EXHIBIT 10.2

 

STANDSTILL AGREEMENT

 

THIS STANDSTILL AGREEMENT (the “Agreement”) is made as of June 10, 2002, by and
between Peter R. Kellogg (“Shareholder”), and Centerspan Communications
Corporation, an Oregon corporation (the “Company”).

 

A.            Shareholder currently owns an aggregate of 2,140,022 shares of
Company Common Stock (defined below).

 

B.            The Company and Shareholder are entering into a Standby Investment
Agreement (the “Standby Agreement”) contemporaneously with this Agreement
whereby Shareholder has agreed to purchase shares of Company Common Stock, and
the Company and Shareholder desire, in connection with the execution of the
Standby Agreement, to make certain covenants and agreements with one another
pursuant to this Agreement.

 

NOW THEREFORE, in consideration of the covenants and promises set forth herein,
the issuance by the Company to Shareholder of a warrant to purchase
100,000 shares of Company Common Stock, the execution and delivery of the
Standby Agreement, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:

 

1.             TERM OF AGREEMENT

 

Except as otherwise expressly provided herein, the covenants and agreements of
Shareholder contained in Section 3 of this Agreement will become effective on
the Notice Date (as defined in Section 2) and will continue in full force and
effect until the earlier of (i) five years from the Notice Date, or (ii) the
date the Shareholder Group (as defined in Section 2) owns less than 15% of the
outstanding Company Common Stock (the “Termination Date”).

 

2.             DEFINITIONS

 

For the purpose of this Agreement, the following terms shall have the meanings
specified below:

 

“Affiliate” shall have the meaning set forth in Rule 12b-2 of the rules and
regulations promulgated under the Exchange Act; provided, however, that for
purposes of this Agreement, the Shareholder and his Affiliates, on the one hand,
and

 

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the Company and its Affiliates, on the other, shall not be deemed to be
“Affiliates” of one another.

 

“Beneficially Own,” “Beneficially Owned,” or “Beneficial Ownership” shall have
the meaning set forth in Rule 13d-3 of the rules and regulations promulgated
under the Exchange Act.

 

“Change in Control of the Company” shall mean any of the following: (i) a
merger, consolidation or other business combination or transaction to which the
Company is a party if the shareholders of the Company immediately prior to the
effective date of such merger, consolidation or other business combination or
transaction, as a result of such share ownership, have Beneficial Ownership of
voting securities representing less than 50% of the Total Current Voting Power
of the surviving entity following such merger, consolidation or other business
combination or transaction; (ii) an acquisition by any person, entity or
13D Group of direct or indirect Beneficial Ownership of Voting Securities of the
Company representing 50% or more of the Total Current Voting Power of the
Company; (iii) a sale of all or substantially all of the assets of the Company;
(iv) a liquidation or dissolution of the Company; (v) the institution of any
proceeding by or against the Company under the provisions of any insolvency or
bankruptcy law which is not dismissed within ninety (90) days; the appointment
of a receiver of a material portion of the assets or property of the Company;
(vi) the issuance of an order for an execution on a material portion of the
property of the Company pursuant to a judgment which is not dismissed within
ninety (90) days; or (vii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election by such
Board of Directors or whose nomination for election by the shareholders of the
Company was approved by a vote of a majority of the directors of the Company
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved, other
than a director designated by a person who has entered into an agreement with
the Company to effect a transaction described in the preceding clauses) cease
for any reason to constitute a majority of the Board of Directors of the Company
then in office.

 

“Company Common Stock” shall mean shares of the Common Stock of the Company.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

“Non-Voting Convertible Securities” shall mean any securities of the Company
which are convertible into, exchangeable for or otherwise exercisable to acquire

 

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Voting Securities of the Company, including convertible securities, warrants,
rights or options to purchase Voting Securities of the Company.

 

“Notice Date” shall mean the date the Company gives Shareholder notice of the
Company’s intent to require Shareholder to purchase Company Common Stock
pursuant to the Standby Agreement.

 

“Person” shall mean an individual, corporation, partnership, limited liability
company, association, trust, or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.

 

“Rule 144” shall mean Rule 144 as promulgated under the Securities Act.

 

“SEC” shall mean the U.S. Securities and Exchange Commission.

 

“Securities Act” shall mean the Securities Act of 1933, as amended.

 

“Shares” shall mean any shares of Company Common Stock held by Shareholder.

 

“Shareholder Controlled Entity” shall mean an entity of which the Shareholder,
together with Affiliates of the Shareholder, directly or indirectly, owns not
less than a majority of the outstanding voting power entitled to vote in the
election of directors of such entity (or, in the event the entity is not a
corporation, the governing members, board or other similar body of such entity).

 

“Shareholder Group” shall mean Shareholder, any Shareholder Controlled Entity
and any Affiliates of Shareholder.

 

“Termination Date” shall have the meaning ascribed to it in Section 1.

 

“Total Current Voting Power” shall mean, with respect to any entity, at the time
of determination of Total Current Voting Power, the total number of votes which
may be cast in the election of members of the board of directors of the
corporation if all securities entitled to vote in the election of such directors
are present and voted (or, in the event the entity is not a corporation, the
governing members, board or other similar body of such entity).

 

“Transfer” shall mean to directly or indirectly, sell, transfer, pledge,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, transfer
the economic risk of ownership of, or otherwise dispose of any Voting
Securities.

 

“Transfer Notice” shall have the meaning ascribed to it in Subsection 5(a).

 

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“Voting Securities” shall mean shares of the Company Common Stock and any other
securities of the Company having the ordinary power to vote in the election of
members of the Board of Directors of the Company.

 

“13D Group” means any group of persons formed for the purpose of acquiring,
holding, voting or disposing of Voting Securities which would be required under
Section 13(d) of the Exchange Act, and the rules and regulations promulgated
thereunder, to file a statement with the SEC on Schedule 13D pursuant to
Rule 13d-1(a) of the rules and regulations promulgated under the Exchange Act or
Schedule 13G pursuant to Rule 13d-1(c) of the rules and regulations promulgated
under the Exchange Act as a “person” within the meaning of Section 13(d)(3) of
the Exchange Act if such group Beneficially Owned Voting Securities representing
more than 5% of any class of Voting Securities then outstanding.

 

3.            COVENANTS OF SHAREHOLDER

 

Shareholder agrees, prior to the Termination Date and subject to the further
provisions hereof, that:

 

(a)           Shareholder shall take such action as may be required so that all
Voting Securities Beneficially Owned by Shareholder or any Shareholder
Controlled Entity (and shall use commercially reasonable efforts to cause any
Voting Securities held by an Affiliate of Shareholder or any 13D Group of which
Shareholder or any Affiliate of Shareholder is a party) are voted for nominees
to the Board of Directors of the Company proposed by either the current Board of
Directors or the members of the Board of Directors who have been nominated by
the current Board of Directors (or such of their successors who have been
nominated by the Board members so nominated) and, unless the Company otherwise
consents in writing, on all other matters to be voted on by the holders of
Voting Securities as recommended by the Company’s Board of Directors. 
Shareholder, as the holder of shares of Voting Securities, shall be present in
person or by proxy (and shall cause any Shareholder Controlled Entities holding
Voting Securities to be so present and shall use reasonable efforts to cause his
Affiliates holding Voting Securities to be so present) at all meetings of
shareholders of the Company so that all Voting Securities Beneficially Owned by
them may be counted for the purpose of determining the presence of a quorum at
such meetings.

 

(b)           No member of the Shareholder Group shall deposit any Voting
Securities in a voting trust or subject any Voting Securities to any arrangement
or agreement with respect to the voting of such Voting Securities.

 

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(c)           No member of the Shareholder Group shall solicit or participate in
any solicitation of proxies with respect to any Voting Securities, nor seek to
advise or influence any person with respect to the voting of any Voting
Securities (other than as otherwise provided or contemplated by this Agreement)
or initiate or propose any shareholder proposal or participate in the making of,
or solicit shareholders for the approval of any shareholder proposals.

 

(d)           No member of the Shareholder Group shall join a 13D Group (other
than a group comprised solely of Shareholder and his Affiliates) or other group,
or otherwise act in concert with any third person for the purpose of acquiring,
holding, voting or disposing of Voting Securities or Non-Voting Convertible
Securities.

 

(e)           Shareholder shall not otherwise act, alone or in concert with
others, to seek control or influence the management, Board of Directors or
policies of the Company, including soliciting or proposing to effect or
negotiate any form of business combination, restructuring, recapitalization or
other extraordinary action involving the Company or a Change in Control of the
Company.

 

(f)            Without the prior written consent of the Company (which consent
may be withheld at the sole and unfettered discretion of the Company), no member
of the Shareholder Group shall Transfer any Voting Securities, except (i) to
another member of the Shareholder Group, (ii) pursuant to a bona fide public
offering, registered under the Securities Act, of Voting Securities (provided
that no sales of Voting Securities are made to any person or related group of
persons who would immediately thereafter, to the knowledge of any member of the
Shareholder Group, own or have the right to acquire Voting Securities
representing more than 3% of the total combined voting power of all Voting
Securities then outstanding), (iii) pursuant to Rule 144 under the Securities
Act, (iv) pursuant to a tender offer or exchange offer (1) commenced by the
Company or (2) approved by the Board of Directors of the Company, or (v) where
the proposed transferee offers to purchase a ratable number of shares of Company
Common Stock from all other holders of Company Common Stock upon the same terms
and conditions offered to Shareholder.  Any attempted Transfer or other
disposition of Voting Securities by a member of the Shareholder Group that is
not in compliance with this Subsection 3(f), shall be null and void ab initio.

 

4.             MISCELLANEOUS

 

(a)           Shareholder and the Company acknowledge and agree that irreparable
damage would occur in the event any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accord­ingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically the

 

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terms and provisions hereof, in addition to any other remedy to which they may
be entitled at law or equity.

 

(b)           If any provision of this Agreement is in violation of any statute,
rule, regulation, order or decree of any governmental authority, court or
agency, or subjects any member of the Shareholder Group to governmental
regulation to which it is not now subject, which violation or regulation would
have a material adverse impact on the operations of the Shareholder Group taken
as a whole, then such member of the Shareholder Group shall be relieved of its
obligations under such provision to the minimum extent necessary to cure such
violation or eliminate the applicability of such regulation; provided that this
subparagraph shall not apply to any such violation or regulation resulting in
part from activities or operations of any member of the Shareholder Group other
than its ownership of Voting Securities and the consummation of the transactions
contemplated by this Agreement; and provided further that in the event any
member of the Shareholder Group is relieved of its obligations under any
provision of this Agreement pursuant to this subparagraph, the Company may
terminate this Agreement, in its sole discretion.

 

(c)           If requested in writing by the Company, Shareholder shall present
or cause to be presented promptly all certificates representing Voting
Securities now owned or hereafter acquired by members of the Shareholder Group,
for the placement thereon of the following legend, which will remain thereon as
long as such Voting Securities are subject to the restrictions contained in this
Agreement:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS OF
AN AGREEMENT DATED AS OF JUNE 10, 2002, BETWEEN SHAREHOLDER AND CENTERSPAN
COMMUNICATIONS CORPORATION, AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN
ACCORDANCE THEREWITH. A COPY OF SAID AGREEMENT IS ON FILE AT THE OFFICE OF THE
CORPORATE SECRETARY OF CENTERSPAN COMMUNICATIONS CORPORATION.  THE COMPANY MAY
ENTER A STOP TRANSFER ORDER WITH THE TRANSFER AGENT OR AGENTS OF VOTING
SECURITIES AGAINST THE TRANSFER OF VOTING SECURITIES EXCEPT IN COMPLIANCE WITH
THE REQUIREMENTS OF THIS AGREEMENT. THE COMPANY AGREES TO REMOVE PROMPTLY ANY
STOP TRANSFER ORDER WITH RESPECT TO, AND ISSUE PROMPTLY UNLEGENDED CERTIFICATES
IN SUBSTITUTION FOR, CERTIFICATES FOR ANY VOTING SECURITIES THAT ARE NO LONGER
SUBJECT TO THE RESTRICTIONS CONTAINED IN THIS AGREEMENT.

 

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(d)           This Agreement and the Standby Agreement contain the entire
understanding of the parties with respect to the transactions contemplated
hereby and this Agreement may be amended only by an agreement in writing
executed by the parties hereto.

 

(e)           Descriptive headings are for convenience only and shall not
control or affect the meaning or construction of any provision of this
Agreement.

 

(f)            All notices, consents, requests, instructions, approvals and
other communications provided for herein and all legal process in regard hereto
shall be validly given, made or served, if in writing and delivered personally,
by telex (except for legal process) or sent by registered mail, postage prepaid,
if to:

 

THE COMPANY:

 

Centerspan Communications Corporation

Suite 400

7175 N.W. Evergreen Parkway

Hillsboro, OR  97124

Attention:  Chief Executive Officer

Facsimile:  (503) 615-3297

 

Copy to:

 

Patrick J. Simpson

Perkins Coie LLP

1211 S.W. Fifth Avenue, Suite 1500

Portland, OR  97204-3715

Telephone:  (503) 727-2008

Fax:  (503) 727-2222

 

SHAREHOLDER:

 

Peter R. Kellogg
c/o Marguette Gorman
120 Broadway

New York, NY 10271

 

or to such other address or facsimile number as any party may, from time to
time, designate in a written notice given in a like manner.  Notice given by
facsimile shall be deemed delivered on the day the sender receives facsimile
confirmation that such notice was received at the facsimile number of the
addressee.  Notice given by mail as

 

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set out above shall be deemed delivered five days after the date the same is
postmarked.

 

(g)           From and after the Termination Date or earlier termination of this
Agreement, the covenants of the parties set forth herein shall be of no further
force or effect and the parties shall be under no further obligation with
respect thereto.

 

(h)           This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Oregon without regard to principles of
conflict of laws.  Each party to this Agreement expressly and irrevocably
consents and submits to the jurisdiction and venue of each state and federal
court located in the County of Multnomah, State of Oregon and each appellate
court located in the State of Oregon in connection with any such legal
proceeding, including to enforce any settlement, order or award.

 

(i)            For the convenience of the parties, this Agreement may be
executed in counterparts by the parties hereto and each such executed
counterpart shall be, and shall be deemed to be, an original instrument.

 

IN WITNESS WHEREOF, Shareholder and the Company have caused this Agreement to be
duly executed as of the day and year first above written.

 

 

CENTERSPAN COMMUNICATIONS CORPORATION

 

 

 

 

 

By

/s/

 

 

Name:

 

 

Title:

 

 

 

 

PETER R. KELLOGG

 

 

 

  /s/

 

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