<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended March 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _______ to _______
Commission File Number 1-11857
MULTICOM PUBLISHING, INC.
(Name of small business issuer as specified in its charter)
WASHINGTON 91-1551337
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1100 OLIVE WAY, TWELFTH FLOOR
SEATTLE, WASHINGTON 98101
(Address of principal (Zip Code)
executive offices)
Issuer's telephone number: (206) 622-5530
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of Common Stock outstanding as of May 14, 1997:
6,539,140.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MULTICOM PUBLISHING, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, 1997 JUNE 30,
(UNAUDITED) 1996
------------------ ---------------
<S> <C> <C>
ASSETS
Current assets
Cash $49,362 $ 3,476,879
Accounts receivable, net of allowances of
$1,052,170 and $1,302,439, respectively 3,390,592 2,303,591
Note receivable 400,000 --
Inventories 1,486,475 940,595
Other current assets 193,143 198,221
------------------ ----------------
Total current assets 5,519,572 6,919,286
------------------ ----------------
Property and equipment, net 1,721,445 937,066
Software development costs, net of accumulated
amortization of $394,213 and $164,364, respectively 550,993 258,686
Other noncurrent assets 96,817 168,928
------------------ ----------------
Total assets $ 7,888,827 $ 8,283,966
================== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade payables $1,389,983 $625,010
Accrued liabilities 1,434,658 1,211,689
Accrued royalties, net of prepayments (6,631) 321,882
Other deferred compensation 112,217 137,450
Bank borrowings 1,629,000 1,000,000
Current portion of shareholder debt 210,000 317,500
------------------ ----------------
Total current liabilities 4,769,227 3,613,531
------------------ ----------------
Long-term debt, net of current portion and debt discount 1,396,001 2,217,894
Shareholder debt, net of current portion 39,316 93,006
------------------ ----------------
Total liabilities 6,204,544 5,924,431
------------------ ----------------
Shareholders' equity
Preferred stock
Series A 1,175,000 --
Series B 350,000 --
Common Stock 15,560,211 13,797,896
Notes receivable -- (81,538)
Unearned royalties (1,058,101) (1,335,577)
Accumulated deficit (14,342,827) (10,021,246)
------------------ ----------------
Total shareholders' equity 1,684,283 2,359,535
------------------ ----------------
Total liabilities and shareholders' equity $ 7,888,827 $ 8,283,966
================== ================
</TABLE>
See accompanying notes to the financial statements
<PAGE> 3
MULTICOM PUBLISHING, INC.
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED NINE MONTHS
MARCH 31, MARCH 31, ENDED NINE MONTHS
1997 1996 MARCH 31, 1997 ENDED
(UNAUDITED) (UNAUDITED) (UNAUDITED) MARCH 31,1996
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Gross sales $3,005,239 $ 2,811,942 $6,559,718 $ 6,845,586
Returns and allowances (577,063) (254,715) (1,907,826) (1,360,724)
------------ ----------- ------------ -----------
Net sales 2,428,176 2,557,227 4,651,892 5,484,862
Cost of sales 1,386,440 1,111,408 3,291,555 2,581,539
------------ ----------- ------------ -----------
Gross profit 1,041,736 1,445,819 1,360,337 2,903,323
------------ ----------- ------------ -----------
Operating expenses
Research and development 255,609 396,864 1,549,405 1,763,159
Sales and marketing 570,511 493,479 1,926,926 2,556,066
General and administrative 394,257 355,115 1,415,901 1,084,121
------------ ----------- ------------ -----------
Total operating expenses 1,220,377 1,245,458 4,892,232 5,403,346
------------ ----------- ------------ -----------
Income (loss) from operations (178,641) 200,361 (3,531,895) (2,500,023)
Interest expense, net (125,233) (128,371) (431,157) (308,197)
------------ ----------- ------------ -----------
Income (loss) before extraordinary item (303,874) 71,990 (3,963,052) (2,808,220)
Extraordinary item, net of tax (352,473) -- (352,473) --
------------ ----------- ------------ -----------
Net income (loss) $(656,347) $71,990 $(4,315,525) $(2,808,220)
============ =========== ============ ===========
Income (loss) per share before extraordinary item
$ (.05) $ .01 $ (.69) $ (.55)
============ =========== ============ ===========
Net income (loss) per share $ (.11) $ .01 $ (.75) $ (.55)
============ =========== ============ ===========
Weighted average number of common shares and common
share equivalents outstanding 6,084,000 7,199,000 5,768,000 5,145,000
============ =========== ============ ===========
</TABLE>
See accompanying notes to the financial statements
<PAGE> 4
MULTICOM PUBLISHING, INC.
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED THREE MONTHS NINE MONTHS NINE MONTHS
MARCH 31, ENDED ENDED ENDED
1997 MARCH 31, 1996 MARCH 31, 1997 MARCH 31,
(UNAUDITED) (UNAUDITED) (UNAUDITED) 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ (656,347) $ 71,990 $ (4,315,525) $ (2,808,220)
Adjustments to reconcile net income (loss) to net cash
used in operating activities
Extraordinary item 352,473 352,473
Depreciation 154,633 72,518 352,280 174,358
Amortization of software development costs 16,878 23,175 66,654 52,198
Amortization of debt discount 23,200 -- 72,914 --
Issuance of common stock for interest payable to 4,562 73,490 28,866 178,502
shareholder
Earned royalties 142,751 88,269 277,476 208,454
Increase in accounts receivable, net (2,295,161) (685,607) (1,857,001) (1,989,071)
Decrease (increase) in inventories, net 57,112 86,235 (545,880) (511,455)
Decrease (increase) in other assets (81,357) (29,055) 4,909 (120,625)
Increase (decrease) in trade payables (166,038) (277,142) 764,973 (945,571)
Increase (decrease) in accrued liabilities 860,019 (1,459,551) 942,969 630,258
Increase (decrease) in accrued royalties (89,985) 66,187 (328,513) 148,211
Increase (decrease) in other deferred compensation (25,667) (44,607) (25,233) 17,617
Increase in customer advances -- -- -- 52,500
----------- ----------- ----------- -----------
Net cash used in operating activities (1,702,927) (2,014,098) (4,208,638) (4,912,844)
----------- ----------- ----------- -----------
Cash flows from investing activities
Additions to property and equipment (112,926) (32,972) (773,715) (509,332)
Additions to software development costs (249,297) (33,725) (358,961) (145,181)
----------- ----------- ----------- -----------
Net cash used in investing activities (362,223) (66,697) (1,132,676) (654,513)
----------- ----------- ----------- -----------
Cash flows from financing activities
Proceeds from bank borrowings 495,000 217,692 629,000 990,000
Proceeds from notes receivable from shareholders -- -- 81,234 --
Proceeds from issuance of long-term debt and warrants -- 3,000,000 -- 3,000,000
Sale of common stock 1,340,005 -- 1,340,005 --
Payment of dividends (21,708) -- (21,708) --
Cash paid for debt issue costs -- (150,018) -- (150,018)
Proceeds from notes payable to shareholders -- -- -- 2,484,516
Repayment of notes payable to shareholders (72,018) (76,527) (161,190) (181,719)
Repayment of bank borrowings -- (1,000,000) -- (1,022,308)
Repayment of long-term debt -- -- -- (6,250)
Exercise of stock options, net of expenses 46,456 -- 46,456 --
----------- ----------- ----------- -----------
Net cash provided by financing activities 1,787,735 1,991,147 1,913,797 5,114,221
----------- ----------- ----------- -----------
Net decrease in cash (277,415) (89,648) (3,427,517) (453,136)
Cash, beginning of period 326,777 240,644 3,476,879 604,132
----------- ----------- ----------- -----------
Cash, end of period $49,362 $ 150,996 $49,362 $150,996
=========== =========== =========== ===========
</TABLE>
o See accompanying notes to the financial statements
<PAGE> 5
MULTICOM PUBLISHING, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The unaudited condensed financial statements and related notes have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to such rules and regulations.
The accompanying condensed financial statements and related notes should be read
in conjunction with the audited financial statements and notes thereto included
in the Company's 1996 Annual Report on Form 10-KSB.
(2) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH 31, 1997 JUNE 30, 1996
-------------- -------------
<S> <C> <C>
Finished Goods $ 702,648 $ 464,790
Books 357,901 300,128
Raw Materials 425,926 175,677
---------- -----------
$1,486,475 $ 940,595
========== ===========
</TABLE>
(3) NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed using the weighted average number
of common and dilutive common stock equivalent shares outstanding during the
period, after applying the treasury stock method. For periods in which the
Company reports a net loss, common stock equivalents do not include stock
options and warrants as their effect would be anti-dilutive. For the period
prior to the effective date of the Company's initial public offering of Common
Stock, common stock equivalents include the impact of the issuance of options
and warrants granted within one year of the initial public offering, at exercise
prices less than the initial public offering price, whether or not the effect is
anti-dilutive.
<PAGE> 6
(4) ACQUISITION OF LICENSE TO PUBLISH
On October 11, 1996, the Company acquired an exclusive license to publish,
distribute and manufacture 11 existing titles and three CD-ROM titles currently
in development from HarperCollins Publishers Inc. (HarperCollins) in exchange
for $30,000 and the assumption of certain liabilities in amounts not to exceed
$240,000. Additionally, the Company acquired the inventories of the existing
titles at cost, which was approximately $350,000. If certain inventories are not
used on or before March 31, 1998, then the amount may be reduced to $250,000.
Royalties will be paid to HarperCollins based upon net sales and Multicom will
pay certain nonrefundable advances against these royalties, in an amount not to
exceed $200,000. Such advances are payable in instalments based upon delivery of
the unpublished titles and other items.
(5) EQUITY TRANSACTIONS
On February 7,1997, the Company issued 697,368 shares of Common Stock in
exchange for cash of $1,340,000 and fixed assets of $250,000. The shares were
issued pursuant to a Common Stock Purchase Agreement. The selling price of these
shares was $2.28 per share, based upon the average closing price on the 20
consecutive trading days immediately preceding the Closing. In conjunction with
this transaction, options to purchase 102,500 shares were exercised for prices
ranging from $.25 to $1.00.
On February 7, 1997, $750,000 in long-term debt was converted to Series A
Preferred Stock. The Series A Preferred Stock is nonvoting, except in instances
where changes and/or issuances of Preferred Stock are being considered as well
as the sale of the Company or other actions which might impact the rights of the
Series A Preferred Shareholders. In such instances, a minimum 51% of the Series
A Preferred Stock must vote in favor of the proposals. The Series A Preferred
Stock carries annual cash dividends of $.65 per share, payable monthly. The
Series A Preferred Stock is convertible to Common Stock at a price of $2.28 per
share, or one share of Series A Preferred Stock for 2.19 shares of Common Stock.
On February 11, 1997, the Company completed an additional conversion of $425,000
in long-term debt in a similar transaction to that outlined in the preceding
paragraph. As part of this transaction, the loan agreement on the remaining debt
was amended to include a financial covenant whereby if, at quarter end,
shareholders' equity is below $1,000,000 or certain minimum standards are not
met, then additional warrants to purchase 15% of the outstanding Common Stock on
a fully diluted basis at February 11, 1997, at an exercise price of $.01 per
share, will be issued. Until the issuance of these warrants becomes probable,
the financial statements do not include any adjustment for the potential value
of these warrants.
On March 31, 1997, the Company issued 400 shares of Series B Preferred Stock.
The Series B Preferred Stock is nonvoting, except in instances where changes
and/or issuances of Preferred Stock are being considered as well as the sale of
the Company or other actions which might impact the rights of the Series B
Preferred Shareholders. The Series B Preferred Stock is
<PAGE> 7
convertible to Common Stock at the lesser of the price of the Common Stock as of
the date of the closing, $1.125, or 75% of the last ten days closing bid price
prior to the conversion date. Payment for these shares was received subsequent
to March 31, 1997 and, thus, a current note receivable has been recorded at
March 31, 1997. In connection with this transaction, the Company expects to
issue warrants to purchase up to 400,000 shares of Common Stock at an exercise
price of $1.125 per share.
On March 31, 1997, the Company issued 106,667 shares of Common Stock in
connection with the acquisition of certain equipment. These shares were issued
at a value of $120,000, based upon the closing price of the stock on the date of
issuance.
(6) EXTRAORDINARY ITEM
In connection with the conversion of long-term debt to Series A Preferred Stock
discussed in Note 5 above, the Company recorded an extraordinary loss on the
extinguishment of debt. This extraordinary loss was determined based upon the
difference between the estimated fair market value of the Preferred Stock and
the carrying value of the converted debt at the time of the conversion.
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION.
General
During the quarter ended March 31, 1997, the Company released one new title and
launched a new series of product offerings, or "suites," which include multiple
titles. Not only did this allow the Company to expand its product offerings, but
it continued to emphasize the strategy of selling brand name, high-quality
titles at low prices. Additionally, the Company continued its expansion of
product marketing into the mass consumer channels. During the quarter ended
March 31, 1997, the Company pioneered the first multiplay DVD disc, which runs
on DVD players and DVD-ROM computers, with the release of Warren Miller's Ski
World. This was the first in a series of DVD product offerings. For additional
discussion on the risks associated with these statements and other
forward-looking statements, refer to the Outlook and Risks section below.
The Company also generates revenue through its custom publishing activities,
which provides Internet, website development and interactive advertising
development for major corporations.
Results of Operations - Three Months Ended March 31, 1997 and 1996
Sales. Gross sales for the quarter ended March 31, 1997 increased 7% over the
quarter ended March 31, 1996. While gross sales to distribution increased
approximately 25%, revenues related to custom publishing and OEM activities
decreased substantially. Net sales for the quarter ended March 31, 1997
decreased 5% over the quarter ended March 31, 1996. This is primarily a result
of a decrease in revenues other than from the sale of products into
distribution.
Allowances for product returns and allowances were 22% and 12% of gross
distributor sales in the quarters ended March 31, 1997 and 1996, respectively.
The Company's decision to reduce pricing on certain form factors of products
(i.e. book bundles, retail boxes, jewel cases), sales of certain holiday
products not being as high as expected, increased competition, the seasonal
slowness experienced in the market during the past months and a general slowness
of the traditional software distribution channels continued to impact product
returns in the March 1997 quarter.
Cost of sales. The Company's gross profit as a percentage of net sales decreased
to 43% in the quarter ended March 31, 1997 from 57% in the quarter ended March
31, 1996. While the allowance for product returns and allowances had a
significant impact on these results, a decline in gross margin also resulted
from the lower pricing being offered on holiday products and certain book
bundles and fewer OEM and custom publishing transactions which typically carry
higher margins. With the increased focus on the sale of higher margin products
such as retail boxes and jewel
<PAGE> 9
cases and expansion of its efforts as they relate to OEM and custom publishing
transactions, the Company expects margins to improve. For additional discussion
on the risks associated with these statements and other forward-looking
statements, refer to the Outlook and Risks section below.
Research and Development. Research and development costs decreased by $141,000
for the quarter ended March 31, 1997 as compared to the quarter ended March 31,
1996. In the quarters ended March 31, 1997 and 1996, $249,000 and $34,000,
respectively, of software development costs were capitalized. The increase is
largely due to the expanded efforts in DVD development.
Sales and Marketing. Sales and marketing expenses increased $77,000 or 16% for
the quarter ended March 31, 1997 as compared to the quarter ended March 31,
1996. The increase was primarily a result of expanded in-store promotions to
more directly target consumers. As a percentage of net sales, sales and
marketing expenses were 23% and 19% for the quarters ended March 31, 1997 and
1996, respectively, with the increase primarily a result of lower net sales. The
Company expects that sales and marketing expenditures will decrease as a
percentage of net sales. For additional discussion on the risks associated with
these statements and other forward-looking statements, refer to the Outlook and
Risks section below.
General and Administrative. For the quarter ended March 31, 1997 compared to the
same quarter a year ago, general and administrative expenses increased $39,000.
Results of Operations - Nine Months Ended March 31, 1997 and 1996
Sales. Gross sales for the nine months ended March 31, 1997 decreased 4% over
the nine months ended March 31, 1996. Gross sales to distributors increased 10%
due to the expanded marketing efforts and sales into mass merchant channels, yet
revenues related to custom publishing decreased by 29% and OEM revenues
decreased substantially. Net sales for the nine months ended March 31, 1997
decreased 15% over the nine months ended March 31, 1996. This is primarily a
result of the recorded allowances for product returns and allowances.
Allowances for product returns and allowances were 27% and 34% of gross
distributor sales in the nine months ended March 31, 1997 and 1996,
respectively. Increased competition, the seasonal slowness experienced in the
market during the past months and a general slowness of the traditional software
distribution channels continued to impact product returns, as well as the
Company's decision to reduce pricing on certain form factors of products and
sales of certain holiday products not being as high as expected. Fiscal 1996
allowances were impacted by the termination of a distribution agreement with
Electronic Arts.
<PAGE> 10
Cost of sales. The Company's gross profit as a percentage of net sales decreased
to 29% in the nine months ended March 31, 1997 from 53% in the nine months ended
March 31, 1996. While the allowance for product returns and allowances had a
significant impact on these results, a decline in gross margin also resulted
from the lower pricing being offered on holiday products and certain book
bundles as well as reduced custom publishing and OEM revenues which typically
carry higher margins.
Research and Development. Research and development costs decreased by $214,000
for the nine months ended March 31, 1997 as compared to the nine months ended
March 31, 1996. At the same time, the Company released twelve titles in the nine
months ended March 31, 1997, compared to ten titles in the nine months ended
March 31, 1996, largely due to the reuse of existing software engines. In the
nine months ended March 31, 1997 and 1996, $358,000 and $145,000 of software
development costs were capitalized, respectively.
Sales and Marketing. Sales and marketing expenses decreased $629,000 or 25% for
the nine months ended March 31, 1997 as compared to the nine months ended March
31, 1996. The reduction in expenses was primarily a result of reduced
advertising and promotions of products, as well as a reduction in public
relations activities and in commissions and bonuses earned. As a percentage of
net sales, sales and marketing expenses were 41% and 47% for the nine months
ended March 31, 1997 and 1996, respectively, with the decrease primarily a
result of lower expenses. The Company expects that sales and marketing
expenditures will continue to decrease as a percentage of net sales. For
additional discussion on the risks associated with these statements and other
forward-looking statements, refer to the Outlook and Risks section below.
General and Administrative. For the nine months ended March 31, 1997 compared to
the same period a year ago, general and administrative expenses increased
$332,000, primarily as a result of the growth of the Company, bad debt reserves
of approximately $150,000 incurred in connection with certain distributor
receivables, and the cost of having its shares publicly traded.
Liquidity and Capital Resources
The Company's cash balances decreased by $277,000 from December 31, 1996 to
March 31, 1997. This was primarily a result of the loss from operations and
increased accounts receivable levels due to high quarter-end sales volumes.
At March 31, 1997, the Company had working capital of $750,000 and had long-term
debt of $1,396,000 outstanding. At March 31, 1997, the Company had drawn
$1,629,000 against its bank line of credit. This bank credit facility is secured
by all the assets of the Company and bears interest at prime plus 3%. This
credit facility expires on July 5, 1997 and requires compliance with various
financial covenants and restrictions, including
<PAGE> 11
maintenance of minimum levels of net worth and profitability, and restricts the
Company's ability to pay dividends. At March 31, 1997, the Company was not in
compliance with certain of its financial covenants. The bank has indicated that
it intends to forbear in connection with these defaults.
During the quarter ended March 31, 1997, the Company converted $1,175,000 of
long term debt to equity. Additionally, it sold restricted shares of Common
Stock at $2.28 per share for $1,300,000 in cash. The purchasers included
primarily the founders and directors of the Company.
As described in Note 4 to the condensed financial statements above, the Company
acquired rights to certain titles from HarperCollins. Payment for this
transaction will be made in cash, over several quarters. For additional
discussion on the risks associated with these statements and other
forward-looking statements, refer to the Outlook and Risks section below.
Outlook and Risks
The Company's future operating results and many of the forward-looking
statements contained in this document are dependent upon a number of factors,
including the Company's ability to effectively manage the restructuring
discussed below, to obtain a new credit facility, to expand successfully
into new markets, to address the impact of the Internet, and to convert its
titles to DVD technology.
On January 9, 1997, the Company implemented a restructuring plan for the
Company. Through the reduction in personnel and other expenses, planned overall
operating expenses for the remainder of fiscal 1997 were reduced by
approximately 35%. The Company has maintained personnel to assist in the
conversion of its titles to DVD technology, as well as other platforms, and to
continue development of new titles, but at a lower volume. This is consistent
with the increased focus of the Company on the sales and marketing efforts and
expansion into other consumer channels.
The Company is currently in the process of identifying an alternate credit
facility which would provide increased financing. The Company believes that this
additional cash availability is critical to ongoing operations.
During the past year, the industry has experienced a general slowing in the sale
of lifestyle multimedia products in the retail software channel. The Company is
supporting its expanded line with aggressive marketing to other channels and
through price reductions. The Company believes that these alternate channels may
provide a significant revenue stream for its CD-ROM business in the future. The
impact that the market trends and the Company's actions may have on Multicom's
operations cannot be fully measured at this time.
A key challenge to the Company's continued growth is selling increased unit
volumes of CD-ROMs at competitive prices. There is a significant amount of
competition in the lifestyle arena and the Company's success is dependent upon
continued demand for existing products, timeliness to market with new products
and its ability to meet the pricing and functionality requirements of the
consumer.
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
(c) 1. On February 7, 1997, pursuant to a Common Stock Purchase
Agreement among the Company and various officers and directors of the Company
and affiliated individuals or individuals with which the Company has a business
relationship, all of whom are accredited investors as defined in Regulation D
("Regulation D") promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), the Company sold an aggregate of 697,368 shares of Common
Stock for $1,590,682 of which 109,649 shares were issued in exchange for a
software accounting system valued at $250,000 and the remainder were issued for
cash. The shares sold in this transaction have not been registered with the
Securities and Exchange Commission and carry a restrictive legend. The selling
price of these shares was $2.28 per share, based upon the average closing price
of the Company's stock as reported by the Nasdaq SmallCap Market for the 20
consecutive trading days immediately preceding the purchase date.
2. On February 7, 1997, the Company converted $750,000 in long-term
debt held by Sirrom Investments, Inc., which is an accredited investor as
defined in Regulation D, to 150,000 shares of Series A Preferred Stock. The
Series A Preferred Stock carries annual cash dividends of $.65 per share,
payable monthly. The Series A Preferred Stock is convertible to Common Stock at
a price of $2.28 per share, or one share of Series A Preferred Stock for 2.19
shares of Common Stock. The shares issued to Sirrom Investments, Inc., have not
been registered with the Securities and Exchange Commission and carry a
restrictive legend.
3. On February 11, 1997, the Company converted an additional $425,000
in long-term debt held by Sirrom Investments, Inc., which is an accredited
investor as defined in Regulation D, to 85,000 shares of Series A Preferred
Stock. The Series A Preferred Stock carries annual cash dividends of $.65 per
share, payable monthly. The Series A Preferred Stock is convertible to Common
Stock at a price of $2.28 per share, or one share of Series A Preferred Stock
for 2.19 shares of Common Stock. The shares issued to Sirrom Investments, Inc.,
have not been registered with the Securities and Exchange Commission and carry a
restrictive legend. In connection with this transaction, the loan agreement on
the remaining debt was amended to include a financial covenant whereby Sirrom
Investments, Inc., will be issued warrants to purchase 15% of the outstanding
Common Stock on a fully diluted basis at February 11, 1997, at an exercise price
of $.01, upon breach of the covenant.
<PAGE> 13
4. On March 31, 1997, the Company issued 106,667 shares of Common
Stock to Sonic Solutions which is an accredited investor as defined in
Regulation D to the best knowledge of the Company. The shares issued to Sonic
Solutions have not been registered with the Securities and Exchange Commission
and carry a restrictive legend. The Common Shares are valued at a price per
share equal to the closing price of Multicom's Common Shares on Thursday, March
27, 1997, or $1.125. The Common Shares were issued to Sonic Solutions in
connection with the acquisition of DVD equipment.
5. On March 31, 1997, pursuant to a Convertible Preferred Stock
Purchase Agreement between the Company and GEM Management Limited, which is an
accredited investor as defined in Regulation D to the best knowledge of the
Company, the Company issued 300 shares of Series B Convertible Preferred Stock
at a price per share of $1,000. The shares sold in this transaction have not
been registered with the Securities and Exchange Commission and carry a
restrictive legend. The Series B Preferred Stock is convertible to Common Stock
at the lesser of the price of the Common Stock as of the date of the closing,
$1.125, or 75% of the last ten days closing bid price prior to the conversion
date. The Parties have entered into a Registration Rights Agreement of the same
date providing for the registration of the Common Stock prior to June 30, 1997.
6. On March 31, 1997, pursuant to a Convertible Preferred Stock
Purchase Agreement between the Company and Vitaloon Inc., which is an accredited
investor as defined in Regulation D to the best knowledge of the Company, the
Company issued 100 shares of Series B Convertible Preferred Stock at a price per
share of $1,000. The shares sold in this transaction have not been registered
with the Securities and Exchange Commission and carry a restrictive legend. The
Series B Preferred Stock is convertible to Common Stock at the lesser of the
price of the Common Stock as of the date of the closing, $1.125, or 75% of the
last ten days closing bid price prior to the conversion date. The Parties have
entered into a Registration Rights Agreement of the same date providing for the
registration of the Common Stock prior to June 30, 1997.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
At March 31, 1997, the Company was in default of certain of its
financial covenants in connection with its borrowing under its bank line of
credit. The bank has indicated that it will forbear this default.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER MATTERS
None
<PAGE> 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-B.
Exhibit
Number Exhibit
3.1* Amended and Restated Articles of Incorporation of
Multicom Publishing, Inc., a Washington corporation,
filed as Exhibit 3.1 to the Company's Registration
Statement on Form SB-2 (File No. 33-4704-LA) (the
"Registration Statement on Form SB-2).
3.2* Restated Bylaws of Multicom Publishing, Inc., a
Washington corporation, filed as Exhibit 3.2 to the
Company's Registration Statement on Form SB-2.
3.3 Amendment to Amended and Restated Articles of
Incorporation of Multicom Publishing, Inc., a
Washington corporation, dated February 7, 1997.
3.4 Amendment to Amended and Restated Articles of
Incorporation of Multicom Publishing Inc., a
Washington corporation dated February 11, 1997.
3.5 Amendment to Amended and Restated Articles of
Incorporation of Multicom Publishing, Inc., a
Washington corporation, dated March 31, 1997.
4.1* Form of Certificate for Common Stock, filed as
Exhibit 4.1 to the Company's Registration Statement
on Form SB-2.
4.2 Registration Rights Agreement dated as of March 31,
1997 between Multicom Publishing, Inc. and Vitaloon,
Inc.
4.3 Registration Rights Agreement dated as of March 31,
1997, between Multicom Publishing, Inc. and GEM
Management Ltd.
4.4 Letter Agreement dated March 31, 1997, between
Multicom Publishing, Inc. and Sonic Solutions.
10.1 Common Stock Purchase Agreement dated February 7,
1997, among Multicom Publishing, Inc., Tamara L. and
Paul G. Attard; Friar, Harper & Arndt LLP; Peter
Hairston, Jr.; Meredith Corporation; and Henrik N.
Vanderlip.
10.2 First Amendment to loan Agreement and Loan Documents
dated February 7, 1997, between Multicom Publishing,
Inc. and Sirrom Investments, Inc., with Amended and
<PAGE> 15
Restated Secured Promissory Note payable to Sirrom
Investments, Inc.
10.3 Series A Preferred Stock Securities Purchase
Agreement dated February 7, 1997, between Multicom
Publishing, Inc. and Sirrom Investments, Inc.
10.4 Second Amendment to Loan Agreement and Loan Documents
dated February 11, 1997, between Multicom Publishing,
Inc. and Sirrom Investments, Inc., with Second
Amended and Restated Secured Promissory Note Payable
to Sirrom Investments, Inc. and Stock Purchase
Warrant to Sirrom Investments, Inc.
10.5 Series A Preferred Stock Securities Purchase
Agreement (II) dated February 11, 1997, between
Multicom Publishing, Inc. and Sirrom Investments,
Inc.
10.6 Convertible Preferred Stock Purchase Agreement dated
as of March 31, 1997, between Multicom Publishing,
Inc. and Vitaloon, Inc.
10.7 Convertible Preferred Stock Purchase Agreement dated
as of March 31 1997, between Multicom Publishing,
Inc. and GEM Management Ltd.
11.1 Calculation of Earnings Per Share.
27 Financial Data Schedule.
- ----------
*Incorporated by reference.
(b) Reports on Form 8-K during the third quarter: Two reports on Form 8-K were
filed during the third quarter. The first report was filed on February 7, 1997.
It describes the issuance of shares pursuant to a Common Stock Purchase
Agreement and the conversion of long-term debt to Series A Preferred Stock and
contains a proforma balance sheet as of March 31, 1996. The second report was
filed on February 11, 1997 and describes the conversion of additional long-term
debt to Series A Preferred Stock. The second report contains a proforma balance
sheet as of January 31, 1997.
<PAGE> 16
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
MULTICOM PUBLISHING, INC.
(Registrant)
Date: May 15, 1997 By /s/ TAMARA L. ATTARD
-------------------------------
Tamara L. Attard
Chief Executive Officer and
Chairman of the Board
(Principal Executive Officer)
Date: May 15, 1997 By /s/ ELLEN R.M. BOYER
-------------------------------
Ellen R.M. Boyer
Vice President of Finance and
Administration and Chief
Financial Officer
(Principal Financial and
Principal Accounting Officer)
<PAGE> 1
EXHIBIT 3.3
ARTICLES OF AMENDMENT
Pursuant to RCW 23B.10.060 of the Washington Business Corporation Act,
the following Articles of Amendment to Restated Articles of Incorporation are
herewith submitted for filing.
ARTICLE 1. The name of record of the corporation is:
Multicom Publishing, Inc.
ARTICLE 2. The text of the amendment as adopted is as follows:
Article III is amended by adding the following:
Rights, Preferences and Restrictions of Series A Preferred Stock
The rights, preferences, privileges, and restrictions granted to and imposed on
the Series A Preferred Stock, which series shall consist of one hundred fifty
thousand (150,000) shares, are as set forth below.
1. Dividends.
(a) Each share of Series A Preferred Stock shall be entitled to
receive out of funds legally available therefor, annual
dividends in the amount of $.65 per share payable monthly in
cash (subject to adjustment pursuant to subparagraph (d)
hereof) (as applicable, the "Series A Dividend Rate").
Dividends on the Series A Preferred Stock shall accrue (on a
daily basis) from the date of the issuance thereof and shall
be cumulative so that if, for any previous or then current
dividend period, dividends shall not have been paid or set
apart for payment, upon all outstanding shares of Series A
Preferred Stock, the deficiency shall be paid and set apart
for payment before any dividends are paid or declared on the
Common Stock or any class or series of stock ranking as to
dividends or assets junior to the Series A Preferred Stock.
(b) Unless otherwise determined by the Board of Directors, the
record date for determining holders entitled to receive the
dividends referenced in clause (a) above shall be the
fifteenth day of the month preceding the scheduled payment
date. Dividends shall be payable monthly on the first day of
each calendar month, with the first anticipated monthly
payment date being the first day of the month following the
issuance thereof.
(c) The shares of Series A Preferred Stock shall have a preference
with respect of payment of dividends superior to all other
equity securities of the Company. Any other class or series
of stock shall be junior to the Series A Preferred Stock in
right of payment of dividends.
1
<PAGE> 2
(d) In case outstanding shares of Series A Preferred Stock shall
be subdivided into a greater number of shares of Series A
Preferred Stock, the Series A Dividend Rate in effect
immediately prior to such a subdivision shall, simultaneously
with the effectiveness of such subdivision, be proportionately
reduced, and, conversely, in case outstanding shares of Series
A Preferred Stock shall be combined into a lesser number of
shares of Series A Preferred Stock, the Series A Dividend Rate
in effect immediately prior to such a combination shall,
simultaneously with such combination, be proportionately
increased.
2. Voting.
(a) Except as otherwise required by law or by the provisions of
the Articles, as amended, or as set forth herein, the shares
of Series A Preferred Stock shall have no voting rights.
(b) The Company will not, without the affirmative vote (with each
share of Series A Preferred Stock being entitled to one vote)
or consent of the holders of not less than fifty-one percent
(51%) of the outstanding shares of Series A Preferred Stock,
voting as a class, given in writing or by resolution adopted
at a meeting called for such purpose:
(1) Authorize or issue any class or series of stock,
including, but not limited to, Convertible Securities
(as defined hereinafter), other than shares of Common
Stock;
(2) Effect an exchange, reclassification or cancellation
of all or part of the shares of Series A Preferred
Stock;
(3) Effect an exchange, or create a right of exchange, of
all or part of the shares of another class or series
into shares of Series A Preferred Stock;
(4) Create a class or series of shares having rights,
preferences or privileges prior to or on a parity
with shares of Series A Preferred Stock;
(5) Effect a redemption, cash or stock dividend;
(6) Except for acquisitions of companies with an
aggregate purchase price of less than $1,000,000 (i)
enter into any merger, share exchange, business
combination or consolidation (or permit any company,
a majority of the voting stock of which is owned or
controlled by the Company, to enter into any such
transaction, excluding a transaction between
wholly-owned subsidiaries of the Company) with any
other company or other entity, (ii) sell, lease, or
otherwise dispose of all or substantially all of its
properties or assets, (iii) acquire all or
substantially all of the properties or assets of
2
<PAGE> 3
any other company or entity, or (iv) liquidate,
dissolve or wind up the Company's affairs;
(7) Amend the Articles or bylaws of the Company in any
way if such amendment would cancel or adversely
change, alter or affect the preferences or rights
(including, without limitation, the conversion
privilege, the redemption privilege or the
liquidation preference) of the Series A Preferred
Stock; or
(8) Increase the maximum number of directors constituting
the Board of Directors to a number in excess of
thirteen (13).
(c) The holders of the Series A Preferred Stock shall be entitled
to have one of their representatives attend each meeting of
the Company's board of directors and each meeting of a
committee of the Company's board of directors.
3. Conversion.
(a) The Series A Preferred Stock shall be convertible, at the
option of the holder thereof , at any time after the date of
issuance of each such share and prior to the redemption of
each such share, at the office of the Company or any transfer
agent for the Series A Preferred Stock, into full paid and
nonassessable shares of Common Stock at a conversion price of
$2.28 per share.
(b) Before any holder of Series A Preferred Stock shall be
entitled to convert the same into shares of Common Stock, the
holder shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Company or of
any transfer agent for the Series A Preferred Stock, and shall
give written notice by mail, postage prepaid, to the Company
at its principal corporate office, of the election to convert
the same and shall state therein the name or names in which
the certificate or certificates for shares of Common Stock are
to be issued. The Company shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of
Series A Preferred Stock, or to the nominee or nominees of
such holder, a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled
as aforesaid. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of
such surrender of the shares of Series A Preferred Stock to be
converted, and the person or persons entitled to receive the
shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of
such shares of Common Stock as of such date.
4. Liquidation Preference.
(a) In the event of any voluntary or involuntary dissolution,
liquidation, sale of substantially all the Company's assets or
winding-up of the affairs of the
3
<PAGE> 4
Company and after payment or provision for payment of the
debts and other liabilities of the Company, the holders of
shares of the Series A Preferred Stock shall be entitled,
before any distribution is made upon any other capital stock
of the Company, to receive a preferential payment from the
assets of the Company of cash or property (to the extent of
funds legally available therefor) equal to $5.00 for each
share of Series A Preferred Stock (the "Base Preference
Amount") plus an amount equal to all accrued dividends
(whether declared or undeclared), including but not limited
to, the dividends in Paragraph 2, computed to the date of
payment thereof for each share (the Base Preference Payment
plus the amount of all such accrued dividends being sometimes
referred to as the "Series A Liquidation Payments").
(b) If upon any dissolution, liquidation, sale of assets or
winding up of the affairs of the Company, the assets of the
Company distributable as aforesaid among the holders of Series
A Preferred Stock shall be insufficient to permit the payment
to them of the full Series A Liquidation Payments to which
they are entitled, then the entire assets of the Company shall
be distributed ratably among the holders of the Series A
Preferred Stock in the proportion that the amount of such
assets bears to the aggregate Series A Liquidation Payments.
(c) Written notice of a liquidation, dissolution, sale of assets
or winding-up, stating a payment date and, to the extent
known, the amount of the Series A Liquidation Payments and the
place where said payments shall be payable, shall be given by
first class mail (postage prepaid), by telecopy, by overnight
courier, or by telex, not less than twenty (20) calendar days
prior to the payment date stated therein, to the holders of
record of the Series A Preferred Stock, such notice to be
addressed to each such holder at the address shown on the
stock transfer records of the Company.
(d) If upon the merger or consolidation of the Company into or
with any other company, or the merger of any other company
into the Company, the capital stock of the Company is to be
converted into or exchanged for cash or other property or
securities of a company other than the Company, the allocation
of any such cash, securities or other property into which
shares of capital stock of the Company are to be converted or
for which it is to be exchanged shall be made in accordance
with the provisions of paragraphs (a) and (b) of this Section
4 as if such merger or consolidation were a liquidation of the
Company. Nothing herein shall be construed as requiring or
permitting a merger or consolidation to be treated as a
liquidation for any purpose other than the allocation provided
for in this Section.
(e) In case outstanding shares of Series A Preferred Stock shall
be subdivided into a greater number of shares of Series A
Preferred Stock, the Series A Liquidation Payment in effect
immediately prior to such a subdivision shall, simultaneously
with the effectiveness of such subdivision, be proportionately
reduced, and, conversely, in case outstanding shares of Series
A Preferred shall be combined
4
<PAGE> 5
into a smaller number of shares of Series A Preferred Stock
the Series A Liquidation payment in effect immediately prior
to each such combination shall, simultaneously with the
effectiveness of such combination, be proportionately
increased.
(f) In the event of any voluntary or involuntary liquidation,
dissolution, sale of assets or winding-up of the Company which
will involve the distribution of assets other than cash, the
Company shall promptly engage a competent independent
appraiser to determine the value of the assets to be
distributed to the holders of shares of Series A Preferred
Stock and the holders of any other series or class of
outstanding capital stock (it being understood that with
respect to the valuation of securities, the Company shall
engage such appraiser as shall be approved by the holders of a
majority of shares of the Company's outstanding Series A
Preferred Stock). The Company shall, upon receipt of such
appraiser's valuation, give prompt written notice to each
holder of shares of Series A Preferred stock of the appraisers
valuation.
5. No Dissolution or Impairment.
The Company will not, by amendment of its Articles or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance or any of
the terms of the Series A Preferred Stock set forth herein, but will
at all times in good faith assist in the carrying out of all such
terms and in the taking of such action as may be necessary or
appropriate in order to protect the rights of the holders of the
Series A Preferred Stock against dilution or other impairment.
6. Additional Remedies.
In the event of any default in performance of the obligations set
forth in paragraphs (c), (d), and (e) hereof, any holder of Series A
Preferred Stock may, in addition to any other remedies provided herein
or by law, bring suit to compel performance of such obligations to
such holder.
7. Notice of Record Date. In the event of:
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders
thereof who are entitle to receive any dividend or other
distribution, or any right to subscribe for, purchase or
otherwise acquire any share of stock of any class or any other
securities or property, or to receive any other right;
(b) any recapitalization of the Company, any reclassification of
the capital stock of the Company, any merger or consolidation
of the Company, or any transfer of all
5
<PAGE> 6
or substantially all of the assets of the Company to any other
Company, or any other entity or person; or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
then and in each such event the Company shall mail or cause to be mailed to
each holder of Series A Preferred Stock a notice specifying (i) the date on
which any such record is to be taken for the purpose of such dividend,
distribution or right and a description of such dividend, distribution or
right, (ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation , merger, dissolution, liquidation or
winding-up is expected to become effective and (iii) the time, if any, that is
to be fixed, as to when the holders of record of Common Stock (or other
securities) shall deliver such Common Stock or other securities for securities
or other property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding- up. Such notice shall be mailed by first class mail, postage prepaid,
or sent by telecopy or overnight courier, at least fifteen (15) days prior to
the date specified in such notice on which such action is to be taken.
ARTICLE 3. The date of adoption of the amendment was:
February 7, 1997
ARTICLE 4. The amendment was adopted by:
The board of directors. Shareholder action was not required.
ARTICLE 5. These Articles will be effective upon filing.
Dated: February 7, 1997
____________________________________
Tamara L. Attard
Chairperson and Chief Executive Officer
6
<PAGE> 1
EXHIBIT 3.4
ARTICLES OF AMENDMENT
Pursuant to RCW 23B.10.060 of the Washington Business Corporation Act,
the following Articles of Amendment to Restated Articles of Incorporation are
herewith submitted for filing.
ARTICLE 1. The name of record of the corporation is:
Multicom Publishing, Inc.
ARTICLE 2. The text of the amendment as adopted is as follows:
Article III is amended by modifying the following language to
increase the number of shares of Series A Preferred Stock by 85,000 shares to
235,000:
Rights, Preferences and Restrictions of Series A Preferred Stock
The rights, preferences, privileges, and restrictions granted to and imposed on
the Series A Preferred Stock, which series shall consist of two hundred
thirty-five thousand (235,000) shares, are as set forth below.
ARTICLE 3. The date of adoption of the amendment was:
February 11, 1997
ARTICLE 4. The amendment was adopted by:
The board of directors. Shareholder action was not required.
ARTICLE 5. These Articles will be effective upon filing.
Dated: February 11, 1997
____________________________________
Tamara L. Attard
Chairman and Chief Executive Officer
1
<PAGE> 1
EXHIBIT 3.5
MULTICOM PUBLISHING, INC.
ARTICLES OF AMENDMENT
Pursuant to RCW 23B.10.060 of the Washington Business Corporation Act,
the following Articles of Amendment to Amended and Restated Articles of
Incorporation are submitted for filing.
ARTICLE 1. The name of record of the corporation is:
Multicom Publishing, Inc.
ARTICLE 2. The text of the amendment as adopted is as follows:
Article III is amended by adding the following:
Rights, Preferences, and Restrictions of Series B Convertible Preferred Stock
The rights, preferences, privileges, and restrictions granted to and imposed on
the Series B Convertible Preferred Stock, which series shall consist of one
thousand (1,000) shares, are as set forth below.
1. Designation, Amount and Par Value.
The series of Preferred Stock shall be designated as the Series B Convertible
Preferred Stock (the "Preferred Stock"), and the number of shares so designated
shall be 1,000. The par value of each share of Preferred Stock shall be $0.01.
Each share of Preferred Stock shall have a stated value of $1,000.00 per share
(the "Stated Value").
2. Dividends.
1
<PAGE> 2
(a) Holders of Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors out of funds legally
available therefor, and the Company shall pay, cumulative dividends at the rate
per share (as a percentage of the Stated Value per share) equal to 4% per
annum, payable, at the option of the Company, in cash or shares of Common
Stock, in arrears on the Conversion Date (as hereinafter defined). Dividends
on the Preferred Stock shall accrue daily commencing the Original Issue Date
(as defined in Section 6) and shall be deemed to accrue on such date whether or
not earned or declared and whether or not there are profits, surplus or other
funds of the Company legally available for the payment of dividends. The party
that holds the Preferred Stock on an applicable record date for any dividend
payment will be entitled to receive such dividend payment and any other accrued
and unpaid dividends which accrued prior to such dividend payment date, without
regard to any sale or disposition of such Preferred Stock subsequent to the
applicable record date but prior to the applicable dividend payment date.
Except as otherwise provided herein, if at any time the Company pays less than
the total amount of dividends then accrued to any class of Preferred Stock,
such payment shall be distributed ratably among the holders of such class based
upon the number of shared held by each holder.
(b) So long as any Preferred Stock shall remain
outstanding, the Company shall not redeem, purchase or otherwise acquire
directly or indirectly any Junior Securities (as defined in Section 6), nor
shall the Company directly or indirectly pay or declare any dividend or make
any distribution (other than a dividend or distribution described in Section 5)
upon, nor shall any distribution be made in respect of any Junior Securities,
nor shall any monies be set aside for or applied to the purchase or redemption
(through a sinking fund or otherwise ) of any Junior Securities unless all
dividends on the Preferred Stock for all past dividend periods shall have been
paid.
3. Voting Rights.
Except as otherwise provided herein and as otherwise provided by law, the
Preferred Stock shall have no voting rights. However, so long as any shares of
Preferred Stock are
2
<PAGE> 3
outstanding, the Company shall not, without the affirmative vote of the holders
of a majority of the shares of the Preferred Stock then outstanding, (i) alter
or change adversely the powers, preferences or rights given to the Preferred
Stock or (ii) authorize or create any class of stock ranking as to dividends or
distribution of assets upon a Liquidation (as defined below) senior to, prior
to or pari passu with the Preferred Stock.
4. Liquidation.
Upon any liquidation, dissolution or winding-up of the Company, whether
voluntary or involuntary (a "Liquidation"), the holders of shares of Preferred
Stock shall be entitled to receive out of the assets of the Company, whether
such assets are capital or surplus, for each share of Preferred Stock an amount
equal to the Stated Value, plus an amount equal to accrued but unpaid dividends
per share, whether declared or not, but without interest, before any
distribution or payment shall be made to the holders of any Junior Securities,
and if the assets of the Company shall be insufficient to pay in full such
amounts, then the entire assets to be distributed shall be distributed among
the holders of Preferred Stock ratably in accordance with the respective
amounts that would be payable on such shares if all amounts payable thereon
were paid in full. A sale, conveyance or disposition of all or substantially
all of the assets of the Company or the effectuation by the Company of a
transaction or series of related transactions in which more than 50% of the
voting power of the Company is disposed of shall be deemed a Liquidation;
provided that, a consolidation or merger of the Company with or into any other
company or companies or any sale of Company stock to a publicly traded company
shall not be treated as a Liquidation, but instead shall be subject to the
provisions of Section 5. The Company shall mail written notice of any such
liquidation, not less than 60 days prior to the payment date stated therein, to
each record holder of Preferred Stock.
5. Conversion.
(a) Each share of Preferred Stock shall be convertible into shares
of Common Stock at the Conversion Ratio at the option of the holder in whole or
in part at any time after the expiration of the earlier to occur of (i) 60 days
after the Original Issue Date and
3
<PAGE> 4
(ii) the date that the Commission declares effective under the Securities Act
the registration statement contemplated by the Registration Rights Agreement,
dated the Original Issue Date (the "Registration Rights Agreement"), by and
between the Company and the original holder of Preferred Stock relating to the
Preferred Stock and the shares of Common Stock into which the Preferred Stock
is convertible in accordance with the terms hereof. Any conversion under this
Section 5(a) shall be of a minimum amount of at least ten shares of Preferred
Stock. The holder shall effect conversions by surrendering the certificate or
certificates representing the shares of Preferred Stock to be converted to the
Company, together with the form of conversion notice attached hereto as Exhibit
A (the "Holder Conversion Notice") in the manner set forth in Section 5(i).
Each Holder Conversion Notice shall specify the number of shares of Preferred
Stock to be converted and the date on which such conversion is to be effected,
which date may not be prior to the date the holder delivers such Notice by
facsimile (the "Holder Conversion Date"). Subject to Section 5(c) and, as to
the original holder (or its sole designee), subject to Section 4.13 of the
Purchase Agreement (as defined in Section 6), each Holder Conversion Notice,
once given, shall be irrevocable. If the holder is converting less than all
shares of Preferred Stock represented by the certificate or certificates
tendered by the holder with the Holder Conversion Notice, the Company shall
promptly deliver to the holder a certificate for such number of shares as have
not been converted.
(b) (i) If the average of the Per Share Market Value for the
ten (10) Trading Days immediately preceding the date that the Company receives
any Holder Conversion Notice is less than $0.50 then the Company shall have the
right, exercisable by notice to the tendering Holder by the close of business
on the Business Day following the Company's receipt of such Conversion Notice,
to redeem the Preferred Stock tendered for conversion pursuant to such Holder
Conversion Notice at a price equal to the product of (i) the average of the Per
Share Market Value for the ten (10) Trading Days immediately preceding the
Conversion Date, (ii) the number of shares of Preferred Stock which would then
be converted but for this section, and (iii) the Conversion Ratio, which
redemption price will be paid by the Company within ten (10) Business Days of
its receipt of such Holder Conversion Notice. If the Company fails for any
reason to pay
4
<PAGE> 5
such redemption price within such period, the Company shall effect the
conversion of Preferred Shares subject to such Holder Conversion Notice at the
lesser of the Conversion Price measured on the Conversion Date indicated in the
Holder Conversion Notice and the Conversion Price measured at the end of such
ten (10) Business Day period. The Holder shall have the right, exercisable at
any time when the Per Share Market Value is such that the Company would have
the right of redemption contemplated in this section were it to receive a
Holder Conversion Notice, to deliver to the Company (by facsimile) a letter
inquiring whether the Company would exercise such redemption right if it
received a Holder Conversion Notice within five (5) calendar days of its
receipt of such letter, which such inquiry letter shall set forth the number of
shares that would be subject to such Holder Conversion Notice. The Company
shall respond to the inquiry letter (by facsimile) by the close of business on
the Business Day after which it is received, which response shall be binding
upon it with respect to the Conversion Notice that is subject to such inquiry
letter. The Company shall be deemed to have waived its redemption right if it
fails for any reason to respond (by facsimile) to the Holder delivering such
inquiry letter by the close of business on the Business Day after its receipt
of the inquiry letter.
(ii) Not later than five (5) Trading Days after the
Conversion Date, the Company will deliver to the holder (i) a certificate or
certificates which shall be free of restrictive legends and trading
restrictions (other than those then required by law and as set forth in the
Purchase Agreement) representing the number of shares of Common Stock being
acquired upon the conversion of shares of Preferred Stock and (ii) one or more
certificates representing the number of shares of Preferred Stock not
converted; provided, however that the Company shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon conversion of
any shares of Preferred Stock until certificates evidencing such shares of
Preferred Stock are either delivered for conversion to the Company or any
transfer agent for the Preferred Stock or Common Stock, or the holder notifies
the Company that such certificates have been lost, stolen or destroyed and
provides a bond (or other adequate security reasonably acceptable to the
Company) satisfactory to the Company to indemnify the Company from any loss
incurred by it in connection therewith. The Company shall, upon request of the
holder,
5
<PAGE> 6
use its best efforts to deliver any Common Stock certificate or certificates
required to be delivered by the Company under this Section 5(c) electronically
through the Depository Trust Corporation or another established clearing
corporation performing similar functions. In the case of a conversion pursuant
to a Holder Conversion Notice, if such certificate or certificates are not
delivered by the date required under this Section 5(c), the holder shall be
entitled by written notice to the Company at any time on or before such
holder's receipt of such certificate or certificates thereafter, to rescind
such conversion, in which event the Company shall immediately return the
certificates representing the shares of Preferred Stock tendered for
conversion.
(c) (i) The conversion price for each share of Preferred
Stock (the "Conversion Price") in effect on any Conversion Date shall be the
lesser of X OR Y: where X is the GREATER of (a) $[Bid Price at Funding] or (b)
[C] / [ ( { C / $[ Bid Price at Funding ] } + 1.5) / 2 ] (where C = the average
Per Share Market Value for the ten (10) Trading Days immediately preceding the
Conversion Date); and Y = 75% of the average Per Share Market Value for the ten
(10) Trading Days immediately preceding the Conversion Date. If the Company
has registered the resale of the Underlying Shares in the Unites States
pursuant to a registration statement filed with the SEC within sixty days of
the Original Issue Date, then Y shall equal 75% of the average Per Share Market
Value for the ten (10) Trading Days immediately preceding the Conversion Date;
provided, however, if the registration statement to be filed by the Company in
accordance with the Registration Rights Agreement is not declared effective by
the Commission for any reason by the Effective Date (as defined in the
Registration Rights Agreement), then for each of the first three months after
such Effective Date that such registration statement shall not have been so
declared effective, X and Y above shall be decreased by 3% (i.e., a reduction
of 3% at the end of the first such month and 6% at the end of the second such
month).
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<PAGE> 7
(ii) If the Company, at any time while any shares of
Preferred Stock are outstanding, (a) shall pay a stock dividend or otherwise
make a distribution or distributions on shares of its Junior Securities payable
in shares of its capital stock (whether payable in shares of its Common Stock
or of capital stock of any class), except as interest payments payable in
Common Stock to Meredith Corporation, (b) subdivide outstanding shares of
Common Stock into a larger number of shares, (c) combine outstanding shares of
Common Stock into a smaller number of shares, or (d) issue by reclassification
of shares of Common Stock any shares of capital stock of the Company, the
Conversion Price designated in Section 5(c)(i) shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding before such event and of which the denominator shall be the number
of shares of Common Stock outstanding after such event. Any adjustment made
pursuant to this Section 5(c)(ii) shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.
(iii) If the Company, at any time while any shares of
Preferred Stock are outstanding, shall issue rights or warrants to all holders
of Common Stock entitling them to subscribe for or purchase shares of Common
Stock at a price per share less than the Per Share Market Value of Common Stock
at the record date mentioned below, the conversion Price designated in Section
5(c)(i) shall be multiplied by a fraction, of which the denominator shall be
the number of shares of Common Stock (excluding treasury shares, if any)
outstanding on the date of issuance of such rights or warrants plus the number
of additional shares of Common Stock offered for subscription or purchase, and
of which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding on the date of issuance of such rights or
warrants plus the number of shares which the aggregate offering price of the
total number of shares so offered would purchase at such Per Share Market
Value. Such adjustment shall be made whenever such rights or warrants are
issued, and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights or warrants
However, upon the expiration of any right or warrant to purchase Common
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<PAGE> 8
Stock the issuance of which resulted in an adjustment in the Conversion Price
designated in Section 5(c)(i) pursuant to this Section 5(c)(iii), if any such
right or warrant shall expire and shall not have been exercised, the Conversion
Price designated in Section 5(c)(i) shall immediately upon such expiration be
recomputed and effective immediately upon such expiration be increased to the
price which it would have been (but reflecting any other adjustments in the
Conversion Price made pursuant to the provisions of the Section 5 after the
issuance of such rights or warrants) had the adjustment of the Conversion Price
made upon the issuance of such rights or warrants been made on the basis of
offering for subscription or purchase only that number of shares of Common
Stock actually purchased upon the exercise of such rights or warrants actually
exercised.
(iv) If the Company, at any time while shares of Preferred Stock
are outstanding, shall distribute to all holders of Common Stock (and not to
holders of Preferred Stock) evidences of its indebtedness or assets or rights
or warrants to subscribe for or purchase any security (excluding those referred
to in Section 5(c)(iii) above) then in each such case the Conversion Price at
which each share of Preferred Stock shall thereafter be convertible shall be
determined by multiplying the Conversion Price in effect immediately prior to
the record date fixed for determination of Stockholders entitled to receive
such distribution by a fraction of which the denominator shall be the Per Share
Market Value of Common Stock determined as of the record date mentioned above,
and of which the numerator shall be such Per Share Market Value of the Common
Stock on such record date less the then fair market value at such record date
for the portion of such assets of evidence of indebtedness so distributed
applicable to one outstanding share of Common Stock as determined by the Board
of Directors in good faith; provided, however that in the event of a
distribution exceeding twenty-five percent (25%) of the net assets of the
Company, such fair market value shall be determined by a nationally recognized
or major regional investment banking firm or firm of independent certified
public accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Company) (an "Appraiser") selected in
good faith by the holders of a majority in interest of the shares of Preferred
Stock; and provided, further that the Company, after receipt of the
determination by such Appraiser
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<PAGE> 9
shall have the right to select an additional Appraiser, in which case the fair
market value shall be equal to the average of the determinations by each such
Appraiser. In either case the adjustments shall be described in a statement
provided to all holders of Preferred Stock of the portion of assets or
evidences of indebtedness so distributed or such subscription rights applicable
to one share of Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date mentioned above.
(v) All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
(vi) Whenever the conversion Price is adjusted pursuant to Section
5(c)(ii), (iii), (iv), or (v), the Company shall promptly mail to each holder
of Preferred Stock a notice stetting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.
(vii) In case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person, the sale
or transfer of all or substantially all of the assets of the Company or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, the holders of the Preferred Stock then
outstanding shall have the right thereafter to convert such shares only into
the shares of stock and other securities and property receivable upon or deemed
to be held by holders of Common Stock following such reclassification,
consolidation, merger, sale, transfer or share exchange, and the holders of the
Preferred Stock shall be entitled upon such event to receive such amount of
securities or property as the shares of the Common Stock of the Company into
which such shares of Preferred Stock could have been converted immediately
prior to such reclassification, consolidation, merger, sale transfer or share
exchange would have been entitled. The terms of any such consolidation,
merger, sale, transfer or share exchange shall include such terms so as to
continue to give to the holder of Preferred Stock the right to receive the
securities or property set forth in the Section 5(c)(vii) upon any conversion
following
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<PAGE> 10
such consolidation, merger, sale, transfer or share exchange. This provision
shall similarly apply to successive reclassifications, consolidations, mergers,
sales, transfers or share exchanges.
(viii) If:
a. the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
b. the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
c. the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock
of any class or of any rights; or
d. the approval of any stockholders of the Company shall
be required in connection with any reclassification
of the Common Stock of the Company (other than a
subdivision of combination of the outstanding shares
of Common Stock), any consolidation or merger to
which the Company is a party, any sale or transfer of
all or substantially all of the assets of the
Company, or any compulsory share exchange whereby the
Common Stock is converted into other securities, cash
or property; or
e. the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding-up of
the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained
for the purpose of conversion of Preferred Stock, and shall cause to be mailed
to the holders of
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<PAGE> 11
Preferred Stock at their last addresses as they shall appear upon the stock
books of the Company, at least ten (10) calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date
on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be
taken, the dates as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined, or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, share exchange, dissolution, liquidation, or winding-up
is expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding-up; provided, however, that the failure to
mail such notice or any defect therein or in the mailing thereof shall not
affect the validity of the corporate action required to be specified in such
notice.
(d) If at any time conditions shall arise by reason of action
taken by the Company which in the opinion of the Board of Directors are not
adequately covered by the other provision hereof and which might materially and
adversely affect the rights of the holders of Preferred Stock (different than
or distinguished from the effect generally on rights of holders of any class of
the Company's capital stock) or if at any time any such conditions are expected
to arise by reason of any action contemplated by the Company, the Company shall
mail a written notice briefly describing the action contemplated and the
material adverse effects of such action on the rights of the holders of
Preferred Stock at least ten (10) calendar days prior to the effective date of
such action, and an Appraiser selected by the holders of majority in interest
of the Preferred Stock shall give its opinion as to the adjustment, if any (not
inconsistent with the standards established in this Section 5), of the
Conversion Price (including, if necessary, any adjustment as to the securities
into which shares of Preferred Stock may thereafter be convertible) and any
distribution which is or would be required to preserve without diluting the
rights of the holders of shares of Preferred Stock; provided, however, that the
Company, after receipt of the determination by such Appraiser, shall have the
right to select an additional Appraiser, in
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<PAGE> 12
which case the adjustment shall be equal to the average of the adjustments
recommended by each such Appraiser. The Board of Directors shall make the
adjustment recommended forthwith upon the receipt of such opinion or opinions
or the taking of any such action contemplated, as the case may be; provided,
however, that no such adjustment of the Conversion Price shall be made which in
the opinion of the Appraiser(s) giving the aforesaid opinion or opinions would
result in an increase of the Conversion Price to more than the Conversion Price
then in effect.
(e) The Company covenants that it will at all times reserve and
keep available out of its authorized and unissued Common Stock solely for the
purpose of issuance upon conversion of Preferred Stock as herein provided, free
from preemptive rights or any other actual contingent purchase rights of
persons other than the holders of Preferred Stock, such number of shares of
Common Stock as shall be issuable (taking into account the adjustments and
restrictions of Section 5(b) and Section 5(d) hereof) upon the conversion of
all outstanding shares of Preferred Stock. The Company covenants that all
shares of Common Stock that shall be so issuable shall, upon issue, be duly and
validly authorized, issued and fully paid and nonassessable.
(f) Upon a conversion hereunder the Company shall not be
required to issue stock certifications representing fractions of shares of
Common Stock, but may if otherwise permitted, make a cash payment in respect of
any final fraction of a share based on the Per Share Market Value at such time.
If the Company elects not, or is unable, to make such a cash payment, the
holder of a share of Preferred Stock shall be entitled to receive, in lieu of
the final fraction of a share, one whole share of Common Stock.
(g) The issuance of certificates for shares of Common Stock on
conversion of Preferred Stock shall be made without charge to the holders
thereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided that the Company
shall not be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the holder of such shares of
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<PAGE> 13
Preferred Stock so converted and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been
paid.
(h) Shares of Preferred Stock converted into Common Stock shall be
canceled and shall have the status of authorized but unissued shares of
Preferred Stock.
(i) Each Holder Conversion Notice shall be given by facsimile and
by mail, postage prepaid, addressed to the attention of the Chief Financial
Officer of the Company at the facsimile telephone number and address of the
principal place of business of the Company. Any such notice shall be deemed
given and effective upon the earliest to occur of (i)(a) if such Conversion
Notice is delivered via facsimile at the facsimile telephone number specified
in this Section 5(i) prior to 4:30 p.m. (Eastern Standard Time) on any date,
such date or such later date as is specified in the Conversion Notice, and (b)
if such Conversion Notice is delivered via facsimile at the facsimile telephone
number specified in this Section 5(i) after 4:30 p.m. (Eastern Standard Time)
on any date, the next date or such later date as is specified in the Conversion
Notice, (ii) five (5) days after deposit in the United States mails or (iii)
upon actual receipt by the party to whom such notice is required to be given.
6. Definitions.
For the purposes hereof, the following terms shall have the following meanings:
"Common Stock" means shares now or hereafter
authorized of the class of Common Stock, par value $0.01, of the Company and
stock of any other class into which such shares may hereafter have been
reclassified or changed.
"Conversion Ratio" means, at any time, a fraction, of
which the numerator is Stated Value plus accrued but unpaid dividends, and of
which the denominator is the Conversion Price at such time.
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<PAGE> 14
"Junior Securities" means the Common Stock and all
other equity securities of the Company, except the Company's Series A Preferred
Stock and Series B Convertible Preferred Stock.
"Original Issue Date" shall mean the date of first
issuance of Preferred Stock and the date of the first issuance of any shares of
Preferred Stock regardless of the number of transfers of such shares of
Preferred Stock and regardless of the number of certificates which may be
issued to evidence such Preferred Stock.
"Per Share Market Value" means on any particular date
(a) the closing bid price per share of the Common Stock on such date on The
Nasdaq SmallCap Market or other stock exchange on which the Common Stock has
been listed or if there is no such price on such date, then the closing bid
price on such exchange on the date nearest preceding such date or (b) if the
Common Stock is not listed on The Nasdaq SmallCap Market or any stock exchange,
the closing bid for a share of Common Stock in the over-the-counter market, as
reported by the NASD at the close of business on such date, or (c) if the
Common Stock is not quoted on the NASD, the closing bid price for a share of
Common Stock in the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or similar organization or agency succeeding to
its functions of reporting prices), or (d) if the Common Stock is no longer
publicly traded the fair market value of a share of Common Stock as determined
by an Appraiser (as defined in Section 5(d)(iv) above) selected in good faith
by the holders of a majority in interest of the shares of the Preferred Stock;
provided, however, that the Company, after receipt of the determination by such
Appraiser, shall have the right to select an additional Appraiser, in which
case, the fair market value shall be equal to the average of the determinations
by each such Appraiser.
"Person" means a corporation, an association, a
partnership, organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
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<PAGE> 15
"Purchase Agreement" means the Convertible Preferred
Stock Purchase Agreement, dated as of the Original Issue Date, between the
Company and the original holder of the Preferred Stock.
"Trading Day" mean (a) a day on which the Common
Stock is traded on The Nasdaq SmallCap Market or principle stock exchange on
which the Common Stock has been listed, or (b) if the Common Stock is not
listed on The Nasdaq SmallCap Market or any stock exchange, a day on which the
Common Stock is traded in the over-the-counter market, as reported by the NASD,
or (c) if the Common Stock is not quoted on the NASD, a day on which the Common
Stock is quoted in the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency succeeding
its functions of reporting prices).
ARTICLE 3. The date of adoption of the amendment was March 27,
1997:
This amendment includes typographical corrections to the amendment
adopted March 27, 1997 and previously filed on March 31, 1997.
ARTICLE 4. The amendment was adopted by:
The Board of Directors. Shareholder action was not required.
ARTICLE 5. These Articles will be effective upon filing.
Dated: April 7, 1997
____________________________________
Patricia E. Hart
Secretary
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<PAGE> 16
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)
The undersigned hereby irrevocably elects to convert the number of shares of
Series B Convertible Preferred Stock indicated below into shares of Common
Stock, par value U.S. $0.01 per share (the "Common Stock") of Multicom
Publishing, Inc. (the "Company") according to the conditions hereof, as of the
date written below. If shares are to be issued in the name of a person other
than the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. No fee will be
charged to the Holder for any conversion, except for such transfer taxes, if
any.
Conversion calculations: -----------------------------------
Date to Effect Conversion
-----------------------------------
Number of shares of Preferred Stock
to be Converted
-----------------------------------
Applicable Conversion Price
-----------------------------------
Signature
-----------------------------------
Name
-----------------------------------
-----------------------------------
Address
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<PAGE> 1
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made
and entered into as of March 31, 1997, by and among Multicom Publishing, Inc.,
a Washington corporation (the "Company"), and Vitaloon Inc., a B.V.I.
corporation (the "Purchaser").
This Agreement is made pursuant to the Convertible Preferred
Stock Purchase Agreement, dated as of March 31, 1997, by and among the Company
and the Purchaser (the "Purchase Agreement"). The execution of this Agreement
is a condition to the closing of the transactions contemplated by the Purchase
Agreement.
The parties hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein shall
have the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"Advice" shall have meaning set forth in Section 4(o).
"Affiliate" means, with respect to any Person, any other
Person that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "control," when
used with respect to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms of "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.
"Blackout" shall have the meaning set forth in Section 3(b).
"Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in
the state of New York generally are authorized or required by law or other
government actions to close.
"Closing Date" shall have the meaning set forth in the
Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, par value
$.01 per share.
"Effectiveness Date" means the 85th day following the Closing
Date.
<PAGE> 2
"Effectiveness Period" shall have the meaning set forth in
Section 2(a).
"Event" shall have the meaning set forth in Section 5.
"Event Date" shall have the meaning set forth in Section 5.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Filing Date" means the 55th day following the Closing Date.
"Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in
Section 7(c).
"Indemnifying Party" shall have the meaning set forth in
Section 7(c).
"Losses" shall have the meaning set forth in Section 7(a).
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under to the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"Registrable Securities" means the shares of Series B
Preferred purchased by the Purchaser pursuant to the Purchase Agreement, the
shares of Common Stock into which such shares of Series B Preferred are
convertible pursuant to the Purchase Agreement and the shares of Common Stock,
if any, issued in payment of the dividend on the Series B Preferred.
"Registration Statement" means the registration statement,
contemplated by Section 2(a), including the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and
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<PAGE> 3
all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such rule.
"Rule 144A" means Rule 144A promulgated by the Commission
pursuant to the Securities Act, as such rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such rule.
"Rule 158" means Rule 158 promulgated by the Commission
pursuant to the Securities Act, as such rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such rule.
"Rule 415" means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means any special counsel to the Holders,
for which the Holders will be reimbursed by the Company pursuant to Section
6(b).
"Underwritten registration or underwritten offering" means a
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective registration
statement.
2. Shelf Registration
(a) On or prior to the Filing Date, the Company shall
prepare and file with the Commission a "shelf" Registration Statement covering
the resale of all of the Registrable Securities for an offering to be made on a
continuous basis pursuant to Rule 415. The Registration Statement shall be on
Form S-3 or another appropriate form permitting registration of Registrable
Securities for resale by the Holders in the manner or manners designated by
them (including, without limitation, public or private sales and one or more
underwritten offerings). The Company shall (i) not permit any securities other
than the Registrable Securities and those securities set forth in Schedule 2(a)
annexed hereto to be included in the Registration Statement and (ii) use its
best efforts to cause the Registration Statement to be declared effective under
the Securities Act as promptly as practicable after the filing thereof, but in
any event prior to the Effectiveness Date, and to keep such Registration
Statement continuously effective under the Securities Act until the date which
is two years after the Closing Date or such earlier date when all Registrable
Securities covered by such Registration Statement have been sold or may be sold
pursuant to Rule 144(k) as determined by the counsel to the Company pursuant to
a written opinion letter, addressed to the Holders, to such effect (the
"Effectiveness Period"); provided, however, that the Company shall not be
deemed to have used its best efforts to keep the
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<PAGE> 4
Registration Statement effective during the Effectiveness Period if it
voluntarily takes any action that would result in the Holders not being able to
sell the Registrable Securities covered by such Registration Statement during
the Effectiveness Period, unless such action is required under applicable law
or the Company has filed a post-effective amendment to the Registration
Statement and the Commission has not declared it effective or except as
otherwise permitted by Section 3(a).
(b) If the Holders of a majority of the Registrable
Securities so elect, an offering of Registrable Securities pursuant to the
Registration Statement may be effected in the form of an underwritten offering.
In such event, and if the managing underwriters advise the Company and such
Holders in writing that in their opinion the amount of Registrable Securities
proposed to be sold in such offering exceeds the amount of Registrable
Securities which can be sold in such offering, there shall be included in such
underwritten offering the amount of such Registrable Securities which in the
opinion of such managing underwriters can be sold, and such amount shall be
allocated pro rata among the Holders proposing to sell Registrable Securities
in such underwritten offering.
(c) If any of the Registrable Securities are to be sold
in an underwritten offering, the investment banker or investment bankers and
manager or managers that will administer the offering will be selected by the
Holders of a majority of the Registrable Securities included in such offering.
No Holder may participate in any underwritten offering hereunder unless such
Person (i) agrees to sell its Registrable Securities on the basis provided in
any underwriting agreements approved by the Persons entitled hereunder to
approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such arrangements.
3. Hold-Back Agreements
(a) Restrictions on Public Sale by the Holders. Subject
to paragraph (b) of this Section 3, the Purchaser hereby understands and agrees
that the registration rights of the Purchaser pursuant to this Agreement and
its ability to offer and sell Registrable Securities pursuant to the
Registration Statement are limited by the provisions of the immediately
following sentence. If the Company determines in its good faith judgment that
the filing of the Registration Statement in accordance with Section 2 or the
use of any Prospectus would require the disclosure of material information
which the Company has a bona fide business purpose for preserving as
confidential or the disclosure of which would impede the Company's ability to
consummate a significant transaction, upon written notice of such determination
by the Company, the rights of the Purchaser to offer, sell or distribute any
Registrable Securities pursuant to the Registration Statement or to require the
Company to take action with respect to the registration or sale of any
Registrable Securities pursuant to the Registration Statement (including any
action contemplated by Section4) will for up to 60 days in any 12-month period
be suspended until the date upon which the Company notifies the Holders in
writing that suspension of such rights for the grounds set forth in this
Section 3(a) is no longer necessary; provided that there may be no such further
suspension after the initial twelve-month period in which such suspension has
occurred.
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<PAGE> 5
(b) Limitation on Blackouts. Notwithstanding anything
contained herein to the contrary, the aggregate number of days (whether or not
consecutive) during which the Company may delay the effectiveness of the
Registration Statement or prevent offerings, sales or distributions by the
Purchaser pursuant to paragraph (a) above or the last paragraph of Section 4
(collectively, a "Blackout") shall in no event exceed 90 days during any
12-month period and no Blackout may continue in consecutive 12 month periods.
4. Registration Procedures
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Prepare and file with the Commission within the time
period set forth in Section 2 a Registration Statement on Form S-3 (or such
other form as may be appropriate) in accordance with the method or methods of
distribution thereof as specified by the Holders, and cause the Registration
Statement to become effective and remain effective as provided herein;
provided, however, that not less than five (5) Business Days prior to the
filing of the Registration Statement or any related Prospectus or any amendment
or supplement thereto (including any document that would be incorporated or
deemed to be incorporated therein by reference), the Company shall (i) furnish
to the Holders, their Special Counsel and any managing underwriters, copies of
all such documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be subject to the
review of such Holders, their Special Counsel and such managing underwriters,
and (ii) cause its officers and directors, counsel and independent certified
public accountants to respond to such inquiries as shall be necessary, in the
opinion of respective counsel to such Holders and such underwriters, to conduct
a reasonable investigation within the meaning of the Securities Act. The
Company shall not file the Registration Statement or any such Prospectus or any
amendments or supplements thereto to which the Holders of a majority of the
Registrable Securities, their Special Counsel, or any managing underwriters,
shall reasonably object in writing on a timely basis.
(b) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective for the
applicable time period; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement, and as so supplemented or
amended to be filed pursuant to Rule 424 (or any similar provisions then in
force) promulgated under the Securities Act; (iii) respond as promptly as
practicable to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto; and (iv) comply with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration Statement
during the applicable period in accordance with the intended methods of
disposition by the Holders thereof set forth in the Registration Statement as
so amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be
sold, their Special Counsel and any managing underwriters immediately (and, in
the case of (i)(A) below, not less than 5 days prior to such filing) and (if
requested by any such Person) confirm such notice in
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<PAGE> 6
writing no later than one Business Day following the day (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment to the
Registration Statement is proposed to be filed and, (B) with respect to the
Registration Statement or any post-ffective amendment, when the same has become
effective; (ii) of any request by the Commission or any other Federal or state
governmental authority for amendments or supplements to the Registration
Statement or Prospectus or for additional information; (iii) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) if at any time any of the
representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated hereby ceases to be true
and correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect
or that requires any revisions to the Registration Statement, Prospectus or
other documents so that, in the case of the Registration Statement or the
Prospectus, as the case may be, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(d) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
the Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(e) If requested by any managing underwriter or the
Holders of a majority of the Registrable Securities to be sold in connection
with an underwritten offering, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment to the Registration Statement such
information as such managing underwriters and such Holders reasonably agree
should be included therein and (ii) make all required filings of such
Prospectus supplement or such post-effective amendment as soon as practicable
after the Company has received notification of the matters to be incorporated
in such Prospectus supplement or post-effective amendment; provided, however,
that the Company shall not be required to take any action pursuant to this
Section 4(e) that would, in the opinion of counsel for the Company, violate
applicable law.
(f) Furnish to each Holder, their Special Counsel and any
managing underwriters, without charge, at least one executed copy of each
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent requested by
such Person (including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the Commission.
(g) Promptly deliver to each Holder, their Special
Counsel, and any underwriters, without charge, as many copies of the Prospectus
or Prospectuses (including each
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<PAGE> 7
form of prospectus) and each amendment or supplement thereto as such Persons
may reasonably request; and the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders and any underwriters in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.
(h) Prior to any public offering of Registrable
Securities, use its best efforts to register or qualify or cooperate with the
selling Holders, any underwriters and their respective counsel in connection
with the registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any Holder or underwriter requests in writing, to keep each such registration
or qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by a Registration Statement; provided, however, that the Company shall
not be required to qualify generally to do business in any jurisdiction where
it is not then so qualified or to take any action that would subject it to
general service of process in any such jurisdiction where it is not then so
subject or subject the Company to any material tax in any such jurisdiction
where it is not then so subject.
(i) Cooperate with the Holders and any managing
underwriters to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold.
(j) Upon the occurrence of any event contemplated by
Section 4(c)(vi), as promptly as practicable, prepare a supplement or
amendment, including a post-effective amendment, to the Registration Statement
or a supplement to the related Prospectus or any document incorporated or
deemed to be incorporated therein by reference, and file any other required
document so that, as thereafter delivered, neither the Registration Statement
nor such Prospectus will 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 light of the circumstances under which they were made,
not misleading.
(k) Use its best efforts to cause all Registrable
Securities relating to such Registration Statement to be listed on each
securities exchange or market, if any, on which similar securities issued by
the Company are then listed.
(l) Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in underwritten
offerings) and take all such other actions in connection therewith (including
those reasonably requested by any managing underwriters and the Holders of a
majority of the Registrable Securities being sold) in order to expedite or
facilitate the disposition of such Registrable Securities, and whether or not
an underwriting agreement is entered into, (i) make such representations and
warranties to such Holders and such underwriters as are customarily made by
issuers to underwriters in underwritten public offerings, and confirm the same
if and when requested; (ii) obtain and deliver copies thereof to each Holder
and the managing underwriters, if any, of opinions of counsel to the Company
and updates thereof addressed to each selling Holder and each such underwriter,
in form, scope and substance reasonably satisfactory to any such managing
underwriters and Special Counsel to the selling
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<PAGE> 8
Holders covering the matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably requested by
such Special Counsel and underwriters; (iii) immediately prior to the
effectiveness of the Registration Statement, and, in the case of an
underwritten offering, at the time of delivery of any Registrable Securities
sold pursuant thereto, Statement); (iv) if an underwriting agreement is entered
into, the same shall contain indemnification provisions and procedures no less
favorable to the selling Holders and the underwriters, if any, than those set
forth in Section 7 (or such other provisions and procedures acceptable to the
managing underwriters, if any, and holders of a majority of Registrable
Securities participating in such underwritten offering; and (v) deliver such
documents and certificates as may be reasonably requested by the Holders of a
majority of the Registrable Securities being sold, their Special Counsel and
any managing underwriters to evidence the continued validity of the
representations and warranties made pursuant to clause 4(l)(i) above and to
evidence compliance with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company.
(m) Make available for inspection by the selling Holders,
any representative of such Holders, any underwriter participating in any
disposition of Registrable Securities, and any attorney or accountant retained
by such selling Holders or underwriters, at the offices where normally kept,
during reasonable business hours, all financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries, and
cause the officers, directors, agents and employees of the Company and its
subsidiaries to supply all information in each case requested by any such
Holder, representative, underwriter, attorney or accountant in connection with
the Registration Statement; provided, however, that any information that is
determined in good faith by the Company in writing to be of a confidential
nature at the time of delivery of such information shall be kept confidential
by such Persons, unless (i) disclosure of such information is required by court
or administrative order or is necessary to respond to inquiries of regulatory
authorities; (ii) disclosure of such information, in the opinion of counsel to
such Person, is required by law; (iii) such information becomes generally
available to the public other than as a result of a disclosure or failure to
safeguard by such Person; or (iv) such information becomes available to such
Person from a source other than the Company and such source is not bound by a
confidentiality agreement.
(n) Comply with all applicable rules and regulations of
the Commission and make generally available to its securityholders earning
statements satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 not later than 45 days after the end of any 12-month period (or 90
days after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Securities are
sold to underwriters in a firm commitment or best efforts underwritten offering
and (ii) if not sold to underwriters in such an offering, commencing on the
first day of the first fiscal quarter of the Company after the effective date
of the Registration Statement, which statement shall cover said 12-month
period, or end shorter periods as is consistent with the requirements of Rule
158.
(o) Provide a CUSIP number for all Registrable
Securities, not later than the effective date of the Registration Statement.
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<PAGE> 9
The Company may require each selling Holder to furnish to the
Company such information regarding the distribution of such Registrable
Securities as is required by law to be disclosed in the Registration Statement
and the Company may exclude from such registration the Registrable Securities
of any such Holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
Each Purchaser covenants and agrees that (i) it will not offer
or sell any Registrable Securities under the Registration Statement until it
has received copies of the Prospectus as then amended or supplemented as
contemplated in Section 4(g) and notice from the Company that such Registration
Statement and any post-effective amendments thereto have become effective as
contemplated by Section 4(c) and (ii) the Purchaser and its officers, directors
or Affiliates, if any, will comply with the prospectus delivery requirements of
the Securities Act as applicable to them in connection with sales of
Registrable Securities pursuant to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of
any event of the kind described in Section 4(c)(ii), 4(c)(iii), 4(c)(iv),
4(c)(v) or 4(c)(vi), such Holder will forthwith discontinue disposition of such
Registrable Securities until such Holder's receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement contemplated by
Section 4(j), or until it is advised in writing (the "Advice") by the Company
that the use of the applicable Prospectus may be resumed, and, in either case,
has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.
5. Liquidated Damages. The Company acknowledges and agrees
that the Holders will suffer damages, and that it would not be feasible to
ascertain the extent of such damages with precision, if the Company fails to
fulfill its obligations hereunder and (a) a Registration Statement is not filed
with the Commission on or prior to the Filing Date, (b) a Registration
Statement is not declared effective by the Commission on or prior to the
Effectiveness Date or (c) a Registration Statement is filed and declared
effective but thereafter ceases to be effective at any time during the
Effectiveness Period without being succeeded within 30 days by a subsequent
Registration Statement filed with and declared effective by the Commission (any
such failure being hereinafter referred to as an "Event", and for purposes of
clauses (a) and (b) the date on which such Event occurs, or for purposes of
clause (c) the date on which such 30-day limit is exceeded, being hereinafter
referred to as an "Event Date").
Upon the occurrence of an Event, the Company agrees to
decrease the Conversion Price applicable to a conversion of Series B Preferred
in accordance with Section 5(c)(i) of the Certificate of Designation by three
percent (3%) per month for each of the first three months after each Event
Date. Such increase in discount shall be paid as liquidated damages, and not
as a penalty, to each Holder; provided, that such liquidated damages will cease
to accrue (subject to the occurrence of another Event) on the date in which the
applicable Registration Statement is no longer subject to an order suspending
the effectiveness thereof or Proceedings relating thereto or a subsequent Shelf
Registration is declared effective.
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<PAGE> 10
The Company shall notify each Holder within ten days of each
Event and Event Date.
6. Registration Expenses
(a) All fees and expenses incident to the performance of
or compliance with this Agreement by the Company shall be borne by the Company
whether or not the Registration Statement is filed or becomes effective and
whether or not any Registrable Securities are sold pursuant to the Registration
Statement. The fees and expenses referred to in the foregoing sentence shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (A) with respect to filings required to
be made with the National Association of Securities Dealers, Inc. and (B) in
compliance with state securities or Blue Sky laws (including, without
limitation, fees and disbursements of counsel for the underwriters or Holders
in connection with Blue Sky qualifications of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as the managing underwriters, if any, or
Holders of a majority of Registrable Securities may designate)), (ii) printing
expenses (including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is requested by the managing underwriters, if any, or by the
holders of a majority of the Registrable Securities included in the
Registration Statement), (iii) messenger, telephone and delivery expenses, (iv)
fees and disbursements of counsel for the Company and Special Counsel for the
Holders (subject to the provisions of Section 6(b)), (v) fees and disbursements
of all independent certified public accountants referred to in Section
4(1)(iii) (including, without limitation, the expenses of any special audit
required by or incident to such performance), (vi) Securities Act liability
insurance, if the Company so desires such insurance, and (vii) fees and
expenses of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement. In addition,
the Company shall be responsible for all of its internal expenses incurred in
connection with the consummation of the transactions contemplated by this
Agreement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, the fees and expenses incurred in connection with the listing
of the Registrable Securities on any securities exchange on which similar
securities issued by the Company are then listed.
(b) In connection with the Registration Statement, the
Company shall reimburse the Holders for the reasonable fees and disbursements
of one firm of attorneys chosen by the Holders of a majority of the Registrable
Securities up to a maximum of $10,000.
7. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding termination of this Agreement and without limitation as to
time, indemnify and hold harmless each Holder, the officers, directors, agents,
brokers, investment advisors and employees of each of them, each Person who
controls any such Holder (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without
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<PAGE> 11
limitation, costs of preparation and attorneys' fees) and expenses
(collectively, "Losses") (as determined by a court of competent jurisdiction in
a final judgment not subject to appeal or review) arising out of or relating to
any untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising
out of or relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein (in
the case of any Prospectus or form of prospectus or supplement thereto, in
light of the circumstances under which they were made) not misleading, except
to the extent, but only to the extent, that such untrue statements or omissions
are based upon information regarding such Holder furnished in writing to the
Company by or on behalf of such Holder expressly for use therein, which
information was reasonably relied on by the Company for use therein or to the
extent that such information relates to such Holder or such Holder's proposed
method of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in the Registration
Statement, such Prospectus or such form of Prospectus or in any amendment or
supplement thereto. The Company shall notify the Holders promptly of the
institution, threat or assertion of any Proceeding of which the Company is
aware in connection with the transactions contemplated by this Agreement.
(b) Indemnification by Holders. In connection with the
Registration Statement, each Holder shall furnish to the Company in writing
such information as the Company reasonably requests for use in connection with
the Registration Statement or any Prospectus and agrees, jointly and not
severally, to indemnify and hold harmless the Company, their directors,
officers, agents and employees, each Person who controls the Company (within
the meaning of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the directors, officers, agents or employees of such controlling
Persons, to the fullest extent permitted by applicable law, from and against
all Losses (as determined by a court of competent jurisdiction in a final
judgment not subject to appeal or review) arising out of or relating to any
untrue statement of a material fact contained in the Registration Statement,
any Prospectus, or any form of prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or relating to any
omission of 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,
that such untrue statement or omission is contained in any information so
furnished in writing by such Holder to the Company specifically for inclusion
in the Registration Statement or such Prospectus and that such information was
reasonably relied upon by the Company for use in the Registration Statement,
such Prospectus or such form of prospectus or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus. In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any
Proceeding shall be brought or asserted against any Person entitled to
indemnity hereunder (an "Indemnified Party"), such Indemnified Party promptly
shall notify the Person from whom indemnity is sought (the
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<PAGE> 12
"Indemnifying Party") in writing, and the Indemnifying Party shall assume the
defense thereof, including the employment of counsel and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this
Agreement, except (and only) to the extent that it shall be finally determined
by a court of competent jurisdiction (which determination is not subject to
appeal or further review) that such failure shall have proximately and
materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed to
pay such fees and expenses; or (2) the Indemnifying Party shall have failed
promptly to assume the defense of such Proceeding and to employ counsel in any
such Proceeding; or (3) the named parties to any such Proceeding (including any
impleaded parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by counsel that a
conflict of interest is likely to exist if the same counsel were to represent
such Indemnified Party and the Indemnifying Party. The Indemnifying Party shall
not be liable for any settlement of any such Proceeding effected without its
written consent, which consent shall not be unreasonably withheld. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.
All reasonable fees and expenses of the Indemnified Party
(including reasonable fees and expenses to the extent incurred in connection
with investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within 20 Business Days of written notice thereof to the Indemnifying
Party; provided, that the Indemnifying Party may require such Indemnified Party
to undertake to reimburse all such fees and expenses to the extent it is
finally judicially determined that such Indemnified Party is not entitled to
indemnification hereunder).
(d) Contribution. If a claim for indemnification under
Section 7(a) or 7(b) is unavailable to an Indemnified Party or is insufficient
to hold such Indemnified Party harmless for any Losses in respect of which this
Section would apply by its terms (other than by reason of exceptions provided
in this Section), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates
to information supplied by, such Indemnifying Party or Indemnified Party, and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result
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<PAGE> 13
of any Losses shall be deemed to include, subject to the limitations set forth
in Section 7(c), any attorneys' or other fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have
been indemnified for such fees or expenses if the indemnification provided for
in this Section was available to such party.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 7(d), the Purchaser
shall not be required to contribute, in the aggregate, any amount in excess of
the amount by which the proceeds actually received by the Purchaser from the
sale of the Registrable Securities subject to the Proceeding exceeds the amount
of any damages that the Purchaser has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
8. Rule 144
The Company shall file the reports required to be filed by it
under the Securities Act and the Exchange Act in a timely manner and, if at any
time the Company is not required to file such reports, they will, upon the
request of any Holder, make publicly available other information so long as
necessary to permit sales of its securities pursuant to Rule 144. The Company
further covenants that it will take such further action as any Holder may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144. Upon the
request of any Holder, the Company shall deliver to such Holder a written
certification of a duly authorized officer as to whether it has complied with
such requirements.
9. Miscellaneous
(a) Remedies. In the event of a breach by the Company or
by a Holder, of any of their obligations under this Agreement, each Holder or
the Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement.
The Company and each Holder agree that monetary damages would not provide
adequate compensation for any losses incurred by reason of a breach by it of
any of the provisions of this Agreement and hereby further agrees that, in the
event of any action for specific performance in respect of such breach, it
shall waive the defense that a remedy at law would be adequate.
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(b) No Inconsistent Agreements. Except as specifically
set forth in Schedule 2 (a) annexed hereto, the Company has not, as of the date
hereof, nor shall the Company , on or after the date of this Agreement, enter
into any agreement with respect to its securities that is inconsistent with the
rights granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Except as set specifically forth in Schedule 2 (a) annexed
hereto, the Company has not previously entered into any agreement granting any
registration rights with respect to any of its securities to any Person.
Without limiting the generality of the foregoing, without the written consent
of the Holders of a majority of the then outstanding Registrable Securities,
the Company shall not grant to any Person the right to request the Company to
register any securities of the Company under the Securities Act unless the
rights so granted are subject in all respects to the prior rights in full of
the Holders set forth herein, and are not otherwise in conflict or inconsistent
with the provisions of this Agreement.
(c) No Piggyback on Registrations. Except as
specifically set forth in Schedule 2(a) annexed hereto, none of the Company nor
any of its securityholders (other than the Holders in such capacity pursuant
hereto) may include securities of the Company in the Registration Statement
other than the Common Stock to be issued under the Purchase Agreement, and the
Company shall not enter into any agreement providing any such right to any of
its securityholders.
(d) Entire Agreement; Amendments. This Agreement,
together with the Exhibits, Annexes and Schedules hereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with
respect to such matters.
(e) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the same shall be in writing and
signed by the Company and the Holders of at least a majority of the then
outstanding Registrable Securities; provided, however, that, for the purposes
of this sentence, Registrable Securities that are owned, directly or
indirectly, by the Company, or an Affiliate of the Company are not deemed
outstanding. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders and that does not directly or indirectly affect the rights of
other Holders may be given by Holders of at least a majority of the Registrable
Securities to which such waiver or consent relates; provided, however, that the
provisions of this sentence may not be amended, modified, or supplemented
except in accordance with the provisions of the immediately preceding sentence.
(f) Notices. Any notice or other communication required
or permitted to be given hereunder shall be in writing and shall be deemed to
have been received (a) upon hand delivery (receipt acknowledged) or delivery by
telex (with correct answer back received), telecopy or facsimile (with
transmission confirmation report) 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
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<PAGE> 15
such address, or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be:
If to the Company:
Multicom Publishing, Inc.
188 Embarcadero, 5th Floor
San Francisco, California 94105
Telecopier: (415) 777-4729
Attn.: CEO, General Counsel
With copies to:
Multicom Publishing, Inc.
1100 Olive Way, 12th floor
Seattle, WA 98101
Telecopier: (206) 622-4380
Attn.: CFO
If to the Purchaser:
If to any other Person who is then the registered Holder:
To the address of such Holder as it appears in the stock
transfer books of the Company
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
(g) Successors and Assigns. This Agreement shall inure
to the benefit of and be binding upon the successors and permitted assigns of
each of the parties and shall inure to the benefit of each Holder. The Company
may not assign its rights or obligations hereunder without the prior written
consent of each Holder.
(h) Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
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(i) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
regard to principles of conflicts of law.
(j) Cumulative Remedies. The remedies provided herein
are cumulative and not exclusive of any remedies provided by law.
(k) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(l) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(m) Shares held by The Company and its Affiliates.
Whenever the consent or approval of Holders of a specified percentage of
Registrable Securities is required hereunder, Registrable Securities held by
the Company or its Affiliates (other than the Purchaser or transferees or
successors or assigns thereof if such Persons are deemed to be Affiliates
solely by reason of their holdings of such Registrable Securities) shall not be
counted in determining whether such consent or approval was given by the
Holders of such required percentage.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
Multicom Publishing, Inc.
By: ____________________________________
Name: Tamara L. Attard
Title: Chairman and CEO
[ ]
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By: ____________________________________
Name:
Title:
17
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EXHIBIT 4.3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made
and entered into as of March 31, 1997, by and among Multicom Publishing, Inc.,
a Washington corporation (the "Company"), and GEM Management Ltd., a B.V.I.
corporation (the "Purchaser").
This Agreement is made pursuant to the Convertible Preferred
Stock Purchase Agreement, dated as of March 31, 1997, by and among the Company
and the Purchaser (the "Purchase Agreement"). The execution of this Agreement
is a condition to the closing of the transactions contemplated by the Purchase
Agreement.
The parties hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein shall
have the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"Advice" shall have meaning set forth in Section 4(o).
"Affiliate" means, with respect to any Person, any other
Person that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "control," when
used with respect to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms of "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.
"Blackout" shall have the meaning set forth in Section 3(b).
"Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in
the state of New York generally are authorized or required by law or other
government actions to close.
"Closing Date" shall have the meaning set forth in the
Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, par value
$.01 per share.
"Effectiveness Date" means the 85th day following the Closing
Date.
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"Effectiveness Period" shall have the meaning set forth in
Section 2(a).
"Event" shall have the meaning set forth in Section 5.
"Event Date" shall have the meaning set forth in Section 5.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Filing Date" means the 55th day following the Closing Date.
"Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in
Section 7(c).
"Indemnifying Party" shall have the meaning set forth in
Section 7(c).
"Losses" shall have the meaning set forth in Section 7(a).
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under to the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"Registrable Securities" means the shares of Series B
Preferred purchased by the Purchaser pursuant to the Purchase Agreement, the
shares of Common Stock into which such shares of Series B Preferred are
convertible pursuant to the Purchase Agreement and the shares of Common Stock,
if any, issued in payment of the dividend on the Series B Preferred.
"Registration Statement" means the registration statement,
contemplated by Section 2(a), including the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and
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all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such rule.
"Rule 144A" means Rule 144A promulgated by the Commission
pursuant to the Securities Act, as such rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such rule.
"Rule 158" means Rule 158 promulgated by the Commission
pursuant to the Securities Act, as such rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such rule.
"Rule 415" means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means any special counsel to the Holders,
for which the Holders will be reimbursed by the Company pursuant to Section
6(b).
"Underwritten registration or underwritten offering" means a
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective registration
statement.
Shelf Registration
(a) On or prior to the Filing Date, the Company shall
prepare and file with the Commission a "shelf" Registration Statement covering
the resale of all of the Registrable Securities for an offering to be made on a
continuous basis pursuant to Rule 415. The Registration Statement shall be on
Form S-3 or another appropriate form permitting registration of Registrable
Securities for resale by the Holders in the manner or manners designated by
them (including, without limitation, public or private sales and one or more
underwritten offerings). The Company shall (i) not permit any securities other
than the Registrable Securities and those securities set forth in Schedule 2(a)
annexed hereto to be included in the Registration Statement and (ii) use its
best efforts to cause the Registration Statement to be declared effective under
the Securities Act as promptly as practicable after the filing thereof, but in
any event prior to the Effectiveness Date, and to keep such Registration
Statement continuously effective under the Securities Act until the date which
is two years after the Closing Date or such earlier date when all Registrable
Securities covered by such Registration Statement have been sold or may be sold
pursuant to Rule 144(k) as determined by the counsel to the Company pursuant to
a written opinion letter, addressed to the Holders, to such effect (the
"Effectiveness Period"); provided, however, that the Company shall not be
deemed to have used its best efforts to keep the
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<PAGE> 4
Registration Statement effective during the Effectiveness Period if it
voluntarily takes any action that would result in the Holders not being able to
sell the Registrable Securities covered by such Registration Statement during
the Effectiveness Period, unless such action is required under applicable law
or the Company has filed a post-effective amendment to the Registration
Statement and the Commission has not declared it effective or except as
otherwise permitted by Section 3(a).
(b) If the Holders of a majority of the Registrable
Securities so elect, an offering of Registrable Securities pursuant to the
Registration Statement may be effected in the form of an underwritten offering.
In such event, and if the managing underwriters advise the Company and such
Holders in writing that in their opinion the amount of Registrable Securities
proposed to be sold in such offering exceeds the amount of Registrable
Securities which can be sold in such offering, there shall be included in such
underwritten offering the amount of such Registrable Securities which in the
opinion of such managing underwriters can be sold, and such amount shall be
allocated pro rata among the Holders proposing to sell Registrable Securities
in such underwritten offering.
(c) If any of the Registrable Securities are to be sold
in an underwritten offering, the investment banker or investment bankers and
manager or managers that will administer the offering will be selected by the
Holders of a majority of the Registrable Securities included in such offering.
No Holder may participate in any underwritten offering hereunder unless such
Person (i) agrees to sell its Registrable Securities on the basis provided in
any underwriting agreements approved by the Persons entitled hereunder to
approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such arrangements.
3. Hold-Back Agreements
(a) Restrictions on Public Sale by the Holders. Subject
to paragraph (b) of this Section 3, the Purchaser hereby understands and agrees
that the registration rights of the Purchaser pursuant to this Agreement and
its ability to offer and sell Registrable Securities pursuant to the
Registration Statement are limited by the provisions of the immediately
following sentence. If the Company determines in its good faith judgment that
the filing of the Registration Statement in accordance with Section 2 or the
use of any Prospectus would require the disclosure of material information
which the Company has a bona fide business purpose for preserving as
confidential or the disclosure of which would impede the Company's ability to
consummate a significant transaction, upon written notice of such determination
by the Company, the rights of the Purchaser to offer, sell or distribute any
Registrable Securities pursuant to the Registration Statement or to require the
Company to take action with respect to the registration or sale of any
Registrable Securities pursuant to the Registration Statement (including any
action contemplated by Section 4) will for up to 60 days in any 12-month period
be suspended until the date upon which the Company notifies the Holders in
writing that suspension of such rights for the grounds set forth in this
Section 3(a) is no longer necessary; provided that there may be no such further
suspension after the initial twelve-month period in which such suspension has
occurred.
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(b) Limitation on Blackouts. Notwithstanding anything
contained herein to the contrary, the aggregate number of days (whether or not
consecutive) during which the Company may delay the effectiveness of the
Registration Statement or prevent offerings, sales or distributions by the
Purchaser pursuant to paragraph (a) above or the last paragraph of Section 4
(collectively, a "Blackout") shall in no event exceed 90 days during any
12-month period and no Blackout may continue in consecutive 12 month periods.
4. Registration Procedures
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Prepare and file with the Commission within the time
period set forth in Section 2 a Registration Statement on Form S- 3 (or such
other form as may be appropriate) in accordance with the method or methods of
distribution thereof as specified by the Holders, and cause the Registration
Statement to become effective and remain effective as provided herein;
provided, however, that not less than five (5) Business Days prior to the
filing of the Registration Statement or any related Prospectus or any amendment
or supplement thereto (including any document that would be incorporated or
deemed to be incorporated therein by reference), the Company shall (i) furnish
to the Holders, their Special Counsel and any managing underwriters, copies of
all such documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be subject to the
review of such Holders, their Special Counsel and such managing underwriters,
and (ii) cause its officers and directors, counsel and independent certified
public accountants to respond to such inquiries as shall be necessary, in the
opinion of respective counsel to such Holders and such underwriters, to conduct
a reasonable investigation within the meaning of the Securities Act. The
Company shall not file the Registration Statement or any such Prospectus or any
amendments or supplements thereto to which the Holders of a majority of the
Registrable Securities, their Special Counsel, or any managing underwriters,
shall reasonably object in writing on a timely basis.
(b) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective for the
applicable time period; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement, and as so supplemented or
amended to be filed pursuant to Rule 424 (or any similar provisions then in
force) promulgated under the Securities Act; (iii) respond as promptly as
practicable to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto; and (iv) comply with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration Statement
during the applicable period in accordance with the intended methods of
disposition by the Holders thereof set forth in the Registration Statement as
so amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be
sold, their Special Counsel and any managing underwriters immediately (and, in
the case of (i)(A) below, not less than 5 days prior to such filing) and (if
requested by any such Person) confirm such notice in
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writing no later than one Business Day following the day (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment to the
Registration Statement is proposed to be filed and, (B) with respect to the
Registration Statement or any post-ffective amendment, when the same has become
effective; (ii) of any request by the Commission or any other Federal or state
governmental authority for amendments or supplements to the Registration
Statement or Prospectus or for additional information; (iii) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) if at any time any of the
representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated hereby ceases to be true
and correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect
or that requires any revisions to the Registration Statement, Prospectus or
other documents so that, in the case of the Registration Statement or the
Prospectus, as the case may be, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(d) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
the Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(e) If requested by any managing underwriter or the
Holders of a majority of the Registrable Securities to be sold in connection
with an underwritten offering, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment to the Registration Statement such
information as such managing underwriters and such Holders reasonably agree
should be included therein and (ii) make all required filings of such
Prospectus supplement or such post-effective amendment as soon as practicable
after the Company has received notification of the matters to be incorporated
in such Prospectus supplement or post-effective amendment; provided, however,
that the Company shall not be required to take any action pursuant to this
Section 4(e) that would, in the opinion of counsel for the Company, violate
applicable law.
(f) Furnish to each Holder, their Special Counsel and any
managing underwriters, without charge, at least one executed copy of each
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent requested by
such Person (including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the Commission.
(g) Promptly deliver to each Holder, their Special
Counsel, and any underwriters, without charge, as many copies of the Prospectus
or Prospectuses (including each
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form of prospectus) and each amendment or supplement thereto as such Persons
may reasonably request; and the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders and any underwriters in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.
(h) Prior to any public offering of Registrable
Securities, use its best efforts to register or qualify or cooperate with the
selling Holders, any underwriters and their respective counsel in connection
with the registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any Holder or underwriter requests in writing, to keep each such registration
or qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by a Registration Statement; provided, however, that the Company shall
not be required to qualify generally to do business in any jurisdiction where
it is not then so qualified or to take any action that would subject it to
general service of process in any such jurisdiction where it is not then so
subject or subject the Company to any material tax in any such jurisdiction
where it is not then so subject.
(i) Cooperate with the Holders and any managing
underwriters to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold.
(j) Upon the occurrence of any event contemplated by
Section 4(c)(vi), as promptly as practicable, prepare a supplement or
amendment, including a post-effective amendment, to the Registration Statement
or a supplement to the related Prospectus or any document incorporated or
deemed to be incorporated therein by reference, and file any other required
document so that, as thereafter delivered, neither the Registration Statement
nor such Prospectus will 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 light of the circumstances under which they were made,
not misleading.
(k) Use its best efforts to cause all Registrable
Securities relating to such Registration Statement to be listed on each
securities exchange or market, if any, on which similar securities issued by
the Company are then listed.
(l) Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in underwritten
offerings) and take all such other actions in connection therewith (including
those reasonably requested by any managing underwriters and the Holders of a
majority of the Registrable Securities being sold) in order to expedite or
facilitate the disposition of such Registrable Securities, and whether or not
an underwriting agreement is entered into, (i) make such representations and
warranties to such Holders and such underwriters as are customarily made by
issuers to underwriters in underwritten public offerings, and confirm the same
if and when requested; (ii) obtain and deliver copies thereof to each Holder
and the managing underwriters, if any, of opinions of counsel to the Company
and updates thereof addressed to each selling Holder and each such underwriter,
in form, scope and substance reasonably satisfactory to any such managing
underwriters and Special Counsel to the selling
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Holders covering the matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably requested by
such Special Counsel and underwriters; (iii) immediately prior to the
effectiveness of the Registration Statement, and, in the case of an
underwritten offering, at the time of delivery of any Registrable Securities
sold pursuant thereto, Statement); (iv) if an underwriting agreement is entered
into, the same shall contain indemnification provisions and procedures no less
favorable to the selling Holders and the underwriters, if any, than those set
forth in Section 7 (or such other provisions and procedures acceptable to the
managing underwriters, if any, and holders of a majority of Registrable
Securities participating in such underwritten offering; and (v) deliver such
documents and certificates as may be reasonably requested by the Holders of a
majority of the Registrable Securities being sold, their Special Counsel and
any managing underwriters to evidence the continued validity of the
representations and warranties made pursuant to clause 4(l)(i) above and to
evidence compliance with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company.
(m) Make available for inspection by the selling Holders,
any representative of such Holders, any underwriter participating in any
disposition of Registrable Securities, and any attorney or accountant retained
by such selling Holders or underwriters, at the offices where normally kept,
during reasonable business hours, all financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries, and
cause the officers, directors, agents and employees of the Company and its
subsidiaries to supply all information in each case requested by any such
Holder, representative, underwriter, attorney or accountant in connection with
the Registration Statement; provided, however, that any information that is
determined in good faith by the Company in writing to be of a confidential
nature at the time of delivery of such information shall be kept confidential
by such Persons, unless (i) disclosure of such information is required by court
or administrative order or is necessary to respond to inquiries of regulatory
authorities; (ii) disclosure of such information, in the opinion of counsel to
such Person, is required by law; (iii) such information becomes generally
available to the public other than as a result of a disclosure or failure to
safeguard by such Person; or (iv) such information becomes available to such
Person from a source other than the Company and such source is not bound by a
confidentiality agreement.
(n) Comply with all applicable rules and regulations of
the Commission and make generally available to its securityholders earning
statements satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 not later than 45 days after the end of any 12-month period (or 90
days after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Securities are
sold to underwriters in a firm commitment or best efforts underwritten offering
and (ii) if not sold to underwriters in such an offering, commencing on the
first day of the first fiscal quarter of the Company after the effective date
of the Registration Statement, which statement shall cover said 12-month
period, or end shorter periods as is consistent with the requirements of Rule
158.
(o) Provide a CUSIP number for all Registrable
Securities, not later than the effective date of the Registration Statement.
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The Company may require each selling Holder to furnish to the
Company such information regarding the distribution of such Registrable
Securities as is required by law to be disclosed in the Registration Statement
and the Company may exclude from such registration the Registrable Securities
of any such Holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
Each Purchaser covenants and agrees that (i) it will not offer
or sell any Registrable Securities under the Registration Statement until it
has received copies of the Prospectus as then amended or supplemented as
contemplated in Section 4(g) and notice from the Company that such Registration
Statement and any post-effective amendments thereto have become effective as
contemplated by Section 4(c) and (ii) the Purchaser and its officers, directors
or Affiliates, if any, will comply with the prospectus delivery requirements of
the Securities Act as applicable to them in connection with sales of
Registrable Securities pursuant to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of
any event of the kind described in Section 4(c)(ii), 4(c)(iii), 4(c)(iv),
4(c)(v) or 4(c)(vi), such Holder will forthwith discontinue disposition of such
Registrable Securities until such Holder's receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement contemplated by
Section 4(j), or until it is advised in writing (the "Advice") by the Company
that the use of the applicable Prospectus may be resumed, and, in either case,
has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.
5. Liquidated Damages. The Company acknowledges and agrees
that the Holders will suffer damages, and that it would not be feasible to
ascertain the extent of such damages with precision, if the Company fails to
fulfill its obligations hereunder and (a) a Registration Statement is not filed
with the Commission on or prior to the Filing Date, (b) a Registration
Statement is not declared effective by the Commission on or prior to the
Effectiveness Date or (c) a Registration Statement is filed and declared
effective but thereafter ceases to be effective at any time during the
Effectiveness Period without being succeeded within 30 days by a subsequent
Registration Statement filed with and declared effective by the Commission (any
such failure being hereinafter referred to as an "Event", and for purposes of
clauses (a) and (b) the date on which such Event occurs, or for purposes of
clause (c) the date on which such 30-day limit is exceeded, being hereinafter
referred to as an "Event Date").
Upon the occurrence of an Event, the Company agrees to
decrease the Conversion Price applicable to a conversion of Series B Preferred
in accordance with Section 5(c)(i) of the Certificate of Designation by three
percent (3%) per month for each of the first three months after each Event
Date. Such increase in discount shall be paid as liquidated damages, and not
as a penalty, to each Holder; provided, that such liquidated damages will cease
to accrue (subject to the occurrence of another Event) on the date in which the
applicable Registration Statement is no longer subject to an order suspending
the effectiveness thereof or Proceedings relating thereto or a subsequent Shelf
Registration is declared effective.
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The Company shall notify each Holder within ten days of each Event and
Event Date.
6. Registration Expenses
(a) All fees and expenses incident to the performance of
or compliance with this Agreement by the Company shall be borne by the Company
whether or not the Registration Statement is filed or becomes effective and
whether or not any Registrable Securities are sold pursuant to the Registration
Statement. The fees and expenses referred to in the foregoing sentence shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (A) with respect to filings required to
be made with the National Association of Securities Dealers, Inc. and (B) in
compliance with state securities or Blue Sky laws (including, without
limitation, fees and disbursements of counsel for the underwriters or Holders
in connection with Blue Sky qualifications of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as the managing underwriters, if any, or
Holders of a majority of Registrable Securities may designate)), (ii) printing
expenses (including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is requested by the managing underwriters, if any, or by the
holders of a majority of the Registrable Securities included in the
Registration Statement), (iii) messenger, telephone and delivery expenses, (iv)
fees and disbursements of counsel for the Company and Special Counsel for the
Holders (subject to the provisions of Section 6(b)), (v) fees and disbursements
of all independent certified public accountants referred to in Section
4(1)(iii) (including, without limitation, the expenses of any special audit
required by or incident to such performance), (vi) Securities Act liability
insurance, if the Company so desires such insurance, and (vii) fees and
expenses of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement. In addition,
the Company shall be responsible for all of its internal expenses incurred in
connection with the consummation of the transactions contemplated by this
Agreement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, the fees and expenses incurred in connection with the listing
of the Registrable Securities on any securities exchange on which similar
securities issued by the Company are then listed.
(b) In connection with the Registration Statement, the
Company shall reimburse the Holders for the reasonable fees and disbursements
of one firm of attorneys chosen by the Holders of a majority of the Registrable
Securities up to a maximum of $10,000.
7. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding termination of this Agreement and without limitation as to
time, indemnify and hold harmless each Holder, the officers, directors, agents,
brokers, investment advisors and employees of each of them, each Person who
controls any such Holder (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without
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limitation, costs of preparation and attorneys' fees) and expenses
(collectively, "Losses") (as determined by a court of competent jurisdiction in
a final judgment not subject to appeal or review) arising out of or relating to
any untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising
out of or relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein (in
the case of any Prospectus or form of prospectus or supplement thereto, in
light of the circumstances under which they were made) not misleading, except
to the extent, but only to the extent, that such untrue statements or omissions
are based upon information regarding such Holder furnished in writing to the
Company by or on behalf of such Holder expressly for use therein, which
information was reasonably relied on by the Company for use therein or to the
extent that such information relates to such Holder or such Holder's proposed
method of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in the Registration
Statement, such Prospectus or such form of Prospectus or in any amendment or
supplement thereto. The Company shall notify the Holders promptly of the
institution, threat or assertion of any Proceeding of which the Company is
aware in connection with the transactions contemplated by this Agreement.
(b) Indemnification by Holders. In connection with the
Registration Statement, each Holder shall furnish to the Company in writing
such information as the Company reasonably requests for use in connection with
the Registration Statement or any Prospectus and agrees, jointly and not
severally, to indemnify and hold harmless the Company, their directors,
officers, agents and employees, each Person who controls the Company (within
the meaning of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the directors, officers, agents or employees of such controlling
Persons, to the fullest extent permitted by applicable law, from and against
all Losses (as determined by a court of competent jurisdiction in a final
judgment not subject to appeal or review) arising out of or relating to any
untrue statement of a material fact contained in the Registration Statement,
any Prospectus, or any form of prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or relating to any
omission of 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,
that such untrue statement or omission is contained in any information so
furnished in writing by such Holder to the Company specifically for inclusion
in the Registration Statement or such Prospectus and that such information was
reasonably relied upon by the Company for use in the Registration Statement,
such Prospectus or such form of prospectus or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus. In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any
Proceeding shall be brought or asserted against any Person entitled to
indemnity hereunder (an "Indemnified Party"), such Indemnified Party promptly
shall notify the Person from whom indemnity is sought (the
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<PAGE> 12
"Indemnifying Party") in writing, and the Indemnifying Party shall assume the
defense thereof, including the employment of counsel and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this
Agreement, except (and only) to the extent that it shall be finally determined
by a court of competent jurisdiction (which determination is not subject to
appeal or further review) that such failure shall have proximately and
materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed to
pay such fees and expenses; or (2) the Indemnifying Party shall have failed
promptly to assume the defense of such Proceeding and to employ counsel in any
such Proceeding; or (3) the named parties to any such Proceeding (including any
impleaded parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by counsel that a
conflict of interest is likely to exist if the same counsel were to represent
such Indemnified Party and the Indemnifying Party. The Indemnifying Party shall
not be liable for any settlement of any such Proceeding effected without its
written consent, which consent shall not be unreasonably withheld. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.
All reasonable fees and expenses of the Indemnified Party
(including reasonable fees and expenses to the extent incurred in connection
with investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within 20 Business Days of written notice thereof to the Indemnifying
Party; provided, that the Indemnifying Party may require such Indemnified Party
to undertake to reimburse all such fees and expenses to the extent it is
finally judicially determined that such Indemnified Party is not entitled to
indemnification hereunder).
(d) Contribution. If a claim for indemnification under
Section 7(a) or 7(b) is unavailable to an Indemnified Party or is insufficient
to hold such Indemnified Party harmless for any Losses in respect of which this
Section would apply by its terms (other than by reason of exceptions provided
in this Section), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates
to information supplied by, such Indemnifying Party or Indemnified Party, and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result
12
<PAGE> 13
of any Losses shall be deemed to include, subject to the limitations set forth
in Section 7(c), any attorneys' or other fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have
been indemnified for such fees or expenses if the indemnification provided for
in this Section was available to such party.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 7(d), the Purchaser
shall not be required to contribute, in the aggregate, any amount in excess of
the amount by which the proceeds actually received by the Purchaser from the
sale of the Registrable Securities subject to the Proceeding exceeds the amount
of any damages that the Purchaser has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
8. Rule 144
The Company shall file the reports required to be filed by it
under the Securities Act and the Exchange Act in a timely manner and, if at any
time the Company is not required to file such reports, they will, upon the
request of any Holder, make publicly available other information so long as
necessary to permit sales of its securities pursuant to Rule 144. The Company
further covenants that it will take such further action as any Holder may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144. Upon the
request of any Holder, the Company shall deliver to such Holder a written
certification of a duly authorized officer as to whether it has complied with
such requirements.
9. Miscellaneous
(a) Remedies. In the event of a breach by the Company or
by a Holder, of any of their obligations under this Agreement, each Holder or
the Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement.
The Company and each Holder agree that monetary damages would not provide
adequate compensation for any losses incurred by reason of a breach by it of
any of the provisions of this Agreement and hereby further agrees that, in the
event of any action for specific performance in respect of such breach, it
shall waive the defense that a remedy at law would be adequate.
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<PAGE> 14
(b) No Inconsistent Agreements. Except as specifically
set forth in Schedule 2(a) annexed hereto, the Company has not, as of the date
hereof, nor shall the Company , on or after the date of this Agreement, enter
into any agreement with respect to its securities that is inconsistent with the
rights granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Except as set specifically forth in Schedule 2(a) annexed
hereto, the Company has not previously entered into any agreement granting any
registration rights with respect to any of its securities to any Person.
Without limiting the generality of the foregoing, without the written consent
of the Holders of a majority of the then outstanding Registrable Securities,
the Company shall not grant to any Person the right to request the Company to
register any securities of the Company under the Securities Act unless the
rights so granted are subject in all respects to the prior rights in full of
the Holders set forth herein, and are not otherwise in conflict or inconsistent
with the provisions of this Agreement.
(c) No Piggyback on Registrations. Except as
specifically set forth in Schedule 2(a) annexed hereto, none of the Company nor
any of its securityholders (other than the Holders in such capacity pursuant
hereto) may include securities of the Company in the Registration Statement
other than the Common Stock to be issued under the Purchase Agreement, and the
Company shall not enter into any agreement providing any such right to any of
its securityholders.
(d) Entire Agreement; Amendments. This Agreement,
together with the Exhibits, Annexes and Schedules hereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with
respect to such matters.
(e) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the same shall be in writing and
signed by the Company and the Holders of at least a majority of the then
outstanding Registrable Securities; provided, however, that, for the purposes
of this sentence, Registrable Securities that are owned, directly or
indirectly, by the Company, or an Affiliate of the Company are not deemed
outstanding. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders and that does not directly or indirectly affect the rights of
other Holders may be given by Holders of at least a majority of the Registrable
Securities to which such waiver or consent relates; provided, however, that the
provisions of this sentence may not be amended, modified, or supplemented
except in accordance with the provisions of the immediately preceding sentence.
(f) Notices. Any notice or other communication required
or permitted to be given hereunder shall be in writing and shall be deemed to
have been received (a) upon hand delivery (receipt acknowledged) or delivery by
telex (with correct answer back received), telecopy or facsimile (with
transmission confirmation report) 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
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<PAGE> 15
such address, or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be:
If to the Company:
Multicom Publishing, Inc.
188 Embarcadero, 5th Floor
San Francisco, California 94105
Telecopier: (415) 777-4729
Attn.: CEO, General Counsel
With copies to:
Multicom Publishing, Inc.
1100 Olive Way, 12th floor
Seattle, WA 98101
Telecopier: (206) 622-4380
Attn.: CFO
If to the Purchaser:
If to any other Person who is then the registered Holder:
To the address of such Holder as it appears in the stock
transfer books of the Company
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
(g) Successors and Assigns. This Agreement shall inure
to the benefit of and be binding upon the successors and permitted assigns of
each of the parties and shall inure to the benefit of each Holder. The Company
may not assign its rights or obligations hereunder without the prior written
consent of each Holder.
(h) Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
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<PAGE> 16
(i) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
regard to principles of conflicts of law.
(j) Cumulative Remedies. The remedies provided herein
are cumulative and not exclusive of any remedies provided by law.
(k) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(l) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(m) Shares held by The Company and its Affiliates.
Whenever the consent or approval of Holders of a specified percentage of
Registrable Securities is required hereunder, Registrable Securities held by
the Company or its Affiliates (other than the Purchaser or transferees or
successors or assigns thereof if such Persons are deemed to be Affiliates
solely by reason of their holdings of such Registrable Securities) shall not be
counted in determining whether such consent or approval was given by the
Holders of such required percentage.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
Multicom Publishing, Inc.
By: ____________________________________
Name: Tamara L. Attard
Title: Chairman and CEO
[ ]
16
<PAGE> 17
By: ____________________________________
Name:
Title:
17
<PAGE> 1
EXHIBIT 4.4
March 31, 1997
Ms. Mary Sauer
Vice President Business Development
Sonic Solutions
101 Rowland Way
Novato, California 94945
Dear Ms. Sauer:
This letter confirms the terms of our agreement under which Multicom Publishing,
Inc. ("Multicom") will issue 106,667 shares of Multicom's Common Stock to Sonic
Solutions (the "Common Shares"). It is understood that the Common Shares are
valued at a price per share equal to the closing price of Multicom's Common
Shares on Thursday, March 27, 1997 (the "Transfer Price"), and that the Common
Shares are being issued to Sonic Solutions in exchange for DVD equipment.
The Common Shares will be issued to Sonic Solutions effective March 31, 1997 and
the certificate representing the Common Shares will be endorsed with a
restrictive legend. That legend will state that the Common Shares evidenced by
the certificate have not been registered under the Securities Act of 1933, as
amended, and may not be transferred without an effective registration statement
covering the Common Shares or an applicable exemption from registration.
Multicom will prepare and file with the Securities and Exchange Commission (the
"Commission") a registration statement registering the Common Shares. The
registration statement will be on Form S-3 or other appropriate form permitting
registration of the Common Shares held by Sonic Solutions. Multicom will cause
the registration statement to be filed in a timely fashion to allow for the
registration statement to be declared effective within 90 days from the date of
this letter. In the event the Commission does not declare the registration
statement effective on or by June 30, 1997, Multicom will pay Sonic Solutions a
penalty equal to $15,000 for each month the registration statement fails to be
declared effective.
For a period of 120 days from the date of this letter agreement, Multicom will
have an option to repurchase the Common Shares held by Sonic Solutions for
$120,000 plus
<PAGE> 2
interest calculated at the Prime Rate on today's date as reported by the Bank of
America, NT&SA, plus 1%. This option may be exercised at any time upon written
notice to Sonic Solutions whether by mail, facsimile or personal delivery to
your attention at the address noted above.
Sonic Solutions will not directly or indirectly transfer the Common Shares to
any other individual without giving verbal notice to Tamara L. Attard ("Attard")
of its intent to transfer the Common Shares and providing Attard with the right
to repurchase the Common Shares. Attard will have a period of three hours from
the time of verbal notification to advise Sonic Solutions of Attard's intent to
exercise her right of first approval.
Sonic Solutions represents to Multicom that:
(a) It realizes that the purchase of Common Shares is highly speculative.
(b) It is able, without impairing it's financial condition, to bear the economic
risk of the purchase of the Common Shares pursuant to the terms of this letter
agreement, to hold the Common Shares for an indefinite period of time and to
suffer a complete loss of it's investment.
(c) It has such knowledge and experience in financial and business matters that
it is capable of (i) evaluating the merits and risks of the purchase of the
Common Shares pursuant to the terms of this letter agreement and (ii) protecting
it's interests in connection therewith.
(d) It has been solely responsible for it's own "due diligence" investigation of
the Company and the management and business of the Company, for it's own
analysis of the merits and risks of this investment, and for it's own analysis
of the fairness and desirability of the terms of the investment; in taking any
action or performing any role relative to the arranging of the proposed
investment, it has acted solely in it's own interest.
The Common Shares are being acquired for it's own account, in each case
for investment and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Securities
Act.
Multicom will indemnify Sonic Solutions against all expenses, claims, losses,
damages and liabilities arising out of or based upon any untrue statement or
alleged untrue statement of a material fact by Multicom contained in any
prospectus, offering circular or other document incident to the registration of
the Common Shares ("Registration Documents") based on any omission of Multicom
to state a material fact required to be stated in the Registration Documents to
make the statements not misleading.
<PAGE> 3
Please signify your acceptance of the terms of this letter agreement by signing
in the space provided below.
Best regards,
Tamara L. Attard
Chairman and CEO
Acknowledged and Accepted this 31st day of March, 1997:
SONIC SOLUTIONS
By:_________________________
Name:_______________________
Title:______________________
<PAGE> 1
EXHIBIT 10.1
MULTICOM PUBLISHING, INC.
COMMON STOCK PURCHASE AGREEMENT
This Agreement is entered into as of February 7, 1997 by and among
Multicom Publishing, Inc., a Washington corporation (the "Company") and each of
the undersigned purchasers of Common Stock of the Company (collectively the
"Purchasers" and individually a "Purchaser") listed on the Schedule of
Purchasers attached hereto as Exhibit A.
In consideration of the mutual promises, covenants and conditions set
forth below, the parties mutually agree as follows:
1. Authorization and Sale of the Shares.
1.1 Authorization. The Company has authorized the issuance
and sale of up to $1,600,000 worth of shares of its Common Stock pursuant to the
terms and conditions of this Agreement. The term "Common Shares" means shares of
Common Stock which equal a value of $1,600,000.
1.2 Issuance and Sale. Subject to the terms and conditions
of this Agreement, at the Closing (as defined below), the Company will issue and
sell to the Purchasers and the Purchasers will purchase from the Company, up to
$1,600,000 worth of shares of Common Stock, at a price per share equal to the
average of the closing sale prices of the Company's Common Stock as reported in
the Wall Street Journal based upon information provided by the Nasdaq SmallCap
Market for each of the 20 consecutive trading days ending on the business day
immediately preceding the Initial Closing Date. The Company's agreement with
each Purchaser hereunder is a separate agreement, and the sale of Common Shares
to each of the Purchasers is a separate sale.
2. Closing Date; Delivery.
2.1 Initial Closing Date. The closing (the "Closing") of the
purchase and sale of certain of the Common Shares (as shown on Exhibit A) of
Common Stock to the Purchasers will be held at the offices of Multicom
Publishing, Inc., 188 Embarcadero, 5th Floor, San Francisco, California 94105.
The Closing shall be held on February 7, 1997 at 10:00 a.m., or at such other
time and place as the Company and the Purchasers may agree.
2.2 Delivery. Subject to the terms of this Agreement, at the
Closing, the Company will deliver to the Purchasers stock certificate(s)
representing the number of Common Shares set forth in the applicable provision
of Section 1 above, against delivery to the Company by each Purchaser at Closing
of a check or wire transfer for the purchase price therefor, as shown on Exhibit
"A".
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<PAGE> 2
3. Representations and Warranties of the Company. Except as set
forth on a Schedule of Exceptions attached to this Agreement as Exhibit B
("Schedule of Exceptions to Representations and Warranties of Company"), the
Company represents and warrants to the Purchasers as follows:
3.1 Organization and Standing; Articles and Bylaws. The
Company is a corporation duly organized and validly existing and in good
standing under the laws of the State of Washington and has full right, power,
authority and capacity to enter into this Agreement and to consummate the
transactions contemplated hereby.
3.2 Capitalization. As of the date of the Closing, the
authorized capital stock of the Company will consist of 40,000,000 shares of
Common Stock and 300,000 shares of Preferred Stock. Immediately prior to the
Closing there will be issued and outstanding approximately 5,600,000 shares of
Common Stock and no shares of Preferred Stock. As of the Closing, there will be
no outstanding rights, plans, options, warrants, conversion rights or agreements
for the purchase or acquisition from the Company of any shares of its capital
stock, except that an aggregate of 204,991 warrants are outstanding and an
aggregate of 1,249,400 shares of Common Stock have been reserved for issuance
upon exercise of outstanding options.
3.3 Authorization.
(a) All corporate action on the part of the Company,
its officers, directors and shareholders necessary for (i) the sale and issuance
of the Common Shares pursuant hereto, and (ii) the execution, performance and
delivery by the Company of the Agreement has been taken or will be taken prior
to the Closing. The Agreement is a valid and binding obligation of the Company,
enforceable against it in accordance with its terms except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors' rights
and rules or laws concerning equitable remedies.
(b) The Common Shares, when issued in compliance
with the provisions of this Agreement, will be validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances; provided, however,
that the Common Shares may be subject to restrictions on transfer under state
and/or federal securities laws as set forth herein or otherwise required by such
laws at the time a transfer is proposed.
(c) The outstanding shares of Common Stock are all
duly and validly authorized and issued, fully paid and nonassessable, and were
issued in compliance with all applicable federal and state securities laws.
(d) No shareholder of the Company has any right of
first refusal or any preemptive rights in connection with the issuance of the
Common Shares.
3.4 No Conflict. The execution and delivery by the Company
of this Agreement, and the performance of the Company's duties hereunder and of
all other acts necessary or appropriate for the consummation of the transaction
contemplated hereunder, will not violate the Company's Articles of Incorporation
or Bylaws, or any material contract,
2
<PAGE> 3
agreement, understanding, arrangement or instrument by which the Company is
bound or to which the Company is a party.
3.5 Securities and Exchange Commission Filings; Financial
Statements. The company has made available to the Purchasers a true and complete
copy of its Annual Report on Form 10-K for the year ended June 30, 1996 (the
"Form 10-K") and its Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996 (the "Form 10-Q"). The financial statements contained in the
Form 10-K and the Form 1O-Q were prepared in accordance with generally accepted
accounting principles, consistently applied throughout the periods covered
thereby.
3.6 Governmental Consent, etc. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of the Agreement, or the offer, sale or issuance of the
Common Shares or the consummation of any other transaction contemplated hereby,
except, if required, qualifications or filings under the Securities Act of 1933
(the "Securities Act"), the California Corporate Securities Law of 1968 (the
"California Law") and other applicable blue sky laws, which qualifications or
filings, if required, will be obtained or made and will be effective within the
period required by law.
4. Representations and Warranties of Purchasers; Indemnity by
Purchasers; Restrictions on Transfer.
4.1 Investor Representations and Warranties by Each
Purchaser. Each Purchaser represents and warrants to the Company as follows:
(a) Purchaser realizes that the purchase of Common
Shares is a highly speculative investment.
(b) Purchaser is able, without impairing Purchaser's
financial condition, to bear the economic risk of the purchase of the Common
Shares pursuant to the terms of this Agreement, to hold the Common Shares for an
indefinite period of time and to suffer a complete loss of Purchaser's
investment.
(c) The Purchaser has such knowledge and experience
in financial and business matters that the Purchaser is capable of (i)
evaluating the merits and risks of the purchase of the Common Shares pursuant to
the terms of this Agreement and (ii) protecting the Purchaser's interests in
connection therewith.
(d) The Purchaser and the Purchaser's
representatives have been solely responsible for such Purchaser's own "due
diligence" investigation of the Company and its management and business, for
such Purchaser's own analysis of the merits and risks of this investment, and
for such Purchaser's own analysis of the fairness and desirability of the terms
of the investment; in taking any action or performing any role relative to the
arranging of the proposed investment, the Purchaser has acted solely in the
Purchaser's own interest.
(e) The Purchaser and its representatives and legal
counsel have been afforded full and free access to corporate books, financial
statements, records, contracts,
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<PAGE> 4
documents, other information concerning the Company and its offices and
facilities, have been afforded an opportunity to ask such questions of the
Company's officers, employees, agents, accountants and representatives
concerning the Company's business, operations, financial condition, assets,
liabilities and other relevant matters as they have deemed necessary or
desirable, and have been given all such information as has been requested, in
order to evaluate the merits and risks of the prospective investments
contemplated herein.
(f) The Common Shares are being acquired for the
Purchaser's own account, in each case for investment and not with a view to, or
for resale in connection with, any distribution or public offering thereof
within the meaning of the Securities Act.
(g) The Purchaser understands that the Common Shares
have not been registered under the Securities Act by reason of their issuance in
a transaction exempt from the registration and prospectus delivery requirements
of the Securities Act pursuant to Section 4(2) of the Securities Act and/or
Regulation D promulgated under the Securities Act, that the Company has no
present intention of registering the Common Shares, that the Common Shares must
be held by the Purchaser indefinitely, and that the Purchaser must therefore
bear the economic risk of such investment indefinitely, unless a subsequent
disposition thereof is registered under the Securities Act or is exempt from
registration. The Purchaser understands that the Common Shares are restricted
Common Shares within the meaning of Rule 144 under the Securities Act, which
allows limited resale of such Common Shares under certain conditions; that, in
any event, such exemption from registration under Rule 144 will not be available
for at least two years, and even then will not be available unless the other
conditions of Rule 144 are complied with.
(h) Purchaser (i) represents and warrants that
Purchaser has retained no finder or broker in connection with the transactions
contemplated by this Agreement and (ii) hereby agrees to indemnify and to hold
the Company harmless of and from any liability for any commission or
compensation in the nature of a finder's fee to any broker or other person or
firm (and the costs and expenses of defending against such liability or asserted
liability) for which Purchaser, or any of Purchaser's employees or
representatives, are responsible.
4.2 Legends. Each certificate or instrument representing the
Common Shares will be endorsed with the following legends:
(a) THE COMMON SHARES EVIDENCED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE
IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH
COMMON SHARES, THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144
PROMULGATED UNDER SUCH ACT OR THE COMPANY RECEIVES AN OPINION OF COUNSEL
FOR THE HOLDER OF THESE COMMON SHARES WHICH IS REASONABLY SATISFACTORY
TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SUCH ACT.
4
<PAGE> 5
(b) Any other legends required by California law,
Washington law or other applicable state blue sky laws.
The Company need not register a transfer of any Common Shares, and may also
instruct its transfer agent not to register the transfer of the Common Shares,
unless the conditions specified in this Agreement are satisfied.
4.3 Removal of Legend and Transfer Restrictions.
(a) Any legend endorsed on a certificate pursuant to
Section 4.2 and any stop transfer instructions applicable to such certificate
regarding the restrictions set forth in such legend will be removed and the
Company will issue a certificate without such legend to the holder thereof if
such Common Shares are registered under the Securities Act and a prospectus
meeting the requirements of Section 10 of the Securities Act is available, if
such legend may be properly removed under the terms of Rule 144 promulgated
under the Securities Act, or if such holder provides the Company with an opinion
of counsel for such holder which opinion is reasonably satisfactory to legal
counsel for the Company, to the effect that a public sale, transfer or
assignment of such Common Shares may be made without registration.
(b) Any legend endorsed on a certificate pursuant to
Section 4.2 and the stop transfer instructions with respect to such Common
Shares will be removed upon receipt by the Company of an order of the California
Department of Corporations or other appropriate blue sky authority authorizing
such removal.
5. Registration Rights.
5.1 Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
(a) The terms "register", "Registered" and
"registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act, and the
declaration or ordering of the effectiveness of such registration statement.
(b) The term "Registrable Securities" means (i) the
Common Shares issued and sold by the company pursuant to this Agreement; (ii)
stock issued in lieu thereof in any reorganization, which has not been sold to
the public; or (iii) stock issued in respect of the stock referred to in (i) and
(ii) as a result of a stock split, stock dividend, recapitalization or the like,
which has not been sold to the public.
(c) The terms "Holder" or "Holders" means any person
or persons to whom Registrable Securities were originally issued or qualifying
transferees under Section 5.7 hereof who hold Registrable Securities.
(d) The term "SEC" means the Securities and Exchange
Commission.
(e) The term "Registration Expenses" shall mean all
expenses incurred by the Company in complying with Sections 5.2 and 5.3 hereof,
including, without limitation, all
5
<PAGE> 6
accounting fees and expenses, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for the
company, blue sky fees and expenses, and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company.)
5.2 Requested Registration.
(a) The Holders shall have the "demand" registration
rights with respect to the Registrable Securities provided in this Section 5.2.
Any Holder or Holders may exercise their demand registration rights at any time
or times after the date which is nine months from the date of the Closing. If
the Company shall receive from any Holder or Holders holding in the aggregate
not fewer than 60% of the Registrable Securities, a written request that the
Company effect any registration with respect to all or a part of the Registrable
Securities having an aggregate offering price, net of underwriting discounts and
expenses, equal to or exceeding $500,000, the Company will, as soon as
practicable, use its best efforts to effect such registration (including,
without limitation, filing post-effective amendments, appropriate qualifications
under applicable blue sky or other state securities laws, and appropriate
compliance with the Securities Act) as would permit or facilitate the sale and
distribution of all or such portion of such Registrable Securities as are
specified in such request. The Holders shall be entitled to exercise these
demand registration rights only twice.
(b) The Company shall file a registration statement
covering the Registrable Securities so requested to be registered as soon as
practicable after receipt of the request or requests of the Holder or Holders;
provided, however, that if (i) in the good faith judgment of the Board of
Directors of the Company, such registration would be seriously detrimental to
the Company and the Board of Directors of the Company concludes, as a result,
that it is essential to defer the filing of such registration statement at such
time, and (ii) the Company shall furnish to the Holder or Holders a certificate
signed by the President of the Company stating that in the good faith judgment
of the Board of Directors of the Company, it would be seriously detrimental to
the Company for such registration statement to be filed in the near future and
that it is, therefore, essential to defer the filing of such registration
statement, then the Company shall have the right to defer such filing for the
period during which such disclosure would be seriously detrimental, provided
that the Company may not defer the filing for a period of more than 180 days
after receipt of the request of the Holder or Holders, and, provided further,
that the Company shall not defer its obligation in this manner more than once in
any twelve-month period.
The registration statement filed pursuant to the request
of the Holder or Holders may include other securities of the Company, with
respect to which registration rights have been granted, and may include
securities of the Company being sold for the account of the Company.
5.3 Company Registration.
(a) The Holders shall have the "piggyback"
registration rights with respect to the Registrable Securities provided in this
Section 5. If the Company shall determine
6
<PAGE> 7
to register any of its securities either for its own account or the account of a
security holder or holders exercising their respective demand registration
rights, the Company will:
(i) promptly give to the Holders written
notice thereof, and
(ii) include in such registration (and any
related qualification under blue sky laws or other compliance), except as set
forth in Section 5.3(b) below, and in any underwriting involved therein, all the
Registrable Securities specified in a written request or requests, made by any
Holder within twenty (20) days after the written notice from the Company
01described in clause (i) above is given. Such written request may specify all
or a part of the Holder's Registrable Securities.
(b) If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 5.3(a)(i). In such event, the right of any Holder to
registration pursuant to this Section 5.3 shall be conditioned upon the Holder's
participation in such underwriting and the inclusion of the Holder's Registrable
Securities in the underwriting to the extent provided herein. The Holder, if
proposing to distribute its securities through such underwriting shall (together
with the Company and the other holders of securities of the Company with
registration rights to participate therein distributing their securities through
such underwriting) enter into an underwriting agreement in customary form with
the representative of the underwriter or underwriters selected by the Company.
Notwithstanding any other provision of this Section 5.3, if the underwriter
determines that marketing factors require a limitation of the number of shares
to be underwritten, the underwriter may limit the amount of securities to be
included in the registration and underwriting by the Company's shareholders;
provided however, the number of Registrable Securities to be included in such
registration and underwriting under this Section 5.3(b) shall not be reduced to
less than twenty percent (20%) of the aggregate securities included in such
registration without the prior consent of at least a majority of the Holders who
have requested their shares to be included in such registration and
underwriting. The Company shall so advise all Holders of Registrable Securities
which would otherwise be registered and underwritten pursuant hereto, and the
number of shares of Registrable Securities that may be included in the
registration and underwriting shall be allocated among Holders requesting
registration in proportion, as nearly as practicable, to the respective amounts
of Registrable Securities held by each of such Holders as of the date of the
notice pursuant to this Section. If any Holder disapproves of the terms of any
such underwriting, he may elect to withdraw therefrom by written notice to the
Company and the underwriter. Any Registrable Securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration.
5.4 Registration Expenses. All Registration Expenses
incurred in connection with any registration, qualification or compliance
pursuant to Section 5.3 hereof, and the first two registrations pursuant to
Section 5.2 hereof, all selling commissions and underwriter discounts on the
shares sold by the Holder or Holders, and reasonable fees of counsel for the
Holder or Holders, as selling stockholders, shall be borne by the Company.
5.5 Form S-3. The Company shall use its best efforts to
qualify for
7
<PAGE> 8
registration on Form S-3 or any comparable or successor form or forms. After the
Company has qualified for the use of Form S-3, in addition to the rights
contained 0in the foregoing provisions of this Section 5, the Holders shall have
the right to request registrations on Form S-3 (such requests shall be in
writing and shall state the number of shares of Registrable Securities to be
disposed of and the intended methods of disposition of such shares by the
Holder), provided, however, that the Company shall not be obligated to effect
any such registration if: (i) the Holder, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) on Form S-3 at an
aggregate price to the public of less than $250,000; or (ii) in the event that
the Company shall furnish the certification described in Section 5.2(b) (but
subject to the limitations set forth therein); or (iii) in a given twelve-month
period, after the Company has effected one such registration in any such period.
5.6 Registration Procedures. In the case of each
registration effected by the Company pursuant to this Section 5, the Company
will keep the Holders advised in writing as to the initiation of each
registration and as to the completion thereof. At its expense, the Company will
use its best efforts to:
(a) Keep such registration effective for a period of
one hundred twenty (120) days or until the Holder or Holders has completed the
distribution described in the registration statement relating thereto, whichever
first occurs; provided, however, in the case of any registration of Registrable
Securities on Form S-3 which are intended to be offered on a continuous or
delayed basis, such 120-day period shall be extended, if necessary, to keep the
registration statement effective until all such Registrable Securities are sold,
provided that Rule 415, or any successor rule under the Securities Act, permits
an offering on a continuous or delayed basis, and provided further that
applicable rules under the Securities Act governing the obligation to file a
post-effective amendment permit, in lieu of filing a post-effective amendment
that: (i) includes any prospectus required by Section 10(a)(3) of the Securities
Act; or (ii) reflects facts or events representing a material or fundamental
change in the information set forth in the registration statement, the
incorporation by reference of information required to be included in (i) and
(ii) above to be contained in periodic reports filed pursuant to Section 13 or
15(d) of the Exchange Act in the registration statement;
(b) Prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection with such registration statement as may be necessary to
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement;
(c) Furnish such number of prospectuses and other
documents incident thereto, including any amendment of or supplement to the
prospectus, as the Holder from time to time may reasonably request;
(d) Notify the Holder, if a seller of Registrable
Securities covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to
8
<PAGE> 9
make the statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of any such seller, prepare and
furnish to such seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include 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 not misleading or
incomplete in the light of the circumstances then existing;
(e) Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange and each over the
counter market on which similar securities issued by the Company are then listed
or quoted;
(f) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant to such registration statement and a
CUSIP number for all such Registrable Securities, in each case not later than
the effective date of such registration;
(g) To the extent economically feasible, use its
best efforts to comply with all applicable rules and regulations of the
Commission, and make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least twelve
months, but not more than eighteen months, beginning with the first month after
the effective date of the Registration Statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act; and
5.7 Indemnification.
(a) The Company will indemnify the Holders and each
of its officers, directors, legal counsel, and accountants and each person
controlling each Holder within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification, or compliance has been
effected pursuant to this Section 5, and each underwriter, if any, and each
person who controls within the meaning of Section 15 of the Securities Act any
underwriter, against all expenses, claims, losses, damages, and liabilities (or
actions, proceedings, or settlements in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) or a material fact
contained in any prospectus, offering circular, or other document (including any
related registration statement, notification, or the like) incident to any such
registration, qualification, or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification, or compliance, and will
reimburse each Holder, each of its officers, directors, legal counsel, and
accountants, each such underwriter, and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending or settling any such claim, loss,
damage, liability, or action, provided that the Company will not be liable in
any such case to the extent that any such claim, loss, damage, liability, or
expense arises out of or is based on any untrue statement or omission based upon
written information furnished to the Company by the Holder and stated to be
specifically for use therein. It is agreed that the indemnity agreement
contained in this Section 5.7(a) shall not apply to amounts paid in settlement
of any such loss, claim,
9
<PAGE> 10
damage, liability, or action if such settlement is effected without the consent
of the Company (which consent has not been unreasonably withheld).
(b) Each Holder will, if Registrable Securities held by it
are included in the securities as to which such registration, qualification, or
compliance is being effected, indemnify the Company, each of its directors,
officers, legal counsel, and accountants and each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company or such underwriter within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular, or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company and directors, officers, legal counsel, and accountants, persons,
underwriters, or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability, or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus, offering
circular, or other document in reliance upon and in conformity with written
information furnished to the Company by the Holder stated to be specifically for
use therein provided, however, that the obligations of each Holder hereunder
shall not apply to amounts paid in settlement of any such claims, losses,
damages, or liabilities (or actions in respect thereof) if such settlement is
effected without the consent of the Holder (which consent shall not be
unreasonably withheld).
(c) Each party entitled to indemnification under
this Section 5.7 (the "Indemnified Party") shall give written notice to the
party required to provide indemnification (the "Indemnifying Party") promptly
after such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to assume the
defense of such claim or any litigation resulting therefrom, provided that
counsel for the Indemnifying Party, who shall conduct the defense of such claim
or any litigation resulting therefrom, shall be approved by the Indemnified
Party (whose approval shall not unreasonably be withheld), and the Indemnified
Party may participate in such defense at such party's expense, and provided
further that the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Section 5, to the extent such failure is not prejudicial. No Indemnifying Party,
in the defense of any such claim or litigation, shall, except with the consent
of each Indemnified Party, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation. Each Indemnified Party shall
furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with defense of such claim and litigation resulting
therefrom.
(d) If the indemnification provided for in this
Section 5.7 is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage, or expense
referred to therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party hereunder, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such loss, liability, claim, damage, or
expense in such
10
<PAGE> 11
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent
that the provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with the underwritten public
offering are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.
5.8 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission that may permit the
sale of restricted securities to the public without registration, the Company
agrees to use its best efforts to:
(a) File with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act at any time after it has become subject to such reporting
requirements;
(b) So long as any Holder owns any restricted
securities, furnish to the Holder upon request, a written statement by the
Company as to its compliance with the reporting requirements of Rule 144 and of
the Securities Act and the Exchange Act, routinely mail to each Holder a copy of
the most recent annual or quarterly report of the Company, and upon request,
furnish such other reports and documents as the Holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing the Holder
to sell any such securities without registration.
5.9 Market Stand-Off. Each Holder agrees not to sell or
otherwise dispose of any securities of the Company (other than securities
included in the applicable registration statement) up to a 180-day period
following the effective date of a public offering of the Company filed under the
Securities Act that includes securities to be sold on the Company's behalf to
the public in an underwritten offering; provided that a majority of the officers
and directors on the effective date of the public offering have executed written
agreement to be similarly bound.
5.10 Transfer of Registration Rights. Holders' rights to
cause the Company to register their securities granted to them by the Company
under Section 5.2, may be assigned to a transferee or assignee of at least
50,000 shares (as adjusted for stock splits, stock dividends, recapitalization
and like events) of a Holder's Registrable Securities not sold to the public,
provided that the Company is given written notice by such Holder at the time of
or within a reasonable time after said transfer, stating the name and address of
said transferee or assignee and identifying the securities with respect to which
such registration right are being assigned. The Company may prohibit the
transfer of any Holders' rights under this Section 5.10 to any proposed
transferee or assignee who the Company reasonably believes is a competitor of
the Company.
11
<PAGE> 12
6. Conditions to Closing.
6.1 Conditions to Obligations of the Purchasers. The
obligation of each Purchaser to purchase Common Shares at the Closing is subject
to the fulfillment of the following conditions, any of which may be waived by
the Purchasers:
(a) Representations and Warranties Correct;
Performance of Obligations. The representations and warranties made by the
Company in Section 3 hereof will be true and correct in all material respects
when made, and will be true and correct in all material respects on the date of
the Closing with the same force and effect as if they had been made on and as of
the date of the Closing, and the Company will have performed all obligations and
conditions herein required to be performed or observed by it on or prior to the
date of the Closing.
(b) Corporate Proceedings; Waivers and Consents. All
corporate and other proceedings to be taken and all waivers, consents and
permits necessary or appropriate for consummation of the transactions
contemplated by this Agreement and the Exhibits attached hereto will have been
taken or obtained.
(c) Compliance Certificate. The Company will have
delivered to the Purchasers a Certificate, executed by the President of the
Company and dated the date of the Closing, certifying as to the fulfillment of
the conditions specified in Sections (a) and (b) of this Section 6.1.
(d) Legal Investment. At the time of the Closing,
the purchase of the Common Shares by the Purchasers hereunder will be legally
permitted by all laws and regulations to which the Purchasers and the Company
are subject.
(e) Blue Sky Matters. All consents, approvals,
qualifications and/or registrations required to be obtained or effected under
any applicable state Common Shares or blue sky laws in connection with the
issuance, sale and delivery of the Common Shares will have been obtained or
effected.
6.2 Conditions to Obligations of the Company. The Company's
obligation to sell and issue the Common Shares at the Closing is subject to the
fulfillment on or prior to the date of the Closing of the following conditions,
any of which may be waived by the Company:
(a) Incorporation of Conditions. The conditions set
forth in Sections (b), (d), and (e) of Section 6.1 shall have been fulfilled.
(b) Representations and Warranties Correct;
Performance of Obligations. The representations and warranties made by the
Purchasers in Section 4 hereof will be true and correct when made, and will be
true and correct on the date of the Closing with the same force and effect as if
they had been made on and as of the date of the Closing, and the Purchasers will
have performed all obligations and conditions herein required to be performed or
observed by them on or prior to the date of the Closing.
12
<PAGE> 13
(c) Compliance Certificate. Each Purchaser will have
delivered to the Company a Certificate, executed by the Purchaser and dated the
date of the Closing, certifying as to the fulfillment of the conditions
specified in Section 6.1(b).
7. Miscellaneous.
7.1 Waivers and Amendments. With the written consent of the
Holders of all of the Registrable Securities, the obligations of the Company and
the rights of the Holders under this Agreement may be waived (either generally
or in a particular instance, either retroactively or prospectively and either
for a specified period of time or indefinitely), and with the same consent the
Company, when authorized by resolution of its Board of Directors, may enter into
a supplementary agreement for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement;
provided, however, that no such waiver or supplemental agreement shall reduce
the aforesaid percentage of Registrable Securities the Holders of which are
required to consent to any waiver or supplemental agreement without the consent
of all of the Holders. Neither this Agreement nor any provision hereof may be
changed, waived, discharged or terminated orally, but only by a statement in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, except to the extent provided in this
Section 7.1.
7.2 Governing Law. This Agreement will be governed in all
respects by the laws of the State of California as such laws are applied to
agreements between California residents entered into and to be performed
entirely within California.
7.3 Survival. The representations, warranties, covenants and
agreements made herein will survive the execution of this Agreement and the
Closing of the transactions contemplated hereby.
7.4 Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof will inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto. The Purchaser may not assign its rights to purchase the
Common Shares and the Company may not assign its rights to receive the proceeds
of such purchase.
7.5 Entire Agreement. This Agreement, the exhibits to this
Agreement and the other documents delivered pursuant hereto or incorporated by
reference herein constitute the full and entire understanding and agreement
among the parties with regard to the subjects hereof and thereof and supersede
all prior oral and written understandings, agreements and commitments with
regard to such subjects by or among the parties hereto.
7.6 Notices, etc. All notices and other communications
required or permitted hereunder will be in writing and will be mailed by
certified or registered mail, postage prepaid, addressed (a) if to the
Purchasers, at the address of each Purchaser set forth on its signature page to
the Agreement, or at such other address as the Purchaser will have furnished to
the Company in writing, or (b) if to the Company, at 188 Embarcadero, 5th Floor,
San Francisco, California 94105, Attn: General Counsel, or at such other address
as the Company will have furnished
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<PAGE> 14
to the Purchasers.
7.7 No Waivers. No failure on the part of any party to
exercise or delay in exercising any right hereunder will be deemed a waiver
thereof, nor will any such failure or delay, or any single or partial exercise
of any such right, preclude any further or other exercise of such right or any
other right.
7.8 Separability. If any provision of this Agreement, or the
application thereof, is for any reason and to any extent determined by a court
of competent jurisdiction to be invalid or unenforceable, the remainder of this
Agreement and the application of such provision to other persons or
circumstances will be interpreted so as best to reasonably effect the intent of
the parties hereto. The parties agree to use their best efforts to replace such
void or unenforceable provision of this Agreement with a valid and enforceable
provision which will achieve, to the extent greatest possible, the economic,
business and other purposes of the void or unenforceable provision.
7.9 Expenses. The Company and the Purchasers shall each bear
their respective expenses and legal fees incurred with respect to this Agreement
and the transactions contemplated hereby.
7.10 Titles and Subtitles. The titles of the Sections of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
7.11 Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be an original, but all of which
together will constitute one instrument.
The parties have executed this Agreement as of the day and year first
above written.
COMPANY:
Multicom Publishing, Inc.
By: ____________________________
Patricia E. Hart
Its: General Counsel
14
<PAGE> 15
PURCHASER'S COUNTERPART SIGNATURE PAGE
MULTICOM PUBLISHING, INC. COMMON STOCK
PURCHASE AGREEMENT
February ___, 1997
"PURCHASER"
If Purchaser is an entity:
By:_________________________________
Title:______________________________
Signature:__________________________
If Purchaser is an individual:
____________________________________
(Signed Name)
15
<PAGE> 16
Exhibit A
Schedule of Purchasers
<TABLE>
<CAPTION>
Name Amount
- ---- ------
<S> <C>
Tamara L. and Paul G. Attard $ 740,000
Friar, Harper & Arendt 250,000
Peter Hairston 50,000
Meredith Corporation 400,000
Henrik Vanderlip, Viking Capital 150,682
----------
Total $1,590,682
</TABLE>
A-1
<PAGE> 17
Exhibit B
Schedule of Exceptions
To
Representations and Warranties of Multicom Publishing, Inc.
in Common Stock Purchase Agreement
Dated as of February , 1997
None
B-1
<PAGE> 1
EXHIBIT 10.2
FIRST AMENDMENT TO
LOAN AGREEMENT AND LOAN DOCUMENTS
THIS FIRST AMENDMENT TO LOAN AGREEMENT AND LOAN
DOCUMENTS (the "First Amendment") dated as of the ___ day of February, 1997, is
made and entered into on the terms and conditions hereinafter set forth, by and
between MULTICOM PUBLISHING, INC., a Washington corporation ("Borrower"), and
SIRROM INVESTMENTS, INC., a Tennessee corporation and assignee of SIRROM CAPITAL
CORPORATION ("Lender").
W I T N E S S E T H:
WHEREAS, Sirrom Capital Corporation has previously made a term loan to
Borrower in the original principal amount of Three Million and No/100ths Dollars
($3,000,000.00) (the "Loan") on the terms and conditions set forth in that
certain Loan Agreement dated March 29, 1996, by and between Lender and Borrower
(as now or hereafter amended, the "Loan Agreement"); capitalized terms used
herein but not otherwise defined shall have the meanings ascribed thereto in the
Loan Agreement; and
WHEREAS, the Loan is further evidenced and secured by certain
agreements, documents and instruments as more particularly described in the Loan
Agreement and defined therein as the "Loan Documents"; and
WHEREAS, Sirrom Capital Corporation has assigned all of its right,
title and interest in the Loan and the Loan Documents to Sirrom Investments,
Inc.; and
WHEREAS, Borrower desires to reduce the principal outstanding balance
of the Loan by converting $750,000 of the Loan into preferred stock to be issued
by Borrower to Lender pursuant to the terms and conditions stated in that
certain Series A Preferred Stock Purchase Agreement dated even date herewith;
and
WHEREAS, this First Amendment shall amend the Loan Documents.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender hereby agree as follows:
1. The second sentence of Section 1.1 of the Loan Agreement is
hereby amended to read in its entirety as follows:
<PAGE> 2
"The original principal amount of the Loan is hereby reduced
from $3,000,000 to $2,250,000 and shall be evidenced by an amended and
restated Secured Promissory Note in the original principal amount of
$2,250,000, substantially in the form of Exhibit A attached hereto and
incorporated herein by reference (the "Note"), dated as of the date
hereof, executed by Borrower, in favor of Lender."
2. The obligations of Borrower in connection with and/or relating to
this First Amendment are further evidenced and/or secured by the Loan Documents.
3. Borrower hereby represents and warrants to Lender that all of the
representations made in Section 2.1 of the Loan Agreement are true and correct
as of the date hereof, except as modified or supplemented by Schedule A attached
hereto and incorporated herein by this reference.
4. The obligation of Lender to consummate the transactions
described herein on the date hereof is subject to Borrower's delivery to Lender
of each of the following:
(a) the completion of a private placement of Borrower's
common stock on terms reasonably satisfactory to Lender, with net
proceeds to Borrower of at least $1,000,000;
(b) an Amended and Restated Secured Promissory Note executed
by Borrower, substantially in the form of Exhibit A attached hereto;
(c) a Series A Preferred Stock Purchase Agreement executed
by Borrower, substantially in the form of Exhibit B attached hereto;
(d) within ten (10) days after the date hereof, an opinion of
Borrower's counsel, of even date herewith, in form and substance
acceptable to Lender's counsel, Chambliss & Bahner, PLLC;
(e) within ten (10) days after the date hereof, waivers and
consents to the transactions described herein and the private placement
of Borrower's common stock, as described in subparagraph 4(a) above from
the following persons or entities:
(i) Cupertino National Bank & Trust;
(ii) Meredith Corporation;
(iii) William H. Luden, III;
(iv) Hendrik N. Vanderlip and Vanderlip Investors;
and
(v) Paul Attard and Tamara L. Attard.
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<PAGE> 3
5. The terms "Loan Document" and "Loan Documents" as defined in the
Loan Agreement are amended to include this First Amendment.
6. Borrower hereby acknowledges that
(a) the Loan Documents have been assigned to Sirrom
Investments, Inc., a wholly owned subsidiary of Sirrom Capital
Corporation;
(b) all references to Sirrom Capital Corporation in the Loan
Documents shall hereinafter refer to and include Sirrom Investments,
Inc.; and
(c) Sirrom Investments, Inc. shall be entitled to all of the
rights of Sirrom Capital Corporation under the Loan Documents.
7. Except as modified and amended hereby, the Loan Documents shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment, or have caused this First Amendment to be executed by their duly
authorized officers, as of the day and year first above written.
BORROWER: LENDER:
MULTICOM PUBLISHING, INC. SIRROM INVESTMENTS, INC., a
a Washington corporation Tennessee corporation and
Assignee of Sirrom Capital
Corporation
By:______________________________ By:______________________________
Title:___________________________ Title:___________________________
3
<PAGE> 4
SCHEDULE A
Modifications of and Supplements to
Representations and Warranties
<PAGE> 5
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. IT HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY,
WITHOUT A VIEW TO RESALE OR DISTRIBUTION AND MAY NOT BE PLEDGED, HYPOTHECATED,
SOLD, MADE SUBJECT TO A SECURITY INTEREST, OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO MAKER THAT
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS.
THIS NOTE IS SUBORDINATE TO CERTAIN INDEBTEDNESS OF MAKER TO CUPERTINO NATIONAL
BANK & TRUST AND MEREDITH CORPORATION PURSUANT TO THOSE CERTAIN INTERCREDITOR
ESTOPPEL AGREEMENTS OF EVEN DATE HEREWITH, RESPECTIVELY.
AMENDED AND RESTATED SECURED PROMISSORY NOTE
$2,250,000 February 7, 1997
FOR VALUE RECEIVED, the undersigned, MULTICOM PUBLISHING, INC., a
Washington corporation ("Maker"), promises to pay to the order of SIRROM
INVESTMENTS, INC., a Tennessee corporation and assignee of SIRROM CAPITAL
CORPORATION ("Payee"; Payee and any subsequent holder[s] hereof are hereinafter
referred to collectively as "Holder"), at the office of Payee at First American
Trust Company, Custody Department, 800 First American Center, Nashville,
Tennessee 37237, Attn: Jeff Eubanks, or at such other place as Holder may
designate to Maker in writing from time to time, the principal sum of TWO
MILLION TWO HUNDRED FIFTY THOUSAND AND NO/100THS DOLLARS ($2,250,000), together
with interest on the outstanding principal balance hereof from the date hereof
at the rate of thirteen percent (13%) per annum (computed on the basis of a
360-day year); provided, however, that Holder may charge and receive interest
upon any renewal or extension hereof at the greater of (i) the rate set out
above, or (ii) any rate agreed to by the undersigned that is not in excess of
the maximum rate of interest allowed to be charged under applicable law (the
"Maximum Rate") at the time of such renewal or extension.
Interest only on the outstanding principal balance hereof shall be due
and payable monthly, in arrears, with the first installment being payable on the
first (1st) day of March, 1997, and subsequent installments being payable on the
first (1st) day of each succeeding month thereafter until March 29, 2001 (the
"Maturity Date"), at which time the entire outstanding principal balance,
together with all accrued and unpaid interest, shall be immediately due and
payable in full.
The indebtedness evidenced hereby may be prepaid in whole or in part,
at any time and from time to time, without penalty. Any such prepayments shall
be credited first to any accrued and unpaid interest and then to the outstanding
principal balance hereof.
<PAGE> 6
Time is of the essence of this Note. It is hereby expressly agreed that
in the event that any default be made in the payment of principal or interest as
stipulated above, which default is not cured within five (5) days; or in the
event that any default or event of default shall occur under that certain Loan
Agreement dated March 29, 1996, between Maker and Sirrom Capital Corporation (as
may be amended from time to time, the "Loan Agreement"), which default or event
of default is not cured following the giving of any applicable notice and within
any applicable cure period set forth in said Loan Agreement; or should any
default by Maker be made in the performance or observance of any covenants or
conditions contained in any other instrument or document now or hereafter
evidencing, securing or otherwise relating to the indebtedness evidenced hereby
(subject to any applicable notice and cure period provisions that may be set
forth therein); then, and in such event, the entire outstanding principal
balance of the indebtedness evidenced hereby, together with any other sums
advanced hereunder, under the Loan Agreement and/or under any other instrument
or document now or hereafter evidencing, securing or in any way relating to the
indebtedness evidenced hereby, together with all unpaid interest accrued
thereon, shall, at the option of Holder and without notice to Maker, at once
become due and payable and may be collected forthwith, regardless of the
stipulated date of maturity. Upon the occurrence of any default as set forth
herein, at the option of Holder and without notice to Maker, all accrued ands
unpaid interest, if any, shall be added to the outstanding principal balance
hereof, and the entire outstanding principal balance, as so adjusted, shall bear
interest thereafter until paid at an annual rate (the "Default Rate") equal to
the lesser of (i) the rate that is seven percentage points (7.0%) in excess of
the above-specified interest rate, or (ii) the Maximum Rate in effect from time
to time, regardless of whether or not there has been an acceleration of the
payment of principal as set forth herein. All default interest shall be paid on
the first day of the month immediately following the curing of any such default.
In the event this Note is placed in the hands of an attorney for
collection, or if Holder incurs any costs incident to the collection of the
indebtedness evidenced hereby, Maker and any indorsers hereof agree to pay to
Holder an amount equal to all such costs, including without limitation all
actual reasonable attorney's fees and all court costs.
Presentment for payment, demand, protest and notice of demand, protest
and nonpayment are hereby waived by Maker and all other parties hereto. No
failure to accelerate the indebtedness evidenced hereby by reason of default
hereunder, acceptance of a past-due installment or other indulgences granted
from time to time, shall be construed as a novation of this Note or as a waiver
of such right of acceleration or of the right of Holder thereafter to insist
upon strict compliance with the terms of this Note or to prevent the exercise of
such right of acceleration or any other right granted hereunder or by applicable
laws. No extension of the time for payment of the indebtedness evidenced hereby
or any installment due hereunder, made by agreement with any person now or
hereafter liable for payment of the indebtedness evidenced hereby, shall operate
to release, discharge, modify, change or affect the original liability of Maker
hereunder or that of any other person now or hereafter liable for payment of the
indebtedness evidenced hereby, either in whole or in part, unless Holder agrees
otherwise in writing. This Note may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.
2
<PAGE> 7
This Note evidences an amendment and restatement of that certain
secured promissory note dated March 29, 1996, in the original principal amount
of $3,000,000, made and executed by Maker payable to the order of Sirrom Capital
Corporation. Accordingly, the indebtedness and other obligations evidenced by
this Note are further evidenced by (i) the Loan Agreement and (ii) certain other
instruments and documents, as may be required to protect and preserve the rights
of Maker and Payee as more specifically described in the Loan Agreement.
All agreements herein made are expressly limited so that in no event
whatsoever, whether by reason of advancement of proceeds hereof, acceleration of
maturity of the unpaid balance hereof or otherwise, shall the amount paid or
agreed to be paid to Holder for the use of the money advanced or to be advanced
hereunder exceed the Maximum Rate. If, from any circumstances whatsoever, the
fulfillment of any provision of this Note or any other agreement or instrument
now or hereafter evidencing, securing or in any way relating to the indebtedness
evidenced hereby shall involve the payment of interest in excess of the Maximum
Rate, then, ipso facto, the obligation to pay interest hereunder shall be
reduced to the Maximum Rate; and if from any circumstance whatsoever, Holder
shall ever receive interest, the amount of which would exceed the amount
collectible at the Maximum Rate, such amount as would be excessive interest
shall be applied to the reduction of the principal balance remaining unpaid
hereunder and not to the payment of interest. This provision shall control every
other provision in any and all other agreements and instruments existing or
hereafter arising between Maker and Holder with respect to the indebtedness
evidenced hereby.
This Note is intended as a contract under and shall be construed and
enforceable in accordance with the laws of the State of Tennessee, except to the
extent that federal law may be applicable to the determination of the Maximum
Rate.
As used herein, the terms "Maker" and "Holder" shall be deemed to
include their respective successors, legal representatives and assigns, whether
by voluntary action of the parties or by operation of law.
MAKER:
MULTICOM PUBLISHING, INC., a Washington
corporation
By:____________________________________
Title:_________________________________
3
<PAGE> 1
EXHIBIT 10.3
SERIES A PREFERRED STOCK
SECURITIES PURCHASE AGREEMENT
BY AND BETWEEN
MULTICOM PUBLISHING, INC.
AND
SIRROM INVESTMENTS, INC.
DATED FEBRUARY ____, 1997
<PAGE> 2
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
made and entered into as of this _____ day of February, 1997 by and between
MULTICOM PUBLISHING, INC., a Washington corporation (the "Company") and SIRROM
INVESTMENTS, INC., a Tennessee corporation and assignee of Sirrom Capital
Corporation (the "Purchaser").
In consideration of the mutual promises and covenants contained in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. Authorization and Sale of Shares.
1.1 Authorization. The Company has, or before the Closing
(as defined in Section 2) will have, duly authorized the sale and issuance of
(a) 150,000 shares of its Series A Preferred Stock, $.01 par value per share
(the "Series A Preferred"), having the rights, restrictions, privileges,
preferences and voting powers set forth in the Certificate of Amendment to the
Company's Certificate of Incorporation attached hereto as Exhibit A (the
"Certificate of Amendment"). The Company has, or on or before the Closing will
have adopted and filed the Certificate of Amendment with the Washington
Secretary of State.
1.2 Sale of Shares. Subject to the terms and conditions of
this Agreement, at the Closing the Company will sell and issue to the Purchaser,
and the Purchaser will purchase 150,000 shares of Series A Preferred for the
purchase price of $750,000. The shares of Series A Preferred being sold under
this Agreement are referred to as the "Shares".
2. The Closing. The closing ("Closing") of the sale and purchase of
the Shares under this Agreement shall take place at such time, date, and place
as are mutually agreeable to the Company and the Purchaser. At the Closing, the
company will deliver to the Purchaser a certificate for the Shares registered in
the name of the Purchaser, against payment to the Company of the purchase price
therefor, in the form of a $750,000 reduction of the original principal amount
outstanding under that certain Loan Agreement dated March 29, 1996 by and
between Company and Purchaser represented by that certain $3,000,000 Secured
Promissory Note made by Company to Purchaser and related documents (collectively
the "Loan Documents"). The date of the Closing is hereinafter referred to as the
"Closing Date". If at the Closing any of the conditions specified in Section 5
shall not have been fulfilled, Purchaser shall, at its election, be relieved of
all of its obligations under this Agreement without thereby waiving any other
rights Purchaser may have by reason of such failure or non-fulfillment.
3. The Company's Representations. The Company hereby represents and
warrants to Purchaser as follows:
3.1 Subsidiaries. The Company neither owns nor has an
interest in, directly or
2
<PAGE> 3
indirectly, any other corporation, partnership, joint venture or other business
organization ("Subsidiaries").
3.2 Authorization. The Company has full legal right, power
and authority to conduct its business and affairs. The Company has full legal
right, power and authority to enter into and perform its obligations hereunder,
without the consent or approval of any other person, firm, governmental agency
or other legal entity. The execution and delivery of this Agreement, the
issuance of the Series A Preferred, the execution and delivery of each Ancillary
Document to which the Company is a party, and the performance by the Company of
its obligations thereunder are within the corporate powers of the Company and
have been duly authorized by all necessary corporate action properly taken, have
received all necessary governmental approvals, if any were required, and do not
and will not contravene or conflict with any provision of law, any applicable
judgment, ordinance, regulation or order of any court or governmental agency,
the charter or bylaws of the Company, or any agreement binding upon the Company
or its properties. The officer(s) executing this Agreement, and all of the other
documents relating to the transactions contemplated hereby to which the Company
is a party (the "Ancillary Documents") are duly authorized to act on behalf of
the Company.
3.3 Validity and Binding Effect. This Agreement and the
Ancillary Documents are the legal, valid and binding obligations of the Company,
enforceable in accordance with their respective terms, subject to limitations
imposed by bankruptcy, insolvency, moratorium or other similar laws affecting
the rights of creditors generally or the application of general equitable
principles.
3.4 Capitalization. Immediately after the date of this
Agreement, the authorized capital stock of the Company consists solely of
40,000,000 shares of common stock $.01 par value per share ("Common Stock") and
300,000 shares of preferred stock $.01 par value per share ("Preferred Stock"),
of which 150,000 shares have been designated as Series A Preferred Stock. Of the
capital stock authorized, 6,415,991 shares of Common Stock and 150,000 shares of
Series A Preferred (the "Outstanding Shares") are issued and outstanding. All of
the Outstanding Shares are duly authorized, validly issued and outstanding and
fully paid and nonassessable and free of preemptive rights. Except for the
Outstanding Shares, there are no shares of capital stock or other securities of
the Company issued or outstanding. Except as set forth on Schedule 3.4 hereto,
there are no outstanding options, warrants or rights to purchase or acquire from
the Company any securities of the Company, and there are no contracts,
commitments, agreements, understandings, arrangements or restrictions as to
which the Company is a party or by which it is bound relating to any shares of
capital stock or other securities of the Company (including the Outstanding
Shares), whether or not outstanding.
3.5 No Conflicts. Consummation of the transactions hereby
contemplated and the performance of the obligations of the Company under and by
virtue of the Agreement or the Ancillary Documents will not result in any breach
of, or constitute a default under, any mortgage, security deed or agreement,
deed of trust, lease, bank loan or credit agreement, corporate charger or
bylaws, agreement or certificate of limited partnership, partnership agreement,
license, franchise
3
<PAGE> 4
or any other instrument or agreement to which the Company is a party or by which
the Company or its respective properties may be bound or affected or to which
the Company has not obtained an effective waiver.
4. Representations of the Purchaser. The Purchaser represents and
warrants to the Company as follows:
4.1 Investment. Purchaser is acquiring the Shares, for the
Purchaser's own account for investment and not with a view to, or for sale in
connection with, any distribution thereof, nor with any present intention of
distributing or selling the same; and, except as contemplated by this Agreement
and the Exhibits hereto, such Purchaser has no present or contemplated
agreement, undertaking, arrangement, obligation, indebtedness, or commitment
providing for the disposition thereof.
4.2 Authority. Purchaser has full power and authority to
enter into and to perform this Agreement in accordance with its terms.
4.3 Accredited Investor. Purchaser is an Accredited Investor
within the definition set forth in Rule 501(a) of Regulation D of the Securities
Act.
5. Conditions to the Obligations of the Purchaser. The obligation
of Purchaser to purchase Shares at the Closing is subject to the fulfillment, or
the waiver by Purchaser, of each of the following conditions on or before the
Closing Date.
5.1 Accuracy of Representations and Warranties. Each
representation and warranty contained in Section 3 shall be true on and as of
the Closing Date with the same effect as though such representation and warranty
had been made on and as of that date.
5.2 Performance. The Company shall have performed and
complied with all agreements and conditions contained in this Agreement required
to be performed or complied with by the company prior to or at the Closing.
5.3 Opinion of Counsel. Purchaser shall have received an
opinion from counsel for the Company, dated the Closing Date, addressed to the
Purchaser, in the form acceptable to the Purchaser's counsel.
5.4 Certificates and Documents. The Company shall have
delivered to counsel to the Purchaser:
(a) The articles of incorporation, as amended, of
the Company, in effect prior to the Closing Date, certified by the
Secretary of State of the State Corporation Commission of its
incorporation.
4
<PAGE> 5
(b) Certificates, as of the most recent practicable
dates, as to the corporate good standing of the Company issued by the
jurisdictions in which the company or any of its Subsidiaries is
conducting business or is otherwise required to qualify.
(c) Bylaws of the Company, certified by its
Secretary of Assistant Secretary as of the Closing Date;
(d) Resolutions of the Board of Directors of the
company, authorizing and approving all matters in connection with this
Agreement, the Ancillary Documents, and the transactions contemplated
hereby and thereby, certified by the Secretary or Assistant Secretary of
the company as of the Closing Date; and
(e) All Ancillary Documents, including all forms
required or requested by the Small Business Administration.
5.5 Compliance Certificate. The Company shall have delivered
to the Purchaser a certificate, executed by the Chairman of the Board or
President of the Company, dated the Closing Date, certifying to the fulfillment
of the conditions specified in this Agreement.
5.6 New Equity. The Company shall have received at least
$1,000,000 from the sale of its Common Stock to third parties, excluding the
proceeds from the sale of Series A Preferred pursuant to this Agreement.
5.7 Compliance with Loan Agreement. The Company shall comply
with all terms and conditions stated in that certain First Amendment to Loan
Agreement and Loan Documents dated even date herewith between the Company and
Purchaser.
6. Covenants and Agreements. The Company makes the covenants and
agreements contained on Schedule 6 attached hereto and incorporated herein by
reference so long as the Series A Preferred are outstanding.
5
<PAGE> 6
7. Default and Remedies.
7.1 Events of Default. The occurrence of any of the
following shall constitute an Event of Default
hereunder:
(a) Default in the payment of the terms of the
Series A Preferred, which default is not cured within twenty (20) days;
(b) Any misrepresentation by the Company as to any
material matter hereunder or under any of the Ancillary Documents, or
delivery by the company of any schedule, statement, resolution, report,
certificate, notice or writing to Purchaser that is untrue in any
material respect on the date as of which the facts set forth therein are
stated or certified;
(c) Any breach of the terms of, or failure of the
company to perform any of its obligations, covenants or agreements
under, this Agreement, or any of the other Ancillary Documents;
8. Sale or Transfer of Shares; Legend.
(a) The Shares shall not be sold or transferred unless
either (i) they first shall have been registered under the Securities
Act, or (ii) the Company first shall have been furnished with an opinion
of legal counsel, reasonably satisfactory to the Company, to the effect
that such sale or transfer is exempt from the registration requirements
of the Securities Act.
(b) Notwithstanding the foregoing, no registration or
opinion of counsel shall be required for a transfer made in accordance
with Rule 144 or Rule 144A under the Securities Act.
(c) Each certificate representing the Shares shall bear a
legend substantially in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED, OR
HYPOTHECATED UNLESS AND UNTIL SUCH SHARES ARE REGISTERED UNDER
SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY IS
OBTAINED TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
6
<PAGE> 7
(d) The Company agrees, upon the request of the
Purchaser, to make available to the Purchaser and to any
prospective transferee of any Shares of the Purchaser the
information concerning the Company described in Rule 144A(d)(4)
under the Securities Act.
(e) Notwithstanding anything to the contrary
contained in this Agreement, Purchaser shall be permitted to assign its right,
title and interest in and to this Agreement and the Series A Preferred to its
senior lender.
9. Miscellaneous.
9.1 Performance by Purchaser. If the Company shall default
in the payment, performance or observance of any covenant, term or condition of
this Agreement, which default is not cured within the applicable cure period,
then Purchaser may, at its option, pay, perform or observe the same, and all
payments made or costs or expenses incurred by Purchaser in connection therewith
(including but not limited to reasonable attorney's fees), with interest thereon
at the maximum rate from time to time allowed by applicable law, shall be
immediately repaid to Purchaser by the Company and shall constitute an
obligation of the Company to Purchaser. Purchaser shall be the sole judge of the
necessity for any such actions and of the amounts to be paid.
9.2 Successors and Assigns Included in Parties. Whenever in
this Agreement one of the parties hereto is named or referred to, the heirs,
legal representatives, successors, successors-in-title and assigns of such
parties shall be included, and all covenants and agreements contained in this
Agreement by or on behalf of the company or by or on behalf of Purchaser shall
bind and inure to the benefit of their respective heirs, legal representatives,
successors-in-title and assigns, whether so expressed or not.
9.3 Costs and Expenses. The Company agrees to pay all
reasonable costs and expenses incurred by Purchase in connection with the
purchase of the Shares, including but not limited to filing fees, and reasonable
attorneys' fees, promptly upon demand of Purchaser. The Company further agrees
to pay all premiums for insurance required to be maintained by the company
pursuant to the terms of the Agreement.
9.4 Time of the Essence. Time is of the essence with respect
to each and every covenant, agreement and obligation of the company hereunder
and under all of the Ancillary Documents.
9.5 Severability. If any provision(s) of this Agreement or
the application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other persons or circumstances shall not be affected there
by and shall be enforced to the greatest extent permitted by law.
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<PAGE> 8
9.6 Article and Section Headings; Defined Terms. Numbered
and titled article and section headings and defined terms are for convenience
only and shall not be construed as amplifying or limiting any of the provisions
of this Agreement.
9.7 Notices. Any and all notices, elections or demands
permitted or required to be made under this Agreement shall be in writing,
signed by the party giving such notice, election or demand and shall be
delivered personally, telecopied, telexed, or sent by certified mail or
overnight via nationally recognized courier service (such as Federal Express),
to the other party at the address set forth below, or at such other address as
may be supplied in writing and of which receipt has been acknowledged in
writing. The date of personal delivery, telecopy or telex or two (2) business
days after the date of mailing (or the next business day after delivery to such
courier service), as the case may be, shall be the date of such notice, election
or demand. For the purposes of this Agreement:
The Address of Purchaser is:
Sirrom Investments, Inc.
Suite 200
500 Church Street
Nashville, TN 37219
Attention: John Harrison
with a copy to:
Chambliss & Bahner, PLLC
1000 Tallan Building
Two Union Square
Chattanooga, TN 37402
Attention: J. Patrick Murphy
The Address of the Company is:
Multicom Publishing, Inc.
1100 Olive Way, Suite 1250
Seattle, WA 98101
Attention: Tamara L. Attard
with a copy to:
Multicom Publishing, Inc.
188 Embacadero
Fifth Floor
San Francisco, California 94105
Pat Hart, Esq.
8
<PAGE> 9
9.8 Entire Agreement. This agreement and the other written
agreements between the Company and Purchaser represent the entire agreement
between the parties concerning the subject matter hereof, and all oral
discussions and prior agreements are merged herein; provided, if there is a
conflict between this Agreement and any other document executed
contemporaneously herewith with respect to the Shares, the provision of this
agreement shall control. The execution and delivery of this Agreement and the
other Ancillary Documents by the Company were not based upon any fact or
material provided by Purchaser, nor was the Company induced or influenced to
enter into this agreement or the other Ancillary Documents by any
representation, statement, analysis or promise by Purchaser.
9.9 Governing Law and Amendments. This Agreement shall be
construed and enforced under the laws of the State of Tennessee applicable to
contracts to be wholly performed in such State. No amendment or modification
hereof shall be effective except in a writing executed by each of the parties
hereto.
9.10 Survival of Representations and Warranties. All
representations and warranties contained herein or made by or furnished on
behalf of this Company in connection herewith shall survive the execution and
delivery of this Agreement and all Ancillary Documents.
9.11 Jurisdiction and Venue. The Company hereby consents to
the jurisdiction of the courts of the State of Tennessee and the United States
District Court for the Middle District of Tennessee, as well as to the
jurisdiction of all courts from which an appeal may be taken from such courts,
for the purpose of any suit, action or other proceeding arising out of any of
its obligations arising under this Agreement or any Ancillary Documents or with
respect to the transactions contemplated hereby, and expressly waives any and
all objections it may have as to venue in any of such courts.
9.12 Waiver of Trial by Jury. PURCHASER AND THE COMPANY
HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDINGS, CLAIMS OR COUNTERCLAIMS,
WHETHER IN CONTRACT OR TORT, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY
RELATING TO THIS AGREEMENT OR THE ANCILLARY DOCUMENTS.
9.13 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.
9.14 Construction and Interpretation. Should any provision of
this agreement require judicial interpretation, the parties hereto agree that
the court interpreting or construing the same shall not apply a presumption that
the terms hereof shall be more strictly construed against the party that itself
or through its agent prepared the same, it being agreed that the Company,
Purchaser and their respective agents have participated in the preparation
hereof.
9
<PAGE> 10
IN WITNESS WHEREOF, the undersigned have hereunto set their
hands as of the day and year first above written.
COMPANY:
MULTICOM PUBLISHING, INC., a Washington
Corporation
By:________________________________________
Title:______________________________________
PURCHASER:
SIRROM INVESTMENTS, INC., a Tennessee
corporation and Assignee of Sirrom Capital
Corporation
By:________________________________________
Title:______________________________________
10
<PAGE> 11
SCHEDULE 6
Company covenants and agrees that so long as any Series A Preferred are
outstanding:
1. Financial Statements and Reports. Company shall furnish to
Purchaser (i) as soon as practicable and in any event within ninety (90) days
after the end of each fiscal year of Company, a consolidated balance sheet of
Company as of the close of such fiscal year, a consolidated statement of
earnings and retained earnings of Company as of the close of such fiscal year
and a consolidated statement of cash flows for Company for such fiscal year,
prepared in accordance with generally accepted accounting principles
consistently applied ("GAAP"), audited by an independent certified public
accountant acceptable to Purchaser and certified by an officer of Company and
accompanied by a certificate of the President of Company, stating that to the
best of the knowledge of such officer, Company has kept, observed, performed and
fulfilled each covenant, term and condition of this Agreement during the
preceding fiscal year and that no Event of Default, as herein defined, has
occurred and is continuing (or if an Event of Default has occurred and is
continuing, specifying the nature of same, the period of existence of same and
the action Company has taken or proposes to take in connection therewith), (ii)
within thirty (30) days of the end of each calendar month, a consolidated
balance sheet of Company as of the close of such month and a consolidated
statement of earnings and retained earnings of Company as of the close of such
month, all in reasonable detail (including financial information for the
preceding six (6) months), and prepared substantially in accordance with GAAP
(except for the absence of footnotes and subject to year-end adjustments), and
(iii) with reasonable promptness, such other financial data as Purchaser may
reasonably request. Without Purchaser's prior written consent, Company shall not
modify or change any accounting policies or procedures in effect on the date
hereof, which change will result in a difference in the statement of earnings,
expenses or revenue in the month of the change in excess of $50,000.
2. Maintenance of Books and Records; Inspection. Company shall
maintain its books, accounts and records in accordance with GAAP, and after
reasonable notice from Purchaser, shall permit Purchaser, its officers,
employees and any professionals designated by Purchaser in writing, at Company's
expense, to visit, inspect and/or audit any of its properties, books and
financial records, and to discuss its accounts, affairs and finances with
Company or the principal officers of Company during reasonable business hours,
all at such times as Purchaser may reasonably request; provided that no such
visit, inspection and/or audit shall materially interfere with the conduct of
Company's business.
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<PAGE> 12
3. Insurance. Without limiting any of the requirements of any of
the other Loan Documents, Company shall maintain in amounts customary for
entities engaged in comparable business activity (i) to the extent required by
applicable law, worker's compensation insurance (or maintain a legally
sufficient amount of self insurance against worker's compensation liabilities,
with adequate reserves, under a plan approved by Purchaser, such approval not to
be unreasonably withheld or delayed), and (ii) fire and "all risk" casualty
insurance on its properties against such hazards and in at least such amounts as
are customary in Company's business. Company will make reasonable efforts to
obtain and maintain public liability insurance in an amount, and at a cost,
deemed reasonable to the Company's Board of Directors. At the request of
Purchaser, Company will deliver forthwith a certificate specifying the details
of such insurance in effect.
4. Taxes and Assessments. Company shall (i) file all tax returns
and appropriate schedules thereto that are required to be filed under applicable
law, prior to the date of delinquency, (ii) pay and discharge all taxes,
assessments and governmental charges or levies imposed upon Company upon its
income and profits or upon any properties belonging to it, prior to the date on
which penalties attach thereto, and (iii) pay all taxes, assessments and
governmental charges or levies that, if unpaid, might become a lien or charge
upon any of its properties; provided, however, that Company in good faith may
contest any such tax, assessment, governmental charge or levy described in the
foregoing clauses (ii) and (iii) so long as appropriate reserves are maintained
with respect thereto.
5. Corporate Existence. Company shall maintain its corporate
existence and good standing in the state of its incorporation, and its
qualification and good standing as a foreign corporation in each jurisdiction in
which such qualification is necessary pursuant to applicable law except for
where the failure to qualify would not have a material adverse effect on
Company.
6. Compliance with Law and Other Agreements. Except where the
failure to do so would not materially adversely affect Company's operations or
its ability to fulfill its obligations under the Loan Documents, Company shall
maintain its business, operations and property owned or used in connection
therewith in compliance with (i) all applicable federal, state and local laws,
regulations and ordinances governing such business operations and the use and
ownership of such property, and (ii) all agreements, licenses, franchises,
indentures and mortgages to which Company is a party or by which Company or any
of its properties is bound. Without limiting the foregoing, Company shall pay
all of its indebtedness promptly in accordance with the terms thereof.
7. Notice of Default. Company shall give written notice to
Purchaser of the occurrence of any default, event of default or Event of Default
under this Agreement or any other Loan Document promptly upon the occurrence
thereof.
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<PAGE> 13
8. Notice of Litigation. Company shall give notice, in writing, to
Purchaser of (i) any actions, suits or proceedings instituted by any persons
whomsoever against Company, or affecting any of the assets of Company, wherein
the amount at issue is in excess of One Hundred Thousand and No/100ths Dollars
($100,000.00), and (ii) any dispute, not resolved within sixty (60) days of the
commencement thereof, between Company on the one hand and any governmental
regulatory body on the other hand, which dispute might materially interfere with
the normal operations of Company.
9. Conduct of Business. Company will continue to engage in a
business of the same general type and manner as conducted by it on the date of
this Agreement. Without Purchaser's prior written consent, Company shall not
modify or change any terms or conditions of any material contracts and/or
agreements to which Company is a party on the date hereof (excluding any
modification or change that (i) is made in the ordinary course of Company's
business or (ii) does or will have a net increase or decrease of expenses or
revenues of Company in an amount less than the greater of $200,000 or 2.5% of
Company's gross revenues during the twelve months following such modification or
change).
10. ERISA Plan. If Company has in effect, or hereafter institutes, a
pension plan that is subject to the requirements of Title IV of the Employee
Retirement Income Security Act of 1974, Pub. L. No. 93-406, September 2, 1974,
88 Stat. 829, 29 U.S.C.A. ss. 1001 et seq. (1975), as amended from time to time
("ERISA"), then the following warranty and covenants shall be applicable during
such period as any such plan (the "Plan") shall be in effect: (i) Company hereby
warrants that no fact that might constitute grounds for the involuntary
termination of the Plan, or for the appointment by the appropriate United States
District Court of a trustee to administer the Plan, exists at the time of
execution of this Agreement, (ii) Company hereby covenants that throughout the
existence of the Plan, Company's contributions under the Plan will meet the
minimum funding standards required by ERISA and Company will not institute a
distress termination of the Plan, and (iii) Company covenants that it will send
to Purchaser a copy of any notice of a reportable event (as defined in ERISA)
required by ERISA to be filed with the Labor Department or the Pension Benefit
Guaranty Corporation, at the time that such notice is so filed.
11. Dividends, Distributions, Stock Rights, etc. Company shall not
declare or pay any dividend of any kind (other than stock dividends payable to
all holders of any class of capital stock), in cash or in property, on any class
of the capital stock of Company, or purchase, redeem, retire or otherwise
acquire for value any shares of such stock, nor make any distribution of any
kind in cash or property in respect thereof, nor make any return of capital of
shareholders, nor make any payments in cash or property in respect of any stock
options, stock bonus or similar plan (except as required or permitted
hereunder), without the prior written consent of Purchaser.
12. Guaranties; Loans; Payment of Debt. Without Purchaser's prior
express written consent, Company shall not guarantee nor be liable in any
manner, whether directly or indirectly, or become contingently liable after the
date of this Agreement in connection with the obligations
13
<PAGE> 14
or indebtedness of any person or entity whatsoever, except for the endorsement
of negotiable instruments payable to Company for deposit or collection in the
ordinary course of business. Without Purchaser's prior express written consent,
Company shall not (i) make any loan, advance or extension of credit to any
person other than in the normal course of its business, or (ii) make
any payment on any debt subordinate to the indebtedness evidenced by the Note;
provided, however, that Company may make advances to licensors, creditors and
developers in the ordinary course of business not to exceed $200,000 in any
given transaction.
13. Debt. Without the express prior written consent of Purchaser,
Company shall not create, incur, assume or suffer to exist indebtedness of any
description whatsoever, (excluding (i) the indebtedness evidenced by the Note,
(ii) the endorsement of negotiable instruments payable to Company for deposit or
collection in the ordinary course of business, (iii) indebtedness incurred in
the ordinary course of business (each of which, individually, does not exceed
$50,000), (iv) the indebtedness listed on Schedule 2.1(l) hereto, (v) guaranteed
royalty obligations incurred in the ordinary course of business not to exceed
$200,000 in any given transaction, and (vi) trade accounts payable, taxes and
obligations to suppliers, customers and employees in the ordinary course of
Company's business.
14. No Liens. Company shall not create, incur, assume or suffer to
exist any lien, security interest, security title, mortgage, deed of trust or
other encumbrance upon or with respect to any of its properties, now owned or
hereafter acquired, except the following permitted liens (the "Permitted
Liens"):
(a) liens in favor of Purchaser;
(b) liens for taxes or assessments or other governmental
charges or levies if not yet due and payable;
(c) liens in connection with the leasing of equipment in
favor of the Lessor of such equipment;
(d) liens described on Schedule 2.1(l) hereto;
(e) licenses of Company's products or technologies in the
ordinary course of business;
(f) liens securing obligations not exceeding $25,000, which
liens are removed within 60 days of their filing; and
(g) restrictions contained in any license agreements
pursuant to which Company's products or technologies are or were
created.
15. Mergers, Consolidations, Acquisitions and Sales. Without the
prior written consent of Purchaser, Company shall not (a) be a party to any
merger, consolidation or corporate
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<PAGE> 15
reorganization, nor (b) purchase or otherwise acquire all or substantially all
of the assets or stock of, or any partnership or joint venture interest in, any
other person, firm or entity, nor (c) sell, transfer, convey, grant a security
interest in or lease all or any substantial part of its assets, nor (d) create
any Subsidiaries nor convey any of its assets to any Subsidiary. Company may
propose a transaction described in Section 3.16(a) for Purchaser's consent,
which consent will not be unreasonably delayed or withheld if the transaction
involves consideration to be paid by Company of less than $3,000,000 in the
aggregate.
16. Transactions With Affiliates. Company shall not enter into any
transaction, including, without limitation, the purchase, sale or exchange of
property or the rendering of any service, with any affiliate, except in the
ordinary course of and pursuant to the reasonable requirements of Company's
business and upon fair and reasonable terms no less favorable to Company than
Company would obtain in a comparable arm's length transaction with a person not
an affiliate. For the purposes of this Section 3.17, "affiliate" shall mean a
person, corporation, partnership or other entity controlling, controlled by or
under common control with Company.
17. Environment. Company shall be and remain in material compliance
with the provisions of all federal, state and local environmental, health, and
safety laws, codes and ordinances, and all rules and regulations issued
thereunder; notify Purchaser immediately of any notice of a hazardous discharge
or environmental complaint received from any governmental agency or any other
party; notify Purchaser immediately of any hazardous discharge from or affecting
Company's premises; immediately contain and remove the same, in compliance with
all applicable laws; promptly pay any fine or penalty assessed in connection
therewith; permit Purchaser to inspect the premises, to conduct tests thereon,
and to inspect all books, correspondence, and records pertaining thereto; and at
Purchaser's request, and at Company's expense, provide a report of a qualified
environmental engineer, satisfactory in scope, form, and content to Purchaser,
and such other and further assurances reasonably satisfactory to Purchaser that
the condition has been corrected.
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<PAGE> 16
SCHEDULE 5.5
Multicom Publishing, Inc.
Compliance Certificate
Pursuant to Section 5.5 of the Securities Purchase Agreement
(the "Agreement") dated February ____, 1997, between Multicom Publishing, Inc.
("Multicom"), a Washington corporation and Sirrom Investments Inc., a Tennessee
corporation, I, _____________________________, President of Multicom Publishing,
Inc., do hereby certify that Multicom has fulfilled all of the conditions
specified in the Agreement on or prior to the date hereof.
IN WITNESS WHEREOF, I have signed this certificate in the
capacity indicated below as of the _________ day of February, 1997.
Name: _____________________________________
President
16
<PAGE> 1
EXHIBIT 10.4
SECOND AMENDMENT TO
LOAN AGREEMENT AND LOAN DOCUMENTS
THIS SECOND AMENDMENT TO LOAN AGREEMENT AND LOAN DOCUMENTS
(the "Second Amendment") dated as of the ___ day of February, 1997, is made and
entered into on the terms and conditions hereinafter set forth, by and between
MULTICOM PUBLISHING, INC., a Washington corporation ("Borrower"), and SIRROM
INVESTMENTS, INC., a Tennessee corporation and assignee of SIRROM CAPITAL
CORPORATION ("Lender").
W I T N E S S E T H:
WHEREAS, Sirrom Capital Corporation has previously made a term loan to
Borrower in the original principal amount of Three Million and No/100ths Dollars
($3,000,000.00) (the "Loan") on the terms and conditions set forth in that
certain Loan Agreement dated March 29, 1996, by and between Lender and Borrower
(as now or hereafter amended, the "Loan Agreement"); capitalized terms used
herein but not otherwise defined shall have the meanings ascribed thereto in the
Loan Agreement; and
WHEREAS, pursuant to that certain First Amendment to Loan Agreement
and Loan Documents (the "First Amendment") dated February 7, 1997 between
Borrower and Lender, Borrower reduced the principal outstanding balance of the
Loan by converting $750,000 of the Loan into 150,000 shares of preferred stock
pursuant to the terms of that certain Series A Preferred Stock Purchase
Agreement dated February 7, 1997 by and between Borrower and Lender; and
WHEREAS, the Loan is further evidenced and secured by certain
agreements, documents and instruments as more particularly described in the Loan
Agreement and defined therein as the "Loan Documents"; and
WHEREAS, Sirrom Capital Corporation has assigned all of its right,
title and interest in the Loan and the Loan Documents to Sirrom Investments,
Inc.; and
WHEREAS, Borrower desires to further reduce the principal outstanding
balance of the Loan by converting an additional $425,000 of the Loan into 85,000
shares of preferred stock to be issued by Borrower to Lender pursuant to the
terms and conditions stated in that certain Series A Preferred Stock Purchase
Agreement (II) dated even date herewith; and
WHEREAS, this Second Amendment shall amend the Loan Documents.
<PAGE> 2
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender hereby agree as follows:
1. The second sentence of Section 1.1 of the Loan Agreement is
hereby amended to read in its entirety as follows:
"The original principal amount of the Loan is hereby
reduced from $3,000,000 to $1,825,000 and shall be evidenced by a second
amended and restated Secured Promissory Note in the original principal
amount of $1,825,000, substantially in the form of Exhibit A attached
hereto and incorporated herein by reference (the "Note"), dated as of
the date hereof, executed by Borrower, in favor of Lender."
2. The obligations of Borrower in connection with and/or relating
to this Second Amendment are further evidenced and/or secured by the Loan
Documents.
3. Borrower hereby represents and warrants to Lender that all of
the representations made in Section 2.1 of the Loan Agreement are true and
correct as of the date hereof, except as modified or supplemented by Schedule A
attached hereto and incorporated herein by this reference.
4. The obligation of Lender to consummate the transactions
described herein on the date hereof is subject to Borrower's delivery to Lender
of each of the following:
(a) a Second Amended and Restated Secured Promissory Note
executed by Borrower, substantially in the form of Exhibit A attached
hereto;
(b) a stock purchase warrant executed by Borrower,
substantially in the form of Exhibit B attached hereto;
(c) a Series A Preferred Stock Purchase Agreement (II)
executed by Borrower, substantially in the form of Exhibit C attached
hereto;
(d) within ten (10) days after the date hereof, an opinion
of Borrower's counsel, of even date herewith, in form and substance
acceptable to Lender's counsel, Chambliss & Bahner, PLLC;
(e) within ten (10) days after the date hereof, waivers and
consents to the transactions described herein and the private placement
of Borrower's common stock, as described in subparagraph 4(a) above from
the following persons or entities:
(i) Cupertino National Bank & Trust;
2
<PAGE> 3
(ii) Meredith Corporation;
(iii) William H. Luden, III;
(iv) Hendrik N. Vanderlip and Vanderlip Investors;
and
(v) Paul Attard and Tamara L. Attard.
5. The terms "Loan Document" and "Loan Documents" as defined in the
Loan Agreement are amended to include this Second Amendment.
6. Borrower hereby acknowledges that
(a) the Loan Documents have been assigned to Sirrom
Investments, Inc., a wholly owned subsidiary of Sirrom Capital
Corporation;
(b) all references to Sirrom Capital Corporation in the Loan
Documents shall hereinafter refer to and include Sirrom Investments,
Inc.; and
(c) Sirrom Investments, Inc. shall be entitled to all of the
rights of Sirrom Capital Corporation under the Loan Documents.
7. Except as modified and amended hereby, the Loan Documents shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment, or have caused this Second Amendment to be executed by their duly
authorized officers, as of the day and year first above written.
BORROWER: LENDER:
MULTICOM PUBLISHING, INC. SIRROM INVESTMENTS, INC., a
a Washington corporation Tennessee corporation and
Assignee of Sirrom Capital
Corporation
By:______________________________ By:______________________________
Title:___________________________ Title:___________________________
3
<PAGE> 4
SCHEDULE A
Modifications of and Supplements to
Representations and Warranties
<PAGE> 5
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. IT HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY,
WITHOUT A VIEW TO RESALE OR DISTRIBUTION AND MAY NOT BE PLEDGED, HYPOTHECATED,
SOLD, MADE SUBJECT TO A SECURITY INTEREST, OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO MAKER THAT
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS.
THIS NOTE IS SUBORDINATE TO CERTAIN INDEBTEDNESS OF MAKER TO CUPERTINO NATIONAL
BANK & TRUST AND MEREDITH CORPORATION PURSUANT TO THOSE CERTAIN INTERCREDITOR
ESTOPPEL AGREEMENTS OF EVEN DATE HEREWITH, RESPECTIVELY.
SECOND AMENDED AND RESTATED SECURED PROMISSORY NOTE
$1,825,000 February ____, 1997
FOR VALUE RECEIVED, the undersigned, MULTICOM PUBLISHING, INC., a
Washington corporation ("Maker"), promises to pay to the order of SIRROM
INVESTMENTS, INC., a Tennessee corporation and assignee of SIRROM CAPITAL
CORPORATION ("Payee"; Payee and any subsequent holder[s] hereof are hereinafter
referred to collectively as "Holder"), at the office of Payee at First American
Trust Company, Custody Department, 800 First American Center, Nashville,
Tennessee 37237, Attn: Jeff Eubanks, or at such other place as Holder may
designate to Maker in writing from time to time, the principal sum of ONE
MILLION EIGHT HUNDRED TWENTY-FIVE THOUSAND AND NO/100THS DOLLARS ($1,825,000),
together with interest on the outstanding principal balance hereof from the date
hereof at the rate of thirteen percent (13%) per annum (computed on the basis of
a 360-day year); provided, however, that Holder may charge and receive interest
upon any renewal or extension hereof at the greater of (i) the rate set out
above, or (ii) any rate agreed to by the undersigned that is not in excess of
the maximum rate of interest allowed to be charged under applicable law (the
"Maximum Rate") at the time of such renewal or extension.
Interest only on the outstanding principal balance hereof shall be due
and payable monthly, in arrears, with the first installment being payable on the
first (1st) day of March, 1997, and subsequent installments being payable on the
first (1st) day of each succeeding month thereafter until March 29, 2001 (the
"Maturity Date"), at which time the entire outstanding principal balance,
together with all accrued and unpaid interest, shall be immediately due and
payable in full.
The indebtedness evidenced hereby may be prepaid in whole or in part,
at any time and from time to time, without penalty. Any such prepayments shall
be credited first to any accrued and unpaid interest and then to the outstanding
principal balance hereof.
<PAGE> 6
Time is of the essence of this Note. It is hereby expressly agreed that
in the event that any default be made in the payment of principal or interest as
stipulated above, which default is not cured within five (5) days; or in the
event that any default or event of default shall occur under that certain Loan
Agreement dated March 29, 1996, between Maker and Sirrom Capital Corporation (as
may be amended from time to time, the "Loan Agreement"), which default or event
of default is not cured following the giving of any applicable notice and within
any applicable cure period set forth in said Loan Agreement; or should any
default by Maker be made in the performance or observance of any covenants or
conditions contained in any other instrument or document now or hereafter
evidencing, securing or otherwise relating to the indebtedness evidenced hereby
(subject to any applicable notice and cure period provisions that may be set
forth therein); then, and in such event, the entire outstanding principal
balance of the indebtedness evidenced hereby, together with any other sums
advanced hereunder, under the Loan Agreement and/or under any other instrument
or document now or hereafter evidencing, securing or in any way relating to the
indebtedness evidenced hereby, together with all unpaid interest accrued
thereon, shall, at the option of Holder and without notice to Maker, at once
become due and payable and may be collected forthwith, regardless of the
stipulated date of maturity. Upon the occurrence of any default as set forth
herein, at the option of Holder and without notice to Maker, all accrued and
unpaid interest, if any, shall be added to the outstanding principal balance
hereof, and the entire outstanding principal balance, as so adjusted, shall bear
interest thereafter until paid at an annual rate (the "Default Rate") equal to
the lesser of (i) the rate that is seven percentage points (7.0%) in excess of
the above-specified interest rate, or (ii) the Maximum Rate in effect from time
to time, regardless of whether or not there has been an acceleration of the
payment of principal as set forth herein. All default interest shall be paid on
the first day of the month immediately following the curing of any such default.
In the event this Note is placed in the hands of an attorney for
collection, or if Holder incurs any costs incident to the collection of the
indebtedness evidenced hereby, Maker and any indorsers hereof agree to pay to
Holder an amount equal to all such costs, including without limitation all
actual reasonable attorney's fees and all court costs.
Presentment for payment, demand, protest and notice of demand, protest
and nonpayment are hereby waived by Maker and all other parties hereto. No
failure to accelerate the indebtedness evidenced hereby by reason of default
hereunder, acceptance of a past-due installment or other indulgences granted
from time to time, shall be construed as a novation of this Note or as a waiver
of such right of acceleration or of the right of Holder thereafter to insist
upon strict compliance with the terms of this Note or to prevent the exercise of
such right of acceleration or any other right granted hereunder or by applicable
laws. No extension of the time for payment of the indebtedness evidenced hereby
or any installment due hereunder, made by agreement with any person now or
hereafter liable for payment of the indebtedness evidenced hereby, shall operate
to release, discharge, modify, change or affect the original liability of Maker
hereunder or that of any other person now or hereafter liable for payment of the
indebtedness evidenced hereby, either in whole or in part, unless Holder agrees
otherwise in writing. This Note may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.
2
<PAGE> 7
This Note evidences an amendment and restatement of that certain
amended and restated secured promissory note in the principal amount of
$2,250,000 made and executed by Maker payable to the order of Sirrom
Investments, Inc., assignee of Sirrom Capital Corporation which further
evidences an amendment and restatement of that certain secured promissory note
dated March 29, 1996, in the original principal amount of $3,000,000, made and
executed by Maker payable to the order of Sirrom Capital Corporation.
Accordingly, the indebtedness and other obligations evidenced by this Note are
further evidenced by (i) the Loan Agreement and (ii) certain other instruments
and documents, as may be required to protect and preserve the rights of Maker
and Payee as more specifically described in the Loan Agreement.
All agreements herein made are expressly limited so that in no event
whatsoever, whether by reason of advancement of proceeds hereof, acceleration of
maturity of the unpaid balance hereof or otherwise, shall the amount paid or
agreed to be paid to Holder for the use of the money advanced or to be advanced
hereunder exceed the Maximum Rate. If, from any circumstances whatsoever, the
fulfillment of any provision of this Note or any other agreement or instrument
now or hereafter evidencing, securing or in any way relating to the indebtedness
evidenced hereby shall involve the payment of interest in excess of the Maximum
Rate, then, ipso facto, the obligation to pay interest hereunder shall be
reduced to the Maximum Rate; and if from any circumstance whatsoever, Holder
shall ever receive interest, the amount of which would exceed the amount
collectible at the Maximum Rate, such amount as would be excessive interest
shall be applied to the reduction of the principal balance remaining unpaid
hereunder and not to the payment of interest. This provision shall control every
other provision in any and all other agreements and instruments existing or
hereafter arising between Maker and Holder with respect to the indebtedness
evidenced hereby.
This Note is intended as a contract under and shall be construed and
enforceable in accordance with the laws of the State of Tennessee, except to the
extent that federal law may be applicable to the determination of the Maximum
Rate.
3
<PAGE> 8
As used herein, the terms "Maker" and "Holder" shall be deemed to
include their respective successors, legal representatives and assigns, whether
by voluntary action of the parties or by operation of law.
MAKER:
MULTICOM PUBLISHING, INC., a Washington
corporation
By:
-------------------------------
Title:
----------------------------
4
<PAGE> 9
STOCK PURCHASE WARRANT
This Warrant is issued this _____ day of February, 1997, by MULTICOM
PUBLISHING, INC., a Washington corporation (the "Company"), to SIRROM
INVESTMENTS, INC., a Tennessee corporation and assignee of SIRROM CAPITAL
CORPORATION, a Tennessee corporation (SIRROM INVESTMENTS, INC. and any
subsequent assignee or transferee hereof are hereinafter referred to
collectively as "Holder" or "Holders").
AGREEMENT:
1. ISSUANCE OF WARRANT; TERM. For and in consideration of SIRROM
INVESTMENTS, INC. converting $1,175,000 of the original principal amount of a
$3,000,000 secured Promissory Note into equity in the Company and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company grants to Holder the right to purchase 844,354 shares
(the "Shares") of the Company's common stock (the "Common Stock"), which the
Company represents to equal 15.0% of the shares of capital stock of the Company
outstanding on the date hereof, calculated on a fully diluted basis after
exercise ("Base Amount"); provided, however, that this Warrant shall not be
effective or exercisable until and unless (i) the Company loses its listing on
the NASDAQ Small Cap Market or (ii) the capital and surplus of the Company is
less than $1,000,000 for any fiscal quarter. For purposes of this Warrant, the
term "capital and surplus" shall have the meaning given such term by the NASDAQ
Marketplace Rules, Series 4300 and 4400 pertaining to minimum net worth
requirements of NASDAQ Small Cap companies.
2. EXERCISE PRICE. The exercise price ("Exercise Price") per share
for which all or any of the Shares may be purchased pursuant to the terms of
this Warrant shall be $.01.
3. EXERCISE. This Warrant may be exercised by the Holder hereof
(but only on the conditions hereinafter set forth) as to all or any increment or
increments of One Hundred (100) Shares (or the balance of the Shares if less
than such number), upon delivery of written notice of intent to exercise to the
Company at the following address: 1100 Olive Way, Suite 1250, Seattle,
Washington 98101 or such other address as the Company shall designate in a
written notice to the Holder hereof, together with this Warrant and payment to
the Company of the aggregate Exercise Price of the Shares so purchased. The
Exercise Price shall be payable, at the option of the Holder, (i) by certified
or bank check, (ii) by the surrender of the Note or portion thereof having an
outstanding principal balance equal to the aggregate Exercise Price or (iii) by
the surrender of a portion of this Warrant having a fair market value equal to
the aggregate Exercise Price. Upon exercise of this Warrant as aforesaid, the
Company shall as promptly as practicable, and in any event within fifteen (15)
days thereafter, execute and deliver to the Holder of this Warrant a certificate
or certificates for the total number of whole Shares for which this Warrant is
being exercised in such names and denominations as are requested by such Holder.
If this Warrant shall be exercised with respect to less than all of the Shares,
the Holder shall be entitled to receive a new Warrant
<PAGE> 10
covering the number of Shares in respect of which this Warrant shall not have
been exercised, which new Warrant shall in all other respects be identical to
this Warrant. The Company covenants and agrees that it will pay when due any and
all state and federal issue taxes which may be payable in respect of the
issuance of this Warrant or the issuance of any Shares upon exercise of this
Warrant.
4. COVENANTS AND CONDITIONS. The above provisions are subject to
the following:
(a) Neither this Warrant nor the Shares have been registered under
the Securities Act or any state securities laws ("Blue Sky Laws"). This Warrant
has been acquired for investment purposes and not with a view to distribution or
resale and may not be pledged, hypothecated, sold, made subject to a security
interest, or otherwise transferred without (i) an effective registration
statement for such Warrant under the Securities Act and such applicable Blue Sky
Laws, or (ii) an opinion of counsel, which opinion and counsel shall be
reasonably satisfactory to the Company and its counsel, that registration is not
required under the Securities Act or under any applicable Blue Sky Laws (the
Company hereby acknowledges that Bass, Berry & Sims is acceptable counsel).
Transfer of the shares issued upon the exercise of this Warrant shall be
restricted in the same manner and to the same extent as the Warrant and the
certificates representing such Shares shall bear substantially the following
legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
APPLICABLE STATE SECURITIES LAW AND MAY NOT BE
TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER
THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (II) IN
THE OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY,
REGISTRATION UNDER SUCH SECURITIES ACTS OR SUCH
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN
CONNECTION WITH SUCH PROPOSED TRANSFER.
The Holder hereof and the Company agree to execute such other documents and
instruments as counsel for the Company reasonably deems necessary to effect the
compliance of the issuance of this Warrant and any shares of Common Stock issued
upon exercise hereof with applicable federal and state securities laws.
(b) The Company covenants and agrees that all Shares which may be
issued upon exercise of this Warrant will, upon issuance and payment therefor,
be legally and validly issued and outstanding, fully paid and nonassessable,
free from all taxes, liens, charges and preemptive rights, if any, with respect
thereto or to the issuance thereof. The Company shall at all times reserve and
keep available for issuance upon the exercise of this Warrant such number of
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of this Warrant.
(c) In the event that the Company sells shares of the Company's
capital stock (other than currently outstanding options) at a price below the
fair market value of such shares, the number of
2
<PAGE> 11
shares of Common Stock issuable upon exercise of this Warrant shall be equal to
the product obtained by multiplying the number of shares then issuable pursuant
to this Warrant prior to such sale by a fraction, the numerator of which shall
be the product of (x) the total number of shares of Common Stock outstanding on
a fully diluted basis immediately after such issuance or sale, multiplied by (y)
the fair market value immediately prior to such issuance or sale and the
denominator of which shall be the sum of (i) the number of shares of Common
Stock outstanding on a fully diluted basis immediately prior to such issuance or
sale multiplied by the fair market value immediately prior to such issuance or
sale, plus (ii) the aggregate amount of the consideration received by the
Company upon such issuance or sale (as illustrated on Schedule I hereto). The
rights granted to Holder under this Section shall not apply to any sale of the
Company's capital stock after the Company has completed bona fide offerings
(public or private) with gross proceeds to the Company from all such offerings
equal to or greater than $15,000,000.
5. TRANSFER OF WARRANT. Subject to the provisions of Section 4
hereof, this Warrant (or the shares) may be transferred, in whole or in part, to
any person or business entity, by presentation of the Warrant to the Company
with written instructions for such transfer; provided however, that if Holder
elects to transfer this Warrant to any person or entity other than an affiliate
of Holder, such transfer shall be subject to rights of first refusal in favor of
the Company and its shareholders, as more particularly set forth in this
Section. Prior to any proposed transfer by Holder of any of the Warrant, Holder
shall give the Company written notice (a "Sales Notice") of its intention to
transfer. The Sales Notice shall contain all of the transfer terms, including,
but not limited to, the name(s) and address(es) of the prospective transferees,
the purchase price and the other terms and conditions of payment (or the
purchase price or basis for determining the same and other terms and
conditions), the date on or about the transfer of the Warrant is to occur, and
the portion of the Warrant to be transferred. Within fifteen (15) days after
delivery of a Sales Notice to the Company, the Company shall notify Holder
whether it elects to purchase the Warrant. If the Company does not elect to
purchase the Warrant, the Company shall promptly send to each of its
shareholders of record on such date (i) a copy of the Sales Notice and (ii) a
pro rata allocation of the Warrant that each such shareholder may purchase. Each
shareholder, during the fifteen (15) day period commencing on the day the
Company delivers the Sales Notice to such shareholder, shall notify the Company
whether it (x) elects to purchase its pro rata allocation of the Warrant and (y)
desires to purchase a specified number of additional remaining portion of the
Warrant, if any, not purchased by other shareholders). After such fifteen (15)
day period, if the Company does not receive any or all notices and/or any
shareholder does not elect to purchase its pro rata allocation of the Warrant,
then the Company shall promptly notify each shareholder that has indicated a
desire to purchase additional remaining portion of the Warrant, and each such
shareholder shall have the obligation to purchase its pro rata allocation of
such remaining portion of the Warrant if such shareholders have indicated a
desire to purchase in the aggregate of such remaining portion of the Warrant at
least equal to the total remaining portion of the Warrant. Within ten (10) days
after delivery of such notice, the Company shall notify each shareholder
obligated to purchase its pro rata allocation of the remaining portion of the
Warrant which it is obligated to purchase. Payment for the Warrant shall be by
check, or wire transfer, against delivery of the Warrant. The Company and each
shareholder shall have the right to pay Holder the fair market value (as
determined in good faith by the Board of Directors of the Company) of any
non-cash consideration offered by Holder for the Warrant. To effect a transfer
of the Warrant
3
<PAGE> 12
to the Company, the Company shall tender payment to Holder, who shall
concurrently deliver the duly endorsed Warrant to the Company. To effect a
transfer of the Warrant to shareholders (a) the Company shall provide Holder
with a list of the purchasing shareholders, their respective allocations of the
Warrant to be transferred, and their respective payment amounts for such shares
(the "List"), (b) the Company and Holder shall enter into an escrow arrangement,
(c) the Company shall place the List into escrow and notify each shareholder of
the escrow arrangement and its respective allocation of the Warrant and payment
amount, (d) Holder shall place the duly endorsed Warrant to be transferred into
escrow, and (e) the shareholders' shall deposit into escrow their respective
payment amounts. Upon the occurrence of such events, the escrow agent shall
effect the transfer, subject to the satisfaction any additional instructions or
conditions from the parties to the escrow. If the Company and the shareholders
fail to give notice to tile Holder that they, in the aggregate, agree to
purchase all of the Warrant described in the Sales Notice within the applicable
period, then Holder may, during the ninety (90) days following the end of the
shareholders' second fifteen (15) day purchase period, transfer the Warrant to
the person or entity (or to the representative thereof) described in such Sales
Notice at a price and upon terms and conditions no more favorable in any
material respect to such person or entity as those set forth in such Sales
Notice. If Holder has not sold such the Warrant or entered into an agreement to
transfer such Warrant (if the sale of the Warrant shall be closed within thirty
(30) days of such agreement) within such ninety (90) day period, Holder shall
not thereafter transfer any of the Warrant without first offering such
securities to each of the Company and its shareholders in the manner provided
above. The Company's or its shareholder's exercise or nonexercise of the right
of first refusal hereunder in connection with one or more transfers of the
Warrant shall not adversely effect such party's first refusal rights in
connection with subsequent transfers of the Warrant. Upon such presentation for
transfer, the Company shall promptly execute and deliver a new Warrant or
Warrants in the form hereof in the name of the assignee or assignees and in the
denominations specified in such instructions. The Company shall pay all expenses
incurred by it in connection with the preparation, issuance and delivery of
warrants or shares under this Section. The rights under this Section shall
survive the exercise of the Warrant.
6. WARRANT HOLDER NOT SHAREHOLDER; RIGHTS OFFERING; PREEMPTIVE
RIGHTS; PREFERENCE RIGHTS. Except as otherwise provided herein, this Warrant
does not confer upon the Holder, as such, any right whatsoever as a shareholder
of the Company. Notwithstanding the foregoing, if the Company should offer to
all of the Company's shareholders the right to purchase any securities of the
Company, then all shares of Common Stock that are subject to this Warrant shall
be deemed to be outstanding and owned by the Holder and the Holder shall be
entitled to participate in such rights offering. The Company hereby grants
preemptive rights to Holder(s) and for purposes of such rights all shares of
Common Stock that are subject to this Warrant are deemed outstanding. The
Company shall not issue any securities which entitle the holder thereof to
obtain any preference over holders of Common Stock upon the dissolution,
liquidation, winding-up, sale, merger, or reorganization of the Company without
the prior written consent of the Holder.
7. OBSERVATION RIGHTS. The Holder of this Warrant shall (a) receive
notice of and be entitled to attend or may send a representative to attend all
meetings of the Company's Board of Directors in a non-voting observation
capacity, (b) receive copies of all notices, packages and documents provided to
members of the Company's Board of Directors for each board of directors
4
<PAGE> 13
meeting, and (c) receive copies of all actions taken by written consent by the
Company's Board of Directors, from the date hereof until such time as the
indebtedness evidenced by the Note has been paid in full.
8. ADJUSTMENT UPON CHANGES IN STOCK.
(a) If all or any portion of this Warrant shall be exercised
subsequent to any stock split, stock dividend, recapitalization, combination of
shares of the Company, or other similar event, occurring after the date hereof,
then the Holder exercising this Warrant shall receive, for the aggregate price
paid upon such exercise, the aggregate number and class of shares which such
Holder would have received if this Warrant had been exercised immediately prior
to such stock split, stock dividend, recapitalization, combination of shares, or
other similar event. If any adjustment under this Section 8(a) would create a
fractional share of Common Stock or a right to acquire a fractional share of
Common Stock, such fractional share shall be disregarded and the number of
shares subject to this Warrant shall be the next higher number of shares,
rounding all fractions upward. Whenever there shall be an adjustment pursuant to
this Section 8(a), the Company shall forthwith notify the Holder or Holders of
this Warrant of such adjustment, setting forth in reasonable detail the event
requiring the adjustment and the method by which such adjustment was calculated.
(b) If all or any portion of this Warrant shall be exercised
subsequent to any merger, consolidation, exchange of shares, separation,
reorganization or liquidation of the Company, or other similar event, occurring
after the date hereof, as a result of which shares of Common Stock shall be
changed into the same or a different number of shares of the same or another
class or classes of securities of the Company or another entity, then the Holder
exercising this Warrant shall receive, for the aggregate price paid upon such
exercise, the aggregate number and class of shares which such Holder would have
received if this Warrant had been exercised immediately prior to such merger,
consolidation, exchange of shares, separation, reorganization or liquidation, or
other similar event. If any adjustment under this Section 8(b) would create a
fractional share of Common Stock or a right to acquire a fractional share of
Common Stock, such fractional share shall be disregarded and the number of
shares subject to this Warrant shall be the next higher number of shares,
rounding all fractions upward. Whenever there shall be an adjustment pursuant to
this Section 8(b), th e Company shall forthwith notify the Holder or Holders of
this Warrant of such adjustment, setting forth in reasonable detail the event
requiring the adjustment and the method by which such adjustment was calculated.
5
<PAGE> 14
9. REGISTRATION.
The Company and the Holder(s) agree that if at any time after the date
hereof the Company shall propose to file a registration statement with respect
to any of its capital stock on a form suitable for a secondary offering either
for its own account or the account of a security holder or holders exercising
their respective demand registration rights, the Holder(s) shall be entitled to
the same registration rights (on a fully diluted pro rata basis) of the
"Purchaser" as defined and set forth in Article VII (excluding Sections 7.1 and
7.10) of that certain Stock Purchase Agreement dated as of June 4, 1994, by and
among the Company, Tamara L. Attard and Meredith Corporation (a copy of said
Article VII is attached hereto as Schedule II).
10. CERTAIN NOTICES. In case at any time the Company shall propose
to:
(a) declare any cash dividend upon its Common Stock;
(b) declare any dividend upon its Common Stock payable in stock or
make any special dividend or other distribution to the holders of its Common
Stock;
(c) offer for subscription to the holders of any of its Common Stock
any additional shares of stock in any class or other rights;
(d) reorganize, or reclassify the capital stock of the Company, or
consolidate, merge or otherwise combine with, or sell all or substantially all
of its assets to, another corporation; or
(e) voluntarily or involuntarily dissolve, liquidate or wind up the
affairs of the Company;
then, in any one or more of said cases, the Company shall give to the Holder of
the Warrant, by certified or registered mail, (i) at least twenty (20) days'
prior written notice of the date on which the books of the Company shall close
or a record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, and (ii) in the case of such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at least
twenty (20) days' prior written notice of the date when the same shall take
place. Any notice required by clause (i) shall also specify, in the case of any
such dividend, distribution or subscription rights, the date on which the
holders of Common Stock shall be entitled thereto, and any notice required by
clause (ii) shall specify the date on which the holders of Common Stock shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up, as the case may be.
11. RIGHTS OF CO-SALE.
The Holder(s) shall be entitled to the same "co-sale" rights of the
"Vanderlip Investors" as
6
<PAGE> 15
defined and set forth in Section 6 of that certain Stock Restriction Agreement
dated as of August 27, 1993, by and among the Company, Tamara Attard, Paul
Attard, Henrik N. Vanderlip, and John Zeiler, and the Shares shall be treated
"Investor Shares" for purposes of such Section 6 (a copy of said Section 6 is
attached hereto as Schedule III).
12. STOCK OPTION PLAN.
Notwithstanding anything contained herein to the contrary, prior to an
IPO, the Company may establish and issue employee stock options and issue shares
of the Company's capital stock in connection therewith without making any
anti-dilution adjustments for the Holder(s) under the anti-dilution provision
hereof; provided, however, that (i) after the date hereof, the Company shall not
establish and issue employee stock options for shares of the Company's capital
stock in an amount greater than ten percent (10%) of the Company's capital stock
issued and outstanding as of the date hereof and (ii) all employee stock options
granted after the date hereof shall have an exercise price of $4.85 or greater
(subject to adjustment for any stock split, stock dividend, recapitalization,
combination of shares of the Company or other similar change in stock).
13. GOVERNING LAW.
This warrant shall be governed by the laws of the State of Tennessee
applicable to agreements made entirely within the State.
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<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
date first above written.
MULTICOM PUBLISHING, INC., a Washington
corporation
By:_______________________________________
Title:____________________________________
SIRROM INVESTMENTS, INC., a Tennessee
corporation and Assignee of Sirrom Capital
Corporation
By:_______________________________________
Title:____________________________________
The undersigned shareholders of the Company join in the execution of this
Warrant to acknowledge and agree to the terms of Sections 9 and 11 hereof.
-------------------------------------
Tamara Attard
-------------------------------------
Paul Attard
8
<PAGE> 17
SCHEDULE I
ILLUSTRATION OF ANTI-DILUTION PROVISION
Assumptions:
Outstanding Common Stock: 100,000 Shares
(fully diluted)
Fair Market Value per share: $10
New Issuance: 20,000 Shares
New Issue Price (all in) $8
Debt Warrant: 10,000 Shares
FMV of Warrant Shares: $100,000 ($10 x 10,000 shares)
Formula:
10,000 x (120,000 x $10)
----------------------------------
(100,000 x $10) + (20,000 x $8)
10,000 x 1,200,000
---------
1,160,000
10,000 x 1.0345
Adjusted No. of Warrant Shares: 10,344.83
Percentage of Outstanding: 10,344.83 = 0.0862
120,000
FMV of Adj. Warrant Shares: .0862 x 1,160,000 = $100,000
<PAGE> 1
EXHIBIT 10.5
SERIES A PREFERRED STOCK
SECURITIES PURCHASE AGREEMENT (II)
BY AND BETWEEN
MULTICOM PUBLISHING, INC.
AND
SIRROM INVESTMENTS, INC.
DATED FEBRUARY ____, 1997
<PAGE> 2
SERIES A PREFERRED STOCK PURCHASE AGREEMENT (II)
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (II) (the
"Agreement") is made and entered into as of this _____ day of February, 1997 by
and between MULTICOM PUBLISHING, INC., a Washington corporation (the "Company")
and SIRROM INVESTMENTS, INC., a Tennessee corporation and assignee of Sirrom
Capital Corporation (the "Purchaser").
In consideration of the mutual promises and covenants contained in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. Authorization and Sale of Shares.
1.1 Authorization. The Company has, or before the Closing (as
defined in Section 2) will have, duly authorized the sale and issuance of (a)
85,000 shares of its Series A Preferred Stock, $.01 par value per share (the
"Series A Preferred"), having the rights, restrictions, privileges, preferences
and voting powers set forth in the Certificate of Amendment to the Company's
Certificate of Incorporation attached hereto as Exhibit A (the "Certificate of
Amendment"). The Company has, or on or before the Closing will have adopted and
filed the Certificate of Amendment with the Washington Secretary of State.
1.2 Sale of Shares. Subject to the terms and conditions of
this Agreement, at the Closing the Company will sell and issue to the Purchaser,
and the Purchaser will purchase 85,000 shares of Series A Preferred for the
purchase price of $425,000. The shares of Series A Preferred being sold under
this Agreement are referred to as the "Shares".
2. The Closing. The closing ("Closing") of the sale and
purchase of the Shares under this Agreement shall take place at such time, date,
and place as are mutually agreeable to the Company and the Purchaser. At the
Closing, the Company will deliver to the Purchaser a certificate for the Shares
registered in the name of the Purchaser, against payment to the Company of the
purchase price therefor, in the form of a $425,000 reduction of the original
principal amount outstanding under that certain First Amendment to Loan
Agreement and Loan Documents dated February 7, 1997 by and between Company and
Purchaser represented by that certain $2,250,000 Secured Promissory Note made by
Company to Purchaser and related documents, which represent a $750,000 reduction
of the original principal amount outstanding under that certain Loan Agreement
dated March 29, 1996 by and between Company and Purchaser represented by that
certain $3,000,000 Secured Promissory Note made by Company to Purchaser and
related documents (collectively the "Loan Documents"). The date of the Closing
is hereinafter referred to as the "Closing Date". If at the Closing any of the
conditions specified in Section 5 shall not have been fulfilled, Purchaser
shall, at its election, be relieved of all of its obligations under this
Agreement without thereby waiving any other rights Purchaser may have by reason
of such failure or non-fulfillment.
2
<PAGE> 3
3. The Company's Representations. The Company hereby represents and
warrants to Purchaser as follows:
3.1 Subsidiaries. The Company neither owns nor has an
interest in, directly or indirectly, any other corporation, partnership, joint
venture or other business organization ("Subsidiaries").
3.2 Authorization. The Company has full legal right, power
and authority to conduct its business and affairs. The Company has full legal
right, power and authority to enter into and perform its obligations hereunder,
without the consent or approval of any other person, firm, governmental agency
or other legal entity. The execution and delivery of this Agreement, the
issuance of the Series A Preferred, the execution and delivery of each Ancillary
Document to which the Company is a party, and the performance by the Company of
its obligations thereunder are within the corporate powers of the Company and
have been duly authorized by all necessary corporate action properly taken, have
received all necessary governmental approvals, if any were required, and do not
and will not contravene or conflict with any provision of law, any applicable
judgment, ordinance, regulation or order of any court or governmental agency,
the charter or bylaws of the Company, or any agreement binding upon the Company
or its properties. The officer(s) executing this Agreement, that certain Stock
Purchase Warrant dated even date herewith between by the Company and Purchaser
(the "Warrant") and all of the other documents relating to the transactions
contemplated hereby to which the Company is a party (the "Ancillary Documents")
are duly authorized to act on behalf of the Company.
3.3 Validity and Binding Effect. This Agreement and the
Ancillary Documents are the legal, valid and binding obligations of the Company,
enforceable in accordance with their respective terms, subject to limitations
imposed by bankruptcy, insolvency, moratorium or other similar laws affecting
the rights of creditors generally or the application of general equitable
principles.
3.4 Capitalization. Immediately after the date of this
Agreement, the authorized capital stock of the Company consists solely of
40,000,000 shares of common stock $.01 par value per share ("Common Stock") and
300,000 shares of preferred stock $.01 par value per share ("Preferred Stock"),
of which 235,000 shares have been designated as Series A Preferred Stock. Of the
capital stock authorized, 6,415,991 shares of Common Stock and 235,000 shares of
Series A Preferred (the "Outstanding Shares") are issued and outstanding. All of
the Outstanding Shares are duly authorized, validly issued and outstanding and
fully paid and nonassessable and free of preemptive rights. Except for the
Outstanding Shares, there are no shares of capital stock or other securities of
the Company issued or outstanding. Except as set forth on Schedule 3.4 hereto,
there are no outstanding options, warrants or rights to purchase or acquire from
the Company any securities of the Company, and there are no contracts,
commitments, agreements, understandings, arrangements or restrictions as to
which the Company is a party or by which it is bound relating to any shares of
capital stock or other securities of the Company (including the Outstanding
Shares), whether or not outstanding.
3
<PAGE> 4
3.5 No Conflicts. Consummation of the transactions hereby
contemplated and the performance of the obligations of the Company under and by
virtue of the Agreement or the Ancillary Documents will not result in any breach
of, or constitute a default under, any mortgage, security deed or agreement,
deed of trust, lease, bank loan or credit agreement, corporate charger or
bylaws, agreement or certificate of limited partnership, partnership agreement,
license, franchise or any other instrument or agreement to which the Company is
a party or by which the Company or its respective properties may be bound or
affected or to which the Company has not obtained an effective waiver.
4. Representations of the Purchaser. The Purchaser represents and
warrants to the Company as follows:
4.1 Investment. Purchaser is acquiring the Shares, for the
Purchaser's own account for investment and not with a view to, or for sale in
connection with, any distribution thereof, nor with any present intention of
distributing or selling the same; and, except as contemplated by this Agreement
and the Exhibits hereto, such Purchaser has no present or contemplated
agreement, undertaking, arrangement, obligation, indebtedness, or commitment
providing for the disposition thereof.
4.2 Authority. Purchaser has full power and authority to
enter into and to perform this Agreement in accordance with its terms.
4.3 Accredited Investor. Purchaser is an Accredited Investor
within the definition set forth in Rule 501(a) of Regulation D of the Securities
Act.
5. Conditions to the Obligations of the Purchaser. The obligation
of Purchaser to purchase Shares at the Closing is subject to the fulfillment, or
the waiver by Purchaser, of each of the following conditions on or before the
Closing Date.
5.1 Accuracy of Representations and Warranties. Each
representation and warranty contained in Section 3 shall be true on and as of
the Closing Date with the same effect as though such representation and warranty
had been made on and as of that date.
5.2 Performance. The Company shall have performed and
complied with all agreements and conditions contained in this Agreement required
to be performed or complied with by the company prior to or at the Closing.
5.3 Opinion of Counsel. Purchaser shall have received an
opinion from counsel for the Company, dated the Closing Date, addressed to the
Purchaser, in the form acceptable to the Purchaser's counsel.
5.4 Certificates and Documents. The Company shall have
delivered to counsel
4
<PAGE> 5
to the Purchaser:
(a) The articles of incorporation, as amended, of
the Company, in effect prior to the Closing Date, certified by the
Secretary of State of the State Corporation Commission of its
incorporation.
(b) Certificates, as of the most recent practicable
dates, as to the corporate good standing of the Company issued by the
jurisdictions in which the company or any of its Subsidiaries is
conducting business or is otherwise required to qualify.
(c) Bylaws of the Company, certified by its
Secretary of Assistant Secretary as of the Closing Date;
(d) Resolutions of the Board of Directors of the
company, authorizing and approving all matters in connection with this
Agreement, the Ancillary Documents, and the transactions contemplated
hereby and thereby, certified by the Secretary or Assistant Secretary of
the company as of the Closing Date; and
(e) All Ancillary Documents, including all forms
required or requested by the Small Business Administration.
5.5 Compliance Certificate. The Company shall have delivered
to the Purchaser a certificate, executed by the Chairman of the Board or
President of the Company, dated the Closing Date, certifying to the fulfillment
of the conditions specified in this Agreement.
5.6 Compliance with Loan Agreement. The Company shall comply
with all terms and conditions stated in that certain Second Amendment to Loan
Agreement and Loan Documents dated even date herewith between the Company and
Purchaser.
6. Covenants and Agreements. The Company makes the covenants and
agreements contained on Schedule 6 attached hereto and incorporated herein by
reference so long as the Series A Preferred are outstanding.
5
<PAGE> 6
7. Default and Remedies.
7.1 Events of Default. The occurrence of any of the
following shall constitute an Event of Default hereunder:
(a) Default in the payment of the terms of the
Series A Preferred, which default is not cured within twenty (20) days;
(b) Any misrepresentation by the Company as to any
material matter hereunder or under any of the Ancillary Documents, or
delivery by the company of any schedule, statement, resolution, report,
certificate, notice or writing to Purchaser that is untrue in any
material respect on the date as of which the facts set forth therein are
stated or certified;
(c) Any breach of the terms of, or failure of the
company to perform any of its obligations, covenants or agreements
under, this Agreement, or any of the other Ancillary Documents;
8. Sale or Transfer of Shares; Legend.
(a) The Shares shall not be sold or transferred
unless either (i) they first shall have been registered under the
Securities Act, or (ii) the Company first shall have been furnished with
an opinion of legal counsel, reasonably satisfactory to the Company, to
the effect that such sale or transfer is exempt from the registration
requirements of the Securities Act.
(b) Notwithstanding the foregoing, no registration
or opinion of counsel shall be required for a transfer made in
accordance with Rule 144 or Rule 144A under the Securities Act.
(c) Each certificate representing the Shares shall
bear a legend substantially in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED, OR
HYPOTHECATED UNLESS AND UNTIL SUCH SHARES ARE REGISTERED UNDER
SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY IS
OBTAINED TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
6
<PAGE> 7
(d) The Company agrees, upon the request of the Purchaser,
to make available to the Purchaser and to any prospective transferee of
any Shares of the Purchaser the information concerning the Company
described in Rule 144A(d)(4) under the Securities Act.
(e) Notwithstanding anything to the contrary contained in
this Agreement, Purchaser shall be permitted to assign its right, title
and interest in and to this Agreement and the Series A Preferred to its
senior lender.
9. Miscellaneous.
9.1 Performance by Purchaser. If the Company shall default
in the payment, performance or observance of any covenant, term or condition of
this Agreement, which default is not cured within the applicable cure period,
then Purchaser may, at its option, pay, perform or observe the same, and all
payments made or costs or expenses incurred by Purchaser in connection therewith
(including but not limited to reasonable attorney's fees), with interest thereon
at the maximum rate from time to time allowed by applicable law, shall be
immediately repaid to Purchaser by the Company and shall constitute an
obligation of the Company to Purchaser. Purchaser shall be the sole judge of the
necessity for any such actions and of the amounts to be paid.
9.2 Successors and Assigns Included in Parties. Whenever in
this Agreement one of the parties hereto is named or referred to, the heirs,
legal representatives, successors, successors-in-title and assigns of such
parties shall be included, and all covenants and agreements contained in this
Agreement by or on behalf of the company or by or on behalf of Purchaser shall
bind and inure to the benefit of their respective heirs, legal representatives,
successors-in-title and assigns, whether so expressed or not.
9.3 Costs and Expenses. The Company agrees to pay all
reasonable costs and expenses incurred by Purchase in connection with the
purchase of the Shares, including but not limited to filing fees, and reasonable
attorneys' fees, promptly upon demand of Purchaser. The Company further agrees
to pay all premiums for insurance required to be maintained by the company
pursuant to the terms of the Agreement.
9.4 Time of the Essence. Time is of the essence with respect
to each and every covenant, agreement and obligation of the company hereunder
and under all of the Ancillary Documents.
9.5 Severability. If any provision(s) of this Agreement or
the application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other persons or circumstances shall not be affected there
by and shall be enforced to the greatest extent permitted by law.
7
<PAGE> 8
9.6 Article and Section Headings; Defined Terms. Numbered
and titled article and section headings and defined terms are for convenience
only and shall not be construed as amplifying or limiting any of the provisions
of this Agreement.
9.7 Notices. Any and all notices, elections or demands
permitted or required to be made under this Agreement shall be in writing,
signed by the party giving such notice, election or demand and shall be
delivered personally, telecopied, telexed, or sent by certified mail or
overnight via nationally recognized courier service (such as Federal Express),
to the other party at the address set forth below, or at such other address as
may be supplied in writing and of which receipt has been acknowledged in
writing. The date of personal delivery, telecopy or telex or two (2) business
days after the date of mailing (or the next business day after delivery to such
courier service), as the case may be, shall be the date of such notice, election
or demand. For the purposes of this Agreement:
The Address of Purchaser is:
Sirrom Investments, Inc.
Suite 200
500 Church Street
Nashville, TN 37219
Attention: John Harrison
with a copy to:
Chambliss & Bahner, PLLC
1000 Tallan Building
Two Union Square
Chattanooga, TN 37402
Attention: J. Patrick Murphy
The Address of the Company is:
Multicom Publishing, Inc.
1100 Olive Way, Suite 1250
Seattle, WA 98101
Attention: Tamara L. Attard
with a copy to:
Multicom Publishing, Inc.
188 Embacadero
Fifth Floor
San Francisco, California 94105
Pat Hart, Esq.
8
<PAGE> 9
9.8 Entire Agreement. This agreement and the other written
agreements between the Company and Purchaser represent the entire agreement
between the parties concerning the subject matter hereof, and all oral
discussions and prior agreements are merged herein; provided, if there is a
conflict between this Agreement and any other document executed
contemporaneously herewith with respect to the Shares, the provision of this
agreement shall control. The execution and delivery of this Agreement and the
other Ancillary Documents by the Company were not based upon any fact or
material provided by Purchaser, nor was the Company induced or influenced to
enter into this agreement or the other Ancillary Documents by any
representation, statement, analysis or promise by Purchaser.
9.9 Governing Law and Amendments. This Agreement shall be construed
and enforced under the laws of the State of Tennessee applicable to contracts to
be wholly performed in such State. No amendment or modification hereof shall be
effective except in a writing executed by each of the parties hereto.
9.10 Survival of Representations and Warranties. All representations
and warranties contained herein or made by or furnished on behalf of this
Company in connection herewith shall survive the execution and delivery of this
Agreement and all Ancillary Documents.
9.11 Jurisdiction and Venue. The Company hereby consents to the
jurisdiction of the courts of the State of Tennessee and the United States
District Court for the Middle District of Tennessee, as well as to the
jurisdiction of all courts from which an appeal may be taken from such courts,
for the purpose of any suit, action or other proceeding arising out of any of
its obligations arising under this Agreement or any Ancillary Documents or with
respect to the transactions contemplated hereby, and expressly waives any and
all objections it may have as to venue in any of such courts.
9.12 Waiver of Trial by Jury. PURCHASER AND THE COMPANY HEREBY WAIVE
TRIAL BY JURY IN ANY ACTION, PROCEEDINGS, CLAIMS OR COUNTERCLAIMS, WHETHER IN
CONTRACT OR TORT, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATING TO
THIS AGREEMENT OR THE ANCILLARY DOCUMENTS.
9.13 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.
9
<PAGE> 10
9.14 Construction and Interpretation. Should any provision of this
agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against the party that itself or
through its agent prepared the same, it being agreed that the Company, Purchaser
and their respective agents have participated in the preparation hereof.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of
the day and year first above written.
COMPANY:
MULTICOM PUBLISHING, INC., a Washington
Corporation
By:________________________________________
Title:______________________________________
PURCHASER:
SIRROM INVESTMENTS, INC., a Tennessee
corporation and Assignee of Sirrom Capital
Corporation
By:________________________________________
Title:______________________________________
10
<PAGE> 11
SCHEDULE 6
Company covenants and agrees that so long as any Series A
Preferred are outstanding:
1. Financial Statements and Reports. Company shall furnish to
Purchaser (i) as soon as practicable and in any event within ninety (90) days
after the end of each fiscal year of Company, a consolidated balance sheet of
Company as of the close of such fiscal year, a consolidated statement of
earnings and retained earnings of Company as of the close of such fiscal year
and a consolidated statement of cash flows for Company for such fiscal year,
prepared in accordance with generally accepted accounting principles
consistently applied ("GAAP"), audited by an independent certified public
accountant acceptable to Purchaser and certified by an officer of Company and
accompanied by a certificate of the President of Company, stating that to the
best of the knowledge of such officer, Company has kept, observed, performed and
fulfilled each covenant, term and condition of this Agreement during the
preceding fiscal year and that no Event of Default, as herein defined, has
occurred and is continuing (or if an Event of Default has occurred and is
continuing, specifying the nature of same, the period of existence of same and
the action Company has taken or proposes to take in connection therewith), (ii)
within thirty (30) days of the end of each calendar month, a consolidated
balance sheet of Company as of the close of such month and a consolidated
statement of earnings and retained earnings of Company as of the close of such
month, all in reasonable detail (including financial information for the
preceding six (6) months), and prepared substantially in accordance with GAAP
(except for the absence of footnotes and subject to year-end adjustments), and
(iii) with reasonable promptness, such other financial data as Purchaser may
reasonably request. Without Purchaser's prior written consent, Company shall not
modify or change any accounting policies or procedures in effect on the date
hereof, which change will result in a difference in the statement of earnings,
expenses or revenue in the month of the change in excess of $50,000.
2. Maintenance of Books and Records; Inspection. Company shall
maintain its books, accounts and records in accordance with GAAP, and after
reasonable notice from Purchaser, shall permit Purchaser, its officers,
employees and any professionals designated by Purchaser in writing, at Company's
expense, to visit, inspect and/or audit any of its properties, books and
financial records, and to discuss its accounts, affairs and finances with
Company or the principal officers of Company during reasonable business hours,
all at such times as Purchaser may reasonably request; provided that no such
visit, inspection and/or audit shall materially interfere with the conduct of
Company's business.
11
<PAGE> 12
3. Insurance. Without limiting any of the requirements of any of
the other Loan Documents, Company shall maintain in amounts customary for
entities engaged in comparable business activity (i) to the extent required by
applicable law, worker's compensation insurance (or maintain a legally
sufficient amount of self insurance against worker's compensation liabilities,
with adequate reserves, under a plan approved by Purchaser, such approval not to
be unreasonably withheld or delayed), and (ii) fire and "all risk" casualty
insurance on its properties against such hazards and in at least such amounts as
are customary in Company's business. Company will make reasonable efforts to
obtain and maintain public liability insurance in an amount, and at a cost,
deemed reasonable to the Company's Board of Directors. At the request of
Purchaser, Company will deliver forthwith a certificate specifying the details
of such insurance in effect.
4. Taxes and Assessments. Company shall (i) file all tax returns
and appropriate schedules thereto that are required to be filed under applicable
law, prior to the date of delinquency, (ii) pay and discharge all taxes,
assessments and governmental charges or levies imposed upon Company upon its
income and profits or upon any properties belonging to it, prior to the date on
which penalties attach thereto, and (iii) pay all taxes, assessments and
governmental charges or levies that, if unpaid, might become a lien or charge
upon any of its properties; provided, however, that Company in good faith may
contest any such tax, assessment, governmental charge or levy described in the
foregoing clauses (ii) and (iii) so long as appropriate reserves are maintained
with respect thereto.
5. Corporate Existence. Company shall maintain its corporate
existence and good standing in the state of its incorporation, and its
qualification and good standing as a foreign corporation in each jurisdiction in
which such qualification is necessary pursuant to applicable law except for
where the failure to qualify would not have a material adverse effect on
Company.
6. Compliance with Law and Other Agreements. Except where the
failure to do so would not materially adversely affect Company's operations or
its ability to fulfill its obligations under the Loan Documents, Company shall
maintain its business, operations and property owned or used in connection
therewith in compliance with (i) all applicable federal, state and local laws,
regulations and ordinances governing such business operations and the use and
ownership of such property, and (ii) all agreements, licenses, franchises,
indentures and mortgages to which Company is a party or by which Company or any
of its properties is bound. Without limiting the foregoing, Company shall pay
all of its indebtedness promptly in accordance with the terms thereof.
7. Notice of Default. Company shall give written notice to
Purchaser of the occurrence of any default, event of default or Event of Default
under this Agreement or any other Loan Document promptly upon the occurrence
thereof.
12
<PAGE> 13
8. Notice of Litigation. Company shall give notice, in writing, to
Purchaser of (i) any actions, suits or proceedings instituted by any persons
whomsoever against Company, or affecting any of the assets of Company, wherein
the amount at issue is in excess of One Hundred Thousand and No/100ths Dollars
($100,000.00), and (ii) any dispute, not resolved within sixty (60) days of the
commencement thereof, between Company on the one hand and any governmental
regulatory body on the other hand, which dispute might materially interfere with
the normal operations of Company.
9. Conduct of Business. Company will continue to engage in a
business of the same general type and manner as conducted by it on the date of
this Agreement. Without Purchaser's prior written consent, Company shall not
modify or change any terms or conditions of any material contracts and/or
agreements to which Company is a party on the date hereof (excluding any
modification or change that (i) is made in the ordinary course of Company's
business or (ii) does or will have a net increase or decrease of expenses or
revenues of Company in an amount less than the greater of $200,000 or 2.5% of
Company's gross revenues during the twelve months following such modification or
change).
10. ERISA Plan. If Company has in effect, or hereafter institutes, a
pension plan that is subject to the requirements of Title IV of the Employee
Retirement Income Security Act of 1974, Pub. L. No. 93-406, September 2, 1974,
88 Stat. 829, 29 U.S.C.A. ss. 1001 et seq. (1975), as amended from time to time
("ERISA"), then the following warranty and covenants shall be applicable during
such period as any such plan (the "Plan") shall be in effect: (i) Company hereby
warrants that no fact that might constitute grounds for the involuntary
termination of the Plan, or for the appointment by the appropriate United States
District Court of a trustee to administer the Plan, exists at the time of
execution of this Agreement, (ii) Company hereby covenants that throughout the
existence of the Plan, Company's contributions under the Plan will meet the
minimum funding standards required by ERISA and Company will not institute a
distress termination of the Plan, and (iii) Company covenants that it will send
to Purchaser a copy of any notice of a reportable event (as defined in ERISA)
required by ERISA to be filed with the Labor Department or the Pension Benefit
Guaranty Corporation, at the time that such notice is so filed.
11. Dividends, Distributions, Stock Rights, etc. Company shall not
declare or pay any dividend of any kind (other than stock dividends payable to
all holders of any class of capital stock), in cash or in property, on any class
of the capital stock of Company, or purchase, redeem, retire or otherwise
acquire for value any shares of such stock, nor make any distribution of any
kind in cash or property in respect thereof, nor make any return of capital of
shareholders, nor make any payments in cash or property in respect of any stock
options, stock bonus or similar plan (except as required or permitted
hereunder), without the prior written consent of Purchaser.
12. Guaranties; Loans; Payment of Debt. Without Purchaser's prior
express written consent, Company shall not guarantee nor be liable in any
manner, whether directly or indirectly, or become contingently liable after the
date of this Agreement in connection with the obligations
13
<PAGE> 14
or indebtedness of any person or entity whatsoever, except for the endorsement
of negotiable instruments payable to Company for deposit or collection in the
ordinary course of business. Without Purchaser's prior express written consent,
Company shall not (i) make any loan, advance or extension of credit to any
person other than in the normal course of its business, or (ii) make
any payment on any debt subordinate to the indebtedness evidenced by the Note;
provided, however, that Company may make advances to licensors, creditors and
developers in the ordinary course of business not to exceed $200,000 in any
given transaction.
13. Debt. Without the express prior written consent of Purchaser,
Company shall not create, incur, assume or suffer to exist indebtedness of any
description whatsoever, (excluding (i) the indebtedness evidenced by the Note,
(ii) the endorsement of negotiable instruments payable to Company for deposit or
collection in the ordinary course of business, (iii) indebtedness incurred in
the ordinary course of business (each of which, individually, does not exceed
$50,000), (iv) the indebtedness listed on Schedule 2.1(l) hereto, (v) guaranteed
royalty obligations incurred in the ordinary course of business not to exceed
$200,000 in any given transaction, and (vi) trade accounts payable, taxes and
obligations to suppliers, customers and employees in the ordinary course of
Company's business.
14. No Liens. Company shall not create, incur, assume or suffer to
exist any lien, security interest, security title, mortgage, deed of trust or
other encumbrance upon or with respect to any of its properties, now owned or
hereafter acquired, except the following permitted liens (the "Permitted
Liens"):
(a) liens in favor of Purchaser;
(b) liens for taxes or assessments or other governmental
charges or levies if not yet due and payable;
(c) liens in connection with the leasing of equipment in
favor of the Lessor of such equipment;
(d) liens described on Schedule 2.1(l) hereto;
(e) licenses of Company's products or technologies in the
ordinary course of business;
(f) liens securing obligations not exceeding $25,000, which
liens are removed within 60 days of their filing; and
(g) restrictions contained in any license agreements
pursuant to which Company's products or technologies are or were
created.
15. Mergers, Consolidations, Acquisitions and Sales. Without the
prior written consent of Purchaser, Company shall not (a) be a party to any
merger, consolidation or corporate
14
<PAGE> 15
reorganization, nor (b) purchase or otherwise acquire all or substantially all
of the assets or stock of, or any partnership or joint venture interest in, any
other person, firm or entity, nor (c) sell, transfer, convey, grant a security
interest in or lease all or any substantial part of its assets, nor (d) create
any Subsidiaries nor convey any of its assets to any Subsidiary. Company may
propose a transaction described in Section 3.16(a) for Purchaser's consent,
which consent will not be unreasonably delayed or withheld if the transaction
involves consideration to be paid by Company of less than $3,000,000 in the
aggregate.
16. Transactions With Affiliates. Company shall not enter into any
transaction, including, without limitation, the purchase, sale or exchange of
property or the rendering of any service, with any affiliate, except in the
ordinary course of and pursuant to the reasonable requirements of Company's
business and upon fair and reasonable terms no less favorable to Company than
Company would obtain in a comparable arm's length transaction with a person not
an affiliate. For the purposes of this Section 3.17, "affiliate" shall mean a
person, corporation, partnership or other entity controlling, controlled by or
under common control with Company.
17. Environment. Company shall be and remain in material compliance
with the provisions of all federal, state and local environmental, health, and
safety laws, codes and ordinances, and all rules and regulations issued
thereunder; notify Purchaser immediately of any notice of a hazardous discharge
or environmental complaint received from any governmental agency or any other
party; notify Purchaser immediately of any hazardous discharge from or affecting
Company's premises; immediately contain and remove the same, in compliance with
all applicable laws; promptly pay any fine or penalty assessed in connection
therewith; permit Purchaser to inspect the premises, to conduct tests thereon,
and to inspect all books, correspondence, and records pertaining thereto; and at
Purchaser's request, and at Company's expense, provide a report of a qualified
environmental engineer, satisfactory in scope, form, and content to Purchaser,
and such other and further assurances reasonably satisfactory to Purchaser that
the condition has been corrected.
15
<PAGE> 16
SCHEDULE 5.5
Multicom Publishing, Inc.
Compliance Certificate
Pursuant to Section 5.5 of the Securities Purchase Agreement
(the "Agreement") dated February ____, 1997, between Multicom Publishing, Inc.
("Multicom"), a Washington corporation and Sirrom Investments Inc., a Tennessee
corporation, I, Tamara Attard, Chief Executive Officer of Multicom Publishing,
Inc., do hereby certify that Multicom has fulfilled all of the conditions
specified in the Agreement on or prior to the date hereof.
IN WITNESS WHEREOF, I have signed this certificate in the
capacity indicated below as of the _________ day of February, 1997.
Name: _____________________________________
Chief Executive Officer
16
<PAGE> 1
EXHIBIT 10.6
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
By and Among
Multicom Publishing, Inc.
and
Vitaloon Inc.
------------------------------
Dated as of March 31, 1997
------------------------------
<PAGE> 2
56073
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I CERTAIN DEFINITIONS ..........................................................1
Section 1.1. Certain Definitions. ..........................................................1
ARTICLE II PURCHASE OF SHARES ..........................................................3
Section 2.1. Purchase of Shares; Closing .................................................3
ARTICLE III REPRESENTATIONS AND WARRANTIES .................................................3
Section 3.1. Representations and Warranties of the Company .............................3
Section 3.2. Representations and Warranties of the Purchaser ...........................6
ARTICLE IV OTHER AGREEMENTS OF THE PARTIES ....................................................8
Section 4.1. Transfer Restrictions ...................................................8
Section 4.2. Stop Transfer Instruction..................................................9
Section 4.3. Furnishing of Information..................................................9
Section 4.4. Notice of Certain Events...................................................9
Section 4.5. Copies and Use of Disclosure Materials .................................9
Section 4.6. Modification to Disclosure Materials ...............................10
Section 4.7. Blue Sky Laws ...........................................................10
Section 4.8. Integration ..........................................................10
Section 4.9. Furnishing of Rule 144A Materials ........................................10
Section 4.10. Solicitation Materials .................................................10
Section 4.11. Subsequent Financial Statements .........................................11
Section 4.12. Right of First Refusal ..................................................11
Section 4.13. Listing of Underlying Shares .........................................11
Section 4.14 Conversion Procedures ..................................................11
ARTICLE V CONDITIONS PRECEDENT TO CLOSING ................................................11
Section 5.1. Conditions Precedent to Obligations of the Purchaser .....................12
Section 5.2. Conditions Precedent to Obligations of the Company .....................13
ARTICLE VI TERMINATION .................................................................13
Section 6.1. Termination by Mutual Consent .......................................13
Section 6.2. Termination by the Company or the Purchaser ..............................13
Section 6.3. Termination by the Company ...............................................14
Section 6.4. Termination by the Purchaser ......................................14
ARTICLE VII MISCELLANEOUS .....................................................................14
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
Section 7.1. Fees and Expenses.........................................................14
Section 7.2. Entire Agreement; Amendments .........................................15
Section 7.3. Notices...................................................................15
Section 7.4. Amendments; Waivers ..................................................16
Section 7.5. Headings..................................................................16
Section 7.6. Successors and Assigns ..................................................16
Section 7.7. No Third Party Beneficiaries .........................................16
Section 7.8. Governing Law ...........................................................16
Section 7.9. Survival..................................................................16
Section 7.10. Counterpart ...........................................................16
Section 7.11. Publicity ...........................................................17
Section 7.12. Severability ...........................................................17
Section 7.13. Remedies..................................................................17
Exhibit A Certificate of Designation
Exhibit B Registration Rights Agreement
Exhibit C Form of Opinion of Gray Cary Ware & Freidenrich, counsel for the Company
Exhibit D Conversion Procedures
Schedule 3.1(c) Capitalization
Schedule 3.1(f) Required Consents and Approvals
Schedule 3.1(g) Litigation
Schedule 3.1(h) Default or Violation
Schedule 3.1(I) Disclosure Materials
</TABLE>
<PAGE> 4
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT, dated as of
March 31, 1997 (this "Agreement"), by and among Multicom Publishing, Inc., a
Washington corporation (the "Company"), and Vitaloon Inc.., a corporation
organized and existing under the laws of B.V.I. (the "Purchaser").
WHEREAS, the Company desires to issue and sell to the
Purchaser and the Purchaser desires to acquire shares of the Company's Series B
Convertible Preferred Stock, par value $0.01 per share (the "Preferred Stock").
IN CONSIDERATION of the mutual covenants and agreements set
forth herein and for good and valuable consideration, the receipt of which is
hereby acknowledged, the parties agree as follows:
ARTICLE 1.
CERTAIN DEFINITIONS
Section 1.1 Certain Definitions. context requires a different
meaning, the following terms have the meanings indicated:
"Affiliate" means, with respect to any Person, any Person
that, directly or indirectly, controls, is controlled by or is under common
control with such Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with") shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
"Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
state of New York are authorized or required by law or other government actions
to close.
"Closing" shall have the meaning set forth in Section 2.1(b).
"Closing Date" shall have the meaning set forth in Section
2.1(b).
"Certificate of Designation" shall have the meaning set forth
in Section 2.1(a).
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations thereunder as in effect on the date hereof.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, par value
$.01 per share.
"Disclosure Materials" means the SEC Documents.
<PAGE> 5
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GEM" means GEM Advisors, Ltd.
"Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of the Registrable Securities.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, encumbrance, charge or security interest of any kind in or on such asset
or the revenues or income thereon or therefrom.
"Material Adverse Effect" shall have the meaning set forth in
Section 3.1(a).
"NASD" means the National Association of Securities Dealers,
Inc.
"Per Share Consideration" shall have the meaning set forth in
Section 2.1(a).
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Preferred Stock" shall have the meaning set forth in the
recitals hereto.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as a part of an effective
registration statement in reliance upon Rule 430A promulgated under to the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"Purchase Price" shall have the meaning set forth in Section
2.1(a).
"Registration Rights Agreement" means the registration rights
agreement, substantially in the form of Exhibit B, as the same may be amended,
supplemented or otherwise modified in accordance with its terms.
"Required Approvals" shall have the meaning set forth in
Section 3.1(f).
"SEC Documents" shall have the meaning set forth in Section
3.1(l).
"Securities Act" means the Securities Act of 1933, as amended.
2
<PAGE> 6
"Shares" means the shares of Preferred Stock to be purchased
by the Purchaser pursuant to this Agreement as set forth at the foot of this
Agreement.
"Underlying Shares" means the shares of Common Stock into
which the Shares are convertible in accordance with the terms hereof and the
Certificate of Designation.
ARTICLE II
PURCHASE OF SHARES
Section 2.1. Purchase of Shares; Closing.
(a) Subject to the terms and conditions herein set forth, the
Company shall issue and sell to the Purchaser, and the Purchaser shall purchase
from the Company, on the Closing Date, the Shares which shall have the
respective rights, preferences and privileges set forth in Exhibit A (the
"Certificate of Designation"), at a price per Share of US$1,000.00 (the "Per
Share Consideration"). The Per Share Consideration multiplied by the number of
Shares to be purchased by the Purchaser hereunder is hereinafter referred to as
the "Purchase Price."
(b) The closing of the purchase and sale of the Shares (the
"Closing") shall take place at the offices of Bryan Cave LLP, 245 Park Avenue,
New York, NY 10167, immediately following the execution hereof, or at such other
time and/or place as the Purchaser and the Company may agree, provided, however,
in no case shall the Closing take place later than the fifth day after the last
of the conditions listed in Article V is satisfied or waived by the appropriate
party. The date of the Closing is hereinafter referred to as the "Closing Date".
(c) At the Closing, (i) the Company shall deliver to the
Purchaser (A) one or more stock certificates representing the Shares purchased
hereunder, registered in the name of the Purchaser and (B) all documents,
instruments and writings required to have been delivered at or prior to Closing
by the Company pursuant to this Agreement, (ii) the Purchaser shall deliver to
the Company (A) the Purchase Price as determined pursuant to this Article II in
United States dollars in immediately available funds by wire transfer to an
account designated in writing by the Company prior to the Closing and (B) all
documents, instruments and writings required to have been delivered at or prior
to Closing by the Purchaser pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties of the Company.
The Company hereby represents and warrants to the Purchaser as follows:
(a) Organization and Qualification. The Company is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, with the requisite corporate
power and authority to own and use its properties and
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assets and to carry on its business as currently conducted. The Company has no
subsidiaries. The Company is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not reasonably be expected to have, individually or in
the aggregate, a material adverse effect on the results of operations, assets,
prospects, or financial condition of the Company (a "Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated hereby and by the Registration Rights Agreement and otherwise to
carry out its obligations hereunder and thereunder. The execution and delivery
of this Agreement and the Registration Rights Agreement by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary action on the part of the Company. Each of this
Agreement and the Registration Rights Agreement has been duly executed and
delivered by the Company and constitutes the 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 or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
(c) Capitalization. The authorized, issued and outstanding
capital stock of the Company is set forth in Schedule 3.1(c). No shares of
Common Stock are entitled to preemptive or similar rights. Except as
specifically disclosed in Schedule 3.1(c), there are no outstanding options,
warrants, or commitments of any character whatsoever relating to, or, except as
a result of the purchase and sale of the Shares hereunder, securities, rights or
obligations convertible into or exchangeable for, or giving any person any right
to subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company is or may
become bound to issue additional shares of Common Stock, or securities or rights
convertible or exchangeable into shares of Common Stock. The Company is not in
violation of any of the provisions of its certificate of incorporation or
bylaws.
(d) Issuance of Shares. The Shares are duly authorized and,
when paid for in accordance with the terms hereof, shall be validly issued,
fully paid and nonassessable. The Company has and at all times while the Shares
are outstanding will maintain an adequate reserve of shares of Common Stock to
enable it to perform its obligations under this Agreement and the Certificate of
Designation. When issued in accordance with the terms hereof, the Underlying
Shares will be duly authorized, validly issued, fully paid and nonassessable.
(e) No Conflicts. The execution, delivery and performance of
this Agreement and the Registration Rights Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
do not and will not (i) conflict with or violate any provision of its
certificate of incorporation or bylaws or (ii) subject to obtaining the consents
referred to in Section 3.1(f), 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, indenture or instrument to which the Company is
a party, or (iii) to the knowledge of the Company result in a violation of any
law, rule, regulation, order, judgment, injunction, decree or other restriction
of any court or governmental authority to
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which the Company is subject (including Federal and state securities laws and
regulations), or by which any property or asset of the Company is bound or
affected, except in the case of each of clauses (ii) and (iii), such conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a Material Adverse Effect.
The business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental authority, except for violations
which, individually or in the aggregate, do not have a Material Adverse Effect.
(f) Consents and Approvals. Except as specifically set forth
in Schedule 3.1(f), the Company is not required to obtain any consent, waiver,
authorization or order of, or make any filing or registration with, any court or
other federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of this
Agreement and the Registration Rights Agreement, other than the filing of the
registration statement covering the Underlying Shares with the Commission and
the making of the applicable blue-sky filings under state securities laws, each
as contemplated by the Registration Rights Agreement and other than, in all
cases, where the failure to obtain such consent, waiver, authorization or order,
or to give or make such notice or filing, would not materially impair or delay
the ability of the Company to effect the Closing and deliver to the Purchaser
the Shares free and clear of all Liens (collectively, the "Required Approvals").
(g) Litigation; Proceedings. Except as specifically disclosed
in the Disclosure Materials or in Schedule 3.1(g), there is no action, suit,
notice of violation, proceeding or investigation pending or, to the best
knowledge of the Company, threatened against or affecting the Company or
properties before or by any court, governmental or administrative agency or
regulatory authority (Federal, State, county, local or foreign) which (i)
relates to or challenges the legality, validity or enforceability of this
Agreement, the Registration Rights Agreement or the Shares (ii) could,
individually or in the aggregate, have a Material Adverse Effect or (iii) could,
individually or in the aggregate, materially impair the ability of the Company
to perform fully on a timely basis its obligations under this Agreement or the
Registration Rights Agreement.
(h) No Default or Violation. The Company is not (i) in default
under or in violation of any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound, except such conflicts or defaults as do not have a Material
Adverse Effect, (ii) in violation of any order of any court, arbitrator or
governmental body, except for such violations as do not have a Material Adverse
Effect, or (iii) in violation of any statute, rule or regulation of any
governmental authority which could (individually or in the aggregate) (x)
adversely affect the legality, validity or enforceability of this Agreement or
the Registration Rights Agreement, (y) have a Material Adverse Effect or (z)
adversely impair the Company's ability or obligation to perform fully on a
timely basis its obligations under this Agreement or the Registration Rights
Agreement.
(i) Certain Fees. No fees or commission will be payable by the
Company to any broker, finder, investment banker or bank with respect to the
consummation of the transactions contemplated hereby except that the Company has
agreed at the Closing to pay to GEM, in consideration for its services in
connection with the sale of the Shares, an amount in cash equal to $20,000 and
to issue to GEM a warrant to purchase 400,000 shares of Common Stock.
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(j) Disclosure Materials. The Disclosure Materials do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(k) Private Offering. Neither the Company nor any Person
acting on its behalf has taken or will take any action (including, without
limitation, any offering of any securities of the Company under circumstances
which would require the integration of such offering with the offering of the
Shares under the Securities Act) which might subject the offering, issuance or
sale of the Shares to the registration requirements of Section 5 of the
Securities Act.
(l) SEC Documents. The Company has filed all reports required
to be filed by it under the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the two years preceding the date hereof (or such shorter
period as the Company was required by law to file such material) (the foregoing
materials, which are specified in Schedule 3.1(l) annexed hereto, being
collectively referred to herein as the "SEC Documents") on a timely basis, or
has received a valid extension of such time of filing. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Documents, when filed,
contained any untrue statement of a material fact or omitted 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 SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved, except as may be otherwise indicated in such financial
statements or the notes thereto, and fairly present in all material respects the
financial position of the Company as of and for 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. Since the
date of the financial statements included in the Company's last filed Quarterly
Report on Form 10-Q, there has been no event, occurrence or development that has
had a Material Adverse Effect which is not specifically disclosed in any of the
Disclosure Materials.
Section 3.2 Representations and Warranties of the Purchaser.
The Purchaser hereby represents and warrants to the Company as follows:
(a) Organization; Authority. The Purchaser is a corporation
duly and validly existing and in good standing under the laws of the
jurisdiction of its incorporation. The Purchaser has the requisite power and
authority to enter into and to consummate the transactions contemplated hereby
and by the Registration Rights Agreement and otherwise to carry out its
obligations hereunder and thereunder. The purchase of the Shares by the
Purchaser hereunder has been duly authorized by all necessary action on the part
of the Purchaser. Each of this Agreement and the Registration Rights Agreement
has been duly executed and delivered by the Purchaser or on its behalf and
constitutes the valid and legally binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity.
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(b) Investment Intent. The Purchaser is acquiring the Shares
and the Underlying Shares for its own account (and/or on behalf of managed
accounts who are purchasing solely for their own accounts for investment) for
investment purposes only and not with a view to or for distributing or reselling
such Shares or Underlying Shares or any part thereof or interest therein,
without prejudice, however, to the Purchaser's right, subject to the provisions
of this Agreement and the Registration Rights Agreement, at all times to sell or
otherwise dispose of all or any part of such Shares or Underlying Shares under
an effective registration statement under the Securities Act and in compliance
with applicable State securities laws or under an exemption from such
registration.
(c) Purchaser Status. At the time the Purchaser (and any
account for which it is purchasing) was offered the Shares, it (and any account
for which it is purchasing) was, and at the date hereof, it (and any account for
which it is purchasing) is, and at the Closing Date, it (and any account for
which it is purchasing) will be, an "accredited investor" as defined in Rule
501(a) under the Securities Act.
(d) Experience of Purchaser. The Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Shares, and has so
evaluated the merits and risks of such investment.
(e) Ability of Purchaser to Bear Risk of Investment. The
Purchaser is able to bear the economic risk of an investment in the Shares and,
at the present time, is able to afford a complete loss of such investment.
(f) Prohibited Transactions. The Shares to be purchased by the
Purchaser are not being acquired, directly or indirectly, with the assets of any
"employee benefit plan", within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended.
(g) Access to Information. The Purchaser acknowledges receipt
of the Disclosure Materials and further acknowledges that it has been afforded
(i) the opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms and
conditions of the offering of the Shares and the merits and risks of investing
in the Shares; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment in the Common
Stock; and (iii) the opportunity to obtain such additional information which the
Company possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the Shares and
to verify the accuracy and completeness of the information contained in the
Disclosure Materials.
(h) Reliance. The Purchaser understands and acknowledges that
(i) the Shares are being offered and sold, and the Underlying Shares are being
offered, to it without registration under the Securities Act in a private
placement that is exempt from the registration provisions of the Securities Act
and (ii) the availability of such exemption depends, in part on, and that the
Company will rely upon the accuracy and truthfulness of, the foregoing
representations and the Purchaser hereby consents to such reliance.
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The Company acknowledges and agrees that the Purchaser makes
no representation or warranty with respect to the transactions contemplated
hereby other than those specifically set forth in Article III herein.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
Section 4.1. Transfer Restrictions. If the Purchaser should
decide to dispose of any of the Shares to be purchased by it hereunder (and upon
conversion thereof, any Underlying Shares), the Purchaser understands and agrees
that it may do so only (i) pursuant to an effective registration statement under
the Securities Act, (ii) to the Company or (iii) pursuant to an available
exemption from registration under the Securities Act. In connection with any
transfer of any Shares other than pursuant to an effective registration
statement or to the Company, the Company may require that the transferor of such
Shares provide to the Company an opinion of counsel experienced in the area of
United States securities laws selected by the transferor, the form and substance
of which opinion shall be, reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such Shares under the
Securities Act or any State securities laws.
The Purchaser agrees to the imprinting, so long as
appropriate, of the following legend on certificates representing the Shares:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER REGULATION D
PROMULGATED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, THEY MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACCEPTANCE HEREOF, THE HOLDER OF THESE SECURITIES AGREES THAT IT WILL
NOT RESELL, PLEDGE OR OTHERWISE TRANSFER THESE SECURITIES OR THE
SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE, EXCEPT (A)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, OR (B) PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT. IF THE PROPOSED TRANSFER IS TO BE MADE OTHER THAN
PURSUANT TO CLAUSE (A) OR (B) ABOVE, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE COMPANY AND THE TRANSFER AGENT SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THEY MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT
TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE
TERMS "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM
BY RULE 902 PROMULGATED UNDER THE SECURITIES ACT.
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The legend set forth above may be removed if and when the
Shares represented by such certificate or the Underlying Shares, as the case may
be, are disposed of pursuant to an effective registration statement under the
Securities Act or in the opinion of counsel to the Company experienced in the
area of United States securities laws such legend is no longer required under
applicable requirements of the Securities Act. The stock certificates
representing the Shares and the Underlying Shares shall also bear any other
legends required by applicable Federal or state securities laws, which legends
may be removed when, in the opinion of counsel to the Company experienced in the
applicable securities laws, such legends are no longer required under the
applicable requirements of such securities laws. The Company agrees that it will
provide the Purchaser, upon request, with a substitute stock certificate or
certificates, free from such legend at such time as such legend is no longer
applicable. The Purchaser agrees that, in connection with any transfer of Shares
or Underlying Shares by it pursuant to an effective registration statement under
the Securities Act, Purchaser will comply with all prospectus delivery
requirements of the Securities Act. The Company makes no representation,
warranty or agreement as to the availability of any exemption from registration
under the Securities Act with respect to any resale of Shares or Underlying
Shares.
Section 4.2 Stop Transfer Instruction. The Purchaser agrees
that the Company shall be entitled to make a notation on its records and give
instructions to any transfer agent of the Company in order to implement the
restrictions on transfer set forth in this Agreement.
Section 4.2. Furnishing of Information. As long as the
Purchaser owns Shares or Underlying Shares, the Company will promptly furnish to
it all reports filed by the Company pursuant to Section 13(a) or 15(d) of the
Exchange Act (or if the Company is not at the time required to file reports
pursuant to such sections, annual and quarterly reports comparable to those
required by Section 13(a) or 15(d) of the Exchange Act).
Section 4.3. Notice of Certain Events. The Company shall (i)
advise the Purchaser promptly after obtaining knowledge thereof, and, if
requested by the Purchaser, confirm such advice in writing, of (A) the issuance
by any state securities commission of any stop order suspending the
qualification or exemption from qualification of the Shares or the Common Stock
for offering or sale in any jurisdiction, or the initiation of any proceeding
for such purpose by any state securities commission or other regulatory
authority, or (B) any event that makes any statement of a material fact made in
the Disclosure Materials untrue or that requires the making of any additions to
or changes in the Disclosure Materials in order to make the statements therein,
in the light of the circumstances under which they are made, not misleading,
(ii) use its best efforts to prevent the issuance of any stop order or order
suspending the qualification or exemption from qualification of the Shares or
the Common Stock under any state securities or Blue Sky laws, and (iii) if at
any time any state securities commission or other regulatory authority shall
issue an order suspending the qualification or exemption from qualification of
the Shares or the Common Stock under any such laws, use its best efforts to
obtain the withdrawal or lifting of such order at the earliest possible time.
Section 4.4. Copies and Use of Disclosure. The Company shall
furnish the Purchaser, without charge, as many copies of the Disclosure
Materials, and any amendments or supplements thereto, as the Purchaser may
reasonably request. The Company consents to the use of the Disclosure Materials,
and any amendments and supplements thereto, by the Purchaser in connection with
resales of the Shares or the Underlying Shares other than pursuant to an
effective registration statement.
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Section 4.5. Modification to Disclosure Materials. If any
event shall occur as a result of which, in the reasonable judgment of the
Company or the Purchaser, it becomes necessary or advisable to amend or
supplement the Disclosure Materials in order to make the statements therein, in
the light of the circumstances at the time the Disclosure Materials were
delivered to the Purchaser, not misleading, or if it is necessary to amend or
supplement the Disclosure Materials to comply with applicable law, the Company
shall promptly prepare an appropriate amendment or supplement to the Disclosure
Materials (in form and substance reasonably satisfactory to the Purchaser) so
that (i) as so amended or supplemented the Disclosure Materials will not include
an untrue statement of material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
existing at the time it is delivered to Purchaser, not misleading and (ii) the
Disclosure Materials will comply with applicable law.
Section 4.6. Blue Sky Laws. The Company shall cooperate with
the Purchaser in connection with the qualification of the Shares and the
Underlying Shares under the securities or Blue Sky laws of such jurisdictions as
the Purchaser may request and to continue such qualification at all times
through the third anniversary of the Closing Date; provided, however, that the
Company shall not be required in connection therewith to qualify as a foreign
corporation where they are not now so qualified.
Section 4.7. Integration. The Company shall not, and shall use
its best efforts to ensure that no Affiliate shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Shares or the Underlying Shares in a manner that would
require the registration under the Securities Act of the sale of the Shares or
Underlying Shares to the Purchaser.
Section 4.8. Furnishing of Rule 144A Materials. The Company
shall, for so long as any of the Shares or Underlying Shares remain outstanding
and during any period in which it is not subject to Section 13 or 15(d) of the
Exchange Act, make available to any registered holder of Shares or Underlying
Shares in connection with any sale thereof and any prospective purchaser of such
Shares or Underlying Shares from such Person, the following information in
accordance with Rule 144A(d)(4) under the Securities Act: a brief statement of
the nature of the business of the Company and the products and services it
offers and the Company's most recent audited balance sheet and profit and loss
and retained earnings statements, and similar audited financial statements for
such part of the two preceding fiscal years as the Company has been in
operation.
Section 4.9. Solicitation Materials. The Company shall not (i)
distribute any offering materials in connection with the offering and sale of
the Shares or Underlying Shares other than the Disclosure Materials and any
amendments and supplements thereto prepared in compliance herewith or (ii)
solicit any offer to buy or sell the Shares or Underlying Shares by means of any
form of general solicitation or advertising.
Section 4.10. Subsequent Financial Statements. The Company
shall furnish to the Purchaser, promptly after they are filed with the
Commission, a copy of all financial statements for any period subsequent to the
period covered by the financial statements included in the Disclosure Materials.
Section 4.11. Right of First Refusal. (a) The Company shall
not directly or indirectly, without the prior consent of the Purchaser, offer,
sell, grant any option to purchase, or
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otherwise dispose (or announce any offer, sale, grant or any option to purchase
or other disposition) of any of its or its Affiliates equity or
equity-equivalent securities (a "Subsequent Sale") for a period of 90 days after
Closing Date, except (i) the granting of options to employees, officers and
directors under, and the issuance of shares upon exercise of options granted
under, any stock option plan heretofore or hereinafter adopted by the Company;
(ii) shares issued upon exercise of any currently outstanding warrants and upon
conversion of any currently outstanding convertible preferred stock disclosed in
Schedule 3.1 and (iii) shares of Common Stock issued upon conversion of Shares
in accordance herewith, unless (A) the Company provides the Purchaser a written
notice (the "Subsequent Financing Notice") of its intention to effect such
Subsequent Financing, which Subsequent Financing Notice shall describe in
reasonable detail the proposed terms of such Subsequent Financing and the amount
of proceeds intended to be raised thereunder and (B) the Purchaser shall not
have notified the Company within forty-eight (48) hours of its receipt of the
Subsequent Financing Notice of its willingness to enter into good faith
negotiations to provide (or to cause its sole designee to provide) financing to
the Company on substantially the terms set forth in the Subsequent Financing
Notice. If the Purchaser shall fail to notify the Company of its intention to
enter into such negotiations within such forty-eight (48) hour period, the
Company may effect the Subsequent Financing substantially upon the terms set
forth in the Subsequent Financing Notice; provided, that the Company shall
provide the Purchaser with a second Subsequent Financing Notice, and the
Purchaser shall again have the right of first refusal set forth above in this
paragraph (a), if the Subsequent Financing subject to the initial Subsequent
Financing Notice shall not have been consummated for any reason on the terms set
forth in such Subsequent Financing Notice within 30 days after the date of the
initial Subsequent Financing Notice.
Section 4.12. Listing of Underlying Shares. The Company shall
take all steps necessary to cause the Underlying Shares to be approved for
listing in The Nasdaq SmallCap Market (or other national securities exchange or
market on which the Common Stock is listed) no later than the first day after
which shares may be converted hereunder by the Purchaser, and shall provide to
the Purchaser evidence of such listing.
Section 4.13. Conversion. Exhibit D attached hereto sets forth
the procedures with respect to the conversion of the Shares, including the forms
of conversion notice to be provided upon conversion.
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
Section 5.1 Conditions Precedent to Obligations of the
Purchaser. The obligation of the Purchaser to purchase the Shares is subject to
the satisfaction or waiver by the Purchaser, at or prior to the Closing, of each
of the following conditions:
(a) Legal Opinion. The Purchaser shall have received the legal
opinion, addressed to it and dated the Closing Date, of Gray Cary Ware &
Freidenrich, counsel for the Company, substantially in the form of Exhibit C;
(b) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company contained herein and in the
Registration Rights Agreement shall be
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true and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except that representations and
warranties that are made as of a specific date need be true in all material
respects only as of such date);
(c) 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 and the Registration Rights
Agreement to be performed, satisfied or complied with by the Company at or prior
to the Closing;
(d) No Material Adverse Effect. Since the date of the
financial statements included in the Company's last filed Quarterly Report on
Form 10-Q, no event which had a Material Adverse Effect shall have occurred
which is not disclosed in the Disclosure Materials;
(e) No Prohibitions. The purchase of and payment for the
Shares (and upon conversion thereof, the Underlying Shares) hereunder (i) shall
not be prohibited or enjoined (temporarily or permanently) by any applicable law
or governmental regulation and (ii) shall not subject the Purchaser to any
penalty, or in its reasonable judgment, other onerous condition under or
pursuant to any applicable law or governmental regulation that would materially
reduce the benefits to the Purchaser of the purchase of the Shares or the
Underlying Shares (provided, however, that such regulation, law or onerous
condition was not in effect in such form at the date of this Agreement);
(f) Company Certificates. The Purchaser shall have received a
certificate, dated the Closing Date, signed by the Secretary or an Assistant
Secretary of the Company and certifying (i) that attached thereto is a true,
correct and complete copy of (A) the Company's Certificate of Incorporation, as
amended to the date thereof, (B) the Company's by-laws, as amended to the date
thereof, and (C) resolutions duly adopted by the Board of Directors of the
Company authorizing the execution and delivery of this Agreement and the
Registration Rights Agreement and the issuance and sale of the Shares and the
Underlying Shares and (ii) the incumbency of officers executing this Agreement
and the Registration Rights Agreement;
(g) Registration Rights Agreement. The Company shall have
executed the Registration Rights Agreement;
(h) No Suspensions of Trading in Common Stock. Trading in the
Common Stock shall not have been suspended by the Commission or the NASD or
other exchange or market on which the Common Stock is listed or quoted (except
for any suspension of trading of limited duration solely to permit dissemination
of material information regarding the Company);
(i) Required Approvals. All Required Approvals shall have been
obtained; and
(j) Delivery of Stock. The Company shall have delivered to the
Purchaser the stock certificate(s) representing the Shares, registered in the
name of the Purchaser, each in form satisfactory to the Purchaser.
Section 5.2 Conditions Precedent to Obligations of the
Company. The obligation of the Company to issue and sell the Shares hereunder is
subject to the satisfaction or waiver by the Company, at or to the Closing, of
each of the following conditions:
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<PAGE> 16
(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
Closing Date as though made at that time (except that representations and
warranties that are made as of a specific date need be true in all material
respects only as of such date);
(b) 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 and the Registration Rights
Agreement to be performed, satisfied or complied with by it at or prior to the
Closing; and
(c) No Prohibitions. The sale of the Shares (and upon
conversion thereof, the Underlying Shares) hereunder (i) shall not be prohibited
or enjoined (temporarily or permanently) by any applicable law or governmental
regulation and (ii) shall not subject the Company to any penalty, or in its
reasonable judgment, any other onerous condition under or pursuant to any
applicable law or governmental regulation that would materially reduce the
benefits to the Company of the sale of Shares or the Underlying Shares to the
Purchaser (provided, however, that such regulation, law or onerous condition was
not in effect in such form at the date of this Agreement).
ARTICLE VI
TERMINATION
Section 6.1. Termination by Mutual Consent. This Agreement may
be terminated at any time prior to Closing by the mutual consent of the Company
and the Purchaser.
Section 6.2 Termination by the Company or the Purchaser. This
Agreement may be terminated prior to Closing by either the Company or the
Purchaser, by giving written notice of such termination to the other party, if:
(a) the Closing shall not have occurred by March 31,
1997; provided that the terminating party is not then in material
breach of its obligations under this Agreement in any manner that shall
have caused the failure referred to in this paragraph (a);
(b) there shall be in effect any statute, rule, law
or regulation that prohibits the consummation of the Closing or if the
consummation of the Closing would violate any non-appealable final
judgment, order, decree, ruling or injunction of any court of or
governmental authority having competent jurisdiction; or
(c) there shall have been an amendment to Regulation
D or an interpretive release promulgated or issued thereunder, which,
in the reasonable judgment of the terminating party, would materially
adversely affect the transactions contemplated hereby and by the
Registration Rights Agreement.
Section 6.3 Termination by the Company. This Agreement may be
terminated prior to Closing by the Company, by giving notice of such termination
to the Purchaser, if the Purchaser
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<PAGE> 17
has materially breached any representation, warranty, covenant or agreement
contained in this Agreement or the Registration Rights Agreement and such breach
is not cured within five business days following receipt by the Purchaser of
notice of such breach.
Section 6.4 Termination by the Purchaser. This Agreement may
be terminated prior to Closing by the Purchaser, by giving notice of such
termination to the Company, if:
(a) the Company has breached any representation,
warranty, covenant or agreement contained in this Agreement or the
Registration Rights Agreement and such breach is not cured within five
business days following receipt by the Company of notice of such
breach;
(b) there has occurred an event since the date of the
financial statements included in the Company's last filed Quarterly
Report on Form 10-Q which could reasonably be expected to have a
Material Adverse Effect and which is not disclosed in the Disclosure
Materials; or
(c) trading in the Common Stock has been suspended by
the Commission or the NASD or other exchange or market on which the
Common Stock is listed or quoted (except for any suspension of trading
of limited duration solely to permit dissemination of material
information regarding the Company).
ARTICLE VII
MISCELLANEOUS
Section 7.1 Fees and Expenses. /Each party shall pay the fees
and expenses of its advisers, brokers, counsel, accountants and other experts,
if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement
except for the fee payable to GEM as provided in Section 3.1(i) hereof. The
Company shall pay all stamp and other taxes and duties levied in connection with
the issuance of the Shares (and upon conversion thereof, the Underlying Shares)
pursuant hereto. The Purchaser shall be responsible for its own tax liability
that may arise as a result of the investment hereunder or the transactions
contemplated by this Agreement. Whether or not the transactions contemplated by
this Agreement are consummated or this Agreement is terminated, the Company
shall pay (i) all costs, expenses, fees and all taxes incident to and in
connection with: (A) the preparation, printing and distribution of the
Disclosure Materials and all amendments and supplements thereto (including,
without limitation, financial statements and exhibits), and all preliminary and
final Blue Sky memoranda and all other agreements, memoranda, correspondence and
other documents prepared and delivered in connection herewith (B) the issuance
and delivery of the Shares and, upon conversion thereof, the Underlying Shares,
(C) the qualification of the Shares and, upon conversion thereof, the Underlying
Shares for offer and sale under the securities or Blue Sky laws of the several
states (including, without limitation, the fees and disbursements of the
Purchasers' counsel relating to such registration or qualification), (D)
furnishing such copies of the Disclosure Materials and all amendments and
supplements thereto, as may reasonably be requested for use in connection, with
resales of the Shares and, upon conversion thereof, the Underlying Shares, and
(E) the preparation of certificates for the Shares and, upon conversion thereof,
the Underlying Shares (including, without limitation, printing and engraving
thereof), (ii) all fees and expenses of the counsel and accountants
14
<PAGE> 18
of the Company and (iii) all expenses and listing fees in connection with the
application for quotation of the underlying Shares in the Nasdaq SmallCap
Market.
Section 7.2 Entire Agreement; Amendments. This Agreement,
together with the Exhibits, Annexes and Schedules hereto, and the Registration
Rights Agreement contain the entire understanding of the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings,
oral or written, with respect to such matters.
Section 7.3 Notices. Any notice or other communication
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been received (a) upon hand delivery (receipt acknowledged) or
delivery by telex (with correct answer back received), telecopy or facsimile
(with transmission confirmation report) 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:
Multicom Publishing, Inc.
188 Embarcadero, 5th Floor
San Francisco, CA 94105
Telecopier: (415) 777-4729
Attn.: CEO, General Counsel
With copies to:
Multicom Publishing, Inc.
1100 Olive Way, 12th Fl.
Seattle, WA 98101
Telecopier: (206) 622-4380
Attn.: CFO
If to the Purchaser:
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
Section 7.4 Amendments; Waivers.. No provision of this
Agreement may be waived or amended except in a written instrument signed, in the
case of an amendment, by both the Company and the Purchaser, or, in the case of
a waiver, by the party against whom enforcement of any such waiver is sought. No
waiver 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 provision, condition or requirement hereof, nor shall any
delay or omission of either party
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<PAGE> 19
to exercise any right hereunder in any manner impair the exercise of any such
right accruing to it thereafter.
Section 7.5 Headings. The headings herein are for convenience
only, do not constitute a part of this Agreement and shall not be deemed to
limit or affect any of the provisions hereof.
Section 7.6 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
permitted assigns. Neither the Company nor the Purchaser may assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the other. The assignment by a party of this Agreement or any rights
hereunder shall not affect the obligations of such party under this Agreement.
Section 7.7 No Third Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
Section 7.8 Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York without regard to the principles of conflicts of law thereof.
Section 7.9 Survival. The representations and warranties of
the Company and the Purchaser contained in Article III and the agreements and
covenants of the parties contained in Article IV and this Article VII shall
survive the Closing (or any earlier termination of this Agreement) and any
conversion of Shares hereunder.
Section 7.10 Counterpart. This Agreement may be executed in
two or more counterparts, all of which when taken together shall be considered
one and the same agreement and shall become effective when counterparts have
been signed by each party and delivered to the other party, it being understood
that both parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature page were an original thereof.
Section 7.11 Publicity. The Company and the Purchaser shall
consult with each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and neither
party shall issue any such press release or otherwise make any such public
statement without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed.
Section 7.12 Severability. In case any one or more of the
provisions of this Agreement shall be invalid or unenforceable in any respect,
the validity and enforceability of the remaining terms and provisions of this
Agreement shall not in any way be affecting or impaired thereby and the parties
will attempt to agree upon a valid and enforceable provision which shall be a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
16
<PAGE> 20
Section 7.13 Remedies. In addition to being entitled to
exercise all rights provided herein or granted by law, including recovery of
damages, the Purchaser will be entitled to specific performance of the
obligations of the Company under this Agreement and the Company will be entitled
to specific performance of the obligations of the Purchaser hereunder with
respect to the subsequent transfer of Shares and the Underlying Shares. Each of
the Company and the Purchaser agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of any breach of its obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first indicated above.
MULTICOM PUBLISHING, INC.
By:_________________________________________
Name:
Title:
Purchaser:
By:_________________________________________
Name:
Title:
No. of Shares to be Purchased_______________
17
<PAGE> 21
Exhibit D
[To be provided by Company]
<PAGE> 1
EXHIBIT 10.7
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
By and Among
Multicom Publishing, Inc.
and
GEM Management Ltd.
------------------------------
Dated as of March 31, 1997
------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I CERTAIN DEFINITIONS .........................................................1
Section 1.1. Certain Definitions. .........................................................1
ARTICLE II PURCHASE OF SHARES .........................................................3
Section 2.1. Purchase of Shares; Closing ................................................3
ARTICLE III REPRESENTATIONS AND WARRANTIES ................................................3
Section 3.1. Representations and Warranties of the Company .....................3
Section 3.2. Representations and Warranties of the Purchaser .....................6
ARTICLE IV OTHER AGREEMENTS OF THE PARTIES ................................................8
Section 4.1. Transfer Restrictions ..................................................8
Section 4.2. Stop Transfer Instruction.................................................9
Section 4.3. Furnishing of Information.......................................... ......9
Section 4.4. Notice of Certain Events..................................................9
Section 4.5. Copies and Use of Disclosure Materials ................................9
Section 4.6. Modification to Disclosure Materials ..............................10
Section 4.7. Blue Sky Laws ..........................................................10
Section 4.8. Integration .........................................................10
Section 4.9. Furnishing of Rule 144A Materials .......................................10
Section 4.10. Solicitation Materials ................................................10
Section 4.11. Subsequent Financial Statements ........................................11
Section 4.12. Right of First Refusal .................................................11
Section 4.13. Listing of Underlying Shares ........................................11
Section 4.14 Conversion Procedures .................................................11
ARTICLE V CONDITIONS PRECEDENT TO CLOSING ...............................................11
Section 5.1. Conditions Precedent to Obligations of the Purchaser ....................12
Section 5.2. Conditions Precedent to Obligations of the Company ....................13
ARTICLE VI TERMINATION ................................................................13
Section 6.1. Termination by Mutual Consent ......................................13
Section 6.2. Termination by the Company or the Purchaser .............................13
Section 6.3. Termination by the Company ..............................................14
Section 6.4. Termination by the Purchaser .....................................14
ARTICLE VII MISCELLANEOUS ....................................................................14
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
Section 7.1. Fees and Expenses........................................................14
Section 7.2. Entire Agreement; Amendments ........................................15
Section 7.3. Notices..................................................................15
Section 7.4. Amendments; Waivers .................................................16
Section 7.5. Headings.................................................................16
Section 7.6. Successors and Assigns .................................................16
Section 7.7. No Third Party Beneficiaries ........................................16
Section 7.8. Governing Law ..........................................................16
Section 7.9. Survival.................................................................16
Section 7.10. Counterpart ..........................................................16
Section 7.11. Publicity ..........................................................17
Section 7.12. Severability ..........................................................17
Section 7.13. Remedies.................................................................17
Exhibit A Certificate of Designation
Exhibit B Registration Rights Agreement
Exhibit C Form of Opinion of Gray Cary Ware & Freidenrich, counsel for the Company
Exhibit D Conversion Procedures
Schedule 3.1(c) Capitalization
Schedule 3.1(f) Required Consents and Approvals
Schedule 3.1(g) Litigation
Schedule 3.1(h) Default or Violation
Schedule 3.1(I) Disclosure Materials
</TABLE>
<PAGE> 4
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT, dated as of
March 31, 1997 (this "Agreement"), by and among Multicom Publishing, Inc., a
Washington corporation (the "Company"), and GEM Management Ltd., a corporation
organized and existing under the laws of B.V.I. (the "Purchaser").
WHEREAS, the Company desires to issue and sell to the
Purchaser and the Purchaser desires to acquire shares of the Company's Series B
Convertible Preferred Stock, par value $0.01 per share (the "Preferred Stock").
IN CONSIDERATION of the mutual covenants and agreements set
forth herein and for good and valuable consideration, the receipt of which is
hereby acknowledged, the parties agree as follows:
ARTICLE 1.
CERTAIN DEFINITIONS
Section 1.1 Certain Definitions. context requires a different
meaning, the following terms have the meanings indicated:
"Affiliate" means, with respect to any Person, any Person
that, directly or indirectly, controls, is controlled by or is under common
control with such Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with") shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
"Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
state of New York are authorized or required by law or other government actions
to close.
"Closing" shall have the meaning set forth in Section 2.1(b).
"Closing Date" shall have the meaning set forth in Section
2.1(b).
"Certificate of Designation" shall have the meaning set forth
in Section 2.1(a).
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations thereunder as in effect on the date hereof.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, par value
$.01 per share.
"Disclosure Materials" means the SEC Documents.
<PAGE> 5
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GEM" means GEM Advisors, Ltd.
"Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of the Registrable Securities.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, encumbrance, charge or security interest of any kind in or on such asset
or the revenues or income thereon or therefrom.
"Material Adverse Effect" shall have the meaning set forth in
Section 3.1(a).
"NASD" means the National Association of Securities Dealers,
Inc.
"Per Share Consideration" shall have the meaning set forth in
Section 2.1(a).
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Preferred Stock" shall have the meaning set forth in the
recitals hereto.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as a part of an effective
registration statement in reliance upon Rule 430A promulgated under to the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"Purchase Price" shall have the meaning set forth in Section
2.1(a).
"Registration Rights Agreement" means the registration rights
agreement, substantially in the form of Exhibit B, as the same may be amended,
supplemented or otherwise modified in accordance with its terms.
"Required Approvals" shall have the meaning set forth in
Section 3.1(f).
"SEC Documents" shall have the meaning set forth in Section
3.1(l).
"Securities Act" means the Securities Act of 1933, as amended.
2
<PAGE> 6
"Shares" means the shares of Preferred Stock to be purchased
by the Purchaser pursuant to this Agreement as set forth at the foot of this
Agreement.
"Underlying Shares" means the shares of Common Stock into
which the Shares are convertible in accordance with the terms hereof and the
Certificate of Designation.
ARTICLE II
PURCHASE OF SHARES
Section 2.1. Purchase of Shares; Closing.
(a) Subject to the terms and conditions herein set forth, the
Company shall issue and sell to the Purchaser, and the Purchaser shall purchase
from the Company, on the Closing Date, the Shares which shall have the
respective rights, preferences and privileges set forth in Exhibit A (the
"Certificate of Designation"), at a price per Share of US$1,000.00 (the "Per
Share Consideration"). The Per Share Consideration multiplied by the number of
Shares to be purchased by the Purchaser hereunder is hereinafter referred to as
the "Purchase Price."
(b) The closing of the purchase and sale of the Shares (the
"Closing") shall take place at the offices of Bryan Cave LLP, 245 Park Avenue,
New York, NY 10167, immediately following the execution hereof, or at such other
time and/or place as the Purchaser and the Company may agree, provided, however,
in no case shall the Closing take place later than the fifth day after the last
of the conditions listed in Article V is satisfied or waived by the appropriate
party. The date of the Closing is hereinafter referred to as the "Closing Date".
(c) At the Closing, (i) the Company shall deliver to the
Purchaser (A) one or more stock certificates representing the Shares purchased
hereunder, registered in the name of the Purchaser and (B) all documents,
instruments and writings required to have been delivered at or prior to Closing
by the Company pursuant to this Agreement, (ii) the Purchaser shall deliver to
the Company (A) the Purchase Price as determined pursuant to this Article II in
United States dollars in immediately available funds by wire transfer to an
account designated in writing by the Company prior to the Closing and (B) all
documents, instruments and writings required to have been delivered at or prior
to Closing by the Purchaser pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties of the Company.
The Company hereby represents and warrants to the Purchaser as follows:
(a) Organization and Qualification. The Company is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, with the requisite corporate
power and authority to own and use its properties and
3
<PAGE> 7
assets and to carry on its business as currently conducted. The Company has no
subsidiaries. The Company is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not reasonably be expected to have, individually or in
the aggregate, a material adverse effect on the results of operations, assets,
prospects, or financial condition of the Company (a "Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated hereby and by the Registration Rights Agreement and otherwise to
carry out its obligations hereunder and thereunder. The execution and delivery
of this Agreement and the Registration Rights Agreement by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary action on the part of the Company. Each of this
Agreement and the Registration Rights Agreement has been duly executed and
delivered by the Company and constitutes the 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 or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
(c) Capitalization. The authorized, issued and outstanding
capital stock of the Company is set forth in Schedule 3.1(c). No shares of
Common Stock are entitled to preemptive or similar rights. Except as
specifically disclosed in Schedule 3.1(c), there are no outstanding options,
warrants, or commitments of any character whatsoever relating to, or, except as
a result of the purchase and sale of the Shares hereunder, securities, rights or
obligations convertible into or exchangeable for, or giving any person any right
to subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company is or may
become bound to issue additional shares of Common Stock, or securities or rights
convertible or exchangeable into shares of Common Stock. The Company is not in
violation of any of the provisions of its certificate of incorporation or
bylaws.
(d) Issuance of Shares. The Shares are duly authorized and,
when paid for in accordance with the terms hereof, shall be validly issued,
fully paid and nonassessable. The Company has and at all times while the Shares
are outstanding will maintain an adequate reserve of shares of Common Stock to
enable it to perform its obligations under this Agreement and the Certificate of
Designation. When issued in accordance with the terms hereof, the Underlying
Shares will be duly authorized, validly issued, fully paid and nonassessable.
(e) No Conflicts. The execution, delivery and performance of
this Agreement and the Registration Rights Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
do not and will not (i) conflict with or violate any provision of its
certificate of incorporation or bylaws or (ii) subject to obtaining the consents
referred to in Section 3.1(f), 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, indenture or instrument to which the Company is
a party, or (iii) to the knowledge of the Company result in a violation of any
law, rule, regulation, order, judgment, injunction, decree or other restriction
of any court or governmental authority to
4
<PAGE> 8
which the Company is subject (including Federal and state securities laws and
regulations), or by which any property or asset of the Company is bound or
affected, except in the case of each of clauses (ii) and (iii), such conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a Material Adverse Effect.
The business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental authority, except for violations
which, individually or in the aggregate, do not have a Material Adverse Effect.
(f) Consents and Approvals. Except as specifically set forth
in Schedule 3.1(f), the Company is not required to obtain any consent, waiver,
authorization or order of, or make any filing or registration with, any court or
other federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of this
Agreement and the Registration Rights Agreement, other than the filing of the
registration statement covering the Underlying Shares with the Commission and
the making of the applicable blue-sky filings under state securities laws, each
as contemplated by the Registration Rights Agreement and other than, in all
cases, where the failure to obtain such consent, waiver, authorization or order,
or to give or make such notice or filing, would not materially impair or delay
the ability of the Company to effect the Closing and deliver to the Purchaser
the Shares free and clear of all Liens (collectively, the "Required Approvals").
(g) Litigation; Proceedings. Except as specifically disclosed
in the Disclosure Materials or in Schedule 3.1(g), there is no action, suit,
notice of violation, proceeding or investigation pending or, to the best
knowledge of the Company, threatened against or affecting the Company or
properties before or by any court, governmental or administrative agency or
regulatory authority (Federal, State, county, local or foreign) which (i)
relates to or challenges the legality, validity or enforceability of this
Agreement, the Registration Rights Agreement or the Shares (ii) could,
individually or in the aggregate, have a Material Adverse Effect or (iii) could,
individually or in the aggregate, materially impair the ability of the Company
to perform fully on a timely basis its obligations under this Agreement or the
Registration Rights Agreement.
(h) No Default or Violation. The Company is not (i) in default
under or in violation of any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound, except such conflicts or defaults as do not have a Material
Adverse Effect, (ii) in violation of any order of any court, arbitrator or
governmental body, except for such violations as do not have a Material Adverse
Effect, or (iii) in violation of any statute, rule or regulation of any
governmental authority which could (individually or in the aggregate) (x)
adversely affect the legality, validity or enforceability of this Agreement or
the Registration Rights Agreement, (y) have a Material Adverse Effect or (z)
adversely impair the Company's ability or obligation to perform fully on a
timely basis its obligations under this Agreement or the Registration Rights
Agreement.
(i) Certain Fees. No fees or commission will be payable by the
Company to any broker, finder, investment banker or bank with respect to the
consummation of the transactions contemplated hereby except that the Company has
agreed at the Closing to pay to GEM, in consideration for its services in
connection with the sale of the Shares, an amount in cash equal to $20,000 and
to issue to GEM a warrant to purchase 400,000 shares of Common Stock.
5
<PAGE> 9
(j) Disclosure Materials. The Disclosure Materials do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(k) Private Offering. Neither the Company nor any Person
acting on its behalf has taken or will take any action (including, without
limitation, any offering of any securities of the Company under circumstances
which would require the integration of such offering with the offering of the
Shares under the Securities Act) which might subject the offering, issuance or
sale of the Shares to the registration requirements of Section 5 of the
Securities Act.
(l) SEC Documents. The Company has filed all reports required
to be filed by it under the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the two years preceding the date hereof (or such shorter
period as the Company was required by law to file such material) (the foregoing
materials, which are specified in Schedule 3.1(l) annexed hereto, being
collectively referred to herein as the "SEC Documents") on a timely basis, or
has received a valid extension of such time of filing. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Documents, when filed,
contained any untrue statement of a material fact or omitted 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 SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved, except as may be otherwise indicated in such financial
statements or the notes thereto, and fairly present in all material respects the
financial position of the Company as of and for 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. Since the
date of the financial statements included in the Company's last filed Quarterly
Report on Form 10-Q, there has been no event, occurrence or development that has
had a Material Adverse Effect which is not specifically disclosed in any of the
Disclosure Materials.
Section 3.2 Representations and Warranties of the Purchaser.
The Purchaser hereby represents and warrants to the Company as follows:
(a) Organization; Authority. The Purchaser is a corporation
duly and validly existing and in good standing under the laws of the
jurisdiction of its incorporation. The Purchaser has the requisite power and
authority to enter into and to consummate the transactions contemplated hereby
and by the Registration Rights Agreement and otherwise to carry out its
obligations hereunder and thereunder. The purchase of the Shares by the
Purchaser hereunder has been duly authorized by all necessary action on the part
of the Purchaser. Each of this Agreement and the Registration Rights Agreement
has been duly executed and delivered by the Purchaser or on its behalf and
constitutes the valid and legally binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity.
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(b) Investment Intent. The Purchaser is acquiring the Shares
and the Underlying Shares for its own account (and/or on behalf of managed
accounts who are purchasing solely for their own accounts for investment) for
investment purposes only and not with a view to or for distributing or reselling
such Shares or Underlying Shares or any part thereof or interest therein,
without prejudice, however, to the Purchaser's right, subject to the provisions
of this Agreement and the Registration Rights Agreement, at all times to sell or
otherwise dispose of all or any part of such Shares or Underlying Shares under
an effective registration statement under the Securities Act and in compliance
with applicable State securities laws or under an exemption from such
registration.
(c) Purchaser Status. At the time the Purchaser (and any
account for which it is purchasing) was offered the Shares, it (and any account
for which it is purchasing) was, and at the date hereof, it (and any account for
which it is purchasing) is, and at the Closing Date, it (and any account for
which it is purchasing) will be, an "accredited investor" as defined in Rule
501(a) under the Securities Act.
(d) Experience of Purchaser. The Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Shares, and has so
evaluated the merits and risks of such investment.
(e) Ability of Purchaser to Bear Risk of Investment. The
Purchaser is able to bear the economic risk of an investment in the Shares and,
at the present time, is able to afford a complete loss of such investment.
(f) Prohibited Transactions. The Shares to be purchased by the
Purchaser are not being acquired, directly or indirectly, with the assets of any
"employee benefit plan", within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended.
(g) Access to Information. The Purchaser acknowledges receipt
of the Disclosure Materials and further acknowledges that it has been afforded
(i) the opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms and
conditions of the offering of the Shares and the merits and risks of investing
in the Shares; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment in the Common
Stock; and (iii) the opportunity to obtain such additional information which the
Company possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the Shares and
to verify the accuracy and completeness of the information contained in the
Disclosure Materials.
(h) Reliance. The Purchaser understands and acknowledges that
(i) the Shares are being offered and sold, and the Underlying Shares are being
offered, to it without registration under the Securities Act in a private
placement that is exempt from the registration provisions of the Securities Act
and (ii) the availability of such exemption depends, in part on, and that the
Company will rely upon the accuracy and truthfulness of, the foregoing
representations and the Purchaser hereby consents to such reliance.
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The Company acknowledges and agrees that the Purchaser makes
no representation or warranty with respect to the transactions contemplated
hereby other than those specifically set forth in Article III herein.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
Section 4.1. Transfer Restrictions. If the Purchaser should
decide to dispose of any of the Shares to be purchased by it hereunder (and upon
conversion thereof, any Underlying Shares), the Purchaser understands and agrees
that it may do so only (i) pursuant to an effective registration statement under
the Securities Act, (ii) to the Company or (iii) pursuant to an available
exemption from registration under the Securities Act. In connection with any
transfer of any Shares other than pursuant to an effective registration
statement or to the Company, the Company may require that the transferor of such
Shares provide to the Company an opinion of counsel experienced in the area of
United States securities laws selected by the transferor, the form and substance
of which opinion shall be, reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such Shares under the
Securities Act or any State securities laws.
The Purchaser agrees to the imprinting, so long as
appropriate, of the following legend on certificates representing the Shares:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER REGULATION D
PROMULGATED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, THEY MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACCEPTANCE HEREOF, THE HOLDER OF THESE SECURITIES AGREES THAT IT WILL
NOT RESELL, PLEDGE OR OTHERWISE TRANSFER THESE SECURITIES OR THE
SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE, EXCEPT (A)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, OR (B) PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT. IF THE PROPOSED TRANSFER IS TO BE MADE OTHER THAN
PURSUANT TO CLAUSE (A) OR (B) ABOVE, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE COMPANY AND THE TRANSFER AGENT SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THEY MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT
TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE
TERMS "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM
BY RULE 902 PROMULGATED UNDER THE SECURITIES ACT.
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The legend set forth above may be removed if and when the
Shares represented by such certificate or the Underlying Shares, as the case may
be, are disposed of pursuant to an effective registration statement under the
Securities Act or in the opinion of counsel to the Company experienced in the
area of United States securities laws such legend is no longer required under
applicable requirements of the Securities Act. The stock certificates
representing the Shares and the Underlying Shares shall also bear any other
legends required by applicable Federal or state securities laws, which legends
may be removed when, in the opinion of counsel to the Company experienced in the
applicable securities laws, such legends are no longer required under the
applicable requirements of such securities laws. The Company agrees that it will
provide the Purchaser, upon request, with a substitute stock certificate or
certificates, free from such legend at such time as such legend is no longer
applicable. The Purchaser agrees that, in connection with any transfer of Shares
or Underlying Shares by it pursuant to an effective registration statement under
the Securities Act, Purchaser will comply with all prospectus delivery
requirements of the Securities Act. The Company makes no representation,
warranty or agreement as to the availability of any exemption from registration
under the Securities Act with respect to any resale of Shares or Underlying
Shares.
Section 4.2 Stop Transfer Instruction. The Purchaser agrees
that the Company shall be entitled to make a notation on its records and give
instructions to any transfer agent of the Company in order to implement the
restrictions on transfer set forth in this Agreement.
Section 4.2. Furnishing of Information. As long as the
Purchaser owns Shares or Underlying Shares, the Company will promptly furnish to
it all reports filed by the Company pursuant to Section 13(a) or 15(d) of the
Exchange Act (or if the Company is not at the time required to file reports
pursuant to such sections, annual and quarterly reports comparable to those
required by Section 13(a) or 15(d) of the Exchange Act).
Section 4.3. Notice of Certain Events. The Company shall (i)
advise the Purchaser promptly after obtaining knowledge thereof, and, if
requested by the Purchaser, confirm such advice in writing, of (A) the issuance
by any state securities commission of any stop order suspending the
qualification or exemption from qualification of the Shares or the Common Stock
for offering or sale in any jurisdiction, or the initiation of any proceeding
for such purpose by any state securities commission or other regulatory
authority, or (B) any event that makes any statement of a material fact made in
the Disclosure Materials untrue or that requires the making of any additions to
or changes in the Disclosure Materials in order to make the statements therein,
in the light of the circumstances under which they are made, not misleading,
(ii) use its best efforts to prevent the issuance of any stop order or order
suspending the qualification or exemption from qualification of the Shares or
the Common Stock under any state securities or Blue Sky laws, and (iii) if at
any time any state securities commission or other regulatory authority shall
issue an order suspending the qualification or exemption from qualification of
the Shares or the Common Stock under any such laws, use its best efforts to
obtain the withdrawal or lifting of such order at the earliest possible time.
Section 4.4. Copies and Use of Disclosure. The Company shall
furnish the Purchaser, without charge, as many copies of the Disclosure
Materials, and any amendments or supplements thereto, as the Purchaser may
reasonably request. The Company consents to the use of the Disclosure Materials,
and any amendments and supplements thereto, by the Purchaser in connection with
resales of the Shares or the Underlying Shares other than pursuant to an
effective registration statement.
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Section 4.5. Modification to Disclosure Materials. If any
event shall occur as a result of which, in the reasonable judgment of the
Company or the Purchaser, it becomes necessary or advisable to amend or
supplement the Disclosure Materials in order to make the statements therein, in
the light of the circumstances at the time the Disclosure Materials were
delivered to the Purchaser, not misleading, or if it is necessary to amend or
supplement the Disclosure Materials to comply with applicable law, the Company
shall promptly prepare an appropriate amendment or supplement to the Disclosure
Materials (in form and substance reasonably satisfactory to the Purchaser) so
that (i) as so amended or supplemented the Disclosure Materials will not include
an untrue statement of material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
existing at the time it is delivered to Purchaser, not misleading and (ii) the
Disclosure Materials will comply with applicable law.
Section 4.6. Blue Sky Laws. The Company shall cooperate with
the Purchaser in connection with the qualification of the Shares and the
Underlying Shares under the securities or Blue Sky laws of such jurisdictions as
the Purchaser may request and to continue such qualification at all times
through the third anniversary of the Closing Date; provided, however, that the
Company shall not be required in connection therewith to qualify as a foreign
corporation where they are not now so qualified.
Section 4.7. Integration. The Company shall not, and shall use
its best efforts to ensure that no Affiliate shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Shares or the Underlying Shares in a manner that would
require the registration under the Securities Act of the sale of the Shares or
Underlying Shares to the Purchaser.
Section 4.8. Furnishing of Rule 144A Materials. The Company
shall, for so long as any of the Shares or Underlying Shares remain outstanding
and during any period in which it is not subject to Section 13 or 15(d) of the
Exchange Act, make available to any registered holder of Shares or Underlying
Shares in connection with any sale thereof and any prospective purchaser of such
Shares or Underlying Shares from such Person, the following information in
accordance with Rule 144A(d)(4) under the Securities Act: a brief statement of
the nature of the business of the Company and the products and services it
offers and the Company's most recent audited balance sheet and profit and loss
and retained earnings statements, and similar audited financial statements for
such part of the two preceding fiscal years as the Company has been in
operation.
Section 4.9. Solicitation Materials. The Company shall not (i)
distribute any offering materials in connection with the offering and sale of
the Shares or Underlying Shares other than the Disclosure Materials and any
amendments and supplements thereto prepared in compliance herewith or (ii)
solicit any offer to buy or sell the Shares or Underlying Shares by means of any
form of general solicitation or advertising.
Section 4.10. Subsequent Financial Statements. The Company
shall furnish to the Purchaser, promptly after they are filed with the
Commission, a copy of all financial statements for any period subsequent to the
period covered by the financial statements included in the Disclosure Materials.
Section 4.11. Right of First Refusal. (a) The Company shall
not directly or indirectly, without the prior consent of the Purchaser, offer,
sell, grant any option to purchase, or
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otherwise dispose (or announce any offer, sale, grant or any option to purchase
or other disposition) of any of its or its Affiliates equity or
equity-equivalent securities (a "Subsequent Sale") for a period of 90 days after
Closing Date, except (i) the granting of options to employees, officers and
directors under, and the issuance of shares upon exercise of options granted
under, any stock option plan heretofore or hereinafter adopted by the Company;
(ii) shares issued upon exercise of any currently outstanding warrants and upon
conversion of any currently outstanding convertible preferred stock disclosed in
Schedule 3.1 and (iii) shares of Common Stock issued upon conversion of Shares
in accordance herewith, unless (A) the Company provides the Purchaser a written
notice (the "Subsequent Financing Notice") of its intention to effect such
Subsequent Financing, which Subsequent Financing Notice shall describe in
reasonable detail the proposed terms of such Subsequent Financing and the amount
of proceeds intended to be raised thereunder and (B) the Purchaser shall not
have notified the Company within forty-eight (48) hours of its receipt of the
Subsequent Financing Notice of its willingness to enter into good faith
negotiations to provide (or to cause its sole designee to provide) financing to
the Company on substantially the terms set forth in the Subsequent Financing
Notice. If the Purchaser shall fail to notify the Company of its intention to
enter into such negotiations within such forty-eight (48) hour period, the
Company may effect the Subsequent Financing substantially upon the terms set
forth in the Subsequent Financing Notice; provided, that the Company shall
provide the Purchaser with a second Subsequent Financing Notice, and the
Purchaser shall again have the right of first refusal set forth above in this
paragraph (a), if the Subsequent Financing subject to the initial Subsequent
Financing Notice shall not have been consummated for any reason on the terms set
forth in such Subsequent Financing Notice within 30 days after the date of the
initial Subsequent Financing Notice.
Section 4.12. Listing of Underlying Shares. The Company shall
take all steps necessary to cause the Underlying Shares to be approved for
listing in The Nasdaq SmallCap Market (or other national securities exchange or
market on which the Common Stock is listed) no later than the first day after
which shares may be converted hereunder by the Purchaser, and shall provide to
the Purchaser evidence of such listing.
Section 4.13. Conversion. Exhibit D attached hereto sets forth
the procedures with respect to the conversion of the Shares, including the forms
of conversion notice to be provided upon conversion.
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
Section 5.1 Conditions Precedent to Obligations of the
Purchaser. The obligation of the Purchaser to purchase the Shares is subject to
the satisfaction or waiver by the Purchaser, at or prior to the Closing, of each
of the following conditions:
(a) Legal Opinion. The Purchaser shall have received the legal
opinion, addressed to it and dated the Closing Date, of Gray Cary Ware &
Freidenrich, counsel for the Company, substantially in the form of Exhibit C;
(b) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company contained herein and in the
Registration Rights Agreement shall be
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true and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except that representations and
warranties that are made as of a specific date need be true in all material
respects only as of such date);
(c) 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 and the Registration Rights
Agreement to be performed, satisfied or complied with by the Company at or prior
to the Closing;
(d) No Material Adverse Effect. Since the date of the
financial statements included in the Company's last filed Quarterly Report on
Form 10-Q, no event which had a Material Adverse Effect shall have occurred
which is not disclosed in the Disclosure Materials;
(e) No Prohibitions. The purchase of and payment for the
Shares (and upon conversion thereof, the Underlying Shares) hereunder (i) shall
not be prohibited or enjoined (temporarily or permanently) by any applicable law
or governmental regulation and (ii) shall not subject the Purchaser to any
penalty, or in its reasonable judgment, other onerous condition under or
pursuant to any applicable law or governmental regulation that would materially
reduce the benefits to the Purchaser of the purchase of the Shares or the
Underlying Shares (provided, however, that such regulation, law or onerous
condition was not in effect in such form at the date of this Agreement);
(f) Company Certificates. The Purchaser shall have received a
certificate, dated the Closing Date, signed by the Secretary or an Assistant
Secretary of the Company and certifying (i) that attached thereto is a true,
correct and complete copy of (A) the Company's Certificate of Incorporation, as
amended to the date thereof, (B) the Company's by-laws, as amended to the date
thereof, and (C) resolutions duly adopted by the Board of Directors of the
Company authorizing the execution and delivery of this Agreement and the
Registration Rights Agreement and the issuance and sale of the Shares and the
Underlying Shares and (ii) the incumbency of officers executing this Agreement
and the Registration Rights Agreement;
(g) Registration Rights Agreement. The Company shall have
executed the Registration Rights Agreement;
(h) No Suspensions of Trading in Common Stock. Trading in the
Common Stock shall not have been suspended by the Commission or the NASD or
other exchange or market on which the Common Stock is listed or quoted (except
for any suspension of trading of limited duration solely to permit dissemination
of material information regarding the Company);
(i) Required Approvals. All Required Approvals shall have been
obtained; and
(j) Delivery of Stock. The Company shall have delivered to the
Purchaser the stock certificate(s) representing the Shares, registered in the
name of the Purchaser, each in form satisfactory to the Purchaser.
Section 5.2 Conditions Precedent to Obligations of the
Company. The obligation of the Company to issue and sell the Shares hereunder is
subject to the satisfaction or waiver by the Company, at or to the Closing, of
each of the following conditions:
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(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
Closing Date as though made at that time (except that representations and
warranties that are made as of a specific date need be true in all material
respects only as of such date);
(b) 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 and the Registration Rights
Agreement to be performed, satisfied or complied with by it at or prior to the
Closing; and
(c) No Prohibitions. The sale of the Shares (and upon
conversion thereof, the Underlying Shares) hereunder (i) shall not be prohibited
or enjoined (temporarily or permanently) by any applicable law or governmental
regulation and (ii) shall not subject the Company to any penalty, or in its
reasonable judgment, any other onerous condition under or pursuant to any
applicable law or governmental regulation that would materially reduce the
benefits to the Company of the sale of Shares or the Underlying Shares to the
Purchaser (provided, however, that such regulation, law or onerous condition was
not in effect in such form at the date of this Agreement).
ARTICLE VI
TERMINATION
Section 6.1. Termination by Mutual Consent. This Agreement may
be terminated at any time prior to Closing by the mutual consent of the Company
and the Purchaser.
Section 6.2 Termination by the Company or the Purchaser. This
Agreement may be terminated prior to Closing by either the Company or the
Purchaser, by giving written notice of such termination to the other party, if:
(a) the Closing shall not have occurred by March 31,
1997; provided that the terminating party is not then in material
breach of its obligations under this Agreement in any manner that shall
have caused the failure referred to in this paragraph (a);
(b) there shall be in effect any statute, rule, law
or regulation that prohibits the consummation of the Closing or if the
consummation of the Closing would violate any non-appealable final
judgment, order, decree, ruling or injunction of any court of or
governmental authority having competent jurisdiction; or
(c) there shall have been an amendment to Regulation
D or an interpretive release promulgated or issued thereunder, which,
in the reasonable judgment of the terminating party, would materially
adversely affect the transactions contemplated hereby and by the
Registration Rights Agreement.
Section 6.3 Termination by the Company. This Agreement may be
terminated prior to Closing by the Company, by giving notice of such termination
to the Purchaser, if the Purchaser
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has materially breached any representation, warranty, covenant or agreement
contained in this Agreement or the Registration Rights Agreement and such breach
is not cured within five business days following receipt by the Purchaser of
notice of such breach.
Section 6.4 Termination by the Purchaser. This Agreement may
be terminated prior to Closing by the Purchaser, by giving notice of such
termination to the Company, if:
(a) the Company has breached any representation,
warranty, covenant or agreement contained in this Agreement or the
Registration Rights Agreement and such breach is not cured within five
business days following receipt by the Company of notice of such
breach;
(b) there has occurred an event since the date of the
financial statements included in the Company's last filed Quarterly
Report on Form 10-Q which could reasonably be expected to have a
Material Adverse Effect and which is not disclosed in the Disclosure
Materials; or
(c) trading in the Common Stock has been suspended by
the Commission or the NASD or other exchange or market on which the
Common Stock is listed or quoted (except for any suspension of trading
of limited duration solely to permit dissemination of material
information regarding the Company).
ARTICLE VII
MISCELLANEOUS
Section 7.1 Fees and Expenses. Each party shall pay the fees
and expenses of its advisers, brokers, counsel, accountants and other experts,
if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement
except for the fee payable to GEM as provided in Section 3.1(i) hereof. The
Company shall pay all stamp and other taxes and duties levied in connection with
the issuance of the Shares (and upon conversion thereof, the Underlying Shares)
pursuant hereto. The Purchaser shall be responsible for its own tax liability
that may arise as a result of the investment hereunder or the transactions
contemplated by this Agreement. Whether or not the transactions contemplated by
this Agreement are consummated or this Agreement is terminated, the Company
shall pay (i) all costs, expenses, fees and all taxes incident to and in
connection with: (A) the preparation, printing and distribution of the
Disclosure Materials and all amendments and supplements thereto (including,
without limitation, financial statements and exhibits), and all preliminary and
final Blue Sky memoranda and all other agreements, memoranda, correspondence and
other documents prepared and delivered in connection herewith (B) the issuance
and delivery of the Shares and, upon conversion thereof, the Underlying Shares,
(C) the qualification of the Shares and, upon conversion thereof, the Underlying
Shares for offer and sale under the securities or Blue Sky laws of the several
states (including, without limitation, the fees and disbursements of the
Purchasers' counsel relating to such registration or qualification), (D)
furnishing such copies of the Disclosure Materials and all amendments and
supplements thereto, as may reasonably be requested for use in connection, with
resales of the Shares and, upon conversion thereof, the Underlying Shares, and
(E) the preparation of certificates for the Shares and, upon conversion thereof,
the Underlying Shares (including, without limitation, printing and engraving
thereof), (ii) all fees and expenses of the counsel and accountants
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of the Company and (iii) all expenses and listing fees in connection with the
application for quotation of the underlying Shares in the Nasdaq SmallCap
Market.
Section 7.2 Entire Agreement; Amendments. This Agreement,
together with the Exhibits, Annexes and Schedules hereto, and the Registration
Rights Agreement contain the entire understanding of the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings,
oral or written, with respect to such matters.
Section 7.3 Notices. Any notice or other communication
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been received (a) upon hand delivery (receipt acknowledged) or
delivery by telex (with correct answer back received), telecopy or facsimile
(with transmission confirmation report) 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:
Multicom Publishing, Inc.
188 Embarcadero, 5th Floor
San Francisco, CA 94105
Telecopier: (415) 777-4729
Attn.: CEO, General Counsel
With copies to:
Multicom Publishing, Inc.
1100 Olive Way, 12th Fl.
Seattle, WA 98101
Telecopier: (206) 622-4380
Attn.: CFO
If to the Purchaser:
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
Section 7.4 Amendments; Waivers.. No provision of this
Agreement may be waived or amended except in a written instrument signed, in the
case of an amendment, by both the Company and the Purchaser, or, in the case of
a waiver, by the party against whom enforcement of any such waiver is sought. No
waiver 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 provision, condition or requirement hereof, nor shall any
delay or omission of either party
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to exercise any right hereunder in any manner impair the exercise of any such
right accruing to it thereafter.
Section 7.5 Headings. The headings herein are for convenience
only, do not constitute a part of this Agreement and shall not be deemed to
limit or affect any of the provisions hereof.
Section 7.6 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
permitted assigns. Neither the Company nor the Purchaser may assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the other. The assignment by a party of this Agreement or any rights
hereunder shall not affect the obligations of such party under this Agreement.
Section 7.7 No Third Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
Section 7.8 Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York without regard to the principles of conflicts of law thereof.
Section 7.9 Survival. The representations and warranties of
the Company and the Purchaser contained in Article III and the agreements and
covenants of the parties contained in Article IV and this Article VII shall
survive the Closing (or any earlier termination of this Agreement) and any
conversion of Shares hereunder.
Section 7.10 Counterpart. This Agreement may be executed in
two or more counterparts, all of which when taken together shall be considered
one and the same agreement and shall become effective when counterparts have
been signed by each party and delivered to the other party, it being understood
that both parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature page were an original thereof.
Section 7.11 Publicity. The Company and the Purchaser shall
consult with each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and neither
party shall issue any such press release or otherwise make any such public
statement without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed.
Section 7.12 Severability. In case any one or more of the
provisions of this Agreement shall be invalid or unenforceable in any respect,
the validity and enforceability of the remaining terms and provisions of this
Agreement shall not in any way be affecting or impaired thereby and the parties
will attempt to agree upon a valid and enforceable provision which shall be a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
16
<PAGE> 20
Section 7.13 Remedies. In addition to being entitled to
exercise all rights provided herein or granted by law, including recovery of
damages, the Purchaser will be entitled to specific performance of the
obligations of the Company under this Agreement and the Company will be entitled
to specific performance of the obligations of the Purchaser hereunder with
respect to the subsequent transfer of Shares and the Underlying Shares. Each of
the Company and the Purchaser agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of any breach of its obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first indicated above.
MULTICOM PUBLISHING, INC.
By:_________________________________________
Name:
Title:
Purchaser:
By:_________________________________________
Name:
Title:
No. of Shares to be Purchased_______________
17
<PAGE> 21
Exhibit D
[To be provided by Company]
18
<PAGE> 1
EXHIBIT 11.1
MULTICOM PUBLISHING, INC.
COMPUTATION OF NET INCOME (LOSS) PER COMMON
AND COMMON EQUIVALENT SHARES
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1997 1996 1997 1996
---------------------------------------------------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net income (loss) $ (656,347) $ 71,990 $(4,315,525) $(2,808,220)
========== ========= =========== ===========
Applicable common shares:
Average outstanding during the period 6,083,752 4,212,640 5,767,732 3,479,186
Average mandatorily redeemable stock outstanding 825,000 825,000
Outstanding stock options(1) -- -- -- 840,983
Common stock equivalents(1) -- 2,160,860 -- --
---------- --------- --------- ---------
Weighted average number of common shares 6,083,752 7,198,500 5,767,732 5,145,169
========== ========= ========= =========
Net income (loss) per common share $ (0.11) $ 0.01 $ (0.75) $ (0.55)
========== ========= ========= =========
</TABLE>
(1) Based on the treasury stock method.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
<CASH> 49,362
<SECURITIES> 0
<RECEIVABLES> 4,842,762
<ALLOWANCES> 1,052,170
<INVENTORY> 1,486,475
<CURRENT-ASSETS> 5,519,572
<PP&E> 2,641,300
<DEPRECIATION> 919,855
<TOTAL-ASSETS> 7,888,827
<CURRENT-LIABILITIES> 4,769,227
<BONDS> 0
0
1,525,000
<COMMON> 15,560,211
<OTHER-SE> (15,400,928)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 2,163,457
<TOTAL-REVENUES> 2,428,176
<CGS> 1,129,251
<TOTAL-COSTS> 1,386,410
<OTHER-EXPENSES> 1,220,377
<LOSS-PROVISION> 44,000
<INTEREST-EXPENSE> 142,160
<INCOME-PRETAX> (303,874)
<INCOME-TAX> 0
<INCOME-CONTINUING> (303,874)
<DISCONTINUED> 0
<EXTRAORDINARY> (352,473)
<CHANGES> 0
<NET-INCOME> (656,347)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> 0
</TABLE>
