DRUGSTORE.COM, INC.
PREFERRED STOCK PURCHASE AGREEMENT
This Preferred Stock Purchase Agreement (this "Agreement") is made as
of July 30, 2000 by and among drugstore.com, inc., a Delaware corporation (the
"Company"), and the investors listed on Schedule I attached hereto (each a
"Purchaser" and together the "Purchasers").
The parties hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED STOCK.
1.1 SALE AND ISSUANCE OF PREFERRED STOCK.
(a) Subject to the terms and conditions of this
Agreement, each of the Purchasers agrees to purchase and the Company agrees to
sell and issue to such Purchaser that number of shares of Series 1 Preferred
Stock, par value $0.0001, of the Company (the "Preferred Stock"), determined by
dividing the Purchase Commitment listed opposite such Purchaser's name on
Schedule 1 by $493.75. The Company shall have the right to amend Schedule I
hereto to add additional Purchasers at any time prior to the Closing, and any
such Purchasers shall become parties to this Agreement.
(b) The Preferred Stock shall have the rights and
restrictions as set forth in the Certificate of Designation of Series 1
Preferred Stock of drugstore.com, inc. (the "Certificate of Designation")
attached hereto as Exhibit A.
(c) The parties hereto acknowledge that, concurrently
herewith, the Company is entering into a Common Stock Purchase Agreement with
the several purchasers listed on Schedule I thereto (the "Common Stock Purchase
Agreement"), pursuant to which such purchasers have agreed to purchase, subject
to the terms and conditions of the Common Stock Purchase Agreement, at least
8,101,265 shares of Common Stock, par value $0.0001 per share, of the Company
(the "Common Stock"), having the rights and restrictions set forth in the
Amended and Restated Certificate of Incorporation of drugstore.com, inc.
attached hereto as Exhibit B (the "Restated Certificate."). The Common Stock to
be issued pursuant to the Common Stock Purchase Agreement shall hereinafter be
referred to as the "Stock".
1.2 CLOSING; DELIVERY.
(a) The purchase and sale of the Preferred Stock
shall take place at the offices of Simpson Thacher & Bartlett (or such other
location mutually agreeable to the parties hereto) no later than 5 business days
after the satisfaction or (subject to applicable law) waiver of the conditions
set forth in Sections 4 and 5 (excluding conditions that, by their terms, cannot
be satisfied until the Closing) (which time and place are designated as the
"Closing").
2
(b) At the Closing, the Company shall deliver to each
Purchaser a certificate or certificates for the number of shares of the
Preferred Stock to be purchased by such Purchaser pursuant to this Agreement
against delivery of the consideration therefor, by wire transfer of immediately
available funds to the Company's bank account.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to each Purchaser that:
2.1 GOOD STANDING. Each of Company and its Subsidiaries (i) is
a corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation; (ii) has the power and authority to own,
lease and operate its properties and carry on its business as now conducted; and
(iii) is duly qualified, licensed to do business and in good standing as a
foreign corporation in each jurisdiction where the failure to be so qualified
could reasonably be expected to have a material adverse effect on the business,
assets, operations or financial condition of the Company ("Material Adverse
Effect").
2.2 CAPITALIZATION.
(a) The authorized capital of the Company consists of
250,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock,
$0.0001 per share (the "Preferred Stock"). The Common Stock has the rights,
preferences and privileges set forth in the Company's Restated Certificate, and
the Preferred Stock has the rights, preferences and privileges set forth in the
Certificate of Designations
(b) As of the date of this Agreement, 52,962,714
shares of Common Stock and no shares of Preferred Stock are issued and
outstanding. All of the outstanding shares of Common Stock have been, and when
issued and paid for in accordance with the terms of the Common Stock Purchase
Agreement the Stock will be, validly issued, duly authorized, fully paid and
nonassessable, and issued in compliance with all applicable federal and state
securities laws (based in part upon the representations of the purchasers
thereof contained in the Common Stock Purchase Agreement). All of the shares of
Series 1 Preferred Stock, when issued and paid for in accordance with the terms
of this Agreement, will be validly issued, duly authorized, fully paid and
nonassessable, and issued in compliance with all applicable federal and state
securities laws (based in part upon the representations of the Purchasers
contained in Sections 3.4, 3.5, 3.6, 3.7 and 3.8).
(c) As of the date of this Agreement (i) 17,509,148
shares of Common Stock are reserved for issuance under the Company's 1998 Stock
Plan (of which 8,000 shares have been issued pursuant to restricted stock
agreements, 890,839 shares are issuable under outstanding options that are
currently exercisable, 10,367,423 shares are issuable under other outstanding
options that are not currently exercisable and 6,250,886 shares remain available
for future grants), (ii) 32,404 shares of Common Stock are reserved for issuance
under the Company's Beauty.com Inc. Stock Plan (of which 9,606 shares are
issuable under outstanding options, all of which are currently exercisable and
22,798 remain available for future grants) and (iii) 1,000,000 shares of Common
Stock are reserved for issuance under the Company's 1999 Employee Stock Purchase
Plan (of which 87,719 have been issued to date).
2
3
(d) Except for the conversion privileges of the
Preferred Stock and except as set forth in (i) the warrant to purchase 500,000
shares of Common Stock issued on June 26, 2000 to Tel-Drug, Inc. (the "Tel-Drug
Warrant") and (ii) the warrant to purchase 2,500,000 shares of Common Stock
issued on July 30, 2000 to Amazon.com, Inc. (the "Amazon Warrant"), as of the
date of this Agreement there are no outstanding options, warrants, rights
(including conversion or preemptive rights and rights of first refusal or
similar rights) or agreements, oral or in writing, for the purchase or
acquisition from the Company of any shares of its capital stock.
(e) The Company's only subsidiaries are DS Pharmacy,
Inc., DS Non-Pharmaceutical Sales, Inc., DS Distribution, Inc., DSGC Idaho,
Inc., Beauty.com, Inc. and Beauty.com Sales, Inc. (each a "Subsidiary" and
together, the "Subsidiaries").
2.3 AUTHORIZATION. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement and the Common Stock
Purchase Agreement (collectively, the "Agreements") and the performance of all
obligations of the Company hereunder and thereunder and the authorization,
issuance and delivery of the Stock and the Preferred Stock has been taken or
will be taken prior to the Closing (subject, in the case of the conversion of
the Preferred Stock into Common Stock, to the receipt of the Stockholder
Approval (as defined herein)), and the Agreements, when executed and delivered
by the Company, will constitute valid and legally binding obligations of the
Company, enforceable against the Company in accordance with their terms except
as limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, and other laws of general application affecting
enforcement of creditors' rights generally, as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies, and except as may be limited by Section 6.2(c).
2.4 VALID ISSUANCE OF PREFERRED STOCK. The Preferred Stock
that will be issued to the Purchasers at Closing will have been duly and validly
reserved for issuance and, when issued and delivered in accordance with the
terms hereof, will be duly authorized, validly issued, fully paid and
nonassessable and free of restrictions on transfer other than restrictions on
transfer under this Agreement and applicable state and federal securities laws.
Based in part upon the representations of the Purchasers in this Agreement, the
Preferred Stock will be issued in compliance with all applicable federal and
state securities laws. The Common Stock issuable upon conversion of the
Preferred Stock has been duly and validly reserved for issuance, and upon
issuance in accordance with the terms of the Certificate of Designations, will
be duly authorized, validly issued, fully paid and nonassessable and free of
restrictions on transfer other than restrictions on transfer under this
Agreement and applicable federal and state securities laws and will be issued in
compliance with all applicable federal and state securities laws.
2.5 LITIGATION. There is no action, suit, proceeding or
investigation pending or, to the Company's knowledge, currently threatened
against the Company or any of its subsidiaries that (i) questions the validity
of the Agreements or the right of the Company or any of its subsidiaries, as
applicable, to enter into them, or to consummate the transactions
3
4
contemplated hereby or thereby nor is the Company aware that there is any basis
for the foregoing or (ii) if adversely determined would have a Material Adverse
Effect. Neither the Company nor any of its subsidiaries is a party or subject to
the provisions of any order, writ, injunction, judgment or decree of any court
or government agency or instrumentality that (i) challenges the validity of the
Agreements or the right of the Company or any of its subsidiaries, as
applicable, to enter into this Agreement, or to consummate the transactions
contemplated hereby and thereby or (ii) would have a Material Adverse Effect.
2.6 LIABILITIES. The Company and its subsidiaries, on a
consolidated basis, have no liabilities and there are no contingent liabilities,
required by generally accepted accounting principles to be disclosed on a
balance sheet but that are not disclosed on the Company's audited balance sheet
as of January 2, 2000 and/or on the Company's unaudited balance sheet as of July
2, 2000 except liabilities that would not have a Material Adverse Effect.
Subsequent to July 2, 2000, the Company and its subsidiaries, on a consolidated
basis, have not incurred any liabilities or any contingent liabilities required
by generally accepted accounting principles to be disclosed on the Company's
balance sheet except liabilities that would not have a Material Adverse Effect.
2.7 COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery
and performance of the Agreements and the consummation of the transactions
contemplated hereby and thereby will not result in any violation or be in
conflict with or constitute, with or without the passage of time and giving of
notice, either a default under or cause acceleration under any provision of the
Restated Certificate or the bylaws of the Company or any instrument, judgment,
order, writ, decree or contract to which the Company or any of its Subsidiaries
is a party or by which it is bound, or any provision of any federal or state
statute, rule or regulation applicable to the Company or any of its
Subsidiaries, the effect of which would (i) have a Material Adverse Effect, (ii)
materially and adversely affect the ability of the Company and its Subsidiaries
to perform their respective obligations under the Agreements or (iii) result in
the creation of any material lien, charge or encumbrance upon any assets of the
Company or any of its Subsidiaries.
2.8 MATERIAL AGREEMENTS. The Company has filed with the SEC
all agreements in existence as of the date of this Agreement that (a) define or
affect the rights of security holders of the Company in their capacity as
security holders including, but not limited to, such security holders' voting
rights, registration rights or standstill rights or obligations, other than (i)
the Agreement dated June 23, 2000 between the Company and WellPoint Health
Networks Inc., (ii) the Tel-Drug Warrant and (iii) the Amazon Warrant or (b) are
required to be filed under Item 601 of Regulation S-K.
2.9. FINANCIAL STATEMENTS. The financial statements of Company
that have been delivered to the Investors (including those for the period ended
July 2, 2000), (i) are in accordance with the books and records of Company and
its Subsidiaries, which have been maintained in accordance with good business
practice; (ii) have been prepared in conformity with GAAP (except as discussed
therein, the absence of footnotes for all unaudited periods and, in the case of
audited financial statements, as approved by the relevant firm of accountants);
and (iii) fairly present the consolidated financial position of Company as of
the dates presented
4
5
therein and the results of operations, changes in financial positions or cash
flows, as the case may be, for the periods presented therein (except, in the
case of financial statements for the period ended July 2, 2000, for normal
year-end audit adjustments). None of the Company or any of the Company's
Subsidiaries has any contingent obligations, liability for taxes or other
outstanding obligations that are material in the aggregate, except as disclosed
in the unaudited financial statements for the period ended July 2, 2000 (except
for normal year-end audit adjustments). None of the Company or its Subsidiaries
has any contingent obligations or liability for taxes that are material in the
aggregate and that would be required to be reflected or reserved against in the
latest balance sheet of the Company, except as disclosed in the unaudited
financial statements for the period ended July 2, 2000 (except for normal
year-end audit adjustments).
2.10. INVESTMENT COMPANY. None of Company or its Subsidiaries
is subject to regulation under the Investment Company Act of 1940, or to any
federal or state statute or regulation limiting its ability to incur
indebtedness.
2.11. SEC REPORTING; INFORMATION PROVIDED. As of the date each
was filed, none of the Company's registration statements, reports or other
filings made with the Securities and Exchange Commission, contained any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Neither this agreement nor any document, certificate or
instrument furnished to any of the Purchasers by or on behalf of the Company
when taken in conjunction with any supplemental or revised information furnished
to any of the Purchasers in writing prior to the date hereof contains any untrue
statement of a material fact or omits, or will omit, to state a material fact
necessary to make the statements in such documents, certificates, instruments or
other information provided, in light of the circumstances in which they were
made, not misleading, except that with respect to any projected financial
information, the Company only represents that it was prepared in good faith and
the Company reasonably believes that the assumptions made in preparing such
projections were reasonable as of the date of such projections.
2.12. ABSENCE OF CERTAIN CHANGES. Since July 2, 2000, no event
has occurred and no condition exists which would have a Material Adverse Effect,
other than (i) any change in the price of the Common Stock or (ii) changes in
general economic conditions or conditions affecting the Company's industry
generally.
2.13. REAL PROPERTY HOLDING COMPANY. The Company is not, and
has not been, a "United States real property holding corporation" within the
meaning of Section 897(c)(2) of the Internal Revenue Code of 1986, as amended
(the "Code"), during the applicable period described in Section 897(c)(1)(A)(ii)
of the Code.
2.14 FORM S-3 ELIGIBILITY. The Company and the transactions
contemplated by Section 6.2 of this Agreement meet the requirements for using
Form S-3 under the Securities Act for resale.
5
6
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser
hereby represents and warrants to the Company with respect to itself that:
3.1 AUTHORIZATION. Such Purchaser has full power and authority
to enter into and deliver this Agreement, and this Agreement, when executed and
delivered by the Purchaser, will constitute a valid and legally binding
obligation of the Purchaser, enforceable against the Purchaser in accordance
with its terms except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, and other laws of general
application affecting enforcement of creditors' rights generally, as limited by
laws relating to the availability of specific performance, injunctive relief, or
other equitable remedies, and except as may be limited by Section 6.2(c)..
3.2 LITIGATION. There is no action, suit, proceeding or
investigation pending or, to the Purchaser's knowledge, currently threatened
against the Purchaser or any of its subsidiaries that questions the validity of
this Agreement or the right of the Purchaser or any of its subsidiaries, as
applicable, to enter into this Agreement, or to consummate the transactions
contemplated hereby nor is the Purchaser aware that there is any basis for the
foregoing. Neither the Purchaser nor any of its subsidiaries is a party or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality that challenges the validity
of this Agreement or the right of the Purchaser or any of its subsidiaries, as
applicable, to enter into this Agreement, or to consummate the transactions
contemplated hereby.
3.3 COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in any violation or be in conflict with or
constitute, with or without the passage of time and giving of notice, either a
default under any provision of the governing documents of the Purchaser or any
instrument, judgment, order, writ, decree or contract to which the Purchaser or
any of its subsidiaries is a party or by which it is bound, or any provision of
any federal or state statute, rule or regulation applicable to the Purchaser or
any of its subsidiaries, the effect of which would have a material adverse
effect on the ability of the Purchaser and its subsidiaries to perform their
respective obligations under this Agreement or result in the creation of any
lien, charge or encumbrance upon any assets of the Purchaser or any of its
subsidiaries.
3.4 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made
with the Purchaser in reliance upon the Purchaser's representation to the
Company, which by the Purchaser's execution of this Agreement, the Purchaser
hereby confirms, that the Preferred Stock to be acquired by the Purchaser will
be acquired for investment for the Purchaser's own account, not as a nominee or
agent, and not with a view to the resale or public distribution of any part
thereof in violation of any requirements of the Securities Act of 1933, as
amended (the "Securities Act") or applicable state securities laws. The
Purchaser has no present intention of selling, granting any participation in, or
otherwise distributing any Preferred Stock purchased hereunder, including,
without limitation, entering into any arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the Stock,
whether any such transaction is to be settled by delivery of Preferred Stock,
Common Stock or
6
7
other securities, in cash or otherwise. By executing this Agreement, the
Purchaser further represents that the Purchaser does not presently have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to such person or to any third person, with
respect to any of the Preferred Stock or the Common Stock issuable upon
conversion thereof.
3.5 DISCLOSURE OF INFORMATION. The Purchaser (i) has had an
opportunity to discuss the Company's business, management, financial affairs and
the terms and conditions of the offering of the Preferred Stock with the
Company's management and (ii) has had an opportunity to review the Company's
facilities. The Purchaser understands that such discussions and reviews, as well
as any written information delivered by the Company to the Purchaser, were
intended to describe the aspects of the Company's business that it believes to
be material.
3.6 RESTRICTED SECURITIES. The Purchaser understands that the
Preferred Stock has not been, and will not be, registered under the Securities
Act, by reason of a specific exemption from the registration provisions of the
Securities Act that depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of the Purchaser's representations as
expressed herein. The Purchaser understands that the shares of Preferred Stock
are "restricted securities" under applicable U.S. federal and state securities
laws and that, pursuant to these laws, the Purchaser must hold the shares of
Preferred Stock indefinitely unless they are registered with the Securities and
Exchange Commission and qualified by state authorities, or an exemption from
such registration and qualification requirements is available. The Purchaser
acknowledges that the Company has no obligation to register or qualify the
Preferred Stock for resale except with regards to the Common Stock issuable upon
conversion of the Preferred Stock as set forth in Section 6.2 hereof. The
Purchaser further acknowledges that if an exemption from registration or
qualification is available, it may be conditioned on various requirements
including, but not limited to, the time and manner of sale, the holding period
for the Preferred Stock, and on requirements relating to the Company that are
outside of the Purchaser's control, and that the Company is under no obligation,
and may not be able, to satisfy.
3.7 LEGENDS. The Purchaser understands that the Preferred
Stock, and any securities issued in respect thereof, may bear one or all of the
following legends:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A
FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933."
(b) Any legend required by the "Blue Sky" laws of any
state to the extent such laws are applicable to the shares represented by the
certificate so legended.
7
8
3.8 ACCREDITED INVESTOR. The Purchaser is an accredited
investor as defined in Rule 501(a) of Regulation D promulgated under the
Securities Act.
4. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT CLOSING. The
obligations of the Purchasers to the Company under this Agreement are subject to
the fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived by each Purchaser:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company shall be true and correct on and as of the date of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of the Closing (except with respect to the
representations and warranties contained in Section 2.2(b), 2.2(c) and the first
sentence of Section 2.2(e), which shall be true and correct in all material
respects as of the date of the Closing).
4.2 PERFORMANCE. The Company shall have performed and complied
with all covenants, agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing and the Company shall have obtained any and all consents, permits
and waivers necessary or appropriate for consummation of the transactions
contemplated by the Agreements.
4.3 RESERVATION OF SHARES. The Preferred Stock issuable
pursuant to this Agreement shall have been duly authorized and reserved for
issuance at the Closing. The Common Stock issuable upon conversion of the
Preferred Stock pursuant to the Certificate of Designations shall have been duly
authorized and reserved for issuance at the Closing.
4.4 COMPLIANCE CERTIFICATE. The President of the Company shall
deliver to the Purchasers at the Closing a certificate certifying that the
conditions specified in Sections 4.1, 4.2 and 4.3 have been fulfilled.
4.5 QUALIFICATIONS. All authorizations, approvals or permits,
if any, of any governmental authority or regulatory body of the United States or
of any state that are required in connection with the lawful issuance and sale
of the Preferred Stock pursuant to this Agreement shall be obtained and
effective as of the Closing including, without limitation, the expiration or
termination of all waiting periods under the Hart-Scott-Rodino Antitrust
Improvement Act of 1976, as amended (the "HSR Act").
4.6 OPINION OF COMPANY COUNSEL. The Purchasers at the Closing
shall have received from Simpson Thacher & Bartlett, counsel for the Company, an
opinion dated as of the Closing covering the matters set forth on Exhibit C.
4.7 COMMON STOCK PURCHASE AGREEMENT. The Company and the
purchasers parties thereto shall have executed and delivered the Common Stock
Purchase Agreement covering the purchase of at least 8,101,265 shares of Common
Stock.
4.8 DELIVERY OF VOTING AGREEMENTS. Each person listed on
Exhibit D hereto shall have executed and delivered to the Purchasers a voting
agreement in the form attached hereto an Exhibit E (each, a "Voting Agreement")
to the effect that such person will
8
9
vote its shares of Common Stock at the Stockholder Meeting (as defined) in favor
of the approval of the issuance of the Common Stock issuable upon conversion of
the Preferred Stock. The persons delivering Voting Agreements shall represent a
majority of the Common Stock.
4.9. MINIMUM INVESTMENT AT CLOSING. At the Closing, Purchasers
investing at least $62,682,825 in the aggregate in the Company under the
Agreements shall have wired their respective investments in the Company into an
escrow account maintained by Brobeck, Phleger & Harrison or an escrow agent
mutually agreeable to the Company and purchasers of the majority of the
Preferred Stock for delivery to the Company, or shall be otherwise legally
obligated to wire such amounts to the Company, before any Purchaser is obligated
to close.
4.10. OPINION OF GENERAL COUNSEL TO THE COMPANY. The
Purchasers at the Closing shall have received from the General Counsel of the
Company an opinion dated as of the Closing covering the matters set forth on
Exhibit F.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to the Purchasers under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Purchasers contained in Section 3 shall be true and correct in
all material respects on and as of the date of the Closing with the same effect
as though such representations and warranties had been made on and as of the
date of the Closing (except to the extent such representations and warranties
speak as of the date of this Agreement, in which case they shall be true and
correct in all material respects on and as of the date of this Agreement).
5.2 PERFORMANCE. All covenants, agreements and conditions
contained in this Agreement to be performed by the Purchasers on or prior to the
Closing shall have been performed or complied with in all material respects.
5.3 COMPLIANCE CERTIFICATE. A senior executive officer of each
of the Purchasers shall deliver to the Company at the Closing a certificate
certifying that the conditions specified in Sections 5.1 and 5.2 have been
fulfilled.
5.4 QUALIFICATIONS. All authorizations, approvals or permits,
if any, of any governmental authority or regulatory body of the United States or
of any state that are required in connection with the lawful issuance and sale
of the Preferred Stock pursuant to this Agreement shall be obtained and
effective as of the Closing including, without limitation, the expiration or
termination of all waiting periods under the HSR Act.
5.5 COMMON STOCK PURCHASE AGREEMENT. The Company and the
purchasers parties thereto shall have executed and delivered the Common Stock
Purchase Agreement covering the purchase of at least 8,101,265 shares of Common
Stock.
9
10
5.6 DELIVERY OF VOTING AGREEMENTS. Each person listed on
Exhibit D hereto shall have executed and delivered to the Purchasers a Voting
Agreement. The persons delivering Voting Agreements shall represent a majority
of the Common Stock.
6. COVENANTS.
6.1 HSR ACT FILINGS. As soon as practicable after the
execution of this Agreement, the Company and each relevant Purchaser will
separately file with the Antitrust Division of the United States Department of
Justice and the United States Federal Trade Commission pursuant to the HSR Act
all requisite documents and notifications in order to provide for the issuance
and sale of the Preferred Stock pursuant to this Agreement. The parties will
cooperate and coordinate with one another in exchanging information and
providing reasonable assistance as the other party may request in connection
with the foregoing.
6.2 REGISTRATION RIGHTS. (a) The Company hereby agrees: (i) to
use its best efforts to file a resale shelf registration statement (the
"Registration Statement") under the Securities Act as soon as reasonably
practicable covering resales of the Common Stock to be issued upon conversion of
the Preferred Stock (such shares of Common Stock, the "Conversion Stock") by the
Purchasers and the Stock to be issued pursuant to the Common Stock Purchase
Agreement, (ii) to use its best efforts to cause the Registration Statement to
be declared effective as soon as reasonably practicable but in any event within
60 days of Closing and (iii) to maintain the effectiveness of the Registration
Statement until the earlier of (x) the eighteen month anniversary of the
effective date of the Registration Statement and (y) the date on which all
shares of Conversion Stock have been resold by the Purchasers. At any time when
the Registration Statement is effective, the Board of Directors of the Company
may determine, as indicated in a certificate signed by any Director of the
Company, the Chief Financial Officer of the Company or the Secretary of the
Company, to suspend offers and sales by Purchasers under the Registration
Statement if an event has occurred or is reasonably likely to occur that would
require additional disclosure by the Company and that the Company has a bona
fide business purpose for keeping confidential, and the nondisclosure of which
would reasonably be expected to cause the Registration Statement to fail to
comply with applicable disclosure requirements. The Company shall give the
Purchasers written notice of the Board of Directors' determination and the
Purchasers agree to suspend offers and sales under the Registration Statement
until the Company has delivered a subsequent notice to the Purchasers revoking
its prior notice; provided, however, that the eighteen month period during which
the Registration Statement is required to be effective shall be extended by the
number of days of such suspensions. The Company may not revoke the ability of
Purchasers to make offers and sales under the Registration Statement more than
three times or for more than 90 days in the aggregate.
(b) For the period during which the Registration Statement is
effective, the Company shall:
(i) furnish to the Purchaser with respect to the Conversion
Stock registered under the Registration Statement (and to each
underwriter, if any, of such Conversion Stock) such reasonable number
of copies of prospectuses in order to facilitate the
10
11
public sale or other disposition of all or any of the Conversion
Stock by the Purchaser; provided, however, that the obligation of the
Company to deliver copies of prospectuses to the Purchaser shall be
subject to the receipt by the Company of reasonable assurances from
the Purchaser that the Purchaser will comply with the applicable
provisions of the Securities Act and of such other securities or blue
sky laws as may be applicable in connection with any use of such
prospectuses;
(ii) during the period when such prospectuses are required to
be delivered under the Securities Act or the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), file all documents required
to be filed with the Commission pursuant to Section 13, 14 or 15 of
the Exchange Act within the time periods required by the Exchange Act
and the rules and regulations promulgated thereunder;
(iii) file documents required of the Company for normal blue
sky clearance in states specified in writing by the Purchaser;
provided, however, that the Company shall not be required to qualify
to do business or consent to service of process in any jurisdiction
in which it is not now so qualified or has not so consented;
(iv) authorize for listing on the Nasdaq National Market the
shares of Conversion Stock by filing with the Nasdaq National Market
a Notification of Listing of Additional Shares (or such other form,
if any, as may be required by the Nasdaq National Market) as soon as
reasonably practicable after the filing of the Registration Statement
or otherwise in accordance with the rules and regulations of the
Nasdaq National Market; and
(v) bear all expenses in connection with the procedures in
this Section 6.2 and the registration of the Conversion Stock
pursuant to the Registration Statement, other than fees and expenses,
if any, of counsel or other advisers to the Purchaser or underwriting
discounts, brokerage fees and commissions incurred by the Purchaser,
if any.
(c) For purposes of this Section 6.2(c), the term "Registration
Statement" shall include any preliminary or final prospectus, exhibit,
supplement or amendment included in or relating to the Registration Statement
referred to in Section 6.2(a).
(i) The Company agrees to indemnify and hold harmless each of
the Purchasers and each of their respective directors, officers,
members and partners, and each person, if any, who controls any
Purchaser within the meaning of the Securities Act, against any
losses, claims, damages, liabilities or expenses, joint or several,
to which such Purchasers and each of their respective directors,
officers, members and partners, or such controlling person may become
subject, under the Securities Act, the Exchange Act, or any other
federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of the Company),
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof as contemplated below) arise out of or are
based upon any untrue statement or alleged untrue statement of any
material fact contained in or incorporated by reference in the
Registration Statement, including the
11
12
prospectus, financial statements and schedules, and all other
documents filed as a part thereof, as amended at the time of
effectiveness of the Registration Statement, including the
preliminary or final prospectus any information deemed to be a part
thereof as of the time of effectiveness pursuant to paragraph (b) of
Rule 430A, or pursuant to Rule 434, of the rules and regulations of
the Commission under the Securities Act (the "Regulations"), or the
prospectus, in the form first filed with the Commission pursuant to
Rule 424(b) of the Regulations, or filed as part of the Registration
Statement at the time of effectiveness if no Rule 424(b) filing is
required (the "Prospectus"), or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to
state in any of them a material fact required to be stated therein or
necessary to make the statements in any of them, in light of the
circumstances under which they were made, not misleading, or arise
out of or are based in whole or in part on any failure of the Company
to perform its obligations under or a violation of the Securities
Act, the Exchange Act or any state securities law, and will reimburse
each Purchaser and each of their respective directors, officers,
members and partners, and each such controlling person for any legal
and other expenses as such expenses are reasonably incurred by such
Purchaser or such controlling person in connection with
investigating, defending, settling, compromising or paying any such
loss, claim, damage, liability, expense or action; provided, however,
that the Company will not be liable in any such case to the extent
that any such loss, claim, damage, liability or expense arises out of
or is based upon (i) an untrue statement or alleged untrue statement
or omission or alleged omission made in the Registration Statement,
the Prospectus or any amendment or supplement thereto in reliance
upon and in conformity with written information furnished to the
Company by or on behalf of the Purchaser expressly for use therein,
or (ii) the failure of such Purchaser to comply with the covenants
and agreements contained in this Section 6.2 respecting the sale of
the Stock, or (iii) any statement or omission in any Prospectus that
is corrected in any subsequent Prospectus that was delivered to the
Purchaser prior to the pertinent sale or sales by the Purchaser.
(ii) Each Purchaser will severally indemnify and hold harmless
the Company, each of its directors, each of its officers who signed
the Registration Statement and each person, if any, who controls the
Company within the meaning of the Securities Act, against any losses,
claims, damages, liabilities or expenses to which the Company, each
of its directors, each of its officers who signed the Registration
Statement or controlling person may become subject, under the
Securities Act, the Exchange Act, or any other federal or state
statutory law or regulation, or at common law or otherwise (including
in settlement of any litigation, if such settlement is effected with
the written consent of such Purchaser) insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect
thereof as contemplated below) arise out of or are based upon any
untrue or alleged untrue statement of any material fact contained in
the Registration Statement, including the prospectus, financial
statements and schedules, and all other documents filed as a part
thereof, as amended at the time of effectiveness of the Registration
Statement, including any information deemed to be a part thereof as
of the time of effectiveness pursuant to paragraph (b) of Rule 430A,
or pursuant to Rule 434, of the Regulations, or the Prospectus, or
any amendment or
12
13
supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements in any of them, in
light of the circumstances under which they were made, not
misleading, or arise out of or are based in whole or in part on any
failure of such Purchaser to perform its obligations under the
Securities Act, the Exchange Act or any state securities law, and
will reimburse the Company, each of its directors, each of its
officers who signed the Registration Statement and each such
controlling person for any legal and other expenses as such expenses
are reasonably incurred by such Purchaser or such controlling person
in connection with investigating, defending, settling, compromising
or paying any such loss, claim, damage, liability, expense 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
was made in the Registration Statement, the Prospectus, or any
amendment or supplement thereto, in reliance upon and in conformity
with written information furnished to the Company by or on behalf of
any Purchaser expressly for use therein.
(iii) Promptly after receipt by an indemnified party under
this Section 6.2(c) of notice of the threat or commencement of any
action, such indemnified party will, if a claim in respect thereof is
to be made against an indemnifying party under this Section 6.2(c)
promptly notify the indemnifying party in writing thereof; but the
omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party for
contribution or otherwise than under the indemnity agreement
contained in this Section 6.2(c) or to the extent it is not
prejudiced as a result of such failure. In case any such action is
brought against any indemnified party and such indemnified party
seeks or intends to seek indemnity from an indemnifying party, the
indemnifying party will be entitled to participate in, and, to the
extent that it may wish, jointly with all other indemnifying parties
similarly notified, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however,
if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be a conflict between the
positions of the indemnifying party and the indemnified party in
conducting the defense of any such action or that there may be legal
defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying
party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the
indemnifying party to such indemnified party of its election so to
assume the defense of such action and approval by the indemnified
party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 6.2(c) for any legal or other
expenses subsequently incurred by such indemnified party in
connection with the defense thereof unless (i) the indemnified party
shall have employed such counsel in connection with the assumption of
legal defenses in accordance with the proviso to the preceding
sentence (it being understood, however, that the indemnifying party
shall not be liable for the expenses of more than one separate
counsel, approved by such indemnifying party, representing all of the
indemnified parties who are parties to such action) or (ii) the
indemnifying party
13
14
shall not have employed counsel reasonably satisfactory to the
indemnified party to represent the indemnified party within a
reasonable time after notice of commencement of action, in each of
which cases the reasonable fees and expenses of counsel shall be at
the expense of the indemnifying party.
(iv) If the indemnification provided for in this Section 6.2
is required by its terms but is for any reason held to be unavailable
to or otherwise insufficient to hold harmless an indemnified party
under paragraphs (i), (ii) or (iii) of this Section 6.2(c) in respect
to any losses, claims, damages, liabilities or expenses referred to
herein, then each applicable indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of
any losses, claims, damages, liabilities or expenses referred to
herein in such proportion as is appropriate to reflect the relative
fault of the indemnifying party on the one hand and the indemnified
party on the other in connection with the statements or omissions
that resulted in such loss, claim, damage, liability or expense as
well as any other relevant equitable considerations. The relative
fault of the Company and such Purchaser shall be determined by
reference to, among other things, whether the untrue or alleged
statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company
or by such Purchaser and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the
limitations set forth in paragraph (iii) of this Section 6.2(c), any
legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action or claim. The
provisions set forth in paragraph (iii) of this Section 6.2(c) with
respect to the notice of the threat or commencement of any threat or
action shall apply if a claim for contribution is to be made under
this paragraph (iv); provided, however, that no additional notice
shall be required with respect to any threat or action for which
notice has been given under paragraph (iii) for purposes of
indemnification. Notwithstanding the provisions of this Section
6.2(c)(iv), no Purchaser shall be required to contribute any amount
in excess of the net proceeds of the offering received by such
Purchaser, except in the case of willful fraud by such Purchaser. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Purchasers' obligations to contribute pursuant
to this Section 6.2(c)(iv) are several and not joint.
6.3 STOCKHOLDER MEETING. The Company shall cause (i) a special
meeting of its common stockholders (the "Stockholder Meeting") to be held as
soon as practicable but in no event later than three months from the Closing,
for the purpose of approving the conversion of the Preferred Stock issued
pursuant to this Agreement into Common Stock or (ii) the holders of the
requisite number of shares of Common Stock to deliver written consents approving
the conversion of the Preferred Stock into Common Stock (the action called for
in (i) and (ii), the "Stockholder Approval").
14
15
7. MISCELLANEOUS.
7.1 SURVIVAL OF WARRANTIES. The warranties and representations
of the Company and the Purchasers contained herein shall terminate on the second
anniversary of the Closing.
7.2 TRANSFER; NO THIRD PARTY BENEFICIARIES. This Agreement and
each party's rights and obligations hereunder shall not be assigned without the
prior written consent of the other party; provided, that a Purchaser may
transfer its rights hereunder to an affiliate, so long as such affiliate agrees
in writing to be bound by all obligations under this Agreement. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement.
7.3 GOVERNING LAW. This Agreement and all acts and
transactions pursuant hereto and the rights and obligations of the parties
hereto shall be governed by and construed in accordance with the laws of the
State of Delaware, without giving effect to principles of conflicts of laws.
7.4 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
7.5 TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 NOTICES. Any notice required or permitted by this
Agreement shall be in writing and shall be deemed sufficient upon delivery, when
delivered personally or by overnight courier or sent by telegram or fax, or
forty-eight (48) hours after being deposited in the U.S. mail, as certified or
registered mail, with postage prepaid, addressed to the party to be notified at
such party's address as set forth on the signature page hereto, or as
subsequently modified by written notice, and if to the Company, with copies to
the General Counsel of the Company at the address of the Company set forth below
and Simpson Thacher & Bartlett, 3373 Hillview Avenue, Suite 250, Palo Alto, CA
94304, Attention: William H. Hinman, telecopy no: (650)-251-5002).
7.7 FINDER'S FEE. Each party represents that it neither is nor
will be obligated for any finder's fee or commission in connection with this
transaction. Each Purchaser agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which such Purchaser or any of its officers, employees,
or representatives is responsible. The Company agrees to indemnify and hold
harmless each Purchaser from any liability for any commission or compensation in
the nature of a finder's fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.
15
16
7.8 FEES AND EXPENSES. Except as otherwise specifically
provided herein, the Company and the Purchasers shall pay their respective fees
and other expenses in connection with the negotiation, execution, delivery and
performance of the Agreements.
7.9 ATTORNEY'S FEES. If any action at law or in equity
(including arbitration) is necessary to enforce or interpret the terms of any of
the Agreements, 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.
7.10 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended or waived only with the written consent of the Company and each of the
Purchasers. Any amendment or waiver effected in accordance with this Section
7.10 shall be binding upon each Purchaser and each transferee of the Preferred
Stock, each future holder of all such Preferred Stock, each transferee and
future holder of Common Stock issued upon conversion of Preferred Stock and the
Company.
7.11 SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith. In the event that the parties cannot
reach a mutually agreeable and enforceable replacement for such provision, then
(a) such provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
7.12 DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to any party under this Agreement, upon any
breach or default of any other party under this Agreement, shall impair any such
right, power or remedy of such non-breaching or non-defaulting party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party, shall be cumulative and not alternative.
7.13 ENTIRE AGREEMENT. This Agreement, and the documents
referred to herein, constitute the entire agreement between the parties hereto
pertaining to the subject matter hereof, and any and all other written or oral
agreements relating to the subject matter hereof existing between the parties
hereto are expressly canceled.
7.14 CONFIDENTIALITY. Except as provided below, each party
hereto agrees that, except with the prior written permission of the other party,
it shall at all times keep confidential and not divulge, furnish or make
accessible to anyone any confidential information, knowledge or data concerning
or relating to the business or financial affairs of the other party to which
such party has been or shall become privy by reason of the Agreements,
discussions or negotiations relating to the Agreements, the performance of its
obligations
16
17
thereunder or the ownership of Stock purchased hereunder. The provisions of this
Section 7.14 shall be in addition to, and not in substitution for, the
provisions of any separate nondisclosure agreement executed by the parties
hereto with respect to the transactions contemplated by the Agreements.
Notwithstanding the foregoing, nothing herein shall prevent any party from
disclosing (i) such information that has been publicly disclosed, (ii) such
information that becomes available to the party on a non-confidential basis from
a source other than the other party hereto, provided that such source is not
bound by a confidentiality agreement with such other party, (iii) information
required to be disclosed pursuant to subpoena or other court process or
otherwise required to be disclosed by law or the regulations of any securities
exchange (provided that, to the extent practicable, advance notice is given to
the party whose confidential information is to be disclosed so that such party
can attempt to obtain a protective order) and (iv) such information that was
known to the party prior to its first receipt from the other party.
7.15 PUBLICITY. After the execution of this Agreement, any of
the parties may issue a press release disclosing that the Purchasers have agreed
to invest in the Company and the terms of the future relationship between the
parties in a form approved by the other party, which approval will not be
unreasonably withheld, conditioned or delayed. In addition, any party may
disclose such information regarding the Purchasers' investment and the
relationship between the parties as required by law or the regulations of any
securities exchange.
7.16 TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(i) at any time by mutual written consent of the Company and
each of the Purchasers; or
(ii) by any party hereto if the Closing does not occur on or
prior to October 31, 2000; (provided, that if on October 31, 2000 any
authorization, approval or permit of any governmental authority or
regulatory body of the United States or of any state that is required
in connection with the lawful issuance and sale of the Stock pursuant
to this Agreement has not been obtained, then no party shall be
entitled to terminate this Agreement pursuant to this clause (ii)
until December 15, 2000 and then only if the Closing has not occurred
on or prior to such date).
Upon any such termination, this Agreement shall become void and of no
further effect, except for Sections 7.3, 7.7, 7.8, 7.9, 7.14 and this Section
7.16 which shall survive such termination.
[Signature Pages Follow]
17
18
The parties have executed this Preferred Stock Purchase Agreement as of
the date first written above.
COMPANY:
DRUGSTORE.COM, INC.
By: /s/ DAVID ROSTOV
-------------------------------------
Name: David Rostov
Title: Chief Financial Officer
Address: 13920 SE Eastgate Way, Suite 300
Bellevue, WA 98005
SIGNATURE PAGE TO THE PREFERRED STOCK PURCHASE AGREEMENT
19
PURCHASERS:
KPCB VIII L.P.
By:
------------------------------------
Name:
------------------------------------
Title:
----------------------------------
Address:
--------------------------------
--------------------------------
SIGNATURE PAGE TO THE PREFERRED STOCK PURCHASE AGREEMENT
20
KPCB VIII FOUNDERS FUND, L.P.
By:
------------------------------------
Name:
------------------------------------
Title:
----------------------------------
Address:
--------------------------------
--------------------------------
SIGNATURE PAGE TO THE PREFERRED STOCK PURCHASE AGREEMENT
21
VULCAN VENTURES INCORPORATED
By:
------------------------------------
Name:
------------------------------------
Title:
----------------------------------
Address:
--------------------------------
--------------------------------
SIGNATURE PAGE TO THE PREFERRED STOCK PURCHASE AGREEMENT
22
L. JOHN DOERR
By:
------------------------------------
Name:
------------------------------------
Title:
----------------------------------
Address:
--------------------------------
--------------------------------
SIGNATURE PAGE TO THE PREFERRED STOCK PURCHASE AGREEMENT
23
[Other Purchasers].
By:
------------------------------------
Name:
------------------------------------
Title:
----------------------------------
Address:
--------------------------------
--------------------------------
SIGNATURE PAGE TO THE PREFERRED STOCK PURCHASE AGREEMENT
24
SCHEDULE I
Preferred Stock Purchase Agreement - Drugstore.com Inc. and Amazon.com Inc.
Was this helpful?