<PAGE>
As filed with the Securities and Exchange Commission on September 20, 1999
Registration No. 333-__________
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
______________________
ASYMETRIX LEARNING SYSTEMS, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
Delaware 911276003
(State or Other Jurisdiction of Incorporation) (I.R.S. Employer Identification No.)
</TABLE>
110-110/TH/ AVENUE NE
BELLEVUE, WASHINGTON 98004
(425) 462-0501
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
____________________
JOHN D. ATHERLY
VICE PRESIDENT, FINANCE AND ADMINISTRATION AND CHIEF FINANCIAL OFFICER
ASYMETRIX LEARNING SYSTEMS, INC.
110-110/TH/ AVENUE NE
BELLEVUE, WASHINGTON 98004
(425) 462-0501
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
____________________
Copies to:
JEFFREY R. VETTER, ESQ.
JASON M. GARLICK, ESQ.
FENWICK & WEST LLP
TWO PALO ALTO SQUARE
PALO ALTO, CALIFORNIA 94306
____________________
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box:
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering:[_]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box:[_]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==================================================================================================================================
Proposed Proposed
Title of Each Class of Securities Amount to be Maximum Offering Maximum Aggregate Amount of
to be Registered Registered Price per Share (1) Offering Price (1) Registration Fee (1)
==================================================================================================================================
<S> <C> <C> <C> <C>
Common Stock, $.01 par value per share 428,571 $8.53 $3,655,711 $1,016.29
==================================================================================================================================
Common Stock, $.01 par value per share, 428,571 $8.53 $3,655,711 $1,016.29
issuable upon exercise of a warrant
==================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee, pursuant to Rule 457(c) under the Securities Act of 1933,
as amended, based on the average of the high and low prices of the common
stock on the Nasdaq National Market on September 15, 1999.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
The information in this prospectus is not complete and may be changed.
These securities may not be sold until the registration statement filed
with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and is not soliciting
an offer to buy the securities in any state where the offer or sale is
not permitted.
PROSPECTUS (subject to completion, dated September 20, 1999)
857,142 SHARES
ASYMETRIX LEARNING SYSTEMS, INC.
COMMON STOCK
___________________
All of the 857,142 shares of common stock of Asymetrix Learning Systems,
Inc. are being sold by a stockholder of Asymetrix. Asymetrix will not receive
any proceeds from the sale of shares offered by the selling stockholder. See
"Selling Stockholder" and "Plan of Distribution."
The common stock is listed on the Nasdaq National Market under the symbol
"ASYM." The shares of common stock offered will be sold as described under "Plan
of Distribution."
On September 15, 1999, the closing price per share of the common stock on
the Nasdaq National Market was $8.38.
___________________
The common stock offered involves a high degree of risk. See "RISK FACTORS" on
page 3.
___________________
The date of this Prospectus is September 20, 1999.
<PAGE>
ASYMETRIX LEARNING SYSTEMS, INC.
Asymetrix provides learning solutions designed to help organizations more
effectively organize, manage, increase and use knowledge as a competitive
advantage. Asymetrix conducts two primary lines of business related to online
learning: (1) a comprehensive enterprise learning solution that consists of a
technology platform and related professional services; and (2) click2learn.com,
an Internet web site that provides a single source for both online learning
delivered over the Internet as well as more traditional forms of learning such
as books and video tapes, and that provides a free authoring environment to
encourage the creation of online content to be licensed through click2learn.com.
Asymetrix's enterprise learning technology platform includes ToolBook II
Instructor and ToolBook II Assistant, which enable customers to author online
learning applications, and Librarian and Ingenium, learning management and
skills assessment systems designed to enable customers to deploy and manage all
aspects of their training needs and to assess the learning needs of their
employees. Asymetrix's professional services include consulting services, custom
development services, systems integration, hosting of customer's training
content and management systems and training services to enable organizations to
establish and maintain a learning solution that is tailored to such
organization's unique needs.
Asymetrix's click2learn.com web site allows customers to purchase learning
content from a variety of well-known vendors for online delivery over the
Internet as well as in tangible formats such as books, videos and CD-ROMs.
Asymetrix intends to include the ability to register online for instructor-led
training provided by a variety of vendors. Click2learn also includes a free,
server-based authoring tool with which users can create their own online
learning courses and publish them to click2learn.com, earning royalties on any
purchases of such courses over click2learn.com The click2learn.com site can be
modified to include the look and feel of corporate customers' intranets or of
other high-traffic Internet sites, allowing it to be adopted as the integrated
"training channel" for these sites.
Asymetrix was incorporated in the State of Washington in 1984. In
connection with Asymetrix's initial public offering in June 1998, Asymetrix
reincorporated as a Delaware corporation through a merger with a Delaware
subsidiary. Our executive offices are located at 110-110/th/ Avenue, NE,
Bellevue, Washington 98004. Our telephone number at this location is (425)
462-0501. Our web sites are located at http://www.asymetrix.com and
http://www.click2learn.com. Information contained in our web sites is not part
of this prospectus.
<PAGE>
RISK FACTORS
You should carefully consider the risks and uncertainties described below
and in the documents incorporated by reference in this Prospectus before making
an investment decision. These risks and uncertainties are not the only ones
facing Asymetrix. Additional risks and uncertainties not presently known to us
or that we currently deem immaterial may also impair our business operations.
If any of the following risks actually occur, our business, financial
condition or operating results could be materially harmed. In such case, the
trading price of our common stock could decline and you may lose all or part of
your investment.
This prospectus also contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors
including the risks faced by us described below and elsewhere in this
prospectus.
Risks Related to Our Business
We have a limited operating history in our target markets which makes it
difficult to evaluate our future prospects
Until early 1995, we were engaged in various research and development
activities and in developing and marketing of multimedia authoring products,
database and Internet tools, web publishing products and other ancillary
products, most of which we do not currently sell. Starting in 1995, we began to
focus our development and marketing efforts on products and services for the
enterprise learning market. We announced our click2learn.com web site in July
1999. Accordingly, we have a limited operating history on which to evaluate our
current business and prospects. Risks we face under our new business modes
include, but are not limited to, the demand for technology-based training and
online learning applications, demand for our products and services, competition
and those other risks described in this section. To address these risks, we
must, among other things:
. successfully introduce and build our click2learn.com web site
. continue to establish relationships with leading providers of learning
content to sell content over the click2learn web site
. continue to establish relationships with high-traffic Internet sites
and corporate customers for the use of click2learn.com as the
"learning channel" for their web sites;
. respond to competitive developments;
. attract, integrate, retain and motivate qualified personnel;
. successfully introduce new products and services; and
. address and establish new technologies and technology standards.
Many of these risks are described in more detail in this "Risk Factors"
section. We may not successfully address any of these risks. If we do not
successfully address these risks, our business would be seriously harmed.
<PAGE>
We have a history of losses and expect to incur losses in the future
We incurred net losses of $6.5 million in 1998 and $4.4 million in the six
months ended June 30, 1999. As of June 30, 1999, we had an accumulated deficit
of approximately $169.9million. Despite our recent announcement of our
click2learn.com web site, we expect to derive most of our revenues for at least
the next twelve months from our enterprise learning software products and
services. Although revenues from our enterprise learning software products have
grown in the past, we may not be able to sustain these growth rates and our
revenues could decline. In fact, our total revenues for the six months ended
June 30. 1999 were less than our total revenues for the six months ended June
30, 1998. Over the longer term, we expect to derive additional revenues from our
click2learn.com web site, which is based on an unproven business model. However,
we expect to incur significant sales and marketing, research and development,
and general and administrative expenses in connection with our click2learn.com
web site. As a result, we expect to incur losses for the foreseeable future.
We have recently introduced our online learning web site and this web site may
not be successful
Asymetrix has recently announced its click2learn.com learning portal web
site. Broad and timely acceptance of this web site is important to the future
success of the Asymetrix business and is subject to a number of significant
risks:
. education and instruction over the Internet and on the world wide web
is a new market;
. Asymetrix has not previously hosted, operated and managed an e-
commerce web site;
. Asymetrix will need to enter into distribution relationships with high
traffic web sites as well as with creators of learning content; and
. Asymetrix will need to attract user traffic to this web site and
establish relationships with corporate customers.
If this new click2learn.com web site is not successful, the business of
Asymetrix could be materially harmed.
Our pricing and revenue model for our click2learn.com web site has not yet been
widely tested in the marketplace
Although we intend to derive revenue from our click2learn.com web site, our
pricing, expense and revenue model for this site has not been broadly tested in
the marketplace. If our pricing, expense and revenue model is not acceptable to
users, customers, content providers or advertisers, our click2learn.com may not
be commercially successful. This would seriously harm our business, particularly
if we experience a decline in the growth of revenues from our enterprise
learning products and services.
Our quarterly operating results could fluctuate significantly from quarter to
quarter
Our quarterly operating results have varied significantly in the past and
are expected to fluctuate significantly in the future as a result of a variety
of factors, many of which are outside our control. Factors that may adversely
affect our quarterly operating results include:
<PAGE>
. the demand for technology-based training and demand for online
learning solutions;
. the size and timing of product orders and the timing and execution of
professional services engagements;
. the mix of revenue from products and services;
. the mix of products sold;
. our ability to meet client project milestones;
. market acceptance of our or competitors' products and services;
. our ability to develop and market new or enhanced products, and
services in a timely manner and the market acceptance of these
products and services;
. timing of revenues and expenses relating to click2learn.com; and
. the timing of revenue recognition.
It is difficult to predict our future revenues and we may not be able to
adjust spending in response to shortfalls. Our limited operating history under
our current business model, including click2learn.com, possible acquisitions and
dispositions and the emerging nature of our market make prediction of future
revenue and expenses difficult. Our expense levels are based, in part, on our
expectations as to future revenue and to a large extent are fixed in the short
term. We may not be able to predict our future revenue accurately and we may be
unable to adjust spending in a timely manner to compensate for any unexpected
revenue shortfall.
We expect to be dependent on sales of our enterprise learning products and
services
For the six months ended June 30, 1999, we derived substantially all of our
revenue from the sale and licensing of our enterprise learning products and
services. These products and services are expected to continue to account for
substantially all of our revenue for at least the next twelve months.
Sales of these products and services may not grow. As a result, a reduction
in demand or an increase in competition with respect to any of our enterprise
learning products and services, including price competition, or a decline in
sales, particularly in the near term, could have a material adverse effect on
our overall revenues, particularly if revenues from our click2learn.com web site
do not grow.
Our market is a developing market and customers may not choose our products and
services over traditional training and education methods
Corporate training and education has historically been conducted primarily
through classroom instruction and has traditionally been performed by a
company's internal personnel. Many companies have invested heavily in their
current training solutions. Although technology-based training applications have
been available for several years, they currently account for only a small
portion of the overall training market.
Accordingly, our future success will depend upon, among other factors, the
extent to which companies adopt technology-based training solutions,
particularly online learning solutions, and the
<PAGE>
extent to which companies utilize the services or purchase products of third-
party providers. Technology-based training or online learning applications may
not become widespread and our products and services may not achieve commercial
success. In addition, companies that have already invested substantial resources
in other methods of corporate training may be reluctant to adopt a new strategy
that may limit or compete with their existing investments.
Even if companies implement technology-based training or online learning
solutions, they may still choose to design, develop, deliver or manage all or a
part of their education and training internally. The failure of technology-based
training or online learning to gain wider market acceptance or the failure of
companies to utilize third parties to design, develop, deliver or manage their
education and training applications would materially and adversely affect our
business.
Competition
The online learning market is highly fragmented and competitive, rapidly
evolving and subject to rapid technological change, with no single competitor
accounting for a dominant market share. Because of the lack of significant
barriers to entry in our market, we expect that new competitors will enter this
market in the future. Our competitors vary in size and scope and the breadth of
products and services offered. We face competition from
. developers of multimedia authoring tools with respect to our authoring
and authoring support products,
. sellers of off-the-shelf technology-based training courses that sell
management systems with their titles with respect to our learning
management systems,
. many small, regional online learning and technology-based training
services businesses,
. other web sites focused on learning and education, such as learn2.com
and headlights.com, with respect to our click2learn.com web site, as
well developers or resellers of training content who make their
content available over the Internet; and
. large professional consulting firms and in-house training departments,
with respect to all aspects of our enterprise learning solutions.
Increased competition could result in pricing pressures, reduced margins or
the failure of our products and services to achieve or maintain market
acceptance, any of which could have a material adverse effect on our business.
Several of our current and potential competitors have longer operating
histories and significantly greater financial, technical, marketing and other
resources and therefore may be able to respond more quickly to new or changing
opportunities, technologies, standards and customer requirements. Many of these
competitors also have broader and more established distribution channels that
may be used to deliver competing products or services directly to customers. If
these competitors were to bundle competing products or services for their
customers, the demand for our products and services might be substantially
reduced and our ability to market and sell products and services successfully
may be substantially diminished. In addition, the existence or announcement of
collaborative relationships involving our competitors could adversely affect our
ability to attract and retain customers.
<PAGE>
We will need to establish and maintain distribution relationships with other web
sites in order to attract traffic to click2learn.com
We intend to pursue distribution relationships with high-traffic web sites
in an effort to attract traffic to private-labeled areas of the click2learn.com
web site, as well as to the click2learn.com branded areas. There is intense
competition for placements on these sites, and we may not be able to enter into
these relationships on commercially reasonable terms, or at all. Even if we
enter into distribution relationships with these web sites, they themselves may
not attract significant numbers of users. Therefore, click2learn.com may not
receive additional users from these relationships. Moreover, we may have to pay
significant fees to establish these relationships or issue securities to
companies that operate these web sites, even if click2learn.com does not receive
additional users as a result.
We could face liability for information displayed on our click2learn.com web
site
We intend to post content developed by third parties on our click2learn.com
web site. Therefore, we may be subjected to claims for defamation, negligence,
copyright or trademark infringement or based on other theories relating to the
information we publish on our click2learn.com web site. There types of claims
have been brought, sometimes successfully, against online services as well as
other print publications in the past. Our insurance may not adequately protect
us against these types of claims.
We must keep pace with the rapid technological changes in our industry
The market for online learning products and services, particularly Internet
or intranet-based products and services, is characterized by rapid technological
advances, changes in customer requirements and frequent new product
introductions and enhancements. The introduction of products or services
embodying new technologies and the emergence of new industry standards could
render our existing products obsolete and unmarketable. We must respond rapidly
to developments related to Internet technology, hardware platforms and operating
systems and applicable programming languages and these developments will require
us to continue to make substantial product development investments. If we do not
anticipate or respond adequately to technological developments or customer
requirements, we could lose revenue or our competitive position.
We depend on the introduction of new versions of our software products and
click2learn.com and we must release our new products or enhancements in a timely
manner
The life cycles of our products are difficult to predict because the market
for our products is new and emerging and is characterized by rapid technological
change, changing customer needs and evolving industry standards. Therefore, we
must develop and sell new software products and enhancements to our existing
products on a timely and cost-effective basis. To be successful, our products
must keep pace with technological developments and emerging industry standards,
address the ever-changing and increasingly sophisticated needs of our customers
and achieve market acceptance. Likewise, we must continue to update and improve
our click2learn.com web site in order to continue attracting new users and
retaining existing users..
<PAGE>
In developing new products or updating click2learn.com, we may:
. fail to develop and market products or implement updates to
click2learn.com that respond to technological changes or evolving
industry standards in a timely or cost-effective manner;
. encounter products, capabilities or technologies developed by others
that render our products or the click2learn.com web site obsolete or
noncompetitive or that shorten the life cycles of our existing
products or the click2learn.com web site;
. experience difficulties that could delay or prevent the successful
development, introduction and marketing of these new products or
updates to the click2learn.com web site; or
. fail to develop new products or updates to the click2learn.com web
site that adequately meet the requirements of the marketplace or
achieve market acceptance.
We may fail to introduce or deliver new products or updates to the
click2learn.com web site on a timely basis or at all. In the past, we have
experienced delays in the commencement of commercial shipments of our new
releases of products, and we have not had significant experience in managing or
updating an e-commerce web site. If new releases or potential new products or
updates to click2learn.com are delayed or do not achieve market acceptance, we
could experience a delay or loss of revenues and customer frustration. Customers
may also delay purchases of our products in anticipation of future releases.
We could be subject to liability if our software or third party software
distributed by click2learn.com contains defects
Software products frequently contain errors or failures, especially when
first introduced or when new versions are released. We have in the past
discovered errors in our products and those of third parties after their initial
release. Because our enterprise learning products are targeted for enterprise
customers in an emerging market, customers and potential customers may have a
greater sensitivity to product defects than the market for software products
generally. These companies may also have more sensitivity to product integration
and interoperability of commercial shipments, product defects could result in
loss of revenue or delay in market acceptance, diversion of development
resources, damage to our reputation, or increased service and warranty costs.
If our professional services do not meet customer expectations, we could lose
customers and brand reputation
We could face liability from our customers if we do not meet their
expectations. Many of our professional services engagements require us to
develop learning applications to suit unique customer requirements. Our failure
or inability to meet a customer's expectations or requirements in the
performance of services could injure our business reputation or result in a
claim for damages against us, regardless of our responsibility for the failure.
We attempt to limit contractually our liability for damages arising from product
defects, negligent acts, errors, mistakes or omissions in rendering professional
services, however, these contractual protections are not always obtained and may
not be enforced or otherwise protect us from liability for damages. Our
insurance may not be sufficient to cover one or more claims.
<PAGE>
We could incur losses if we do not accurately price our fixed-price professional
services engagements
Many of our professional services projects are performed on a fixed-price
basis rather than on a time and materials basis. If we do not accurately predict
the costs of these projects, we could incur unexpected costs. If we do not
complete fixed-price engagements within budget, on time and to clients'
satisfaction, we would bear the risk of cost overruns.
Changing economic conditions could affect our potential customers' willingness
to purchase our products or services
Our revenues are subject to fluctuation as a result of general economic
conditions. A significant portion of our revenues are derived from the sale of
products and services to Fortune 1000 companies or government agencies, which
historically have adjusted their expenditures for education and training during
economic downturns. Should the economy weaken in any future period, these
organizations may not increase or may reduce their expenditures on education and
training, which could have an adverse effect on our business.
Our success depends on retaining our current key personnel and attracting
additional key personnel
Our future success depends on the performance of our senior management team
and other key employees. Our success will also depend on our ability to attract,
integrate, motivate and retain additional highly skilled technical, sales and
marketing and professional services personnel. There is intense competition for
these personnel. We do not have employment agreements with most of our
executives or other key employees. In addition, we do not maintain key person
life insurance for any of our officers or key employees.
The measures we have taken to protect our intellectual property may not be
sufficient
Despite our precautions, it may be possible for a third party to copy or
otherwise obtain and use our intellectual property or trade secrets without
authorization. In addition, others could independently develop substantially
equivalent intellectual property. Litigation may be necessary in the future to
enforce our intellectual property rights, to protect our trade secrets or to
determine the validity and scope of the proprietary rights of others. This
litigation could result in substantial costs and diversion of management and
technical resources.
We depend on licenses of third party content and technology and it would be
difficult to run our business without them
We use licensed third party technology in our products and in our
click2learn.com web site and license content from third parties for our
click2learn.com web site. We may not be able to continue to license technology
or content from third parties. We could also face liability if this licensed
technology or content infringed the rights of another party. Future licenses to
this technology and content may not
<PAGE>
be available to us on commercially reasonable terms or at all. The loss of or
inability to obtain or maintain any of these technology or content licenses
could result in delays in introduction of our products or could force us to
discontinue permitting access to portions of the click2learn web site until
equivalent technology, if available, is identified, licensed and integrated. It
could also require us to obtain content from other sources, which we may not be
able to do in a timely manner or at all.
We could be subject to litigation with respect to alleged infringement of
others' intellectual property
From time to time we have received, and we may in the future receive,
notice of claims of infringement of other parties' proprietary rights. We are
currently involved in litigation filed in May 1996 relating to a claim that our
ToolBook product lines infringe a patent owned by Richard B. Grant and seeking
an unspecified amount of damages. This action is still in the discovery stage
and it is not yet possible to assess its outcome. Although we have received an
opinion that our products do not infringe this patent and that the patent is
invalid, the outcome of litigation can never be predicted with certainty and the
cost of our defense of this claim, regardless of outcome, could have a material
adverse effect on our business.
Infringement or other claims could be asserted or prosecuted against us in
the future. Any such claims, with or without merit, could be time-consuming,
result in costly litigation and diversion of technical and management personnel.
They could also cause product shipment delays or require us to develop non-
infringing technology or enter into royalty or licensing agreements. These
royalty or licensing agreements, if required, may not be available on reasonable
terms, or at all.
We may need to obtain additional capital to run our business
As of June 30, 1999, we had cash and cash equivalents of $16.2 million. We
anticipate that this cash together with the proceeds we received from our sale
of stock to Go2Net will be sufficient to meet our working capital and capital
expenditures for at least the next 12 months. Our long-term liquidity will be
affected by numerous factors, including:
. demand for our products and services;
. the extent to which our products and services achieve market
acceptance;,
. the timing of and extent to which we invest in new technology;
. the expenses of sales and marketing and new product development;
. the extent to which competitors are successful in developing their own
products and services and increasing their own market share;
. the level and timing of revenues;
. the expenses of marketing our click2learn.com web site;
. the success of our clicklearn.com web site;
. amounts we pay for distribution relationships with other web sites;
and
<PAGE>
. the amount we pay for content for click2learn.com.
To the extent that resources are insufficient to fund activities, we may
need to raise additional funds. Additional funding, if needed, may not be
available on attractive terms, or at all. If adequate funds are not available on
acceptable terms, we may be unable to expand our business, develop or enhance
our products and services, adequately market the click2learn.com web site, take
advantage of future opportunities or respond to competitive pressures. If we
raise additional funds in an equity-based financing transaction, your equity
could be significantly diluted.
Our business could be adversely affected if the systems we use are not Year 2000
compliant or if our customers or potential customers alter their purchasing
patterns as a result of the Year 2000 problem
Although we believe that our software products, click2learn.com and our
internally developed systems and technology are Year 2000 compliant, our
information technology systems nevertheless could be substantially impaired or
cease to operate due to Year 2000 problems and our products could contain and
click2learn.com could contain undetected Year 2000 problems. Additionally, we
rely on information technology supplied by third parties. Year 2000 problems
experienced by us or any of these third parties could materially adversely
affect our business. Additionally, the Internet could face serious disruptions
arising from the Year 2000 problem.
Many potential customers have implemented policies that prohibit or
strongly discourage making changes or additions to their internal computer
systems until after January 1, 2000. We will experience fewer sales if potential
customers who might otherwise purchase our software products delay the purchase
and implementation of our products or services until after January 1, 2000 in an
effort to stabilize their internal computer systems in order to cope with the
Year 2000 problem or because their information technology budgets have been
diverted to address Year 2000 issues.
We may need to make acquisitions in order to remain competitive in our market.
Our business could be adversely affected as a result of any of these future
acquisitions
In the past, we have completed a number of acquisitions. In order to remain
competitive in the future, we may find it necessary to acquire additional
businesses, products or technologies. If we identify an appropriate acquisition
candidate, we may not be able to negotiate the terms of the acquisition
successfully, finance the acquisition, or integrate the acquired business,
products or technologies into our existing business and operations. Further,
completing a potential acquisition and integrating an acquired business will
cause significant diversions of management time and resources. If we consummate
one or more significant acquisitions in which the consideration consists of
stock or other securities, your equity could be significantly diluted. If we
were to proceed with one or more significant acquisitions in which the
consideration included cash, we could be required to use a substantial portion
of our available cash to consummate any acquisition. Acquisition financing may
not be available on favorable terms, or at all. In addition, we may be required
to amortize significant amounts of goodwill and other intangible assets in
connection with future acquisitions.
Our stock price has been and likely will continue to be volatile
<PAGE>
The market price of our common stock has been highly volatile since our
initial public offering. The stock market in general, and the stock prices of
technology companies in particular, has experienced significant price and volume
fluctuations. Factors that may have an impact on the price of our stock include:
. fluctuations in our operating results;
. announcements of technological innovations or new products or services
by us or our competitors;
. analysts' reports and projections; and
. general market conditions.
In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted against such a company. This type of litigation could result in
substantial costs and a diversion of our management's attention and resources.
One of our stockholders will have the ability to influence matters to be voted
upon by stockholders
As of June 30, 1999, Paul Allen owned approximately 42% of our common
stock. As a result, this stockholder will be able to influence all matters
requiring stockholder approval, including the election of directors and approval
of significant corporate transactions such as a merger, consolidation or sale of
substantially all of our assets. This concentration of ownership might have the
effect of delaying or preventing a change in control.
Risks Related to the Internet Industry
We depend on increasing use of the Internet. If the use of the Internet does
not grow as anticipated, our business will be seriously harmed
Our click2learn.com web site depends on the increased acceptance and use of
the Internet, both generally and as means for the purchase and delivery of
learning content. Rapid growth in the use of the Internet is a recent
phenomenon. As a result, acceptance and use may not continue to develop at
historical rates and a sufficiently broad base of business customers or
consumers may not adopt or continue to use the Internet, particularly for
training and education. Demand and market acceptance for recently introduced
services and products over the Internet are subject to a high level of
uncertainty, and there exist few proven services and products.
Our business would be seriously harmed if:
. use of the Internet and other online services does not continue to
increase or increases more slowly than expected;
. the technology underlying the Internet and other online services does
not effectively support any expansion that may occur;
. the Internet and other online services do not create a viable
commercial marketplace, reducing the need for our services;
<PAGE>
. the necessary communication and computer network technology for the
Internet does not continue to develop; or
. governmental regulation of the Internet increases.
Security risks and concerns may deter the use of the Internet for training and
education
A significant barrier to the widespread use of the Internet for
applications such as training and education is the secure transmission of
confidential information over public networks. Advances in computer
capabilities, new discoveries in the field of cryptography or other events or
developments could result in compromises or breaches of our security systems or
those of other web sites to protect proprietary information. If any well-
publicized security breach were to occur, the Internet may not become widely
accepted for commerce and communications. Anyone who circumvents our security
measures could misappropriate proprietary information or cause interruptions in
our services or operations.
The Internet is a public network, and data is sent over this network from
many sources. In the past, computer viruses, software programs that disable or
impair computers, have been distributed and have rapidly spread over the
Internet. Computer viruses could be introduced into our systems or those of our
customers or content providers, which could disrupt our click2learn.com web site
or make it inaccessible to users. We may be required to expend significant
capital and other resources to protect against the threat of security breaches
or to alleviate problems caused by breaches. To the extent that our activities
may involve the storage and transmission of proprietary information, such as
personal information or credit card numbers, security breaches could expose us
to a risk of loss or litigation and possible liability.
Our click2learn.com web site may experience performance problems or delays as a
result of high volumes of traffic or content
Our click2learn.com web site has only been recently introduced. If the
volume of traffic or content on the web site increases, the site may experience
slower response times or other problems. In addition, both Asymetrix and users
depend on Internet service providers, telecommunications companies and the
efficient operation of their computer networks and other computer equipment for
the operation of and access to our click2learn.com web site. Each of these has
experienced significant outages in the past and could experience outages, delays
and other difficulties due to system failures unrelated to our systems. Any
delays in response time or performance problems could cause users of our
click2learn.com web site to perceive this service as not functioning properly
and therefore not use our web site.
Increasing government regulation could limit the use of the Internet for
training and education
As Internet commerce evolves, we expect that federal, state or foreign
agencies will adopt regulations covering issues such as user privacy, pricing,
content and quality of products and services. It is possible that legislation
could expose companies involved in electronic commerce to liability, which could
limit the growth of electronic commerce generally. Legislation could dampen the
growth in Internet usage and decrease its acceptance as a communications and
commercial medium. If enacted, these laws, rules or regulations could limit the
market for our products and services.
<PAGE>
We collect sales taxes in respect of services that can be purchased through
our click2learn.com web site only in those jurisdictions in which we collect
sales taxes on our enterprise software and services. However, one or more states
may seek to impose sales tax collection obligations on out-of-state companies
like us that engage in or facilitate electronic commerce. A number of proposals
have been made at the state and local level that would impose additional taxes
on the sale of goods and services over the Internet. These proposals, if
adopted, could substantially impair the growth of electronic commerce and could
adversely affect our opportunity to derive financial benefit from such
activities.
Use of Proceeds
If the warrant described under "Selling Stockholder" is exercised for cash,
then we would receive the proceeds from exercise of the warrant. However,
Asymetrix will not receive any of the proceeds from the sale of shares by the
selling stockholder.
Selling Stockholder
The following table sets forth certain information known to Asymetrix with
respect to the beneficial ownership of Asymetrix's common stock as of September
15, 1999 by Go2Net, Inc., the selling stockholder. On August 18, 1999 Asymetrix
entered into a three-year marketing, distribution, licensing and co-branding
partnership with the selling stockholder. In connection with the commercial
agreement described above, the selling stockholder purchased 428,571 shares of
Common Stock and received a warrant to purchase 428,571 shares of Common Stock
at an exercise price of $7.00 per share.
The table assumes that the selling stockholder sells all of the shares
offered by him in this offering. However, Asymetrix is unable to determine the
exact number of shares that will actually be sold or when or if such sales will
occur. Asymetrix will not receive the proceeds of any shares sold under this
prospectus.
The selling stockholder has advised Asymetrix that it is the beneficial
owner of the shares being offered.
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Before Offering Shares Being Owned After Offering
------------------------- ------------ --------------------
Name Number Percent Offered Number Percent
---- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Go2Net, Inc. 857,142 5.82% 857,142 --- ---
</TABLE>
Plan of Distribution
We are registering the shares of common stock under (1) a Securities
Purchase Agreement, or the Agreement, dated as of August 18, 1999 by and among
Asymetrix and the selling stockholder and (2) a Common Stock Purchase Warrant,
or the Warrant, dated August 18, 1999 by and among Asymetrix and the selling
stockholder. The Warrant is exercisable until August 16, 2004 and has an
exercise price of $7.00 per share. The Agreement and the Warrant were issued in
connection with the commercial agreement entered by Asymetrix and the selling
stockholder described under "Selling Stockholder." We have filed a Registration
Statement of which this prospectus forms a part pursuant to registration rights
we granted to the selling stockholder pursuant to the Agreement and the Warrant.
To Asymetrix's knowledge, the selling stockholder has not entered into any
agreement, arrangement or understanding
<PAGE>
with any particular broker or market maker with respect to the shares offered
hereby, nor does Asymetrix know the identity of the brokers or market makers
that will participate in the offering.
The shares of common stock may be offered and sold from time to time by the
selling stockholder or by pledgees, donees, transferees and other successors in
interest. The selling stockholder will act independently of Asymetrix in making
decisions with respect to the timing, manner and size of each sale. Such sales
may be made over the Nasdaq National Market or otherwise, at then prevailing
market prices, at prices related to prevailing market prices or at negotiated
prices. The shares may be sold by one or more of the following:
. a block trade in which the broker-dealer engaged by the selling
stockholder will attempt to sell the shares as agent but may position
and resell a portion of the block as principal to facilitate the
transaction;
. purchases by the broker-dealer as principal and resale by such broker
or dealer for its account pursuant to this Prospectus; and
. ordinary brokerage transactions and transactions in which the broker
solicits purchasers.
Asymetrix has been advised by the selling stockholder that it has not, as
of the date hereof, entered into any arrangement with a broker-dealer for the
sale of shares through a block trade, special offering, or secondary
distribution of a purchase by a broker-dealer. In effecting sales, broker-
dealers engaged by the selling stockholder may arrange for other broker-dealers
to participate. Broker-dealers will receive commissions or discounts from the
selling stockholder in amounts to be negotiated immediately prior to the sale.
In connection with distributions of the shares or otherwise, the selling
stockholder may enter into hedging transactions with broker-dealers. In
connection with these transactions, broker-dealers may engage in short sales of
the shares in the course of hedging the positions they assume with selling
stockholder. The selling stockholder may also sell shares short and redeliver
the shares to close out such short positions. The selling stockholder may also
enter into option or other transactions with broker-dealers which require the
delivery to the broker-dealer of the shares, which the broker-dealer may resell
or otherwise transfer under this prospectus. A selling stockholder may also loan
or pledge the shares to a broker-dealer and the broker-dealer may sell the
shares so loaned or, upon a default, the broker-dealer may effect sales of the
pledged shares under this Prospectus.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from the selling stockholder in amounts to
be negotiated in connection with the sale. Broker-dealers and any other
participating broker-dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with the sales, and any commission,
discount or concession may be deemed to be underwriting discounts or commissions
under the Securities Act. In addition, any securities covered by this Prospectus
which qualify for sale under Rule 144 of the Securities Act may be sold under
Rule 144 rather than under this Prospectus.
Asymetrix has advised the selling stockholder that the anti-manipulation
rules under the Exchange Act may apply to sales of shares in the market and to
the activities of the selling stockholder and its affiliates. The selling
stockholder has advised Asymetrix that during such time as it may be engaged in
the attempt to sell shares registered, it will:
. not engage in any stabilization activity in connection with any of
Asymetrix's securities;
. not bid for or purchase any of Asymetrix's securities or any rights to
acquire Asymetrix's securities, or attempt to induce any person to
purchase any of Asymetrix's
<PAGE>
securities or rights to acquire Asymetrix's securities other than as
permitted under the Exchange Act;
. not effect any sale or distribution of the shares until after the
prospectus shall have been appropriately amended or supplemented, if
required, to set forth the terms thereof; and
. effect all sales of shares in broker's transactions through broker-
dealers acting as agents, in transactions directly with market makers
or in privately negotiated transactions where no broker or other third
party (other than the purchaser) is involved.
Under certain circumstances, Asymetrix has the ability to suspend the use
of this prospectus if, in the good faith judgment of the Board of Directors of
Asymetrix, it would be seriously detrimental to Asymetrix and its stockholders
for resales of shares to be made due to:
. the existence of a material development or potential material
development with respect to or involving Asymetrix which Asymetrix
would be obligated to disclose in the prospectus, which disclosure
would in the good faith judgment of the Board of Directors of
Asymetrix be premature or otherwise inadvisable at such time and would
have a material adverse affect upon Asymetrix and its stockholders, or
. the occurrence of any event that makes any statement made in the
prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or which requires
the making of any changes in the prospectus so that it will not
contain any untrue statement of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
This offering will terminate on the earlier of:
. the termination of the period during which Asymetrix is required to
maintain the effectiveness of the Registration Statement of which this
Prospectus forms a part, or
. the date on which all shares offered have been sold by the selling
stockholder.
Asymetrix has agreed to pay the expenses of registering the shares under
the Securities Act, including registration and filing fees, printing expenses,
administrative expenses and certain legal and accounting fees including fees and
disbursements of one counsel for the selling stockholder. The selling
stockholder will bear all discounts, commissions or other amounts payable to
underwriters, dealers or agents.
Asymetrix and the selling stockholder have agreed to indemnify each other
and certain other related parties for certain liabilities in connection with the
registration of the Shares offered hereby.
Upon the occurrence of any of the following events, this prospectus will be
amended to include additional disclosure before offers and sales of the
securities in question are made:
. to the extent the securities are sold at a fixed price or at a price
other than the prevailing market price, such price would be set forth
in the prospectus,
. if the securities are sold in block transactions and the purchaser
acting in the capacity of an underwriter wishes to resell, such
arrangements would be described in the prospectus,
<PAGE>
. if the selling stockholder sells to a broker-dealer acting in the
capacity as an underwriter, such broker-dealer will be identified in
the prospectus and
. if the compensation paid to broker-dealers is other than usual and
customary discounts, concessions or commissions, disclosure of the
terms of the transaction would be included in the prospectus.
Legal Matters
The validity of the shares of common stock offered hereby will be passed
upon for Asymetrix by Fenwick & West LLP, Palo Alto, California.
Experts
The consolidated balance sheets of Asymetrix, Inc., and subsidiaries as of
December 31, 1998 and 1997 and the consolidated statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1998, have been incorporated by reference herein and
in the registration statement in reliance upon the report of KPMG LLP,
independent auditors, incorporated by reference herein, and upon the authority
of said firm as experts in accounting and auditing.
<PAGE>
Documents Incorporated By Reference
In This Prospectus
This Prospectus incorporates documents by reference which are not presented
in this document or delivered with this document.
All documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act, after the date of this prospectus are incorporated
by reference into and to be a part of this prospectus from the date of filing of
those documents.
You should rely only on the information contained in this document or that
we have referred you to. We have not authorized anyone to provide you with
information that is different.
The following documents which were filed by Asymetrix with the Securities
and Exchange Commission, are incorporated by reference into this prospectus.
. Asymetrix's Annual Report on Form 10-K for the year ended December 31,
1998 and Asymetrix's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1999 and June 30, 1999
. Asymetrix's definitive Proxy Statement dated April 22, 1999, filed in
connection with the 1999 annual meeting of stockholders
. Asymetrix's Registration Statement on Form 8-A (SEC file number 000-
24289 originally filed on May 19, 1998 and declared effective June 12,
1998, which describes Asymetrix's common stock)
. All documents filed by us under Section 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act, after the date of this prospectus are
incorporated by reference into and to be a part of this prospectus
from the date of filing of those documents
Any statement contained in a document incorporated or deemed to be
incorporated herein by reference will be deemed to be modified or superseded for
purposes of this prospectus to the extent that a statement contained in this
prospectus or any other subsequently filed document that is deemed to be
incorporated in this prospectus by reference modifies or supersedes the
statement. Any statement so modified or superseded will not be deemed, except as
so modified or superseded, to constitute a part of this prospectus.
Where You Can Find More Information
The documents incorporated by reference into this prospectus are available
from us upon request. We will provide a copy of any and all of the information
that is incorporated by reference in this prospectus, not including exhibits to
the information unless those exhibits are specifically incorporated by reference
into this proxy statement prospectus, to any person, without charge, upon
written or oral request.
Requests for documents should be directed to Asymetrix Learning Systems,
Inc., Attention: Investor Relations, 110-110/th/ Avenue NE, Suite 700 Bellevue,
Washington 98004, telephone number (425) 637-1581.
<PAGE>
We file reports, proxy statements and other information with the Securities
and Exchange Commission. Copies of our reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the SEC:
Judiciary Plaza Citicorp Center Seven World Trade Center
Room 1024 5000 West Madison Street 13th Floor
450 Fifth Street, N.W. Suite 1400 New York, New York 10048
Washington, D.C. 20549 Chicago, Illinois 60661
Copies of these materials can also be obtained by mail at prescribed rates
from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549 or by calling the SEC at 1-800-SEC-0330. The SEC
maintains a web site that contains reports, proxy statements and other
information regarding each of us. The address of the SEC web site is
http://www.sec.gov.
Asymetrix has filed a registration statement under the Securities Act with
the Securities and Exchange Commission with respect to the shares to be sold by
the selling stockholder. This prospectus has been filed as part of the
registration statement. This prospectus does not contain all of the information
set forth in the registration statement because certain parts of the
registration statement are omitted in accordance with the rules and regulations
of the SEC. The registration statement is available for inspection and copying
as set forth above.
This prospectus does not constitute an offer to sell, or a solicitation of
an offer to purchase, the securities offered by this prospectus or the
solicitation of a proxy, in any jurisdiction to or from any person to whom or
from whom it is unlawful to make such offer, solicitation of an offer or proxy
solicitation in such jurisdiction. Neither the delivery of this prospectus nor
any distribution of securities pursuant to this prospectus shall, under any
circumstances, create any implication that there has been no change in the
information set forth or incorporated herein by reference or in our affairs
since the date of this prospectus.
<PAGE>
================================================================================
ASYMETRIX LEARNING SYSTEMS, INC.
857,142 Shares of
Common Stock
____________________
PROSPECTUS
____________________
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses to be paid by the Registrant in connection with this
offering are as follows:
NASDAQ Stock Market Fee $17,142.84
Securities and Exchange Commission registration fee $ 2,032.58
Accounting fees and expenses $10,000.00
Legal fees and expenses $10,000.00
Miscellaneous ---
Total $39,175.42
==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by the Delaware General Corporation Law (the "DGCL"), the
Registrant's Amended and Restated Certificate of Incorporation includes a
provision that eliminates the personal liability of its directors for monetary
damages for breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the Registrant or its
stockholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) under section 174 of
the DGCL (regarding unlawful dividends and stock purchases) or (iv) for any
transaction from which the director derived an improper personal benefit.
As permitted by the DGCL, the Registrant's Bylaws provide that (i) the
Registrant is required to indemnify its directors and officers to the fullest
extent permitted by the DGCL, subject to certain very limited exceptions, (ii)
the Registrant may indemnify its other employees and agents to the extent that
it indemnifies its officers and directors, unless otherwise required by law, its
Amended and Restated Certificate of Incorporation, its Bylaws or agreements,
(iii) the Registrant is required to advance expenses, as incurred, to its
directors and executive officers in connection with a legal proceeding to the
fullest extent permitted by the DGCL, subject to certain very limited exceptions
and (iv) the rights conferred in the Bylaws are not exclusive.
Registrant has entered into Indemnification Agreements with each of its
current directors and executive officers to give such directors and officers
additional contractual assurances regarding the scope of the indemnification set
forth in the Registrant's Amended and Restated Certificate of Incorporation and
Bylaws and to provide additional procedural protections. At present, there is no
pending litigation or proceeding involving a director, officer or employee of
the Registrant regarding which indemnification is sought, nor is the Registrant
aware of any threatened litigation that may result in claims for
indemnification.
<PAGE>
ITEM 16. EXHIBITS.
The following exhibits are filed herewith or incorporated by reference herein:
4.1 - Amended and Restated Certificate of Incorporation (incorporated herein
by reference to Exhibit 3.04 of the Registrant's Registration Statement
on Form S-1 (File No. 333-49037) and incorporated herein by reference
("Form S-1").
4.2 - Registrant's Bylaws (incorporated herein by reference to Exhibit 3.06 of
the Form S-1).
4.3 - Form of Specimen Certificate for Registrant's Common Stock (incorporated
herein by reference to Exhibit 4.02 of the Form S-1).
4.4 - Securities Purchase Agreement dated as of August 18, 1999.
4.5 - Common Stock Purchase Warrant dated as of August 18, 1999.
5.1 -- Opinion of Fenwick & West LLP regarding the legality of common stock.
23.1 -- Independent Auditors' Consent.
23.2 -- Consent of Fenwick & West LLP (included in Exhibit 5.1).
24.1 -- Power of Attorney (see page II-5).
- ---------------------------
<PAGE>
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement: (i) to include
any prospectus required by Section 10(a)(3) of the Securities Act of 1933 (the
"Securities Act"); (ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information in the Registration Statement; and (iii)
to include any material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change to
such information in the Registration Statement; provided, however, that (i) and
(ii) do not apply if the information required to be included in a post-effective
amendment thereby is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
(the "Exchange Act") that are incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by
reference in this Registration Statement shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant certifies
that it has reasonable grounds to believe that it meets all for the requirements
for filing on Form S-3 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Bellevue, State of Washington, on the ___ day of September, 1999.
ASYMETRIX LEARNING SYSTEMS, INC.
By: /s/ James A. Billmaier
____________________________________________
James A. Billmaier, Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that each individual whose signature appears below
constitutes and appoints James A. Billmaier and John D. Atherly, and each of
them, his attorneys-in-fact, and agents, each with the power of substitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to sign any registration statement for the same offering covered
by this Registration Statement that is to be effective upon filing pursuant to
Rule 462(b) promulgated under the Securities Act of 1933, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or his or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Name Title Date
- ---- ----- ----
<S> <C> <C>
Principal Executive Officer:
September 20, 1999
/s/ James A. Billmaier Chief Executive Officer and
___________________________ Director
James A. Billmaier
Principal Financial Officer and
Principal Accounting Officer:
/s/ John D. Atherly Vice President, Finance and September 20, 1999
___________________________ Administration and Chief Financial Officer
John D. Atherly
Additional Directors:
/s/ Sally Narodick Director September 20, 1999
___________________________
Sally Narodick
/s/ Joseph DiNucci Director September 20, 1999
___________________________
Joseph DiNucci
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Ronald S. Posner Director September 20, 1999
__________________________
Ronald S. Posner
/s/ Kevin Oakes President, General Manager, September 20, 1999
__________________________ Learning Services and Director
Kevin Oakes
/s/ Shelley Harrison Director September 20, 1999
__________________________
Shelley Harrison, Ph.D.
/s/ Bert Kolde Chairman of the Board September 20, 1999
__________________________
Bert Kolde
</TABLE>
<PAGE>
EXHIBIT INDEX
Number Exhibit Title
- ------ -------------
4.1 Amended and Restated Certificate of Incorporation (incorporated herein by
reference to Exhibit 3.04 of the Form S-1.
4.2 Registrant's Bylaws (incorporated herein by reference to Exhibit 3.06 of
the Form S-1).
4.3 Form of Specimen Certificate for Registrant's Common Stock (incorporated
herein by reference to Exhibit 4.02 of the Form S-1).
4.4 Securities Purchase Agreement dated as of August 18, 1999.
4.5 Common Stock Purchase Warrant dated as of August 18, 1999.
5.1 Opinion of Fenwick & West LLP regarding the legality of common stock.
23.1 Independent Auditors' Consent.
23.2 Consent of Fenwick & West LLP (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-5).
<PAGE>
EXHIBIT 4.4
EXECUTION COPY
ASYMETRIX LEARNING SYSTEMS, INC.
SECURITIES PURCHASE AGREEMENT
Dated as of August 18, 1999
<PAGE>
ASYMETRIX LEARNING SYSTEMS, INC.
SECURITIES PURCHASE AGREEMENT
Dated as of August 18, 1999
INDEX
-----
ARTICLE I PURCHASE AND SALE OF SHARES -1-
---------------------------
1.1 Purchase and Sale -1-
-----------------
1.2 Purchase and Sale of Warrant -1-
----------------------------
1.3 Closing -1-
-------
1.4 Use of Proceeds -2-
---------------
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY -2-
----------------------------------------
2.1 Organization and Corporate Power -2-
--------------------------------
2.2 Authorization -2-
-------------
2.3 Government Approvals -3-
--------------------
2.4 Authorized and Outstanding Stock -3-
--------------------------------
2.5 Subsidiaries -4-
------------
2.6 Securities Law Compliance -4-
-------------------------
2.7 Commission Documents; Financial Information -5-
-------------------------------------------
2.8 Absence of Certain Events; No Material Adverse Change -5-
-----------------------------------------------------
2.9 Litigation -7-
----------
2.10 Compliance with Laws and Other Instruments -7-
------------------------------------------
2.11 Taxes -8-
-----
2.12 Intellectual Property; Proprietary Rights; Employee
---------------------------------------------------
Restrictions -8-
------------
2.13 Agreements of Directors, Officers and Employees -10-
-----------------------------------------------
2.14 Governmental and Industrial Approvals -11-
-------------------------------------
2.15 Federal Reserve Regulations -11-
---------------------------
2.16 Contracts and Commitments -11-
-------------------------
2.17 Employee Matters -11-
----------------
2.18 No Brokers or Finders -12-
---------------------
2.19 Transactions with Affiliates -12-
----------------------------
2.20 Assumptions, Guarantees, etc. of Indebtedness of Other
------------------------------------------------------
Persons -12-
-------
2.21 Corporate Records -12-
-----------------
2.22 Year 2000 -12-
---------
2.23 Disclosures -13-
-----------
ARTICLE III AFFIRMATIVE COVENANTS OF THE COMPANY -13-
------------------------------------
3.1 Inspection -13-
----------
3.2 Board of Directors Meetings; Materials -14-
--------------------------------------
3.3 The Company SEC Documents -14-
-------------------------
<PAGE>
3.4 Grant Matter -14-
------------
ARTICLE IV NEGATIVE COVENANTS OF THE COMPANY -15-
---------------------------------
4.1 Dealings with Affiliates -15-
------------------------
4.2 No Conflicting Agreements -15-
-------------------------
ARTICLE V INVESTMENT REPRESENTATIONS -15-
--------------------------
5.1 Representations and Warranties -15-
------------------------------
5.2 Permitted Sales; Legends -16-
------------------------
ARTICLE VI CONDITIONS OF PURCHASER'S OBLIGATION -17-
------------------------------------
6.1 Effect of Conditions -17-
--------------------
6.2 Representations and Warranties -17-
------------------------------
6.3 Performance -17-
-----------
6.4 Warrant Certificate -17-
-------------------
6.5 Opinion of Counsel -17-
------------------
6.6 Certified Documents, etc -17-
------------------------
6.7 No Material Adverse Change -17-
--------------------------
6.8 Co-Branding and Promotion Agreement -17-
-----------------------------------
6.9 Consents and Waivers -18-
--------------------
6.10 Common Stock Certificates -18-
-------------------------
ARTICLE VII CONDITIONS OF THE COMPANY'S OBLIGATION -18-
--------------------------------------
7.1 Effect of Conditions -18-
--------------------
7.2 Representations and Warranties; Performance -18-
-------------------------------------------
7.3 Co-Branding and Promotion Agreement -18-
-----------------------------------
7.4 Consideration for the Shares -18-
----------------------------
ARTICLE VIII REGISTRATION RIGHTS AGREEMENT -18-
-----------------------------
8.1 Certain Definitions -18-
-------------------
8.2. Registration -19-
------------
8.2.1 Registration of Registrable Securities -19-
--------------------------------------
8.2.2 Piggyback Registration -20-
----------------------
8.2.3 Expenses of Registration -20-
------------------------
8.2.4 Registration Procedures -20-
-----------------------
8.2.5 Suspension of Registration Statement -21-
------------------------------------
8.3 Indemnification -22-
---------------
8.4 Information by the Purchaser -24-
----------------------------
8.5 Rule 144 Reporting -24-
------------------
8.6 Transfer of Registration Rights -25-
-------------------------------
8.7. Pari Passu Rights -25-
-----------------
8.8 Lock-Up Agreement -25-
-----------------
ARTICLE IX CERTAIN DEFINITIONS -25-
-------------------
<PAGE>
ARTICLE X TERMINATION -28-
-----------
10.1 Termination by Mutual Written Consent -28-
-------------------------------------
10.2 Termination for Breach -28-
----------------------
10.3 Termination for Delay -28-
---------------------
10.4 Rights After Termination -28-
------------------------
ARTICLE XI MISCELLANEOUS -28-
-------------
11.1 Survival of Representations -28-
---------------------------
11.2 Assignment; Parties in Interest -28-
-------------------------------
11.3 RESERVED -29-
--------
11.4 Amendments and Waivers -29-
----------------------
11.5 Notices -29-
-------
11.6 Expenses -30-
--------
11.7 Counterparts -30-
------------
11.8 Effect of Headings -30-
------------------
11.9 Adjustments -30-
-----------
11.10 Governing Law -31-
-------------
11.11 RESERVED -31-
--------
11.12 Waiver of Jury Trial -31-
--------------------
<PAGE>
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT is entered into as of August 18,
1999 by and between Asymetrix Learning Systems, Inc., a Delaware corporation
(the "Company"), and Go2Net, Inc., a Delaware corporation (the "Purchaser").
WHEREAS, the Purchaser has indicated a desire to purchase from the
Company 428,571 shares of the Company's common stock, $0.01 par value per share
("Common Stock"); and
WHEREAS, the Company has indicated a desire to sell such shares of
Common Stock to the Purchaser and to grant the Purchaser a Warrant (the
"Warrant") to purchase 428,571 shares of Common Stock; and has agreed to
register such securities under the Securities Act (as such term is defined
herein) on the terms set forth herein.
NOW, THEREFORE, for and in consideration of the mutual consents and
agreements herein contained, the parties hereto do hereby covenant and agree as
follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
---------------------------
1.1 Purchase and Sale. Subject to the terms and conditions
-----------------
hereinafter set forth, at the Closing (as defined below) the Company shall issue
and sell to the Purchaser and the Purchaser shall purchase from the Company,
428,571 shares (the "Purchased Shares") of the Common Stock, for an aggregate
purchase price of Three Million Dollars ($3,000,000) payable as provided in
Section 1.3. The Common Stock shall have the rights, terms and privileges set
forth in the Company's Amended and Restated Certificate of Incorporation. Terms
used herein as defined terms that are not defined in the context hereof shall
have the meaning set forth in Article IX.
1.2 Purchase and Sale of Warrant. At the Closing, the Company will
----------------------------
grant to the Purchaser the Warrant to purchase an aggregate of 428,571 shares of
the Company's Common Stock at a per share exercise price of $7.00 (as may be
adjusted for stock splits, dividends, recapitalizations, and the like). The
Warrant will be issued pursuant to a Warrant Certificate in the form of Exhibit
A attached hereto (the "Warrant Certificate"). The shares of Common Stock
issuable upon exercise of the Warrant purchased pursuant to this Section 1.2 are
referred to herein as the "Warrant Shares." The Company has authorized and
reserved and hereby covenants that it will continue to reserve, free of any
preemptive rights or encumbrances, a sufficient number of authorized but
unissued shares of Common Stock for issuance upon exercise of the Warrant.
1.3 Closing. Subject to the satisfaction or waiver of the conditions
-------
set forth in Articles VI and VII hereof, a closing (the "Closing") of the sale
and purchase of the Purchased Shares and the grant of the Warrant above shall
take place at the offices of
<PAGE>
Asymetrix Learning Systems, Inc., 110-110th Avenue NE, Bellevue, Washington
98004, at 10:00 A.M., on August 16, 1999, or such other date, time and place as
shall be mutually agreed upon by the Company and the Purchaser (the "Closing
Date"). At the Closing, the Company will deliver the Warrant Certificate and
will instruct its transfer agent to issue a certificate for the Purchased Shares
being acquired by the Purchaser in the Purchaser's name and to deliver such
certificate to Purchaser within ten (10) days of the Closing Date.
1.4 Use of Proceeds. As an integral part of the purpose and structure
---------------
of the financing contemplated herein, the Company shall use the proceeds
received upon the sale of the Purchased Shares at the Closing to fund general
working capital, including, but not limited to, the business arrangement between
the Company and the Purchaser as contemplated by that certain Co-Branding and
Promotion Agreement described in Section 6.8 hereof, and to fund other
activities related to the click2learn portal, subject to the compliance with the
covenants and agreements contained herein and in the Company's Amended and
Restated Certificate of Incorporation.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
In order to induce the Purchaser to purchase the Purchased Shares and
the Warrant, the Company makes the following representations and warranties
which shall be true, correct and complete in all respects on the date hereof.
2.1 Organization and Corporate Power. The Company and, except as set
--------------------------------
forth on Schedule 2.1, each of its Subsidiaries, is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own its properties and to carry on its business as presently
conducted. The Company and each of its Subsidiaries is duly licensed or
qualified to do business as a foreign corporation in each jurisdiction wherein
the character of its property or the nature of the activities presently
conducted by it, makes such qualification necessary and where the failure to so
qualify would have a Material Adverse Effect.
2.2 Authorization. The Company has all necessary corporate power and
-------------
has taken all necessary corporate action required for the due authorization,
execution, delivery and performance by the Company of this Agreement, the
Warrant Certificate, the Co-Branding and Promotion Agreement referred to in
Section 6.8 and any other agreements or instruments executed by the Company in
connection herewith or therewith (collectively, the "Related Agreements"), and
the consummation of the transactions contemplated herein or therein, and for the
due authorization, issuance and delivery of the Purchased Shares, the Warrant,
the Warrant Shares issuable upon exercise of the Warrant. Sufficient shares of
authorized but unissued Common Stock have been reserved for issuance upon
conversion of the Warrant Shares. The issuance of the Purchased Shares
<PAGE>
and the Warrant does not, the Warrant Shares issuable upon exercise of the
Warrant will not, require any further corporate action and is not and will not
be subject to any preemptive right, right of first refusal or the like. This
Agreement, the Related Agreements and the other agreements and instruments
executed by the Company in connection herewith or therewith will each be a valid
and binding obligation of the Company enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization and moratorium laws
and other laws of general application affecting enforcement of creditors' rights
generally.
2.3 Government Approvals. No consent, approval, license or
--------------------
authorization of, or designation, declaration or filing with, any court or
governmental authority is or will be required on the part of the Company in
connection with the execution, delivery and performance by the Company of this
Agreement, any of the Related Agreements and any other agreements or instruments
executed by the Company in connection herewith or therewith, or in connection
with the issuance of the Purchased Shares and Warrant or the issuance of the
Warrant Shares upon exercise of the Warrant, except for (i) those which have
already been made or granted and (ii) the filing of registration statements with
the Commission pursuant to Article VIII hereof and filings to be made with the
Nasdaq National Market and any applicable state securities commission.
2.4 Authorized and Outstanding Stock.
--------------------------------
(a) The authorized capital stock of the Company (immediately
prior to the Closing and the transactions contemplated by Section 1.3 hereof)
will consist of 40,000,000 shares of Common Stock and 2,000,000 shares of
Preferred Stock.
(b) The issued and outstanding capital stock of the Company
(immediately prior to the Closing and the transactions contemplated by Section
1.3 hereof) will consist of (i) 14,234,925 shares of Common Stock and (ii) no
shares of Preferred Stock. In addition, (i) 428,571 shares of Common Stock have
been reserved for issuance upon the exercise of the Warrant, (ii) options to
purchase 4,259,736 shares of Common Stock are currently outstanding and
unexercised and an additional 1,589,933 shares are reserved for issuance under
the Company's 1995 Combined Incentive and Non-qualified Stock Option Plan, 1998
Equity Incentive Plan and the 1998 Directors Stock Option Plan (collectively the
"Option Plans"), (iii) 14,573 shares of Common Stock have been reserved for
issuance upon the exercise of an option granted to Leo Lucas; and (iv) 4,500,000
shares of Common Stock have been reserved for issuance under the Company's 1999
Employee Stock Purchase Plan (the "Stock Purchase Plan"). All of the issued and
outstanding shares of capital stock of the Company are, and when issued in
accordance with the terms hereof, the Purchased Shares and the Warrant Shares
will be, duly authorized and validly issued and fully paid and non-assessable,
with no personal liability attaching to the ownership thereof and will be free
and clear of all Liens, claims, charges, Encumbrances, or transfer restrictions
imposed by or through the Company, except for restrictions imposed by Federal or
state securities or "blue sky"
<PAGE>
laws and except for those imposed pursuant to this Agreement. The designations,
powers, preferences, rights, qualifications, limitations and restrictions in
respect of each class or series of capital stock of the Company are as set forth
in the certified corporate charter of the Company delivered under Section 6.6
hereof and all such designations, powers, preferences, rights, qualifications,
limitations and restrictions are valid, binding and enforceable in accordance
with their terms and in accordance with applicable law.
(c) Except as set forth in Schedule 2.4(c) hereto or as provided
---------------
in this Agreement, (i) no subscription, warrant, option, convertible security or
other right (contingent or otherwise) to purchase or acquire any shares of
capital stock of the Company is authorized or outstanding, (ii) there is not any
commitment of the Company to issue any subscription, warrant, option,
convertible security or other such right or to issue or distribute to holders of
any shares of its capital stock any evidences of indebtedness or assets of the
Company, except for stock options granted to employees in connection with offers
of employment made in the ordinary course of business, (iii) the Company has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any shares of its capital stock or any interest therein or to pay any dividend
or make any other distribution in respect thereof and (iv) there are no
agreements, written or oral, between the Company and any holder of its capital
stock or, to the Company's knowledge, among any holders of its capital stock,
relating to the acquisition, disposition or voting of the capital stock of the
Company. No person or entity is entitled to (i) any preemptive right, right of
first refusal or similar rights granted by the Company with respect to the
issuance of any capital stock of the Company. Except as set forth on Schedule
--------
2.4(c), the SEC Documents, or as provided in Article VIII of this Agreement, no
- ------
person or entity has been granted rights by the Company with respect to the
registration of any capital stock of the Company under the Securities Act of
1933, as amended (the "Securities Act"). All of the issued and outstanding
shares of the Company's capital stock have been offered, issued and sold by the
Company in compliance with applicable Federal and state securities laws.
2.5 Subsidiaries. Except as set forth in the SEC Documents or
------------
Schedule 2.5 hereto, and except for investments in marketable securities made in
- ------------
the ordinary course of business where the Company has an immaterial equity
position, the Company has no Subsidiaries nor any investment or other interest
in, or any outstanding loan or advance which, individually or in the aggregate,
exceeds $60,000, to or from, any Person, including, without limitation, any
officer, director or shareholder. The Company owns of record and beneficially,
free and clear of all Liens, charges, restrictions, claims and Encumbrances of
any nature, all of the issued and outstanding capital stock of each of its
Subsidiaries. All of the Company's Subsidiaries are 100% wholly owned by the
Company.
2.6 Securities Law Compliance. Assuming the representations and
-------------------------
warranties of the Purchaser set forth in Section 5.1 hereof are true and correct
in all respects, the offer and sale of the Purchased Shares, the Warrant and the
Warrant
<PAGE>
Shares (collectively, the "Issuable Securities") pursuant to this Agreement will
be exempt from the registration requirements of the Securities Act. Neither the
Company nor any person acting on its behalf has, in connection with the offering
of the Issuable Securities, engaged in (i) any form of general solicitation or
general advertising (as those terms are used within the meaning of Rule 502(c)
under the Securities Act), (ii) any action involving a public offering within
the meaning of Section 4(2) of the Securities Act, or (iii) any action that
would require the registration under the Securities Act of the offering and sale
of the Issuable Securities pursuant to this Agreement or that would violate
applicable state securities or "blue sky" laws. The Company has not made and
will not prior to the Closing make, directly or indirectly, any offer or sale of
the Issuable Securities or of securities of the same or similar class as the
Issuable Securities if, as a result, the offer and sale contemplated hereby
could fail to be entitled to exemption from the registration requirements of the
Securities Act. As used herein, the terms "offer" and "sale" have the meanings
specified in Section 2(3) of the Securities Act.
2.7 Commission Documents; Financial Information.
-------------------------------------------
(a) The Company has made available to the Purchaser true and
complete copies of all SEC Documents filed with the Commission prior to the date
hereof. As of their respective filing dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act, Exchange Act and
the rules and regulations of the Commission thereunder applicable to such SEC
Documents, and as of their respective dates none of the SEC Documents 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 comply as of their respective dates as to
form in all material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto (except as may be
indicated in the notes thereto or, in the case of the unaudited statements, as
permitted by Form 10-Q promulgated by the Commission), and present fairly (or
will present fairly) as of their respective dates the consolidated financial
position of the Company and the Subsidiaries as at the dates thereof and the
consolidated results of their operations and their consolidated cash flows for
each of the respective periods, in conformity with GAAP. As used in this
Agreement, the consolidated balance sheet of the Company and its Subsidiaries at
June 30, 1999 previously provided to the Purchaser is hereinafter referred to as
the "Balance Sheet," and June 30, 1999 is hereinafter referred to as the
"Balance Sheet Date."
(b) Except as and to the extent expressly set forth in the
Balance Sheet, or the notes, schedules or exhibits thereto, or as disclosed in
the SEC Documents, (i) as of the Balance Sheet Date, neither the Company nor the
Subsidiaries had any material liabilities or obligations (whether absolute,
contingent, accrued or otherwise) that would be required to be included on the
Company's balance sheet or in the notes, schedules or exhibits thereto prepared
in accordance with GAAP and (ii) since the Balance Sheet Date,
<PAGE>
the Company and its Subsidiaries have not incurred any such material liabilities
or obligations other than in the ordinary course of business.
2.8 Absence of Certain Events; No Material Adverse Change. Except as
-----------------------------------------------------
disclosed in the SEC Documents filed with the Commission prior to the date
hereof, since the Balance Sheet Date, the Company and its Subsidiaries each has
conducted its business operations in the ordinary course and there has not
occurred any event or condition having or, that is reasonably likely to have, a
Material Adverse Effect. Without limiting the generality of the foregoing, other
than as is disclosed in the SEC Documents filed with the Commission prior to the
date hereof or on Schedule 2.8 hereto, since the Balance Sheet Date there has
------------
not occurred:
(a) any change or agreement to change the character or nature of
the business of the Company or any of its Subsidiaries;
(b) any purchase, sale, transfer, assignment, conveyance or
pledge of the assets or properties of the Company or any of its Subsidiaries,
except in the ordinary course of business;
(c) any waiver or modification by the Company or any of its
Subsidiaries of any right or rights of substantial value, or any payment, direct
or indirect, in satisfaction of any liability, in each case, having a Material
Adverse Effect;
(d) any liability, contract, agreement, license or other
commitment entered into or assumed by or on behalf of the Company or any of its
Subsidiaries which involve future payments or receipts of payments by the
Company in excess of $60,000, relating to the business, assets or properties of
the Company or any of its Subsidiaries, whether oral or written, except in the
ordinary course of business;
(e) any loan, advance or capital expenditure in excess of
$60,000 by the Company or any of its Subsidiaries, except for such loans,
advances and capital expenditures made in the ordinary course of business;
(f) any change in the accounting principles, methods, practices
or procedures followed by the Company in connection with the business of the
Company or any change in the depreciation or amortization policies or rates
theretofore adopted by the Company in connection with the business of the
Company and its Subsidiaries;
(g) any declaration or payment of any dividends, or other
distributions in respect of the outstanding shares of capital stock of the
Company or any of its Subsidiaries (other than dividends declared or paid by
wholly-owned Subsidiaries);
(h) any issuance of any shares of capital stock of the Company
or any of its Subsidiaries or any other change in the authorized capitalization
of the Company or
<PAGE>
any of its Subsidiaries, except as contemplated by this Agreement or issuances
of shares of capital stock to employees pursuant to the Option Plans or the
Stock Purchase Plan;
(i) any grant or award of any options, warrants, conversion
rights or other rights to acquire any shares of capital stock of the Company or
any of its Subsidiaries, except as contemplated by this Agreement or except
pursuant to the Option Plans or the Stock Purchase Plan in the ordinary course
of business consistent with past practice;
(j) (a) any granting by the Company or any of its Subsidiaries
to any employee earning in excess of $100,000 per year any increase in
compensation, except in the ordinary course of business consistent with prior
practice or as was required under an employment agreement in effect as of the
date of the most recent audited financial statements included in the SEC
Documents, (b) any granting by the Company or any of its Subsidiaries to any
employee earning in excess of $100,000 per year of any increase in severance or
termination pay, except as was required under any employment, severance, or
termination agreement in effect as of the date of the most recent audited
financial statements included in the SEC Documents, or (c) any entry by the
Company or any of its Subsidiaries into any employment, severance, or
termination agreement with any employee earning in excess of $100,000 per year;
or
(k) any adoption, or amendment in any material respect, by the
Company or any of its Subsidiaries of any collective bargaining agreement or any
written bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, change of control, retention, disability, death
benefit, hospitalization, medical, or other plan providing benefits to any
current or former employee, officer, or director of the Company or any of its
Subsidiaries (collectively, "Benefit Plans"); or
(l) entering into any commitment (contingent or otherwise) to do
any of the foregoing.
2.9 Litigation. Except as otherwise set forth on Schedule 2.9 or in
---------- ------------
the SEC Documents, there is no litigation or governmental proceeding or
investigation pending or, to the knowledge of the Company, threatened, against
the Company or any Subsidiary or affecting any of the Company's or such
Subsidiary's properties or assets, or, to the knowledge of the Company, against
any officer, key employee or shareholder of the Company or any Subsidiary in his
or her capacity as such, nor, to the knowledge of the Company, has there
occurred any event or does there exist any condition on the basis of which any
litigation, proceeding or investigation might properly be instituted with any
substantial chance of recovery, except for any such litigation, proceeding or
investigation which, if determined adversely to the Company, would not have a
Material Adverse Effect. Neither the Company, any Subsidiary nor, to the
knowledge of the Company, any officer, key employee or shareholder of the
Company, in his or her capacity as such, is in default with respect to any
order, writ, injunction, decree, ruling or decision of any court, commission,
board or other government agency.
<PAGE>
2.10 Compliance with Laws and Other Instruments. The Company and its
------------------------------------------
Subsidiaries are in compliance with all of the provisions of this Agreement and
of its charter and by-laws, and in all respects with the provisions of each
mortgage, indenture, lease, license, other agreement or instrument, and each
judgment, decree, judicial order, statute, and regulation (whether issued under
domestic, foreign or international law) by which any of them is bound or to
which any of them or any of their respective properties are subject (including,
but not limited to, agreements or instruments, judgments, decrees, judicial
orders, statutes, and regulations related to environmental matters), except
where such noncompliance would not have a Material Adverse Effect. Neither the
execution, delivery or performance of this Agreement and the Related Agreements,
nor the offer, issuance, sale or delivery of the Purchased Shares and Warrant,
or the Warrant Shares upon exercise of the Warrant, with or without the giving
of notice or passage of time, or both, will violate, or result in any breach of,
or constitute a default under, or result in the imposition of any encumbrance
upon any asset of the Company or any Subsidiary pursuant to any provision of the
Company's or such Subsidiary's charter or by-laws, or any statute, rule or
regulation, contract, lease, judgment, decree or other document or instrument by
which the Company or any Subsidiary is bound or to which the Company or any
Subsidiary or any of their respective properties are subject, or, to the
knowledge of the Company, will cause the Company or any Subsidiary to lose the
benefit of any right or privilege it presently enjoys or, to the knowledge of
the Company, cause any Person who is expected to normally do business with the
Company or any Subsidiary to discontinue to do so on the same basis, any of
which would, individually or in the aggregate, have a Material Adverse Effect.
2.11 Taxes. Except as set forth in Schedule 2.11, the Company and each
----- -------------
Subsidiary has filed all Tax returns (including statements of estimated Taxes
owed) required to be filed within the applicable periods for such filings and
has paid all Taxes required to be paid, and has established adequate reserves
(net of estimated Tax payments already made) for the payment of all Taxes
payable in respect to the period subsequent to the last periods covered by such
returns. Except as set forth on Schedule 2.11, no deficiencies for any Tax are
-------------
currently assessed against the Company or any Subsidiary, and no Tax returns of
the Company or any Subsidiary have been audited during the last three (3) years,
and, there is no such audit pending or, to the knowledge of the Company,
contemplated. There is no Tax Lien, whether imposed by any federal, state or
local Taxing authority, outstanding against the assets, properties or business
of the Company or any Subsidiary. For the purposes of this Agreement, the terms
"Tax" and "Taxes" shall include all federal, state, local and foreign taxes,
including income, franchise, property, sales, withholding, payroll and
employment taxes.
2.12 Intellectual Property; Proprietary Rights; Employee Restrictions.
----------------------------------------------------------------
For purposes of this Agreement, "Intellectual Property Rights" shall mean all
registered copyrights, copyright registrations and copyright applications,
trademark registrations
<PAGE>
and applications for registration, patents and patent applications, trademarks,
service marks, trade names and Internet domain names that are used by the
Company in the Company's business as presently conducted, together with all
other intellectual property rights owned by the Company and used in connection
with its business and (i) all licenses, assignments and releases of intellectual
property rights of others in material works embodied in the Company's products,
(ii) any and all intellectual property rights, licenses, databases, computer
programs and other computer software user interfaces, know-how, trade secrets,
customer lists, proprietary technology, processes and formulae, source code,
object code, algorithms, architecture, structure, display screens, layouts,
development tools, instructions, templates and marketing materials created by or
on behalf of the Company, and (iii) inventions, trade dress, logos and designs
created by or on behalf of the Company. All Intellectual Property Rights
purported to be owned by the Company are owned free and clear by the Company by
operation of law or, to the knowledge of the Company, have been validly assigned
to the Company, including, without limitation, such Intellectual Property Rights
which were developed, worked on or otherwise held by an employee, officer,
consultant or otherwise. All licenses, assignments, and releases of Intellectual
Property Rights are valid and binding agreements of the parties thereto,
enforceable in accordance with their terms, subject to applicable bankruptcy,
insolvency, reorganization and moratorium laws and other laws of general
application affecting enforcement of creditors' rights generally. All services
provided to the Company by non-employees in respect of the creation,
modification or improvement of any Intellectual Property Rights of the Company
(including, without limitation, software, hardware, copyrightable works and the
like) have been performed pursuant to agreements with the Company that assign to
the Company ownership of such Intellectual Property Rights, each of which is a
valid and binding agreement of the parties thereto, enforceable in accordance
with its terms subject to applicable bankruptcy, insolvency, reorganization and
moratorium laws and other laws of general application affecting enforcement of
creditors' rights generally. The Intellectual Property Rights are sufficient in
all material respects to carry on the business of the Company as presently
conducted. The Company has exclusive ownership of or license to use all
Intellectual Property Rights as owned or licensed by the Company or has obtained
any licenses, releases or assignments reasonably necessary to use all third
parties' Intellectual Property Rights in works embodied in the Company's
products. To the knowledge of the Company, the present business activities or
products of the Company and any of its Subsidiaries do not infringe any
Intellectual Property Rights of others. Except as set forth on Schedule 2.12,
-------------
the Company has not received any notice or other claim from any person asserting
that any of the Company's present activities infringe in any material respect or
may infringe any Intellectual Property Rights of such person.
The Company has the right to use all trade secrets, data, customer
lists, log files, hardware designs, programming processes, software and other
information required for or incident to its products or its business (including,
without limitation, the operation of its Web sites) as presently conducted in
any material respect and has no reason to believe that any of such information
that is provided to the Company by third parties will not continue to be
provided to the Company on the same terms and conditions as currently
<PAGE>
exist. The Company has taken all measures reasonably necessary to protect and
preserve the security and confidentiality of its trade secrets and other
confidential information. None of the Company's trade secrets or other
confidential information of the Company is part of the public domain, nor, to
the knowledge of the Company, have any of them been misappropriated by any
person having an obligation to maintain such trade secrets or other confidential
information in confidence for the Company. To the knowledge of the Company, no
employee or consultant of the Company has used any trade secrets or other
confidential information of any other person in the course of their work for the
Company.
The Company is the exclusive owner of all right, title and interest in
its Intellectual Property Rights as purported to be exclusively owned by the
Company, and such Intellectual Property Rights are valid and in full force and
effect. No university, government agency (whether federal or state) or other
organization which sponsored research and development conducted by the Company
or has any claim of right to or ownership of or other encumbrance upon the
Intellectual Property Rights of the Company. The Company is not aware of any
infringement by others of its copyrights or other Intellectual Property Rights
in any of its products, technology or services, or any violation of the
confidentiality of any of its proprietary information, except for any such
infringements or violations which individually or in the aggregate would not
have a Material Adverse Effect. To the knowledge of the Company, the Company is
not making unlawful use of any confidential information or trade secrets of any
past or present employees of the Company.
The Company is not in violation of any agreement or arrangement with
any current or former employee or any third party relating to (i) confidential
information or trade secrets of such current or former employee or third party
(as the case may be), or (ii) the assignment of rights by such current or former
employee or third party to any inventions, know-how or intellectual property of
any kind. To the knowledge of the Company, none of the Company's officers or
employees have any agreements or arrangements with current employers of such
officers or employees, other than the Company, relating to (i) confidential
information or trade secrets of such employers, or (ii) the assignment of rights
by such or employees to any inventions, know-how or intellectual property of any
kind. To the knowledge of the Company, none of the Company's officers or
employees are in violation of any agreements or arrangements with former
employers of such officers or employees relating to (i) confidential information
or trade secrets of such employers, or (ii) the assignment of rights by such or
employees to any inventions, know-how or intellectual property of any kind. To
the knowledge of the Company, none of the Company's consultants are bound by any
consulting agreement relating to confidential information or trade secrets of
another entity that is being violated by the consultants or the other entity.
(b) All information and content of the Company's World Wide Web
sites (other than information provided by users, customers, advertisers and
other third parties who are not agents of the Company) is accurate in all
material respects.
<PAGE>
2.13 Agreements of Directors, Officers and Employees. To the Company's
-----------------------------------------------
knowledge, no director, officer or employee of or consultant to the Company or
any Subsidiary is in violation of any terms of any employment contract,
non-competition agreement, non-disclosure agreement, patent disclosure or
assignment agreement or other contract or agreement containing restrictive
covenants relating to the right of any such director, officer, employee or
consultant to be employed or engaged by the Company or such Subsidiary because
of the nature of the business conducted or proposed to be conducted by the
Company or such Subsidiary, or relating to the use of trade secrets or
proprietary information of others. Set forth on Schedule 2.13 is a list of all
-------------
employees of the Company who have not executed an employee confidentiality
agreement, invention assignment agreement or non-competitive or non-solicitation
agreement with the Company.
2.14 Governmental and Industrial Approvals. The Company and each of
-------------------------------------
its Subsidiaries has all material permits, licenses, orders, franchises and
other rights and privileges of all federal, state, local or foreign governmental
or regulatory bodies necessary for the Company and such Subsidiaries to conduct
their respective businesses as presently conducted. All such permits, licenses,
orders, franchises and other rights and privileges are in full force and effect
and, to the knowledge of the Company, no suspension or cancellation of any of
them is threatened, and none of such permits, licenses, orders, franchises or
other rights and privileges will be adversely affected by the consummation of
the transactions contemplated in this Agreement and the Related Agreements.
2.15 Federal Reserve Regulations. Neither the Company nor any of its
---------------------------
Subsidiaries has engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation G of the
Board of Governors of the Federal Reserve System), and no part of the proceeds
of the sale of the Purchased Shares will be used to purchase or carry any margin
security or to extend credit to others for the purpose of purchasing or carrying
any margin security or in any other manner which would involve a violation of
any of the regulations of the Board of Governors of the Federal Reserve System.
2.16 Contracts and Commitments. All of the material contracts of the
-------------------------
Company or any of its Subsidiaries that are required to be described in the SEC
Documents or to be filed as exhibits thereto prior to the date hereof are
described in the SEC Documents filed prior to the date hereof or filed as
exhibits thereto and to the extent that such contracts have not been fully
performed, are in full force and effect. True and complete copies of all such
material contracts have been made available to the Purchaser. All material
contracts to which the Company or its Subsidiaries are parties on or prior to
the date hereof which will be required to be described or filed as an Exhibit in
the SEC Documents required to be filed following the date hereof have been made
available to the Purchaser or are listed on Schedule 2.16 and are in full force
-------------
and effect. Neither the Company nor any of its Subsidiaries nor, to the
knowledge of the
<PAGE>
Company, any other party, is in material breach of or in default under any such
contract.
2.17 Employee Matters. The Company has described or filed as an
----------------
exhibit in the SEC Documents all of the following types of documents,
agreements, plans or arrangements which by their terms are required to be
described or filed as an exhibit to the SEC Documents: employment agreements,
consulting agreements, deferred compensation, pension or retirement agreements
or arrangements (including all "employee pension benefit plans" as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), bonus, incentive or profit-sharing plans or arrangements, or labor
or collective bargaining agreements, written or oral, in effect by the Company
and Subsidiaries (collectively, the "ERISA Documents"). The Company has no
knowledge that any of the officers or other key employees of the Company or any
Subsidiary presently intends to terminate his employment. The Company and its
Subsidiaries are in compliance in all material respects with all applicable laws
and regulations relating to labor, employment, fair employment practices, terms
and conditions of employment, and wages and hours. The Company and each
Subsidiary is in compliance in all material respects with the terms of all ERISA
Documents, and each such ERISA Document is in compliance in all material
respects with all of the requirements and provisions of ERISA. No such ERISA
Document has engaged in any "prohibited transaction" as defined in Section 4975
of the Internal Revenue Code of 1986, as amended (the "Code"), or has incurred
any "accumulated funding deficiency" as defined in Section 302 of ERISA, nor has
any reportable event as defined in Section 4043(b) of ERISA occurred with
respect to any such ERISA Document. With respect to each ERISA Document, all
required filings, including all filings required to be made with the United
States Department of Labor and Internal Revenue Service, have been timely filed.
2.18 No Brokers or Finders. No person has or will have, as a result of
---------------------
the transactions contemplated by this Agreement, any right, interest or claim
against or upon the Company, any of its Subsidiaries or the Purchaser for any
commission, fee or other compensation as a finder or broker because of any act
or omission by the Company or any of its Subsidiaries.
2.19 Transactions with Affiliates. Except as disclosed in the SEC
----------------------------
Documents filed with the Commission prior to the date hereof or as set forth on
Schedule 2.19, there are no loans, leases or other agreements, understandings or
- -------------
continuing transactions between the Company or any Subsidiary on the one hand,
and any officer or director of the Company or any Subsidiary or any person
owning five percent (5%) or more of the Common Stock of the Company or any
respective family member or affiliate of such officer, director or shareholder
on the other hand that would be required to be described in the SEC Documents.
2.20 Assumptions, Guarantees, etc. of Indebtedness of Other Persons.
--------------------------------------------------------------
Except as disclosed in the SEC Documents filed with the Commission prior to the
date hereof or
<PAGE>
as set forth on Schedule 2.20, neither the Company nor any Subsidiary has
-------------
assumed, guarantied, endorsed or otherwise become directly or contingently
liable on or for any indebtedness of any other Person, except guarantees by
endorsement of negotiable instruments for deposit or collection.
2.21 Corporate Records. The minute books of the Company contain
-----------------
materially accurate, complete and current copies of all charter documents and of
all minutes of meetings, resolutions and other proceedings of its board of
directors and Stockholders for the period beginning December 31, 1996 until the
present, duly signed by the Secretary, an Assistant Secretary or another
appropriate officer, all directors or all Stockholders, as appropriate. The
stockholder list of the Company as of August 11, 1999, prepared by the Company's
transfer agent is complete, correct and current. The Company has made available
true, correct and complete copies of the foregoing minute books, stockholder
list and stock record books to the Purchaser.
2.22 Year 2000. The Company has engaged in a review of the hardware,
---------
software and firmware products used by the Company and its Subsidiaries in its
business (collectively, the "Software") to identify any material deficiency in
"Year 2000 Capabilities." Such review is accurately described in (i) the
materials attached as Exhibit C to the Minutes of a Meeting of the Company's
Board of Directors, dated April 21, 1999 (the "Y2K Materials") and (ii) the
Company's Form 10-Q for the calendar quarter ended March 31, 1999 filed with the
Commission. Except as set forth in the Y2K materials, the Software, whether
owned or leased, is designed to be used prior to, during, and after the calendar
year A.D. 2000, and the Software will operate during each such time without
error relating to the date-related data, specifically including any error
relating to, or the product of, date-related data which represents or references
different centuries or more than one century.
"Year 2000 Capabilities" means the ability of the Software (i) to
manage and manipulate data involving dates, including single century formulas
and multi-century formulas, and to not generate incorrect values or invalid
results involving such dates, (ii) to provide that all date-related user
interface functionalities and data fields include the indication of century, and
(iii) to provide that all date-related data interface functionalities include
the indication of century.
2.23 Disclosures. Neither this Agreement, any Schedule or Exhibit to
-----------
this Agreement, any Related Agreements nor any of the Financial Statements or
Balance Sheet contains any untrue statement of a material fact or omits a
material fact necessary to make the statements made herein or therein, in light
of the circumstances in which made, not misleading.
<PAGE>
ARTICLE III
AFFIRMATIVE COVENANTS OF THE COMPANY
------------------------------------
Without limiting any other covenants and provisions hereof, the Company
covenants and agrees that it will observe the following covenants on and after
the date hereof and for so long as the Purchaser holds at least 100,000
Purchased Shares:
3.1 Inspection. Upon prior notice, at any reasonable time during
----------
normal business hours and from time to time, the Company (and each of its
Subsidiaries) will permit the Purchaser or any of its authorized agents or
representatives to examine and make copies of and extracts from the records and
books of account of and visit the properties of the Company (and any of its
Subsidiaries) and to discuss the Company's affairs, finances and accounts with
any of the Company's executive officers or directors; provided that any Person
or Persons exercising rights under this Section 3.1 shall (i) use all reasonable
efforts to ensure that any such examination or visit results in a minimum of
disruption to the operations of the Company and (ii) prior to the Company
disclosing or providing access to information with respect to the Company, shall
agree in writing to keep all proprietary information of the Company disclosed to
him in the course of such inspection confidential in a manner consistent with
prudent business practices and treatment of such Person's or Persons' own
confidential information. The rights granted under this Section 3.1 shall be in
addition to any rights which any Purchaser may have under applicable law in its
capacity as a shareholder of the Company.
3.2 Board of Directors Meetings; Materials. The Purchaser shall have
--------------------------------------
the right to designate one (1) representative (which representative may be
replaced from time to time, as the Purchaser deems necessary in its sole
discretion) (the "Representative") to attend and observe any and all meetings of
the Company's Board of Directors and committees thereof (including, without
limitation, any meetings of its executive committee or the equivalent thereof)
in a non-voting observer capacity, which shall not include the right to observe
meetings of the compensation committee of the Board of Directors at which time
discussions may be held with respect to non-executive employees. The
Representative shall be entitled to receive all notices, financial reports,
budgets and any and all other documentation furnished by the Company to its
directors at or in connection with and copies of the minutes of, any such
meetings. Notwithstanding the foregoing, the Company shall have the right, based
on an opinion of its outside counsel, to (i) exclude the Representative from any
portion of any meeting of the Board of Directors or any committee thereof or
(ii) withhold any written materials from being delivered to the Representative,
if, and only to the extent that, in such portion of any such meeting or in any
such written materials, the Company's legal counsel is conveying legal advice to
the Board of Directors with respect to a particular legal matter (a "Legal
Matter"), which such advice is subject to the Company's attorney-client
privilege; provided, however, that immediately upon the conclusion of any such
-------- -------
meeting or withholding of any such documentation described in the preceding
sentence, the Company shall provide the Representative with sufficient factual
and other information
<PAGE>
as may be reasonably requested by the Representative regarding the Legal Matter
as is necessary and adequate to fully inform the Representative thereof.
3.3 The Company SEC Documents. The Company shall continue to file all
-------------------------
reports in accordance with Section 13 and 15(d) of the Securities Exchange Act
with the Commission in order to maintain its eligibility to register the resale
of the Purchased Shares, the Warrant, and the Warrant Shares on Form S-3 (or any
successor form thereto) and to permit the Purchaser to sell the Purchased Shares
and/or the Warrant Shares pursuant to Rule 144 under the Act. After the Closing
Date, the Company will file with the Commission SEC Documents and any other such
reports and other materials required to be filed by the Company under the
federal securities laws on a timely basis.
3.4 Grant Matter. The Company hereby covenants and agrees that in the
------------
event that as part of any transaction by and between the Company and any third
party which may take the form of (but is not limited to) a joint venture, equity
or sub-debt financing or any business arrangement which is consummated on or
after the date hereof, the Company agrees to provide such third party any right,
benefit or protection, in the form of indemnification, purchase price adjustment
or otherwise, relating in any way to the Grant Matter, then the Company will
promptly notify the Representative of such arrangement and upon the consummation
of any such transaction the Purchaser will automatically be entitled to
identical rights, benefits and/or protections with respect to the Grant Matter
as was provided to any such third party.
ARTICLE IV
NEGATIVE COVENANTS OF THE COMPANY
---------------------------------
Without limiting any other covenants and provisions hereof, the Company
covenants and agrees that it will comply (and will cause each Subsidiary to
comply) with each of the provisions of this Article IV on and after the date
hereof until the sale of all the Purchased Shares and Warrant Shares.
4.1 Dealings with Affiliates. Except for transactions made on an
------------------------
arms-length basis, or through the Company's normal and customary dealings, the
Company will not enter into any transaction including, without limitation, any
loans or extensions of credit or royalty agreements with any officer or director
of the Company or any Subsidiary or holder of any class of capital stock of the
Company, or any member of their respective immediate families or any corporation
or other entity directly or indirectly controlled by one or more of such
officers, directors or Stockholders or members of their immediate families,
except for (i) advances in reasonable amounts made to employees of the Company
or any Subsidiary for valid business purposes, provided that such advances are
repaid to the Company within ninety (90) days, and (ii) advances made to
employees of the Company, upon approval of the Board of Directors, related to
such employees' exercise of stock options.
<PAGE>
4.2 No Conflicting Agreements. The Company agrees that neither it nor
-------------------------
any Subsidiary will, without the consent of the Purchaser, enter into or amend
any agreement, contract, commitment or understanding which would restrict or
prohibit the exercise by the Purchaser of any of its rights under this Agreement
or any Related Agreement.
ARTICLE V
INVESTMENT REPRESENTATIONS
--------------------------
5.1 Representations and Warranties. The Purchaser hereby represents
------------------------------
and warrants to the Company, understanding and agreeing that the Company is
entering into this Agreement in part in reliance on such representations and
warranties, as follows:
(a) The Purchaser is an "Accredited Investor" as that term is
defined in Rule 501(a) of Regulation D promulgated under the Act;
(b) The Purchaser is duly authorized to execute this Agreement
and the Related Agreements, and assuming due execution and delivery by the
Company of the Agreement and the Related Agreements, this Agreement and the
Related Agreements to which the Purchaser is a party constitute legal, valid and
binding obligations of the Purchaser, enforceable against the Purchaser in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization and moratorium laws and other laws of general
application affecting enforcement of creditors' rights generally;
(c) The Purchaser has been advised by the Company that none of
the Purchased Shares or Warrant have been registered under the Act, that the
Purchased Shares and Warrant will be issued on the basis of the statutory
exemption provided by Section 4(2) of the Act or Regulation D promulgated
thereunder, or both, relating to transactions by an issuer not involving any
public offering and under similar exemptions under certain state securities
laws, that this transaction has not been reviewed by, passed on or submitted to
any federal or state agency or self-regulatory organization where an exemption
is being relied upon, and that the Company's reliance thereon is based in part
upon the representations made by the Purchaser in this Agreement and the Related
Agreements. The Purchaser acknowledges that it has been informed by the Company
of, or is otherwise familiar with, the nature of the limitations imposed by the
Act and the rules and regulations thereunder on the transfer of securities;
(d) The Purchaser is purchasing the Purchased Shares and Warrant
for investment purposes, for its own account and not with a view to, or for sale
in connection with, any distribution thereof in violation of federal or state
securities laws;
(e) By reason of its business or financial experience, the
Purchaser has the capacity to protect its own interest in connection with the
transactions contemplated hereunder; and
<PAGE>
(f) No person has or will have, as a result of the transaction
contemplated by this Agreement, any right, interest or claim against or upon the
Purchaser, the Company, or any of its Subsidiaries for any commission, fee or
other compensation as a finder or broker because of any act or omission by the
Purchaser.
5.2 Permitted Sales; Legends. Notwithstanding the foregoing
------------------------
representations, the Company agrees that it will permit a sale or other transfer
of any of the Purchased Shares, the Warrant Shares or the Warrant to a Permitted
Transferee if such transaction is exempt from the registration requirements of,
or is covered by an effective registration statement under, the Act and
applicable state securities or "blue-sky" laws. The certificates representing
the Purchased Shares shall bear a legend evidencing such restriction on transfer
substantially in the following form:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended ("the Act"), and have been
acquired for investment and not with a view to, or in connection with,
the sale or distribution thereof. Such shares may not be sold, offered
for sale, pledged or hypothecated in the absence of an effective
registration statement as to the shares under the Act."
ARTICLE VI
CONDITIONS OF PURCHASER'S OBLIGATION
------------------------------------
6.1 Effect of Conditions. The obligation of the Purchaser to purchase
--------------------
and pay for the Purchased Shares and the Warrant at the Closing, if any, shall
be subject at its election to the satisfaction of each of the conditions stated
in the following Sections of this Article VI.
6.2 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in this Agreement shall be true and correct
on the date of the Closing, and the Purchaser shall have received a certificate
dated as of such Closing and signed on behalf of the Company to that effect.
6.3 Performance. The Company shall have performed and complied with
-----------
all of the agreements, covenants and conditions contained in this Agreement
required to be performed or complied with by it at or prior to the Closing, and
the Purchaser shall have received a certificate dated as of such Closing and
signed on behalf of the Company to that effect.
6.4 Warrant Certificate. A Warrant Certificate in the form attached
-------------------
hereto as Exhibit A shall have been executed by the Company and the Purchaser.
<PAGE>
6.5 Opinion of Counsel. The Purchaser shall have received an opinion,
------------------
dated the date of the Closing, from Fenwick & West LLP, counsel to the Company,
in the form attached hereto as Exhibit B.
6.6 Certified Documents, etc. Counsel for the Purchaser shall have
------------------------
received a copy of the Company's Certificate of Incorporation, as amended,
certified by the Secretary of State of the State of Delaware and copies of the
Company's By-Laws certified by its Secretary, as well as any and all other
documents, including certificates as to votes adopted and incumbency of officers
and certificates from appropriate authorities as to the legal existence and good
standing of the Company and its Subsidiaries, which the Purchaser or their
counsel may reasonably request.
6.7 No Material Adverse Change. The business, properties, assets or
--------------------------
condition (financial or otherwise) of the Company and its Subsidiaries shall not
have been materially adversely affected since the date of this Agreement,
whether by fire, casualty, act of God or otherwise, and there shall have been no
other changes in the business, properties, assets, condition (financial or
otherwise), management or prospects of the Company or any of its Subsidiaries
that would have a material adverse effect on their respective businesses or
assets; provided, however, that a decline in the trading price of the Company's
Common Stock alone shall not constitute, in and of itself, a material adverse
change.
6.8 Co-Branding and Promotion Agreement. The Company and the
-----------------------------------
Purchaser shall have executed the Co-Branding and Promotion Agreement in the
form of Exhibit C attached hereto (the "Co-Branding and Promotion Agreement").
6.9 Consents and Waivers. The Company shall have obtained all
--------------------
consents or waivers necessary to execute this Agreement and the other agreements
and documents contemplated herein, to issue the Purchased Shares, and to carry
out the transactions contemplated hereby and thereby. All corporate and other
action and governmental filings necessary to effectuate the terms of this
Agreement, the Related Agreements, the Purchased Shares and other agreements and
instruments executed and delivered by the Company in connection herewith shall
have been made or taken.
6.10 Common Stock Certificates. The Company shall have instructed its
-------------------------
transfer agent in writing to deliver a stock certificate to the Purchaser
representing the Purchased Shares in accordance with Section 1.3 hereof.
ARTICLE VII
CONDITIONS OF THE COMPANY'S OBLIGATION
--------------------------------------
7.1 Effect of Conditions. The Company's obligation to sell the
--------------------
Purchased Shares shall be subject at its election to the satisfaction of each of
the conditions stated in the following Sections of this Article VII.
<PAGE>
7.2 Representations and Warranties; Performance. The representations
-------------------------------------------
and warranties of the Purchaser contained in this Agreement shall be true and
correct on the date of the Closing with the same effect as though made on and as
of that date and, with respect to the Company's obligation to issue and deliver
Purchased Shares of the Purchaser, the Purchaser shall have tendered payment for
the Purchased Shares at the Closing in accordance with Section 1.3 hereof.
7.3 Co-Branding and Promotion Agreement. The Company and the
-----------------------------------
Purchaser shall have executed the Co-Branding and Promotion Agreement.
7.4 Consideration for the Shares. The Purchaser shall have paid the
----------------------------
purchase price of the Purchased Shares in full at the Closing either by check or
by wire transfer to an account designated in writing by the Company.
ARTICLE VIII
REGISTRATION RIGHTS AGREEMENT
-----------------------------
8.1 Certain Definitions. As used in this Article VII, the following
-------------------
terms shall have the following meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Registrable Securities" means any of (i) Purchased Shares, (ii) the
Warrant, (iii) the Warrant Shares and (iv) any other securities issued or
issuable with respect to the Purchased Shares or the Warrant Shares by way of
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise.
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.
"Registration Expenses" shall mean all expenses, incurred by the
Company or the Purchaser in complying with Section 8.2.1 or 8.2.2 hereof,
including, without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for the
Company, blue sky fees and expenses, stock transfer taxes applicable to the
securities registered by the Purchaser, all fees and disbursements of one (1)
counsel for the Purchaser, 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
provided, however, that the Registration Expenses shall not include any and all
Selling Expenses).
<PAGE>
"Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any similar federal statute and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions.
8.2. Registration
------------
8.2.1 Registration of Registrable Securities. The Company shall
--------------------------------------
file with the Commission a registration statement on Form S-3 (or any successor
form to S-3) for a public resale offering by the Purchaser of the Registrable
Securities as soon as practicable, but in no event later than thirty (30) days
from the Closing Date, and shall use its best efforts to cause such registration
statement to become and remain effective for the period ending one (1) year from
the date of effectiveness of said registration statement. If the Company is
obligated to maintain the effectiveness of such registration statement described
in the preceding sentence in accordance with Section 1.3 of the Warrant
Certificate, then the Company shall maintain the effectiveness of the
registration statement with respect to all of the Registrable Securities for a
period of one (1) year from the date of the exercise of the Warrant or until the
earlier sale of all of the Warrant Shares. The Company shall promptly prepare
and file with the Commission such amendments to the registration statement as
may be necessary to keep such registration statement effective in accordance
with this Section 8.2.1.
8.2.2 Piggyback Registration.
----------------------
(a) If at any time during which the registration statement
filed pursuant to Section 8.2.1 above is not effective the Company proposes to
register any shares of Common Stock under the Securities Act in connection with
an underwritten offering, either for its own account or the account of a
security holder or holders exercising their registration rights, (except
pursuant to a registration statement filed on Form S-4 or Form S-8 or such other
form as shall be prescribed under the Securities Act for the same purposes), the
Company will promptly at each such time give written notice to the Purchaser of
its intention to do so. Within twenty (20) days after receipt of such notice,
the Purchaser may request that the Company register all or part of the
Registrable Securities (the "Designated Shares"). Upon receipt of such request,
the Company shall use its best efforts to effect the registration of the
Designated Shares identified by including such Designated Shares in such
registration statement.
(b) In the event that securities of the same class as the
Designated Shares are being registered by the Company in such registration
statement and such securities as well as any of the Designated Shares are to be
distributed in an underwritten offering, such Designated Shares shall be
included in such underwritten offering on the same terms and conditions as the
securities being issued by the Company for distribution pursuant to such
underwritten offering; provided, however, that if the managing
-------- -------
<PAGE>
underwriter of such underwritten offering reasonably determines in good faith
and advises the parties that the inclusion in such underwritten offering of all
the Designated Shares would materially and adversely affect the success of the
underwritten offering, then the Company may offer all of the securities it
proposes to register for its own accounts for the maximum amounts that the
underwriter considers saleable, and thereafter the number of Designated Shares
to be included in the registration statement shall be reduced to the amount
recommended in good faith by and set forth in the opinion of such managing
underwriter; provided, further, that as to the Purchaser, such reduction shall
be pro rata (based on the number of shares held by each) with respect to the
Designated Shares with other persons holding contractual, incidental or "piggy-
back" registration rights as of the date of such underwritten offering.
8.2.3 Expenses of Registration. All Registration Expenses
------------------------
incurred in connection with registrations pursuant to Sections 8.2.1 and 8.2.2
shall be borne by the Company. Selling Expenses shall be borne by the Purchaser
based upon the number of Registrable Securities registered by the Purchaser on
any such registration statement.
8.2.4 Registration Procedures. In the case of each registration,
-----------------------
qualification or compliance effected by the Company pursuant to this Agreement,
the Company will keep the Purchaser advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. The Company will:
(a) Prepare and furnish to the Purchaser and to the
underwriters (if any) of the securities being registered such reasonable number
of copies of the registration statement, preliminary prospectus, final
prospectus (any supplements or revisions thereto required under the Securities
Act) and such other documents as the Purchaser and underwriters may reasonably
request in order to facilitate the public offering of such securities and make
the Company's representatives and the Company's counsel available for discussion
of such document and make such changes in such document relating to the
Purchaser prior to the filing thereof as the Purchaser, counsel for the
Purchaser, or underwriters may reasonably request.
(b) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Purchaser, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
(c) Notify the Purchaser 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 make the statements therein not misleading in
<PAGE>
the light of the circumstances then existing; and to promptly prepare and file
all amendments or supplements and related revised prospectuses as shall be
required under the Securities Act as a result of such untrue statements or
omissions.
(d) Use its best efforts to comply with all applicable
federal and state securities laws (including without limitation the rules and
regulations of the Commission), and make generally available to its security
holders earning statements satisfying the provisions of Section 11(a) of the
Securities Act no later than forty-five (45) days after the end of a twelve (12)
month period after the Closing Date (or within ninety (90) days after the end of
a fiscal year).
(e) At the request of the Purchaser, use its best
efforts to furnish on the date that the Registrable Securities are delivered to
any underwriter for sale in connection with a registration pursuant to this
Agreement (i) an opinion of the counsel representing the Company for the
purposes of such registration, and (ii) a letter from the independent certified
public accountants of the Company, each dated such date and in form and
substance as is customarily given by counsel and independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
Purchaser's underwriter and to the Purchaser.
8.2.5 Suspension of Registration Statement. The Company shall
------------------------------------
have the right, upon the advice of its Board of Directors (the "Board") and upon
giving written notice to the Purchaser of the exercise of such right, to require
the Purchaser not to sell any shares pursuant to the registration statement for
the resale of securities for a period (as determined in good faith by the Board)
from the date on which such notice is given (a "black-out period"), if (i)(A)
the Company is engaged in discussions or negotiations with respect to, or has
taken a substantial step to commence, or there otherwise is pending, any merger,
acquisition, other form of business combination, divesture, tender offer,
financing or other transaction, or there is an event or state of facts relating
to the Company, in each case which is material to the Company (any such
negotiation, step, event or state of facts being herein called "Material
Activity"), (B) in the reasonable judgment of the Board, after consultation with
and acting upon the advice of outside counsel, which advice and dependence
thereon shall be recorded in the minutes of the Board, disclosure of such
Material Activity would be necessary or advisable under applicable securities
laws and (C) such disclosure would be adverse to the interests of the Company,
or (ii) the Board, after consultation with and acting upon the advice of outside
counsel, which advice and dependence thereon shall be recorded in the minutes of
the Board, deems it necessary to file a post-effective amendment to such
registration statement or to prepare a supplement to, or otherwise amend, the
form of prospectus contained therein. During any such black-out period, the
Purchaser agrees not to sell any Registrable Securities under such registration
statement for such period of time as the Board, acting on the written advice of
outside counsel, may in good faith deem advisable; provided, however, that no
single black-out period will be longer than thirty (30) calendar days and, in
the aggregate, all black-out periods in any twelve (12) month period shall not
include more than sixty (60) calendar days; provided, further, however, that no
black-out
<PAGE>
period may be imposed by the Company during the first thirty (30) calendar days
after the effectiveness of the registration statement filed pursuant to Section
8.2.1. The period of effectiveness of any registration statement in effect at
the time of a black-out period and the termination period under shall be
extended for a period equal to the black-out period.
8.3 Indemnification.
---------------
(a) With respect to any registration of Registrable Securities,
the Company will indemnify the Purchaser, its officers and directors and each
person controlling the Purchaser within the meaning of Section 15 of the
Securities Act, with respect to which registration, qualification or compliance
has been effected pursuant to this Agreement, and each underwriter, if any, and
each person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages or liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, 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 of 1933, the Securities Exchange Act of 1934,
state securities law or any rule or regulation promulgated under such laws
applicable to the Company in connection with any such registration,
qualification or compliance, and the Company will reimburse the Purchaser, its
officers and directors, and each person controlling the Purchaser, each such
underwriter and each person who controls any such underwriter, for any legal and
any other expenses reasonably incurred, as such expenses are incurred, in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, whether or not resulting in any liability, 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 or alleged untrue statement or omission, made in
reliance upon and in conformity with written information furnished to the
Company by the Purchaser, controlling person or underwriter and stated to be
specifically for use therein; provided, however, that the foregoing indemnity
agreement is subject to the condition that, insofar as it relates to any such
untrue statement, alleged untrue statement, omission or alleged omission made in
a preliminary prospectus, such indemnity agreement shall not inure to the
benefit of any underwriter, or the Purchaser, if there is no underwriter, if a
copy of the final prospectus filed with the Commission pursuant to its Rule
424(b) was not furnished to the person asserting the loss, liability, claim or
damage at or prior to the time such action is required by the Securities Act,
and if such final prospectus cured the untrue statement, alleged untrue
statement, omission or alleged omission giving rise to the loss, liability,
claim or damage.
(b) With respect to any registration of Registrable Securities
and the Warrant, the Purchaser will indemnify, severally and not jointly, the
Company, each of its
<PAGE>
directors and officers, each underwriter, if any, of the Company's securities
covered by such registration statement, and each person who controls the Company
or such underwriter within the meaning of Section 15 of the Securities Act
against all expenses, 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, such directors, officers, partners, persons, underwriters or
control persons for any legal or any other expenses reasonably incurred, as such
expenses are incurred, in connection with investigating, preparing 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 Purchaser
and stated to be specifically for use therein. Notwithstanding the foregoing,
the liability of the Purchaser under this Section 8.3(b) shall be limited to and
in proportion to an amount equal to the lesser of (i) the net proceeds received
by the Purchaser from the sale of the Registrable Securities sold by the
Purchaser pursuant to such registration statement and (ii) the Purchaser's
proportionate share of any such loss, claim, damage, liability or expense which
is equal to the proportion that the public offering price of the Registrable
Securities sold by the Purchaser under such registration statement bears to the
total public offering price of all securities sold thereunder. In no event will
the Purchaser be required to enter into any agreement or undertaking for the
benefit of the Company in connection with any registration under this Agreement
providing for any indemnification or contribution obligations on the part of the
Purchaser greater than the Purchaser's obligations under this Section 8.3 (b).
(c) Each party entitled to indemnification under this Section
8.3 (the "Indemnified Party") shall give 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 any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall be 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 Agreement unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action,
and provided further that the Indemnifying Party shall not assume the defense
for matters as to which representation of both the Indemnifying Party and the
Indemnified Party by the same counsel would be inappropriate due to actual or
potential differing interests between them, but shall instead in such event pay
the fees and costs of separate counsel for the Indemnified Party. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the
<PAGE>
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation. No Indemnified Party shall
be entitled to indemnification from any Indemnifying Party for any amounts paid
in any settlement effected without the consent of the Indemnifying Party.
(d) The indemnification provided for under this Agreement will
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Party or any officer, director or controlling person
of such Indemnified Party.
8.4 Information by the Purchaser. The Purchaser shall furnish to the
----------------------------
Company such information regarding the Purchaser, the Registrable Securities
held by it and the distribution proposed by it as the Company may request in
writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Agreement.
8.5 Rule 144 Reporting. With a view to making available the benefits
------------------
of certain rules and regulations of the Commission which may at any time permit
the sale of the Registrable Securities to the public without registration,
assuming that a public market exists for the Ordinary Shares of the Company, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act during the term
of this Agreement;
(b) File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Securities Exchange Act (at any time after it has become subject to such
reporting requirements); and
(c) So long as the Purchaser owns any Registrable Securities, to
furnish to the Purchaser forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
and of the Securities Act and the Securities Exchange Act, a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents of the Company and other information in the possession of or
reasonably obtainable by the Company as the Purchaser may reasonably request in
availing itself of any rule or regulation of the Commission allowing the
Purchaser to sell any such securities without registration.
8.6 Transfer of Registration Rights. The rights to cause the Company
-------------------------------
to register securities granted the Purchaser under this Article VIII may be
assigned or transferred to a Permitted Transferee (as defined in Section 11.2
hereof) of at least 100,000 shares of Purchased Shares.
<PAGE>
8.7. Pari Passu Rights. While this Agreement is in effect, the Company
-----------------
shall be prohibited from granting any registration rights to any other party
which rank superior to those granted to the Purchaser hereunder; provided that
this Section 8.7 shall not affect any registration rights previously granted by
the Company and disclosed to the Purchaser.
8.8 Lock-Up Agreement. The Purchaser agrees that, during a period not
-----------------
to exceed ninety (90) days specified by the Company and an underwriter of common
stock or other securities of the Company, following the effective date of an
underwritten registration statement described in Section 8.2.2 filed under the
Securities Act, it shall not, to the extent requested by the Company and such
underwriter, directly or indirectly sell, offer to sell, contract to sell or
otherwise transfer or dispose of (other than to donees who agree to be similarly
bound) any securities of the Company held by it at any time during such period,
except securities included for sale in such registration statement; provided,
--------
however, that all executive officers and all directors and major stockholders of
- -------
the Company and all other persons with registration rights (whether or not
pursuant to this Agreement) enter into similar agreements with identical
restrictions. Notwithstanding anything to the contrary contained herein, this
Section 8.8 shall not apply to the S-3 registration statement required to be
filed by the Company pursuant to Section 8.2.1 hereof.
In order to enforce the foregoing covenant, the Company shall have the
right to place restrictive legends on the certificates representing the shares
subject to this Section and to impose stop transfer instructions with respect to
the Registrable Securities and such other shares of stock of each Holder (and
the shares of securities of every other person subject to the foregoing
restriction) until the end of such period.
ARTICLE IX
CERTAIN DEFINITIONS
-------------------
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Agreement" means this Stock Purchase Agreement as from time to time
amended and in effect between the parties.
"Closing" and "Closing Date" shall have the meanings set forth in
Section 1.4.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall have the meaning set forth in Section 2.3.
"Common Stock" shall have the meaning set forth in the preamble.
<PAGE>
"Company" means and shall include Asymetrix Learning Systems, Inc., a
Delaware corporation, its predecessors, successors and assigns.
"Encumbrances" means any lien, mortgage, security interest, pledge,
restriction on transferability, defect of title or other claim, charge or
encumbrance of any nature whatsoever on any property or property interest.
"ERISA" shall have the meaning set forth in Section 2.17.
"Financial Statements" shall mean the financial statements of the
Company and its Subsidiaries included in the SEC Documents.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"Grant Matter" shall mean the litigation referred to as "Richard B.
Grant v. Asymetrix Corporation, No. CV-96-3635 HLH, Central District of
California" in the SEC Documents and any and all actions, claims, proceedings or
investigations which may arise, from time to time, in connection therewith.
"Intellectual Property Rights" shall have the meaning set forth in
Section 2.12.
"Lien" means, with respect to any asset, any mortgage, deed of trust,
pledge, hypothecation, assignment, security interest, lien, charge, restriction,
adverse claim by a third party, title defect or encumbrance of any kind
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any assignment or other conveyance of any right to receive
income and any assignment of receivables with recourse against assignor), any
filing of any financing statement as debtor under the Uniform Commercial Code or
comparable law of any jurisdiction and any agreement to give or make any of the
foregoing.
"Material Adverse Effect" shall mean a material adverse effect upon the
business, condition (financial or otherwise), assets or results of operations of
the Company and its Subsidiaries taken as whole.
"Permitted Transferee" shall have the meaning set forth in Section
11.2.
"Person" means an individual, corporation, partnership, limited
liability company, joint venture, trust or unincorporated organization or a
government or agency or political subdivision thereof.
<PAGE>
"Purchased Shares" shall have the meaning set forth in Section 1.1.
"Purchaser" shall mean Go2Net, Inc., a Delaware corporation.
"Related Agreements" shall have the meaning set forth in Section 2.2.
"SEC Documents" means all reports, schedules, registration statements,
proxy statements and other documents (including all exhibits and schedules
thereto and financial statements included therewith) filed by the Company with
the Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Subsidiary" or "Subsidiaries" means any corporation, association or
other business entity of which the Company and/or any of its other Subsidiaries
(as herein defined), directly or indirectly owns at the time more than fifty
percent (50%) of the outstanding voting shares of every class of such
corporation or trust other than directors' qualifying shares.
"Tax" and "Taxes" shall have the meaning set forth in Section 2.11.
"Warrant" shall have the meaning set forth in Section 1.2.
"Warrant Certificate" shall have the meaning set forth in Section 1.2.
"Warrant Shares" shall have the meaning set forth in Section 1.2.
ARTICLE X
TERMINATION
-----------
10.1 Termination by Mutual Written Consent. This Agreement may be
-------------------------------------
terminated, and the transactions contemplated hereby abandoned, at any time
prior to the Closing by the written agreement of the Company and the Purchaser.
10.2 Termination for Breach. This Agreement may be terminated and the
----------------------
transactions contemplated hereby may be abandoned at any time before the Closing
(or any date to which such Closing may have been extended by the written
agreement of the parties obligated to perform at such Closing) by any party
obligated to perform at such Closing if the conditions for its benefit set forth
in Article VI or VII, as the case may be, have not been satisfied on or prior to
such Closing and if the conditions for the benefit of the other parties have
been satisfied or waived, and if such performing party shall have given written
notice of termination to the non-performing party.
10.3 Termination for Delay. Unless earlier terminated in accordance
---------------------
with Section 10.1 or Section 10.2, this Agreement may be terminated and the
transactions contemplated hereby may be abandoned by the Company or the
Purchaser if the Closing
<PAGE>
does not occur by August 18, 1999, provided, however, that the right to
-------- -------
terminate this Agreement under this Section 10.3 shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Closing to occur on or before such
date.
10.4 Rights After Termination. Upon termination of this Agreement
------------------------
under this Article X, the parties shall be released from all obligations arising
hereunder, except as to any liability for misrepresentations, breach or default
in connection with any warranty, representation, covenant, duty or obligation
given, occurring or arising prior to the date of termination.
ARTICLE XI
MISCELLANEOUS
-------------
11.1 Survival of Representations. The representations, warranties,
---------------------------
covenants and agreements made herein or in any certificates or documents
executed in connection herewith shall survive the execution and delivery hereof
and the Closing of the transactions contemplated hereby.
11.2 Assignment; Parties in Interest. (a) Neither the Company nor the
-------------------------------
Purchaser may assign or transfer any of its rights pursuant to this Agreement
without the other party's prior written consent, which consent will not be
unreasonably withheld. A transferee of such permitted assignment is referred to
herein as a "Permitted Transferee." Except as otherwise set forth herein, all
covenants, agreements, representations, warranties and undertakings contained in
this Agreement shall be binding on and shall inure to the benefit of the
respective successors and Permitted Transferees of the parties hereto (including
Permitted Transferees of any of the Purchased Shares, the Warrant or the Warrant
Shares).
(b) Except as may be required to be disclosed by order of a court or
otherwise required by law, the parties agree to maintain in confidence the terms
of the purchase of the Purchased Shares hereunder, except that the Purchaser may
disclose such terms to their investors in the ordinary course and except that
the Company may disclose such terms to its stockholders, accountants, bankers
and advisors in the ordinary course.
11.3 RESERVED.
11.4 Amendments and Waivers. Amendments or additions to this Agreement
----------------------
may be made and compliance with any term, covenant, agreement, condition or
provision set forth herein may be omitted or waived (either generally or in a
particular instance and either retroactively or prospectively) upon the written
consent of the Company and the Purchaser. This Agreement (including the
Schedules and Exhibits annexed hereto, which are an integral part of this
Agreement) constitutes the full and complete agreement of the parties with
respect to the subject matter hereof.
<PAGE>
11.5 Notices. All notices, requests, consents, reports and demands
-------
shall be in writing and shall be hand delivered, sent by facsimile or other
electronic medium, or mailed, postage prepaid, to the Company or to the
Purchaser at the address set forth below or to such other address as may be
furnished in writing to the other parties hereto:
The Company: Asymetrix Learning Systems, Inc.
110-110th Avenue NE
Bellevue, Washington 98004
Attention: General Counsel
Tel: (425) 462-0501
Fax:(425) 637-1540
with copy to: Fenwick & West LLP
Two Palo Alto Square
Palo Alto, California 94306
Attention: Jeffrey R. Vetter, Esq.
Tel: (650) 494-0600
Fax: (650) 494-1417
The Purchaser: Go2Net, Inc.
999 Third Avenue
Seattle, WA 98104
Attention: General Counsel
Tel: (206) 447-1595
Fax: (206) 447-1625
with copy to: Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, Massachusetts 02110
Attention: Francis J. Feeney, Jr., Esq.
Tel: (617) 951-6600
Fax: (617) 951-1295
All such notices, request, demands, consents and other communications
shall be deemed to have been duly given or sent two (2) days following the date
on which mailed, or on the date on which delivered by hand or by facsimile
transmission (receipt confirmed), as the case may be, and addressed as
aforesaid.
11.6 Expenses. (a) Each party hereto will pay its own expenses in
--------
connection with the transactions contemplated hereby, provided, however, that in
the event that the transactions contemplated hereby are consummated, the Company
shall pay the Purchaser's reasonable costs and expenses not to exceed $30,000
(including reasonable fees and expenses of its legal counsel and accountants) in
connection with the investigation, preparation, execution and delivery of this
Agreement (and due diligence
<PAGE>
related thereto) and the other instruments and documents to be delivered
hereunder and the transactions contemplated hereby and thereby on the Closing
Date.
(b) If any action is instituted (i) to enforce or interpret the terms
of this Agreement or the Warrant, or (ii) under a breach of contract claim
related to this Agreement or the Warrant, the prevailing party shall be entitled
to reasonable attorney's fees, costs and necessary disbursements in addition to
any other relief to which such party may be entitled.
11.7 Counterparts. This Agreement and any exhibit hereto may be
------------
executed in multiple counterparts, each of which shall constitute an original
but all of which shall constitute but one and the same instrument. One or more
counterparts of this Agreement or any exhibit hereto may be delivered via
telecopier, with the intention that they shall have the same effect as an
original counterpart hereof.
11.8 Effect of Headings. The article and section headings herein are
------------------
for convenience only and shall not affect the construction or interpretation
hereof.
11.9 Adjustments. All provisions of this Agreement shall be
-----------
automatically adjusted to reflect any stock dividend, stock split or other such
form of recapitalization.
11.10 Governing Law. The parties hereby agree that this Agreement, and
-------------
the respective rights, duties and obligations of the parties hereunder, shall be
governed by and construed in accordance with the General Corporation Law of the
State of Delaware as to matters within the scope thereof and, as to all other
matters, shall be governed by and construed with the laws of the State of
Washington, without giving effect to principles of conflicts of law thereunder.
Each of the parties hereby (i) irrevocably consents and agrees that any legal or
equitable action or proceeding arising under or in connection with this
Agreement shall be brought exclusively in the Federal or state courts sitting in
Seattle, Washington and any court to which an appeal may be taken in any such
litigation, and (ii) by execution and delivery of this Agreement, irrevocably
submits to and accepts, with respect to any such action or proceeding, for
itself and in respect of its properties and assets, generally and
unconditionally, the jurisdiction of the aforesaid courts, and irrevocably
waives any and all rights such party may now or hereafter have to object to such
jurisdiction.
11.11 RESERVED.
<PAGE>
11.12 Waiver of Jury Trial. Each of the Company and the Purchaser
--------------------
hereby expressly waives its respective rights to a jury trial of any claim or
cause of action based upon or arising out of this agreement, any other related
agreements or any dealings between them relating to the subject matter of this
agreement. The Company and the Purchaser also waive any bond or surety or
security upon such bond which might, but for this waiver, be required of any
party. The scope of this waiver is intended to be all encompassing of any and
all disputes that may be filed in any court and that relate to the subject
matter of this transaction, including without limitation, contract claims, tort
claims, breach of duty claims, and all other common law and statutory claims.
The Company and the Purchaser further warrant and represent that each has
reviewed this waiver with its legal counsel, and that each voluntarily waives
its jury trial rights following consultation with legal counsel. This waiver is
irrevocable and may only be modified either orally or in amendments, renewals,
supplements or modifications to this agreement, any other related agreement or
the purchased shares. In the event of litigation, this agreement may be filed as
a written consent to a trial (without a jury) by the court.
* * * * * * *
<PAGE>
ASYMETRIX LEARNING SYSTEMS, INC.
COUNTERPART SIGNATURE PAGE
--------------------------
IN WITNESS WHEREOF, the Company and the Purchaser have caused this
Agreement to be duly executed and delivered as an instrument under seal as of
the date first above written.
THE COMPANY:
ASYMETRIX LEARNING SYSTEMS, INC.
By: /s/ Steven Esau
--------------------------------------
Name: Steven Esau
Title: Vice President, General Counsel
PURCHASER:
GO2NET, INC.
By: /s/ Michael J. Riccio, Jr.
--------------------------------------
Name: Michael J. Riccio, Jr.
Title: COO
<PAGE>
EXHIBIT 4.5
EXECUTION COPY
COMMON STOCK PURCHASE WARRANT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES
LAWS, AND NO SALE OR TRANSFER HEREOF MAY BE EFFECTED WITHOUT
AN EFFECTIVE REGISTRATION STATEMENT OR AN OPINION OF COUNSEL
FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
No. W-1 Right to Purchase 428,571 Shares of
Common Stock of Asymetrix Learning Systems, Inc.
ASYMETRIX LEARNING SYSTEMS, INC.
Common Stock Purchase Warrant
Asymetrix Learning Systems, Inc., a Delaware corporation (the "Company"),
hereby certifies that, for value received, Go2Net, Inc., a Delaware corporation,
or registered permitted assigns, is entitled, subject to the terms set forth
below, to purchase from the Company at any time or from time to time before 5:00
P.M., Seattle, Washington, time, on August 16, 2004, 428,571 fully paid and
nonassessable shares of common stock, par value $.01 per share, of the Company,
at an exercise price per share of $7.00 (such Exercise Price per share as
adjusted from time to time as herein provided is referred to herein as the
"Exercise Price"). The number and character of such shares of Common Stock and
the Exercise Price are subject to adjustment as provided herein.
This Warrant issued pursuant to a certain Securities Purchase Agreement
(the "Agreement"), dated as of August 18, 1999, by and between the Company and
Go2Net, Inc., a copy of which is on file at the principal offices of the
Company. Capitalized terms not defined herein shall have the meanings ascribed
to them in the Agreement. The holder of this Warrant shall be entitled to all of
the benefits of the Agreement as provided therein, including, without
limitation, the registration rights set forth in Article VIII thereof.
<PAGE>
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "Company" shall include Asymetrix Learning Systems, Inc. and
any corporation which shall succeed or assume the obligations of the Company
hereunder.
(b) The term "Common Stock" includes the Company's Common Stock, $.01 par
value per share, as authorized on the date of the Agreement and any other
securities into which or for which any of such Common Stock may be converted or
exchanged pursuant to a plan of recapitalization, reorganization, merger, sale
of assets or otherwise.
1. Exercise of Warrant.
--------------------
1.1. Full Exercise. This Warrant may be exercised at any time in full
-------------
in the sole discretion of the holder hereof by surrender of this Warrant, with
the form of subscription at the end hereof duly executed by such holder, to the
Company at its principal office, accompanied by payment, in cash or by certified
or official bank check payable to the order of the Company or by wire transfer
in immediately available funds, in the amount obtained by multiplying the number
of shares of Common Stock for which this Warrant is then exercisable by the
Exercise Price then in effect.
1.2. Partial Exercise. This Warrant may be exercised at any time in
----------------
the sole discretion of the holder hereof in part by surrender of this Warrant in
the manner and at the place provided in Section 1.1 except that the amount
payable by the holder on such partial exercise shall be the amount obtained by
multiplying (a) the number of shares of Common Stock designated by the holder in
the subscription at the end hereof by (b) the Exercise Price then in effect;
provided, however, that in no event shall any such partial exercise be for less
than the lesser of (i) 10,000 shares or (ii) the entire unexercised balance of
the Warrant. On any such partial exercise the Company at its expense will
forthwith issue and deliver to or upon the order of the holder hereof a new
Warrant or Warrants of like tenor, in the name of the holder hereof or as such
holder (upon payment by such holder of any applicable transfer taxes) may
request, calling in the aggregate on the face or faces thereof for the number of
shares of Common Stock for which such Warrant or Warrants may still be
exercised.
1.3 Net Issue Election. The holder hereof may elect to receive,
------------------
without the payment by such holder of any additional consideration, shares of
Common Stock equal to the net value of this Warrant or any portion hereof by the
surrender of this Warrant or such portion to the Company, with the form of
subscription at the end hereof duly executed by such holder, at the office of
the Company. Thereupon, the Company shall issue to such holder such number of
fully paid and nonassessable shares of Common Stock as is computed using the
following formula:
<PAGE>
X = Y (A-B)
-------
A
where X = the number of shares of Common Stock to be issued to such holder
pursuant to this Section 1.3;
Y = the number of shares covered by this Warrant exercised in the net issue
election made pursuant to this Section 1.3;
A = the fair market value of one (1) share of Common Stock, as determined
in accordance with the following provisions, as at the time the net issue
election is made pursuant to this Section 1.3; and
B = the Exercise Price in effect under this Warrant at the time the net
issue election is made pursuant to this Section 1.3.
For purposes of this Section 1.3, "fair market value" of one (1) share of
Common Stock shall be determined as follows:
(1) Where there exists a public market for the Company's
Common Stock at the time of such exercise, the fair market value per
share shall be the average of the closing bid and asked prices of the
Common Stock quoted in the Over-The-Counter Market Summary or the last
reported sale price of the Common Stock or the closing price quoted on
the NASDAQ National Market System or on any exchange on which the
Common Stock is listed, whichever is applicable, as published in The
Wall Street Journal for the five (5) trading days prior to the date of
determination of fair market value.
(2) If no public market for the Common Stock exists at the
time of such exercise, the Company and the holder hereof shall
negotiate in good faith in an effort to reach agreement upon the fair
market value of one share of Common Stock for a period of ten (10)
days after delivery of the executed subscription.
(3) If the Company and the holder hereof are unable to reach
agreement under the foregoing subparagraph (2), the fair market value
of one share of Common Stock shall be determined by appraisal. The
Company and the holder hereof shall each select an appraiser (the
"Selected Appraisers") within thirty (30) days after the expiration of
the ten-day period in subparagraph (2) above. Each Selected Appraiser
shall render its appraisal within thirty (30) days of its appointment
hereunder. In the event that either Selected Appraiser fails to render
an appraisal
<PAGE>
within such thirty (30) day period, the first appraisal rendered shall
be conclusive. In the event that the values determined by the Selected
Appraisers differ by less than ten percent (10%) of the lower value,
the fair market value shall be the average of the appraisals made by
each of the Selected Appraisers. In the event that the values differ
by ten percent (10%) or more of the lower value, the Selected
Appraisers shall within ten (10) days select a third appraiser which
does not have and has not had a business relationship with the Company
or the holder (the "Neutral Appraiser") to conduct an appraisal. The
Neutral Appraiser shall render its appraisal within thirty (30) days
of its appointment hereunder. The fair market value of one (1) share
of Common Stock shall be equal to the appraisal made by the Neutral
Appraiser if such appraisal is between the two (2) appraisals made by
the Selected Appraisers or, if such appraisal by the Neutral Appraiser
is not between the two appraisals made by the Selected Appraisers,
then the fair market value of one share of Common Stock shall be that
one of the two appraisals made by the Selected Appraisers that is
closer to the appraisal made by the Neutral Appraiser. All appraisals
delivered pursuant to this subparagraph (3) shall be in writing and
signed by the appraiser. The fees, costs and expenses of each of the
Selected Appraisers will be borne by the party who selected such
appraiser, and the fees, costs and expenses of the Neutral Appraiser
will be borne equally by the Company and the holder hereof.
(4) In appraising the fair market value of one (1) share of
Common Stock, there shall be no discount for minority interests or
illiquidity.
(5) The fair market value as determined in accordance with
this Section 1.3 shall be conclusive, final and binding upon the
Company and the holder hereof, and shall be enforceable in any court
having jurisdiction over a proceeding to enforce the terms of this
Warrant.
Notwithstanding the foregoing, this Warrant must be exercised for cash in
the event that the shares of Common Stock issuable upon exercise of this Warrant
are subject to a registration statement on Form S-3 (or any successor form to S-
3) that is effective as of the date of such exercise. The Company agrees to
maintain the effectiveness of the registration statement described in the
preceding sentence for a period of one (1) year from the date of the exercise of
the Warrant.
1.4. Trustee for Warrant Holders. In the event that a bank or trust
---------------------------
company shall have been appointed as trustee for the holders of this Warrant
pursuant to Section 4.2, such bank or trust company shall have all the powers
and duties of a warrant agent appointed pursuant to Section 12 and shall accept,
in its own name for the account of the Company or such successor person as may
be entitled thereto, all amounts
<PAGE>
otherwise payable to the Company or such successor, as the case may be, on
exercise of this Warrant pursuant to this Section 1.4.
1.5 Company Acknowledgment. The Company will, at the time of the
----------------------
exercise of this Warrant, upon the request of the holder hereof, acknowledge in
writing its continuing obligation to afford to such holder any rights to which
such holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such holder any such rights.
2. Delivery of Stock Certificates, etc. on Exercise. As soon as
------------------------------------------------
practicable after the exercise of this Warrant in full or in part, and in any
event within ten (10) days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the holder hereof, or as such holder (upon payment by such
holder of any applicable transfer taxes and, if requested by the Company,
demonstration by such holder of compliance with applicable securities laws) may
direct, a certificate or certificates for the number of fully paid and
nonassessable shares of Common Stock to which such holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the then
current market value of one full share, together with any other stock or other
securities and property (including cash, where applicable) to which such holder
is entitled upon such exercise pursuant to Section 1 or otherwise.
3. Adjustment for Dividends in Other Stock, Property, etc.;
--------------------------------------------------------
Reclassification, etc. In case at any time or from time to time, the holders of
- ----------------------
Common Stock shall have received, or (on or after the record date fixed for the
determination of shareholders eligible to receive) shall have become entitled to
receive, without payment therefor,
(a) other or additional stock or other securities or property (other
than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of earnings
or earned surplus of the Company), or
(c) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate rearrangement,
other than additional shares of Common Stock issued as a stock dividend or in a
stock-split (adjustments in respect of which are provided for in Section 5.3),
then and in each such case the holder of this Warrant, on the exercise hereof as
provided in Section 1, shall be entitled to receive the amount of stock and
other securities and property (including cash in the cases referred to in
clauses (b) and (c) of this Section 3) which such holder would hold on the date
of such exercise if on the date hereof he had been the holder of record of the
number of shares of Common Stock called for on the face of this Warrant
<PAGE>
and had thereafter, during the period from the date hereof to and including the
date of such exercise, retained such shares and all such other or additional
stock and other securities and property (including cash in the cases referred to
in clauses (b) and (c) of this Section 3) receivable by him as aforesaid during
such period, giving effect to all adjustments called for during such period by
Sections 4 and 5.
4. Adjustment for Reorganization, Consolidation, Merger, etc.
----------------------------------------------------------
4.1. Reorganization. In case at any time or from time to time, the
--------------
Company shall (a) effect a reorganization, (b) consolidate with or merge into
any other person, or (c) transfer all or substantially all of its properties or
assets to any other person under any plan or arrangement contemplating the
dissolution of the Company, then, in each such case, the holder of this Warrant,
on the exercise hereof as provided in Section 1 at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution as the case may be, shall receive, in lieu of the
Common Stock issuable on such exercise prior to such consummation or such
effective date, the stock and other securities and property (including cash) to
which such holder would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if such holder had so
exercised this Warrant immediately prior thereto, all subject to further
adjustment thereafter as provided in Sections 3 and 5.
4.2. Dissolution. In the event of any dissolution of the Company
-----------
following the transfer of all or substantially all of its properties or assets,
the Company (other than in connection with a transaction described in Section
4.1), prior to such dissolution, shall at its expense deliver or cause to be
delivered the stock and other securities and property (including cash, where
applicable) receivable by the holders of the Warrant had the Warrant been
exercised immediately prior to such dissolution, less an amount equal to the
aggregate exercise price of the Warrant, after the effective date of such
dissolution pursuant to this Section 4 to a bank or trust company having its
principal office in Seattle, Washington, as trustee for the holder or holders of
the Warrant.
4.3 Continuation of Terms. Upon any reorganization, consolidation,
---------------------
merger or transfer (and any dissolution following any transfer) referred to in
this Section 4, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 6.
5. Adjustment for Issue or Sale of Common Stock at Less Than The
-------------------------------------------------------------
Purchase Price in Effect.
- ------------------------
<PAGE>
5.1. General. If the Company shall, at any time or from time to time,
-------
issue any additional shares of Common Stock (other than shares of Common Stock
excepted from the provisions of this Section 5 by Section 5.4) without
consideration or for a net consideration per share less than the Exercise Price
in effect immediately prior to such issuance, then, and in each such case: (a)
the Exercise Price shall be lowered to an amount determined by multiplying such
Exercise Price then in effect by a fraction:
(1) the numerator of which shall be (a) the number of shares of
Common Stock outstanding (excluding treasury shares, but including for
this purpose shares of Common Stock issuable upon exercise of this
Warrant) immediately prior to the issuance of such additional shares
of Common Stock, plus (b) the number of shares of Common Stock which
the net aggregate consideration, if any, received by the Company for
the total number of such additional shares of Common Stock so issued
would purchase at the Exercise Price in effect immediately prior to
such issuance, and
(2) the denominator of which shall be (a) the number of shares of
Common Stock outstanding (excluding treasury shares, but including for
this purpose shares of Common Stock issuable upon exercise of this
Warrant) immediately prior to the issuance of such additional shares
of Common Stock, plus (b) the number of such additional shares of
Common Stock so issued;
and (b) the holder of this Warrant shall thereafter, on the exercise hereof as
provided in Section 1, be entitled to receive the number of shares of Common
Stock determined by multiplying the number of shares of Common Stock which would
otherwise (but for the provisions of this Section 5.1) be issuable on such
exercise by the fraction of which (i) the numerator is the Exercise Price which
would otherwise (but for the provisions of this Section 5.1) be in effect, and
(ii) the denominator is the Exercise Price in effect on the date of such
exercise.
5.2. Definitions, etc. For purposes of this Section 5 and of Section 7:
-----------------
The issuance of any warrants, options or other subscription or
purchase rights with respect to shares of Common Stock and the issuance of
any securities convertible into or exchangeable for shares of Common Stock
(or the issuance of any warrants, options or any rights with respect to
such convertible or exchangeable securities) shall be deemed an issuance at
such time of such Common Stock if the Net Consideration Per Share which may
be received by the Company for such Common Stock (as hereinafter
determined) shall be less than the Exercise Price at the time of such
issuance and, except as hereinafter provided, an adjustment in the Exercise
Price and the number of shares of Common Stock issuable upon exercise of
this Warrant shall be made upon each such issuance in the manner provided
in Section 5.1. Any obligation, agreement or undertaking to issue warrants,
options, or other subscription or purchase rights at any time in the
<PAGE>
future shall be deemed to be an issuance at the time such obligation,
agreement or undertaking is made or arises. No adjustment of the Exercise
Price and the number of shares of Common Stock issuable upon exercise of
this Warrant shall be made under Section 5.1 upon the issuance of any
shares of Common Stock which are issued pursuant to the exercise of any
warrants, options or other subscription or purchase rights or pursuant to
the exercise of any conversion or exchange rights in any convertible
securities if any adjustment shall previously have been made upon the
issuance of any such warrants, options or other rights or upon the issuance
of any convertible securities (or upon the issuance of any warrants,
options or any rights therefor) as above provided. Any adjustment of the
Exercise Price and the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to this Section 5.2 which relates to
warrants, options or other subscription or purchase rights with respect to
shares of Common Stock shall be disregarded if, as, and to the extent that
such warrants, options or other subscription or purchase rights expire or
are canceled without being exercised, so that the Exercise Price effective
immediately upon such cancellation or expiration shall be equal to the
Exercise Price that otherwise would have been in effect at the time of the
issuance of the expired or canceled warrants, options or other
subscriptions or purchase rights, with such additional adjustments as would
have been made to that Exercise Price had the expired or canceled warrants,
options or other subscriptions or purchase rights not been issued. For
purposes of this Section 5.2, the "Net Consideration Per Share" which may
be received by the Company shall be determined as follows:
(A) The "Net Consideration Per Share" shall mean the amount equal
to the total amount of consideration, if any, received by the Company for
the issuance of such warrants, options, subscriptions, or other purchase
rights or convertible or exchangeable securities, plus the minimum amount
of consideration, if any, payable to the Company upon exercise or
conversion thereof, divided by the aggregate number of shares of Common
Stock that would be issued if all such warrants, options, subscriptions, or
other purchase rights or convertible or exchangeable securities were
exercised, exchanged or converted.
(B) The "Net Consideration Per Share" which may be received by
the Company shall be determined in each instance as of the date of issuance
of warrants, options, subscriptions or other purchase rights, or
convertible or exchangeable securities without giving effect to any
possible future price adjustments or rate adjustments which may be
applicable with respect to such warrants, options, subscriptions or other
purchase rights or convertible securities.
For purposes of this Section 5, if a part or all of the consideration
received by the Company in connection with the issuance of shares of the
Common Stock or the issuance of any of the securities described in this
Section 5 consists of property other than cash, such consideration shall be
deemed to have the same
<PAGE>
value as shall be determined in good faith by the Board of Directors of the
Company.
This Section 5.2 shall not apply under any of the circumstances described
in Section 5.4.
5.3. Extraordinary Events. In the event that the Company shall (i)
--------------------
issue additional shares of the Common Stock as a dividend or other distribution
on outstanding Common Stock, (ii) subdivide its outstanding shares of Common
Stock, or (iii) combine its outstanding shares of the Common Stock into a
smaller number of shares of the Common Stock, then, in each such event, the
Exercise Price shall, simultaneously with the happening of such event, be
adjusted by multiplying the then Exercise Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Exercise Price then in effect. The Exercise
Price, as so adjusted, shall be readjusted in the same manner upon the happening
of any successive event or events described herein in this Section 5.3. The
holder of this Warrant shall thereafter, on the exercise hereof as provided in
Section 1, be entitled to receive that number of shares of Common Stock
determined by multiplying the number of shares of Common Stock which would
otherwise (but for the provisions of this Section 5.3) be issuable on such
exercise by a fraction of which (i) the numerator is the Exercise Price which
would otherwise (but for the provisions of this Section 5.3) be in effect, and
(ii) the denominator is the Exercise Price in effect on the date of such
exercise.
5.4. Excluded Shares. Section 5.1 shall not apply to:
----------------
(i) shares of the Company's Common Stock issuable pursuant
to options not to exceed 5,849,669 shares in the aggregate (the
"Option Pool"), for an exercise price equal to the fair market
value at the time of grant of any such option to employees,
officers, directors, contractors, advisors or consultants of the
Company pursuant to the Option Plans; provided, that the Company
--------
may increase the Option Pool if, and only to the extent that,
such increase of the Option Pool is approved by the Board of
Directors (including a majority of the non-employee directors)
and shareholders of the Company; and provided further, that the
----------------
Company may grant options with an exercise price below the then
fair market value at the time of grant (but in any event no lower
than 85% of the then fair market value) if, and only to the
extent that, such exercise price is approved by the Board of
Directors (including a majority of the non-employee directors)
and upon prior consultation with the holder of this Warrant;
<PAGE>
(ii) shares of the Company's Common Stock not to exceed
4,500,000 shares in the aggregate (the "Employee Stock Pool"),
issued for a purchase price equal to the lesser of 85% of the
fair market value at the Offering Date or the Purchase Date (as
such terms are defined in the Stock Purchase Plan; provided that
--------
the Company may increase the Employee Stock Pool if, and only to
the extent that, such increase of the Employee Stock Pool is
approved by the Board of Directors (including a majority of the
non-employee directors) and shareholders of the Company;
(iii) shares of the Company's Common Stock (and/or options
or warrants therefor) not to exceed 14,573 shares in the
aggregate issued pursuant to a certain option agreement by and
between the Company and Leo Lucas;
(iv) shares of the Company's Common Stock or Preferred
Stock issued in connection with any stock split or stock dividend
pursuant to Section 5.3 above,
(v) any shares of the Company's Common Stock or Preferred
Stock (and/or options or warrants therefor), issued to financial
institutions or lessors in connection with commercial credit
arrangements, equipment financings or similar transactions, which
issuances are primarily for other than equity financing purposes,
and provided that: (x) the aggregate of such issuances and
similar issuances in the preceding twelve (12) month period do
not exceed two percent (2%) of the then outstanding Common Stock
of the Company (assuming full conversion and exercise of all
outstanding convertible and exercisable securities) and (y) no
more than one percent (1%) of the then outstanding Common Stock
of the Company (assuming full conversion and exercise of all
outstanding convertible and exercisable securities) shall be
issued in any one transaction or series of related transactions;
and
(vi) securities issued for consideration other than cash
pursuant to a bonafide merger, consolidation, acquisition or
similar business combination, which, in each case, was approved
by the Company's Board of Directors.
6. Performance of this Warrant. The Company will not, by amendment of its
---------------------------
Amended and Restated Certificate of Incorporation 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 of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the holders of this Warrant hereunder. Without limiting the
<PAGE>
generality of the foregoing, the Company (a) will not increase the par value of
any shares of stock receivable on the exercise of this Warrant above the amount
payable therefor on such exercise, (b) will take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of stock on the exercise of this Warrant
from time to time outstanding, and (c) will notify the holder of this Warrant no
later than twenty (20) days prior to the transfer of all or substantially all of
its properties and assets to any other person (corporate or otherwise), or
consolidation with or merger with or into any other person, whether or not the
Company is the surviving corporation.
7. Certificate as to Adjustments. In each case of any adjustment or
-----------------------------
readjustment in the shares of Common Stock issuable on the exercise of this
Warrant, the Company at its expense will promptly cause its Chief Financial
Officer to compute such adjustment or readjustment in accordance with the terms
of this Warrant and prepare a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based, including a statement of (a) the consideration received
or receivable by the Company for any additional shares of Common Stock issued or
sold or deemed to have been issued or sold, (b) the number of shares of Common
Stock outstanding or deemed to be outstanding, and (c) the Exercise Price and
the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such issue or sale and as adjusted and
readjusted as provided in this Warrant. The Company will forthwith mail a copy
of each such certificate to the holder of this Warrant, and will, on the written
request at any time of the holder of this Warrant, furnish to such holder a like
certificate setting forth the Exercise Price at the time in effect and showing
how it was calculated.
8. Notices of Record Date, etc. In the event of
----------------------------
(a) any taking by the Company of a record of the holders of any class
or securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of all
or substantially all the assets of the Company to or consolidation or
merger of the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or winding-up
of the Company, or
(d) any proposed issue or grant by the Company of any shares of stock
of any class or any other securities, or any right or option to subscribe
for,
<PAGE>
purchase or otherwise acquire any shares of stock of any class or any
other securities (other than the issue of Common Stock on the exercise of
this Warrant),
then and in each such event the Company will mail or cause to be mailed to each
registered holder of a Warrant 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 stating the amount and character 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 to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock shall be entitled to exchange their shares
of Common Stock for securities or other property deliverable on such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up, and (iii) the amount and
character of any stock or other securities, or rights or options with respect
thereto, proposed to be issued or granted, the date of such proposed issue or
grant and the persons or class of persons to whom such proposed issue or grant
is to be offered or made. Such notice shall be mailed at least ten (10)
business days prior to the date specified in such notice on which any such
action is to be taken.
9. Reservation of Stock, etc., Issuable on Exercise of Warrant. The
-----------------------------------------------------------
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of this Warrant, all shares of Common Stock from time
to time issuable on the exercise of this Warrant.
10. Exchange of Warrant. On surrender for exchange of this Warrant,
-------------------
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of the holder thereof a new warrant or warrants of
like tenor, in the name of such holder or as such holder (upon payment by such
holder of any applicable transfer taxes and, if requested by the Company,
demonstration by such holder of compliance with applicable securities laws) may
direct, calling in the aggregate on the face or faces thereof for the number of
shares of Common Stock called for on the face or faces of the Warrant so
surrendered.
11. Replacement of Warrant. On receipt of evidence reasonably
----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
on delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new warrant of like tenor.
12. Warrant Agent. The Company may, by written notice to the holder of
-------------
this Warrant, appoint an agent having an office in Seattle, Washington, for the
purpose of issuing Common Stock on the exercise of this Warrant pursuant to
Section 1, exchanging this Warrant pursuant to Section 10, and replacing this
Warrant pursuant to Section 11, or
<PAGE>
any of the foregoing, and thereafter any such issuance, exchange or replacement,
as the case may be, shall be made at such office by such agent.
13. Remedies. The Company stipulates that the remedies at law of the
--------
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
14. Negotiability, etc. This Warrant is issued upon the following
-------------------
terms, to all of which each holder or owner hereof by the taking hereof consents
and agrees:
(a) the holder of this Warrant may is assign its rights pursuant to
this Warrant only with the written consent of the Company, which consent
shall not be unreasonably withheld.
(b) the Company may assign its rights and obligations pursuant to this
Warrant only with the written consent of the holder of this Warrant, which
consent shall not be unreasonably withheld.
(c) subject to compliance with all applicable securities laws and
subsection (a) above, title to this Warrant may be transferred by
endorsement (by the holder hereof executing the form of assignment at the
end hereof) and delivery in the same manner as in the case of a negotiable
instrument transferable by endorsement and delivery;
(d) subject to the transfer restrictions set forth in subsection (a)
above, any person in possession of this Warrant properly endorsed is
authorized to represent himself as absolute owner hereof and is empowered
to transfer absolute title hereto by endorsement and delivery hereof to a
bona fide purchaser hereof for value; each prior taker or owner waives and
renounces all of his equities or rights in this Warrant in favor of each
such bona fide purchaser, and each such bona fide purchaser shall acquire
absolute title hereto and to all rights represented hereby; and
(e) until this Warrant is transferred on the books of the Company, the
Company may treat the registered holder hereof as the absolute owner hereof
for all purposes, notwithstanding any notice to the contrary.
15. Notices, etc. All notices and other communications from the Company
-------------
to the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder or, until any such holder furnishes to the
Company an address, then to,
<PAGE>
and at the address of, the last holder of this Warrant who has so furnished an
address to the Company.
16. Miscellaneous. This Warrant and any term hereof may be changed,
-------------
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. The parties hereby agree that this Warrant, and the respective
rights, duties and obligations of the parties hereunder, shall be governed by
and construed in accordance with the General Corporation Law of the State of
Delaware as to matters within the scope thereof and, as to all other matters,
shall be governed by and construed with the laws of the State of Washington,
without giving effect to principles of conflicts of law thereunder. The
headings in this Warrant are for purposes of reference only, and shall not limit
or otherwise affect any of the terms hereof. The invalidity or unenforceability
of any provision hereof shall in no way affect the validity or enforceability of
any other provision.
17. Expiration; Automatic Exercise. The right to exercise this Warrant
------------------------------
shall expire at 5:00 P.M., Seattle, Washington, time, on August 18, 2004.
Notwithstanding the foregoing, this Warrant shall automatically be deemed to be
exercised in full pursuant to the provisions of Section 1.3 hereof, without any
further action on behalf of the holder hereof, immediately prior to the time
this Warrant would otherwise expire pursuant to the preceding sentence.
Dated: August 18, 1999 ASYMETRIX LEARNING SYSTEMS,
INC.
By: /s/ Steven Esau
------------------------------------
Name: Steven Esau
Title: Vice President, General Counsel
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: ASYMETRIX LEARNING SYSTEMS, INC.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder _______ shares
of Common Stock of Asymetrix Learning Systems, Inc. and herewith makes payment
of $__________ therefor, and requests that the certificates for such shares be
issued in the name of, and delivered to whose address is
______________________________
Dated: _________________________________________
(Signature must conform to name of holder
as specified on the face of the Warrant)
___________________________
<PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto ...................... the right represented by the within Warrant to
purchase _____ shares of Common Stock of Asymetrix Learning Systems, Inc. to
which the within Warrant relates, and appoints ____________________ Attorney to
transfer such right on the books of Asymetrix Learning Systems, Inc. with full
power of substitution in the premises.
Dated: ____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
____________________________________________
(Address)
Signed in the presence of:
__________________________________
<PAGE>
EXHIBIT 5.1
-----------
September 20, 1999
Asymetrix Learning Systems, Inc.
110-110th Avenue, NE
Bellevue, WA 98064
Gentlemen/Ladies:
At your request, we have examined the Registration Statement on Form S-3
(the "Registration Statement") to filed by you with the Securities and Exchange
Commission (the "Commission") on or about September 20, 1999 in connection with
the registration under the Securities Act of 1933, as amended, of an aggregate
of 857,142 shares of your Common Stock (the "Stock"), 428,571 of which are
presently issued and outstanding (the "Issued Stock") and 428,571 of which are
issuable upon the exercise of a Common Stock Purchase Warrant (the "Warrant
Stock") and all of which Stock will be sold by a certain selling stockholder
(the "Selling Stockholder").
In rendering this opinion, we have examined the following:
(1) your registration statement on Form 8-A (File Number 000-24289) filed
with the Commission on May 19, 1998, together with the order of
effectiveness issued by the Commission therefor on June 12, 1998;
(2) the Registration Statement, together with the Exhibits filed as a part
thereof;
(3) the Prospectuses prepared in connection with the Registration
Statement;
(4) the minutes of meetings and actions by written consent of the
stockholders and Board of Directors that are contained in your minute
books, that are in our possession;
(5) the stock records that you have provided to us (consisting of a
certificate from your transfer agent of even date herewith verifying
the number of your issued and outstanding shares of capital stock as
of the date hereof and a list of option and warrant holders respecting
your capital and of any rights to purchase capital stock that was
prepared by you and dated September 17, 1999 verifying the number of
such issued and outstanding securities);
(6) a Management Certificate addressed to us and dated of even date
herewith executed by you containing certain factual and other
representations; and
<PAGE>
September 20, 1999
Page 2
(7) The Securities Purchase Agreement and the Common Stock Purchase
Warrant under which the Selling Stockholder acquired the Stock to be
sold by them as described in the Registration Statement.
By telephone call to the offices of the Commission, we have confirmed the
continued effectiveness of your registration under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the timely filing by you of all
reports required to be filed by you pursuant to Rules 13, 14 and 15 promulgated
under the Exchange Act.
In our examination of documents for purposes of this opinion, we have
assumed, and express no opinion as to, the genuineness of all signatures on
original documents, the authenticity and completeness of all documents submitted
to us as originals, the conformity to originals and completeness of all
documents submitted to us as copies, the legal capacity of all natural persons
executing the same, the lack of any undisclosed termination, modification,
waiver or amendment to any document reviewed by us and the due authorization,
execution and delivery of all documents where due authorization, execution and
delivery are prerequisites to the effectiveness thereof.
As to matters of fact relevant to this opinion, we have relied solely upon
our examination of the documents referred to above and have assumed the current
accuracy and completeness of the information obtained from public officials and
records referred to above. We have made no independent investigation or other
attempt to verify the accuracy of any of such information or to determine the
existence or non-existence of any other factual matters; however, we are not
-------
aware of any facts that would cause us to believe that the opinion expressed
herein is not accurate.
We are admitted to practice law in the State of California, and we express
no opinion herein with respect to the application or effect of the laws of any
jurisdiction other than the existing laws of the United States of America and
the State of California and (without reference to case law or secondary sources)
the existing Delaware General Corporation Law.
In connection with our opinion expressed below, we have assumed that, at or
prior to the time of the delivery of any shares of Stock, the Registration
Statement will have been declared effective under the Securities Act of 1933, as
amended, that the registration will apply to such shares of Stock and will not
have been modified or rescinded and that there will not have occurred any change
in law affecting the validity or enforceability of such shares of Stock.
You have informed us that you intend to issue the Stock from time to time
on a delayed or continuous basis. This opinion is limited to the laws,
including the rules and regulations, as in effect on the date hereof. We are
basing this opinion on our understanding that, prior to issuing any Stock, you
will advise us in writing of the terms thereof and other information material
thereto, will afford us an opportunity to review the operative documents
pursuant to which such Stock is to be issued (including the Registration
Statement, the Prospectus and the applicable Prospectus Supplement, as then in
effect) and will file such supplement or amendment to this opinion (if any) as
we may reasonably consider necessary or appropriate with respect to such Stock.
However, we undertake no responsibility to monitor your future compliance with
applicable laws, rules or regulations of the Commission or other governmental
body. We also
<PAGE>
September 20, 1999
Page 3
assume you will timely file any and all supplements to the Registration
Statement and Prospectus as are necessary to comply with applicable laws in
effect from time to time.
Based upon the foregoing, it is our opinion that the 428,571 shares of
Issued Stock to be sold by the Selling Stockholder pursuant to the Registration
Statement are validly issued, fully paid and nonassessable and that the 428,571
shares of Warrant Stock to be sold by the Selling Stockholder pursuant to the
Registration Statement when issued in accordance upon exercise of the Common
Stock Warrant Purchase Warrant will be validly issued, fully paid and
nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us, if any, in the
Registration Statement, the Prospectus constituting a part thereof and any
amendments thereto.
This opinion speaks only as of its date and we assume no obligation to
update this opinion should circumstances change after the date hereof. This
opinion is intended solely for the your use as an exhibit to the Registration
Statement for the purpose of the above sale of the Stock and is not to be relied
upon for any other purpose.
Very truly yours,
FENWICK & WEST LLP
By: /s/ Jeffrey Vetter
_______________________________
Jeffrey Vetter, a Partner
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
The Board of Directors
Asymetrix Learning Systems, Inc.:
We consent to the use of our reports incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the filing on Form S-3.
/s/ KPMG
Seattle, Washington
September 17, 1999
