EXHIBIT 4.18
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PREFERRED STOCK PURCHASE AGREEMENT
BY AND BETWEEN
WAM!NET INC.
AND
SILICON GRAPHICS, INC.
______________________________
Dated as of March 3, 1999
______________________________
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PREFERRED STOCK PURCHASE AGREEMENT
Preferred Stock Purchase Agreement, dated as of March 3, 1999 (this
"Agreement"), by and between WAM!NET INC., a Minnesota corporation (the
"Company"), and SILICON GRAPHICS, INC., a Delaware corporation ("Buyer").
W I T N E S S E T H:
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WHEREAS, the Company has designated two additional series of its preferred
stock, consisting of 5,710,425 shares, par value $0.01 per share, designated as
its "Class B Convertible Preferred Stock" (the "Class B Preferred Shares"), and
878,527 shares, par value $0.01 per share, designated as its "Class C
Convertible Preferred Stock" (the "Class C Preferred Shares" and together with
the Class B Preferred Shares, the "Preferred Shares");
WHEREAS, the Preferred Shares are convertible into shares (the "Conversion
Shares") of the Company's common stock, par value $0.01 per share (the "Common
Stock") in accordance with the terms of the Class B Certificate of Designation
and the Class C Certificate of Designation (each as defined herein);
WHEREAS, the terms, limitations and relative rights and preferences of the
Class B Preferred Shares are set forth in the "Statement of Rights and
Preferences of Class B Convertible Preferred Shares" (the "Class B Certificate
of Designation"), a copy of which is attached hereto as Exhibit I, and the
terms, limitations and relative rights and preferences of the Class C Preferred
Shares are set forth in the "Statement of Rights and
Preferences of Class C Convertible Preferred Shares" (the "Class C Certificate
of Designation"), a copy of which is attached hereto as Exhibit II; and
WHEREAS, Buyer desires to subscribe for and purchase from the Company, and
the Company desires to issue and sell to Buyer, the Class B Preferred Shares and
the Class C Preferred Shares, all in accordance with the terms and subject to
conditions of this Agreement.
NOW THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereby agree as follows:
I. PURCHASE AND SALE OF PREFERRED STOCK
1.01 Purchase and Sale of the Preferred Stock. On the terms and subject to
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the conditions set forth in this Agreement, on the Closing Date (as defined
herein), Buyer shall subscribe for and purchase from the Company, and the
Company shall issue and sell to Buyer:
(a) The Class B Preferred Shares for an aggregate purchase price of
$65,000,000, of which (i) $25,000,000 shall be payable in cash and (ii)
$40,000,000 shall be payable by transfer and conveyance of title to Buyer's
campus facility located at ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, as described
in greater detail in the Real Property Documents (as defined herein) (the "Real
Property" and, together with the amount set forth in (i), the "Class B Purchase
Price"); and
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(b) The Class C Preferred Shares for an aggregate purchase price of
$10,000,000 payable in cash (the "Class C Purchase Price").
1.02 Duration, Rights and Preferences of the Preferred Stock. The Class B
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Preferred Shares shall have and enjoy the rights and preferences as are set
forth in the Class B Certificate of Designation and the Class C Preferred Shares
shall have and enjoy the rights and preferences as are set forth in the Class C
Certificate of Designation.
1.03 Closing. (a) Unless this Agreement shall have been terminated and the
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transactions herein contemplated shall have been abandoned pursuant to Section 5
hereof, the closing of the purchase and sale of the Preferred Shares and the
other transactions contemplated hereby (the "Closing") shall be held at 10:00
a.m. (Central Standard Time) on the third business day following the
satisfaction or waiver of the conditions set forth herein, at the offices of the
Company, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ (or at such other time,
date and place as the parties may mutually agree). The date on which the
Closing actually occurs is hereinafter referred to as the "Closing Date."
(b) At the Closing, the Company shall deliver to Buyer stock certificates
registered in the name of Buyer representing the Preferred Shares being
purchased by Buyer, against payment and delivery by Buyer to the Company of the
Class B Purchase Price and the Class C Purchase Price. Buyer shall effect such
payment and delivery of the Class B Purchase Price and the Class
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C Purchase Price as follows: (i) with respect to cash, by wire transfer of
immediately available funds to such bank account or bank accounts designated by
the Company and (ii) with respect to the Real Property, by execution and
delivery of the agreements, instruments and documents set forth on Schedule
1.03(b) hereto necessary to convey good and marketable title to the Real
Property to the Company (the "Real Property Documents").
II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.01 The Company hereby represents, warrants and covenants to Buyer that,
as of the date hereof and as of the Closing Date:
(a) Corporate Organization and Power; Qualification. The Company (i) is
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duly organized, validly existing and in good standing as a corporation under the
laws of the state of Minnesota, (ii) has all corporate power and authority to
own its properties and to carry on its businesses as now being conducted and
(iii) is duly qualified and in good standing as a foreign corporation, and is
authorized to do business, in all jurisdictions in which the character of its
properties or the nature of its businesses requires such qualification or
authorization, except for qualifications and authorizations the lack of which,
individually or in the aggregate, would not reasonably be expected to result in
a material adverse effect on the business, financial condition, results of
operations, assets or liabilities of the Company and its subsidiaries taken as a
whole (a "Material Adverse Effect").
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(b) Subsidiaries. Set forth on Schedule 2.01(b) hereto is a complete list
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of all of the subsidiaries of the Company. Except as set forth on Schedule
2.01(b) hereto, the Company does not own, directly or indirectly, any capital
stock or other equity securities of any corporation, nor does the Company have
any direct or indirect ownership interest, including interests in partnerships
and joint ventures, in any other entity or business. Each of the subsidiaries
has been duly incorporated, is validly existing and in good standing under the
laws of its respective jurisdiction of incorporation and is duly qualified and
in good standing as a foreign corporation, and is authorized to do business, in
all jurisdictions in which the character of its properties or the nature of its
businesses requires such qualification or authorization, except for
qualifications and authorizations the lack of which, individually or in the
aggregate, would not reasonably be expected to result in a Material Adverse
Effect. Each of the subsidiaries has the requisite power and authority to own
and hold its properties and to carry on its business as now being conducted.
Except as disclosed in the registration statements, reports and proxy statements
filed by the Company with the Securities and Exchange Commission (the "SEC
Reports"), disclosed in the Financial Statements (as defined herein) or set
forth on Schedule 2.01(b) hereto: (i) all of the outstanding shares (other than
director's qualifying shares, if any) of capital stock of each of the
subsidiaries are owned beneficially and of record by the Company, one of its
subsidiaries or any combination thereof, in each case
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free and clear of any liens, charges, restrictions, claims or encumbrances
created or suffered by the Company or any of its subsidiaries, other than
restrictions on transfer imposed by the Securities Act of 1933, as amended (the
"Securities Act"), or any other provision of applicable law; and (ii) there are
no outstanding subscriptions, warrants, options, convertible securities or other
rights (contingent or other) pursuant to which any of the subsidiaries is or may
become obligated to issue any shares of its capital stock to any person other
than the Company or a subsidiary.
(c) Power and Authority; Authorization; Enforceability. The Company has
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all requisite corporate power and authority necessary to execute and deliver (i)
this Agreement, (ii) the Real Property Documents to which it is a party, (iii)
the Stockholders' Agreement, by and among the Company, Buyer and MCI WORLDCOM,
Inc., the form of which is attached hereto as Exhibit III (the "Stockholders'
Agreement"), (iv) the Preferred Provider Agreement, by and between the Company
and Buyer, the form of which is attached hereto as Exhibit IV (the "Preferred
Provider Agreement" and, collectively with the Real Property Documents to which
the Company or Buyer, as the case may be, is a party and the Stockholders'
Agreement, the "Other Transaction Documents") and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Other Transaction Documents and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action on the part
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of the Company and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement and the Other Transaction Documents and to
consummate the transactions contemplated hereby and thereby. This Agreement has
been (and the Other Transaction Documents, when executed and delivered in
accordance with their respective terms, will be) duly executed and delivered by
the Company and constitutes (and, in the case of the Other Transaction
Documents, will constitute) the valid and binding obligation of the Company,
enforceable against it in accordance with its terms, except as enforceability
against the Company may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to the rights of creditors generally and other general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law) and except as any rights to indemnity and contribution contemplated by
Section 6.02 may be limited by applicable federal and state securities laws and
public policy considerations.
(d) No Violations; Consents and Approvals. The execution and delivery by
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the Company of this Agreement and the Other Transaction Documents, the
performance by the Company of its obligations hereunder and thereunder and the
consummation by the Company of the transactions contemplated hereby and thereby
will not (i) violate, conflict with, result in a breach of, constitute a default
under, or result in or require the creation of any lien upon any assets of the
Company under its Articles of Incorporation, as amended (the "Charter"), By-laws
or any
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material contract to which the Company is a party or by which the Company or any
of its properties may be bound or (ii) require any consent or approval other
than such consents and approvals to be obtained before the Closing and those
that have been obtained which are final and not subject to review on appeal or
to collateral attack and are in full force and effect, except for such
violations, conflicts, breaches, defaults or liens which, or consents or
approvals which, if not obtained, would not reasonably be expected to,
individually or in the aggregate, result in a Material Adverse Effect.
(e) Litigation; Compliance with Laws. Except as disclosed in the SEC
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Reports, disclosed in the Financial Statements or set forth on Schedule 2.01(e),
there are no (i) actions, suits, claims, proceedings or investigations
instituted and pending or, to the knowledge of the Company, threatened, against
or affecting the Company or any of its subsidiaries, at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, (ii)
arbitration proceedings relating to the Company instituted and pending under
collective bargaining agreements or otherwise or (iii) governmental inquiries
instituted and pending or, to the knowledge of the Company, threatened, against
or affecting the Company, any of which would reasonably be expected to result in
a Material Adverse Effect. Except for any defaults which would not reasonably
be expected to result in a Material Adverse Effect, neither the Company nor any
of its subsidiaries is in default with respect to any order,
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writ, injunction or decree known to or served upon the Company of any court or
of any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign. Except where the
failure to do so would not reasonably be expected to result in a Material
Adverse Effect, neither the Company nor any of its subsidiaries has failed to
comply with any laws, rules, regulations and orders applicable to its respective
business, operations, properties, assets, products and services, the Company and
each of its subsidiaries has all necessary permits, licenses and other
authorizations required to conduct its business as presently conducted and the
Company and each of its subsidiaries has operated its respective business
pursuant to and in compliance with the terms of all such permits, licenses and
other authorizations.
(f) Taxes. The Company has filed (or obtained extensions of the time by
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which it is required to file) all United States federal, state and local income
tax returns and all other material tax returns required to be filed by it, and
has paid all taxes shown due on the returns so filed as well as the other taxes,
assessments and governmental charges which have become due, except such taxes,
if any, as are being contested in good faith and as to which adequate reserves
have been provided. The Company will continue to make all such filings in a
timely manner and pay all such taxes, assessments and other governmental charges
required of it.
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(g) Capitalization. (i) As of the date hereof, the authorized capital
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stock of the Company consists of 500,000,000 shares, the designations and
classes of which are set forth on Schedule 2.01(g) hereto. The Company does not
hold any of its shares in treasury.
(ii) As of the date hereof, 9,291,027 shares of Common Stock and 100,000
shares of the Company's Class A Preferred Stock, par value $10.00 per share (the
"Class A Preferred Stock"), are issued and outstanding and have been validly
issued and are fully paid and nonassessable and are not subject to preemptive
rights.
(iii) Except as contemplated by this Agreement, disclosed in the SEC
Reports, disclosed in the Financial Statements or set forth on Schedule 2.01(g)
hereto, as of the date hereof there are no outstanding subscriptions, options,
warrants or other rights of any kind to acquire any additional shares of capital
stock of the Company or other instruments or securities convertible into or
exchangeable for, or which otherwise confer on the holder thereof any right to
acquire, any such additional shares of capital stock, nor is the Company
committed to issue any such option, warrant, right or security. Except as
provided for in the Charter, disclosed in the SEC Reports or set forth on
Schedule 2.01(g) hereto, the Company has no obligation (contingent or other) to
purchase, redeem or otherwise acquire any of its equity securities or any
interest therein or to pay any dividend or make any other distribution in
respect thereof.
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All of the outstanding securities of the Company were issued in compliance with
the registration requirements under applicable federal and state securities laws
(or pursuant to applicable exemptions therefrom).
(iv) Except as contemplated by this Agreement, disclosed in the SEC Reports
or disclosed in the Financial Statements, as of the date hereof, there are no
agreements relating to voting, purchase or sale of capital stock between the
Company and any of its stockholders or affiliates, and to the best of the
Company's knowledge, there are no such agreements among any of its stockholders.
(v) The Preferred Shares are duly authorized and, when issued and paid for
pursuant to the terms of this Agreement, will be validly issued, fully paid and
nonassessable, will have the rights, preferences and privileges specified in the
Class B Certificate of Designation and the Class C Certificate of Designation,
as the case may be. The Conversion Shares are duly authorized and have been
reserved for issuance and, when issued upon conversion in accordance with the
terms of the Class B Certificate of Designation and the Class C Certificate of
Designation, as the case may be, will be validly issued, fully paid and
nonassessable, and will be free and clear of all liens, encumbrances and
restrictions (other than those contemplated hereby and by the Other Transaction
Documents, created or suffered by Buyer (or the current holder thereof) and
restrictions on transfer imposed by the Securities Act or any
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other applicable federal or state securities laws, and the rules and regulations
promulgated thereunder). Neither the issuance, sale or delivery of the Preferred
Shares nor the contemplated issuance or delivery of the Conversion Shares is
subject to any currently existing preemptive right of stockholders of the
Company, any right of first refusal or other right in favor of any person, in
each case except for rights that have been waived.
(h) Financial Statements. The Company has delivered to Buyer copies of its
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financial statements (including balance sheets, income statements, changes in
stockholders equity, statements of cash flow and any related notes) for the year
ended December 31, 1998 (the "Financial Statements") and will deliver to Buyer
(as soon as practicable but in no event later than March 31, 1999) audited
copies of the Financial Statements. The Financial Statements (i) fairly
present, in all material respects, the financial condition, assets and
liabilities of the Company as of the date thereof and the results of its
operations and changes in its cash flows for the periods covered thereby, (ii)
were prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved, except as may be
noted therein, and (iii) were prepared from the books and records of the
Company, which books and records are complete and correct and fairly reflect all
material transactions of the Company's business.
(i) Absence of Certain Changes. Except as contemplated by this Agreement,
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disclosed in the SEC Reports or set forth on
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Schedule 2.01(i) hereto, since December 31, 1998, (i) there has been no change
in the assets, liabilities or financial condition of the Company and its
subsidiaries (on a consolidated basis) from that reflected in the balance sheet
of the Company and its subsidiaries as of December 31, 1998, except for changes
(A) in the ordinary course of business or (B) which in the aggregate have not
resulted in and would not reasonably be expected to result in a Material Adverse
Effect and (ii) there has not been any event or change that would reasonably be
expected to result in a Material Adverse Effect, individually or in the
aggregate, whether or not insured against (excluding general economic or
industry changes).
(j) No Brokers. No broker, finder or investment banker is entitled to any
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brokerage, finder's or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
the Company.
(k) Proprietary Information of Third Parties. Except for such claims that
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would not reasonably be expected to result in a Material Adverse Effect, to the
knowledge of the Company, no third party has claimed or has reason to claim that
the Company or any of its subsidiaries has (a) violated or may be violating any
of the terms or conditions of any non-competition or non-disclosure agreement
with such third party, (b) disclosed or may be disclosing or utilized or may be
utilizing any trade secret or proprietary information or documentation of such
third party or (c) interfered or may be interfering in the employment
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relationship between such third party and any of its present or former
employees. Neither the Company nor any of its subsidiaries has utilized and
does not propose to utilize any trade secret or any information or documentation
proprietary to any other person in violation of existing arrangements with such
person, and to the knowledge of the Company, neither the Company nor any of its
subsidiaries has violated any confidential relationship which any such person
may have had with any third party, in connection with the development,
manufacture or sale of any product or the development or sale of any service of
the Company.
(l) Patents, Trademarks, Etc. Set forth on Schedule 2.01(l) hereto is a
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list of all domestic and foreign trademarks, trademark applications, patents,
registered copyrights (except copyrighted software licensed to the Company in
its ordinary course of business) and patent applications owned by, registered in
the name of or licensed to or from the Company and its subsidiaries as of the
date hereof. Except where the failure to do so would not reasonably be expected
to result in a Material Adverse Effect, the Company and its subsidiaries own or
possess, or can acquire on reasonable terms, adequate patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures), trademarks, service marks and trade names (including those
necessary for the use and protection of the names and/or marks "WAM!NET",
"WAM!BASE" and "WAM!PROOF") or other intellectual
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property (collectively, "Intellectual Property") necessary to carry on its
business as presently conducted. Except as set forth on Schedule 2.01(l) hereto,
neither the Company nor any subsidiary has received any notice of any
infringement of or conflict with asserted rights of others with respect to any
Intellectual Property or of any facts or circumstances which would render any
Intellectual Property invalid or inadequate to protect the interest of the
Company or any of its subsidiaries, and which infringement or conflict (if the
subject of any unfavorable decision, ruling or finding) or invalidity or
inadequacy, individually or in the aggregate, would reasonably be expected to
result in a Material Adverse Effect.
(m) The Year 2000. Except where the failure to do so would not reasonably
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be expected to result in a Material Adverse Effect, the Company has used (or is
in the process of using) reasonable procedures to verify that any of its
software licensed or otherwise provided to its customers and any software used
in its business will recognize and process date fields after the turn of the
century, and perform date-dependent calculations and operations (including
sorting, comparing and reporting) after the turn of the century correctly, and
has used (or is in the process of using) reasonable efforts to ensure that any
such software will not produce invalid and incorrect results as a result of the
change of century (all without human intervention, other than original data
entry of valid dates), provided that such software receives correct and properly
formatted date inputs from all
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software and hardware that exchanges data with or provides data to the software.
(n) Title to Properties. Except as disclosed in the SEC Reports, the
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Company and its subsidiaries have good and valid title to all real and personal
property which they own and which are reflected on the Financial Statements
(except for assets and properties sold, consumed or otherwise disposed of by
them in the ordinary course of business since December 31, 1998), and such
assets and properties are owned free and clear of all mortgages, pledges, liens,
security interests, claims, restrictions or encumbrances of any kind, except (i)
those securing indebtedness reflected on the Financial Statements or
indebtedness incurred in the ordinary course of business and consistent with
past practice after the date thereof, (ii) mechanics', materialmens' and other
liens which have arisen in the ordinary course of business or (iii) mortgages,
pledges, liens, security interests, claims, restrictions or encumbrances which,
individually or in the aggregate, would not be reasonably likely to impair, in
any material respect, the continued use of such asset or property.
(o) Agreements. Except as set forth in Schedule 2.01(o) hereto or
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disclosed in the Financial Statements, all material agreements, contracts or
instruments required to be filed as exhibits to the SEC Reports have been so
filed. Neither the Company nor any of its subsidiaries is in breach or default
of any agreement, contract, instrument or other commitment, except for such
breaches and defaults which would not reasonably be expected to result in a
Material Adverse Effect. To the
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knowledge of Company, no other party to any of such agreements, contracts,
instruments or other commitments is, as of the date of this Agreement, in breach
or default (and no event has occurred which with notice or the lapse of time or
both would constitute a default or violation) thereunder, except for such
breaches and defaults which would not reasonably be expected to result in a
Material Adverse Effect. The Company is in full compliance with all of the terms
and provisions of its Charter and By-laws, except where the failure to so comply
would not reasonably be expected to result in a Material Adverse Effect.
(p) Offering of the Preferred Shares. The Company has not, directly or
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indirectly, solicited any other offer to buy or offered to sell, and will not,
directly or indirectly, solicit any other offer to buy or offer to sell, any
security which is or would be integrated with the sale of the Preferred Shares
in a manner that would require the Preferred Shares to be registered under the
Securities Act.
(q) Transactions With Affiliates. Except as disclosed in the SEC Reports
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or disclosed in the Financial Statements, neither the Company nor any subsidiary
is a party to any transaction of the type required to be disclosed pursuant to
Item 404 of Regulation S-K under the Securities Act.
(r) Disclosure. Neither this Agreement (including the Schedules hereto)
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nor the SEC Reports (as of the date filed with the Securities and Exchange
Commission) contains an untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
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therein, in light of the circumstances under which they were made, not
misleading. None of the statements, documents, certificates or other items
prepared by the Company and supplied to Buyer or its counsel in connection with
the transactions contemplated hereby (other than those relating to (i) projected
financial information, (ii) plans and objectives regarding the Company's future
operations, (iii) future economic performance and (iv) assumptions underlying
any of the matters described in (i) through (iii), each as to which no
representation or warranty is given) contains an untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading.
III. REPRESENTATIONS AND WARRANTIES OF BUYER
3.01 Buyer hereby represents, warrants and covenants to the Company that:
(a) Corporate Organization and Power; Qualification. Buyer (i) is duly
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organized, validly existing and in good standing as a corporation under the laws
of the state of Delaware and (ii) has all corporate power and authority to own
its properties and to carry on its businesses as now being conducted.
(b) Power and Authority; Authorization; Enforceability. Buyer has all
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requisite corporate power and authority necessary to execute and deliver this
Agreement and the Other Transaction Documents and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and
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the Other Transaction Documents and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action on the part of Buyer and no other corporate
proceedings on the part of Buyer are necessary to authorize this Agreement and
the Other Transaction Documents and to consummate the transactions contemplated
hereby and thereby. This Agreement has been (and the Other Transaction
Documents, when executed and delivered in accordance with their respective
terms, will be) duly executed and delivered by Buyer and constitutes (and, in
the case of the Other Transaction Documents, will constitute) the valid and
binding obligation of Buyer, enforceable against it in accordance with its
terms, except as enforceability against Buyer may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to the rights of creditors generally and other
general principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law) and except as any rights to indemnity and
contribution contemplated by Section 6.02 may be limited by applicable federal
and state securities laws and public policy considerations.
(c) No Violations; Consents and Approvals. The execution and delivery by
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Buyer of this Agreement and the Other Transaction Documents, the performance by
Buyer of its obligations hereunder and thereunder and the consummation by Buyer
of the transactions contemplated hereby and thereby will not (i) violate,
conflict with, result in a breach of, constitute a default under, or
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result in or require the creation of any lien upon any assets of Buyer under its
certificate of incorporation, by-laws (or other comparable charter documents) or
any material contract to which Buyer is a party or by which Buyer or any of its
properties may be bound or (ii) require any consent or approval other than such
consents and approvals to be made and obtained before the Closing and those that
have been obtained which are final and not subject to review on appeal or to
collateral attack and are in full force and effect, except for such violations,
conflicts, breaches, defaults or liens which, or consents or approvals which, if
not obtained would not reasonably be expected to, individually or in the
aggregate, result in a material adverse effect on the business, financial
condition, results of operations, assets or liabilities of Buyer.
(d) Due Diligence. Buyer has sufficient knowledge and experience in
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investing in companies similar to the Company in terms of the Company's stage of
development and is capable of evaluating the merits and risks of its investment
in the Company as contemplated by this Agreement and is able to bear the
economic risk of such investment for an indefinite period of time. Buyer has
been given access to full and complete information regarding the Company and has
utilized such access to its satisfaction for the purpose of obtaining
information Buyer desires or deems relevant to its decision to purchase the
Preferred Shares. Buyer has had the opportunity to ask questions of and receive
answers from representatives of the Company concerning the terms and conditions
of this Agreement, to discuss
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the Company's business, management and financial affairs with the Company's
management and to obtain any additional information Buyer desires or deems
relevant. Buyer has obtained, to the extent it has deemed necessary,
professional advice with respect to the risks inherent in the investment in the
Preferred Shares and the Company, including, without limitation, the matters
relating to the Company's business and financial condition set forth in the SEC
Reports.
(e) Investment Intent. Buyer is acquiring the Preferred Shares for its own
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account for investment and not with a view towards the resale, transfer or
distribution thereof, nor with any present intention of distributing the
Preferred Shares in violation of the Securities Act or any other applicable
federal or state securities laws, and the rules and regulations promulgated
thereunder. Buyer understands that no public market currently exists for the
Preferred Shares or the Common Stock, and that no such public market may ever
exist. Buyer further understands and agrees that the Preferred Shares have not
been (and the Conversion Shares, upon issuance, will not be) registered under
the Securities Act by reason of their issuance in a transaction exempt from the
registration requirements of the Securities Act, that the Preferred Shares and
the Conversion Shares will bear a legend (and the Company will make a notation
on its transfer books) to such effect and the Preferred Shares (and, upon
issuance, the Conversion Shares) must be held indefinitely unless subsequently
disposed of pursuant to an effective registration statement under the Securities
Act or in a
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transaction exempt from, or not subject to, the registration requirements
thereof. Buyer agrees that if it sells any Conversion Shares pursuant to Rule
144A under the Securities Act, it will take all necessary steps in order to
perfect the exemption from registration provided thereby, including, without
limitation, obtaining on behalf of the Company information to enable the Company
to establish a reasonable belief that the purchaser is a "qualified
institutional buyer" (within the meaning of Rule 144A) and advising such
purchaser that Rule 144A is being relied upon with respect to such resale. Buyer
was not organized for the specific purpose of acquiring the Preferred Shares and
is an "accredited investor" within the meaning of Rule 501(a) of the Securities
Act.
(f) No Brokers. No broker, finder or investment banker is entitled to
----------
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
Buyer.
IV. CONDITIONS
4.01 Conditions of Each Party. The respective obligations of each of the
------------------------
Company and Buyer to consummate the transactions contemplated hereby are subject
to the fulfillment, at or prior to the Closing, of each of the following
conditions, any or all of which may be waived in whole or in part to the extent
permitted by applicable law:
22
(a) All filings required to be made, and all consents, approvals, permits
and authorizations required to be obtained, prior to the Closing from any
governmental or regulatory authorities in connection with the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby shall have been made or obtained;
(b) No court or governmental or regulatory authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, judgment, decree, injunction or other order (whether
temporary, preliminary or permanent) or taken any action that prohibits the
consummation of the transactions contemplated by this Agreement; provided,
---------
however, that any party invoking this condition shall use its reasonable best
-------
efforts to have any such judgment, decree, injunction or order vacated;
(c) Any waiting period applicable to the consummation of the transactions
contemplated hereby under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended, shall have expired or been terminated; and
(d) All proceedings to be taken by a party in connection with this
Agreement and the transactions contemplated hereby and all documents incident
hereto and thereto shall be reasonably satisfactory in form and substance to
such party and its counsel, and each party and its counsel shall have received
all such counterpart originals or certified or other copies of such documents as
they may reasonably request.
23
4.02 Conditions of the Company. The obligations of the Company to
-------------------------
consummate the transactions contemplated hereby are subject to the fulfillment,
at or prior to the Closing, of each of the following conditions, any or all of
which may be waived in whole or in part by the Company to the extent permitted
by applicable law:
(a) Buyer shall have performed and complied with, in all material respects,
all of its respective obligations hereunder required to be performed by it at or
prior to the Closing;
(b) Each of the representations and warranties of the Buyer contained in
this Agreement and in any certificate or other writing delivered by Buyer
pursuant hereto qualified as to materiality shall be true and correct, and those
not so qualified shall be true and correct, in all material respects in each
case at and as of the Closing Date as if made at and as of such time (except to
the extent it relates to a particular date);
(c) The Company shall have received a certificate from Buyer, signed by an
executive officer of Buyer, to the effect set forth in clauses (a) and (b) of
this Section 4.02;
(d) Buyer shall have executed and delivered the Stockholders' Agreement;
(e) Buyer shall have executed and delivered the Preferred Provider
Agreement; and
24
(f) Buyer shall have executed and delivered each of the Real Property
Documents to which it is a party and has caused the delivery of all other Real
Property Documents to be delivered by any party other than the Company.
4.03 Conditions of Buyer. The obligation of Buyer to consummate the
-------------------
transactions contemplated by this Agreement is subject to the fulfillment, at or
prior to the Closing, of each of the following conditions, any or all of which
may be waived in whole or in part by Buyer to the extent permitted by applicable
law:
(a) The Company shall have performed and complied with, in all material
respects, all of its obligations hereunder required to be performed by it at or
prior to the Closing;
(b) Each of the representations and warranties of the Company contained in
this Agreement and in any certificate or other writing delivered by the Company
pursuant hereto qualified as to materiality shall be true and correct, and those
not so qualified shall be true and correct, in all material respects at and as
of the Closing Date as if made at and as of such time (except to the extent it
relates to a particular date);
(c) Buyer shall have received a certificate from the Company, signed by an
executive officer of the Company, to the effect set forth in clauses (a) and (b)
of this Section 4.03;
(d) The Company shall have executed and delivered the Shareholders'
Agreement;
25
(e) The Company shall have executed and delivered the Preferred Provider
Agreement; and
(f) The Company shall have delivered copies of the following documents:
(i) (A) The Charter, certified as of a recent date by the Secretary of State of
the State of Minnesota and (B) a certificate of said Secretary dated as of a
recent date as to the due incorporation and good standing of the Company; and
(ii) a certificate of the Secretary or an Assistant Secretary of the Company
dated the Closing Date and certifying: (A) that attached thereto is a true and
complete copy of the By-laws of the Company as in effect on the date of such
certification; (B) that attached thereto is a true and complete copy of all
resolutions adopted by the Board of Directors or the stockholders of the Company
authorizing the execution, delivery and performance of this Agreement and the
Other Transaction Documents, the issuance, sale and delivery of the Preferred
Shares and the reservation, issuance and delivery of the Conversion Shares, and
that all such resolutions are in full force and effect and are all the
resolutions adopted in connection with the transactions contemplated by this
Agreement and the Other Transaction Documents; and (C) that the Charter has not
been amended since the date of the last amendment referred to in the certificate
delivered pursuant to Section 4.03(g)(i)(B).
(g) Buyer shall have received from ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, an opinion,
dated the Closing Date, covering the matters set forth in Exhibit V hereto,
subject to customary
26
qualifications, limitations and assumptions for opinions given in transactions
of the kind contemplated hereby.
4.04 Materiality of Conditions. Notwithstanding anything contained
-------------------------
herein, no condition involving the performance of obligations by the Company or
the truth and accuracy of representations and warranties made by the Company as
of the Closing Date shall be deemed not fulfilled, and Buyer shall not be
entitled to fail to consummate the transactions contemplated hereby or terminate
this Agreement on such basis, if the respects in which such conditions have not
been performed or such representations and warranties are untrue (assuming for
this purpose that the representations and warranties are not qualified by
materiality), in the aggregate, would not reasonably be expected to result in a
Material Adverse Effect.
V. TERMINATION
5.01 Termination. This Agreement may be terminated and the transactions
-----------
contemplated hereby may be abandoned at any time prior to the Closing:
(a) by joint written agreement of the Company and Buyer;
(b) by the Company, if Buyer has breached any representation, warranty,
covenant or agreement contained in this Agreement and has not cured such breach
within ten (10) business days after written notice to Buyer (provided that the
-------------
Company is not then in material breach of the terms of this Agreement; and
---
provided further that no cure period shall be required for a
---------------------
27
breach which by its nature cannot be cured) such that the conditions set forth
in Section 4.01 or 4.02 hereof, as the case may be, will not be satisfied;
(c) by Buyer, if the Company has breached any representation, warranty,
covenant or agreement contained in this Agreement and has not cured such breach
within ten (10) business days after written notice to the Company (provided that
-------------
Buyer is not then in material breach of the terms of this Agreement; and
---
provided further that no cure period shall be required for a breach which by its
---------------------
nature cannot be cured) such that the conditions set forth in Section 4.01 or
4.03 hereof, as the case may be, will not be satisfied; or
(d) by any party if the Closing has not occurred on or before April 30,
1999; provided, however, that a party may not terminate this Agreement pursuant
-----------------
to this Section 5.01(d) if the failure of such party to fulfill any of its
obligations hereunder shall have been the reason that the Closing shall not have
occurred on or before said date.
5.02 Effect of Termination. In the event of termination of this Agreement
---------------------
pursuant to this Article V, this Agreement shall forthwith terminate and (except
in the event of the willful breach of this Agreement by any party) there shall
be no liability on the part of any party; provided, however, that Sections
-----------------
2.01(j), 3.01(f), 5.02, 6.03, 7.01, 7.02, 7.04, 7.07 and 7.10 shall survive the
termination of this Agreement.
VI. OTHER AGREEMENTS
28
6.01 Consents And Approvals. Each of the parties agrees to use all
----------------------
commercially reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated hereby, including, without limitation, using all
commercially reasonable efforts to obtain all necessary waivers, consents and
approvals, to effect all necessary registrations and filings (including, but not
limited to, filings with all applicable governmental agencies) and to lift any
injunction or other legal bar to the transactions contemplated hereby (and, in
such case, to proceed with such transactions as expeditiously as possible).
6.02 Registration Rights.
-------------------
(a) Piggy-back Registration. If, commencing one (1) year after the date
-----------------------
hereof, the Company proposes to claim an exemption under Section 3(b) of the
Securities Act for a public offering of any of its securities or to register
under the Securities Act (except pursuant to a registration statement on Form S-
4 or S-8 (or any substitute form adopted by the Commission) or any other form
that does not permit the inclusion of shares by its security holders) its Common
Stock, it will give written notice to Buyer of its intention to do so and, upon
the written request of Buyer given within twenty (20) days after receipt of any
such notice (which request shall specify the number of Conversion Shares
intended to be sold or disposed of by Buyer and the nature of any
29
proposed sale or other disposition thereof), the Company will use its best
efforts to cause all Conversion Shares that Buyer shall have requested the
registration of to be included in such notification or the registration
statement proposed to be filed by the Company; provided, however, that nothing
-----------------
herein shall prevent the Company from, at any time, abandoning or delaying any
such registration initiated by it. If any such registration shall be
underwritten in whole or in part, the Company may require that the Conversion
Shares requested for inclusion pursuant to this Section 6.02 be included in the
underwriting on the same terms and conditions as the securities otherwise being
sold through the underwriters. If in the good faith judgment of the managing
underwriter, as expressed in writing delivered to Buyer, the inclusion of all of
the Conversion Shares of Common Stock originally covered by a request for
registration would reduce the number of Common Stock to be offered by the
Company or interfere with the successful marketing of the Common Stock offered
by the Company, the number of Conversion Shares otherwise to be included
pursuant to this Section 6.02 in the underwritten public offering may be
reduced; provided, however, that any such required reduction shall be pro
-----------------
rata among all persons (other than the Company and any other persons demanding
registration pursuant to existing rights who are entitled to be protected
against any such reduction) who are participating in such offering. Conversion
Shares which are thus excluded from the underwritten public offering shall be
withheld from the market for a period, not to exceed 90 days, which the managing
30
underwriter reasonably determines is necessary in order to effect the
underwritten public offering. All expenses of such offering, except the fees of
special counsel to Buyer and brokers' commissions or underwriting discounts
payable by Buyer, shall be borne by the Company.
(b) Demand Registration. In addition, on one occasion only, commencing
-------------------
upon the later of one (1) year after the date hereof and the date that is six
months after an IPO, upon request by Buyer to register the Conversion Shares,
the Company will promptly use its reasonable best efforts to register such
shares under the Securities Act; provided that (i) such request must be made
-------------
within five (5) years from the date hereof and (ii) the Company may delay the
filing of any registration statement requested pursuant to this Section 6.02(b)
to a date not more than ninety (90) days following the date of such request if
in the opinion of the Company's principal investment banker at the time of such
request such a delay is necessary in order not to adversely affect the Company's
financing efforts then underway or if in the opinion of the Company such a delay
is necessary or advisable to avoid disclosure of material nonpublic information.
The costs and expenses directly related to any registration requested pursuant
to this Section 6.02(b), including, but not limited to, legal fees of the
Company's counsel, audit fees, printing expenses, filing fees of the Commission
and the National Association of Securities Dealers, Inc. and fees and expenses
relating to qualifications under state securities or blue sky laws incurred by
the Company shall be borne entirely by the
31
Company; provided, however, that the persons for whose account the securities
-------- -------
covered by such registration are sold shall bear the expenses of brokers'
commissions or underwriting discounts applicable to their shares and fees of
their legal counsel. If Buyer is the only person whose shares are included in
the registration pursuant to this Section 6.02(b), Buyer shall bear the expense
of inclusion of any audited financial statements contained in the registration
statement which are not dated as of the Company's fiscal year-end or are not
otherwise prepared by the Company for its own business purposes. The Company
shall keep effective and maintain any registration statement specified in this
Section 6.02(b) for such period as may be necessary for Buyer to dispose of the
Conversion Shares so registered, and from time to time shall amend or
supplement, at Buyer's expense, the prospectus used in connection therewith to
the extent necessary in order to comply with applicable law; provided that the
-------------
Company shall not be obligated to maintain any registration statement for a
period of more than nine (9) months. If, at the time any written request for
registration is received by the Company pursuant to this Section 6.02(b), the
Company had previously determined to proceed with the preparation and filing of
a registration statement under the Securities Act in connection with the
proposed offer and sale of Common Stock, such written request shall be deemed to
have been given pursuant to Section 6.02(a) rather than this Section 6.02(b),
and the rights of Buyer shall be governed by Section 6.02(a) hereof.
32
(c) Registration Procedures. If and whenever the Company is required by
-----------------------
the provisions of Sections 6.02(a) or 6.02(b) hereof to effect the registration
of Conversion Shares under the Securities Act, the Company will:
(i) prepare and file with the Commission a registration statement with
respect to such securities, and use its reasonable best efforts to cause such
registration statement to become and remain effective for such period as may be
reasonably necessary to effect the sale of such securities, not to exceed nine
(9) months;
(ii) prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus contained therein as
may be necessary to keep such registration statement effective for such period
as may be reasonably necessary to effect the sale of such securities, not to
exceed nine (9) months;
(iii) furnish to the security holders participating in such registration
and to the underwriters of the securities being registered, such reasonable
number of copies of the registration statement, preliminary prospectus, final
prospectus and such other documents as such participating security holders and
underwriters may reasonably request in order to facilitate the public offering
of such securities;
(iv) use its reasonable best efforts to register or qualify the
securities covered by such registration statement under such state securities or
blue sky laws of such jurisdictions as such participating security holders and
33
underwriters may reasonably request in writing within 30 days following the
original filing of such registration statement, except that the Company shall
not for any purpose be required to execute a general consent to service of
process or to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified;
(v) notify the participating security holders, promptly after it shall
receive notice thereof, of the time when such registration statement has become
effective or a supplement to any prospectus forming a part of such registration
statement has been filed;
(vi) notify such participating security holders promptly of any request
by the Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
(vii) prepare and file with the Commission, promptly upon the request of
any such participating security holders, any amendments or supplements to such
registration statement or prospectus which, in the opinion of counsel for such
holders (and concurred with by counsel for the Company), is required under the
Securities Act or the rules and regulations promulgated thereunder in connection
with the distribution of such Conversion Shares by such holder;
(viii) prepare and promptly file with the Commission and promptly notify
such participating security holders of the filing of such amendment or
supplement to such registration statement or prospectus as may be necessary to
correct any statements or
34
omissions if, at the time when a prospectus relating to such securities is
required to be delivered under the Securities Act, any event shall have occurred
as the result of which any such prospectus or any other prospectus as then in
effect would include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading;
(ix) advise such participating security holders, promptly after it shall
receive notice of the issuance of any stop order by the Commission suspending
the effectiveness of such registration statement or the initiation or
threatening of any proceeding for that purpose, and promptly use its reasonable
best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued; and
(x) furnish on the effective date of the registration statement and, if
such registration includes an underwritten public offering, at the closing
provided for in the underwriting agreement: (A) opinions, dated such respective
dates, of counsel representing the Company for the purposes of such
registration, addressed to the underwriters, covering such matters as such
persons may reasonably request in customary form as would be given to
underwriters in connection with underwritten offerings and (B) letters, dated
such respective dates, from the independent certified public accountants of the
Company addressed to the underwriters, in customary form and concerning matters
of the type customarily covered in "comfort" letters in connection
35
with underwritten offerings, and such other matters as permitted by the
Statement on Accounting Standards No. 72.
(d) Indemnification. In connection with such registration, the Company
---------------
shall indemnify Buyer, its officers, directors, employees and agents, and any
person who controls Buyer within the meaning of Section 15 of the Securities
Act, against all losses, claims, damages and liabilities caused by any untrue
statement of a material fact contained in any registration statement or
prospectus, (and as amended or supplemented, if the Company shall have furnished
any amendments or supplements thereto) or any preliminary prospectus, or caused
by any omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages or liabilities are caused by any untrue statement
or omission contained in information furnished in writing to the Company by
Buyer expressly for use therein, and Buyer agrees that it will indemnify and
hold harmless the Company and each of its officers who signs such registration
statement and each of its directors and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act with respect to
losses, claims, damages or liabilities which are caused by any untrue statement
or omission contained in information furnished in writing to the Company by
Buyer expressly for use therein.
(e) Contribution. In addition, in connection with any such registration,
------------
the Company and Buyer agree that if the indemnification to be provided for
pursuant to Section 6.02(d) is
36
unavailable to an indemnified party as provided herein in respect of any losses,
claims, damages, liabilities or expenses referred to therein, then the Company
or Buyer (as the case may be), in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the Company, on
the one hand, and Buyer, on the other hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of the Company on the one hand, and of Buyer, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statements of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or by
Buyer, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages, liabilities and
expenses referred to above shall be deemed to include, without limitation, any
legal or other fees or expenses reasonably incurred by such party in connection
with investigating or defending any action or claim. The Company and Buyer agree
that it would not be just and equitable if contribution pursuant to this Section
6.02(e) were determined by a pro rata allocation or by any other method of
allocation that does not take account of the equitable considerations referred
to
37
in this Section 6.02(e). Notwithstanding the provisions of this Section 6.02(e),
Buyer shall not be required to contribute any amount in excess of the amount by
which the total price which Buyer's securities were sold to the public. The
parties agree that in connection with any such registration, no person guilty of
fraudulent misrepresentations (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(f) Termination. The registration rights provided in this Section 6.02
-----------
shall terminate on the earliest to occur of: (i) the date that is five (5) years
from the date hereof and (ii) the date on which all of the Conversion Shares
then held by Buyer could be sold pursuant to Rule 144(k) under the Securities
Act (or any comparable or successor provision).
6.03 Confidentiality. (a) Without the consent of the other party,
---------------
neither Buyer nor the Company shall make any public comment, statement or
communication with respect to, or otherwise disclose or permit the disclosure of
the terms of this Agreement and the transactions contemplated hereby, and each
party shall cause its authorized officers, directors, partners, employees,
counsel, accountants, agents and other representatives (collectively,
"Representatives") to strictly comply with the foregoing.
(b) Each of the parties hereby covenants and agrees to use due care to
prevent the disclosure of the information and other material furnished under or
in connection with this Agreement to
38
persons other than its Representatives who have a need to know such information
or to have access to such material in connection with Buyer's investment in the
Company and who have agreed to keep such information and material confidential.
For purposes of this Section 6.03(b), "due care" means at least the same level
of care that a person would use to protect the confidentiality of its own
sensitive or proprietary information, and this obligation shall survive
termination of this Agreement.
(c) Notwithstanding Sections 6.03(a) and (b), either party may disclose or
deliver any information or other material disclosed to or received by it (i)
should such party be advised by its counsel that such disclosure or delivery is
required by law, regulation, legal process or administrative order, if the
disclosing party has first provided the other party with prompt notice of the
request to disclose or deliver such information or other material a reasonable
period of time in advance of making such disclosure or delivery so as to enable
such other party to seek a protective order or other appropriate remedy or (ii)
in connection with a public or private financing effected by the Company, to the
extent required in any Registration Statement, prospectus or other offering
document, or to the extent necessary to make any statements contained in any of
the foregoing not misleading.
(d) In the event of any termination of this Agreement prior to the Closing
Date, Buyer shall return to the Company all
39
material previously furnished to it or its Representatives in connection with
this transaction.
6.04 Information Rights. From and after the Closing Date until the
------------------
earlier to occur of (i) the issuance of shares of Common Stock to the public in
an underwritten offering pursuant to a registration statement filed under the
Securities Act covering the offer and sale of Common Stock (an "IPO") and (ii)
the date on which Buyer no longer owns any Preferred Shares, within 45 days
following the end of each of its first three fiscal quarters and within 90 days
following the end of its fourth fiscal quarter, the Company shall furnish Buyer
with a copy of its financial statements, (including balance sheets, income
statements, changes in stockholders equity and statements of cash flow) for each
of such quarters and fiscal year, respectively. In addition, during such
period, the Company will furnish Buyer with such additional financial and
business information, including monthly or other periodic financial statements
as the Company may prepare from time to time, upon the reasonable request of
Buyer.
6.05 Subscription Right. (a) From and after the Closing Date until the
------------------
earlier of (i) an IPO and (ii) the date on which Buyer no longer owns any
Preferred Shares, if the Company proposes to issue equity securities of any kind
(the term "equity securities" shall include for the purposes of this Section
6.05, any equity securities and all warrants, options or other rights to acquire
equity securities, and debt securities convertible
40
into or exchangeable for equity securities) of the Company (other than the
issuance of securities (i) upon conversion of or exercise securities of the
Company outstanding as of the date hereof, (ii) in an IPO, (iii) pursuant to the
acquisition of another entity by the Company by merger, purchase of
substantially all of the assets or other form of reorganization, (iv) pursuant
to an employee stock option plan, stock bonus plan, stock purchase plan or other
management equity program, (v) to vendors, customers and consultants of the
Company for purposes primarily other than the raising of capital or (vi) in
connection with a public or private debt financing effected by the Company
(other than with an affiliate of the Company) or upon the conversion or exercise
of any securities so issued), then the Company shall: (A) give written notice to
Buyer setting forth in reasonable detail: (1) the designation and all of the
terms and provisions of the securities proposed to be issued (the "Proposed
Securities"), including, where applicable, the voting powers, preferences and
relative participating, optional or other special rights and the qualifications,
limitations or restrictions thereof; (2) the price and other terms of the
proposed sale of Proposed Securities; (3) the amount of Proposed Securities
proposed to be issued; and (4) such other information as Buyer may reasonably
request in order to evaluate the proposed issuance; and (B) offer to issue to
Buyer a portion of the Proposed Securities equal to a percentage determined by
dividing (1) the number of shares of Common Stock held by Buyer and issuable to
Buyer (including for purposes of this calculation,
41
conversion and exercise in full of all securities then held by Buyer that are
then convertible into or exchangeable for Common Stock) by (2) the total number
of shares of Common Stock then outstanding (including for purposes of this
calculation, conversion and exercise in full of all securities then outstanding
that are then convertible into or exchangeable for Common Stock).
(b) Buyer must exercise its purchase right hereunder within fifteen (15)
days after receipt of such notice from the Company. To the extent that the
Company offers two or more securities in units, Buyer must purchase such units
as a whole and will not be given the opportunity to purchase only one of the
securities making up such unit. Upon the expiration of such fifteen-day period,
the Company will be free to sell Proposed Securities that Buyer has not elected
to purchase during the ninety (90) days following such expiration on terms and
conditions no more favorable to the purchasers thereof than those offered to
Buyer. Any Proposed Securities offered or sold by the Company after such 90-day
period must be reoffered to Buyer pursuant to this Section 6.05.
(c) The election by Buyer not to exercise its subscription rights under
this Section 6.05 in any one instance shall not affect its right (other than in
respect of a reduction in its percentage holdings) as to any subsequent proposed
issuance of equity securities by the Company. Any sale of equity securities by
the Company without first giving Buyer the rights described in this Section 6.05
shall be void and of no force and effect.
42
6.06 By-laws. The Company shall at all times cause its By-laws to provide
-------
that the number of directors fixed in accordance therewith shall in no event
conflict with any of the terms or provisions of the Preferred Shares as set
forth in the Charter. The Company shall at all times maintain provisions in its
By-laws or Charter indemnifying all directors to the maximum extent permitted
under the Minnesota Business Corporation Act.
VII. MISCELLANEOUS
7.01 Amendments, Waivers and Consents. No provision in this Agreement may
--------------------------------
be altered or amended, and compliance with any covenant or provision set forth
herein may not be omitted or waived, except by an instrument in writing duly
executed by Buyer and the Company. Any waiver or consent may be given subject to
satisfaction of conditions stated therein and any waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
7.02 Notices. All notices required or permitted by this Agreement shall be
-------
in writing, and shall be hand delivered, sent by facsimile or nationally
recognized overnight delivery service, addressed as follows:
(a) If to Buyer:
Silicon Graphics, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
Senior Vice President, Corporate Operations
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
43
with a copy to:
▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP
High Street Tower, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
(b) If to the Company:
WAM!NET INC.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, III, President
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
or to such other person or address as a party shall specify by notice in writing
to the other party. All such notices and other communications shall be
effective when received.
7.03 Binding Effect; Assignment. This Agreement shall be binding upon and
--------------------------
inure to the benefit of the Company and Buyer. No assignment of rights or
delegation of duties arising under this Agreement may be made by any party
hereto without the prior written consent of the other party.
7.04 Third-Party Beneficiaries. This Agreement is for the sole benefit of
-------------------------
the parties hereto and their permitted assigns and nothing herein expressed or
implied shall give or be
44
construed to give to any person, other than the parties hereto and such
permitted assigns, any legal or equitable rights hereunder.
7.05 Entire Agreement. This Agreement (including all Schedules and
----------------
Exhibits hereto) constitutes the entire agreement between the parties hereto
with respect to the subject matter contained herein and supersedes all other
prior understandings or agreements, both written and oral, between the parties
with respect to the matters contained herein.
7.06 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 a provision 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; but this Agreement
shall be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of a provision, had never been contained herein, and such
provisions or part reformed so that it would be valid, legal and enforceable to
the maximum extent possible.
7.07 Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with, the law of the State of Minnesota without regard to its
principles of conflicts of laws.
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7.08 Headings. Article, Section and sub-Section headings in this Agreement
--------
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
7.09 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one and the same instrument, and any of the parties
hereto may execute this Agreement by signing any such counterpart by original or
facsimile signature.
7.10 Expenses. Each party shall pay the fees and expenses of its
--------
respective counsel, accountants and other experts (including any broker, finder,
advisor or intermediary), and shall pay all other expenses incurred by it in
connection with the negotiation, preparation and execution of this Agreement and
the consummation of the transactions contemplated hereby.
46
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
day and year first above written.
WAM!NET INC.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
____________________________________
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: Chief Technology Officer
SILICON GRAPHICS, INC.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
____________________________________
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its: Senior Vice President
47