purchaser's sole benefit and may be waived by the Purchaser at any time in its
sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each
of the representations and warranties of the Company shall be true and correct
in all material respects as of the date when made and as of the Draw Down
Exercise Date as though made at that time (except for representations and
warranties that speak as of a particular date).
(b) Effective Registration Statement. The Registration Statement
registering the Shares shall have been declared effective by the Commission and
shall have been amended or supplemented, as required, to disclose the sale of
the Shares prior to the Closing Date or each Settlement Date, as applicable.
(c) No Suspension. Trading in the Company's Common Stock shall not
have been suspended by the Commission or the NASD (except for any suspension of
trading of limited duration agreed to by the Company, which suspension shall be
terminated prior to each Draw Down request), and, at any time prior to such
request, trading in securities generally as reported by the American Stock
Exchange shall not have been suspended or limited, or minimum prices shall not
have been established on securities whose trades are reported by the American
Stock Exchange.
(d) Material Adverse Effect; Material Change in Ownership. No
Material Adverse Effect and no Material Change in Ownership shall have occurred.
ARTICLE VI
Draw Down Terms; Call Option
Section 6.1 Drawn Down Terms. Subject to the satisfaction of the
conditions set forth in this Agreement, the parties agree as follows:
(a) The Company, may, in its sole discretion, issue a Draw Down
Notice with respect to up to (i) $30,000,000 if the Threshold Price is equal to
or exceeds $22.00; (ii) $25,000,000 if the Threshold Price is equal to or
exceeds $18.00 but is less than $22.00; (iii) $20,000,000 if the Threshold Price
is equal to or exceeds $14.00 but is less than $18.00; and (iv) up to
$15,000,000 if the Threshold Price is equal to or exceeds $10.00 but is less
than $14.00 (a "Draw Down") during any Draw Down Pricing Period, which Draw Down
the Purchaser will be obligated to accept. Prior to issuing any Draw Down
Notice, the Company shall have Shares representing at least the Draw Down Amount
registered under the Registration Statement.
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(b) The number of Shares to be issued in connection with each Draw
Down shall be equal to the sum of the quotients (for each trading day of the
Draw Down Pricing Period for which the VWAP equals or exceeds the Threshold
Price) of (x) 1/18th of the Draw Down Amount divided by (y) the applicable Draw
Down Discount Percentage multiplied by the VWAP for such day.
(c) Only one Draw Down shall be allowed in each Draw Down Pricing
Period. Each Draw Down Pricing Period shall consist of two periods of nine
consecutive trading days (each, a "Settlement Period").
(d) The number of Shares purchased by the Purchaser with respect to
each Draw Down shall be determined on a daily basis during each Draw Down
Pricing Period and settled on the second business day following the end of each
Settlement Period (the "Settlement Date").
(e) There shall be a minimum of five (5) trading days between Draw
Downs.
(f) There shall be a maximum of seven (7) Draw Downs during the
term of this Agreement.
(g) Each Draw Down will expire on the last trading day of each Draw
Down Pricing Period.
(h) For each trading day during the Draw Down Pricing Period that
the VWAP is at or above the Threshold Price, one-eighteenth (1/18th) of the Draw
Down Amount shall be allocated to purchase Shares at a price equal to the
product of (x) the Draw Down Discount Percentage times (y) the VWAP for such
day. For each trading day during the Draw Down Pricing Period that the VWAP is
less than the Threshold Price, the Purchaser may elect in its sole discretion to
allocate 1/18th of the Draw Down Amount to purchase Shares at the end of such
Draw Down Pricing Period at a price equal to the product of (A) the Draw Down
Discount Percentage times (B) the Threshold Price. At no time shall the
Threshold Price be set below $10.00 unless agreed upon by the Company and the
Purchaser. If trading in the Company's Common Stock is suspended for any reason
for more than three (3) hours in any trading day, at the Purchaser's option, the
price of the Common Stock shall be deemed to be below the Threshold Price for
that trading day.
(i) The Company must inform the Purchaser via facsimile
transmission as to the Draw Down Amount the Company wishes to exercise before
commencement of trading on the first trading day of the Draw Down Pricing Period
(the "Draw Down Notice"). In addition to the Draw Down Amount, the Company shall
set the Threshold Price with each Draw Down Notice and shall designate the first
trading day of the Draw Down Pricing Period.
(j) On each Settlement Date, the Company shall deliver the Shares
purchased by the Purchaser to the Purchaser or to The Depositary Trust Company
("DTC") on the Purchaser's behalf via DWAC. The Company shall cause such Shares
to be credited to the DTC account designated by the Purchaser upon receipt by
the Company of payment for the Draw Down into an account designated by the
Company by wire transfer of immediately available funds; provided that the
Shares are received by the Purchaser no later than 1:00 p.m. EST or next day
available funds if the Shares are received thereafter. The delivery of the
shares of Common Stock
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into the Purchaser's DTC account in exchange for payment therefor shall be
referred to herein as "Settlement". The Purchaser shall coordinate Settlement
with the Company through DTC.
(k) If during any Draw Down Pricing Period, the Company with the
consent of the Purchaser shall issue any shares of Common Stock (other than
shares of Common Stock issued under this Agreement or in connection with a
Permitted Transaction), the Purchaser may in its sole discretion (i) purchase up
to the number of shares of Common Stock so issued, at the price and on such
terms as the Company issued such shares of Common Stock during such Draw Down
Pricing Period, (ii) purchase up to the Draw Down Amount of shares of Common
Stock at the applicable Draw Down Discount Percentage times the VWAP for such
Draw Down Pricing Period, or (iii) elect not to purchase any Shares during such
Draw Down Pricing Period. The Purchaser shall notify the Company of its election
of the business day preceding the Settlement Date.
(l) If during any thirty day period, the VWAP for the Common Stock is
less than $10.00 for five (5) or more consecutive trading days, the Company
shall notify the Purchaser if it desires to secure additional financing and the
Company and the Purchaser shall negotiate the possible terms of such financing.
If the Company and the Purchaser cannot agree on the terms of such additional
financing, the Company may secure additional debt or equity financing from a
third party. If such third party offers to purchase securities from the Company
on terms the Company finds acceptable, the Company shall notify the Purchaser of
such offer and the Purchaser may within ten (10) days following such notice
elect to purchase securities from the Company on the same terms and in up to the
same amounts as the third party. If the Purchaser does not participate in such
additional financing, the Company shall have the right to close such additional
financing with a third party on the scheduled closing date, provided that all of
the terms and closing conditions of such closing are substantially the same as
those provided to the Purchaser. Whether or not the Purchaser participates in
such additional financing, if the Company closes the third party financing the
Purchaser in its sole discretion may (i) purchase any Shares then required to be
purchased under Section 6.1 for the applicable Draw Down Pricing Period, or (ii)
elect not to purchase any Shares during the then-current Draw Down Pricing
Period.
(m) If on the Settlement Date, the Company fails to deliver the
Shares to be purchased by the Purchaser, and such failure continues for ten (10)
trading days, the Company shall pay in cash or restricted shares of Common
Stock, at the option of the Purchaser, as liquidated damages and not as a
penalty to the Purchaser an amount equal to two percent (2%) of the Draw Down
Amount for the initial thirty (30) days and each additional thirty (30) day
period thereafter until such failure has been cured, which shall be pro rated
for such periods less than thirty (30) days (the "Periodic Amount"). Cash
payments to be made pursuant to this clause (l) shall be due and payable
immediately upon demand in immediately available cash funds. Certificates
evidencing the restricted shares of Common Stock shall be delivered immediately
upon demand. The parties agree that the Periodic Amount represents a reasonable
estimate on the part of the parties, as of the date of this Agreement, of the
amount of damages that may be incurred by the Purchaser if the Company fails to
deliver the Shares on the Settlement Date. If the Purchaser elects to receive
shares of Common Stock instead of cash, the Purchaser shall have the right to
demand registration once within twelve (12) months of the date of issuance of
such
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shares of Common Stock and piggyback registration rights if the Company
files a separate registration statement.
Section 6.2 Call Option.
(a) The Purchaser shall have the right to exercise multiple call
options to purchase shares representing up to a maximum aggregate amount of
$10,000,000 (a "Call Option") during the first Draw Down Pricing Period.
(b) The number of shares of Common Stock to be issued in connection
with the Call Option shall be equal to the amount of the Call Option identified
in the notice thereof (the "Call Option Notice") divided by a price equal to the
applicable Draw Down Discount Percentage times the VWAP (the "Call Option
Discount Price") for the Common Stock on the day the Purchaser issues its Call
Option Notice, which price shall not be less than the Threshold Price.
(c) The Call Option shall be settled on each of the Settlement
Dates during the first Draw Down Pricing Period (with respect to half of the
Shares subject thereto on each of the Settlement Dates).
(d) The Threshold Price designated by the Company in its Draw Down
Notice shall apply to the Call Option.
(e) For the Call Option that the Purchaser exercises pursuant to
this Section, the Purchaser must issue via facsimile a Call Option Notice to the
Company no later than 5:00 p.m. (California time) on the day such Call Option is
exercised. If the Purchaser does not exercise a Call Option by 5:00 p.m.
(California time) on the last day of the first Draw Down Pricing Period, the
Purchaser's Call Options with respect to that Draw Down Pricing Period shall
terminate.
ARTICLE VII
Termination
Section 7.1 Termination by Mutual Consent. The term of this
Agreement shall be nine (9) months from the Effective Date. This Agreement may
be terminated at any time by mutual consent of the parties.
Section 7.2 Other Termination. The Purchaser may terminate this
Agreement upon (x) one (1) day's notice if the Company issues convertible
debentures or enters an equity financing facility as set forth in Section 4.7
without the Purchaser's prior written consent, or (y) one (1) day's notice if an
event resulting in a Material Adverse Effect or a Material Change of Control in
Ownership has occurred. The Company may terminate this Agreement upon one (1)
day's notice if (i) the Purchaser breaches any agreement hereunder and such
breach shall continue unremedied for a period of five (5) trading days after the
Purchaser has received written notice from the Company that such breach shall
have occurred or (ii) a Change of Control has occurred. For purposes of this
Section, a "Change of Control" of the Company shall be deemed
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to have occurred at such time as (a) any person is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act, directly or indirectly,
of securities of the Company representing in excess of fifty (50%) percent or
more of the combined voting power of the Company's outstanding securities
ordinarily having the right to vote at elections of directors, trustees or
managers; or (b) individuals who constitute the incumbent board of directors
cease for any reason to constitute at least a majority thereof, provided that
any person becoming a director subsequent to the date hereof whose election or
nomination for election by the Company's shareholders was approved by a vote of
at least a majority of the directors comprising the incumbent board of
directors, shall be, for purposes of this clause (b), considered as though he
were a member of the incumbent board of directors; or (c) a sale by the Company
of all or substantially all of its assets.
Section 7.3 Effect of Termination. In the event of termination by
the Company or the Purchaser, written notice thereof shall forthwith be given to
the other party and the transactions contemplated by this Agreement shall be
terminated without further action by either party. If this Agreement is
terminated as provided in Section 7.1 or 7.2 herein, this Agreement shall become
void and of no further force and effect, except as provided in Section 9.10.
Nothing in this Section 7.3 shall be deemed to release the Company or the
Purchaser from any liability for any breach under this Agreement, or to impair
the rights of the Company and the Purchaser to compel specific performance by
the other party of its obligations under this Agreement.
ARTICLE VIII
Indemnification
Section 8.1 General Indemnity.
(a) Indemnification by the Company. The Company will indemnify and
hold harmless the Purchaser and each person, if any, who controls the Purchaser
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act from and against any losses, claims, damages, liabilities and
expenses (including reasonable costs of defense and investigation and all
attorney's fees) to which the Purchaser and each person, if any, who controls
the Purchaser may become subject, under the Securities Act or otherwise, insofar
as such losses, claims, damages, liabilities and expenses (or actions in respect
thereof) arise out of or are based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained, or incorporated by reference, in
the Registration Statement or the Prospectus relating to the shares being sold
to the Purchaser, or any amendment or supplement to it, or (ii) the omission or
alleged omission to state in that Registration Statement or any document
incorporated by reference in the Registration Statement, a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
The Company will reimburse the Purchaser and each such controlling person
promptly upon demand for any legal or other costs or expenses reasonably
incurred by or the controlling person in investigating, defending against, or
preparing to defend against any such claim, action, suit or proceeding, except
that the Company will not be liable to the extent a claim or action
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which results in a loss, claim, damage, liability or expense arises out of, or
is based upon, an untrue statement, alleged untrue statement, omission or
alleged omission, included in the Registration Statement or any Prospectus in
reliance upon, and in conformity with, written information furnished by the
Purchase to the Company for inclusion in the Registration Statement or
Prospectus.
(b) Indemnification by the Purchaser. The Purchaser will indemnify
and hold harmless the Company, each of its directors and officers, and each
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act from and against any
expenses (including reasonable costs of defense and investigation and all
attorneys fees) to which the Purchaser and each person, if any, who controls the
Purchaser may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages, liabilities and expenses (or actions in respect
thereof) arise out of or are based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in any Prospectus or (ii) the
omission or alleged omission to state in the Registration Statement or any
Prospectus a material fact required to be stated therein or necessary to make
the statements therein not misleading, to the extent, but only to the extent,
the untrue statement, alleged untrue statement, omission or alleged omission was
made in reliance upon, and in conformity with, written information furnished by
the Purchaser to the Company for inclusion in the Registration Statement or
Prospectus, and the Purchaser will reimburse the Company and each such director,
officer or controlling person promptly upon demand for any legal or other costs
or expenses reasonably incurred by the Company or the other person in
investigating, defending against, or preparing to defend against any such claim,
action, suit or proceeding.
Section 8.2 Indemnification Procedures. Promptly after a person
receives notice of a claim or the commencement of an action for which the person
intends to seek indemnification under paragraph (a) or (b) of Section 8.1, the
person will notify the indemnifying party in writing of the claim or
commencement of the action, suit or proceeding, but failure to notify the
indemnifying party will not relieve the indemnifying party from liability under
paragraph (a) or (b) of Section 8.1, except to the extent it has been materially
prejudiced by the failure to give notice. The indemnifying party will be
entitled to participate in the defense of any claim, action, suit or proceeding
as to which indemnification is being sought, and if the indemnifying party
acknowledges in writing the obligation to indemnify the party against whom the
claim or action is brought, the indemnifying party may (but will not be required
to) assume the defense against the claim, action, suit or proceeding with
counsel satisfactory to it. After an indemnifying party notifies an indemnified
party that the indemnifying party wishes to assume the defense of a claim,
action, suit or proceeding the indemnifying party will not be liable for any
legal or other expenses incurred by the indemnified party in connection with the
defense against the claim, action, suit or proceeding except that if, in the
opinion of counsel to the indemnifying party, one or more of the indemnified
parties should be separately represented in connection with a claim, action,
suit or proceeding the indemnifying party will pay the reasonable fees and
expenses of one separate counsel for the indemnified parties. Each indemnified
party, as a condition to receiving indemnification as provided in Paragraph (a)
or (b) or Section 8.1, will cooperate in all reasonable respects with the
indemnifying party in the defense of any action or claim as to which
indemnification is sought. No indemnifying party will be liable for any
settlement of any action effected without its prior written consent. No
indemnifying party will, without the prior written consent of the indemnified
party, effect any settlement of a pending or
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threatened action with respect which an indemnified party is, or is informed
that it may be, made a party and for which it would be entitled to
indemnification, unless the settlement includes an unconditional release of the
indemnified party from all liability and claims which are the subject matter of
the pending or threatened action.
If for any reason the indemnification provided for in this Agreement is not
available to, or is not sufficient to hold harmless, an indemnified party in
respect of any loss or liability referred to in paragraph (a) or (b) of Section
8.1, each indemnifying party will, in lieu of indemnifying the indemnified
party, contribute to the amount paid or payable by the indemnified party,
contribute to the amount paid or payable by the indemnified party as a result of
the loss or liability, (i) in the proportion which is appropriate to reflect the
relative benefits received by the indemnifying party on the one hand and by the
indemnified party on the other from the sale of stock which is the subject of
the claim, action, suit or proceeding which resulted in the loss or liability or
(ii) if that allocation is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits of the sale of
stock, but also the relative fault of the indemnifying party and the indemnified
party with respect to the statements or omissions which are the subject of the
claim, action, suit or proceeding that resulted in the loss or liability, as
well as any other relevant equitable considerations.
ARTICLE IX
Miscellaneous
Section 9.1 Fees and Expenses. The Company shall pay all
reasonable fees and expenses related to the transactions contemplated by this
Agreement; provided, that the Company shall pay, at the Closing, all reasonable
attorneys fees and expenses (exclusive of disbursements and out-of-pocket
expenses and reasonably itemized) incurred by the Purchaser up to $40,000 in
connection with the preparation, negotiation, execution and delivery of this
Agreement. In addition, the Company shall pay all reasonable fees and expenses
incurred by the Purchaser in connection with any amendments, modifications or
waivers of this Agreement or incurred in connection with the enforcement of this
Agreement, including, without limitation, all reasonable attorneys fees and
expenses. The Company shall pay all stamp or other similar taxes and duties
levied in connection with issuance of the Shares pursuant hereto.
Section 9.2 Specific Enforcement, Consent to Jurisdiction.
(a) The Company and the Purchaser acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
(b) Each of the Company and the Purchaser (i) hereby irrevocably
submits to the jurisdiction of the United States District Court and other courts
of the United States sitting in the
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State of New York for the purposes of any suit, action or proceeding arising out
of or relating to this Agreement and (ii) hereby waives, and agrees not to
assert in any such suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. Each of the Company and the Purchaser consents
to process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this Section shall affect or
limit any right to serve process in any other manner permitted by law.
Section 9.3 Entire Agreement; Amendment. This Agreement contains the
entire understanding of the parties with respect to the matters covered hereby
and, except as specifically set forth herein, neither the Company nor the
Purchaser makes any representations, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived or amended
other than by a written instrument signed by the party against whom enforcement
of any such amendment or waiver is sought.
Section 9.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery, by telex (with correct answer
back received), telecopy or facsimile at the address or number designated below
(if delivered on a business day during normal business hours where such notice
is to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day following the date
of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
If to the Company: ▇▇▇▇▇▇▇.▇▇▇, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel. No.: ▇▇▇.▇▇▇.▇▇▇▇
Fax No.: ▇▇▇.▇▇▇.▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
With copies to: Fenwick & West LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel. No.: ▇▇▇.▇▇▇.▇▇▇▇
Fax No.: ▇▇▇.▇▇▇.▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇
If to the Purchaser: Acqua Wellington North American Equities Fund, Ltd.
c/o Mees Pierson Fund Services (Bahamas) Ltd.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Centre
East Bay Street, P. ▇. ▇▇▇ ▇▇-▇▇▇▇
-▇▇-
▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Tel. No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
With copies to: ▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
The Chrysler Building
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Tel. No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Any party hereto may from time to time change its address for notices by
giving at least ten (10) days written notice of such changed address to the
other party hereto.
Section 9.5 Waivers. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
Section 9.6 Headings. The article, section and subsection headings
in this Agreement are for convenience only and shall not constitute a part of
this Agreement for any other purpose and shall not be deemed to limit or affect
any of the provisions hereof.
Section 9.7 Successors and Assigns. The Purchaser may not assign
this Agreement to any person without the prior consent of the Company, which
consent will not be unreasonably withheld. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns. The
parties hereto may not amend this Agreement or any rights or obligations
hereunder without the prior written consent of the Company and each Purchaser to
be affected by the amendment. After Closing, the assignment by a party to this
Agreement of any rights hereunder shall not affect the obligations of such party
under this Agreement.
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Section 9.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions.
Section 9.9 Survival. The representations and warranties of the
Company and the Purchaser contained in Article III and the covenants contained
in Article IV shall survive the execution and delivery hereof and the Closing
until the termination of this Agreement, and the agreements and covenants set
forth in Article VIII of this Agreement shall survive the execution and delivery
hereof and the Closing hereunder. Section 9.14 shall survive the termination of
this Agreement.
Section 9.10 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and shall become effective when counterparts have been signed by
each party and delivered to the other parties hereto, it being understood that
all parties need not sign the same counterpart. In the event any signature is
delivered by facsimile transmission, the party using such means of delivery
shall cause four additional executed signature pages to be physically delivered
to the other parties within five days of the execution and delivery hereof.
Section 9.11 Publicity. Prior to the Closing, neither the Company
nor the Purchaser shall issue any press release or otherwise make any public
statement or announcement with respect to this Agreement or the transactions
contemplated hereby or the existence of this Agreement. In the event the Company
is required by law, based upon an opinion of the Company's counsel, to issue a
press release or otherwise make a public statement or announcement with respect
to this Agreement prior to the Closing, the Company shall consult with the
Purchaser on the form and substance of such press release. Promptly after the
Closing, the Company may issue a press release or otherwise make a public
statement or announcement with respect to this Agreement or the transactions
contemplated hereby or the existence of this Agreement; provided, that prior to
issuing any such press release, making any such public statement or
announcement, the Company obtains the prior consent of the Purchaser, which
consent shall not be unreasonably withheld or delayed.
Section 9.12 Severability. The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement, and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
Section 9.13 Further Assurances. From and after the date of this
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the Purchaser shall execute and deliver such instrument, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.
-26-
Section 9.14 Confidentiality. Purchaser agrees to maintain the
confidentiality of all information about the Company received from any officer,
employee or agent of the Company, until such time as that confidential
information is released to the public generally other than as a result of any
disclosure by Purchaser.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorize officer as of the date first above
written.
▇▇▇▇▇▇▇.▇▇▇, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
ACQUA WELLINGTON NORTH
AMERICAN EQUITIES FUND, LTD.
By: ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Director
-28-
EXHIBIT A TO THE
COMMON STOCK PURCHASE AGREEMENT
OPINION OF COUNSEL
-29-
February 17, 2000
Acqua Wellington North American Equities Fund, Ltd.
c/o Mees Pierson Fund Services (Bahamas) Ltd.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Centre
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇-▇▇▇▇
Nassau, Bahamas
Re: ▇▇▇▇▇▇▇.▇▇▇, Inc.
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 5.2(e) of that certain
Common Stock Purchase Agreement (the "Purchase Agreement"), dated February 17,
2000, between ▇▇▇▇▇▇▇.▇▇▇, Inc., a Delaware corporation formerly known as
OnSale, Inc. (the "Company") and Acqua Wellington North American Equities Fund,
Ltd., a company organized under the laws of the Commonwealth of The Bahamas (the
"Purchaser"). We have acted as counsel for the Company in connection with the
issuance and sale to the Purchaser of an aggregate of up to 5,000,000 shares of
common stock, par value $0.001 per share, of the Company (the "Shares").
We advise you that we have participated in the preparation of that certain
registration statement on Form S-3 (Registration No. 333-91553) (the "Initial
Registration Statement") filed with the Securities and Exchange Commission (the
"Commission"), which Initial Registration Statement became effective on February
3, 2000 (such Initial Registration Statement, including all exhibits thereto and
including the information contained in the form of final prospectus filed with
the Commission pursuant to Rule 424(b) under the Securities Act of 1933, as
amended (the "Securities Act"), and deemed by virtue of Rule 430A under the
Securities Act to be part of the Registration Statement at the time it was
declared effective, being hereinafter collectively referred to as the
"Registration Statement," and the final prospectus in the form first filed
pursuant to Rule 424(b) under the Securities Act being hereinafter referred to
as the "Prospectus"). Except as otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to them in the Purchase Agreement.
To render this opinion, we have examined originals, certified copies or
other copies identified to us as being true copies of originals of the
following, which we believe to be all those necessary for us to examine in order
to render the opinions set forth herein. We have not examined any documents
other than those referred to below.
(1) the executed Purchase Agreement;
(2) a copy of the Company's Amended and Restated Certificate of
Incorporation, as filed with the Delaware Secretary of State on
November 19, 1999 (the "Certificate of Incorporation");
(3) a copy of the Company's First Amended and Restated Bylaws, as
adopted on September 10, 1999 (the "Bylaws");
(4) the resolutions adopted by the Company's Board of Directors (the
"Board") on November 15, 1999 and by the Finance Committee of the
Board on February 15, 2000, relating to the transactions
contemplated by the Purchase Agreement;
(5) the stock records for the Company that is has provided to us
(consisting of a certificate from the transfer agent of even date
herewith verifying the number of the Company's issued and
outstanding shares of capital stock as of the date hereof and
summary reports from the Company confirming the number of the
Company's issued and outstanding shares of capital stock and the
number of options and any other rights to acquire shares of the
Company's capital stock outstanding as of the date hereof)
(collectively, the "Stock Records");
(6) copies provided to us by the Company of the agreements and
instruments listed in Part II, Item 21 of the Company's
registration statement on Form S-4 (File No. 333-87377), filed
with the Commission on September 17, 1999, as subsequently
amended on September 22, 1999, which agreements and instruments
have been identified to us by the Company as all material
agreements and instruments binding on the Company and required to
be filed in connection with such registration statement (the
"Material Agreements");
(7) the form of share certificate to represent the Shares;
(8) a certificate of good standing of the Company from the Delaware
Secretary of State dated February 15, 2000, verifying the good
standing of the Company with that agency;
(9) a Certificate of Status Foreign Corporation from the California
Secretary of State dated February 15, 2000, verifying the
Company's qualification to do business in California and the good
standing of the Company with that agency;
(10) a tax status certificate from the California Franchise Tax Board
dated February 15, 2000, verifying the tax good standing of the
Company with that agency;
(11) a Certificate of Existence/Authorization from the office of the
Washington Secretary of State dated February 15, 2000, verifying
the good standing of the Subsidiary with that agency;
(12) a Certificate of Existence/Authorization from the Washington
Secretary of State dated February 16, 2000, verifying the good
standing of the Company with that agency;
(13) facsimile notice as of the date hereof from the Company's filing
agent, to the effect that the information provided in the
respective certificates or letter referred to in items 8-12
continues to be accurate as of such date (together with the
certificates and letter referred to in items 8-12, the
"Governmental Certificates");
(14) certificate of Registrar and Transfer Agent dated February 16,
2000 executed and delivered by Equiserve LLC (the "Transfer Agent
Certificate");
(15) the other certificates and documents delivered by or on behalf of
the Company, the Company's transfer agent and the Purchaser at
the Closing (collectively with item 14, the "Closing Documents");
and
(16) a certificate addressed to us and dated the date hereof executed
by the Company containing certain factual and other
representations (the "Management Certificate").
In our examination of documents for purposes of this opinion, we have
assumed, and express no opinion as to, the genuineness 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 lack of any undisclosed termination, modification, waiver or
amendment to any document reviewed by us, the legal competence or capacity of
all natural persons executing the same and, except with respect to due
authorization, execution and delivery of the Purchase Agreement by the Company,
the due authorization, execution and delivery of all documents where due
authorization, execution and delivery are prerequisites to the effectiveness
thereof.
In order to render this opinion, we have examined such questions of law as
we deem advisable under the circumstances. As to questions of fact, we have
relied solely upon: (a) our examination of the documents referred to above, and
we have assumed the current accuracy and completeness of the information
obtained from public officials and records included in the documents referred to
above; (b) the representations and warranties of the Company set forth in the
Purchase Agreement and the Closing Documents; (c) the representations and
warranties made by representatives of the Company to us including, without
limitation, those set forth in the Management Certificate; and (d) our actual
knowledge. We have not considered parole evidence in connection with any of the
agreements and instruments reviewed by us in connection with this opinion. We
have made no attempt to verify the accuracy of any of such information,
representations or warranties or to determine the existence or non-existence of
any factual matters, nor, except as set forth above, have we searched any docket
or other records of any court, tribunal, agency or similar authority or any
other record of any governmental agency or third party. However, we are not
aware of any facts that would lead us to believe that any of the opinions
expressed herein are not accurate.
As used in this opinion, the phrases "to our knowledge," "our actual
knowledge," "known to us" or "we are not aware of" or words of similar import
refer only to the actual knowledge of the attorneys currently in this firm who
have rendered legal services to the Company in connection with the Registration
Statement and the Purchase Agreement and mean that, while
such attorneys have not been informed by the Company that the matters stated are
factually incorrect, we have made no investigation of such matters other than
our examination of the documents referred to in this letter. No inference as to
our knowledge of any matters bearing on the accuracy of any such statement
should be drawn from the fact of our representation of the Company.
Where statements in this opinion are qualified by the term "material,"
those statements involve judgments and opinions as to the materiality or lack of
materiality of any matter to the Company or its business, assets or financial
condition that are entirely those of the Company and its officers, after having
been advised by us as to the legal effect and consequences of such matters;
however, such opinions and judgments are not known to us to be incorrect.
For the purposes of this opinion, we have also assumed that: (a) the
Purchaser has all requisite power and authority for, and has taken all
corporate, partnership or other action necessary for, the Purchaser's due
authorization, execution and delivery of the Purchase Agreement and all other
related documents signed by or on behalf of the Purchaser in connection
therewith, and for the performance by the Purchaser of all its obligations under
all such documents; (b) the Purchaser has fully performed all other obligations
that it is to perform at or before the Closing; and (c) the Purchase Agreement
constitutes a legal, valid and binding obligation of the Purchaser enforceable
against the Purchaser in accordance with its terms.
This letter is qualified by and is subject to, and we render no opinion
with respect to: (a) compliance or noncompliance with applicable non-United
States, foreign and state statutes, rules and regulations concerning the
issuance and sale of securities; (b) compliance by the Company or the Purchaser
with any state or foreign "blue sky" laws, statutes, rules and regulations in
connection with the issuance and sale of the Shares pursuant to the Purchase
Agreement; (c) the Bylaws, rules and regulations of the National Association of
Securities Dealers, Inc. with respect to the underwriting terms and arrangements
in connection with the offering of the Shares pursuant to the Purchase
Agreement; or (d) the enforceability of provisions relating to indemnity or
contribution for liabilities arising under the Securities Act. We render no
opinion as to compliance or non-compliance with anti-fraud provisions of
applicable state or federal laws, statutes, rules and regulations concerning the
issuance or sale of securities.
This opinion is qualified by, and is subject to, and we render no opinion
with respect to, general limitations and exceptions applicable to all contracts,
including, without limitation:
(a) the effect of bankruptcy, insolvency, reorganization, arrangement,
moratorium, fraudulent conveyance and other similar laws relating to
or affecting the rights of creditors generally;
(b) the effect of general principles of equity and similar principles,
including, without limitation, concepts of public policy and
unconscionability and the possible unavailability of specific
performance, injunctive relief or other equitable remedies, regardless
of whether considered in a proceeding in equity or at law; and
(c) the effect of laws regarding unconscionability and of court decisions
indicating that certain covenants and provisions of agreements are
unenforceable where (i) the breach of such covenants or provisions
imposes restrictions or burdens upon the other party and it cannot be
demonstrated that the enforcement of such restrictions or burdens is
reasonably necessary for the protection of the party seeking to
enforce such provisions or (ii) the enforcement of such covenants or
provisions under the circumstances would violate the implied covenant
of good faith and fair dealing.
In connection with the opinions expressed in paragraph 1 below, insofar as
they relate to the valid existence or good standing or qualification as a
foreign corporation of the Company and the Subsidiary, we have relied solely on
the Management Certificate and the Governmental Certificates referred to in the
third paragraph of this letter.
In connection with the opinion expressed in paragraph 3 below, we have
assumed that no changes in any facts or laws as of the date of this opinion set
forth above will have occurred as of the date of settlement of each Draw Down,
other than that as of such date the Purchaser has paid the purchase price in
full for the shares being purchased, and otherwise complied with all of its
obligations under the Purchase Agreement.
In connection with the opinions expressed in paragraphs 3 and 4 below, we
have examined the Certificate of Incorporation, the Bylaws, the Stock Records,
the Transfer Agent Certificate and the contents of the Company's minute books.
The Company has represented to us, and we have assumed, that these records
accurately identify and describe all issuances of shares of the Company's
capital stock and of any options, warrants or other rights to purchase such
capital stock; however, we are not aware of any facts that would cause us to
believe that any of the opinions expressed in paragraphs 3 and 4 are not
accurate.
In connection with the opinions expressed in paragraphs 4, 6 and 7 below,
we have not conducted any special investigation of statutes, rules, regulations
or orders and our opinion is limited to such California, Delaware General
Corporate Law and United States orders, statutes, rules or regulations as in our
experience are of general application to transactions of the sort contemplated
by the Purchase Agreement.
We are admitted to practice law in the State of California, and we express
no opinion herein with respect to the application or effect of the laws of any
jurisdiction other than the existing laws of: (a) the State of California; (b)
the Delaware General Corporation Law set forth in statutory compilations without
reference to case law or secondary sources; and (c) the existing federal
securities laws of the United States of America. Additionally, we disclaim any
opinion as to the application of any law of any city, county or other local
subdivision or other local governmental authority of the State of California. To
the extent that any of the documents reviewed by us in connection with this
opinion are governed by the laws of any jurisdiction other than the State of
California, such as the Purchase Agreement, our opinion relating to those
documents is based solely upon the apparent meaning of the language without
regard to interpretation or construction that might be indicated by the laws
governing those agreements and instruments.
We also call your attention to the fact that under various reports
published by committees of the State Bar of California, certain assumptions,
qualifications and exceptions are implicit in opinions of lawyers. Although we
have expressly set forth some assumptions, qualifications and exceptions herein,
we are not limiting or omitting any others set forth in the various reports or
otherwise deemed standard practice for lawyers in California.
Based upon the foregoing, and subject to the assumptions,
qualifications and exceptions referred to herein, it is our opinion that:
1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware. The Company has
the requisite corporate power to own and operate its properties and assets, and
to carry on its business as presently conducted. The Company and EO Corporation,
a Washington corporation and wholly-owned subsidiary of the Company (the
"Subsidiary"), are each duly qualified to do business as foreign corporations
and are in good standing in every jurisdiction in which the nature of the
business conducted or property owned by each makes such qualification necessary,
except for any jurisdiction in which the failure to be so qualified will not
have a Material Adverse Effect.
2. The Company has the requisite corporate power and authority to
enter into and perform its obligations under the Purchase Agreement and to issue
and sell the Shares. The execution, delivery and performance of the Purchase
Agreement by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary corporate action
and no further consent or authorization of the Company, the Board or the
Company's stockholders is required. The Purchase Agreement has been duly
executed and delivered, and constitutes a legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its terms. The
Shares are not subject to preemptive rights under the Certificate of
Incorporation or Bylaws.
3. The Shares, when duly countersigned by the Company's transfer
agent and registrar, and delivered to you against payment in full as provided in
the Purchase Agreement, will be duly and validly issued, fully paid and
nonassessable.
4. The execution, delivery and performance of and compliance with the
terms of the Purchase Agreement and the issuance of the Shares do not: (a)
violate any provision of the Certificate of Incorporation or Bylaws; (b)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
mortgage, deed of trust, indenture, note, bond, license, lease agreement or
instrument to which the Company is a party that is filed or incorporated by
reference as an exhibit to the Registration Statement; or (c) create or impose a
lien, charge or encumbrance on any property of the Company under any agreement
to which the Company is a party or by which the Company is bound or by which any
of its respective properties or assets are bound that is filed or incorporated
by reference as an exhibit to the Registration Statement, provided that we
express no opinion with respect to the compliance by the Company with financial
covenants, financial ratios and similar matters; except, in all cases other than
violations pursuant to clause (a) above,
for such conflicts, defaults, terminations, amendments, acceleration,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect.
5. To our knowledge, there is no action, suit, claim, investigation
or proceeding pending or threatened against the Company or the Subsidiary which
questions the validity of the Purchase Agreement or the transactions
contemplated hereby or any action taken or to be taken pursuant to the
Agreement. To our knowledge, there is no action, suit, claim, investigation or
proceeding pending or threatened against or involving the Company or the
Subsidiary or any of their respective properties or assets which, if adversely
determined, is reasonably likely to result in a Material Adverse Effect.
6. No consent, approval or authorization of or designation,
declaration or filing with any Delaware state or United States federal
governmental authority on the part of the Company is required in connection with
the valid execution and delivery of the Purchase Agreement, or the offer, sale
or issuance of the Shares or the consummation of any other transaction
contemplated by the Purchase Agreement (other than the registration of the offer
and sale by the Company of the Shares under the Securities Act, and such
consents, approvals, authorizations, registrations or qualifications as may be
required under the Exchange Act, applicable state securities laws and the Nasdaq
National Market).
7. Based solely upon oral representations from the Staff of the
Commission, the Registration Statement was declared effective under the
Securities Act as of 5:00 p.m. Eastern Standard Time on February 3, 2000, and to
our knowledge no stop order suspending the effectiveness of the Registration
Statement has been issued and to our knowledge no proceedings for that purpose
have been instituted or are threatened, pending or contemplated.
8. The Company is not, and as a result of and immediately upon
Closing will not be, an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
This opinion is intended solely for the use of the Purchaser for the
purpose of the transactions provided for in the Purchase Agreement and is not to
be relied upon by the Purchaser for any other purpose or to be made available to
or relied upon for any other purpose by any other person or entity, whether or
not named in the Purchase Agreement, without our prior written consent. We
assume no obligation to advise you of any fact, circumstance, event or change in
the law or the facts that may hereafter be brought to our attention, whether or
not they would affect or modify the opinions expressed herein.
Very truly yours,
FENWICK & WEST LLP
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇, a partner