EXHIBIT 10.19
RIGHTS AGREEMENT
This Rights Agreement (the "AGREEMENT") is made this 19 day of May, 1995, by
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and among Virtual Realty Network, Inc., a Nevada corporation (the "COMPANY"),
and the individuals and entities set forth on Exhibit A attached hereto (the
"HOLDERS").
RECITALS
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A. The Company and the Holders have entered into the Series A Preferred Stock
Purchase Agreement (the "PURCHASE AGREEMENT") of even date herewith,
pursuant to which the Company will issue and sell, and the Holders will
purchase, Series A Preferred Stock of the Company (the "SHARES").
B. It is a condition to the purchase of the Shares that the Company enter into
this Agreement with the Holders.
in consideration of the mutual promises and covenants hereinafter set,forth, the
parties agree as follows:
1. DEFINITIONS
1.1 The term "HOLDER" means any holder of outstanding Registrable
Securities or any person to which the rights provided for in this
Agreement shall have been properly assigned in accordance with
specific terms hereof.
1.2 The term "INITIATING HOLDERS" means any Holder or Holders making a
request for registration pursuant to the provisions of Section 3.1.
1.3 The terms "REGISTER", "REGISTERED" and "REGISTRATION" 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.
1.4 The term "REGISTRABLE SECURITIES" means: (i) any Common Stock issued
or to be issued pursuant to conversion of any shares of Series A
Preferred Stock issued pursuant to this Agreement, (ii) any other
Common Stock issued as a dividend or other distribution with respect
to, or in exchange for or in replacement of, any shares of Series A
Preferred Stock issued pursuant to this Agreement or the shares of
Common Stock issued pursuant to conversion of such shares of Series A
Preferred Stock and (iii) any other Common Stock of the Company owned
or hereafter acquired by the Holders.
1.5 The term "SEC" means the Securities and Exchange Commission.
1.6 The term "SECURITIES ACT" means the Securities Act of 1933, as
amended.
1.7 The term "SUBSTANTIAL AMOUNT OF REGISTRABLE SECURITIES" means at least
forty percent (40%) of the Registrable Securities then outstanding
that have not been resold to the public in a registered public
offering.
2. FINANCIAL STATEMENTS AND BOARD VISITATION RIGHTS
2.1 Reports.
For fiscal years ending after the date of this Agreement, the Company
agrees to deliver to each Holder:
(a) as soon as practicable after the end of each fiscal year, and in
any event within ninety (90) days thereafter, a balance sheet of
the Company as of the end of such fiscal year and a statement of
operations and a statement of sources and application of funds of
the Company for such year, prepared in accordance with generally
accepted accounting principles consistently applied and setting
forth in each case in comparative form the figures for the two
previous fiscal years, all in reasonable detail and audited by
independent public accountants selected by the Company; and
(b) within forty-five (45) days after the end of each of the first
three (3) quarters of each fiscal year, an unaudited consolidated
profit or loss statement for such fiscal quarter and an unaudited
balance sheet as of the end of such fiscal quarter.
2.2 Annual Plan.
Within ten (10) days of adoption by the Board of Directors, but not
later than the beginning of each fiscal year of the Company, the
Company shall submit to each Holder of Registrable Securities (as
adjusted for stock splits, stock dividends or recapitalizations) an
annual plan for such year which shall include quarterly capital and
operating expense budgets, cash flow statements, manpower projections,
projected balance sheets, profit and loss projections and sales
projections for each month and for the end of such year itemized in
such detail as the Board may reasonably determine. Approval of such
budgets, statements and projections shall be required by at least a
majority of the Board of Directors of the Company. If the annual plan
is modified by the Board of Directors to reflect changes as a result
of operating results and other events that occur during the
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year covered by the annual plan, copies of such modification shall be
promptly submitted to the Holders.
2.3 Termination of Reports and Rights.
The Company shall deliver the reports and give the rights specified in
Sections 2.1 and 2.2 to each such Holder entitled to the same until
the earlier of such time as such Holder is no longer a shareholder or
until the closing of the first underwritten offering of the Company's
securities to the general public that is effected with the SEC under
the Securities Act.
2.4 Board Visitation Rights.
For so long as each Holder holds Registrable Securities (as adjusted
for stock splits, stock dividends or recapitalizations) such Holder
shall have the right, at such Holder's expense, to designate a
representative to attend all meetings of the Company's Board of
Directors in a non-voting observer capacity, and, in this respect, the
Company shall give such Holder copies of all notices, minutes,
consents and other materials that it provides to its directors;
provided, however, that such Holder and its representative shall agree
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to hold in confidence and trust all information so provided. Meetings
to be held by telephone conference and actions to be taken by consent
shall not be prohibited provided notice is given to such Holder.
3. REGISTRATION
3.1 Registration.
(a) Requested Registration. If at any time the Company shall receive
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from the Holders of a Substantial Amount of Registrable
Securities a written request that the Company effect any
registration, qualification or compliance with respect to all or
a part of the Registrable Securities, the Company will:
1. promptly give written notice of the proposed registration,
qualification or compliance to all other Holders; and
2. as soon as practicable, use its diligent best efforts to
effect such registration, qualification and compliance
(including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate
qualification under the applicable blue sky or other state
securities laws and appropriate compliance with applicable
regulations issued
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under the Securities Act and any other governmental
requirements or regulations) as may be so requested and as
would permit or facilitate the sale and distribution of all
or such portion of such Holder's or Holders' Registrable
Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any
other Holder or Holders joining in such request as are
specified in a written notice given within fifteen (15) days
after receipt of such written notice from the Company,
except that the Company shall not be obligated to take any
action to effect any such registration, qualification or
compliance pursuant to this Section 3.1 after the Company
has effected three (3) registrations, qualifications or
compliances pursuant to request under this subsection 3.1
(a).
Subject to the foregoing provisions, the Company shall file a
registration statement covering the Registrable Securities so
requested to be registered as soon as practicable, but in any
event within one hundred eighty (180) days after receipt of the
request or requests of the Initiating Holders.
(b) Underwriting. If the Initiating Holders intend to distribute the
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Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company. The Company and
the Initiating Holders shall mutually agree upon and shall
designate the underwriter or underwriters to be employed in
connection therewith as a part of their request made pursuant to
subsection 3.1(a). The Company shall include such information in
the written notice referred to in subsection 3.1(a)(1). In such
event, the right of any Holder to registration pursuant to this
Section 3.1 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 at least 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 3.1, if the underwriter
advises the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten,
the securities to be issued on behalf of the Company and the
securities of the Company (other than Registrable Securities)
held by officers or directors and by other shareholders shall be
excluded from such registration to the extent so required by such
limitation and if a limitation of the number of
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shares is still required, then the Initiating Holders shall so
advise all Holders of Registrable Securities that would otherwise
be registered and underwritten pursuant hereto, and the number of
shares included in the registration and underwriting shall be
allocated among the Holders of Registrable Securities requesting
registration in proportion, as nearly as practicable, to the
total number of Registrable Securities held by such Holders at
the time of filing of the registration statement and requested to
be included in the registration. If any Holder disapproves of the
terms of the underwriting, it may elect to withdraw therefrom by
written notice to the Company, the underwriter and the Initiating
Holders. The Registrable Securities so withdrawn shall also be
withdrawn from registration.
(c) Subject to the foregoing limitations set forth in Section 3.1(b),
the Company shall have the right to include in any registration
statement offering effected pursuant to this Section 3.1
securities to be sold on behalf of the Company.
(d) If the Company shall furnish to the Holders a certificate signed
by the President of the Company stating that, in the good faith
judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for
such registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the
registration statement for a period of not more than 180 days
after the receipt of the request of the Holders under this
Section 3.1, except that the Company shall not utilize this
right more than once in any 12 month period.
3.2 Company Registration.
(a) Notice of Registration. If at any time or from time to time, the
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Company shall determine to register any of its securities, either
for its own account or the account of a security holder or
holders (other than a registration relating solely to employee
stock option or purchase plans or relating solely to an SEC Rule
145 transaction), the Company will:
1. promptly give to each Holder written notice thereof which
shall include a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under
the applicable blue sky or other state securities laws;
2. include in such registration (and any related qualification
under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable
Securities
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specified in a written request or requests, made within
thirty (30) days after receipt of such written notice from
the Company, by any Holder or Holders, except as set forth
in subsection 3.2(b) below.
The Company represents that it has not and covenants that it will
not enter into any agreement with any Holder or other shareholder
of the Company giving such shareholder or Holder any right to
restrict the Company's registration of its securities pursuant to
Section 3.2 hereof or otherwise.
(b) Underwriting. If the registration of which the Company gives
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notice 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 3.2(a)(1). In
such event the right of any Holder to registration pursuant to
this Section 3.2 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 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 3.2, if the underwriter determines that
marketing factors require a limitation of the number of shares to
be underwritten, the securities of the Company (other than
Registrable Securities) held by officers or directors and by
other shareholders shall be excluded from such registration to
the extent so required by such limitation and if a limitation of
the number of shares is still required, then the underwriter may
limit the number of Registrable Securities to be included in the
registration and underwriting, provided that in connection with
any registered public offering no such reduction may reduce the
securities being offered by the Holders to less than 25% of the
total number of securities requested to be included in such
registration and underwriting. The Company shall advise all
Holders of Registrable Securities which would otherwise be
registered and underwritten pursuant hereto of any such
limitations, and the number of shares of Registrable Securities
that may be 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. The Registrable Securities so withdrawn shall also
be withdrawn from registration.
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3.3 Form S-3 Registration.
In case the Company shall receive from any Holder or Holders a written
request or requests that the Company effect a registration on Form S-3
(or any substantially equivalent registration form under the
Securities Act subsequently adopted by the SEC that permits inclusion
or incorporation by reference to other documents filed by the Company
with the SEC) and any related qualification or compliance with respect
to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company will:
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders;
and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as
would permit or facilitate the sale and distribution of all or
such portion of such Holder's or Holders' Registrable Securities
as are specified in such request, together will all or such
portion of the Registrable Securities of any Holder or Holders
joining in such request as are specified in a written request
given within fifteen (15) days after receipt of such written
notice from the Company, except that the Company shall not be
obligated to effect any such registration, qualification or
compliance, pursuant to this Section 3.3:
1. if Form S-3 is not available for such offering by the
Holders; or
2. if the Company shall furnish to the Holders a certificate
signed by the President of the Company stating that, in good
faith judgment of the Board of Directors of the Company, it
would be seriously detrimental to the Company and its
shareholders for such Form S-3 registration to be effected
at such time, in which event the Company shall have the
right to defer the filing of the Form S-3 registration
statement for a period of not more than 60 days after
receipt of the request of the Holder or Holders under this
Section 3.3, except that the Company shall not utilize this
right more than once in any twelve (12) month period; or
3. if the Company has, within the twelve (12) month period
preceding the date of such request, already effected one
registration on Form S-3 for the Holders pursuant to this
Section 3.3.
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Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable
after receipt of the request or requests of the Holders.
Registrations effected pursuant to this Section 3.3 shall not be
counted as demands for registration or registrations effected
pursuant to Section 3.1 or 3.2, respectively.
3.4 Expenses of Registration.
All expenses incurred in connection with the registration,
qualification or compliance pursuant to Sections 3.1, 3.2 and 3.3,
respectively, including without limitation, all registration, filing
and qualification fees, printing expenses, fees and disbursements of
counsel for the Company, expenses of any special audits incidental to
or required by such registration and the fees and disbursements of one
counsel retained by the Holders of Registrable Securities covered by
such registration, qualification or compliance shall be borne by the
Company, except that:
(a) The Company shall not be required to pay for expenses of any
registration proceeding begun pursuant to Section 3.1, the
request of which has been subsequently withdrawn by the
Initiating Holders, in which case, such expenses shall be borne
by the Initiating Holders of securities (including Registrable
Securities) requesting or causing such withdrawal; and
(b) The Company shall not be required to pay underwriters' discounts,
commissions, or stock transfer taxes relating to Registrable
Securities.
3.5 Registration Procedures.
In the case of each registration, qualification or compliance effected
by the Company pursuant to Section 3, the Company will keep each
Holder participating therein advised in writing as to the initiation
of each registration, qualification and compliance and as to the
completion thereof. At its expense (except as otherwise provided in
Section 3.4 above) the Company will:
(a) keep such registration, qualification or compliance pursuant to
Sections 3.1, 3.2 or 3.3 effective for a period of one hundred
eighty (180) days or until the Holder or Holders have completed
the distribution described in the registration statement relating
thereto, whichever first occurs;
(b) furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request;
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(c) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection
with such registration statements as may be necessary to comply
with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration
statement;
(d) notify each Holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating
thereto covered by such registration statement is required to be
delivered under the Securities Act, of the happening of any event
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
(e) furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to this Section 3, on the date
that such Registrable Securities are delivered to the
underwriters for sale in connection with a registration pursuant
to this Section 3, if such securities are being sold through
underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statements with
respect to such securities becomes effective, (i) an opinion,
dated such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities and
(ii) a letter dated such date, from the independent certified
public accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Holders requesting registration
of Registrable Securities.
3.6 Indemnification.
(a) The Company will indemnify each Holder of Registrable Securities
with respect to which registration, qualification or compliance
has been effected pursuant to this Section 3, each of its
officers and directors, and each person controlling such Holder,
and each underwriter, if any, of such Registrable Securities and
each person who controls any such underwriter, against all
claims, losses, damages, costs, expenses and liabilities of any
nature whatsoever
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(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 registration statement, prospectus, offering
circular or other documents (including any related registration,
statement, notification or the like) incident to any such
registration, qualification or compliance, or based on 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, or any violation by the Company of the
Securities Act or any state securities law or 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, qualification or compliance, and will reimburse
each such Holder, each of its officers and directors, and each
person controlling such Holder, and each such underwriter and
each person who controls any such underwriter, for any legal and
other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, cost,
expense, liability or action, except that the Company will not be
liable in any such case to the extent that any such claim, loss,
damage, cost, expense, liability or action arises out of or is
based on any untrue statement or omission based upon written
information furnished to the Company in an instrument duly
executed by any Holder and stated to be specifically for use
therein.
(b) Each Holder will, if Registrable Securities held by or issuable
to such Holder are included in the securities to which such
registration, qualification or compliance is being effected,
indemnify 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
within the meaning of the Securities Act, and each other Holder,
each of such other Holder's officers and directors and each
person controlling such other Holder, against all claims, losses,
damages, costs, expenses and liabilities of any nature whatsoever
(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 documents (including any related
registration statement, notification or the like) incident to
any such registration, qualification or compliance, or based on
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 other Holders,
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such directors, officers, persons or underwriters for any legal
or other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, cost,
expense, 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 in an instrument duly
executed by such Holder and stated to be specifically for use
therein; provided, however, that the indemnity agreement
contained in this subsection 3.6(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the
Holder, which consent shall not be unreasonably withheld;
provided further, that in no event shall any indemnity under this
subsection 3.6(b) exceed the gross proceeds from the offering
received by such Holder.
(c) Each party entitled to indemnification under this Section 3.6
(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
claim 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 unreasonably be withheld), and the Indemnified
Party may participate in such defense. Failure of the Indemnified
Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 3.6,
unless the failure or delay in giving notice has a material
adverse impact on the ability of the Indemnifying Party to defend
against such claim. 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 that does not include as an unconditional term
thereof, the giving of a release from all liability in respect to
such claim or litigation. If any such Indemnified Party shall
have been advised by counsel chosen by it that there may be one
or more legal defenses available to such Indemnified Party that
are different from or additional to those available to the
lndemnifying Party, the Indemnifying Party shall not have the
right to assume the defense of such action on behalf of such
lndemnified Party and will reimburse such Indemnified
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Party and any person controlling such Indemnified Party for the
reasonable fees and expenses of any counsel retained by the
Indemnified Party, it being understood that the Indemnifying
Party shall not, in connection with any one action or separate
but similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable
for the reasonable fees and expenses of more than one separate
firm of attorneys for such Indemnified Party or controlling
person, which firm shall be designated in writing by the
Indemnified Party to the Indemnifying Party.
3.7 Information by Holder.
The Holder or Holders of Registrable Securities included in any
registration shall furnish to the Company such information regarding
such Holder or Holders and the distribution proposed by such Holder or
Holders as the Company may reasonably request in writing and as shall
be required in connection with any registration, qualification or
compliance referred to in this Section 3.
3.8 Termination of the Company's Obligations.
The Company shall have no obligations pursuant to Sections 3.1, 3.2 or
3.3 with respect to any request made by any Holder (i) after seven (7)
years following the consummation of the Company's initial sale of its
Common Stock in a bona fide, firm commitment underwriting pursuant to
a registration statement under the Securities Act (other than a
registration statement relating either to the sale of securities to
employees of the Company pursuant to a stock option, stock purchase or
similar plan or a SEC Rule 145 transaction) or (ii) at such time
following the Company's initial public offering and for so long as
such Holder may sell all of such Holder's Registrable Securities in
any one three-month period pursuant to Rule 144 (or such successor
rule as may be adopted).
3.9 Rule 144 Reporting.
With a view to making available the benefits of certain rules and
regulations of the SEC which may permit the sale of Shares or
Registrable Securities to the public without registration, the Company
agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety
(90) days after the effective date of the first registration
filed by the Company that involves an underwritten sale of
securities of the Company to the general public;
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(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), as is necessary to enable
the Holders to utilize Form S-3 for the sale of their Registrable
Securities, such action to be taken as soon as practicable after
the end of the fiscal year in which the first registration
statement filed by the Company for the underwritten offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and
the Exchange Act; and
(d) furnish to each Holder so long as such Holder owns any Shares or
Registrable Securities forthwith upon written request a written
statement by the Company that it has complied with the reporting
requirements of such Rule 144 (at any time after ninety days
after the effective date of such first registration statement
filed by the Company), and of the Securities Act and the
Securities Exchange Act (at any time after it has become subject
to such reporting requirements), a copy of the most recent annual
or quarterly report of the Company, and such other reports and
documents so filed by the Company as may be reasonably requested
in availing the Holder of any rule or regulation of the SEC
permitting the selling of any such securities without
registration.
3.10 Transfer of Registration Rights.
The rights to cause the Company to register securities granted by the
Company under Sections 3.1, 3.2 and 3.3 may be assigned by any Holder
to any transferee or assignee of the Shares or of Registrable
Securities, provided that such transfer may otherwise be and is
effected in accordance with applicable securities laws and provided
further that the Company is given written notice by such Holder at the
time of or within reasonable time after such transfer, stating the
name and address of such transferee or assignee and identifying the
securities with respect to which such registration rights are being
assigned.
3.11 Limitations on Subsequent Registration Rights.
From and after the date of this Agreement, the Company shall not,
without the prior written consent of the Holders of at least a
majority of the Registrable Securities, enter into any agreement with
any holder or prospective holder of any securities of the Company
which would allow
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such holder or prospective holder of any securities of the Company the
right to require the Company to initiate any registration of any
securities of the Company. Any right given by the Company to any
holder or prospective holder of the Company's securities in connection
with the registration of securities shall be conditioned such that it
shall be consistent with the provisions of this Section 3 and with the
rights of the Holders provided in this Agreement. This Section 3 shall
not limit the right of the Company to enter into any agreements with
any holder or prospective holder of any securities of the Company
giving such holder or prospective holder the right to require the
Company, upon any registration of any of its securities, to include,
among the securities which the Company is then registering, securities
owned by such holder if such rights are subordinate to the rights of
the Holders.
4. ADDITIONAL RIGHTS.
4.1 Right of First Offer.
Subject to the terms and conditions specified in this Section 4.1,
the Company hereby grants to each Holder, a right of first offer with
respect to future sales by the Company of its New Securities (as
defined in subsection 4.1(d)(i)). For purposes of this Section 4.1,
the term Holder includes any partners, shareholders or affiliates of
the Holder. The Holder shall be entitled to apportion the right of
first offer hereby granted among itself and its partners, shareholders
and affiliates in such proportions as it deems appropriate.
(a) In the event the Company proposes to issue New Securities, it
shall give each Holder written notice (the "NOTICE") of its
intention stating (i) a description of the New Securities it
proposes to issue, (ii) the number of shares of New Securities it
proposes to offer, (iii) the price per share at which, and other
terms on which, it proposes to offer such New Securities and (iv)
the number of shares that the Holder has the right to purchase
under this Section 4.1, based on the Holder's Percentage (as
defined in Subsection 4.1(d)(ii)).
(b) Within thirty (30) days after the Notice is given (in accordance
with Section 6.4), the Holder may elect to purchase, at the price
specified in the Notice, up to the number of shares of the New
Securities proposed to be issued equal to the Holder's
Percentage. An election to purchase shall be made in writing and
must be given to the Company within such thirty (30) day period
(in accordance with Section 6.4). The closing of the sale of New
Securities by the
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Company to the participating Holder upon exercise of its rights
under this Section 4.1 shall take place simultaneously with the
closing of the sale of New Securities to third parties.
(c) The Company shall have ninety (90) days after the last date on
which the Holder's right of first offer lapsed to enter into an
agreement (pursuant to which the sale of New Securities covered
thereby shall be closed, if at all, within forty-five days from
the execution thereof) to sell the New Securities which the
Holders did not elect to purchase under this Section 4.1, at or
above the price and upon terms not materially more favorable to
the purchasers of such securities than the terms specified in the
initial Notice given in connection with such sale. In the event
the Company has not entered into an agreement to sell the New
Securities within such ninety (90) day period (or sold and issued
New Securities in accordance with the foregoing within thirty
(30) days from the date of such agreement), the Company shall not
thereafter issue or sell any New Securities without first
offering such New Securities to the Holders in the manner
provided in this Section 4.1.
(d) (i) "NEW SECURITIES" shall mean any shares of, or securities
convertible into or exercisable for any shares of any class of
the Company's capital stock; provided that "New Securities" does
not include: (A) the Shares or the Common Stock issuable upon
conversion thereof; (B) securities issued pursuant to the
acquisition of another business entity by the Company by merger,
purchase of substantially all of the assets of such entity, or
other reorganization whereby the Company owns not less than a
majority of the voting power of such entity; (C) up to 500,000
shares of the Company's Common Stock and the shares of Common
Stock issuable upon exercise of such options, issued pursuant to
any arrangement approved by the Board of Directors to employees,
officers and directors of, or consultants, advisors or other
persons performing services for, the Company; (D) shares of the
Company's Common Stock or Preferred Stock of any series issued in
connection with any stock split, stock dividend or
recapitalization of the Company; (E) Common Stock issued upon
exercise of warrants, options or convertible securities if the
issuance of such warrants, options or convertible securities was
a result of the exercise of the right of first offer granted
under this Section 4.1 or was subject to the right of first offer
granted under this Section 4.1; (F) securities sold to the public
in an offering pursuant to a registration statement filed with
the SEC under the Securities Act.
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(ii) The applicable "PERCENTAGE" for each Holder shall be the
number of shares of New Securities calculated by dividing (A) the
total number of shares of Common Stock owned by the Holder
(assuming conversion of all outstanding shares of Preferred
Stock) by (B) the total number of shares of Common Stock
outstanding at the time the Notice is given (assuming conversion
of all outstanding shares of Preferred Stock).
(e) The right of first offer granted under this Section 4.1 shall not
apply to and shall expire upon the consummation of the Company's
sale of its Common Stock in a bona fide, firm commitment
underwriting pursuant to a registration statement under the
Securities Act at the public offering price per share of not less
than $7.50 per share (adjusted to reflect subsequent stock
dividends, stock splits or recapitalization) and which results in
aggregate gross cash proceeds to the Company in excess of
$15,500,000 (other than a registration statement relating either
to the sale of securities to employees of the Company pursuant to
a stock option, stock purchase or similar plan or a SEC Rule 145
transaction).
(f) The right of first offer granted under this section may be
assigned by each Holder to a transferee or assignee of the
Holder's shares of the Company's stock. In the event that a
Holder shall assign its right of first offer pursuant to this
Section 4.1 in connection with the transfer of less than all of
its shares of the Company's stock, the Holder shall also retain
its right of first offer to the extent then applicable under this
Section 4.1.
4.2 Put Right Upon Failure to Use ProShare(TM).
(a) In the event that the Company uses a video conferencing solution
other than Intel's ProShare(TM) with its product, lntel shall
have the right, by delivering written notice (the "REDEMPTION
NOTICE") to the Company to cause the Company to purchase all
Intel Shares. The per share purchase price for the Intel Shares
shall be the higher of (i) the price Intel initially paid for the
Intel Shares plus the amount of any declared but unpaid dividends
thereon through the date of the Redemption Notice, plus 10% per
annum, compounded annually, of the price Intel initially paid for
the Intel Shares calculated from the date Intel purchased the
Shares through the date of the Redemption Notice; or (ii) the
then current Fair Market Value (as defined in Section 4.2(b)
below of the Intel Shares as of the date of the Redemption
Notice. The full purchase price for the Intel Shares shall be
paid to Intel in cash by wire transfer or
-16-
certified check. The put right granted pursuant to this Section
4.2 shall not be assignable to any transferee of the Intel
Shares.
(b) If the Company has Common Stock publicly traded at the time of
such determination, "FAIR MARKET VALUE" of the Intel Shares (on a
fully converted basis) shall be equal to the average closing
price of such Common Stock on the primary exchange on which such
Common Stock is then traded (or the average of the closing bid
and asked prices for such Common Stock, if then primarily traded
on Nasdaq) over the 20 trading days prior to the date of the
Redemption Notice. If there is no active public market, the Fair
Market Value shall be the Fair Market Value thereof, as
determined in good faith by the Board of Directors of the
Company.
4.3 Employee and Other Stock Arrangements.
Each acquisition of any shares of capital stock of the Company or any
option or right to acquire any shares of capital stock of the Company
by an employee, consultant, officer or director of the Company will be
conditioned upon the execution and delivery by the Company and such
employee, consultant, officer or director of an agreement
substantially in the form approved by the Board of Directors of the
Company, providing, among other things, that such shares, when granted
to an employee, consultant, officer or director, shall be subject to
vesting at the rate of 12/48th of the shares granted after one year
from the date of grant and 1/48th of the shares granted monthly
thereafter.
5. MISCELLANEOUS
5.1 Governing Law.
This Agreement shall be governed in all respects by the laws of the
state of Delaware without regard to provisions regarding choice of
laws.
5.2 Successors and Assigns.
Except as otherwise expressly provided herein, the provisions hereof
shall inure to the benefit of, and be binding upon, the successors,
assigns, heirs, executors and administrators of the parties hereto
whose rights or obligations hereunder are affected by such amendments.
-17-
5.3 Entire Agreement.
This Agreement and the exhibits hereto which are hereby expressly
incorporated herein by this reference constitute the entire
understanding and agreement between the parties with regard to the
subjects hereof and thereof; provided, however, that nothing in this
-----------------
Agreement shall be deemed to terminate or supersede the provisions of
any confidentiality and nondisclosure agreements executed by the
parties hereto prior to the date hereof, which agreements shall
continue in full force and effect until terminated in accordance with
their respective terms.
5.4 Notices.
Except as may be otherwise provided herein, all notices and other
communications required or permitted hereunder shall be in writing and
shall be hand delivered or mailed by registered or certified first
class mail, postage prepaid, addressed, (a) if to the Holders, to each
such Holder's address set forth on Exhibit A attached hereto, or to
such other address as such Holder or any of its successors or assigns
shall have furnished to the Company in writing, or (b) if to the
Company, to its address set forth below its signature hereto, or to
such other address as the Company shall have furnished to the Holders
or their successors or assigns in writing. Notices hand delivered
shall be effective upon delivery and notices sent by first class mail
shall be effective three days following deposit in the United States
mail.
5.5 Amendments and Waivers.
Any term of this Agreement may be amended and the observance of any
term of the Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only
with the written consent of the Company and the Holders of at least a
majority of the Registrable Securities.
5.6 Delays or Omissions.
No delay or omission to exercise any right, power or remedy accruing
to the Company or to the Holders, upon any breach or default of any
party hereto under this Agreement, shall impair any such right, power
or remedy of the Company, or the Holders nor shall it be construed to
be a waiver of any such breach or default, or an acquiescence therein,
or of any similar breach of default thereafter occurring; nor shall
any waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or
character on the part of the Company or the Holders of any breach of
default under this
-18-
Agreement or any waiver on the part of the Company or the Holders of
any provisions or conditions of this Agreement, must be in writing and
shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement, or be law or
otherwise afforded to the Company or the Holders shall be cumulative
and not alternative.
5.7 Legal Fees.
In the event of any action at law, suit in equity or arbitration
proceeding in relation to this Agreement, the prevailing party, shall
be paid by the other party a reasonable sum for attorney's fees and
expenses for such prevailing party.
5.8 Titles and Subtitles.
The titles of the sections and subsections of this Agreement are for
convenience of reference only and are not to be considered in
construing this Agreement.
5.9 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute
one instrument.
5.10 Severability.
Should any provision of this Agreement be determined to be illegal or
unenforceable, such determination shall not affect the remaining
provisions of this Agreement.
5.11 Confidentiality.
Each party hereto agrees that, except with the prior written
permission of the other party, it shall at all times keep confidential
and not divulge, furnish or make accessible to anyone any confidential
information, knowledge or data concerning or relating to the business
or financial affairs of the other parties to which such party has been
or shall become privy by reason of this Agreement, discussions or
negotiations relating to this Agreement or the performance of its
obligations hereunder. The parties hereto further agree that there
shall be no press release or other public statement issued by either
party relating to this Agreement or the transactions contemplated
hereby, unless the parties otherwise agree in writing. The provisions
of this Section 5.11 shall be in addition to, and not in
substitution for, the provisions of any separate nondisclosure
-19-
agreement executed by the parties hereto with respect to the
transactions contemplated hereby.
5.12 Public Announcements.
Neither the Company nor any Holder (other than Intel) shall use
Intel's name or refer to Intel directly or indirectly in connection
with Intel's relationship with the Company in any advertisement, news
release or professional or trade publication, or in any other manner,
unless otherwise required by law or with Intel's prior written
consent, which consent will generally not be granted. The parties
agree that there will be no press release or other public statement
issued by either party relating to this Agreement or the transactions
contemplated hereby unless required by law. If the Company determines
that it is required by law to file this Agreement with the SEC, it
shall at a reasonable time before making any such filing, consult with
Intel regarding such filing and seek confidential treatment for such
portions of the Agreement as may be requested by Intel.
[signature page follows]
-20-
agreement executed by the parties hereto with respect to the
transactions contemplated hereby.
5.12 Public Announcements.
Neither the Company nor any Holder (other than Intel) shall use
Intel's name or refer to Intel directly or indirectly in connection
with Intel's relationship with the Company in any advertisement, news
release or professional or trade publication, or in any other manner,
unless otherwise required by law or with Intel's prior written
consent, which consent will generally not be granted. The parties
agree that there will be no press release or other public statement
issued by either party relating to this Agreement or the transactions
contemplated hereby unless required by law. If the Company determines
that it is required by law to file this Agreement with the SEC, it
shall at a reasonable time before making any such filing, consult with
Intel regarding such filing and seek confidential treatment for such
portions of the Agreement as may be requested by Intel.
5.13 Termination of Prior Rights.
Effective and contingent upon execution of this Agreement by American
Growth Fund I L.P. and upon the closing of the transactions
contemplated by the Purchase Agreement the Investment Agreement dated
March 21, 1995, and as amended by the Addendum dated March 31, 1995,
between American Growth Fund I L.P. and the Company (the "Investment
Agreement") is hereby declared null and void and is amended and
restated in its entirety to read as set forth in this Agreement.
[signature page follows]
-21-
IN WITNESS WHEREOF, this parties hereto have executed this Agreement as of the
day and year herein above first written.
VIRTUAL REALTY, INC.
0000 XxxXxxxxx Xxxx., Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
By:
----------------------------------------
Title:
-------------------------------------
HOLDERS:
INTEL CORPORATION
By: /s/ XXXXX XXXXXXX
---------------------------------------
Title:
------------------------------------
-22-
IN WITNESS WHEREOF, this parties hereto have executed this Agreement as of the
day and year herein above first written.
VIRTUAL REALTY NETWORK, INC.
0000 XxxXxxxxx Xxxx., Xxx. 000
Xxxxxxx Xxxxx, XX 00000
By: /s/ XXXXXXX X. XXXXXX
---------------------------------------
Title: President
------------------------------------
HOLDERS:
INTEL CORPORATION
By:
---------------------------------------
Title:
------------------------------------
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EXHIBIT A
------- -
HOLDERS
INTEL CORPORATION
0000 Xxxxxxx Xxxxxxx Xxxx.
Xxxxx Xxxxx, XX 00000
Attn:
-------------------------
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