Exhibit 99.1
AGREEMENT
This Agreement is entered into as of February 4, 2005 by and among GuruNet
Corporation, a Delaware corporation (the "COMPANY"), and each of the holders
(each a "HOLDER" and collectively, the "HOLDERS") set forth on Exhibit A
attached hereto and incorporated herein by such reference.
R E C I T A L S
WHEREAS, each of the Holders is a holder of a Warrant issued by the
Company dated January 30, 2004 or February 17, 2004 (each a "WARRANT" and
collectively, the "WARRANTS"); and
WHEREAS, each Holder wishes to (i) exercise their Warrants for the number
of Warrant Shares set forth opposite their respective names on Exhibit A under
the heading "Warrant Shares" and or (ii) transfer their respective Warrants to
certain third parties, in either case as each has indicated on the form attached
hereto as Exhibit B (the "ELECTION FORM") and incorporated herein by such
reference which has been delivered to the Company; and
WHEREAS, as consideration for such exercise or transfer, the Company is
willing to issue to each Holder certain Additional Warrants as described herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and each Holder
severally and jointly agree as follows.
In addition to the terms defined elsewhere in this Agreement, capitalized terms
that are not otherwise defined herein have the meanings given to such terms in
that certain Securities Purchase Agreement (the "PURCHASE AGREEMENT"), dated as
of January 30, 2004, by and among the Company and the Purchasers identified
therein, together with their successors and assigns (the "PURCHASERS").
SECTION 1
EXERCISE OF THE WARRANT
THIS SECTION IS APPLICABLE ONLY TO THOSE HOLDERS WHO HAVE INDICATED THEIR
IMMEDIATE EXERCISE OF THEIR WARRANT BY CHECKING THE APPROPRIATE BOX ON THE
ELECTION FORM .
1.1 On the date hereof (for purposes of this Section 1, the "EXERCISE DATE"),
each Holder of Warrants will deliver to the Company an Exercise Notice and the
applicable Exercise Price pursuant to the provisions of Paragraph 4(b) of its
Warrant.
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1.2 On the Exercise Date and concurrently with the exercise by each such
Holder of its Warrant, pursuant to the provisions of Section 1.1 hereof, the
Company will grant to the Holder an additional warrant (each an "ADDITIONAL
WARRANT" and collectively, the "ADDITIONAL WARRANTS") in substantially the form
attached hereto as Exhibit C and incorporated herein by such reference, and as
further described in Section 2 hereof.
1.3 On the Exercise Date, the Company will deliver to each Holder (i) the
Warrant Shares required to be delivered to such Holder pursuant to the
provisions of Paragraph 5(a) of its Warrant and (ii) the Additional Warrant
granted to such Holder on the Exercise Date.
1.4 The Company will include the shares of its common stock issuable upon
exercise of the Additional Warrants (the "REGISTRABLE SECURITIES") in a
registration statement on an appropriate SEC Form (the "REGISTRATION STATEMENT")
to be filed by the Company with the Commission as soon as practicable following
the date of this Agreement, but in no event later than the Filing Date (as
defined below).
SECTION 2
ADDITIONAL WARRANTS
2.1 In accordance with the provisions of Section 1 above, each Holder will be
issued an Additional Warrant to purchase up to the number of shares of the
Company's common stock as set forth under the heading "Additional Warrant
Shares" on Exhibit A at the exercise price of $17.27 per share. The Additional
Warrant will be exercisable commencing on the date hereof and ending on the five
(5) year anniversary of the date hereof.
2.2 In the event required by the rules of the Company's Trading Market:
(a) the Company shall seek, and use its best efforts to obtain as soon as
possible but in no event later than 90 days following the date hereof or 120
days in the event the proxy materials shall be reviewed by the Commission
shareholder approval of the issuance of the shares of common stock underlying
the Additional Warrants (the "ADDITIONAL WARRANTS Proposal"), which approval
shall meet the requirements of the American Stock Exchange rule under Section
713 of the AMEX Company Guide (the "SHAREHOLDER APPROVAL DATE").
(b) As soon as practicable following the date of this Agreement, but in
no event less than 90 days following the date of this Agreement, the Company
shall prepare and file with the Commission proxy materials calling an annual
meeting (the "ANNUAL MEETING") of its shareholders, among other things, seeking
approval of the Additional Warrants Proposal. The Company shall use its
reasonable best efforts to cause such proxy materials to reach the "no further
comment" stage as soon as reasonably practicable (the "CLEARANCE DATE") and to
hold the Annual Meeting as soon as possible following the Clearance Date, but in
no event later than 60 days following the Clearance Date.
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(c) The Board of Directors shall recommend approval thereof by the
Company's shareholders. The Company shall mail and distribute its proxy
materials for the Annual Meeting to its shareholders at least 30 days prior to
the date of the Annual Meeting and shall actively solicit proxies to vote for
the Additional Warrants Proposal. The Company shall provide the Lead Holder an
opportunity to review and comment on such proxy materials by providing (which
may be by e-mail) copies of such proxy materials and any revised preliminary
proxy materials to the Lead Holder at least three (3) days prior to their filing
with the Commission. The Company shall provide the Lead Holder (which may be by
e-mail) copies of all correspondence from or to the Commission or its staff
concerning the proxy materials for the Annual Meeting promptly after the same is
sent or received by the Company and summaries of any comments of the
Commission's staff which the Company receives orally promptly after receiving
such oral comments. The Company shall (i) furnish to the Lead Holder and its
counsel (which may be by e-mail) a copy of its definitive proxy materials for
the Annual Meeting and any amendments or supplements thereto promptly after the
same are first used, mailed to shareholders or filed with the Commission, (ii)
inform the Lead Holder of the progress of solicitation of proxies for such
meeting and (iii) inform the Lead Holder of any adjournment of the Annual
Meeting and shall report the result of the vote of shareholders on the
Additional Warrants Proposal at the conclusion of the Annual Meeting.
(d) If for any reason the Additional Warrants Proposal is not approved
at the Annual Meeting, the Company will take such additional acts or actions as
are necessary to hold an additional Annual Meeting to consider the Additional
Warrants Proposal and in conjunction therewith shall hire a nationally
recognized proxy solicitation firm, selected by the Lead Holder which is
reasonably satisfactory to the Company, to assist it in obtaining the necessary
shareholder votes to approve the Additional Warrants Proposal. The Company shall
bear all costs and expenses of the preparation and filing of any and all proxy
materials and Annual Meetings, including but not limited to the costs and
expenses of the proxy solicitation firm if needed.
2.3 By execution and delivery of this Agreement, each Holder hereby waives any
adjustment in the number or exercise price of the Warrants as that term is
defined in the Securities Purchase Agreement by virtue of the issuance of the
Additional Warrants.
SECTION 3
REGISTRATION RIGHTS
3.1 Shelf Registration
(a) As promptly as reasonably practicable, and in any event on or prior
to the Filing Date (as defined below), the Company shall prepare and file with
the Commission a "Shelf" Registration Statement covering the resale of all
Registrable Securities for an offering to be made on a continuous basis pursuant
to Rule 415. The Registration
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Statement shall be on an appropriate SEC Form and shall contain (except if
otherwise directed by the Lead Holder) the "Plan of Distribution" attached
hereto as Exhibit D.
(b) The Company shall use its best efforts to cause the Registration
Statement to be declared effective by the Commission as promptly as reasonably
practicable after the filing thereof, but in any event prior to the Required
Effectiveness Date (as defined below), and shall use its best efforts to keep
the Registration Statement continuously effective under the Securities Act until
the fifth anniversary of the Effective Date or such earlier date when all
Registrable Securities covered by such Registration Statement have been sold
publicly (the "EFFECTIVENESS Period").
(c) The Company shall notify the Lead Holder in writing promptly (and in
any event within three business days) after receiving notification from the
Commission that the Registration Statement has been declared effective.
(d) Upon the occurrence of any Event (as defined below) and on every
monthly anniversary thereof until the earlier of (i) such time as the applicable
Event is cured or (ii) such time as the Registrable Securities may be sold to
the public pursuant to Rule 144(k) (or any similar provision then in force)
under the Securities Act, as partial relief for the damages suffered therefrom
by the Holders (which remedy shall be exclusive of any other remedies available
under this Agreement, at law or in equity), the Company shall pay to each Holder
an amount in cash, as liquidated damages and not as a penalty, equal to 1% of
the aggregate Exercise Price paid by such Holder under Section 1.1 above for the
first month and 1.5% for each month thereafter, prorated for any partial month.
The payments to which a Holder shall be entitled pursuant to this Section 3.1(d)
are referred to herein as "EVENT PAYMENTS". Any Event Payments payable pursuant
to the terms hereof shall apply on a pro-rata basis for any portion of a month
prior to the cure of an Event. In the event the Company fails to make Event
Payments in a timely manner, such Event Payments shall bear interest at the rate
of 1.5% per month (prorated for partial months) until paid in full.
For such purposes, each of the following shall constitute an "EVENT":
(i) the Registration Statement is not filed on or prior to the
Filing Date or is not declared effective on or prior to the Required
Effectiveness Date;
(ii) after the Effective Date, a Holder is not permitted to sell
Registrable Securities under the Registration Statement (or a subsequent
Registration Statement filed in replacement thereof) or Rule 144 for any
reason for twenty or more Business Days in any 24-month period;
(iii) the Company fails to have available a sufficient number of
authorized but unissued and otherwise unreserved shares of Common Stock
available to issue Registrable Securities upon any exercise of the
Warrants; and
(iv) the Company fails for any reason to deliver a certificate
evidencing any Securities to a Holder within five Trading Days after
delivery of such certificate is required pursuant to any Transaction
Document or the exercise rights
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of the Holders pursuant to the Transaction Documents are otherwise
suspended for any reason; or
(e) The Company shall not, prior to the Effective Date of the Registration
Statement, prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities.
(f) For the purposes of this Agreement, the following terms shall have the
meaning set forth below:
"EFFECTIVE DATE" means the date that the Registration Statement is first
declared effective by the Commission.
"FILING DATE" means March 6, 2005.
"REQUIRED EFFECTIVENESS DATE" means May 5, 2005.
3.2 Registration Procedures. In connection with the Company's registration
obligations hereunder, the Company shall:
(a) Not less than three Trading Days prior to the filing of a Registration
Statement or any related Prospectus or any amendment or supplement thereto
(including any document that would be incorporated or deemed to be incorporated
therein by reference), the Company shall (i) furnish to the Lead Holder and any
counsel designated by the Lead Holder (the "HOLDER COUNSEL", and Vertical
Ventures, LLC (the "LEAD HOLDER") has initially designated Proskauer Rose LLP,
the "LP COUNSEL") copies of all such documents proposed to be filed, which
documents (other than those incorporated or deemed to be incorporated by
reference) will be subject to the review of the Lead Holder and LP Counsel, and
(ii) cause its officers and directors, counsel and independent certified public
accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
(b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to each Registration Statement and the Prospectus
used in connection therewith as may be necessary to keep the Registration
Statement continuously effective as to the applicable Registrable Securities for
the Effectiveness Period and prepare and file with the Commission such
additional Registration Statements in order to register for resale under the
Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424; (iii)
respond as promptly as reasonably possible, and in any event within ten days, to
any comments received from the Commission with respect to the Registration
Statement or any amendment thereto and as promptly as reasonably possible
provide the Holders true and complete copies of all correspondence from and to
the Commission relating to the Registration Statement; and (iv) comply in all
material respects with the provisions of the Securities Act and the Exchange Act
with respect to the disposition of
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all Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Holders thereof set forth in the Registration Statement as so amended or in such
Prospectus as so supplemented
(c) Notify the Lead Holder of Registrable Securities to be sold and LP
Counsel as promptly as reasonably possible, and (if requested by any such
Person) confirm such notice in writing no later than three Trading Days
thereafter, of any of the following events: (i) the Commission notifies the
Company whether there will be a "review" of any Registration Statement; (ii) the
Commission comments in writing on any Registration Statement (in which case the
Company shall deliver to the Lead Holder a copy of such comments and of all
written responses thereto); (iii) any Registration Statement or any
post-effective amendment is declared effective; (iv) the Commission or any other
Federal or state governmental authority requests any amendment or supplement to
any Registration Statement or Prospectus or requests additional information
related thereto; (v) the Commission issues any stop order suspending the
effectiveness of any Registration Statement or initiates any Proceedings for
that purpose; (vi) the Company receives notice of any suspension of the
qualification or exemption from qualification of any Registrable Securities for
sale in any jurisdiction, or the initiation or threat of any Proceeding for such
purpose; or (vii) the financial statements included in any Registration
Statement become ineligible for inclusion therein or any statement made in any
Registration Statement or Prospectus or any document incorporated or deemed to
be incorporated therein by reference is untrue in any material respect or any
revision to a Registration Statement, Prospectus or other document is required
so that it will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(d) Use its best efforts to avoid the issuance of or, if issued, obtain
the withdrawal of (i) any order suspending the effectiveness of any Registration
Statement, or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, as soon as possible.
(e) Furnish to each Holder and LP Counsel, without charge, at least one
conformed copy of each Registration Statement and each amendment thereto,
including financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference, and all exhibits to the extent
requested by such Person (including those previously furnished or incorporated
by reference) promptly after the filing of such documents with the Commission.
(f) Promptly deliver to each Holder and LP Counsel, without charge, as
many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request. The Company hereby consents to the use of such Prospectus
and each amendment or supplement thereto by each of the selling Holders in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement thereto.
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(g) (i) In the time and manner required by each Trading Market, prepare
and file with such Trading Market an additional shares listing application
covering all of the Registrable Securities; (ii) take all steps necessary to
cause such Registrable Securities to be approved for listing on each Trading
Market as soon as possible thereafter; (iii) provide to the Lead Holder evidence
of such listing; and (iv) maintain the listing of such Registrable Securities on
each such Trading Market or another Eligible Market.
(h) Prior to any public offering of Registrable Securities, use its best
efforts to register or qualify or cooperate with the selling Holders and LP
Counsel in connection with the registration or qualification (or exemption from
such registration or qualification) of such Registrable Securities for offer and
sale under the securities or Blue Sky laws of such jurisdictions within the
United States as any Holder requests in writing, to keep each such registration
or qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by a Registration Statement.
(i) Cooperate with the Holders to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be delivered to
a transferee pursuant to a Registration Statement, which certificates shall be
free, to the extent permitted by this Agreement, of all restrictive legends, and
to enable such Registrable Securities to be in such denominations and registered
in such names as any such Holders may request.
(j) Upon the occurrence of any event described in Section 3.2(c)(vii), as
promptly as reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
(k) Cooperate with any due diligence investigation undertaken by the Lead
Holder in connection with the sale of Registrable Securities, including, without
limitation, by making available any documents and information; provided that the
Company will not deliver or make available to any Holder material, nonpublic
information unless such Holder specifically requests in advance to receive
material, nonpublic information in writing and enters into an appropriate
confidentiality agreement in such form as is mutually acceptable to such Holder
and the Company.
(l) If Holders of a majority of the Registrable Securities being offered
pursuant to a Registration Statement select underwriters for the offering, the
Company shall enter into and perform its obligations under an underwriting
agreement, in usual and customary form, including, without limitation, by
providing customary legal opinions, comfort letters and indemnification and
contribution obligations.
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(m) Comply with all applicable rules and regulations of the Commission.
3.3 Registration Expenses. The Company shall pay (or reimburse the Holders
for) all fees and expenses incident to the performance of or compliance with
this Agreement by the Company, including without limitation (a) all registration
and filing fees and expenses, including without limitation those related to
filings with the Commission, any Trading Market and in connection with
applicable state securities or Blue Sky laws, (b) printing expenses (including
without limitation expenses of printing certificates for Registrable Securities
and of printing prospectuses requested by the Holders), (c) messenger, telephone
and delivery expenses, (d) fees and disbursements of counsel for the Company,
(e) fees and expenses of all other Persons retained by the Company in connection
with the consummation of the transactions contemplated by this Agreement, and
(f) all listing fees to be paid by the Company to the Trading Market.
3.4 Indemnification
(a) Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Holder,
the officers, directors, partners, members, agents, brokers (including brokers
who offer and sell Registrable Securities as principal as a result of a pledge
or any failure to perform under a margin call of Common Stock), investment
advisors and employees of each of them, each Person who controls any such
Holder (within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) and the officers, directors, partners, members, agents
and employees of each such controlling Person, to the fullest extent permitted
by applicable law, from and against any and all Losses, as incurred, arising
out of or relating to any untrue or alleged untrue statement of a material
fact contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, except to the extent, but only to the extent, that (i)
such untrue statements, alleged untrue statements, omissions or alleged
omissions are based solely upon information regarding such Holder furnished in
writing to the Company by such Holder expressly for use therein, or to the
extent that such information relates to such Holder or such Holder's proposed
method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (ii) in the case of an occurrence of an
event of the type specified in Section 3.2(c)(v)-(viii), the use by such
Holder of an outdated or defective Prospectus after the Company has notified
the Lead Holder in writing that the Prospectus is outdated or defective and
prior to the receipt by such Holder of the Advice contemplated in Section 3.5.
The Company shall notify the Lead Holder promptly of the institution, threat
or assertion of any Proceeding of which the Company is aware in connection
with the transactions contemplated by this Agreement.
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(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and
the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses
(as determined by a court of competent jurisdiction in a final judgment not
subject to appeal or review) arising solely out of any untrue statement of a
material fact contained in the Registration Statement, any Prospectus, or any
form of prospectus, or in any amendment or supplement thereto, or arising
solely out of any omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or
form of prospectus or supplement thereto, in the light of the circumstances
under which they were made) not misleading to the extent, but only to the
extent, that such untrue statement or omission is contained in any information
so furnished in writing by such Holder to the Company specifically for
inclusion in such Registration Statement or such Prospectus or to the extent
that (i) such untrue statements or omissions are based solely upon information
regarding such Holder furnished in writing to the Company by such Holder
expressly for use therein, or to the extent that such information relates to
such Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form
of Prospectus or in any amendment or supplement thereto (it being agreed that
the Holders have expressly and in writing approved Exhibit D for this purpose)
or (ii) in the case of an occurrence of an event of the type specified in
Section 3.2(c)(v)-(viii), the use by such Holder of an outdated or defective
Prospectus after the Company has notified such Holder in writing that the
Prospectus is outdated or defective and prior to the receipt by such Holder of
the Advice contemplated in Section 3.5. In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the
net proceeds received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"INDEMNIFIED PARTY"), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the "INDEMNIFYING PARTY") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment
of counsel reasonably satisfactory to the Indemnified Party and the payment of
all fees and expenses incurred in connection with defense thereof; provided,
that the failure of any Indemnified Party to give such notice shall not
relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless:
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(i) the Indemnifying Party has agreed in writing to pay such fees and expenses;
or (ii) the Indemnifying Party shall have failed promptly to assume the defense
of such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; or (iii) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified Party
and the Indemnifying Party, and such Indemnified Party shall have been advised
by counsel that a conflict of interest is likely to exist if the same counsel
were to represent such Indemnified Party and the Indemnifying Party (in which
case, if such Indemnified Party notifies the Indemnifying Party in writing that
it elects to employ separate counsel at the expense of the Indemnifying Party,
the Indemnifying Party shall not have the right to assume the defense thereof
and such counsel shall be at the expense of the Indemnifying Party), provided
that under no circumstances shall the Indemnifying Party be responsible for the
fees and expenses of more than one counsel for all Indemnified Parties with
respect to a Proceeding arising out of the same claim. The Indemnifying Party
shall not be liable for any settlement of any such Proceeding effected without
its written consent, which consent shall not be unreasonably withheld. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten
Business Days of written notice thereof to the Indemnifying Party and submission
of reasonably satisfactory documentation to the Indemnifying Party (regardless
of whether it is ultimately determined that an Indemnified Party is not entitled
to indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section
3.4(a) or (b) is unavailable to an Indemnified Party (by reasons other than the
specified exclusions to indemnification), then each Indemnifying Party, in lieu
of indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses, in such proportion
as is appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section
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3.4(c), any reasonable attorneys' or other reasonable fees or expenses incurred
by such party in connection with any Proceeding to the extent such party would
have been indemnified for such fees or expenses if the indemnification provided
for in this Section was available to such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 3.4(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 3.4(d), no Holder shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by such Holder from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
3.5 Dispositions. Each Holder agrees that it will comply with the prospectus
delivery requirements of the Securities Act as applicable to it in connection
with sales of Registrable Securities pursuant to the Registration Statement.
Each Holder further agrees that, upon receipt by the Lead Holder of a notice
from the Company of the occurrence of any event of the kind described in
Sections 3.2(c)(v), (vi) or (vii), such Holder will discontinue disposition of
such Registrable Securities under the Registration Statement until such Holder's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 3.2(j), or until the Lead Holder is advised in
writing (the "ADVICE") by the Company that the use of the applicable Prospectus
may be resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement. The Company may provide
appropriate stop orders to enforce the provisions of this paragraph.
3.6 Piggy-Back Registrations. If at any time during the Effectiveness Period
there is not an effective Registration Statement covering all of the Registrable
Securities and the Company shall determine to prepare and file with the
Commission a registration statement relating to an offering for its own account
or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to the Lead Holder written notice of
such determination and if, within fifteen days after receipt of such notice, any
Holder shall so
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request in writing, the Company shall include in such registration statement all
or any part of such Registrable Securities such Holder requests to be
registered.
SECTION 4
TRANSFER OF WARRANTS
THIS SECTION IS APPLICABLE ONLY TO THOSE HOLDERS WHO HAVE INDICATED THEIR
TRANSFER OF THEIR WARRANTS BY CHECKING THE APPROPRIATE BOX ON THE ELECTION FORM
(EACH A "TRANSFERRING HOLDER" AND COLLECTIVELY, THE "TRANSFERRING HOLDERS").
4.1 On the date hereof (for purposes of this Section 4, the "TRANSFER DATE")
and in accordance with Paragraph 3 of the Warrants, each Transferring Holder
will transfer such Holder's Warrant in full to the individual or entity named on
the Form of Assignment (in substantially the form attached to the Warrant)
delivered by the Holder to the Company contemporaneously herewith. Upon such
transfer, the Holder shall have no further right, title or interest in or to
such Holder's Warrant.
4.2 On the Transfer Date and concurrently with the transfer by each
Transferring Holder's of its Warrant, pursuant to the provisions of Section 2.1
hereof, the Company will grant to the Holder an Additional Warrant.
4.3 On or prior to the third Trading Day following the Transfer Date, the
Company will deliver to each Transferring Holder the Additional Warrant granted
to such Transferring Holder on the Transfer Date.
4.4 The Company will include the Registrable Securities in a Registration
Statement to be filed by the Company with the Commission as soon as practicable
following the date of this Agreement, but in no event later than the Filing
Date.
SECTION 5
MISCELLANEOUS
5.1 Closing / Publicity. The closing of this transaction shall be consummated
by February 6, 2005 with each of the Holders that have delivered to the Company
their respective signature page. The Company shall, on or before 8:30 a.m. New
York time, on February 7, 2005, issue a press release or a Current Report of
Form 8-K with the Commission, each in a form reasonable acceptable to the Lead
Holder.
5.2 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective as described in the Securities Purchase Agreement.
5.3 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the
12
Company and the Lead Holder or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either part to exercise any right hereunder in
any manner impair the exercise of any such right.
5.4 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
5.5 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Lead Holder.
5.6 No Third-Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective successors and permitted assigns and
is not for the benefit of, nor may any provision hereof be enforced by, any
other Person.
5.7 Governing Law; Venue; Waiver of Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by and construed and enforced in accordance with the internal laws
of the State of New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in The City of New
York, Borough of Manhattan. Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City of
New York, Borough of Manhattan for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of this Agreement), and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is improper. Each party
hereto hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
Each party hereto hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby or thereby. If either party shall commence an action or proceeding to
enforce any
13
provisions of this Agreement, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its reasonable attorneys
fees and other reasonable costs and expenses incurred with the investigation,
preparation and prosecution of such action or proceeding.
5.8 Execution. This Agreement may be executed in two or more counterparts, all
of which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
5.9 Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be affected or
impaired thereby and the parties will attempt to agree upon a valid and
enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
5.10 Independent Nature of Holders' Obligations and Rights. The obligations of
each Holder under this Agreement are several and not joint with the
obligations of any other Holder, and no Holder shall be responsible in any
way for the performance of the obligations of any other Holder under this
Agreement. The decision of each Holder pursuant to this Agreement has been
made by such Holder independently of any other Holder and independently of
any information, materials, statements or opinions as to the business,
affairs, operations, assets, properties, liabilities, results of
operations, condition (financial or otherwise) or prospects of the Company
which may have been made or given by any other Holder or by any agent or
employee of any other Holder, and no Holder or any of its agents or
employees shall have any liability to any other Holder (or any other
person) relating to or arising from any such information, materials,
statements or opinions. Nothing contained herein or in any Transaction
Document, and no action taken by any Holder pursuant thereto, shall be
deemed to constitute the Holders as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the
Holders are in any way acting in concert or as a group with respect to
such obligations or the transactions contemplated by this Agreement. The
Company hereby confirms that it understands and agrees that the Holders
are not acting as a "group" as that term is used in Section 13(d) of the
Securities Exchange Act of 1934. Each Holder acknowledges that no other
Holder has acted as agent for such Holder in connection with making its
investment hereunder and that no other Holder will be acting as agent of
such Holder in connection with monitoring its investment hereunder. Each
Holder shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement, and
it shall not be necessary for any other Holder to be joined as an
additional party in any proceeding for such
14
purpose. Each Holder represents that it has been represented by its own
separate legal counsel in its review and negotiations of this Agreement
and that Proskauer Rose LLP represents only Vertical Ventures, LLC in
connection with this Agreement.
5.11 Fees and Expenses. On or prior to the date of this Agreement, the Company
shall pay to Vertical Ventures, LLC an aggregate of $15,000 for their legal fees
and expenses incurred in connection with the preparation and negotiation of this
Agreement. In lieu of the foregoing payment, Vertical Ventures, LLC may retain
such amount on the Exercise Date from the Exercise Price due under Section 1.1
above. Except as expressly set forth in herein to the contrary, each party shall
pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement.
The Company shall pay all transfer agent fees, stamp taxes and other taxes and
duties levied in connection with the issuance of any Securities, including the
Additional Warrants.
15
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective authorized signatories as of the date first above
written.
THE COMPANY:
GuruNet Corporation
By: ______________________________
Name:
Title:
16
THE HOLDERS:
[ ]
By: _____________________________
Its: ____________________________
[ ]
By: _____________________________
Its: ____________________________
[ ]
By: _____________________________
Its: ____________________________
17
Exhibit A
Name of Holder Warrant Shares Additional Warrant Shares
18
EXHIBIT B
FORM OF ELECTION OF EXERCISE OR TRANSFER
PLEASE CHECK THE APPROPRIATE BOX:
[ ] I wish to immediately exercise my Warrant in the amount set forth on
Exhibit A opposite my name (the "HOLDER'S WARRANT"). In conjunction with my
exercise, the Company will issue me Additional Warrants as described Section 1.1
hereof.
[ ] I wish to transfer my Holder's Warrant pursuant to the provisions of
Paragraph 15(a) of the Warrant. In conjunction with my transfer, the Company
will issue me Additional Warrants as set forth in Section 2 hereof. A copy of
the Form of Assignment is attached hereto.
[ ] I do not wish to exercise my Warrant. I understand that I will not
be entitled to any Additional Warrants.
HOLDER:
By: ______________________________
Name:
Title:
