EXHIBIT 4.06
INTERLAND, INC.
July 11, 2002
Xx. Xxxxx Xxxxxxx
0000 X. Xxxxxx Xxxxxx, Xxx. 0
Xxxxxx Xxxx, XX 00000
Xx. Xxxxxxx Xxxxxx
0000 X. Xxxxxxxx
Xxxxxx Xxxx, XX 00000
Re: Amendment No. 2 to Stock Rights Agreement
Gentlemen:
I am writing to confirm our agreement amending the Stock Rights Agreement
by and among Interland, Inc., Xxxxx Xxxxxxx and Xxxxxxx Xxxxxx dated as of
February 8, 2002, as amended March 28, 2002 (the "Stock Rights Agreement"). Our
agreement is to amend Section 3(d) of the Stock Rights Agreement as follows:
1. Section 3(d) of the Stock Rights Agreement is deleted and the following
is substituted in lieu thereof, effective immediately:
(d) On the first month anniversary of the Effective Time, and on each
monthly anniversary thereafter for the next 10 months, there shall be
released from the restrictions of Section 3(a), automatically and
without any action on the part of any party hereto, an amount of
Common Stock equal to 8.3% of the Common Stock issued to such
Stockholder pursuant to the Merger Agreement as of the Effective Time,
and on the twelfth monthly anniversary thereafter, all Common Stock
not previously released hereunder shall be released; provided that in
the event the employment of such Shareholder with the Company ceases
for any or no reason (including, without limitation, voluntarily or
involuntarily, with or without cause or by resignation, death,
disability or otherwise) then the applicable per month percentage for
releasing the restrictions of Section 3(a) shall be 16.6% instead of
8.3%. All Common Stock released from the restrictions of Section 3(a)
shall be released for all time and all purposes, notwithstanding any
Xx. Xxxxx Xxxxxxx
Xx. Xxxxxxx Xxxxxx
July 11, 2002
Page 2
previous or subsequent circumstance, event, sale, transfer or
disposition including without limitation the exercise of the Put
Option Agreement or the purchase and sale by Interland of an aggregate
of 781,250 shares of Common Stock from the Shareholders as of July 11,
2002. Xx. Xxxxxx covenants and agrees to use 50% of the proceeds (net
of reasonable provisions for federal, state and local taxes and of
brokers' fees) of the sale of his Registrable Securities to reduce his
obligations under the Promissory Notes (described in Section 3(c)),
except that no payment shall be made in respect of the 468,750 shares
sold by Xx. Xxxxxx to Interland as of July 11, 2002.
2. Interland, Inc. shall continue to use its best efforts to cause the
Registration Statement to be declared effective by the SEC. If the Registration
Statement has not been declared effective by September 15, 2002, then:
(i) Interland, Inc. will reimburse Xx. Xxxxxxx and Xx. Xxxxxx for
$15,000 in legal fees;
(ii) for the period from September 1, 2002, until the Registration
Statement is declared effective, Interland, Inc. shall forgive any interest
that would have otherwise accrued under both the $2,000,000 Non-recourse
Promissory Note and the $735,000 Promissory Note executed by Xx. Xxxxxx on
February 8, 2002 in favor of Interland, Inc.; and
(iii) Section 3(d) of the Stock Rights Agreement, as amended by the
foregoing paragraph 1, shall be deleted and the following inserted in lieu
thereof:
"(d) On the first month anniversary of the Effective Time, and on each
monthly anniversary thereafter for the next 10 months, there shall be
released from the restrictions of Section 3(a), automatically and
without any action on the part of any party hereto, an amount of
Common Stock equal to 10% of the Common Stock issued to such
Shareholder pursuant to the Merger Agreement as of the Effective Time,
and on the tenth month anniversary of the Effective Time, all Common
Stock not previously released hereunder shall be released; provided
that in the event the employment of such Shareholder with the Company
ceases for any or no reason (including, without limitation,
voluntarily or involuntarily, with or without cause or by resignation,
death, disability or otherwise) then the applicable per month
percentage for releasing the restrictions of Section 3(a) shall be 20%
instead of 10%. All Common Stock released from the restrictions of
Xx. Xxxxx Xxxxxxx
Xx. Xxxxxxx Xxxxxx
July 11, 2002
Page 3
Section 3(a) shall be released for all time and all purposes,
notwithstanding any previous or subsequent circumstance, event, sale,
transfer or disposition including without limitation the exercise of
the Put Option Agreement or the purchase and sale by Interland of an
aggregate of 781,250 shares of Common Stock from the Shareholders as
of July 11, 2002. Xx. Xxxxxx covenants and agrees to use 50% of the
proceeds (net of reasonable provisions for federal, state and local
taxes and of brokers' fees) of the sale of his Registrable Securities
to reduce his obligations under the Promissory Notes (described in
Section 3(d)), except that no payment shall be made in respect of the
468,750 shares sold by Xx. Xxxxxx to Interland as of July 11, 2002."
It is understood and agreed that the remedies provided to Xx. Xxxxxxx and Xx.
Xxxxxx in subparagraphs (i)-(iii) above shall not in any way reduce or impair
Interland's obligation to continue to diligently pursue effective registration
of the shares of Common Stock held by Xx. Xxxxxxx and Xx. Xxxxxx.
3. Except as expressly amended hereby, the Stock Rights Agreement and all
of its provisions shall remain in full force and effect. The Stock Rights
Agreement (together with this Amendment No. 2) contain the entire agreement and
understanding among the parties hereto with respect to the subject matter
hereof.
4. This Amendment No. 2 is effective on and as of July 11, 2002 (the date
upon which the parties reached agreement), even though the individual parties
may have signed this Agreement No. 2 after such date when their agreement was
documented.
5. In connection with shares of Common Stock held by Xx. Xxxxxxx or Xx.
Xxxxxx that are free from the restrictions contained in Section 3(a) of the
Stock Rights Agreement, and to enable Xx. Xxxxxxx and Xx. Xxxxxx to sell such
shares, Interland, Inc., within two business days after receipt of a request
therefor, shall (i) instruct its transfer agent to remove restrictive legends
from such shares of Common Stock, and (ii) undertake any other action necessary
to effectuate the removal of such restrictive legends. The request for removal
of the restrictive legends shall be in either the form to be provided to them by
Interland, Inc. within 10 business days after the date of execution of this
Amendment, or another customary form which accurately describes the transaction
in question and supports removal of the legend.
Xx. Xxxxx Xxxxxxx
Xx. Xxxxxxx Xxxxxx
July 11, 2002
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6. Interland, Inc. acknowledges and agrees that Xx. Xxxxxxx or Xx. Xxxxxx
may enter into one or more private placements (sales) of shares of Common Stock
that are free from the restriction contained in Section 3(a) of the Stock Rights
Agreement, provided that counsel for the selling shareholder shall deliver to
Interland, Inc. an opinion, in accordance with industry standards, to the effect
that such transfer was effected in compliance with the requirements of
applicable state and federal securities laws. Interland, Inc. shall permit any
such transferees to participate in the Registration Statement as selling
shareholders to the same extent the person selling such shares was entitled to
participate.
7. Interland, Inc. shall immediately, but in no event later than 10 a.m.
EDT on July 25, 2002, wire transfer an aggregate of $2.5 million in cash to Xx.
Xxxxxxx an Xx. Xxxxxx in payment for the 781,250 shares of Common Stock sold by
them to Interland.
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Xx. Xxxxx Xxxxxxx
Xx. Xxxxxxx Xxxxxx
July 11, 2002
Page 5
If this accurately sets forth our agreement, please execute a copy of
this letter and return it to me by facsimile (1 copy) and overnight courier (3
copies). I will then send each of you a signed original.
Very truly yours,
INTERLAND, INC.
By: /s/ Xxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
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Title: Vice President and General Counsel
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Read and Agreed to as of July 11, 2002:
/s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx
/s/ Xxxxxxx Xxxxxx
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Xxxxxxx Xxxxxx
cc: P. Xxxxxxxx Xxxxxxx, Esq.
T. Xxxxx Xxxxxxxxxx III, Esq.
[Signature Page to Amendment No. 2]
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