Exhibit 4.02
AMENDED AND RESTATED RIGHTS AGREEMENT
This Amended and Restated Rights Agreement (the "Agreement") is made as of
this 16th day of October, 1998, by and among Xxxxxxx.xxx, Inc., a California
corporation (the "Company"), the persons or entities listed on Schedule A
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attached hereto (individually, an "Investor," and collectively, the
"Investors"), the Founders (as hereinafter defined), and the shareholders named
on Schedule B attached hereto (individually, a "Shareholder," and collectively,
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the "Shareholders").
RECITALS
WHEREAS, the Company, the Founders and the Shareholders entered into that
certain Amended and Restated Registration Rights Agreement dated May 8, 1998
(the "Rights Agreement"), pursuant to which, among other things, the Company
granted certain registration and other rights to the Founders and such
Shareholders;
WHEREAS, the Company now proposes to issue and sell up to an aggregate of
710,000 shares of Series D Convertible Preferred Stock to the Investors pursuant
to a Series D Convertible Preferred Stock Purchase Agreement of even date
herewith (the "Purchase Agreement");
WHEREAS, pursuant to Section 9.3 of the Rights Agreement the parties
thereto wish to enter into this Agreement in order to amend, restate and replace
their rights and obligations under the Rights Agreement with the rights and
obligations set forth in this Agreement and to permit the Investors to become
parties to this Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing and of the mutual promises
and covenants contained herein, the parties agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
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shall have the following meanings:
1.1 Commission means the Securities and Exchange Commission, or any
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other federal agency at the time administering the Securities Act and the
Exchange Act.
1.2 Common Stock means (a) the Company's Common Stock, as authorized
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on the date of this Agreement, (b) any other capital stock of any class or
classes (however designated) of the Company, authorized on or after the date
hereof, the holders of which shall have the right, without limitation as to
amount, either to all or to a share of the balance of current dividends and
liquidating dividends after the payment of dividends and distributions on any
shares entitled to preference, and the holders of which shall ordinarily, in the
absence of contingencies or in the absence of any provision to the contrary in
the Company's Amended and Restated Articles of Incorporation, as amended (the
"Articles"), be entitled to vote for the
election of a majority of directors of the Company (even though the right so to
vote has been suspended by the happening of such a contingency or provision),
and (c) any other securities into which or for which any of the securities
described in (a) or (b) may be convened or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.
1.3 Exchange Act means the Securities Exchange Act of 1934, as
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amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
1.4 Founders means Xxxxxxx Xxxxxx and Xxxxx Xxxxxx.
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1.5 Founder Shares shall mean the shares of Common Stock that the
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Founders own, or have the right to acquire on the date hereof or in the future,
but excluding any such Common Stock that has been (a) registered under the
Securities Act pursuant to an effective registration statement filed thereunder
and disposed of in accordance with the registration statement covering them or
(b) publicly sold pursuant to Rule 144 under the Securities Act.
1.6 Indebtedness means with respect to any Person (a) all
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indebtedness or other obligations of such Person for borrowed money or for the
deferred purchase price of property or services, other than for trade accounts
payable incurred in the ordinary course of the Company's business, (b) all
Indebtedness described in clause (a) of any other Person in respect of which
such Person is liable, contingently or otherwise, to pay or advance money or
property as guarantor, endorser or otherwise (except as endorser for collection
in the ordinary course of business), and (c) all lease obligations of such
Person which are required, in accordance with generally accepted accounting
principles ("GAAP"), to be capitalized on the books of the lessee.
1.7 Person means an individual, corporation, partnership, joint
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venture, trust, or unincorporated organization, or a government or any agency or
political subdivision thereof.
1.8 Preferred Shares means the Series A Convertible Preferred Stock,
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Series B Convertible Preferred Stock, Series C Convertible Preferred Stock and
Series D Convertible Preferred Stock of the Company.
1.9 Qualified Public Offering means a public, underwritten offering
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of the capital stock of the Company which generates net proceeds to the Company
in excess of $15,000,000 and offers such shares of capital stock at a minimum
sale price of $8.28 (subject to adjustment for stock splits, stock dividends,
recapitalizations and the like).
1.10 Registrable Securities means any shares of Common Stock owned by
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an Investor or Shareholder as of the date hereof or its permitted successors and
assigns, including shares of Common Stock issued or issuable upon conversion of
any Preferred Shares; except for (i) any shares of such Common Stock (A) which
have at any time been sold by such parties other than to a permitted transferee,
as provided for in Section 2.8 hereof, of an Investor or a Shareholder, and (B)
which have at any time been sold in a registered public offering or pursuant to
Rule 144 promulgated under the Securities Act, and (ii) the Founder Shares.
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1.11 Securities Act means the Securities Act of 1933, as amended, or
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any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
1.12 Shares means any and all shares of Common Stock or Preferred
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Shares owned by an Investor or a Shareholder.
1.13 Subsidiary means any Person of which a Person at the applicable
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time owns or controls, directly or indirectly through one or more Subsidiaries,
a majority of the voting stock.
2. Registration Rights
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2.1 Piggyback Registrations.
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(a) If at any time or times the Company shall determine to
register any of its Common Stock or securities convertible into or
exchangeable for Common Stock under the Securities Act, whether in connection
with a public offering of securities by the Company (a "primary offering"), a
public offering thereof by shareholders (a "secondary offering"), or both (but
not in connection with a registration effected solely to implement an employee
benefit plan or a transaction to which Rule 145 or any other similar role of
the Commission under the Securities Act is applicable), the Company will
promptly give written notice thereof to the holders (the "Holders") of
Registrable Securities and Founder Shares then outstanding, and will use its
best efforts to effect the registration under the Securities Act of all
Registrable Securities and Founder Shares which the Holders may request in a
writing delivered to the Company within fifteen (15) days after the notice
given by the Company; provided, however, that the number of shares of
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Registrable Securities and Founder Shares to be included in such an
underwriting may be reduced (pro rata among the requesting Holders based upon
the number of shares of Registrable Securities and Founder Shares owned by all
such Holders) if and to the extent that the managing underwriter shall be of
the opinion that such inclusion would adversely affect the marketing of the
securities to be sold by the Company therein, provided, that the Company shall
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first exclude from such registration, in the following order, all shares of
Common Stock sought to be included therein by (i) any holder thereof not
having any such contractual, registration rights, and (ii) any holder thereof
having contractual, registration rights subordinate and junior to the rights
of the Holders of Registrable Securities or Founder Shares, provided further,
that in no event shall the Registrable Securities and the Founder Shares be
reduced to less than thirty percent (30%) of the of the aggregate shares to be
offered in any such offering. For purposes of the preceding parenthetical
concerning pro rata apportionment, for any selling shareholder that is a
Holder of Registrable Securities and that is a partnership or corporation, the
partners, retired partners and shareholders of such Holder, or the estates and
family members of any such partners and retired partners and any trusts for
the benefit of any of the foregoing persons shall be deemed to be a single
selling Holder, and any pro rata reduction with respect to such selling
Holder shall be based upon the aggregate amount of Registrable Securities
owned by all such related entities and individuals.
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(b) Underwriting. If the registration of which the Company gives
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notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 2.1 (a). In such event the right of any Holder to
registration pursuant to Section 2.1 shall be conditioned upon such Holder's
participation in such underwriting to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company and the other holders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the managing underwriter selected for such underwriting by the Company
in the event of an offering pursuant to this Section 2.1 and by two-thirds of
the Holders, subject to the approval of the Company, which at royal shall not be
unreasonably withheld, in the event of an offering pursuant to Section 2.2 or
Section 2.3 below. Notwithstanding any other provision of this Section 2.1, if
the managing underwriter determines that marketing factors require limitation of
the number of shares to be underwritten, the managing underwriter may limit the
Registrable Securities and Founder Shares to be included in such registration as
provided for in Section 2.1(a) above. To facilitate the allocation of shares in
accordance with the provisions of Section 2.1(a) above, the Company may round
the number of shares allocated to any Holder or holder to the nearest 100
shares. If any Holder or holder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the managing underwriter. Any securities withdrawn from such
underwriting shall be withdrawn from such registration, and shall not be
transferred in a public distribution prior to ninety (90) days after the
effective date of the registration statement relating thereto, or such other
shorter period of time as the underwriters may require.
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2.2 Form S-3.
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(a) If the Company becomes eligible to use Form S-3, the Company shall
use its reasonable efforts to continue to qualify at all times for registration
on Form S-3. If and when the Company becomes entitled to use Form S-3, the
Holders of Registrable Securities shall have the right to request registration
of shares of Registrable Securities held by them on Form S-3 for a public
offering of shares of Registrable Securities, of which the reasonably
anticipated aggregate price to the public, net of underwriting discounts and
commissions, is $2,500,000; provided, however, that the Company shall not be
obligated to effect more than three (3) registrations pursuant to this Section
2.2 and provided further that the Company shall not be obligated to effect more
than two (2) registrations pursuant to this Section 2.2 in any twelve (12) month
period. Such requests shall be in writing and shall state the number of shares
of Registrable Securities to be disposed of and the intended method of
disposition of such shares by such Holder or Holders. The Company shall use best
efforts to maintain such registration under this Section 2.2 until the earlier
of (i) 180 days from the effectiveness of such registration or (ii) the date
that all such shares so registered under the Form S-3 registration have been
sold. Notwithstanding the foregoing, the Company shall not be required to effect
a registration under this Section 2.2 if such Holders of Registrable Securities
may then sell all Registrable Securities within a 90 day period without
registration under the Securities Act. The substantive provisions of Section 2.1
(b) shall be applicable to each underwritten registration initiated under this
Section 2.2(a).
(b) Notwithstanding the foregoing, the Company shall not be
obligated to take any action pursuant to this Section 2.2:
(1) in any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required
by the Securities Act;
(2) if the Company, within ten (10) days of the receipt of
the request of the Holders of Registrable Securities, gives notice of its bona
fide intention to effect the filing of a registration statement with the
Commission within sixty (60) days of receipt of such request (other than with
respect to a registration statement relating to a Rule 145 transaction, an
offering solely to employees or any other registration which is not
appropriate for the registration of Registrable Securities);
(3) within one hundred twenty (120) days of the effective
date of any registration, provided that the Company is actively employing in
good faith all reasonable efforts to cause such registration statement to
become effective; or
(4) if the Company shall furnish to such Holders of
Registrable Securities a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors it would be
seriously detrimental to the Company for the registration statement to be
filed at such time, then the Company's obligation to use its best efforts to
file a registration statement shall be deferred for a period not to exceed
ninety (90)
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days from the receipt of the request to file such registration by such Holders,
provided that the Company may not use this right more than once in any twelve
(12) month period.
2.3 Request for Registration.
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(a) If the Company shall receive at any time after the 180 day
period following the Company's initial public offering, a written request from
Holders of an aggregate of not less than fifty percent (50%) of Registrable
Securities then outstanding that the Company file a registration statement
under the Securities Act covering the registration of Registrable Securities
having an aggregate proposed offering price to the public, net of underwriting
discounts and commission of not less than $5,000,000 and not previously
registered pursuant to a registration under the Securities Act, then the
Company shall, on one occasion only:
(i) within ten (10) clays of the receipt thereof, give
written notice of such request to all Holders of Registrable Securities; and
(ii) effect as soon as practicable, and in any event within
sixty (60) days of the receipt of such request, the registration under the
Securities Act of all Registrable Securities which the Holders of Registrable
Securities request to be registered.
(b) Notwithstanding the foregoing, if the Company shall furnish
to Holders of Registrable Securities requesting a registration statement
pursuant to this Section 2.3, a certificate signed by the President of the
Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
shareholders for such registration statement to be filed and it is therefore
essential to defer the filing of such registration statement, the Company
shall have the right to defer taking action with respect to such filing for a
period of not more than ninety (90) days after receipt of the request of the
Holders; provided, however, the Company may not use this fight more than once
in any twelve (12) month period.
2.4 Registration Expenses. (a) In the event of a registration
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described in Sections 2.1.2.2 and 2.3, all expenses of registration and offering
of the Company and the Holders participating in the offering including, without
limitation, printing expenses, fees and disbursements of counsel, and
independent public accountants, fees and expenses (including, without
limitation, counsel fees incurred in connection with complying with state
securities or "blue sky" laws, fees of the National Association of Securities
Dealers, Inc. and fees of transfer agents and registrars), shall be borne by the
Company, except that the Holders shall bear underwriting commissions and
discounts attributable to their Registrable Securities or Founder Shares, as the
case may be, being registered. Notwithstanding the foregoing, the Company shall
pay reasonable legal fees for one special counsel to the Holders.
2.5 Further Obligations of the Company. Whenever under the preceding
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sections of this Agreement the Company is required hereunder to register
Registrable Securities or Founder Shares, it agrees that it shall also do the
following:
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(a) Use its best efforts to diligently prepare for filing with the
Commission a registration statement and such amendments and supplements to said
registration statement and the prospectus used in connection therewith as may be
necessary to keep said registration statement effective and to comply with the
provisions of the Securities Act with respect to the sale of securities covered
by said registration statement for the period necessary to complete the proposed
public offering;
(b) Furnish to each selling Holder such copies of each
preliminary and final prospectus and such other documents as such Holder may
reasonably request to facilitate the public offering of its Registrable
Securities or Founder Shares;
(c) Enter into and perform its obligations under an underwriting
agreement with provisions reasonably required by the proposed underwriter for
the selling Holders, if any; and
(d) Use its best efforts to register or qualify the Registrable
Securities and Founder Shares covered by said registration statement under the
securities or "blue-sky" laws of such jurisdictions as any selling holder of
Registrable Securities or Founder Shares may reasonably request, provided that
the Company shall not be required to register in any states which shall require
it to qualify to do business or subject itself to general service of process as
a condition of such registration.
2.6 Indemnification.
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(a) Incident to any registration referred to in this Agreement,
and subject to applicable law, the Company will indemnify each underwriter,
each Holder of Registrable Securities and Founder Shares so registered, each
person controlling any of them, and the partners or officers, directors and
shareholders of each Holder against all claims, losses, damages and
liabilities (joint or several), including legal and other expenses reasonably
incurred in investigating or defending it against the same, arising out of any
untrue or alleged untrue statement of a material fact contained in any
prospectus or other document (including any related registration statement or
any amendments or supplements thereto) or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, or arising out of any violation or
alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities or "blue-sky" laws or any rule or regulation thereunder in
connection with such registration; provided, however, that the Company will
not be liable in any case to the extent that any such claim, loss, damage or
liability arises out of or is based upon an untrue statement or omission based
upon information furnished in writing to the Company by such Holder expressly
for use therein.
(b) In the event of any registration of any of the Registrable
Securities or Founder Shares under the Securities Act pursuant to this
Agreement, each seller of Registrable Securities or Founder Shares included in
such registration, as the case may be, will indemnify and hold harmless the
Company, each of its directors and officers and each underwriter (if any) and
each person, if any, who controls the Company or any such underwriter within the
meaning of the Securities Act or the Exchange Act against any claims, losses,
damages and liabilities
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(joint or several), including legal and other expenses reasonably incurred in
investigating or defending it against the same, arising out of any untrue or
alleged untrue statement of a material fact contained in any prospectus or other
document (including any related registration statement or any amendments or
supplements thereto) or any omission or alleged omission to state thereto a
material fact required to be stated therein or necessary to make the statements
therein not misleading, provided that the statement or omission was made in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of such selling Holder, expressly for use in connection
with the preparation of such registration statement, prospectus, amendment of
supplement; provided, however, that the obligations of such selling Holders
hereunder shall be limited to an amount equal to the net proceeds to each Holder
of Registrable Securities or Founder Shares sold as contemplated herein.
(c) Each party entitled to indemnification under this Section
2.6 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to assume the defense of
any such claim or any litigation resulting therefrom, provided that counsel
for the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval shall
not unreasonably be withheld), and the Indemnified Party may participate in
such defense at such party's expense, provided; however, that the Indemnified
Party shall have the right to retain its own counsel, with the fees and
expenses to be paid by the Indemnifying Party, if representation of such
Indemnified Party by the counsel retained by the Indemnifying Party would be
appropriate due to actual or potential differing interests between such
Indemnified Party and any other party represented by such counsel in such
proceeding, and provided further that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 2.6 unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such
action and provided further, that the Indemnifying Party shall not assume the
defense for matters as to which there is a conflict of interest or separate
and different defenses. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement.
(d) If the indemnification provided for in this Section 2.6 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any losses, claims, damages or liabilities referred to
herein, the Indemnifying Party, in lieu of indemnifying such Indemnified Party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such Indemnified Party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party on the one hand and of the
Indemnified Party on the other in connection with the act or omission that
resulted in such loss, claim, damage or liability, as well as any other
relevant equitable considerations. The relative fault of the Indemnifying
Party and of the Indemnified Party shall be determined by a court of law by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates
to information supplied by the Indemnifying Party or by the Indemnified
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Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission; provided, that in
no event shall any contribution by a Holder hereunder exceed the net proceeds
from the offering received by such Holder.
2.7 Rule 144 Requirements. If the Company becomes subject to the
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reporting requirements of either Section 13 or Section 15(d) of the Exchange
Act, the Company will use its best efforts to file with the Commission such
information as the Commission may require under either of said Sections; and in
such event, the Company shall use its best efforts to take all action as may be
required as a condition to the availability of Rule 144 under the Securities Act
(or any successor exemptive rule hereinafter in effect). The Company shall
furnish to any Holder of Registrable Securities or Founder Shares upon request,
a written statement executed by the Company as to the steps it has taken to
comply with the current public information requirements of Rule 144.
2.8 Transfer Of Registration Rights. The registration rights of the
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Holders under Section 2 of this Agreement may be transferred to any transferee
of any Registrable Securities or Founder Shares who (i) is a Holder of
Registrable Securities or Founders Shares as of the date of this Agreement, (ii)
is an affiliate, as that term is defined in the Investment Company Act of 1940,
of a Holder of Registrable Securities as of the date of this Agreement
(including a partner of such Holder), (iii) is the owner of an investment
account which is managed or advised by an Investor, Technology Crossover
Management IL L.L.C. ("TCV") or by Geocapital Management, L.P. ("GeoCapital"),
or by an affiliate of an Investor, TCV or Geocapital (iv) acquires at least
100,000 shares of Common Stock, assuming conversion of all Preferred Shares (or
such lesser number of shares of Common Stock which constitutes the total number
of shares of Common Stock purchased by the transferring Holder of Registrable
Securities or Founder Shares under this Agreement) (as adjusted for stock
splits, stock dividends, reclassifications, recapitalizations or other similar
events), (v) receives such Registrable Securities as a result of a
reorganization, distribution, dissolution or other such similar event undertaken
by OnWord Information, Inc. or (vi) is a subsidiary, parent, partner, limited
partner, retired partner or shareholder of a Holder. Each such transferee shall
be deemed to be a "Holder" for purposes of this Agreement; provided, that, no
transfer of registration rights by a Holder pursuant to this Section 2.8 shall
create any additional rights in the transferee beyond those rights granted to
Holders in this Agreement.
2.9 Granting Of Registration Rights. The Company shall not, without
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the prior written consent of the holders of at least a majority in interest of
the Registrable Securities, grant any rights to any Persons to register any
shares of capital stock or other securities of the Company if such rights could
reasonably be expected to be superior to or be on parity with, the rights of the
Holders of Registrable Securities granted pursuant to this Agreement.
2.10 Termination of Registration Rights. The obligations of the
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Company pursuant to this Section 2 shall terminate with respect to any Holder on
the date on which the Holder can sell any Registrable Securities or Founder
Shares under Rule 144(k) or sell all of his/her remaining Registrable Securities
or Founder Shares under Rule 144 during any three (3) month period.
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3. Right of First Refusal and Co-Sale.
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3.1 Right of First Refusal on Sales.
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(a) Sales to Third Parties. If at any time an Investor or a
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Shareholder (an "Offeror") desires to sell, transfer or otherwise dispose of
all or any part of his Shares pursuant to a bona fide offer from a third party
(the "Proposed Transferee"), such Offeror shall submit a written offer (the
"Offer") to sell such Shares (the "Offered Shares") to the Company and the
other parties hereto (the "Purchasing Parties") on terms and conditions,
including price (the "Offered Price"), not less favorable to the Purchasing
Parties than those on which the Offeror proposes to sell such Offered Shares
to the Proposed Transferee. The Offer shall disclose the identity of the
Proposed Transferee, the Offered Shares proposed to be sold, the total number
of Shares owned by the Offeror, the terms and conditions, including the
Offered Price and any other material facts relating to the proposed sale and
shall include a copy of any written proposal, term sheet or other agreement
relating to the proposed transfer. The Offer shall further state that the
Purchasing Parties may acquire, in accordance with the provisions of this
Agreement, the Offered Shares for the Offered Price and upon the other terms
and conditions, including deferred payment (if applicable), set forth therein.
(b) The Company's and the Purchasing Parties' Right of First
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Refusal.
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(i) The Company shall have the opportunity to purchase all
or any part of the Offered Shares. If the Company desires to purchase all or
any pan of the Offered Shares, it must, within the fifteen (15) day period
(the "Company Refusal Period") commencing on the date of the Offer, give
written notice to the Offeror of the Company's election to purchase the
Offered Shares. In the event that the Company elects not to purchase all of
the Offered Shares, the remaining Offered Shares may be purchased by the
Investors and Shareholders as set forth below. Within fifteen (15) days after
expiration of the Company Refusal Period, the Company will give written notice
(the "Company's Expiration Notice") to the Shareholders and the Investors
specifying either (A) that all or a portion of the Offered Shares was
subscribed by the Company exercising its Right of First Refusal or (B) that
the Company waived its right to purchase any of the Offered Shares.
Notwithstanding any failure by the Company to deliver a Company's Expiration
Notice, a failure by the Company to exercise its rights within the Company
Refusal Period shall be deemed a waver of such right.
(ii) In the event the Company does not purchase all of the
Offered Shares, each Investor and Shareholder (excluding the Offeror) shall
have the opportunity to purchase its pro rata share of the remaining Offered
Shares. For purposes of this Section 3 only, an Investor's and a Shareholder's
pro rata share shall be determined by dividing the number of Shares held by
the Investor or Shareholder by the total number of Shares held by all
Investors and Shareholders. For purposes of this Section 3, all of the shares
of the Company's Common Stock which a party has the fight to acquire from the
Company upon the conversion, exercise or exchange of any of the securities of
the Company then owned by such party shall be deemed to be Shares then owned
by such party. (The amount of Offered Shares that each Investor and
Shareholder is entitled to purchase under this Section 3.1 (b) shall be
referred to as its "Pro Rata
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Fraction"). If any Investor or Shareholder, or their respective assignees,
desire to purchase any of the remaining Offered Shares, such Investor or
Shareholder must, within a ten (10) day period (the "Investor Refusal Period")
commencing on the later of the date of (A) the Company's Expiration Notice or
(B) by the 30th day after the Offer, give written notice ("Investor Notice") to
the Offeror and to the Company of such party's election to purchase its Pro Rata
Fraction of the Offered Shares. In the event that any Investor or Shareholder
elects not to purchase its Pro Rata Fraction of the Offered Shares, such
Investor and Shareholder shall, within five (5) days after the expiration of the
Investor Refusal Period, give written notice ("Investor's Expiration Notice") to
the Offeror that such Investor or Shareholder is waiving its right to purchase
its Pro Rata Fraction of the Offered Shares. Any Offered Shares not purchased by
an Investor or Shareholder may be purchased by the other Investors and
Shareholders. Notwithstanding any failure by an Investor or Shareholder to
deliver an Investor's Expiration Notice, a failure by an Investor or Shareholder
to exercise its Right of First Refusal within the Investor Refusal Period shall
be deemed a waiver of such right.
(c) Closing on Offered Shares. Sales of the Offered Shares to be sold
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to the Company, the Investors or the Shareholders pursuant to this Section 3
shall be made at the offices of the Company on the 45th day following the date
the Offer was made (or if such 45th day is not a business day, then on the next
succeeding business day). Such sales shall be effected by the Offeror's delivery
to the Purchasing Party of a certificate or certificates evidencing the Offered
Shares to be purchased by it, duly endorsed for transfer to such Purchasing
Party, against payment to the Offeror of the Offered Price therefor by such
Purchasing Party. If the Offered Price includes consideration other than cash,
the cash equivalent value of the non-cash consideration will be determined by
the Board of Directors of the Company in good faith, which determination will be
binding upon the parties absent fraud or error.
(d) Sales to Proposed Transferee. If the Purchasing Parties do not
----------------------------
purchase all of the Offered Shares, the Offered Shares not so purchased may be
sold by the Offeror at any time within ninety (90) days after the date the Offer
was made, subject to the provisions of Sections 3.2 and 3.3 below. Any such sale
shall be to the Proposed Transferee, at not less than the Offered Price and upon
other terms and conditions, if any, not more favorable to the Proposed
Transferee than those specified in the Offer. Any Offered Shares not sold within
such 90-day period shall continue to be subject to the requirements of a prior
offer pursuant to this Section 3.1. If Offered Shares are sold pursuant to this
Section 3.1 to any purchaser who is not a party to this Agreement, the Offered
Shares so sold shall no longer be subject to this Agreement.
3.2 Right of Participation in Sales by a Shareholder.
------------------------------------------------
(a) Co-Sale Right. If at any time an Offeror desires to sell all or
-------------
any part of the Shares owned by him to any Proposed Transferee in accordance
with Section 3.1, each of the other Investors and Shareholders shall have the
right to sell to the Proposed Transferee, as a condition to such sale by the
Offeror, upon the same economic terms and legal conditions as involved in such
sale by the Offeror, a number of Shares equal to the Investor's or the
Shareholder's Pro Rata Fraction of the Offered Shares. In the event that the
Investor or the
11
Shareholder does not hold any of the series, class or type of Shares that the
Proposed Transferee proposes to purchase from the Offeror and the Proposed
Transferee is unwilling to purchase a different series, class or type of Shares
from the Investor or Shareholder, then the Investor or Shareholder shall have
the Put Right set forth in Section 3.4 below with respect to its Pro Rata
Fraction of the Offered Shares.
(b) Notice of Intent to Participate. Each Investor and Shareholder
-------------------------------
wishing to so participate in any sale under this Section 3.2 shall notify the
Offeror in writing of such intention as soon as practicable after such
Investor's and Shareholder's receipt of the Offer made pursuant to Section 3.1,
and in any event within ten (10) days after the date of the Investor's
Expiration Notice. Such notification shall be delivered in person or mailed to
the Offeror at the address set forth in accordance with Section 9.4 below.
(c) Sale to Proposed Transferee. The Offeror and each participating
---------------------------
Investor and Shareholder shall sell to the Proposed Transferee those Shares
proposed to be sold by the Offeror and the participating Investor and/or
Shareholder at not less than the Offered Price and upon other terms and
conditions, if any, not more favorable to the Proposed Transferee than those in
the Offer provided by the Offeror under Section 3.1 above.
(d) Continuation of Restrictions. Any Shares sold by the Offeror
----------------------------
and/or participating Investor or Shareholder to any third party pursuant to this
Section 3.2 shall still be subject to the restrictions or benefits imposed by
Section 3 of this Agreement, and such third party shall be required to execute a
counterpart of this Agreement.
3.3 Prohibited and Permitted Transfers.
----------------------------------
(a) Prohibited Transfers. Neither an Investor nor a Shareholder may
--------------------
sell, assign, transfer, grant an option to or for, pledge, hypothecate,
mortgage, encumber or dispose of all or any of his Shares except as expressly
provided in this Agreement.
(b) Permitted Transfers. Notwithstanding the foregoing, the terms and
-------------------
conditions of Sections 3.1 and 3.2 hereof shall not apply to any Permitted
Transfer by an Investor or a Shareholder. For purposes of this Agreement,
"Permitted Transfer" means any transfer by an Investor or a Shareholder (a) of
such party's Shares to or for the benefit of any parent, sibling, spouse, child
or grandchild Of such Investor or Shareholder, or to a mist for the benefit of
any of the foregoing, or (b) by will or the laws of descent and distribution to
a Permitted Transferee (any person referred to in this paragraph being defined
as a "Permitted Transferee"), (c) of up to one percent (1%) of the shares of
Common Stock of the Company then outstanding on a fully-diluted and as converted
to Common Stock basis in any twelve (12) month period, (d) to an affiliate (as
that term is defined in the Securities Act) or (e) the transfer of Preferred
Shares or Common Stock by virtue of a reorganization, distribution, dissolution
or other such similar event undertaken by OnWord Information, Inc.; provided,
that it shall be a condition of each such transfer that the Permitted Transferee
agree to be bound by the terms and conditions of Section 3 of this Agreement as
an Investor or Shareholder and executes a counterpart of Section 3 of this
Agreement.
12
As used hereto, the term "Shareholder" and "Investor" are deemed to include
any Permitted Transferees of the Shareholder or Investor, except as expressly
provided otherwise.
3.4 Put Right. In the event of any sale, transfer, assignment or
---------
disposition of any Shares by an Investor or Shareholder in violation of any
provision of this Section 3 (a "Violating Investor"), the other Investors and
Shareholders shall each have the right to elect to cause such Violating Investor
to purchase, and such Violating Investor shall be obligated to purchase, from
such Investor and Shareholder, and at the same price per share and on the same
terms and conditions as involved in such sale by such Violating Investor, such
number of shares of capital stock {calculated on a fully-diluted basis) equal to
the number of Shares sold by such Violating Investor multiplied by a fraction,
the numerator of which is the aggregate number of Shares owned by such Investor
or Shareholder and the denominator of which is the sum of all Shares owned by
all Investors and Shareholders desiring to sell shares to such Violating
Investor under this Section 3.
4. Right to Participate in Sale of Additional Securities.
-----------------------------------------------------
4.1 Right of First Offer. The Company hereby covenants and agrees
--------------------
that it shall not, until such date as the Company completes a Qualified Public
Offering, issue or sell any (i) shares of capital stock of the Company, (ii)
securities convertible into or carrying any rights to purchase capital stock of
the Company, or (iii) options, warrants or other right to subscribe for,
purchase or otherwise acquire any capital stock of the Company, other than in
connection with such Qualified Public Offering, unless (a) the Company has
received a bona fide, arms' length offer to purchase such securities from a
third party and (b) the Company first submits a written offer (the "Written
Offer") to each Investor and Shareholder that, together with its affiliates,
owns in the aggregate at least 100,000 Shares, to permit them to purchase their
"proportionate share" of such securities on terms and conditions, including
price, not less favorable to the Investors and Shareholders than those offered
by such other prospective purchaser. Each Investor and Shareholder shall have
the right to elect to purchase a number of such securities based on the ratio
which the Common Stock of the Company owned by the Investor or Shareholder or
obtainable by said Investor or Shareholder upon conversion of the Preferred
Shares owned by him (as the case may be) bears to all the issued and outstanding
shares of Common Stock of the Company, including shares of Common Stock issuable
upon exercise or conversion of any outstanding Preferred Shares or other
convertible securities. The Company's offer to the Investors and Shareholders
shall remain open and irrevocable for a period of thirty (30) days following
receipt by the Investors and Shareholders of the Written Offer. Promptly upon
the expiration of such thirty (30) day period, the Company shall, in writing,
inform each Investor and Shareholder which elects to purchase all the securities
available to it of any other Investor's or Shareholder's failure to do likewise.
During the ten (10) day period commencing after the receipt of such information,
each fully-exercising Investor and Shareholder shall have the right to elect to
purchase up to its proportionate share of the securities not subscribed for by
the other Investors and Shareholders based on the ratio which the Common Stock
of the Company owned by the fully exercising Investor or Shareholder or
obtainable by said Investor or Shareholder upon conversion of the Preferred
Shares owned by him bears to the Common Stock of the Company owned by, or
obtainable upon conversion of the Preferred Shares owned by all
13
fully exercising Investors and Shareholders who desire to purchase certain of
the unsubscribed for securities.
4.2 Transfer of Rights. Any Investor or Shareholder may transfer its
------------------
right to be offered any such opportunity to any transferee who (i) is an
Investor or Shareholder, (ii) is an affiliate, as that term is defined in the
Securities Act, of an Investor or Shareholder (including a partner of an
Investor or Shareholder), (iii) has theretofore acquired from an Investor or
Shareholder at least 100,000 Shares (or such lesser number of Shares which
constitutes the total number of Shares purchased by the transferee under this
Agreement) (as adjusted for stock splits, stock dividends, reclassifications,
recapitalizations or other similar events) or (iv) receives Preferred Shares or
Common Stock by virtue of a reorganization, distribution, dissolution or
liquidation or such other similar event undertaken by On Word Information, Inc.
or (v) is a subsidiary, parent, partner, limited partner, retired partner or
shareholder of an Investor or Shareholder.
4.3 Sale by Company. Any securities offered to the Investors and
---------------
Shareholders pursuant to this Section 4 which such Investors and Shareholders
have not elected to purchase within the time fixed herein may, within ninety
(90) days after the date for making such election, be sold by the Company at not
less than the same price and upon terms not materially less favorable to the
Company than were offered to the Investors and Shareholders but may not
otherwise be sold without renewed compliance with this Section 4.
4.4 Excluded Securities. Notwithstanding the above, the Company may
-------------------
from the date hereof, without having offered such securities to the Investors
and Shareholders, issue (i) up to an aggregate of 750,588 shares of Common Stock
(as adjusted for stock splits, stock dividends, reclassifications,
recapitalizations or other similar events) for issuance to or for the benefit of
employees or directors, consultants, and others pursuant to warrants or stock
option, stock purchase or similar plans approved by the Board of Directors; (ii)
securities offered to the public in a Qualified Public Offering; (iii)
securities issued pursuant to the acquisition of another corporation by the
Company by merger, purchase of substantially all of the assets or other
reorganization whereby the Company or its purchasers own not less than fifty-one
percent (51%) of the voting power of the surviving or successor corporation;
(iv) up to an aggregate of 710,000 shares of Series D Convertible Preferred
Stock; (v) Common Stock issued upon conversion of the Preferred Shares; (vi)
warrant or warrants for the purchase of shares of capital stock of the Company
(and stock issued upon exercise of such warrant or warrants) which have been
approved by the Board of Directors of the Company and issued in connection with
an equipment lease, equipment financing or bank line financing; or (vii) stock
issued in connection with stock splits, stock dividends, recapitalizations and
the like by the Company.
5. Termination of Rights Under Sections 3 and 4. The rights and
--------------------------------------------
obligations granted to the parties pursuant to Sections 3 and 4 of this
Agreement shall terminate upon a Qualified Public Offering.
6. Legends. Any certificates representing shares of capital stock subject
-------
to this Agreement shall bear a legend indicating the existence of the
restrictions imposed hereunder.
14
7. Lock-Up Agreement. Each of the Founders, Investors and Shareholders
-----------------
hereby agree that in connection with the Company's initial public offering, upon
the request of the Company or the principal underwriter managing the initial
public offering, not to sell, make any short sale of, loan, grant an option for
the purchase of, or otherwise dispose of any Registrable Securities now owned or
hereafter acquired by him without the prior written consent of the Company or
such managing underwriter, as the case may be, for one hundred and eighty (180)
days or such other shorter period of time as such underwriter may specify;
provided (i) that the officers, directors, each of the Investors and any
shareholder holding more than one percent (1%) of the outstanding voting
securities of the Company also agree to such restriction and (ii) any
discretionary waiver or termination of these restrictions by the Company or the
managing underwriter shall apply to all persons subject to such agreements pro-
rata based on the number of shares held by such persons on a fully-diluted and
as-converted to Common Stock basis.
8. Covenants Of The Company.
------------------------
So long as an Investor or Shareholder, together with any of its affiliates,
holds in the aggregate, at least 100,000 Shares, and until the Company completes
a Qualified Public Offering, the Company shall comply with the following
covenants.
8.1 Financial Statements: Restatements and Accounting Provision. The
-----------------------------------------------------------
Company shall furnish to the Investors and Shareholders the following reports:
(a) within one hundred and twenty (120) days after the end of each fiscal year,
an audited consolidated balance sheet of the Company as at the end of such year,
together with audited consolidated statements of income, shareholders' equity
and cash flows of the Company for such year, certified by independent public
accountants of recognized standing (which shall be one of the six largest
independent public accounting firms in the United States, or such other
independent public accountants of recognized national or regional standing as
may be approved by the Board of Directors of the Company) prepared in accordance
with GAAP; (b) within forty-five (45) days after the end of each quarter, an
unaudited consolidated balance sheet of the Company as of the end of such
quarter, an unaudited consolidated statement of invoice and cash flows for the
Company for such quarter and for the year to date prepared in accordance with
GAAP (except that such financial statements need not contain footnotes or other
normal year end adjustments) and fairly reflecting the financial affairs of the
Company subject to year-end adjustments; (c) within thirty (30) days after the
end of each month, an unaudited consolidated balance sheet of the Company as at
the end of such month and an unaudited consolidated statement of income and cash
flows for the Company for such month and for the year to date prepared in
accordance with GAAP (except that such financial statements need not contain
footnotes or other normal year end adjustments) and fairly reflecting the
financial affairs of the Company subject to year-end adjustments; (d) within
sixty (60) days prior to the start of each fiscal year, a proposed budget for
such fiscal year which shall include, where appropriate, capital and operating
expense budgets, cash flow projections and income and loss projections for the
Company; and (e) such other financial information as the Investors may
reasonably request, including without limitation, certificates of the principal
financial officer of the Company concerning compliance with the covenants of the
Company under Section 4.1 hereof. At any time when the Company has Subsidiaries,
all financial statements furnished hereunder will be consolidated.
15
8.2 Conduct of Business. The Company shall continue to engage
-------------------
principally in the business of being an Internet content provider principally
engaged in the automotive markets, and shall engage in only such additional
business activities as (a) shall be reasonably related or incidental thereto and
which shall facilitate the conduct, development or expansion of such business,
or (b) which shall be approved or ratified by the Board of Directors. The
Company will keep in full force and effect its corporate existence and will
comply in all material respects with all applicable laws and regulations in the
conduct of its business. As of the date of this Agreement, (i) the Company will
be an eligible corporation as defined in Section 1202(e)(4) of the Internal
Revenue Code of 1986, as amended (the "Code"), (ii) the Company will not have
made any purchases of its own stock during the one-year period proceeding the
date of this Agreement having an aggregate value exceeding five percent (5%) of
the aggregate value of all its stock as of the beginning of such period and
(iii) the Company's aggregate gross assets, as defined by Code Section
1202(d)(2), at no time between October 5, 1995 and through the date of this
Agreement, have exceeded or will exceed $50 million, taking into account the
assets of any corporations required to be aggregated with the Company in
accordance with Code Section 1202(d)(3); provided further, for so long as shares
of Preferred Stock or the Common Stock issuable upon conversion thereof
(together, the "Qualified Stock") are held by an Investor or Shareholder or a
transferee in whose hands the Qualified Stock is eligible to qualify as
"Qualified Small Business Stock" as defined in Section 1202(c) of the Code, the
Company will use its best efforts to cause the Qualified Stock to qualify as
"Qualified Small Business Stock." The Company will, as a condition of employment
of any employee or consultant of the Company, require that that employee or
consultant enter into a inventions and confidentiality agreement with the
Company.
8.3 Adverse Changes. The Company shall promptly advise the Investors
---------------
and the Shareholders of (a) any event which represents a material adverse change
in the business, assets or condition, financial or otherwise, or operations of
the Company and Co) any suit or proceeding commenced or threatened against the
Company which, if adversely determined, would result in such a material adverse
change.
8.4 Insurance. The Company shall keep its insurable properties
---------
insured by financially sound and reputable insurers against the perils of
liability, casualty, fire and extended coverage in amounts of coverage at least
equal to those customarily maintained by companies in the same or a similar
business of similar size. The Company shall also maintain with such insurers
insurance against other hazards and risks and liability to persons and property,
to the extent and in the manner customary for corporations engaged in the same
or a similar business of similar size.
8.5 Life Insurance. The Company shall maintain and continue to pay
--------------
the premiums on a key-man term life insurance policy on the life of each of the
Founders, in the amount of not less than $2,000,000, naming the Company as
beneficiary provided that such coverage is available to the Company on
reasonable terms and such coverage is approved by the Board of Directors. The
life insurance proceeds received by the Company, if' any, shall be used for
valid business purposes of the Company as approved by the Board of Directors of
the Company.
16
8.6 Maintenance of Properties. The Company will maintain all
-------------------------
properties used or useful in the conduct of its business in good repair, working
order and condition as necessary to permit such business to be properly and
advantageously conducted.
8.7 Affiliated Transactions. All transactions between the Company
-----------------------
and any officer, Founder, director or shareholder of the Company or Persons
controlled by or affiliated with such officer, Founder, director or
shareholder, other than transactions in their capacity as such, shall be
conducted on an arms-length basis, shall be on terms and conditions no less
favorable to the Company than could be obtained from nonrelated Persons and
shall be unanimously approved in advance by the disinterested Directors of the
Company after full disclosure of the terms thereof.
8.8 Lock-Up for Certain Shareholders. The Company will cause .any
--------------------------------
compensation benefit plan or contract, whether now existing or here, after
created, under which offers and sales of securities of the Company are made to
officers, directors and the Founders of the Company, to provide that in
connection with an underwritten public offering, upon the request of the Company
or the principal underwriter managing such public offering, resales of such
securities may not be sold without the prior written consent of the Company or
such underwriters, as the case may be, for at least one hundred and eighty (180)
days or such other shorter period of time as the underwriters of such offering
may specify, but in no event greater than the period of time imposed on the
Investors and Shareholders pursuant to Section 7 herein.
8.9 Inspection. The Company shall permit authorized representatives
----------
of the Investors and the Shareholders to visit and inspect any of the properties
of the Company, including its books of account (and to make copies thereof and
take extracts therefrom), and to discuss its affairs, finances and accounts with
its officers, administrative employees and independent accountants, all at such
reasonable times upon prior notice and during normal business hours and as often
as may be reasonably requested; provided that all such information provided to
the Investors and the Shareholders by the Company will be maintained as
confidential by the Investors and the Shareholders, will not be disclosed to
third parties and will not be used by the Investors or the Shareholders in a
manner that is adverse to the Company.
8.10 Board of Directors Meeting. The Company will reimburse full
--------------------------
coach airfare and all other direct out-of-pocket expenses reasonably incurred by
each director elected by each series of Preferred Shares in attending meetings
of the Board of Directors or any committee thereof or in conducting any other
business of the Company which has been requested of such 'director by the Board
of Directors or any committee thereof or by senior management. The Company shall
ensure that meetings of its full Board of Directors are held at least four (4)
times each year and at intervals of not more than four (4) months. The Company's
Articles and Bylaws, each as amended from time to time, shall provide for
indemnification and exculpation of directors from personal liability, to the
fullest extent permitted under applicable state law. The Company shall, from
time to time, consider the appropriateness of obtaining directors' and officers'
liability insurance, and, if appropriate and approved by the Board of Directors
of the Company, the Company shall obtain such insurance providing reasonable
coverage and the payment of reasonable premiums.
17
8.11 Loans and Advances. The Company will not make any loan or
------------------
advance to, or own any stock or other securities of, any Person without the
approval of the Board of Directors, except that the Company may own all of the
outstanding capital stock of a Subsidiary.
8.12 Indebtedness. Except as set forth on Exhibit 2 to the Purchase
------------
Agreement, the Company will not create, incur, assume or suffer to exist any
Indebtedness, or repay any Indebtedness existing on the date of this Agreement
to its shareholders, except as unanimously approved by the Board of Directors of
the Company.
8.13 Executive Search. The Company will use commercially reasonable
----------------
efforts to hire a chief executive officer following the date of this Agreement.
Such chief executive officer shall be approved in advance of being hired by a
majority of the members of the Board of Directors of the Company.
8.14 Matters Requiring Majority Approval of the Board of Directors.
-------------------------------------------------------------
So long any Investor or Shareholder owns, beneficially or of record, at least
100,000 Shares (as adjusted for stock splits, stock dividends and the like), the
matters (a), (c), (e), (i), and (s) below shall require the approval by more
than fifty percent (50%) of the members of the Board of Directors of the
Company, including a majority of the directors elected by the holders of each
series of the Preferred Shares. The remainder of the items and matters shall
require the approval by more than fifty percent (50%) of the members of the
Board of Directors of the Company. Any of such items (a), (c), (e), (i), and (s)
below may also be approved by more than fifty percent (50%) of the members of a
duly authorized committee of the Board of Directors so long as a majority of the
directors elected by holders of each series of the Preferred Shares are then
members of such committee and vote in favor of such an approval:
(a) the Company's annual business plan, including marketing and
personnel plans;
(b) the Company's multi-year strategic plans and any changes in
the strategy or policy falling outside of the approved strategic plan;
(c) the Company's annual budget, including, inter alia, the
budgeted income statement, capital expenditure budget and cash flow, and any
revision thereto;
(d) any proposal for the raising of additional finance falling
outside the annual budget previously approved by the Board of Directors;
(e) except as otherwise provided herein, the remuneration of
officers and directors of the Company, including the adoption of stock option,
incentive, bonus, or other compensation plans;
(f) the entry into change, alternation, or termination of any
contract or employment or other material contract in respect to the provisions
of any services or service to the Company other than one terminable at will by
the Company on thirty days notice or less;
18
(g) the entry into, change, or alteration or termination of the
terms of any transaction or agreement with any director or shareholder of the
Company or any person associated with or affiliated to such person;
(h) any revaluation of the Company's assets;
(i) the acquisition by the Company, whether by formation or
otherwise, of any subsidiary company, partnership, or joint venture company
of the stock or substantially all of the assets of any company or business or
the making of any investments m any other company or business;
(j) any material alterations to the personnel policies and
practices of the Company;
(k) the settlement, assignment, compromise, or release of any
claim of, or against, the Company in excess of $50,000 and the submission of
any of the Company's disputes to arbitration or other alternate dispute
resolution or the admission of any liability in excess of $50,000;
(l) any material transaction other than in the ordinary course of
business;
(m) the establishment of or any variation to the equity
structure or the ratio between equity and debt of the Company from time to
time;
(n) any change in the Company's fiscal year,
(o) any claims, disclaimers, election, or consent of a material
nature for tax purposes;
(p) any decision or agreement to prosecute, defend, or settle any
legal or administrative proceedings or arbitration or other form of alternate
dispute resolution in excess of $50,000 (other than routine debt collection);
(q) any material change in the Company's accounting or reporting
policies or procedures unless the change is recommended by the independent
certified public accountants retained to audit the Company's financial
statements;
(r) the filing of a petition in bankruptcy or for
reorganization under any bankruptcy law or law for the relief of debtors or
the making of an assignment for the benefit of creditors; and
(s) take any action or make any expenditure, capital or
otherwise, in excess of $100,000, which action or expenditure falls outside of
the annual business plan and budget approved by the Board of Directors of the
Company.
9. Miscellaneous
-------------
19
9.1 Damages. The rights of the parties under this Agreement are
-------
unique and, accordingly, the parties shall have the right, in addition to such
other remedies as may be available to any of them at law or in equity, to
enforce their rights hereunder by actions for specific performance in addition
to any other legal or equitable remedies they might have to the extent permitted
by law.
9.2 No Waiver, Cumulative Remedies. No failure or delay on the part
------------------------------
of any party to this Agreement in exercising any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy hereunder.
The remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
9.3 Amendments and Waivers. Except as hereinafter provided,
----------------------
amendments to this Agreement shall require and shall be effective upon receipt
of the written consent of: (a) the Company and (b) the holders of at least
seventy-five percent (75%) of the Registrable Securities. In the case of any
amendment adversely affecting the rights of the Founders, Investors or
Shareholders, the holders of at least a majority in interest of the Founder
Shares or Shares held by the Founders, Investors or Shareholders, as the case
may be, shall be required; provided, however, that if an amendment shall
adversely affect a holder or holders of Registrable Securities but not all
holders of Registrable Securities, then the consent required by (b) above shall
include the consent of such adversely affected holder or holders. Except as
hereinafter provided, compliance with any covenant or provision set forth herein
may be waived upon written consent by the party or parties whose rights are
being waived; provided, that (A) if the rights of holders of Registrable
Securities arc being waived, upon the written consent of the holders of at least
seventy-five percent (75%) of the Registrable Securities and (B) if the rights
of a Founder are being waived, upon the written consent of the holders of at
least a majority in interest of the Founder Shares. Notwithstanding the
foregoing, no waivers or amendments shall be effective to reduce the percentage
in interest of the Registrable Securities the consent of the holders of which is
required to amend this Section 9.3. Any waiver or amendments may be given
subject to satisfaction of conditions stated therein and any waiver or
amendments shall be effective only in the specific instance and for the specific
purpose for which given.
9.4 Notices. As the terms "notice" or "notices" are used herein as
-------
between the parties, such term shall mean a written document, explaining in
reason for the notice, and the same shall be mailed by United States Postal
Service via Certified Mail, Return Receipt Requested, or by express courier
service addressed as follows:
to the Company or the Founders:
Xxxxxxx.xxx, Inc.
0000 Xxx Xxxxxx, Xxxxxxxx 0
Xxxxx Xxxxx, XX 00000
Attention: Xx. Xxxxxxx Xxxxxx
20
with a copy by mail and fax (which shall not constitute notice) to:
Xxxx Xxxx Xxxx & Freidenrich LLP
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
to the Investors:
Torstar Corporation
Xxx Xxxxx Xxxxxx
Xxxxxxx, XXXXXX X0X0X0
Attention: Xxxxxxx Xxxxx
Telephone: 000.000.0000
Facsimile: 416.869.4183
with a copy by mail and fax (which shall not constitute notice) to:
Torstar Corporation
Xxx Xxxxx Xxxxxx
Xxxxxxx, XXXXXX X0X0X0
Attention: General Counsel
Telephone: 000.000.0000
Facsimile: 416.869.4183
to the Shareholders, at such Shareholder's address as set forth in the
Company's records.
Such notice shall be deemed to have been given on the date placed in the U.S.
Mails or delivered to an express courier, and sent by fax to counsel, whether
actually received by the addressee or not. The parties shall, as a matter of
convenience and courtesy, send each party receiving notice a copy of said notice
by facsimile or electronic means, but such notifications shall not be deemed
lawful "notice" as required hereby. The parties may from time to time amend the
above addresses and names by written notice given the other party.
9.5 Binding Effect: Assignment. This Agreement shall be binding upon
--------------------------
and inure to the benefit of the parties hereto and their respective heirs,
successors and assigns, except that the Company shall not have the right to
delegate its obligations hereunder or to assign its rights hereunder or any
interest herein without the prior written consent of the holders of at least a
majority in interest of the Registrable Securities.
9.6 Prior Agreements. This Agreement constitutes the entire
----------------
agreement between the parties with respect to the subject matters hereof and
restates and supersedes all prior oral and written agreements (including,
without limitation, the Rights Agreement and the
21
Stockholders Agreement) and understandings between them or any of them as to
such subject matters.
9.7 Severability. The provisions of this Agreement are severable
------------
and, in the event that any court of competent jurisdiction shall determine
that any one or more of the provisions or part of a provision contained in
this Agreement, shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision or part of a provision of this Agreement,
but this Agreement shall be reformed and construed as if such invalid or
illegal or unenforceable provision, or pan of a provision, had never been
contained herein, and such provisions or part reformed so that it would be
valid, legal and enforceable to the maximum extent possible.
9.8 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the substantive laws of the State of California, without
regard to conflict of laws principles.
9.9 Headings. Article, section and subsection headings in this
--------
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
9.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
9.11 Further Assurances. From and alter the date of this Agreement,
------------------
upon the request of any party hereto, the other parties shall execute and
deliver such instruments, documents and other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of this Agreement.
[REST OF THIS PAGE INTENTIONALLY LEFT BLANK]
22
IN WITNESS WHEREOF, the undersigned have executed this Rights Agreement as
of the day and year first above written.
XXXXXXX.XXX, INC.
By: /s/ Xxxxx Xxxxxx
----------------------------------------------
Name: Xxxxx Xxxxxx
Title: President/CEO
FOUNDERS
/s/ Xxxxxxx Xxxxxx
---------------------------------------------
Xxxxxxx Xxxxxx
/s/ Xxxxx Xxxxxx
---------------------------------------------
Xxxxx Xxxxxx
[SIGNATURE PAGE TO AMENDED AND RESTATED RIGHTS AGREEMENT]
COUNTERPART SIGNATURE PAGE TO
THE AMENDED AND RESTATED RIGHTS AGREEMENT
October 16, 1998
INVESTOR:
TORSTAR CORPORATION,
a Canadian corporation
By: /s/ Xxxxx Xxxxxxxxx
-----------------------------------
Printed: Xxxxx Xxxxxxxxx
-----------------------------
Title: General Counsel & Secretary
-------------------------------
COUNTERPART SIGNATURE PAGE TO
THE AMENDED AND RESTATED RIGHTS AGREEMENT
October 16, 1998
INVESTOR:
GCWF Investment Partners
---------------------------------------
By: Xxxx Xxxx Corporation
------------------------------------
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
Printed: Xxxxxx Xxxxxxx
-------------------------------
Title: Vice President
-------------------------------
COUNTERPART SIGNATURE PAGE TO
THE AMENDED AND RESTATED RIGHTS AGREEMENT
October 16, 1998
INVESTOR:
GCWF Investment Associates
---------------------------------------
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
Printed: Xxxxxx Xxxxxxx
-------------------------------
Title: General Partner
-------------------------------
COUNTERPART SIGNATURE PAGE TO
THE AMENDED AND RESTATED RIGHTS AGREEMENT
October 16, 1998
SHAREHOLDERS
Agree and Acknowledge that this Agreement supersedes in its entirety the
Amended and Restated Registration Rights Agreement dated May 8, 1998.
TCV II, V.O.F.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxx
-----------------------------
Title: Chief Financial Officer
----------------------------
COUNTERPART SIGNATURE PAGE TO
THE AMENDED AND RESTATED RIGHTS AGREEMENT
October 16, 1998
SHAREHOLDERS
Agree and Acknowledge that this Agreement supersedes in its entirety the
Amended and Restated Registration Rights Agreement dated May 8, 1998.
Technology Crossover Ventures II, L.P.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxx
-----------------------------------
Title: Chief Financial Officer
-----------------------------------
COUNTERPART SIGNATURE PAGE TO
THE AMENDED AND RESTATED RIGHTS AGREEMENT
October 16, 1998
SHAREHOLDERS
Agree and Acknowledge that this Agreement supersedes in its entirety the
Amended and Restated Registration Rights Agreement dated May 8, 1998.
TCV II (Q), L.P.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxx
----------------------------
Title: Chief Financial Officer
----------------------------
COUNTERPART SIGNATURE PAGE TO
THE AMENDED AND RESTATED RIGHTS AGREEMENT
October 16, 1998
SHAREHOLDERS
Agree and Acknowledge that this Agreement supersedes in its entirety the
Amended and Restated Registration Rights Agreement dated May 8, 1998.
TCV II Strategic Partners, L.P.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxx
----------------------------
Title: Chief Financial Officer
----------------------------
COUNTERPART SIGNATURE PAGE TO
THE AMENDED AND RESTATED RIGHTS AGREEMENT
October 16, 1998
SHAREHOLDERS
Agree and Acknowledge that this Agreement supersedes in its entirety the
Amended and Restated Registration Rights Agreement dated May 8, 1998.
Technology Crossover Ventures II, C.V.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxx
---------------------------------
Title: Chief Financial Officer
---------------------------------
COUNTERPART SIGNATURE PAGE TO
THE AMENDED AND RESTATED RIGHTS AGREEMENT
October 16, 1998
SHAREHOLDERS
Agree and Acknowledge that this Agreement supersedes in its entirety the
Amended and Restated Registration Rights Agreement dated May 8, 1998.
By: /s/ X.X. Xxxxx
------------------------------
Name: X.X. Xxxxx
-----------------------------
Title: General Partner
----------------------------
COUNTERPART SIGNATURE PAGE TO
THE AMENDED AND RESTATED RIGHTS AGREEMENT
October 16, 1998
SHAREHOLDERS
Agree and Acknowledge that this Agreement supersedes in its entirety the
Amended and Restated Registration Rights Agreement dated May 8, 1998.
By: On Word Information
-------------------------------
Name: Xxxx Xxxx
---------------------------
Title: President
---------------------------
SCHEDULE A
THE INVESTORS
TORSTAR CORPORATION
GCWF INVESTMENT PARTNERS
GCWF INVESTMENT ASSOCIATES
SCHEDULE B
THE SHAREHOLDERS
----------------
Series A Preferred Stock Shareholders:
Xxxxx Xxxxxx 22,000 shares of Series A Preferred
Xxxxxxxx Xxxxxx 1,831 shares of Series A Preferred
Xxxxxx X. Xxxxxx 12,007 shares of Series A Preferred
Xxxx Xxxxxxx 2,245 shares of Series A Preferred
Xxxx X. Xxxxxx 3,205 shares of Series A Preferred
Xx. Xxxxx & Mrs. Flueur Xxxxx 6,386 shares of Series A Preferred
Xxxxxx X. Xxxxxx, M.D. 3,543 shares of Series A Preferred
Xxxxxx Xxxxxx, in trust for Francisco Xxx Xxxxxx 3,379 shares of Series A Preferred
Xxxx Xxxxxx 312 shares of Series A Preferred
Xxxxxxx X. Xxxxxx, Xx. 10,463 shares of Series A Preferred
Xxxx X. Xxxxx 484 shares of Series A Preferred
Xxxxx Xxxxxx 3,692 shares of Series A Preferred
Xxxxx Xxxxxx 3,692 shares of Series A Preferred
Xxxxxxx Xxxxxx, M.D. 1,162 shares of Series A Preferred
OnWord Information, Inc. 847,002 shares of Series A Preferred
Point Break Ventures, LLC 41,752 shares of Series A Preferred
Raifman & Xxxxxxx LIP 145,000 shares of Series A Preferred
Xxxxxx X. Xxxx, M.D. 1,321 shares of Series A Preferred
Xxxxxx Xxxx 151,029 shares of Series A Preferred
Xxxx Xxxx 6,302 shares of Series A Preferred
Xxxxxx X. Xxxxx 1,614 shares of Series A Preferred
Xxxx Xxx-Xxxxxx 60,619 shares of Series A Preferred
Xxxx X. Xxxxxxxxx 3,432 shares of Series A Preferred
Xxxx Xxxxxxxx-Xxxx 56,604 shares of Series A Preferred
Xxxxxxx Xxxxxx 130,290 shares of Series A Preferred
Xxxxx Xxxxxx 130,291 shares of Series A Preferred
Series B Preferred Stock Shareholders
Broadview Partners Group 40,807 shares of Series B Preferred
Geocapital IV, L.P. 1,591,490 shares of Series B Preferred
Series C Preferred Stock Shareholders
TCV II, V.O.F. 24,553 shares of Series C Preferred
Technology Crossover Ventures II, L.P. 755,820 shares of Series C Preferred
TCV II (Q), L.P. 581,085 shares of Series C Preferred
TCV II Strategic Partners, L.P. 103,122 shares of Series C Preferred
Technology Crossover Ventures IT, C.V. 115,399 shares of Series C Preferred
