Exhibit 10.20
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT, dated as of January 10, 2000, by and among
xxxxxxxx.xxx, inc., a Delaware corporation (the "Company"), the investors listed
on Schedule A hereto (collectively the "Investors" and individually an
"Investor"), those existing holders (collectively the "Founders") of the
Company's outstanding Common Stock, $.01 par value per share (the "Common
Stock"), who appear on Schedule A hereto, and any subsequent stockholder of the
Company who becomes a party to this Agreement pursuant to the terms and
conditions hereof (collectively, the "Additional Stockholders," and with the
Investors and the Founders sometimes hereinafter collectively referred to herein
as the "Stockholders" or individually as the "Stockholder").
PREAMBLE
The Investors are purchasing shares of the Company's Series A
Convertible Preferred Stock, $.01 par value per share (the "Series A Preferred
Stock"), pursuant to that certain Series A Preferred Stock Purchase Agreement of
the same date herewith between the Company and the Investors (the "Stock
Purchase Agreement") in the amounts set forth on Schedule A, and the Founders
hold shares of Common Stock of the Company in the amounts set forth on Schedule
A; and
One of the conditions to the Closing as defined in the Stock Purchase
Agreement is the execution by the holders of the outstanding Series A Preferred
Stock and outstanding Common Stock of this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
ELECTION OF DIRECTORS
1.1 Election of Directors. At each annual meeting of the stockholders
of the Company, or at each special meeting of the stockholders of the Company
involving the election of directors of the Company, and at any other time at
which stockholders of the Company will have the right to or will vote for or
render consent in writing regarding the election of directors of the Company,
then and in each event, the Stockholders hereby covenant and agree to vote all
shares of voting capital stock of the Company presently owned or hereafter
acquired by them (whether owned of record or over which any person exercises
voting control) in favor of the following
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actions:
(a) to fix and maintain the number of directors initially at ten which
number may not be further changed except by an amendment to this Agreement
approved by the consent of the holders of fifty-one percent (51%) or more of the
Series A Preferred Stock and;
(b) to cause and maintain the election to the Board of Directors of the
Company (i) so long as at least one-third of the number of shares of Series A
Preferred Stock set forth on Schedule A are outstanding, three representatives
designated by the Investors, one of whom shall be a representative of TBG
Information Investors LLC (the "TBG Director"), who shall initially be Oakleigh
Xxxxxx, one of whom shall be a representative of Core Learning Group LLC (the
"Core Learning Director"), who shall initially be Xxxxxxx Xxxxxxxxx, and the
other of whom shall be a representative of the Investors as a class (the
"Investor Director" and, with the TBG Director and the Core Learning Director,
the "Investor Directors"), who shall initially be Xxxxxx Xxxxxxx; (ii) three
nominees designated by Xxxx & Xxxxxx Company; (iii) two nominees designated by
Infonautics, Inc., who shall initially be Xxxxx Xxxxxxxxx and Xxxxx Xxx Xxxxx
Xxxxxx; and (iv) two nominees represented by the Company's management, who shall
initially be Xxxx X. Xxxxx, Xx. and Xxxxx Xxxxxx. The Investor Director shall be
nominated by holders of a majority of the outstanding Series A Preferred Stock
owned by the Investors.
1.2 Removal of Directors. None of the parties hereto, except in the
case of a director designated or nominated by any such party by right in
accordance with Section 1(b), shall vote any voting capital stock held by it to
remove a director, except for bad faith or willful misconduct. Each of the
parties hereto shall vote or cause to be voted all shares of voting capital
stock owned by them or over which they have voting control (i) to remove from
the Board of Directors any director designated by any party pursuant hereto at
the request of such party, and (ii) to fill any vacancy in the membership of the
Board of Directors with a designee of the party whose designee's resignation or
removal from the Board caused such vacancy.
1.3 Notice. The Company shall provide to each party entitled to
designate directors hereunder prior written notice of any intended mailing of
notice to stockholders for a meeting at which directors are to be elected, and
any party entitled to designate directors pursuant hereto shall notify the
Company in writing, prior to such mailing, of the person designated by it or
them as its or their nominee for election as director. If any party entitled to
designate directors hereunder fails to give notice to the Company as provided
above, it shall be deemed that the designee of such party then serving as
director shall be its designee for reelection.
1.4 Committees. The Board of Directors shall establish an Audit and a
Compensation Committee of the Board of Directors, each of which (i) shall
consist of three "Non-Employee
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Directors" (as that term is defined in Rule 16b-3 of the Exchange Act of 1934,
as amended), and (ii) shall include at least one of the Investor Directors who
shall be different for each of the audit and Compensation Committee. Any other
committee of the Board shall have at least one of the TBG Director or the
Investor Directors as a member.
1.5 Observer Rights. As long as any Investor owns not less than ten
percent (10%) of the shares of Series A Preferred Stock issued pursuant to the
Stock Purchase Agreement (or an equivalent amount of Common Stock issued upon
conversion thereof) and they are not otherwise represented on the Board by one
of the Investor Directors directly affiliated with them, the Company shall
invite a representative of such Investor to attend all meetings of its Board of
Directors in a nonvoting-observer capacity and, in this respect, shall give such
representative copies of all notices, minutes, consents and other materials it
provides to its directors; provided, however, that such representative shall
agree to hold such in confidence; and, provided further, that the Company
reserves the right to withhold any information and to exclude such
representative from any meeting or portion thereof if access to such information
or attendance at such meeting will adversely affect the attorney-client
privilege between the Company and its counsel.
1.6 Approval of Indebtedness. So long as at least one-third of the
number of shares of Series A Preferred Stock set forth on Schedule A are
outstanding, the Company will not incur indebtedness in excess of $2,500,000, in
one or a series of related transactions, without the prior approval of two of
the three Investor Directors.
1.7 Termination of Rights. The rights and obligations of the Company
and the Stockholders set forth in this Article I shall terminate upon the
earlier of (i) the consummation of a sale of two-thirds or more of the Series A
Preferred Stock issued in accordance with the terms of the Stock Purchase
Agreement and (ii) the closing of an underwritten public offering of shares of
Common Stock of the Company at a public offering price of at least $11.50 per
share (as adjusted for any stock split, stock dividend or recapitalization after
the date of the first issuance of the Series A Preferred Stock) and gross
proceeds to the Company in excess of $40,000,000 (a "Qualified IPO").
Additionally, with respect to each party which has the right to designate or
nominate a director pursuant to Section 1(b) above, such right shall terminate
if such party holds less than 100,000 shares of Common Stock of the Company
(assuming the conversion of all Series A Preferred Stock, if applicable, and as
adjusted for stock split, dividend, combination or like forms of
recapitalization). Any vacancy in the Board of Directors resulting from the
termination of such right shall be filled by a director elected by all holders
of voting capital stock of the Company in a single class.
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ARTICLE II
RIGHTS OF CO-SALE
2.1 Proposed Transfer of Shares. The Stockholders shall not transfer
either in a single transaction or in a series of transactions any shares of
capital stock of the Company (the "Shares") or any right or interest therein
then owned by him or it except by a transfer that meets the requirements of this
Article II and of this Agreement generally. In the event that a Stockholder (a
"Transferring Stockholder") proposes to transfer any portion of the Shares
(each, a "Shares Transfer"), whether voluntarily or involuntarily, other than a
Permitted Transfer (as defined below), then at least 60 days prior to any
proposed Shares Transfer, such Transferring Stockholder shall give written
notice (the "TS Notice") to the Company and the Investors of his or its
intention to effect the Shares Transfer. The TS Notice shall set forth (i) its
bonafide intention to offer such shares, (ii) the class, series and number of
Shares to be sold by the Transferring Stockholder (the "Sale Shares"), (iii) the
date or proposed date of the Shares Transfer and the name and address of the
proposed transferee, and (iv) the principal terms of the Shares Transfer,
including the cash or other property or consideration to be received upon such
Shares Transfer. The term "Permitted Transfer" shall mean (i) a Shares Transfer
made pursuant to the rights and obligations set forth in Article X of the Master
Transaction Agreement, dated as of July 8, 1999, as amended on September 28 and
December 15, 1999, by and among the Founders, Xxxx & Xxxxxx Company and
Infonautics Corporation (the "MTA"), (ii) a Shares Transfer from a Stockholder
to one or more of its "Affiliates" or "Subsidiaries" as those terms are defined
in Rule 405 ("Rule 405") of the Securities Act of 1933, as amended, and (iii) a
Shares Transfer to a spouse (other than pursuant to any divorce or separation
proceedings or settlement), parents, children (natural or adopted), stepchildren
or grandchildren or a trust for any of their benefit in the case of a
Transferring Stockholder that is an individual (each recipient pursuant to any
of (i), (ii) or (iii) being a "Permitted Transferee"); provided, however, that
prior to such Shares Transfer, such Permitted Transferee shall agree in writing
to be bound by the obligations imposed upon Stockholders under this Agreement as
if such transferee were originally a signatory to this Agreement.
2.2 Right to Participate in Transfer. In the event the Transferring
Stockholder desires to effect a Shares Transfer, other than a Permitted
Transfer, then, upon receipt of the TS Notice specified in Section 2.1, each
Investor shall have the right (by written notice to the Transferring Stockholder
and the Company to be sent within 20 days after the Investor receives the TS
Notice) to require the Transferring Stockholder to cause to be purchased from
such Investor the number of shares of Common Stock issued or issuable upon
conversion of shares of Series A Preferred Stock then held by such Investor that
equals (x) the number of Sale Shares that the Transferring Stockholder proposes
to transfer, multiplied by (y) the percentage determined by dividing (i) the
number of shares of Series A Preferred Stock (or Common Stock, as the case may
be) then held by the Investor by (ii) the sum of the number of shares of Series
A Preferred Stock (or Common Stock, as the case may be) then held by all of the
Investors plus the number of Shares then held by the Transferring Stockholder.
For purposes of this Section 2.2, the Series A Preferred Stock
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shall be treated as if it had been converted into the number of shares of Common
Stock then issuable upon such conversion. The foregoing restriction shall not
apply to a transfer or series of transfers by an employee or employees of the
Company which transfer or series of transfers results in the transfer of less
than 5% of the Shares outstanding on a fully diluted basis (including, for
purpose of such calculation, all Shares issuable upon exercise of outstanding
options as being issued for any such employee and for outstanding Shares
generally).
2.3 Terms of Purchase. The purchase from the Investors pursuant to
Section 2.2 shall be on the same terms and conditions, including per Share price
and date of Shares Transfer, as are received by the Transferring Stockholder and
stated in the TS Notice provided to the Investors; provided, however, that, in
all events, the Sale Shares (and any shares sold by Investors in accordance with
Section 2.2 above) shall continue to be subject to the terms of this Agreement
and any such transferee shall agree in writing to be bound by the obligations
imposed upon Stockholders under this Agreement as if such transferee were
originally a signatory to this Agreement.
2.4 Transfers Void. Any attempted Shares Transfer by the Stockholders
in violation of the terms of this Article II shall be ineffective to vest in any
transferee any interest held by the Transferring Stockholder in the Shares.
Without limiting the foregoing, any purported Shares Transfer in violation
hereof shall be ineffective as against the Investors and the Investors shall
have a continuing right and option (but not an obligation), until the
restrictions contained in this Article II terminate, to purchase the Shares
purported to be transferred by the Transferring Stockholders for a price and on
terms the same as those at which the purported Shares Transfer was effected.
2.5 Termination of Restrictions. The restrictions in this Article II
shall terminate upon the consummation of a Qualified IPO.
ARTICLE III
RIGHT OF FIRST OFFER
3.1 Right of First Offer. Subject to the terms and conditions specified
in this Article III, the Company hereby grants to each Investor and each Founder
a right of first offer with respect to future sales by the Company of its Shares
or securities convertible into or exercisable for any Shares (collectively,
"Offered Securities"). For purposes of this Section, "Investor" includes
transferees of any Investor and any general partners, members and/or affiliates
of an Investor and "Founder" includes transferees of any Founder. An Investor
shall be entitled to apportion the right of first offer hereby granted it among
itself and its partners and affiliates in such proportions as it deems
appropriate.
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Each time the Company proposes to offer any Offered Securities, the
Company shall first make an offering of such Offered Securities to each Investor
and Founder in accordance with the following provisions:
(a) The Company shall deliver written notice (the "Offer Notice") to
the Investors and Founders stating (i) its bona fide intention to offer such
Offered Securities, (ii) the class, series and number of Offered Securities to
be offered, and (iii) the price and terms upon which it proposes to offer such
Offered Securities.
(b) Within 30 days after receipt of the Offer Notice, each Investor and
Founder may elect to purchase, at the price and on the terms specified in the
Offer Notice, up to that portion of such Offered Securities which equals the
proportion that the number of shares of Common Stock issued and held, or
issuable upon conversion of the Series A Preferred Stock then held, by such
Investor or Founder, as the case may be, bears to the total number of shares of
Common Stock of the Company (assuming full conversion and exercise of all
convertible or exercisable securities) then held by all the Company's
Stockholders. The Company shall promptly give written notice to each Investor
and Founder which purchases all the Offered Securities available to it (each, a
"Fully-Exercising Investor or Founder") of any other Investor's or Founder's, as
the case may be, failure to do likewise. During the 20-day period commencing
after receipt of such information, each Fully-Exercising Investor or Founder
shall be entitled to obtain that portion of the Offered Securities not
subscribed for by the Investors or Founders equal to the proportion the number
of shares of Common Stock issued and held, or issuable upon conversion of Series
A Preferred Stock then held, by such Fully-Exercising Investor or Founder bears
to the total number of shares of Common Stock issued and held, or issuable upon
conversion of the Series A Preferred Stock then held, by all Fully-Exercising
Investors or Founders who wish to purchase some of the unsubscribed shares.
(c) If all Offered Securities are not purchased as provided in
subsection (b), the Company may, during the 45-day period following the
expiration of the period provided in subsection (b) hereof, offer the remaining
unsubscribed portion of such Offered Securities to any person or persons at a
price not less than, and upon terms no more favorable to the offeree than, those
specified in the Notice. If the Company does not enter into an agreement for the
sale of the Offered Securities within such period, or if such agreement is not
consummated within 45 days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such Offered Securities shall not be
offered unless first reoffered to the Investors and Founders in accordance
herewith.
(d) The right of first offer in this Article III shall not be
applicable to (i) the issuance by the Company of options to employees, directors
or unaffiliated consultants (or to the exercise of such options) pursuant to
option plans adopted by the Board of Directors in amounts calculated as follows:
(A) options to purchase up to 3,000,000 shares of Common Stock, heretofore
reserved for issuance (subject to appropriate adjustments in the event of any
stock dividend,
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stock split, combination or similar recapitalization affecting such shares),
(B) options to purchase such number of shares of Common Stock that equals up to
20% of the Series A Preferred Stock (calculated on an as-converted basis), and
(C) options to purchase such number of shares of Common Stock that equals up to
20% of any shares of future equity issued by the Company (calculated on an
as-converted basis); (ii) the issuance of securities pursuant to the conversion
or exercise of convertible or exercisable securities; (iii) the issuance of
securities in connection with a bona fide business acquisition of or by the
Company, whether by merger, consolidation, sale of assets, sale or exchange of
stock or otherwise; (iv) the issuance of securities pursuant to equipment lease
financing arrangements with equipment lessors which have been approved by the
Board, including two of the three Investor Directors; or (v) the issuance of
securities pursuant to a Qualified IPO.
3.2 Termination of Rights. The rights and obligations of the Company
and Stockholders set forth in this Article III shall terminate upon the Closing
of a Qualified IPO.
ARTICLE IV
MANAGEMENT AND CONTROL
4.1 General. The business and affairs of the Company shall be managed,
controlled and operated in accordance with its certificate of incorporation and
bylaws, as the same may be amended from time to time, except that neither the
certificate of incorporation nor the bylaws shall be amended in any manner that
would conflict with, or be inconsistent with, the provisions of this Agreement.
4.2 Limitation on Certain Actions by the Company. The Company shall not
take any of the following actions without the written consent or affirmative
vote of the holders of at least fifty-one percent (51%) of the then outstanding
shares of Series A Preferred Stock, given in writing or by vote at a meeting,
consenting or voting (as the case may be) separately as a class: (i) any
amendment or change of the rights, preferences, privileges or powers of, or the
restrictions provided for the benefit of, the Series A Preferred Stock; (ii) any
action that authorizes, creates or issues shares of any class or series of stock
having preferences superior to the Series A Preferred Stock; (iii) any action
that reclassifies any outstanding shares into shares having preferences or
priority as to dividends or assets senior to preferences of the Series A
Preferred Stock; (iv) any amendment of the Company's Articles of Incorporation
that adversely affects the rights of the Series A Preferred Stock; (v) any
merger or consolidation of the Company with one or more other corporations in
which the Stockholders of the Company immediately after such merger or
consolidation hold stock representing less than forty percent (40%) of the
voting power of the outstanding stock of the surviving corporation unless
holders of Series A Preferred Stock receive at least $21 per share (subject to
appropriate adjustments in the event of any stock dividend, stock split,
combination or other similar recapitalization affecting
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such shares); (vi) the sale of all or substantially all of the Company's assets
unless holders of Series A Preferred Stock receive at least $21 per share
(subject to appropriate adjustments in the event of any stock dividend, stock
split, combination or other similar recapitalization affecting such shares);
(vii) the liquidation or dissolution of the Company; (viii) the declaration or
payment of a dividend on the Common Stock (other than a dividend payable solely
in shares of Common Stock); (ix) taking any other actions adversely affecting
the Series A Preferred Stock vis-a-vis the right of holders of any other
securities of the Corporation; (x) the repurchase of any shares of Common Stock
except from employees upon termination of employment pursuant to the terms and
conditions of employment agreements approved by the Board.
ARTICLE V
REGISTRATION RIGHTS
5.1 Definitions. As used in this Article V, the following terms shall
have the following meanings:
(a) "Commission" shall mean the Securities and Exchange Commission, or
any other federal agency at the time administering the Securities Act.
(b) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
(c) "Holder" shall mean any holder of outstanding Registrable
Securities or anyone who holds outstanding Registrable Securities to whom the
registration rights conferred by this Agreement have been transferred in
compliance with this Agreement.
(d) "Initiating Holders" shall mean any Holder or Holders of at least
twenty-five percent (25%) of the Registrable Securities then outstanding.
(e) "Register," "registered" and "registration" shall 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, and compliance with applicable
state securities laws of such states in which Holders notify the Company of
their intention to offer Registrable Securities.
(f) "Registrable Securities" shall mean all of the following to the
extent the same have not been sold to the public (i) any and all shares of
Common Stock of the Company, issued or issuable, upon conversion of shares of
the Company's Series A Preferred Stock and up to an aggregate of 7,600,000
shares (subject to appropriate adjustments in the event of any stock
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dividend, stock split, combination or other similar recapitalization affecting
such shares) of Common Stock owned by Founders; or (ii) stock issued in respect
of stock referred to in (i) above in any reorganization; or (iii) stock issued
in respect of the stock referred to in (i) or (ii) as a result of a stock split,
stock dividend, recapitalization or combination. Notwithstanding the foregoing,
Registrable Securities shall not include otherwise Registrable Securities
(i) sold by a person in a transaction in which his rights under this Agreement
are not properly assigned; (ii) (A) sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction, or
(B) sold in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(1) thereof so that all
transfer restrictions, and restrictive legends with respect thereto, if any, are
removed upon the consummation of such sale; or (iii) if they are held by a
Holder who can sell all Registrable Securities held by such holder in any
three-month period without registration pursuant to Rule 144.
(g) "Rule 144" shall mean Rule 144 under the Securities Act or any
successor or similar rule as may be enacted by the Commission from time to time,
but shall not include Rule 144A.
(h) "Securities Act" shall mean the Securities Act of 1933, as amended,
or any similar federal statute and the rules and regulations thereunder, all as
the same shall be in effect at the time.
5.2 Demand Registration.
(a) If the Company shall receive from Initiating Holders a written
request that the Company effect any registration with respect to all or at least
25% of the issued and outstanding Registrable Securities held by Holders, the
Company shall:
i. promptly give written notice of the proposed registration
to all other Holders; and
ii. as soon as practicable use its best efforts to register
(including, without limitation, the execution of an undertaking to file
post-effective amendments and any other governmental requirements) all
Registrable Securities which the Initiating Holders request to be registered;
provided, that the Company shall not be obligated to file a registration
statement pursuant to this Section 5.2:
(A) prior to the date which is six months after the
closing of the Company's first underwritten public offering of securities;
(B) in any particular state in which the Company
would be required to execute a general consent to service of process in
effecting such registration;
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(C) within 180 days following the effective date of
any registered offering of the Company's securities to the general public in
which the Holders of Registrable Securities shall have been able effectively to
register all Registrable Securities as to which registration shall have been
requested;
(D) in any registration having an aggregate offering
price (before deduction of underwriting discounts and expenses of sale) of less
than $5,000,000;
(E) after the Company has effected two such
registrations by the Investors and two such Registrations by the Founders
pursuant to this Section 5.2 and such registrations have been declared or
ordered effective, except as provided in Section 5.3; or
(F) during the period starting with the date sixty
(60) days prior to the Company's good faith estimate of the date of filing of,
and ending on a date one hundred eighty (180) days after the effective date of,
a registration subject to Section 5.3 hereof; provided that the Company is
actively employing in good faith its best efforts to cause such registration
statement to become effective; and provided further that the Company may not
rely on this Section 5.2(a)(ii)(F) more than once during the term of this
Agreement to not register Registrable Securities pursuant to a request made by
Initiating Holders pursuant to this Section 5.2.
Subject to the foregoing clauses (A) through (F), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practical, but in any event within 60 days after receipt
of the request or requests of the Initiating Holders and shall use reasonable
best efforts to have such registration statement promptly declared effective by
the Commission whether or not all Registrable Securities requested to be
registered can be included; provided, however, that if the Company shall furnish
to such Holders a certificate signed by the President of the Company stating
that in the good-faith judgment of the Board of Directors it would be seriously
detrimental to the Company and its Stockholders for such registration statement
to be filed within such 60-day period and it is therefore essential to defer the
filing of such registration statement, the Company shall have an additional
period of not more than 60 days after the expiration of the initial 60-day
period within which to file such registration statement; provided, that during
such time the Company may not file a registration statement for securities to be
issued and sold for its own account except as contemplated by Section
5.2(a)(ii)(F) above.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request. In such event, if so requested in
writing by the Company, the Initiating Holders shall negotiate with an
underwriter selected by the Company with regard to the underwriting of such
requested registration; provided, however, that if a majority in interest of the
Initiating Holders have not agreed with such underwriter as to the terms and
conditions of such underwriting within 20 days following commencement of such
negotiations, a majority in interest of the Initiating
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Holders may select an underwriter of their choice. The right of any Holder to
registration pursuant to Section 5.2 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. The Company shall (together with all Holders proposing to
distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of this
Section 5, if the managing underwriter advises the Initiating Holders in writing
that marketing factors require a limitation of the number of shares to be
underwritten, the Company shall so advise all Holders, and the number of shares
of Registrable Securities that may be included in the registration and
underwriting may be reduced up to an amount that is not less than 25% of all the
securities included in such registration and the Registrable Securities to be
included shall be allocated among all Holders thereof in proportion, as nearly
as practicable, to the respective amounts of Registrable Securities held by such
Holders; provided, however, that securities to be included in such registration
statement as a result of piggyback registration rights not contained in this
Article V as well as any securities to be offered by the Company, its officers
and employees shall be excluded from the registration statement prior to the
exclusion of any Registrable Securities held by the Holders and further provided
that no Registrable Securities held by Holders other than the Founders shall be
reduced if any Registrable Securities held by the Founders are included in the
registration. If any Holder disapproves of the terms of the underwriting, he may
elect to withdraw therefrom by written notice to the Company, the managing
underwriter and the Initiating Holders. If, by the withdrawal of such
Registrable Securities, a greater number of Registrable Securities held by other
Holders may be included in such registration (up to the limit imposed by the
underwriters) the Company shall offer to all Holders who have included
Registrable Securities in the registration the right to include additional
Registrable Securities in the same proportion used in determining the limitation
as set forth above. Any Registrable Securities which are excluded from the
underwriting by reason of the underwriter's marketing limitation or withdrawn
from such underwriting shall be withdrawn from such registration.
5.3 Piggyback Registration.
(a) If at any time or from time to time, the Company shall determine to
register any of its securities, for its own account or the account of any of its
Stockholders, other than a registration relating solely to employee benefit
plans, or a registration relating solely to a transaction pursuant to Rule 145
under the Securities Act, a transaction relating solely to the sale of debt or
convertible debt instruments or a registration on any form (other than Form X-0,
X-0 or S-3, or their successor forms) which does not include substantially the
same information as would be required to be included in a registration statement
covering the sale of Registrable Securities, the Company will:
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i. give to each Holder written notice thereof as soon as
practicable prior to filing the registration statement; and
ii. include in such registration and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within 15 days after receipt of such written notice from the
Company, by any Holder or Holders, except as set forth in subsection (b) below.
(b) If the registration is for a registered public offering involving
an underwriting, the Company shall so advise the Holders as a part of the
written notice given pursuant to subsection 5.3. In such event, the right of any
Holder to registration pursuant to Section 5.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the other holders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting by the
Company. Notwithstanding any other provision of this Section 5.3, if the
managing underwriter advises the Holders who are participating in such
underwriting in writing that marketing factors require a limitation of the
number of shares to be underwritten, the managing underwriter may limit the
number of Registrable Securities to be included in the registration and
underwriting to an amount that is not less than 25% of all the securities
included in such registration, or may exclude Registrable Securities entirely
from such registration if the registration is the first registered offering for
the sale of the Company's equity securities to the general public (provided that
no shares held by officers and directors of the Company, other than Registrable
Securities that may be owned by officers and directors, are included in the
registration and underwriting and further provided that no Registrable
Securities held by Holders other than the Founders shall be reduced if any
Registrable Securities held by the Founders are included in the registration).
The Company shall so advise all Holders, and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated first among all Holders in proportion, as nearly as practicable, to
the respective amounts of Registrable Securities held by such Holders at the
time of filing the registration statement and next to holders of piggyback
registration rights not contained in this Article V. If any Holder disapproves
of the terms of any such underwriting, he may elect to withdraw therefrom by
written notice to the Company and the managing underwriter. If, by the
withdrawal of such Registrable Securities, a greater number of Registrable
Securities held by other Holders may be included in such registration (up to the
limit imposed by the underwriters), the Company shall offer to all Holders who
have included Registrable Securities in the registration the right to include
additional Registrable Securities. Any Registrable Securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
5.4. Form S-3. The Company shall use its reasonable best efforts to
qualify for registration on Form S-3 or its successor form. After the Company
has qualified for the use of
12
Form S-3, Initiating Holders shall have the right at any time to request
registrations on Form S-3 (such requests shall be in writing and shall state the
number of shares of Registrable Securities to be disposed of and the intended
method of disposition of shares by such Holders), subject only to the following:
(a) The Company shall not be required to file a registration statement
pursuant to this Section 5.4 within 180 days of the effective date of any
registration referred to in Sections 5.2 and 5.3 above.
(b) The Company shall not be required to file a registration statement
pursuant to this Section 5.4 unless the Holder or Holders requesting
registration propose to dispose of shares of Registrable Securities having an
aggregate disposition price (before deduction of underwriting discounts and
expenses of sale) of at least $1,000,000.
(c) The Company shall not be required to file more than two
registration statements pursuant to this Section 5.4 within any twelve-month
period.
The Company shall give written notice to all Holders of Registrable
Securities of the receipt of a request for registration pursuant to this Section
5.4 and shall provide a reasonable opportunity for other Holders to participate
in the registration; provided, that if the registration is for an underwritten
offering, the following terms shall apply to all participants in such offering:
The right of any Holder to registration pursuant to Section 5.4 shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company and the other Holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of this Section 5.4, if the managing underwriter advises the
Initiating Holders in writing that marketing factors require a limitation of the
number of shares to be underwritten, the Company shall so advise all Holders,
and the number of shares of Registrable Securities that may be included in the
registration and underwriting may be reduced up to an amount that is not less
than 25% of all the securities included in such registration and the Registrable
Securities to be included shall be allocated among all Holders thereof in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by such Holders; provided, however, that securities to be
included in such registration statement as a result of piggyback registration
rights not contained in this Article V as well as any securities to be offered
by the Company, its officers and employees shall be excluded from the
registration statement prior to the exclusion of any Registrable Securities held
by the Holders and further provided that no Registrable Securities held by
Holders other than the Founders shall be reduced if any Registrable Securities
held by the Founders are included in the registration. If any Holder disapproves
of the terms of any such underwriting, he may elect to withdraw therefrom by
written notice to the Company and the underwriter. If, by
13
the withdrawal of such Registrable Securities, a greater number of Registrable
Securities held by other Holders may be included in such registration (up to the
limit imposed by the underwriters), the Company shall offer to all Holders who
have included Registrable Securities in the registration the right to include
additional Registrable Securities in the same proportion used in determining the
limitation as set forth above. Any Registrable Securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration. Subject to the
foregoing, the Company will use its best efforts to effect promptly the
registration of all shares of Registrable Securities on Form S-3 to the extent
requested by the Holder or Holders thereof for purposes of disposition.
5.5 Expenses of Registration. In addition to the fees and expenses
contemplated by Section 5.6 hereof, all expenses incurred in connection with
registrations pursuant to Sections 5.2, 5.3 and 5.4 hereof, including without
limitation all registration, filing and qualification fees, printing expenses,
fees and disbursements of counsel for the Company and expenses of any special
audits of the Company's financial statements incidental to or required by such
registration, shall be borne by the Company, except that the Company shall not
be required to pay underwriters' fees, discounts or commissions relating to
Registrable Securities or fees of a separate legal counsel of a Holder.
5.6 Registration Procedures. In the case of each registration effected
by the Company pursuant to this Agreement, the Company will keep each Holder
participating therein advised in writing as to the initiation of each
registration and as to the completion thereof. At its expense the Company will:
(a) keep such registration pursuant to Sections 5.2, 5.3 and 5.4
continuously effective for periods of 120 days, or, in each case, such
reasonable period necessary to permit the Holder or Holders to complete the
distribution described in the registration statement relating thereto, whichever
first occurs;
(b) promptly prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to comply with the provisions of the Securities
Act, and to keep such registration statement effective for that period of time
specified in Subsection 5.6(a) above;
(c) furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request;
(d) use reasonable best efforts to obtain the withdrawal of any order
suspending the effectiveness of a registration statement, or the lifting of any
suspension of the qualification of any of the Registrable Securities for sale in
any jurisdiction, at the earliest possible moment;
14
(e) subject to Subsection 5.2(a)(ii)(B), register or qualify such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions as any Holder or underwriter reasonably requires, and keep
such registration or qualification effective during the period set forth in
Subsection 5.6(a) above;
(f) cause all Registrable Securities covered by such registrations to
be listed on each securities exchange, including NASDAQ, on which similar
securities issued by the Company are then listed or, if no such listing exists,
use reasonable best efforts to list all Registrable Securities on one of the New
York Stock Exchanges, the American Stock Exchange or NASDAQ; and
(g) cause its accountants to issue to the underwriter, if any, or the
Holders, if there is no underwriter, comfort letters and updates thereof, in
customary form and covering matters of the type customarily covered in such
letters with respect to underwritten offerings;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably, request in order to expedite or facilitate the disposition of such
Registrable Securities (including, without limitation, effecting a stock split
or a combination of shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent retained by
any such seller or underwriter, such financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply such
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement; and
(j) if the offering is underwritten, at the request of any Holder of
Registrable Securities to furnish on the date that Registrable Securities are
delivered to the underwriters for sale pursuant to such registration: (i) an
opinion dated such date of counsel representing the Company for the purposes of
such registration, addressed to the underwriters and to such Holder, stating
that such registration statement has become effective under the Securities Act
and that (A) to the best knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under the Securities Act, (B) the
registration statement, the related prospectus and each amendment or supplement
thereof comply as to form in all material respects with the requirements of the
Securities Act (except that such counsel need not express any opinion as to
financial statements or other financial data contained therein) and (C) to such
other effects as reasonably may be requested by counsel for the underwriters or
by such Holder or its counsel and (ii) a letter dated such date from the
independent public accountants retained by the Company, addressed to the
underwriters and to such seller, stating that they are independent public
accountants within the
15
meaning of the Securities Act and that, in the opinion of such accountants, the
financial statements of the Company included in the registration statement or
the prospectus, or any amendment or supplement thereof, comply as to form in all
material respects with the applicable accounting requirements of the Securities
Act, and such letter shall additionally cover such other financial matters
(including information as to the period ending no more than five business days
prior to the date of such letter) with respect to such registration as such
underwriters reasonably may request;
(k) notify each Holder, at any time a prospectus covered by such
registration statement is required to be delivered under the Securities Act, of
the happening of any event of which it has knowledge 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 the light of the circumstances then existing; and
(l) take such other actions as shall be reasonably requested by any
Holder.
5.7 Indemnification.
(a) In the event of a registration of any of the Registrable Securities
under the Securities Act pursuant to Sections 5.2, 5.3 or 5.4, the Company will
indemnify, defend and hold harmless each Holder of such Registrable Securities
thereunder, each underwriter of such Registrable Securities thereunder and each
other person, if any, who controls such Holder or underwriter within the meaning
of the Securities Act, against any losses, claims, damages or liabilities, joint
or several, to which such Holder, underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such Registrable Securities
were registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof, 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
therein not misleading, or any violation by the Company of any rule or
regulation promulgated under the Securities Act or any state securities law
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, and will indemnify each such
Holder, each of its officers, directors and partners, and each person
controlling such Holder, each such underwriter and each person who controls any
such underwriter, for any reasonable legal and any other expenses incurred in
connection with investigating, defending or settling any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage or liability arises
out of or is based on any untrue statement or omission based upon written
information furnished to the Company by an instrument duly executed by such
Holder or underwriter specifically for use therein; provided, further, that the
16
Company shall not be liable if any such omission or statement of material fact
is corrected in a later prospectus that was provided to the Investors in a
timely manner by the Company and the Investors did not deliver such updated
prospectus.
(b) Each Holder will, if Registrable Securities held by or issuable to
such Holder are included in the securities as to which such registration is
being effected, indemnify and hold harmless the Company, each of its directors
and officers, each underwriter, if any, of the Company's securities covered by
such a registration statement, each person who controls the Company and each
underwriter within the meaning of the Securities Act, and each other such
Holder, each of its officers, directors and partners and each person controlling
such Holder, against all claims, losses, expenses, 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 Holders, such directors, officers, partners, persons or
underwriters for any reasonable legal or any other expenses incurred in
connection with investigating, defending or settling 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 an instrument duly executed by such Holder
specifically for use therein; provided, however, the total amount for which any
Holder, its officers, directors and partners, and any person controlling such
Holder, shall be liable under this Section 5.7 shall not in any event exceed the
aggregate proceeds received by such Holder from the sale of Registrable
Securities sold by such Holder in such registration.
(c) Each party entitled to indemnification under this Section 5.7 (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 claims 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 not be unreasonably
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 hereunder, unless such failure resulted in actual detriment to
the Indemnifying Party. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement 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 of such claim or
litigation.
17
(d) Notwithstanding the foregoing, to the extent that the provisions on
indemnification contained in the underwriting agreements entered into among the
selling Holders, the Company and the underwriters in connection with the
underwritten public offering are in conflict with the foregoing provisions, the
provisions in the underwriting agreement shall be controlling as to the
Registrable Securities included in the public offering; provided, however, that
if, as a result of this Subsection 5.7(d), any Holder, its officers, directors,
and partners and any person controlling such Holder is held liable for an amount
which exceeds the aggregate proceeds received by such Holder from the sale of
Registrable Securities included in a registration, as provided in Subsection
5.7(b) above, pursuant to such underwriting agreement (the "Excess Liability"),
the Company shall reimburse any such Holder for such Excess Liability.
(e) If the indemnification provided for in this Section 5.7 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage or expense referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other hand in
connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relevant fault of the indemnifying party and the indemnified
party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. Notwithstanding the foregoing, the amount any Holder
shall be obligated to contribute pursuant to this Subsection 5.7(e) shall be
limited to an amount equal to the proceeds to such Holder of the Restricted
Securities sold pursuant to the registration statement which gives rise to such
obligation to contribute (less the aggregate amount of any damages which the
Holder has otherwise been required to pay in respect of such loss, claim,
damage, liability or action or any substantially similar loss, claim, damage,
liability or action arising from the sale of such Restricted Securities).
(f) Survival of Indemnity. The indemnification provided by this Section
5.7 shall be a continuing right to indemnification and shall survive the
registration and sale of any securities by any Person entitled to
indemnification hereunder and the expiration or termination of this Agreement.
5.8 Lockup Agreement. In consideration for the Company agreeing to its
obligations under this Agreement, each Holder agrees in connection with any
registration of the Company's securities (whether or not such Holder is
participating in such registration) upon the request of the Company and the
underwriters managing any underwritten offering of the Company's
18
securities, not to sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any Registrable Securities (other than
those included in the registration) without the prior written consent of the
Company or such underwriters, as the case may be, for such period of time (not
to exceed 180 days in the case of the Company's initial public offering and 90
days in any other public offering) from the effective date of such registration
as the Company and the underwriters may specify, so long as all Holders or
stockholders holding more than one percent (1%) of the outstanding common stock
and all officers and directors of the Company are, and continue to be, bound by
a comparable obligation; provided, however, that nothing herein shall prevent
any Holder that is a partnership or corporation from making a distribution of
Registrable Securities to the partners or Stockholders thereof that is otherwise
in compliance with applicable securities laws, so long as such distributees
agree to be so bound.
5.9 Rule 144. With a view to making available to Holders of Registrable
Securities the benefits of certain rules and regulations of the Commission which
may permit the sale of the Registrable Securities to the public without
registration, the Company agrees at all times after ninety (90) days after the
effective date of the first registration filed by the Company for an offering of
its securities to the general public to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144; and
(b) use its reasonable best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act.
5.10 Transfer of Registration Rights. The rights to cause the Company
to register Registrable Securities of a Holder and other rights under this
Section 5 may be assigned by a Holder to any partner or Stockholder of such
Holder, to any other Holder, or to a transferee or assignee who receives at
least 50,000 shares of Registrable Securities (as adjusted for any stock split,
stock dividend or recapitalization after the date of the first issuance of the
Series A Preferred Stock); provided, that the Company is given written notice by
the Holder at the time of or within a reasonable time after said transfer,
stating the name and address of said transferee or assignee and identifying the
securities with respect to which such registration rights are being assigned.
5.11. Limitations on Subsequent Registration Rights. From and after the
date these registration rights are granted, the Company shall not, without the
prior written consent of the Holders of not less than a majority of the
Registrable Securities then held by Holders, enter into any agreement with any
holder or prospective holder of any securities of the Company which would allow
such holder or prospective holder to include such securities in any registration
filed under Sections 5.2, 5.3 and 5.4 hereof other than rights subordinate to
the rights of any Holder
19
hereunder; provided, further, that granting registration rights to holders in
connection with a Rule 145 transaction shall not require the approval of the
Holders.
5.12. Termination of Rights. The rights and obligations of the Company
and the Stockholders set forth in this Article V shall terminate on December 31,
2006 (except for the provisions in regard to indemnification which shall
continue and shall survive the termination hereof).
ARTICLE VI
MISCELLANEOUS
6.1 Information Rights. For so long as the Company is not subject to
the periodic reporting requirements of Section 12 of the Securities Exchange Act
of 1934, as amended, the Investors shall have the right to receive the
information stated in this Section 6.1 from the Company:
(a) Periodic Financial and Other Information. So long as an Investor is
the holder of not less than 100,000 shares of Series A Preferred Stock:
(i) within 90 days after the end of each fiscal year of the
Company, commencing with the year ending December 31, 1999; the Company will
provide such Investor with financial statements of the Company for such fiscal
year, consisting of an income statement, balance sheet and statement of changes
in financial position, and prepared in accordance with generally accepted
accounting principles consistently applied ("GAAP") which may be audited by such
Investor's internal auditors at such times and from time to time as such
Investor deems appropriate; the Company shall provide such Investor with full
access to its premise, officers, employees, books and records as shall be
requested by such Investor in order to exercise such audit right;
(ii) within 45 days after the end of each quarterly accounting
period of each fiscal year of the Company, commencing with the quarter ending
March 31, 2000, the Company will provide such Investor with an unaudited income
statement, balance sheet and statement of changes in financial position with
comparisons to budget and the immediately preceding fiscal year for such quarter
and for the year to date, prepared in accordance with GAAP;
20
(iii) within 30 days after the end of each fiscal month,
commencing with the first fiscal month ending after the date hereof or ending in
the 30 day period before the date hereof, the Company will provide such Investor
with internal monthly financial and operating statements for such month, plus a
statement setting forth a comparison by reasonable categories to the applicable
budget and comparable figures for the prior year; and
(iv) within 30 days after the end of each fiscal year, the
Company will provide such Investor with an annual budget for the next succeeding
fiscal year, with the first such annual budget to be provided January 30, 2001.
(b) Additional Information. So long as an Investor is the holder of not
less than 100,000 shares of Series A Preferred Stock, the Company will permit
such Investor or any representative of such Investor to visit and inspect the
Company's premises and properties, including its books and records of account,
from time to time, and to discuss the Company's business, finances and accounts
with the Company's officers at reasonable times during the Company's regular
business hours, upon reasonable advance written notice to the Company and in a
manner that will not unreasonably interfere with the normal business operations
of the Company; and
(c) Books and Records. So long as an Investor is the holder of not less
than 100,000 shares of Series A Preferred Stock, the Company will keep books and
records of account in which full, accurate and correct entries in all material
respects will be made of all dealings and transactions in relation to the
business and affairs of the Company in accordance with GAAP.
6.2 Transfer of Stock. Except as otherwise expressly provided by this
Agreement, each Stockholder agrees not to transfer any of his shares of capital
stock of the Company unless the transferee agrees in writing to be bound by the
terms and conditions of this Agreement and executes a counterpart of this
Agreement, and unless such Stockholder has complied with applicable law and all
provisions of this Agreement in connection with such transfer.
6.3 Duration of Agreement. Except for those provisions that, by their
terms, terminate sooner, the rights and obligations of the Company and each
Stockholder under this Agreement shall terminate as to such Stockholder on the
earliest to occur of the following: (a) the transfer in accordance with this
Agreement of all Shares held by such Stockholder or (b) upon the written consent
of the Company and Stockholders holding at least 66 2/3 % of the Registrable
Securities.
6.4 Legend. In addition to any legends which the Company determines to
be reasonably necessary at the time of issuance to comply with restrictions or
requirements imposed by Federal or state securities laws or by General
Corporation Law of the State of Delaware, each certificate representing shares
of Series A Preferred Stock and Common Stock shall bear the following legend,
until such time as the shares of Series A Preferred Stock and Common Stock
represented thereby are no longer subject to the provisions hereof:
21
"THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A CERTAIN STOCKHOLDERS AGREEMENT WHICH INCLUDES A VOTING
AGREEMENT. COPIES OF THE STOCKHOLDERS AGREEMENT MAY BE OBTAINED UPON
WRITTEN REQUEST TO THE COMPANY'S SECRETARY."
6.5 Severability; Governing Law. If any provisions of this Agreement
shall be determined to be illegal or unenforceable by any court of law, the
remaining provisions shall be severable and enforceable in accordance with their
terms. This Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of New York.
6.6 Injunctive Relief. It is acknowledged that it will be impossible to
measure the damages that would be suffered by the nonbreaching party if any
party fails to comply with the provisions of this Agreement and that in the
event of any such failure, the nonbreaching parties will not have an adequate
remedy at law. The non-breaching parties shall, therefore, be entitled to obtain
specific performance of the breaching party's obligations hereunder and to
obtain immediate injunctive relief. The breaching party shall not urge, as a
defense to any proceeding for such specific performance or injunctive relief,
that the nonbreaching parties have an adequate remedy at law. If any action at
law or in equity is necessary to enforce or interpret the terms of this
Agreement, the prevailing party shall be entitled to reasonable attorneys' fees,
costs and necessary disbursements in addition to any other relief to which such
party may be entitled.
6.7 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective permitted successors and
assignees, legal representatives and heirs. 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, except as expressly provided
in this Agreement. The administrator, executor or legal representative of any
deceased or incapacitated Stockholder shall have the right to execute and
deliver all documents and perform all acts necessary to exercise and perform the
rights and obligations of such Stockholder under the terms of this Agreement.
6.8 Additional Stockholders. Prior to being issued Shares, all future
stockholders of the Company during the term of this Agreement shall agree to be
Additional Stockholders and to be bound by the terms and provisions of this
Agreement, including, without limitation, those who obtain Shares through the
exercise of the options described in Section 3.1(d). The Company shall add
Additional Stockholders by joinder whereby the Additional Stockholders shall
sign a counterpart to this Agreement and the Schedule A hereto shall be amended
to reflect the Shares issued to the Additional Stockholder. The joinder of an
Additional Stockholder as contemplated by the preceding sentence shall not
constitute an amendment to this Agreement requiring the consent of the existing
Stockholders except as may otherwise required by this Agreement in connection
with the issuance of such Shares. Promptly following the addition of an
Additional
22
Stockholder, the Company shall distribute to all Stockholders copies of this
Agreement executed by the Additional Stockholder with a revised Schedule A.
6.9 Modification or Amendment. Neither this Agreement nor any
provisions hereof can be modified, amended, changed, discharged or terminated
except by an instrument in writing, signed by the holders of at least a majority
of the shares of capital stock then subject to this Agreement, based upon voting
power and calculated on an "as if converted" basis, together with the consent of
Investors and Founders holding at least sixty-six and two-thirds percent
(66 2/3%) of the outstanding Shares held by the Investors and the Founders
outstanding on the date hereof.
6.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same instrument.
6.11 Notices. All notices to be given or otherwise made to any party to
this Agreement shall be deemed to be sufficient if contained in a written
instrument, delivered by hand in person, or by express overnight courier
service, or by electronic facsimile transmission (with a copy sent by
first-class mail, postage prepaid), or by registered or certified mail, return
receipt requested, postage prepaid, addressed to such party at the address set
forth on the signature page hereof or at such other address as may hereafter be
designated in writing by the addressee to the addressor listing all parties.
All such notices shall, when mailed or transmitted, be effective when
received or when attempted delivery is refused.
6.12 Waiver of Preemptive Rights. Except as is expressly set forth in
Article III, the Founders agree that the Amended and Restated Limited Liability
Company Agreement of BHW/INFO/XXXX.XXX, LLC, dated December 15, 1999, by and
between the Founders (the "LLC Agreement"), is terminated in all regards, and
without limitation to the foregoing, the Founders hereby waive any and all
preemptive and other rights that they may have, or have had, pursuant to the LLC
Agreement or otherwise outside the scope of this Agreement.
6.13 Amendment to Master Transaction Agreement. The Founders, Xxxx &
Xxxxxx Company, Infonautics Corporation and the Company agree that (a) the
definition of "Change of Control" as is set forth in Annex A of the MTA shall
hereby be amended for purposes of the MTA and the Related Agreements (as defined
in the MTA) to delete: "; or (iii) any other change in 'control' (as defined in
Rule 405 promulgated pursuant to the Securities Act) of such Party" and (b)
Section 9.1 of the MTA shall be deleted in its entirety.
6.14 No Other Agreements. Each Stockholder represents that he has not
granted and is not a party to any proxy, voting trust or other agreement which
is inconsistent with or conflicts with the provisions of this Agreement, and no
holder of Shares shall grant any proxy or become
23
party to any voting trust or other agreement which is inconsistent with or
conflicts with the provisions of this Agreement.
6.15 Certificate of Incorporation and Bylaws. The certificate of
incorporation and bylaws of the Company may be amended in any manner permitted
thereunder, except that neither the certificate nor the bylaws shall be amended
in any manner that would conflict with, or be inconsistent with, the provisions
of this Agreement.
24
IN WITNESS WHEREOF, the Company, the Investors and the Founders have
executed this agreement in counterparts as of the date first above specified.
XXXXXXXX.XXX, INC.
By: /s/ Xxxx X. Xxxxx, Xx.
-------------------------------
Name: Xxxx X. Xxxxx, Xx.
Title: CEO
Address: 000 Xxxx Xxxxxx Xxxx, Xxxxx 0000, Xxxxx, XX 00000-0000
Fax No.:
FOUNDERS:
XXXX & XXXXXX INFORMATION AND
LEARNING COMPANY
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President & CEO
Address: 300 X. Xxxx; Xxx Xxxxx, XX 00000
Fax No.: 000.000.0000
XXXX & XXXXXX COMPANY (for purposes of Section 6.13 only)
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Executive Vice President - Chief Financial Officer
Address: 0000 Xxxxxxx Xxxx; Xxxxxx, XX 00000
Fax No.: 000-000-0000
[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]
25
INFONAUTICS, INC.
By: /s/ Xxxxx Xxx Xxxxx Xxxxxx
-------------------------------
Name: Xxxxx Xxx Xxxxx Xxxxxx
Title: CEO
Address: 000 Xxxx Xxxxxx Xxxx, Xxxxx, XX
Fax No.: 000-000-0000
INFONAUTICS CORPORATION (for purposes of Section 6.13 only)
By: /s/ Xxxxx Xxx Xxxxx Xxxxxx
-------------------------------
Name: Xxxxx Xxx Xxxxx Xxxxxx
Title: CEO
Address: 000 Xxxx Xxxxxx Xxxx, Xxxxx, XX
Fax No.: 000-000-0000
INVESTOR STOCKHOLDERS:
TBG INFORMATION INVESTORS LLC
By: /s/ Oakleigh Xxxxxx
-------------------------------
Name: Oakleigh Xxxxxx
Title: CEO
Address: XX Xxx 000, Xxxx Xxxxxx, XX 00000
Fax No.: 000.000.0000
[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]
26
CORE LEARNING GROUP LLC
By: /s/ Xxxxxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Chairman
Address: 0000 Xxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxxxx, XX 00000
Fax No.:
CORE LEARNING GROUP - BC, LLC
By: /s/ Xxxxxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Chairman
Address: 0000 Xxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxxxx, XX 00000
Fax No.:
APA EXCELSIOR V, L.P.
By: APA Excelsior Partners L.P.,
its General Partner
By: Patricof & Co. Managers, Inc.
its General Partner
By: /s/ Xxxxxx Xxxxxxx
-------------------------------
Xxxxxx Xxxxxxx
Vice President
27
[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]
PATRICOF PRIVATE INVESTMENT CLUB II, L.P.
By: APA Excelsior Partners L.P.,
its General Partner
By: Patricof & Co. Managers, Inc.
its General Partner
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
Xxxxxx Xxxxxxx
Vice President
By: /s/ Xxxxx X. Xxxxxx, Xx.
------------------------------------
Xxxxx X. Xxxxxx, Xx.
Address: 0000 Xxxxx Xxxx Xxxxxx, Xxxxxxxxx, XX 00000
Fax No.:000 000-0000
WS INVESTMENT COMPANY 99B
By: /s/ Xxxx X. Xxxxxx
------------------------------------
Name: Xxxx X. Xxxxxx
Title: Partner
Address: 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, XX 00000
Fax No.: 000-000-0000
28
[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]
THE SAN DOMENICO TRUST
By: /s/ Xxxx X. Xxxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Co-Trustee
Address: 0000 Xxxxxx Xxxxx, Xxxxx Xxxx, XX 00000
Fax No.:000-000-0000
/s/ Xxxx X. Xxxxxx
------------------------------------
Xxxx X. Xxxxxx
Address: Address: 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, XX 00000
Fax No.:000-000-0000
/s/ Xxxxxxx X. Xxxxxx
------------------------------------
Xxxxxxx X. Xxxxxx
Address: 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, XX 00000
Fax No.: 000-000-0000
/s/ Xxxxxx X. Xxxx
------------------------------------
Xxxxxx X. Xxxx
Address: Address: 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, XX 00000
Fax No.:000-000-0000
29
[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]
30
ADDITIONAL STOCKHOLDERS:
By: ___________________________ Dated: ____________________
Name:
Title:
Address:
Fax No.:
By: ___________________________ Dated: ____________________
Name:
Title:
Address:
Fax No.:
By: ___________________________ Dated: ____________________
Name:
Title:
Address:
Fax No.:
By: ___________________________ Dated: ____________________
Name:
Title:
Address:
Fax No.:
[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]
31
SCHEDULE A
FORMATION ISSUANCES
------------------------------------------------------------------------------------------------------------------
FOUNDER Number of Date Issued
Shares of Common Stock
------------------------------------------------------------------------------------------------------------------
XXXX & XXXXXX INFORMATION 10,366,667 1-10-00
AND LEARNING COMPANY
------------------------------------------------------------------------------------------------------------------
INFONAUTICS, INC. 4,633,333 1-10-00
------------------------------------------------------------------------------------------------------------------
CLOSING
------------------------------------------------------------------------------------------------------------------
INVESTOR Number of Shares of Series A Preferred Date Issued
Stock
------------------------------------------------------------------------------------------------------------------
TBG INFORMATION 3,010,000 1-10-00
INVESTORS LLC
------------------------------------------------------------------------------------------------------------------
CORE LEARNING GROUP LLC 2,510,000 1-10-00
------------------------------------------------------------------------------------------------------------------
CORE LEARNING GROUP - 500,000 1-10-00
BC, LLC
------------------------------------------------------------------------------------------------------------------
APA EXCELSIOR V, L.P.. 1,486,941 1-10-00
------------------------------------------------------------------------------------------------------------------
PATRICOF PRIVATE INVESTMENT CLUB II, L.P. 18,060 1-10-00
------------------------------------------------------------------------------------------------------------------
XXXXX X. XXXXXX, XX. 35,715 1-10-00
------------------------------------------------------------------------------------------------------------------
WS INVESTMENT 14,286 1-10-00
COMPANY 99B
------------------------------------------------------------------------------------------------------------------
XXXX X. XXXXXX 14,286 1-10-00
------------------------------------------------------------------------------------------------------------------
THE SAN DOMENICO TRUST 3,286 1-10-00
------------------------------------------------------------------------------------------------------------------
XXXXXXX X. XXXXXX 7,143 1-10-00
------------------------------------------------------------------------------------------------------------------
XXXXXX X. XXXX 285 1-10-00
------------------------------------------------------------------------------------------------------------------
SERIES A PREFERRED TOTAL 7,600,002 1-10-00
------------------------------------------------------------------------------------------------------------------
ADDITIONAL ISSUANCES
------------------------------------------------------------------------------------------------------------------
NAME Number and Class of Shares Date Issued
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
32
