EXHIBIT 10.12
AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT
THIS AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT (this "Agreement") is
made and entered into as of August 23, 1999, by and among ASD SYSTEMS, INC., a
Texas corporation (the "Company"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"), ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
("▇▇▇▇▇▇▇▇") , and each of the persons and entities identified on Schedules ▇-▇,
▇-▇ and A-3 attached hereto (Charney, Jennings and such persons and entities
listed on Schedules ▇-▇, ▇-▇ and A-3 being hereinafter referred to collectively
as "Shareholders" and individually as a "Shareholder") and each of the persons
and entities listed on Schedule B attached hereto (each, a "Preferred Investor")
W I T N E S S E T H:
WHEREAS, the Company, in connection with the transactions contemplated by
that certain Securities Purchase Agreement between the Company and the Preferred
Investor of dated August 22, 1999 (the "Securities Purchase Agreement"), has
amended and restated its Articles of Incorporation (the "Amended and Restated
Articles") to provide that it is authorized to issue 50,000,000 shares of Common
Stock, $.0001 par value per share (the "Common Stock") and 7,500,000 shares of
Preferred ▇▇▇▇▇, ▇.▇▇▇▇ par value (the "Preferred Stock"), of which 1,111,111
shares are designated Series A Preferred Stock (the "Series A Preferred Stock")
1,111,111 shares are designated Series B Preferred Stock ("Series B Preferred
Stock") and 3,200,000 shares are designated Series C Preferred Stock (the
"Series C Preferred Stock"); and
WHEREAS, upon filing of the Amended and Restated Articles, each share of
the Company's Series A Common Stock, $.0001 par value (the "Series A Common
Stock"), will be reclassified into one share of common stock; and
WHEREAS, each Shareholder listed on Schedules ▇-▇, ▇-▇ and A-3 is the
record and beneficial owner of the number of issued and outstanding shares of
Common Stock set forth opposite such Shareholder's name on such Schedule; and
WHEREAS, Charney (together with his family and including trusts for the
benefit of his children) and ▇▇▇▇▇▇▇▇ together control 100% of the equity
interests in ASD Partners, Ltd., a Texas limited partnership ("ASD Partners"),
which owns 6,000,000 of the shares of Common Stock; and
WHEREAS, the holders of the Common Stock, Charney, Jennings and the Company
previously executed a Shareholders Agreement dated January 29, 1999 (the
"Original Shareholders Agreement"); and
WHEREAS, in connection with the Securities Purchase Agreement, the Company,
the Preferred Investor and all of the Shareholders desire to amend and restate
the Original Shareholders Agreement in its entirety as set forth herein;
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NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
set forth herein, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Defined Terms. As used in this Agreement, the following terms
have the following meanings:
"Affiliate" means, with respect to any Shareholder, any Person that
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Shareholder.
"Available Shares" has the meaning set forth in Section 2.2.
"Board" means the Board of Directors of the Company.
"Business Day" means a day other than a Saturday, Sunday or other day on
which commercial banks in New York or Texas are authorized or required by law to
close.
"Buyer" has the meaning set forth in Section 2.3.
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Common Stock" has the meaning set forth in the recitals hereto.
"Control" of a Person means the power, directly or indirectly, to vote more
than fifty percent (50%) of the securities having voting power for the election
of directors of such Person or to direct or cause the direction of the
management and policies of such Person, whether by voting power, contract or
otherwise; provided, however, that neither the power of the Staubach Affiliated
Shareholders, the Preferred Investors nor the Private Shareholders to elect
members of the Board pursuant to Article III nor the powers of such Board
member(s) pursuant to Article III shall be deemed to constitute the power to
direct or cause the direction of the management and policies of the Company.
"Controlling Person" means a Person possessing Control with respect to the
Person specified.
"Demand Registration" means the registration of a Registrable Security
pursuant to the terms and provisions of Section 4.1.
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"Equity Security" means any capital stock of the Company, including Common
Stock or any security convertible into or exchangeable for Common Stock or
carrying any warrant or right to subscribe to or purchase Common Stock or any
such warrant or right.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Family Member" means any parent, spouse, lineal descendent or adopted
child of a Shareholder.
"First Offer Notice" has the meaning set forth in Section 2.2.
"Management Shareholder" means Charney, Jennings, each Affiliate of Charney
and ▇▇▇▇▇▇▇▇, and any Permitted Transferee of any of the foregoing (in each
case, holding Stock in the Company).
"Non-Management Shareholder" means any Shareholder or Preferred Investor
who is not a Management Shareholder.
"Offered Shares" has the meaning set forth in Section 2.3.
"Offering Shareholder" has the meaning set forth in Section 2.3.
"Participating Shares" has the meaning set forth in Section 2.3.
"Permitted Transferee" means (A) with respect to any Shareholder or
Preferred Investor, any of the following: (i) any wholly owned subsidiary or
Affiliate of such Person; (ii) any partnership of which such Person or any
family member or Affiliate of such shareholder is a general partner and,
together with such Person's family members, holds in excess of fifty percent
(50%) of the economic interest of the partnership; (iii) any family member of
such Person; (iv) any trust of which there is, during the term hereof, no
beneficiary other than such Person or any one or more persons or entities who
would be a "Permitted Transferee" hereunder; (v) any corporation of which the
Person owns or controls 100% of the capital stock; or (vi) an executor or
administrator of a Person's estate upon his or her death; (B) with respect to
any Staubach Affiliated Shareholder, in addition to the Persons listed in (A)
above, any other Staubach Affiliated Shareholder or the Staubach Company or its
affiliated entities or any director, officer or employee thereof; and (C) with
respect to ASD Partners, any partner of ASD Partners.
"Person" means an individual, a corporation, a partnership, a joint
venture, an association, a joint stock company, a trust, an unincorporated
association or other entity of whatever nature.
"Piggy-Back Registration" means the registration of a Registrable Security
pursuant to the terms and provisions of Section 4.2 hereunder.
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"Plan" means any purchase, savings, option, bonus, appreciation, profit
sharing, thrift, incentive, pension or similar plan of the Company that provides
for the issuance of any Equity Security.
"Preferred Investors" means any person or entity listed on Schedule B
hereto and any Permitted Transferee of any of the foregoing (in each case,
holding Stock in the Company).
"Private Shareholder" means any person or entity listed on Schedule
A-2 hereto and any Permitted Transferee of any of the foregoing (in each case,
holding Stock in the Company).
"Pro Rata Portion" means (A) with respect to a right to purchase Stock
given only to the Staubach Affiliated Shareholders, that portion determined by
multiplying the number of shares of Stock subject to Transfer times a fraction,
the numerator of which equals the number of shares of Stock held by the Staubach
Affiliated Shareholder to whom such right to purchase is given, and the
denominator of which equals the aggregate number of shares of Stock owned by all
of the Staubach Affiliated Shareholders having a right to purchase such shares
of Stock, (B) with respect to a right to purchase Stock given only to the
Management Shareholders, that portion determined by multiplying the number of
shares of Stock subject to Transfer times a fraction, the numerator of which
equals the number of shares of Stock held by the Management Shareholder to whom
such right to purchase is given, and the denominator of which equals the
aggregate number of shares of Stock owned by all of the Management Shareholders
having a right to purchase such shares of Stock, (C) with respect to a right to
purchase Stock given only to the Private Shareholders, that portion determined
by multiplying the number of shares of Stock subject to Transfer times a
fraction, the numerator of which equals the number of shares of Stock held by
Private Shareholders to whom such right to purchase is given, and the
denominator of which equals the aggregate number of shares of Stock owned by all
of the Private Shareholders having a right to purchase such shares of Stock, (D)
with respect to a right to purchase Stock given only to the Preferred Investors,
that portion determined by multiplying the number of shares of Stock subject to
Transfer times a fraction, the numerator of which equals the number of shares of
Stock (which for purposes hereof shall include all shares of Common Stock into
which Series A Preferred Stock then held by the Preferred Investors is then
convertible at the then applicable conversion price and an additional number of
shares of Common Stock into which the Series B Preferred Stock would be
convertible if it had the right to convert into Common Stock at the same
conversion price as the Series A Preferred (the "Series B Amount")) held by
Preferred Investors to whom such right to purchase is given, and the denominator
of which equals the aggregate number of shares of Stock (determined as
aforesaid) owned by all of the Preferred Investors having a right to purchase
such shares of Stock, and (E) with respect to a right to purchase Stock given to
the Shareholders and the Preferred Investors, that portion determined by
multiplying the number of shares of Stock subject to Transfer (which shall
include the number of shares of Common Stock into which shares of Series A
Preferred Stock subject to Transfer are convertible into at the applicable
conversion price and the Series B Amount) times a fraction, the numerator of
which equals the number of shares of Stock (including the number of shares of
Common Stock into which any Series A Preferred Stock is convertible and the
Series B Amount) held by the Shareholder or Preferred Investor to whom such
right to purchase is given and the denominator of which equals the aggregate
number of shares of Stock (which for
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purposes hereof shall include all shares of Common Stock into which Series A
Preferred Stock then held by the Preferred Investors is then convertible at the
then applicable conversion price and the Series B Amount) owned by all of the
Shareholders and Preferred Investors having a right to purchase such shares of
Stock.
"Public Offering" means an offering of Equity Securities pursuant to an
effective registration statement (other than a registration statement on Form S-
8 or S-4 or any successor or similar forms) under the Securities Act.
"Registrable Amount" has the meaning set forth in Section 4.1(a).
"Registrable Securities" means (i) the shares of Common Stock currently
owned by the Rights Holders as set forth on Schedules A-1 and A-2, (ii) any
shares of Common Stock issued to the Preferred Investors upon conversion of the
Series A Preferred Stock, (iii) any shares of Common Stock issued to the
Preferred Investors upon exercise of Warrants, and (iv) and any and all Common
Stock of the Company issued or issuable with respect to such shares by way of a
dividend, reclassification, stock split, or other distribution or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. Any Registrable Security will cease to be a
Registrable Security when (i) a Registration Statement covering such Registrable
Security has been declared effective by the Commission and the Registrable
Security has been Transferred pursuant to such effective registration statement,
(ii) the Registrable Security is sold under circumstances in which all of the
applicable conditions of Rule 144 (or any similar provisions then in force)
promulgated under the Securities Act are met, (iii) the Registrable Security has
been otherwise Transferred, the Company has delivered a new certificate or other
evidence of ownership for it not bearing a legend restricting further Transfer,
and it may be resold without subsequent registration under the Securities Act or
(iv) the Registrable Security is eligible for sale pursuant to Rule 144(k) (or
any successor provision) under the Securities Act.
"Registration Expenses" means those expenses associated with any
Registration Statement filed under Article IV hereof, as described in Section
4.3.
"Registration Statement" means a registration statement pursuant to the
Securities Act and the rules and regulations promulgated thereunder.
"Remaining Available Shares" has the meaning set forth in Section 2.2.
"Rights Holders" means the Staubach Affiliated Shareholders, the Preferred
Investors and the Private Shareholders, in each case holding Registrable
Securities.
"Sale Price" means the price per share for Available Shares or Offered
Shares, as applicable, proposed to be Transferred pursuant to Section 2.2 or
Section 2.3, as applicable.
"Second Offer Notice" has the meaning set forth in Section 2.2.
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"Section 2.3 Notice" has the meaning set forth in Section 2.3.
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Demand Holders" has the meaning set forth in Section 4.1(c).
"Selling Holders" has the meaning set forth in Section 4.2(a).
"Selling Shareholder" has the meaning set forth in Section 2.2.
"Series A Preferred Stock" has the meaning set forth in the recitals
hereto.
"Series B Preferred Stock" has the meaning set forth in the recitals
hereto.
"Series C Preferred Stock" has the meaning set forth in the recitals
hereto.
"Shareholder Group" means the Staubach Affiliated Shareholders, the
Preferred Investors, the Management Shareholders or the Private Shareholders, as
applicable, acting as a group for any purpose provided in this Agreement.
"Staubach Affiliated Shareholders" means any person or entity listed on
Schedule A-1 and any Permitted Transferee of any of the foregoing (in each case,
holding Stock in the Company).
"Stock" means shares of Common Stock or Preferred Stock, or any securities
having voting rights for the election of the Board of Directors of the Company,
or any securities convertible into or exercisable for any shares of the
foregoing, or any agreement or commitment to issue any of the foregoing, in each
case, now or hereafter owned by any party.
"Terms" means all material terms and conditions (other than the Sale Price)
of a proposed transfer of Available Shares or Offered Shares, as applicable,
pursuant to Section 2.2 or Section 2.3, as applicable.
"Third-Party Offer" means a bona fide offer received by a Shareholder from
a third party to purchase (i) any shares of Stock or Preferred Stock owned
directly or indirectly by such Shareholder, (ii) any equity interest in any
entity which owns shares of Stock or Preferred Stock and is Controlled by such
Shareholder or (iii) any equity interest in ASD Partners.
"Transfer" (including the term "Transferred") means any sale, transfer,
assignment, pledge, hypothecation, gift, encumbrance or other disposition of
shares of Stock or any right to or interest in any such shares.
"Transferee" means any person to whom shares of Stock are Transferred.
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"Underwritten Public Offering" means any Public Offering in which Equity
Securities are sold or to be sold pursuant to a firm commitment underwriting by
an investment banking concern of recognized national or regional standing.
Section 1.2 Other Definitional Provisions. All definitions contained in
this Agreement are equally applicable to the singular and plural forms of the
terms defined. The words "hereof," "herein," and "hereunder" and words of
similar import referring to this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement. Unless otherwise
specified, all Article and Section references pertain to this Agreement.
ARTICLE II
RESTRICTIONS ON TRANSFER OF STOCK
Section 2.1 General Restrictions on All Transfers. In addition to the
restrictions on Transfer set forth in Sections 2.2 and 2.3 hereof, during the
term of this Agreement, none of the shares of Stock now owned or hereafter
acquired by any Shareholder or Preferred Investor may be Transferred unless:
(a) either (i) such shares are registered under the Securities
Act and registered or qualified under any other applicable securities
statute, or (ii) the Company has received an opinion of counsel, in form
and substance reasonably satisfactory to the Company, that such shares may
be Transferred in compliance with the Securities Act and any other
applicable securities statute without such registration or qualification;
and
(b) until such time as an initial public offering has closed, the
Transferee executes and delivers a document reasonably acceptable to the
Company pursuant to which such Transferee agrees that the shares of Stock
being Transferred and the Transferee's ownership thereof will be subject to
all of the applicable terms and conditions of this Agreement and that such
Transferee will comply with the provisions hereof.
Any purported Transfer in violation of any provision of this Agreement
shall be void and ineffectual. The Company shall not be required to recognize
or register any Transfer on the stock record books of the Company until it is
reasonably satisfied that such Transfer is being made in compliance with the
terms and conditions set forth in this Agreement.
Section 2.2 First Offer Right. If any Shareholder receives a Third-Party
Offer and desires to accept the Third-Party Offer, then such Shareholder (the
"Selling Shareholder") shall first offer the shares subject to the Third-Party
Offer (the "Available Shares") to the other Shareholders, the Preferred
Investors and the Company as described below by giving written notice (the
"First Offer Notice") to the Company, the Preferred Investors and the other
Shareholders of the proposed Transferee, the number of Available Shares, the
Sale Price for the Available Shares and the Terms, all in accordance with the
Third-Party Offer. For purposes of a
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Third-Party Offer for any equity securities of any entity that owns Stock, the
number of Available Shares shall be the number of shares of Common Stock
indirectly owned by virtue of the ownership of such equity interest. The
Company, the Preferred Investors and the other Shareholders shall then have the
following rights and options with respect to the Available Shares:
(a) Order of Offers. The Selling Shareholder shall first offer the
Available Shares to the other members of the Shareholder Group of which the
Selling Shareholder is a member. The members of the applicable Shareholder
Group (other than the Selling Shareholder) shall then have twenty (20) days
(after which the right and option to purchase the Available Shares will
expire unless extended to the next succeeding Business Day as provided
below) from the date on which the First Offer Notice is given to purchase,
in the aggregate, all or a portion of the Available Shares for a cash
purchase price per share equal to the Sale Price and upon terms and
conditions no less favorable to the Selling Shareholder than the Terms. If
the other members of the applicable Shareholder Group decide to exercise
such right, they shall do so by notifying the Selling Shareholder in
writing within such twenty (20) day period of such Shareholders' acceptance
of the offer set forth in the First Offer Notice and the number of
Available Shares the other members of the Shareholder Group, in the
aggregate, desire to purchase. The purchase of such Available Shares shall
take place on the thirtieth (30th) day after the giving of the First Offer
Notice (or such earlier date as such Shareholders shall designate in
writing to the Offering Shareholder) or, if such day is not a Business Day,
then on the next succeeding Business Day. If the other members of the
Shareholder Group to whom an offer is made as set forth this in paragraph
(a) do not agree to purchase all of the Available Shares, then the Selling
Shareholder shall give written notice (the "Second Offer Notice") to the
Company, the Preferred Investors and the Shareholders to whom the shares
were not previously offered, setting forth the name of the proposed
Transferee, the number of remaining Available Shares (the "Remaining
Available Shares"), the Sale Price and the Terms. The Company shall have
fifteen (15) days (after which the right and option to purchase the
Available Shares will expire unless extended to the next succeeding
Business Day as provided below) from the date on which the Second Offer
Notice is given to purchase all or a portion of the Remaining Available
Shares for a cash purchase price per share equal to the Sale Price and upon
terms and conditions no less favorable to the Selling Shareholder than the
Terms. If the Company decides to exercise such right, it shall do so by
notifying the Selling Shareholder in writing within such fifteen (15) day
period of the Company's acceptance of the offer set forth in the Second
Offer Notice and the number of Remaining Available Shares the Company
desires to purchase. If the Company accepts such offer, the purchase of
the Remaining Available Shares shall take place on the fifteenth (15th) day
after the giving of the Second Offer Notice (or such earlier date as the
Company shall designate in writing to the Selling Shareholder) or, if such
day is not a Business Day, then on the next succeeding Business Day. If
the Company does not agree to purchase all of the Remaining Available
Shares, then the Selling Shareholder shall make an offer, for a period of
ten (10) days following the expiration of the Company's fifteen-day option
period, of the shares not purchased to the Preferred Investor. The
Preferred Investor shall
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then have ten (10) days (after which the right and option to purchase the
Available Shares will expire unless extended to the next succeeding
Business Day as provided below) to purchase all or a portion of the
Remaining Available Shares for a cash purchase price per share equal to the
Sale Price and upon terms and conditions no less favorable to the Selling
Shareholder than the Terms. If the Preferred Shareholder decides to
exercise such right, it shall do so by notifying the Selling Shareholder in
writing within such ten (10) day period of the Preferred Investor's
acceptance of the offer and the number of Remaining Available Shares the
Preferred Investor desires to purchase. If the Preferred Investor accepts
such offer, the purchase of the Remaining Available Shares shall take place
on the tenth day after the Preferred Investor's acceptance of the offer (or
such earlier date that the Preferred Investor shall designate in writing to
the Selling Shareholder) or, if such day is not a Business Day then, on the
next succeeding Business Day. If the Preferred Investor does not agree to
purchase all the Remaining Available Shares, then the Selling Shareholder
shall make an offer, for a period of ten (10) days following the expiration
of the Preferred Investor's ten (10) day option of the shares not
purchased, to other Shareholder Group(s) to whom the shares were not
previously offered. Each member of such Shareholder Group shall then have
ten (10) days (after which the right and option to purchase any Remaining
Shares will expire unless extended to the next succeeding Business Day)
from the date on which the offer is given to purchase all or a portion of
such Shareholder Group's aggregate Pro Rata Portion of any Remaining
Available Shares or for a cash purchase price per share equal to the Sale
Price and upon terms and conditions no less favorable to the Selling
Shareholder than the Terms.
(b) Sale to Third Party. If the Shareholders and the Company do
not agree to purchase all of the Available Shares and any Remaining
Available Shares under Section 2.2(a) above, the Selling Shareholder shall
then have the right, at his, her or its election, for a period of ninety
(90) days after the expiration of the option periods provided under Section
2.2(a) or (b), as applicable, to sell all of the Available Shares either
pursuant to the Third-Party Offer or, if the Third-Party Offer is no longer
effective, to any third party at a purchase price per share equal to the
Sale Price and on terms and conditions no less favorable to the Selling
Shareholder than the Terms. The Selling Shareholder shall proceed with
reasonable diligence to consummate the sale of the Available Shares
pursuant to this subsection, subject, however, to the provisions of Section
2.3.
Each party hereto agrees that upon the reasonable request of any other
party it will cooperate and will cause its Affiliates to cooperate with the
other parties hereto to effect the provisions of this Section. Without limiting
the generality of the foregoing, the Company, subject to reasonable restrictions
to protect confidential information of the Company and the confidential nature
of all negotiations related to the transactions contemplated by this Section,
will provide reasonable access, during normal business hours, to all books and
records reasonably requested by any party or proposed Transferee and will permit
any party or proposed Transferee to interview the officers and directors of the
Company and all others who possess material information concerning the Company.
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Notwithstanding the foregoing provisions of this Section, no compliance
with such provisions shall be required (i) with respect to any Transfer by any
Shareholder to any Permitted Transferee (though any Transfer to a Permitted
Transferee shall comply with Section 2.1), or (ii) with respect to any Transfer
by any Shareholder as part of any Underwritten Public Offering.
Section 2.3 Participation Rights on Transfer. If any Management
Shareholder proposes to Transfer all or any of its shares of Common Stock
(including a Transfer by Charney, Jennings or any Permitted Transferee of either
of them of any equity securities of ASD Partners) to a third party, such
Management Shareholder (the "Offering Shareholder") shall give notice of such
proposed Transfer (the "Section 2.3 Notice") to the Non-Management Shareholders.
The Section 2.3 Notice must set forth the name of the proposed Transferee (the
"Buyer"), the number of shares of Common Stock to be Transferred (the "Offered
Shares"), the Sale Price, and the Terms of the proposed Transfer. For purposes
of a proposed Transfer by a Management Shareholder of any equity securities of
any entity that owns Common Stock, the number of Offered Shares shall be the
number of shares of Common Stock indirectly owned by virtue of the ownership of
such equity interest. Each Non-Management Shareholder shall have fifteen (15)
days (after which the right and option to participate in the proposed Transfer
will expire unless extended to the next succeeding Business Day as provided
below) from the date on which the Section 2.3 Notice is given to Transfer to the
Buyer (and the number of shares that may be sold by the Offering Shareholder to
the Buyer shall be reduced accordingly) up to that number of shares
("Participating Shares") of Common Stock equal to the product of (a) the total
number of Offered Shares, multiplied by (b) a fraction, the numerator of which
is equal to the number of shares of Common Stock (including the number of shares
of Common Stock then obtainable by the Preferred Investors upon conversion of
the Series A Preferred Stock at the then applicable conversion price and the
Series B Amount) owned by such Non-Management Shareholder, and the denominator
of which is equal to the sum of (x) the aggregate number of shares of Common
Stock (including the number of shares of Common Stock then obtainable by the
Preferred Investors upon conversion of the Series A Preferred Stock at the then
applicable conversion price and the Series B Amount) issued and outstanding and
(y) the number of shares of Common Stock owned by the Offering Shareholder. All
sales of Participating Shares pursuant to this Section shall be at the Sale
Price and on terms and conditions no less favorable to the Offering Shareholder
than the Terms set forth in the Section 2.3 Notice. Except as otherwise
provided in this Section, any attempt to Transfer to a Transferee other than the
Buyer or to Transfer on terms other than those set forth in the Section 2.3
Notice shall not be made without the Offering Shareholder's further compliance
with the notice and option provisions of this Section.
For purposes of this Section, the Staubach Affiliated Shareholders shall be
deemed to be a single Non-Management Shareholder.
Notwithstanding the foregoing provisions of this Section, no compliance
with the notice and option provisions of this Section shall be required (i) with
respect to any Transfer by any Management Shareholder in compliance with Section
2.2, (ii) with respect to any Transfer to a Permitted Transferee (provided that
any Transfer to a Permitted Transferee shall comply with Section 2.1) or (iii)
with respect to any Transfer by any Management Shareholder as part of an
Underwritten Public Offering.
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ARTICLE III
BOARD OF DIRECTORS
Section 3.1 Board Composition and Election. The Shareholders and
Preferred Investors hereby acknowledge and agree that the composition of the
Board shall be subject to the following terms and conditions:
(a) Upon the execution hereof, the Board shall consist of six (6)
members, and the size of the Board may be increased in connection with the
nomination of parties contemplated in this Section 3.1; provided that any
increase in the size of the Board above seven (7) members shall be made by
a resolution adopted by at least seventy-five percent (75%) of the members
of the Board. At each annual meeting of the shareholders of the Company or
any special meeting called for the purpose of electing directors of the
Company, the voting committee of the Staubach Affiliated Shareholders and
the Private Shareholders each shall separately have the right to nominate
one (1) member of the Board, and the Preferred Investors and ▇▇▇▇ ▇▇▇▇▇▇▇
shall each have the right to separately nominate two (2) members of the
Board (for purposes of this Article III the Staubach Affiliated
Shareholders (as a group), the Private Shareholders (as a group), the
Preferred Investors (as a group) and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ are each referred to as
a "Nominating Party") and each of the Shareholders and Preferred Investors
shall vote all of the shares of Common Stock then owned by them, directly
or indirectly, in favor of the election of such nominated persons and
otherwise use their respective best efforts as shareholders or directors of
the Company to cause and maintain the election to the Board of such
persons; provided however, that (i) in the event that the Staubach
Affiliated Shareholders and/or the Private Shareholders shall at any time
own in the aggregate less than 500,000 shares of Common Stock (subject to
adjustment for stock splits, combinations and reclassifications and
dividends paid in Stock), the Staubach Affiliated Shareholders and/or the
Private Shareholders, as applicable, shall cease to have the right to
nominate a member of the Board until such time as the members of the
affected Shareholder Group again own in the aggregate at least 500,000
shares of Common Stock (subject to adjustment for stock splits,
combinations and reclassifications and dividends paid in Stock) and (ii) in
the event the Preferred Investors shall at any time own less than 1,000,000
shares of Common Stock (including the number of shares of Common Stock then
obtainable upon conversion of the Series A Preferred Stock at the
applicable conversion price and upon conversion, subject to adjustment for
subsequent stock splits, combinations and reclassification and dividends),
the Preferred Investors shall cease to have the right to nominate two (2)
members of the board until such time as the Preferred Investors again own
in the aggregate at least 1,000,000 shares of Common Stock (determined as
aforesaid). The Company shall pay the reasonable and accountable out-of-
pocket expenses incurred by the directors nominated herein which are
associated with the attendance of such directors at any Board meeting.
Each person elected as a director pursuant to this Section shall hold
office until the next annual meeting of
11
shareholders and until his successor is duly elected and qualified in
accordance with this Section or until his death, resignation or removal.
(b) ▇▇▇▇ ▇▇▇▇▇▇▇, the Private Shareholders, the Staubach
Affiliated Shareholders and the Preferred Investors hereby respectively
agree that, to the extent the conditions set forth in Section 3.1(a) above
are met, ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇ shall be the representatives of
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ shall be the representative of the Private
Shareholders, ▇▇▇▇▇ ▇▇▇▇▇ shall be the representative of the Staubach
Affiliated Shareholders, and ▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇ shall be the
representatives of the Preferred Investors, respectively, to initially
represent such parties on the Board.
(c) No Shareholder shall vote its shares of Common Stock in
favor of the removal of the director nominated by a Nominating Party unless
so requested by the applicable Nominating Party. If, however, a Nominating
Party shall request the removal of the director nominated by such
Nominating Party, each Shareholder shall vote all of the shares of Common
Stock owned by it at the time in favor of the removal of such director.
(d) If any vacancy occurs in the Board because of the death,
disability, resignation, retirement, or removal of a director nominated and
elected in accordance with paragraph (a) of this Section, the applicable
Nominating Party shall nominate a successor, and each Shareholder shall
vote all of the shares of Common Stock then owned by it in favor of the
election of such successor member to the Board. Any such vacancy that
occurs shall be filled as promptly as possible upon the request of the
applicable Nominating Party.
Section 3.2 Board Approval of Certain Matters. The Company shall not,
without the affirmative consent or approval of at least two-thirds (2/3) of the
members of the Board:
(i) sell, abandon, transfer, lease or otherwise dispose of all or
substantially all of the properties or assets of the Company (other than to
a corporation in which the shareholders of the Company own (or will own)
fifty percent (50%) or more of the voting power upon completion of the
transaction);
(ii) merge or consolidate with or into, or permit any subsidiary
to merge or consolidate with or into, any other corporation, corporations
or other entity or entities (other than a corporation or other entity in
which the shareholders of the Company own (or will own) fifty percent (50%)
or more the voting power on completion of the transaction);
(iii) voluntarily dissolve, liquidate, or wind-up or carry out any
partial liquidation or distribution or transaction in the nature of a
partial liquidation or distribution;
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(iv) incur or permit to exist any indebtedness for borrowed
money in excess of $500,000, other than debt existing on the date of this
Agreement;
(v) incur or agree to incur any single capital expenditure or
group of related capital expenditures in excess of $100,000;
(vi) declare or pay any dividend on or make any distribution with
respect to any Common Stock or Preferred Stock;
(vii) make any payment on account of the purchase of any Common
Stock or Series B Preferred Stock other than Common Stock or Series B
Preferred Stock purchased from a director or employee of the Company who
owns less than two percent (2%) of the outstanding shares of Common Stock
and Series B Preferred Stock at the time of purchase (other than any such
payment made in compliance with the terms of this Agreement or for
repurchases pursuant to the Long Term Incentive Plan);
(viii) authorize or issue any additional series or class or shares
of Common Stock or any other Equity Securities other than: (1) the issuance
of options pursuant to the Company's Long-Term Incentive Plan as presently
in effect or the issuance of shares upon exercise thereof, (2) the issuance
of shares pursuant to the Stock Option Agreement to Mr. ▇▇▇▇ ▇▇▇▇▇▇▇▇
exercisable for 957,500 shares of Series B Common Stock (to be reclassified
Series B Preferred Stock), (3) pursuant to the exercise of Warrants to
purchase 1,000,000 shares of Series B Common Stock (to be reclassified
Series B Preferred Stock), (4) shares of Common Stock issuable upon
conversion of the Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock or (5) shares of Common Stock upon exercise of the
Warrants issued to Preferred Investors pursuant to the Securities Purchase
Agreement, as any of the same may be amended by approval of the Board of
Directors (including the representatives of the Preferred Investors) and
subject to, in each case, adjustment for stock splits, combinations and
reclassifications and dividends paid in stock;
(ix) originate, renew, extend or amend the terms of any
employment agreement with any executive officer of the Company; or
(x) create an Executive Committee or other committee of the
Board which will have the authority to act on behalf of the Board.
13
ARTICLE IV
REGISTRATION RIGHTS
Section 4.1 Demand Registration.
(a) Request for Registration.
(i) At any time after one year following the closing date of an
initial Public Offering, a Rights Holder (other than the Preferred
Investors) who owns, or group of Investing Shareholders who own, in the
aggregate, twenty-five percent (25%) or more of the total number of
Registrable Securities owned by all of the Rights Holders (other than the
Preferred Investors ) (a "Registrable Amount"), may make a written request
(a "Demand Notice") for registration under the Securities Act (a "Demand
Registration") of at least the Registrable Amount, subject to the
conditions of this Article IV.
(ii) At any time after one year following the closing date of an
initial Public Offering, a Preferred Investor who owns, or a group of
Preferred Investors who own, in the aggregate, fifty percent (50%) or more
of the total number of Registrable Securities owned by all of the Preferred
Investors (a "Preferred Registrable Amount"), may make a Demand Notice for
a Demand Registration of at least the Preferred Registrable Amount, subject
to the conditions of this Article IV.
(iii) Each Demand Notice will specify the number of shares of
Registrable Securities proposed to be sold and will also specify the
intended method of disposition thereof. Within ten (10) days after receipt
of such Demand Notice, the Company will give written notice of the
Company's receipt of such Demand Notice to all Rights Holders at least
twenty (20), but not more than sixty (60), days before the anticipated
filing date of such Registration Statement, and such Rights Holders will be
given the opportunity to participate in such Demand Registration and shall
be deemed a Demanding Holder (as hereinafter defined) for purposes of this
Agreement. Subject to Section 4.1(d) hereof, the Company will include in
such Demand Registration all Registrable Securities with respect to which
the Company has received written requests for inclusion therein within
fifteen (15) days after the delivery to the applicable Rights Holders of
the Company's notice. Each such Rights Holder's request also will specify
the number of Registrable Securities to be registered and, subject to
Section 4.1(f) hereof, the intended method of disposition thereof. In
addition, Demand Registrations shall be on such appropriate registration
form of the Commission as the Company shall determine.
(b) Limitation on Demand Registration.
(i) Notwithstanding any provision of this Agreement to the
contrary, the Company shall not be obligated to effect more than one (1)
Demand Registration under Section 4.1(a)(i) of this Agreement and more than
two (2) Demand Registrations under Section 4.1(a)(ii) of this Agreement.
Notwithstanding any provision of this Agreement to
14
the contrary, the Company shall not be obligated to honor any Demand Notice
requesting a Demand Registration, or otherwise cause a Demand Registration
to become effective hereunder if the Demand Notice is delivered to the
Company during the period commencing ninety (90) days prior to the
Company's good faith estimate of the effective date of a registration
statement pursuant to which the Company is offering shares of any class of
equity securities of the Company in an Underwritten Public Offering and
ending one-hundred twenty (120) days after the closing date of any such
offering.
(ii) The Company may postpone or suspend for up to 90 days the filing
or the effectiveness of Registration Statements for Demand Registrations if
the Board determines reasonably and in good faith, that such registration
(or the effect thereof) is likely to have a material adverse effect on any
proposal or plan by the Company; provided, however, that the Company may
not utilize this right to postpone or suspend more than twice in any
twelve-month period.
(c) Effective Registration and Expenses. Upon receipt of a written
request for a Demand Registration, the Company will (i) take appropriate action,
on a reasonable, timely basis and in any event within sixty (60) days of such
request, to prepare and file a Registration Statement covering the shares
requested to be included in such Demand Registration subject to Section 4.1(e)
and (ii) use its reasonable best efforts to cause each Demand Registration to
become effective under the Securities Act. A registration will not count as a
Demand Registration (i) unless a Registration Statement with respect thereto has
become effective (unless the Rights Holders whose Registrable Securities are
included in such Demand Registration ("Selling Demand Holders") withdraw their
shares of Registrable Securities requested to be included in the Demand
Registration so that less than a Registrable Amount of shares remains subject to
such Demand Registration, in which case such demand shall count as a Demand
Registration unless the Selling Demand Holders agree to pay all Registration
Expenses), (ii) if after it has become effective, such registration is
interfered with by any stop order, injunction or other order or requirement of
the Commission or other governmental agency or court for any reason not
attributable to the Selling Demand Holders and has not thereafter become
effective, or (iii) if the conditions to closing specified in the underwriting
agreement, if any, entered into in connection with such registration are not
satisfied or waived, other than by reason of a failure on the part of the
Selling Demand Holders. Except as set forth above, the Company will pay all
Registration Expenses in connection with any Demand Registration as set forth in
Section 4.3, whether or not it becomes effective.
(d) No Third-Party Piggy-Back on Demand Registrations. Neither the
Company nor any of its respective securityholders (other than the holders of
Registrable Securities exercising rights granted pursuant to Section 4.2 hereof)
may include securities of the Company in any Demand Registration without the
prior written consent of the Demanding Holder or, if more than one Demanding
Holder, the Majority Demanding Holder (as hereinafter defined), and the Company
shall not enter into any agreement providing any such right to any of its
securityholders.
15
(e) Cutback on Demand Registration. In the event the offering of shares
pursuant to a Demand Registration shall be in the form of an Underwritten Public
Offering pursuant to subsection (f) below, if the underwriter or the managing
underwriter of a group of underwriters, as applicable, of such offering advises
the Company and the Selling Demand Holders that market or other conditions
require a limitation on the number of Registrable Securities to be included in
the Registration Statement, then the Company may limit the number of shares of
Registrable Securities to be included in the Demand Registration. Upon such
advice by the underwriter or managing underwriter, the Company shall give notice
to all of the Selling Demand Holders of the number of shares of Registrable
Securities of the Selling Demand Holders that will be entitled to be included in
the Registration Statement, and the number of shares of Registrable Securities
of the Selling Demand Holders that may be so included shall be allocated among
all of the Selling Demand Holders (other than employees and directors of the
Company) in proportion, as nearly as practicable, to the respective numbers of
shares of Registrable Securities that such Selling Demand Holders had requested
to be included in the Registration Statement. To the extent that there remain
additional Registrable Securities which may be sold, such Registrable Securities
will then be allocated among Selling Demand Holders who are directors and
employees of the Company in the proportions set forth above. Any Selling Demand
Holder which disapproves of the terms of any such underwriting may elect to
withdraw therefrom by written notice to the Company and the underwriter or
managing underwriter. Any shares of Registrable Securities so withdrawn from
such underwriting shall be withdrawn from the Registration Statement.
(f) Manner of Offering: Selection of underwriters. If the Non-Management
Shareholder(s) requesting a Demand Registration ("Demanding Holder(s)") so
requests (or if more than one Demanding Holder, if the Demanding Holders owning
a majority of the Registrable Securities requested to be included in the Demand
Regulation by the Demanding Holders so requests (the "Majority Demanding
Holders")), the offering of Registrable Securities pursuant to a demand
Registration shall be in the form of an Underwritten Public Offering, and all
Demanding Holders electing to participate in such Demand Registration shall be
bound by such determination. If a Demand Registration is in the form of an
Underwritten Public Offering, the Majority Demanding Holders shall select the
managing underwriter or underwriters to be used in connection with the offering;
provided, however, that such underwriter or underwriters must be reasonably
satisfactory to the Company.
Section 4.2 Piggy-Back Registration.
(a) Request for Registration. If at any time after the closing date of an
initial Public Offering, any Equity Securities are proposed to be sold or
disposed, either for the account of the Company or for the account of a security
holder or holders, in a Public Offering (other than in connection with any
exchange offer, a registration relating solely to the sale of Securities to
participants in a Company stock plan, or an offering of securities solely to the
Company's existing security holders), the Company shall (a) promptly give to
each Rights Holder with rights remaining under this Section 4.2 notice of such
proposed offering, including a description of the securities to be offered, a
statement of the anticipated number and dollar amount of securities to be
offered, identifying any proposed underwriter or representative of the
underwriters, and
16
describing the proposed method of distribution (including, without limitation, a
list of the jurisdictions in which the Company intends to attempt to register or
qualify such securities under applicable state securities law) and the
anticipated timing of the offering, and (b) include in the appropriate
Registration Statement covering such Equity Securities, and in any underwriting
relating thereto, all of the shares of Registrable Securities specified in a
written request made by any Rights Holder with rights remaining under this
Section 4.2 (a "Piggy-Back Registration") within thirty (30) days after receipt
of the notice of the proposed offering, except as set forth below in this
Section. If the registration pursuant to this Section involves an Underwritten
Public Offering, all of the Rights Holder proposing to distribute shares of
Registrable Securities through such Underwritten Public Offering (the "Selling
Holders") and the Company shall enter into an underwriting agreement in
customary form with the underwriter or representative of the underwriters named
in the Company's notice given pursuant to this Section.
(b) Limitation on Piggy-Back Registrations. Notwithstanding any provision
of this Agreement to the contrary, the Company shall not be obligated to effect
more than two (2) Piggy-Back Registrations under this Agreement for the Rights
Holders; provided however, the Preferred Investors shall not be limited in the
number of Piggy Back Registrations the Company may be obligated to effect. The
Company may postpone or suspend for up to 90 days the filing or the
effectiveness of a Registration Statement involving a Piggy-Back Registration if
the Board determines, reasonably and in good faith, that such registration (or
the effect thereof) is likely to have a material adverse effect on any proposal
or plan by the Company.
(c) Cutback on Piggy-Back Registration. Notwithstanding any other
provision of this Section, if the underwriter or the managing underwriter of a
group of underwriters, as applicable, advises the Company and the Selling
Holders that market or other conditions require a limitation of the number of
Registrable Securities to be included in the Registration Statement, then the
Company may limit the number of Registrable Securities of the Selling Holders to
be included in the Registration Statement and underwriting. Upon such advice by
the underwriter or managing underwriter, the Company shall give notice to all of
the Selling Holders of the number of Registrable Securities of the Selling
Holders that will be entitled to be included in the Registration Statement, and
the number of shares of Registrable Securities of the Selling Holders that may
be so included shall be allocated among all of the Selling Holders (other than
employees and directors of the Company) in proportion, as nearly as practicable,
to the respective numbers of shares of Registrable Securities that such Selling
Holders had requested to be included in the Registration Statement. To the
extent that there remain additional Registrable Securities which may be sold,
such Registrable Securities will then be allocated among the Selling Holders who
are directors and employees of the Company in the proportions set forth above.
Any Selling Holder which disapproves of the terms of any such underwriting may
elect to withdraw therefrom by written notice to the Company and the underwriter
or managing underwriter. Any shares of Registrable Securities so withdrawn from
such underwriting shall be withdrawn from the Registration Statement.
Section 4.3 Registration Expenses. All costs and expenses incurred in
connection with any registration, qualification, or compliance effected pursuant
to this Article IV, including (without limitation) all registration, filing, and
qualification fees, printing expenses, fees and
17
disbursements of counsel (including one special counsel to the Selling Demand
Holders or Selling Holders, as the case may be) and independent accountants
(including, without limitation, the expenses of any special audit or "cold
comfort" letters required by or incident to such registration, qualification or
compliance) and other experts of the Company, as the case may be, shall be borne
by the Company to the extent permitted by applicable law; provided, however,
that the Company shall not be required to pay any underwriting discounts or
commissions relating to shares of Common Stock owned by the Selling Demand
Holders or Selling Holders, as the case may be.
Section 4.4 Obligations of the Company. Whenever required under this
Article IV to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) prepare and file with the SEC a Registration Statement with
respect to such Registrable Securities and use its reasonable best efforts to
cause such Registration Statement to become effective, and, upon the request of
the Rights Holders of a majority of the Registrable Securities registered
thereunder, keep such Registration Statement effective for a period of up to 120
days or until the distribution contemplated in the Registration Statement has
been completed, whichever first occurs; provided, however, that such 120-day
period shall be extended for a period of time equal to the period the Rights
Holder refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities) of the Company
or by the Company;
(b) prepare and file with the SEC such amendments and supplements
to such Registration Statement and the prospectus used in connection with such
Registration Statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
Registration Statement;
(c) furnish to the Rights Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them;
(d) use its reasonable best efforts to register and qualify the
securities covered by such Registration Statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Rights Holders; provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions in
which it is not, at the time, so qualified;
(e) in the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering;
(f) notify each Rights Holder of Registrable Securities covered by
such Registration Statement at any time when a prospectus relating thereto is
required to be delivered
18
under the 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;
(g) cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed; and
(h) provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
provided; however, it shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Article IV with respect to the
Registrable Securities of any selling Rights Holder that such Rights Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Rights Holder's
Registrable Securities.
Section 4.5 Form S-3 Registration. Subject to the requirements of
Section 4.1(b)(ii), in case the Company shall receive a written request or
requests from either (i) Preferred Investors holding a majority of the
Registrable Securities then held by the Preferred Investors or (ii) the Staubach
Affiliated Shareholders and the Private Shareholders (collectively, the
"Investing Shareholders") holding a majority of the Registrable Securities then
held by the Investing Shareholders, that the Company effect a registration on
Form S-3 with respect to all or part of the Registrable Securities owned by such
Preferred Investors or the Investing Shareholders, as the case may be; provided
that the Company then (and throughout the period of the proposed registration)
qualifies for registration on Form S-3, the Company will:
(i) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Rights Holders; and
(j) 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 Rights
Holder's or Rights Holders' Registrable Securities as are specified in such
request, together with all or such portion of the Registrable Securities of any
other Rights Holder or Rights Holders joining in such request as are specified
in a written request given within 15 days after receipt of such written notice
from the Company.
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 Rights
Holders; provided that in no event may (i) the Preferred Investor make more than
two (2) requests for registration under this Section 4.5 or (ii) the Investing
Shareholders make more than one (1) request for registration under this Section
4.5.
19
Registrations effected pursuant to this Section 4.5 shall not be counted as
demands for registration or registrations effected pursuant to Section 4.1.
Section 4.6 Limitations on Subsequent Registration Rights. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of the Preferred Investors holding a majority of the Registrable
Securities then held by the Preferred Investors, enter into any agreement with
any holder or prospective holder of any securities of the Company which would
allow such holder or prospective holder (a) to include such securities in any
registration filed under this Article IV hereof, unless under the terms of such
agreement, such holder or prospective holder may include such securities in any
such registration only to the extent that the inclusion of his securities will
not reduce the amount of the Registrable Securities of the Preferred Investors
which is included or (b) to make a demand registration which could result in
such registration statement being declared effective prior to date that is one
year subsequent to the closing of an initial Public Offering.
Section 4.7 Termination of Registration Rights. The rights of the Rights
Holders under Sections 4.1 through 4.4 shall terminate on the first to occur of
(a) the seventh (7th) anniversary date of the closing of an initial Public
Offering and (b) with respect to each Rights Holder, on the date such Rights
Holder may sell all of his, her or its Registrable Securities in any three month
period pursuant to Rule 144 promulgated under the Securities Act, as such rule
may be amended from time to time, or any similar rule or regulation hereafter
promulgated by the Commission.
Section 4.8 Transfer of Registration Rights. Notwithstanding anything in
this Agreement to the contrary, upon the Transfer of Registrable Securities by
an Rights Holder to a Permitted Transferee, the rights of such Non-Management
Shareholder under this Article IV shall inure to the benefit of such Permitted
Transferee provided that the Company is given prompt notice of such Transfer and
to the extent exercising rights under this Article IV, such Permitted Transferee
shall be bound by the provisions of this Article IV.
Section 4.9 Rule 144. The Company covenants that it will file the reports
required to be filed by it under the Securities Act and the Exchange Act and the
rules and regulations promulgated thereunder (or, if the Company is not required
to file such reports, it will, following consummation of a Public Offering, make
publicly available other information as long as necessary under Rule 144
promulgated under the Securities Act) from the date of the Company's initial
Public Offering, and it will take such further action after such date as any
Rights Holder may reasonably request, all to the extent required from time to
time to enable such Rights Holder to sell Stock pursuant to Rule 144 under the
Securities Act, as such rule may be amended from time to time, or any similar
rule or regulation hereafter promulgated by the Securities and Exchange
Commission.
Section 4.10 Indemnification. The following indemnification provisions
shall apply to the matters described in this Article:
20
(a) With respect to each registration, qualification or compliance
effected pursuant to this Article, the Company shall indemnify and hold
harmless each Rights Holder and its Controlling Persons from and against,
and will reimburse such Rights Holder and each such Controlling Person with
respect to, any and all losses, claims, damages, liabilities and expenses
(including, without limitation, the costs and expenses of investigating,
preparing for and defending any legal proceeding, including reasonable
attorneys' fees) to which such Rights Holder or any such Controlling Person
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages, liabilities and expenses arise out of or are based
upon (i) any untrue statement (or alleged untrue statement) of a material
fact contained in any prospectus, preliminary prospectus, or Registration
Statement, or any amendment or supplement thereto, or (ii) 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 rule or regulation
promulgated thereunder and relating to action or inaction required of the
Company in connection with any such registration, qualification, or
compliance; provided, however, that the Company shall not be liable in any
case to the extent that any such loss, claim, damage, or liability (or
action in respect thereto) arises out of or is based upon any untrue
statement or omission made in any prospectus, preliminary prospectus, or
Registration Statement, or any amendment or supplement thereto, in reliance
upon and in conformity with written information furnished to the Company by
such Rights Holder or Controlling Person of such Shareholder specifically
for inclusion in such prospectus, preliminary prospectus, or Registration
Statement, or any amendment or supplement thereto.
(b) With respect to each registration, qualification, or compliance
effected pursuant to this Article for the benefit of a Rights Holder, such
Rights Holder shall indemnify the Company and each of its Controlling
Persons from and against, and will reimburse the Company and each such
Controlling Person with respect to, any and all losses, claims, damages,
liabilities and expenses (including, without limitation, the costs and
expenses of investigating, preparing for and defending any legal
proceeding, including reasonable attorneys' fees) to which the Company or
any such Controlling Person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities and
expenses arise out of or are based upon (i) any untrue statement (or
alleged untrue statement) of a material fact contained in any prospectus,
preliminary prospectus, or Registration Statement, or any amendment or
supplement thereto, or (ii) 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 to the extent that any such loss,
claim, damage, or liability (or action in respect thereto) arises out of or
is based upon any untrue statement or omission made in any prospectus,
preliminary prospectus, or Registration Statement, or any amendment or
supplement thereto, in reliance upon and in conformity with written
information furnished to the Company by such Rights Holder specifically for
inclusion in such prospectus, preliminary prospectus, or Registration
Statement, or amendment or supplement thereto; provided, however, that a
Rights Holder shall not be liable for any amount in excess of
21
the net proceeds of any such registration, qualification or compliance
which are received by such Rights Holder.
(c) Promptly after receipt by an indemnified party hereunder of
written notice of the commencement of any action or proceeding involving a
claim referred to in Sections 4.7(a) or (b), such indemnified party will,
if a claim in respect thereof is to be made against an indemnifying party,
give written notice to the indemnifying party of the commencement of such
action; provided, that the failure of any indemnified party to give notice
as provided in this subsection shall not relieve the indemnifying party of
its obligations under Sections 4.7(a) or (b) unless the indemnifying party
is actually prejudiced by such failure to give such notice. In case any
such action is brought against an indemnified party, the indemnifying party
will be entitled to participate in and to assume the defense thereof,
jointly with any other indemnifying party similarly notified to the extent
that it may wish, with counsel reasonably satisfactory to such indemnified
party; provided, however, if any indemnified party shall have reasonably
concluded that there may be legal defenses available to it which are
different from or additional to those available to the indemnifying party,
or if there is a conflict of interest that would prevent counsel for the
indemnifying party from also representing the indemnified party, the
indemnified party shall have the right to select separate counsel to
participate in the defense of such action on behalf of such indemnified
party. After notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party
will not be liable to such indemnified party pursuant to the provisions of
Sections 4.7(a) or (b) for any legal or other expense subsequently incurred
by such indemnified party in connection with the defense thereof, other
than reasonable costs of investigation, unless (i) the indemnified party
shall have employed counsel in connection with the proviso of the
immediately preceding sentence, (ii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party within a reasonable
time after the notice of the commencement of the action, or (iii) the
indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party. No
indemnifying party shall consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release
from all liability in respect of such claim or litigation.
(d) If the indemnification provided for in this Section from the
indemnifying party is unavailable to an indemnified party in respect of any
losses, claims, damages, liabilities or expenses referred to in this
Section, then the 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, claims, damages, liabilities
or expenses in such proportion as is appropriate to reflect the relative
fault of the indemnifying party and indemnified parties in connection with
the actions, statements or omissions which resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and
indemnified parties shall be determined by reference to, among other
things, whether in the case of an untrue statement of a material fact or
the omission to state a material fact,
22
such statement or omission relates to information supplied by the
indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. For purposes of this Section,
the term "damages" includes any legal or other expenses reasonably incurred
by the indemnified party in connection with investigating or defending
against or appearing as a third party witness in any action or claim that
is the subject of the contribution provisions of this Section. No Person
guilty of a fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any
Person who is not guilty of such fraudulent misrepresentation.
ARTICLE V
PREEMPTIVE RIGHTS AND ANTI-DILUTION PROTECTION
Section 5.1 Preemptive Rights. Subject to the provisions of Section 5.2,
each Non-Management Shareholder shall have the right of first refusal to
purchase all (or any part) of its pro rata portion of any additional shares of
Common Stock or other Equity Securities ("New Securities"), that the Company
may, from time to time, propose to sell and issue other than: (i) options issued
by the Company pursuant to its Long-Term Incentive Plan approved by the Board
(or shares issued upon the exercise thereof) or shares issued pursuant to that
certain Stock Option Agreement dated February 10, 1999 between ▇▇▇▇ ▇▇▇▇▇▇▇▇ and
the Company, (ii) shares issued upon the exercise of outstanding warrants to
acquire 1,000,000 shares of Series B Common Stock, (iii) shares of Common Stock
issued by the Company as a dividend, distribution or stock split pro rata among
all Shareholders (or similar action resulting in a pro rata distribution of
shares of Common Stock among all Shareholders), (iv) shares of Common Stock
issued by the Company as consideration for the acquisition of substantially all
the assets or at least fifty percent (50%) of the voting power of the equity
securities, of another corporation or other entity, (v) shares or Securities
issued to the Preferred Investors (including any securities acquired upon
exercise or conversion of securities issued to the Preferred Investors), and
(vi) shares issued in an initial Public Offering (the shares described in the
preceding clauses (i) through (vi) and any shares issued or issuable with
respect to such shares by way of a dividend, reclassification, stock split, or
other distribution or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise are
hereinafter referred to as the "Excluded Shares"). The pro rata portion of New
Securities which each party is entitled to purchase pursuant to this Article V
(subject to the provisions of Section 5.2) shall equal the ratio of (a) the
number of shares of Stock held by such party at the time the New Securities are
offered to (b) the number of shares of Common Stock held by all the Non-
Management Shareholders. For purposes of this Article V, the Staubach
Affiliated Shareholders shall be deemed to be a single party.
Section 5.2 Acceptance of Purchase Rights. If the Company proposes to
undertake an issuance of New Securities, it shall give each party having a right
of first refusal under this Article V written notice (the "Notice") of its
intention, describing the type of New Securities, the price, the amount of New
Securities to be issued, and the general terms and conditions upon
23
which the Company proposes to issue the same. Each party having a right of first
refusal under this Article V shall have fourteen (14) days from the giving of
such Notice to agree to purchase New Securities for the price and upon the terms
and conditions specified in the First Notice by giving written notice (the
"Acceptance Notice") to the Company and stating therein whether such party
desires to purchase the quantity (up to such party's pro rata portion) of the
New Securities such party is electing to purchase. The purchase of New
Securities by each party so electing shall take place no later than the twenty-
fourth (24th) day after the giving of the Notice.
Section 5.3 Sale of New Securities by the Company. If the parties having
a right of first refusal under this Article V fail to exercise such right within
fourteen (14) days from the giving of the Notice, the Company shall have ninety
(90) days thereafter to sell the New Securities in respect of which such
parties' rights were not exercised, at a price and upon terms and conditions no
more favorable to the purchasers thereof than specified in the Company's notice
pursuant to Section 5.2 above. If the Company has not sold the New Securities
within such ninety (90) days, the Company shall not thereafter issue or sell any
New Securities without first offering such securities to the parties having a
right of first refusal under this Article V in accordance with the provisions of
this Article V.
Section 5.4 Anti-Dilution Protection. If the Company proposes to issue any
shares of Common Stock (other than Excluded Shares as defined in Section 5.1) at
a New Price (as hereinafter defined) which is less than the Base Price (as
hereinafter defined), and the Staubach Affiliated Shareholders and the Private
Shareholders, acting as separate Shareholder Groups, shall elect not to exercise
their rights of first refusal pursuant to Section 5.2, then either the Staubach
Affiliated Shareholders, the Private Shareholders, the Preferred Investors (with
respect to shares of Common stock actually owned by them) or all of them, acting
as a group (in each case an Electing Shareholder Group") may elect at any time
within fifteen (15) days after notice of such new issuance, to have the Company
issue to the members of such Electing Shareholder Group, immediately upon the
issuance or sale of such Common Stock, without any further consideration due or
payable therefor by any member of an Electing Shareholder Group, such number of
shares of Common Stock determined by multiplying the number of shares of Common
Stock owned by such member of the Electing Shareholder Group by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately prior to such issuance plus the number of shares of additional
Common Stock to be issued at the New Price, and the denominator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
issuance plus the number of shares of Common Stock that the aggregate adequate
consideration to be received by the Company for such issuance would purchase at
the Base Price. For purposes of this Section 5.4, the "New Price" shall equal
the consideration per share received by the Company for the proposed issuance of
Common Stock, and the "Base Price" shall mean $1.00 per share (as adjusted for
stock splits, combinations and reclassifications and dividends paid in stock).
24
ARTICLE VI
LEGENDS AND FILING
Section 6.1 Legend on Certificates. The certificates representing the
shares of Stock owned by the Shareholders, whether now outstanding or hereafter
to be issued during the term of this Agreement, shall have conspicuously
endorsed upon them a legend in substantially the following form:
"The shares of stock represented by this certificate are subject to the
terms of an effective Shareholders' Agreement, a copy of which is on file
at the principal office of the Company. The shares represented hereby may
be voted and sold, transferred, assigned, pledged, encumbered, or otherwise
alienated only in accordance with the terms of the Shareholders' Agreement.
A copy of the Shareholders' Agreement shall be furnished without charge to
the holder of this certificate upon the receipt by the Company of a written
request therefor from the holder."
The Shareholders acknowledge that they understand that none of the shares
of Stock owned by them have been registered under the Securities Act or
registered or qualified under any state securities laws; that the provisions of
Rule 144 promulgated under the Securities Act currently are not available for
the public resale of the shares of Stock; that the shares of Stock therefore are
not and will not be Transferable in the absence of a Registration Statement with
respect to such shares or an applicable exemption from registration; and that
there may be typed or otherwise printed on the certificates representing the
shares of Stock a legend in substantially the following form:
"The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 or any other applicable state
securities laws and may not be offered for sale, sold, assigned,
transferred, pledged or otherwise disposed of unless either (i) such shares
are registered under the Securities Act of 1933 and registered or qualified
under any other applicable securities statute, or (ii) such shares may be
offered, sold, assigned, transferred, pledged, or otherwise disposed of
pursuant to an exemption from the registration requirements of the
Securities Act of 1933 and any other applicable securities statute. The
Company may, in its discretion, require delivery of an opinion of counsel,
in form and substance reasonably satisfactory to the Company, to the effect
such exemptions are available for the offer, sale, transfer, pledge or
other disposition of the Shares represented hereby."
Section 6.2 Filing of this Agreement. The parties hereto acknowledge and
agree that a copy of this Agreement shall be placed on file by the Company at
its principal place of business and shall be subject to the same right of
examination by any Shareholder, in person or by agent, attorney, or accountant,
as are the books and records of the Company.
25
ARTICLE VII
TERM AND ENFORCEMENT
Section 7.1 Term of Entire Agreement. This entire Agreement shall expire
or terminate upon (a) the distribution to the Shareholders of all proceeds (if
any) distributable to them as the result of the cessation of business,
bankruptcy, submission to receivership, or dissolution of the Company, (b) the
decision to so terminate evidenced by a document signed by Shareholders owning
at least seventy-five percent (75%) of the shares of Common Stock (including for
purposes of such calculation the shares issuable upon conversion of Series A
Preferred Stock and the Series B Amount) outstanding and subject to this
Agreement at the time of such decision, (c) the distribution to the Shareholders
of all proceeds (if any) distributable to them as the result of the sale of all
or substantially all of the assets of the Company, or (d) except with respect to
Articles I, IV and VIII, (except to the extent provided for therein), the
consummation of an initial Public Offering. No such termination shall, however,
negate, limit, impair, or otherwise affect any right, remedy, obligation, or
liability of any party hereto under this Agreement which matured or became
applicable before such termination.
Section 7.2 Specific Enforcement. Each Shareholder acknowledges and
agrees that a violation by him, her or it of any of the provisions of this
Agreement will cause irreparable damage to the Company and the other
Shareholders and that the Company and the other Shareholders will have no
adequate remedy at law for such violation. Accordingly, each party hereto
agrees that the Company and the non-violating Shareholders shall be entitled as
a matter of right to an injunction from any court of competent jurisdiction,
restraining any further violation of such provision or affirmatively compelling
such offender to carry out its obligations hereunder. Such right to injunctive
relief shall be cumulative and in addition to whatever remedies the Company or
non-violating Shareholders may have at law.
Section 7.3 Severability and Reformation. The parties hereto intend all
provisions of this Agreement to be enforced to the fullest extent permitted by
law. If, however, any provision of this Agreement is held to be illegal,
invalid, or unenforceable under any present or future law, such provision shall
be fully severable, and this Agreement shall be construed and enforced as if
such illegal, invalid, or unenforceable provision were never a part hereof, and
the remaining provisions shall remain in full force and effect and shall not be
affected by the illegal, invalid, or unenforceable provision or by its
severance. Further, the illegal, invalid, or unenforceable provision shall be
limited so that it will remain in effect to the fullest extent permitted by law.
Section 7.4 Attorneys' Fees. If any action at law or in equity is brought
by any party hereto to enforce the terms and conditions of this Agreement, the
party in whose favor a final judgment is entered shall be entitled, in addition
to any other relief which may be awarded, to recover from the other party or
parties, its reasonable attorneys' fees, together with such prevailing party's
other reasonable and necessary expenses incurred in connection with such
litigation.
26
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Information Rights.
(a) The Company shall deliver to each Non-Management
Shareholder:
(i) audited annual balance sheets, statements of income and
statements of cash flow of the Company within ninety (90) days following
the end of each fiscal year of the Company;
(ii) quarterly unaudited balance sheets, statements of
income and statements of cash flow of the Company within forty-five (45)
days of the close of each fiscal quarter of the Company;
(iii) unaudited monthly financial statements within thirty (30)
days of the close of each month; and
(iv) a copy of the Company's annual budget and operating plan,
including forecasted balance sheets, statements of income and statements of
cash flow (accompanied by the related assumptions and detail backup) on or
before December 31 of each year.
Each Non-Management Shareholder shall also have the right, upon reasonable
notice at its own expense, to inspect the books and records of the Company at
the Company's offices during normal business hours. The Non-Management
Shareholders acknowledge that the information provided may be confidential or
proprietary and agree to treat such information accordingly and to conduct any
such review in a manner so as to not unreasonably interfere with the business
activities of the Company.
(b) The rights set forth in Section 8.1(a) above terminate upon
an initial Public Offering; provided that for a period of three years following
an initial Public Offering the Company would, upon the request of any Non-
Management Shareholder, transmit copies of the Company's Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q, Report on Form 8-K and annual report to
shareholders promptly after such documents are filed with the Securities and
Exchange Commission.
Section 8.2 Notices. Any and all notices, consents, waivers, requests,
and other communications required or permitted to be given to the parties hereto
shall be in writing and transmitted by same-day or overnight courier for
personal delivery, by registered or certified mail, postage prepaid, return
receipt requested, or by facsimile, to the parties at the following addresses:
27
If to the Company: ASD Systems, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
If to any of the
Shareholders: At their respective addresses then set forth in the
stock records of the Company.
If to the Preferred
Investor: VantagePoint Venture Partners
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: 650.866.3100
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
Any of the above addresses may be changed only by giving notice of such change
of address to each of the other parties hereto. Any communication transmitted
in either manner described above in this Section shall be deemed sufficiently
given or otherwise effective upon delivery to the addressee (with the courier's
delivery receipt, the return receipt or the facsimile answer back being
conclusive evidence of such delivery) or at such time as delivery is refused by
the addressee.
Section 8.3 Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
Section 8.4 Inurement. Subject to the restrictions on Transfer contained
herein, the provisions of this Agreement shall inure to the benefit of, and
shall be binding upon, the assigns, successors in interest, and legal
representatives of each of the parties hereto.
Section 8.5 Amendment and Waiver. This Agreement may be amended only by
the written consent of Shareholders owning at least seventy-five percent (75%)
of the shares of Common Stock outstanding and subject to this Agreement at the
time of such amendment. No provision of this Agreement may be waived except by
a document executed by each party against which the waiver is sought to be
enforced.
Section 8.6 Entire Agreement. This Agreement contains the entire contract
and understanding among the parties hereto and supersedes all prior oral or
written agreements among the parties hereto, or between any of them, with
respect to the subject matter hereof. There are no representations, agreements,
or understandings, oral or written, between or among the parties hereto relating
to the subject matter of this Agreement which are not expressed or referred to
herein.
28
Section 8.7 Status of Spouses. Unless (a) shares of Stock are separately
issued by the Company to a spouse of a Shareholder in such spouse's own name,
(b) the Company acknowledges the proper Transfer of shares of Stock to such
spouse, or (c) the provisions of this Agreement otherwise expressly provide,
references to a "Shareholder" or to "Shareholders" (or any variation thereof)
shall not include the spouse of any of the Shareholders. If any married
Shareholder is required to sell his or her shares of Stock to the Company or the
other Shareholders pursuant to the terms of this Agreement, such Shareholder
hereby agrees to use his or her best efforts to cause any and all rights to and
interest in such shares of Stock that such spouse may then have (or claim to
have) to be sold, in like manner and upon the same terms and conditions, to the
Company or the other Shareholders.
Section 8.8 Descriptive Headings. The descriptive headings in this
Agreement have been used for convenience only and shall not be deemed to limit
or otherwise affect the construction of any of the provisions hereof.
Section 8.9 Gender. Whenever in this Agreement the context so requires,
the male gender shall include the female and neuter; the female gender shall
include the male gender and neuter; and the neuter shall include the male and
female.
Section 8.10 Further Acts. Each of the parties hereto shall perform all
such further acts and execute all such additional documents as may be necessary
or reasonably appropriate to effect the intent and purposes of this Agreement.
Section 8.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed an original and all
of which shall constitute the same instrument. This Agreement shall be
considered fully executed when all parties have executed an identical
counterpart, notwithstanding that all signatures may not appear on the same
counterpart.
Section 8.12 Amendment and Restatement. This Agreement amends and
restates in its entirety the Original Shareholders Agreement. Any issuances of
securities on or prior to the date hereof are consented to in all respects and
any preemptive rights or antidilution protections with respect thereto are
deemed waived.
29
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first above written.
THE COMPANY:
ASD SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
SHAREHOLDERS:
ASD PARTNERS, LTD., a Texas limited partnership
By: ASD GP, Inc., its general partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
VANTAGEPOINT VENTURE PARTNERS III (Q), L.P.
By: VANTAGE POINT ASSOCIATES III, LLC
-------------------------------------------------
Name: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------------
Title: ▇▇▇▇ ▇▇▇▇▇▇▇, Managing Member
-------------------------------------------
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------------------
/s/ ▇▇▇▇▇ ▇▇▇▇▇
----------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ as Attorneys-in-Fact
for each of the Staubach Affiliated Shareholders
listed in Schedule A-1 attached hereto
----------------------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as Attorney-in-Fact for each of the
Private Shareholders listed in Schedule A-2 attached
hereto
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
(Signature pages continued)
VANTAGE POINT COMMUNICATIONS
PARTNERS, L.P.
By: VANTAGEPOINT COMMUNICATIONS
ASSOCIATES, LLC
Name: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------------
Title: ▇▇▇▇ ▇▇▇▇▇▇▇, Managing Member
ASD SYSTEMS, INC.
SHAREHOLDERS' AGREEMENT
SCHEDULE A-1
Name of Shareholder Number of Shares of Common Stock Owned
------------------- --------------------------------------
▇▇▇▇▇ ▇▇▇▇▇ 50,000
▇▇▇▇▇▇▇ ▇▇▇▇ 180,000
▇▇▇▇▇ ▇▇▇▇▇▇▇ 50,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 75,000
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 25,000
▇▇▇▇▇▇ ▇▇▇▇ 25,000
▇▇▇▇▇ ▇▇▇▇▇ 25,000
▇▇▇▇▇ ▇▇▇▇▇▇▇ 25,000
▇▇▇▇ ▇▇▇▇▇▇▇ 75,000
CRYSTAL PARTNERS V 40,000
▇▇▇▇ ▇▇▇▇▇ 100,000
▇▇▇ ▇▇▇▇▇▇ 25,000
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 25,000
▇▇▇ ▇▇▇▇▇▇▇▇▇ 25,000
▇▇▇▇▇ ▇▇▇▇▇ 25,000
▇▇▇▇▇ ▇▇▇▇▇▇ 25,000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 25,000
▇▇▇▇ ▇▇▇▇▇ 25,000
▇▇▇▇▇▇▇ FAMILY PARTNERS, LTD. 100,000
▇▇▇▇▇ ▇▇▇▇▇▇ 25,000
▇▇▇ ▇▇▇▇▇▇ 100,000
▇▇▇▇▇ ▇▇▇▇▇▇▇ 50,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 50,000
▇▇▇ ▇▇▇▇▇▇▇▇ 30,000
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 25,000
▇▇▇ ▇▇▇▇ 50,000
▇▇▇▇▇ ▇▇▇▇▇▇▇ 30,000
▇▇▇▇ ▇▇▇▇ 25,000
▇▇▇▇ ▇▇▇▇▇▇▇ 25,000
▇▇▇▇▇ ▇▇▇▇▇ 75,000
▇▇▇▇▇ ▇▇▇▇▇▇▇ 25,000
SCHEDULE A-1 - Page 1
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 100,000
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ 75,000
▇▇▇▇ ▇▇▇▇▇▇▇ 25,000
▇▇▇▇ ▇▇▇▇▇▇▇ 25,000
▇▇▇▇▇ ▇▇▇▇ 100,000
▇▇▇▇ ▇▇▇▇▇▇ 25,000
▇▇▇▇ ▇▇▇▇▇▇▇ 220,000
▇▇▇▇▇ ▇▇▇▇▇ 75,000
▇▇▇▇▇▇ ▇▇▇▇▇▇ 25,000
▇▇▇▇▇▇▇ FAMILY LIMITED 100,000
PARTNERSHIP
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 25,000
▇▇▇▇▇ ▇▇▇▇▇ 25,000
▇▇▇▇▇ ▇▇▇▇▇▇▇ 100,000
SCHEDULE A-1 - Page 2
ASD SYSTEMS, INC.
SHAREHOLDERS' AGREEMENT
SCHEDULE A-2
Name of Shareholder Number of Shares of Common Stock Owned
------------------- --------------------------------------
CLB PARTNERS, LTD. 500,000
▇▇▇▇▇ ▇▇▇▇▇▇ 75,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 25000
▇▇▇▇▇▇ ▇▇▇▇ 75,000
▇▇▇▇▇ ▇▇▇▇ 75,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 50,000
▇▇▇ ▇▇▇▇▇▇▇ 25,000
RPM TECHINVESTOR 100,000
YELLOW SNOW ENTERPRISES, LLC 100,000
▇▇▇▇▇▇ ▇▇▇▇ SEPARATE PROPERTY TRUST 75,000
FIRST SECURITY COMPANY, II, L.P. 250,000
WILLOW CAPITAL PARTNERS, L.P. 250,000
FIRST SECURITY INTERNATIONAL FUND
LIMITED 250,000
FIRST SECURITY ASSOCIATES, L.P. 250,000
▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. 25,000
SCHEDULE A-2 - Page 1
ASD SYSTEMS, INC.
SHAREHOLDERS' AGREEMENT
SCHEDULE A-3
Name of Shareholder Number of Shares Owned
------------------- ----------------------
ASD PARTNERS, LTD. 6,000,000 Shares of Common Stock
SCHEDULE A-3 - Page 1
SCHEDULE B
Name of Shareholder Number of Shares Owned
------------------- ----------------------
VANTAGEPOINT VENTURE PARTNERS III, 740,741 Shares of Series A
(Q), L.P., A DELAWARE LIMITED Preferred Stock
PARTNERSHIP 740,741 Shares of Series B
Preferred Stock
VANTAGEPOINT COMMUNICATIONS 370,370 Shares of Series A
PARTNERS, L.P. Preferred Stock
370,370 Shares of Series B
Preferred Stock
SCHEDULE B - Page 1
