SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
MAY 17, 2002
FAIRMARKET, INC.
(Exact name of registrant as specified in charter)
DELAWARE 000-29423 04-3551937
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(State or other jurisdiction (Commission file number) (IRS employer
of incorporation) identification no.)
500 UNICORN PARK DRIVE
WOBURN, MA 01801
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (781) 376-5600
ITEM 5. OTHER EVENTS
On May 17, 2002, FairMarket, Inc. (the "Company") completed a private
placement of 952,380 shares of its Series B Preferred Stock, par value $0.001
per share (the "Series B Preferred Stock"), to eBay Inc. ("eBay") for an
aggregate purchase price of $2.0 million. A copy of the Company's press release
dated May 20, 2002 announcing such sale is attached as Exhibit 99.1 and
incorporated herein by reference.
The Series B Preferred Stock is convertible at any time by the holder
thereof into shares of the Company's common stock, $0.001 par value per share
(the "Common Stock"), initially on a one-for-one basis, and contains certain
adjustment mechanisms, including a weighted average anti-dilution mechanism
that, with certain exceptions, applies to issuances by the Company of shares of,
options exercisable for or warrants convertible into, Common Stock at a purchase
price per share of less than $2.10. The Series B Preferred Stock is entitled to
cash dividends payable quarterly at the rate of 6.5% per annum in preference to
any dividend on any other series of preferred stock of the Company and the
Common Stock (collectively, the "Junior Securities"). The Series B Preferred
Stock is also entitled to participate pro rata in any dividend paid on the
Common Stock on an as if converted to Common Stock basis. In the event of any
liquidation, dissolution or winding up of the Company (a "Liquidation"), the
holders of the Series B Preferred Stock are entitled to receive in preference to
the holders of the Junior Securities a per share amount equal to $2.10 plus all
accrued and unpaid dividends (the "Liquidation Preference"). In the event of a
Liquidation, after the payment of the Liquidation Preference and the payment of
any liquidation preference due on any Junior Securities that rank on liquidation
prior and in preference to the Common Stock, the Series B Preferred Stock is
entitled to participate on a pro rata basis with the Common Stock in the
distribution of the remaining assets of the Company with the Series B Preferred
Stock treated on an as if converted to Common Stock basis. The holders of the
Series B Preferred Stock may, at their election, treat as a Liquidation any
merger, acquisition, sale of voting control or sale of substantially all of the
assets of the Company. The holders of the Series B Preferred Stock have the
right to require the Company to redeem the Series B Preferred Stock at any time
after the earlier of (a) May 17, 2003, and (b) the happening of a material
adverse effect on the business, condition (financial or otherwise) or assets of
the Company and its subsidiaries as a whole. The Company has the right, at any
time after May 17, 2004, to redeem the outstanding Series B Preferred Stock. Any
redemption shall be at a purchase price equal to $2.10 per share plus all
accrued and unpaid dividends. The Series B Preferred Stock will vote together
with the Common Stock and not as a separate class except as specifically
provided for pursuant to its terms or as otherwise required by law. Each share
of Series B Preferred Stock shall have a number of votes equal to the number of
shares of Common Stock then issuable upon conversion of such share of Series B
Preferred Stock. Without the consent of a majority in interest of the
outstanding shares of the Series B Preferred Stock, the Company may not take any
action that (i) alters or changes adversely the rights, preferences or
privileges of the Series B Preferred Stock, (ii) increases or decreases the
authorized number of shares of the Common Stock, any other series of preferred
stock, or the Series B Preferred Stock, (iii) creates (by reclassification or
otherwise) any new class or series of shares having rights, preferences or
privileges senior to or on a parity with the Series B Preferred, or (iv) amends
or waives any provision of the Company's Amended and Restated Certificate of
Incorporation or its By-laws, in a manner adverse to the Series B Preferred
Stock.
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The foregoing description of the Series B Preferred Stock does not
purport to be complete and is qualified in its entirety by reference to the
Certificate of Designations, Preferences and Rights of a Series of Preferred
Stock of FairMarket, Inc. classifying and designating the Series B Preferred
Stock which is attached as Exhibit 3.1 and incorporated herein by reference.
In connection with the sale of the Series B Preferred Stock, the
Company and eBay entered into a Registration Rights Agreement dated as of May
17, 2002 (the "Registration Rights Agreement"), pursuant to which, among other
things, the Company is required to file with the Securities Exchange Commission
(the "SEC"), on or prior to July 16, 2002, a shelf registration statement
covering the resale of the shares of Common Stock issuable upon conversion of
the shares of Series B Preferred Stock (the "Conversion Shares"), and to use its
best efforts to have such registration statement declared effective by the SEC.
Pursuant to the terms of the Registration Rights Agreement (1) the Company is
required to keep such registration statement effective for a period of one (1)
year after its effective date, (2) eBay has the right to request inclusion of
Conversion Shares in certain future registrations by the Company for the
Company's account or the account of other security holders of the Company who
have demanded registration of their securities, and (3) eBay agreed not to sell
any shares of Series B Preferred Stock or Common Stock until after September 14,
2002. The Registration Rights Agreement also contains provisions relating to
indemnification and underwriting arrangements. The foregoing description of the
Registration Rights Agreement does not purport to be complete and is qualified
in its entirety by reference to the Registration Rights Agreement which is
attached hereto as Exhibit 99.2 and incorporated herein by reference.
On May 17, 2002, the Company and eBay also entered into a Voting and
Standstill Agreement (the "Voting and Standstill Agreement"), pursuant to which,
among other things, eBay has agreed, until June 1, 2003, to (X) vote its shares
of Series B Preferred Stock and Common Stock in favor of the Company's nominees
for directors, and the Company's proposals, at the Company's stockholder
meetings or any adjournment or postponements thereof, (Y) not become the
beneficial owner of more than 14.9% of the then outstanding Common Stock,
directly or indirectly, whether alone or part of any group, and (Z) refrain from
taking certain actions with respect to, or against, the Company. The foregoing
description of the Voting and Standstill Agreement does not purport to be
complete and is qualified in its entirety by reference to the Voting and
Standstill Agreement which is attached hereto as Exhibit 99.3 and incorporated
herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
Exhibit 3.1 - Certificate of Designations, Preferences and Rights of
a Series of Preferred Stock of FairMarket, Inc.
classifying and designating the Series B Preferred
Stock.
Exhibit 99.1 - Press Release dated May 20, 2002 regarding investment.
Exhibit 99.2 - Registration Rights Agreement, dated as of May 17,
2002, between FairMarket, Inc. and eBay Inc.
Exhibit 99.3 - Voting and Standstill Agreement, dated as of May 17,
2002, between FairMarket, Inc. and eBay Inc.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FAIRMARKET, INC.
Date: May 20, 2002 By: /s/ Nanda Krish
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Name: Nanda Krish
Title: President and Chief
Executive Officer
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
3.1 - Certificate of Designations, Preferences and Rights of a Series of
Preferred Stock of FairMarket, Inc. classifying and designating
the Series B Preferred Stock.
99.1 - Press Release dated May 20, 2002 regarding investment.
99.2 - Registration Rights Agreement, dated as of May 17, 2002, between
FairMarket, Inc. and eBay Inc.
99.3 - Voting and Standstill Agreement, dated as of May 17, 2002, between
FairMarket, Inc. and eBay Inc.
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