EXHIBIT 10.4
FOURTH AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
This Fourth Amended and Restated Stockholders Agreement ("Agreement") is
entered into as of April 13, 1999, among Xxxxxx.xxx, Inc., a Delaware
corporation (the "Company"), the persons listed on Exhibit A hereto
(individually, a "Purchaser" and collectively the "Purchasers"), Xxxxxxxx X.
Xxxxxxxx, Xxxxx X. X'Xxxxx and Xxxx W. A. Xxxxxxxx (individually, a "Founder"
and collectively, the "Founders") and the other holders of Common Stock of the
Company listed on the signature pages below and such other parties as may from
time to time and with the consent of the Company and a majority of the then
existing Common Stockholders become parties hereto (the Founders and such other
holders of Common Stock are collectively referred to as the "Common
Stockholders").
Recitals:
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The Company, Global Retail Partners, L.P., DLJ Diversified Partners, L.P.,
DLJ Diversified Partners-A, L.P., GRP Partners, L.P., Global Retail Partners
Funding, Inc., DLJ ESC II L.P., Pequot Private Equity Fund, LP, Pequot Offshore
Private Equity Fund, Inc., Nexus Capital Partners I, LP, Xxx Xxxxxxx Capital
Management, Inc., Xxxxxxxxx & Xxxxx California, H&Q Garden Escape Investors, LP,
Austin Ventures IV-A, L.P, Austin Ventures IV-B, L.P., Xxxxxxxx-Xxxxx Specialty
Retail Group III, L.P., Xxxxx X. Xxxxx, Scripps Ventures, LLC, Oak Investment
Partners, VII, Limited Partnership, Oak VII Affiliates Fund, Limited Partnership
and the Founders are parties to a Third Amended and Restated Stockholders
Agreement dated as of June 11, 1998 (the "Prior Stockholders Agreement").
The Company and certain of the Purchasers have entered into a Stock
Purchase Agreement (the "Purchase Agreement") on this date, providing, among
other things, for the purchase by such Purchasers of shares of the Series E
Preferred Stock. Terms defined in the Purchase Agreement and not otherwise
defined herein are used herein with the same meanings as defined in the Purchase
Agreement.
This is the Stockholders Agreement referred to in the Purchase Agreement.
The parties to the Prior Stockholders Agreement desire to amend and restate the
Prior Stockholders Agreement to read in its entirety as set forth herein. The
execution and delivery of this Agreement is a condition to the Closing of the
issuance and sale of shares of the Series E Preferred Stock under the Purchase
Agreement.
The parties agree as follows:
1. Voting Provisions.
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1A. Composition of Board of Directors. The shares of Series A Preferred
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Stock issued pursuant to the Series A Purchase Agreement, the shares of Series B
Preferred Stock issued pursuant to the Series B Purchase Agreement, the shares
of Series C Preferred Stock issued pursuant to the Series C Purchase Agreement
and issued or issuable upon exercise of the Series C Warrants, the shares of
Series D Preferred Stock issued pursuant to the Series D Purchase Agreement and
issued or issuable upon exercise of the H&Q Series D Warrants, the shares of
Series E Preferred Stock issued pursuant to the Purchase Agreement, and, unless
the context requires otherwise, the shares of Common Stock issued or issuable
upon the conversion of such shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series E
Preferred Stock are referred to in this Agreement as the "Shares." For so long
as at least 200,000 Shares are outstanding, the Purchasers and the Common
Stockholders agree that in any election of directors of the Company, they shall
vote all shares of capital stock of the Company owned or controlled by them,
including all Shares, to elect a Board of Directors comprising not less than
eight nor more than eleven directors designated as follows:
(i) five directors shall be designated by the holders of a majority
of the Shares (each a "Purchaser Director"); provided, that one Purchaser
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Director may be designated by Austin Ventures for so long as it holds at least
100,000 Shares, one Purchaser Director may be designated by Xxxxxxxx-Xxxxx for
so long as it holds at least 100,000 Shares, one Purchaser Director may be
designated by Scripps for so long as it holds at least 100,000 Shares, one
Purchaser Director may be designated by Oak for so long as it holds at least
100,000 Shares, and one Purchaser Director may be designated by Global for so
long as it holds at least 100,000 Shares; and
(iii) three directors shall be designated by the holders of a majority
of the Common Stock held by the Common Stockholders; provided, that if at any
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time the Shares represent less than a majority of the outstanding Common Stock
(assuming the conversion of all outstanding Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock), upon written notice to such effect given by the holders of a
majority of the Common Stock held by the Common Stockholders, such holders of
Common Stock may designate three additional directors, such that the holders of
a
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majority of the Common Stock held by the Common Stockholders may designate a
majority of the directors constituting the Board of Directors.
Until notice is given to the contrary, the Purchaser Director designated by
Austin Ventures shall be Xxxx X. Xxxxxxxx, the Purchaser Director designated by
Xxxxxxxx-Xxxxx shall be Xxxxxx X. Xxxxxxxx, the Purchaser Director designated by
Scripps shall be Xxxxxxx X. Xxxxx, the Purchaser Director designated by Oak
shall be Xxxxxx X. Xxxxxxxxx, the Purchaser Director designated by Global shall
be Xxxxxx X. Xxxxx, and the directors designated by the holders of a majority of
the Common Stock held by the Common Stockholders shall be Xxxxxxxx X. Xxxxxxxx,
Xxxxx X. X'Xxxxx and Xxxx W.A. Xxxxxxxx. The obligation to vote shares in
accordance with this paragraph 1A shall be specifically applicable to and
enforceable against any transferees of the parties hereto.
1B. Compensation Committee. The Board of Directors shall maintain a
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compensation committee comprised of Xxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxxxx and
such other Purchaser Directors as a majority of the Board of Directors shall
designate. The compensation committee of the Board of Directors will review and
make recommendations to the Board of Directors regarding salaries, bonuses and
other compensation and benefits of officers and key employees of the Company and
its Subsidiaries, and will administer the Approved Plans and any other stock
option, incentive or compensation plans or arrangements.
1C. Vacancies; Removal. In the event of any vacancy in the Board of
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Directors, each of the Purchasers and the Common Stockholders agree to vote all
Shares and shares of Common Stock owned or controlled by them and to otherwise
use their best efforts to fill such vacancy so that the Board of Directors of
the Company will include directors designated as provided in paragraph 1A. Each
of the Purchasers and the Common Stockholders agrees to vote all Shares and
shares of Common Stock owned or controlled by them for the removal of a director
whenever (but only whenever) there shall be presented to the Board of Directors
the written direction that such director be removed, signed by the Purchaser or
holders of Shares entitled to designate such director, in the case of a
Purchaser Director, or by the holders of a majority of the Common Stock held by
the Common Stockholders, in the case of any other director. Each of the parties
agrees to use its best efforts to cause designees to be elected to the Board of
Directors as provided in paragraph 1A.
1D. Meetings; Quorum. The Company agrees to hold quarterly meetings of
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the Board of Directors. A quorum for purposes of a meeting of directors must
consist of at least three of the Purchaser Directors. So long as Pequot holds
not less
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than 250,000 Shares, the Company will give a designated representative of Pequot
(the "Pequot Representative") written notice at the same time as the directors
but in any case not less than 24 hours in advance of all meetings of the Board
of Directors and all meetings of committees of the Board of Directors, which
notice shall include a copy of all written materials distributed to directors in
connection with such meeting, and will permit the Pequot Representative to
attend meetings of the Board of Directors. So long as Patricof holds not less
than 250,000 Shares, the Company will give a designated representative of
Patricof (the "Patricof Representative") written notice at the same time as the
directors but in any case not less than 24 hours in advance of all meetings of
the Board of Directors and all meetings of committees of the Board of Directors,
which notice shall include a copy of all written materials distributed to
directors in connection with such meeting, and will permit the Patricof
Representative to attend meetings of the Board of Directors. So long as
Attractor holds not less than 250,000 Shares, the Company will give a designated
representative of Attractor (the "Attractor Representative") written notice at
the same time as the directors but in any case not less than 24 hours in advance
of all meetings of the Board of Directors and all meetings of committees of the
Board of Directors, which notice shall include a copy of all written materials
distributed to directors in connection with such meeting, and will permit the
Attractor Representative to attend meetings of the Board of Directors. If any
Purchaser Director designated by a Purchaser pursuant to paragraph 1A(i) is not
able to attend a Board of Directors meeting or a meeting of a committee on which
he serves, such Purchaser may designate any one person to attend as an observer.
1E. Expenses. The Company shall reimburse all Persons serving as
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directors for their actual and reasonable out-of-pocket expenses incurred in
attending meetings of the Board of Directors and all committees thereof and
otherwise incurred in fulfilling their duties as directors. If a Purchaser
entitled to designate a director pursuant to paragraph 1A(i) has not designated
a Purchaser Director or if the Purchaser Director designated by such Purchaser
is unable to attend a meeting of the Board of Directors or a committee on which
he serves, the Company shall reimburse one representative of such Purchaser for
actual and reasonable out-of-pocket expenses incurred in attending meetings of
the Board of Directors and such committees. Each of Austin Ventures, Oak,
Global, Pequot, Patricof and Attractor shall be considered to be one Purchaser
for purposes of this paragraph.
1F. Indemnification Agreement. On each date that a Purchaser Director or
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any other director is first elected or appointed to the Board of Directors, and
on the date that the Pequot Representative, the Patricof Representative and the
Attractor Representative are designated, the Company shall enter into an
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indemnification agreement in substantially the form attached as Exhibit A with
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each Purchaser Director, each other director of the Company who is elected or
appointed to the Board of Directors on such date and with the Pequot
Representative, the Patricof Representative and the Attractor Representative.
1G. Material Transactions with Scripps. The approval of a majority of the
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disinterested directors (as set forth in Section 144 of the Delaware General
Corporation Law) shall be required for all material transactions between the
Company and The X. X. Xxxxxxx Company ("X. X. Xxxxxxx"). For purposes of this
paragraph 1G, the term "material transaction" shall mean any of the following:
(a) any transaction, or series of similar transactions, to which the
Company is to be a party, in which the amount involved exceeds five
percent of the consolidated assets of the Company and its Subsidiaries
as of the end of the Company's most recently completed fiscal quarter
and in which X. X. Xxxxxxx, any of its subsidiaries, officers or
directors or nominees for director, any beneficial holder of five
percent or more of the outstanding capital stock of X. X. Xxxxxxx, or
the Purchaser Director designated by Scripps will have a direct or
indirect material interest, other than an interest arising from the
ownership of Shares by Scripps or an interest arising pursuant to the
Purchase Agreement or any Ancillary Agreement or the purchase by
Scripps of Equity Securities; or
(b) indebtedness owed by the Company to X. X. Xxxxxxx, any of its
subsidiaries, officers or directors or nominees for director, any
beneficial holder of five percent or more of the outstanding capital
stock of X. X. Xxxxxxx, or the Purchaser Director designated by
Scripps, or indebtedness owed by X. X. Xxxxxxx or any such other
Person to the Company, in either case, in an amount in excess of five
percent of the consolidated assets of the Company and its Subsidiaries
as of the end of the Company's most recently completed fiscal quarter.
2. Provisions Relating to Restricted Stock.
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2A. General Restrictions on Transfer of Capital Stock.
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(i) For purposes of this Agreement, "Restricted Stock" is (a) Common
Stock now owned or subsequently acquired by any Common Stockholder or a
transferee of a Common Stockholder in a Permitted Transfer (as defined in
paragraph 2A(iii)) and (b) Shares now owned or subsequently acquired
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by any Purchaser or a transferee of a Purchaser in a Permitted Transfer.
References in this part 2 to "shares of Restricted Stock" shall be deemed to
include warrants representing the right to acquire shares of Restricted Stock,
including, without limitation, the Series C Warrants, the H&Q Series D Warrants
and the H&Q Series E Warrants (collectively, the "H&Q Warrants") representing
the right to acquire Shares. During the term of this Agreement, none of the
shares of Restricted Stock may be sold, assigned, transferred, pledged,
encumbered or otherwise disposed of (a "transfer") except in a Permitted
Transfer or a transfer that complies with the provisions of paragraphs 2B and
2C.
(ii) Any attempted transfer of shares of Restricted Stock other than
in accordance with this Agreement shall be null and void and the Company shall
refuse to recognize any such transfer and shall not reflect on its records any
change in record ownership of shares of Restricted Stock pursuant to any such
transfer.
(iii) The following transfers of Restricted Stock (each a "Permitted
Transfer") may be made free of the restrictions and requirements of paragraphs
2B and 2C hereof: (a) an individual holder of Restricted Stock may transfer any
or all of the shares of Restricted Stock owned by him to his spouse or children,
or to trusts established for the benefit of his spouse or children, provided
that the transferee grants to the transferor an irrevocable proxy coupled with
an interest to vote all of the shares of Restricted Stock so transferred and
agrees to be bound by the provisions of this Agreement, including, without
limitation, paragraphs 2B and 2C; (b) provided that the transferee agrees to be
bound by the provisions of this Agreement, a partnership, limited liability
company, corporation or trust holding Restricted Stock may transfer any shares
of Restricted Stock owned by such holder (1) to its Affiliates, (2) to its
general or limited partners, members, shareholders or beneficiaries, or (3) to
an entity owned by or organized for the benefit of the general or limited
partners, members, shareholders, officers, directors, employees, Affiliates or
beneficiaries of such holder, as applicable, (c) a holder of Restricted Stock
may pledge any shares of Restricted Stock owned by such holder to secure the
repayment of any bona fide indebtedness owing by such holder, the Company or any
Subsidiary to a financial institution, provided that such holder retains the
power to vote the shares of Restricted Stock so pledged until such time as the
pledgee shall have realized upon the pledge and that the provisions of this
Agreement, including, without limitation, parts 1 and 2, shall be applicable to
the shares of Restricted Stock so pledged, (d) a holder of Restricted Stock may
sell any or all shares of Restricted Stock held by such holder pursuant to an
effective registration statement under the Securities Act free of the
restrictions of this Agreement, including without limitation, the provisions of
parts 1 and 2, and (e) a Common Stockholder may sell Restricted Stock to the
Company pursuant to an agreement (including the Restricted
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Stock Agreement dated as of December 21, 1995, between the Company and each
Founder) under which the Company has the option to repurchase such Restricted
Stock upon the occurrence of certain events, including the termination of
employment by or service to the Company or any subsidiary of the Company.
2B. Right of First Refusal - Sales by Common Stockholders.
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(i) Subject to paragraph 2B(vi), whenever and as often as any Common
Stockholder or a Permitted Transferee of a Common Stockholder desires to sell
any shares of Restricted Stock pursuant to a bona fide written offer to purchase
such shares, such Common Stockholder (the "Selling Holder" for purposes of this
paragraph 2B) shall give written notice (the "Notice," for purposes of this
paragraph 2B) to the Company, to each other Common Stockholder who on the date
of such Notice is a full-time employee of the Company and each holder of Shares
(each an "Offeree," for the purposes of this paragraph 2B) to such effect,
enclosing a copy of such offer and specifying the number of shares of Restricted
Stock which the Selling Holder desires to sell, the name of the person or
persons to whom the Selling Holder desires to make such sale and the
consideration per share of Common Stock which has been offered in connection
with such offer. Upon receipt of the Notice, the Offerees shall initially have
the first right and option to purchase the shares proposed to be sold for cash
at the same purchase price and on the same terms as specified in the Notice, pro
rata according to their respective holdings of Restricted Stock, exercisable for
15 business days after receipt of the Notice. Failure of any Offeree to respond
to the Notice within the 15 business day period shall be deemed to constitute a
notification to the Selling Holder of such Offeree's decision not to exercise
the first right and option to purchase shares of Restricted Stock under this
paragraph 2B. If any Offeree fails to exercise its first right and option, the
Selling Holder shall give written notice to each of the other Offerees who has
elected to purchase his or her or its pro rata share of the shares of Restricted
Stock proposed to be transferred, and each such Offeree shall have the right,
exercisable for a period of seven business days from the date of receipt of such
Notice, to purchase the remaining shares of Restricted Stock, pro rata according
to the Restricted Stock held by all such electing Offerees or in such other
proportion as they may agree upon. In the event such consideration includes
non-cash consideration, the dollar value of such non-cash consideration shall be
its fair market value, as reasonably determined by the Board of Directors.
(ii) The Offerees may exercise the right and option to purchase such
Restricted Stock by giving written notice of exercise to the Selling Holder
within such 15 business day period, specifying the date (not later than seven
business days from the date of such notice) upon which payment of the purchase
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price for the shares purchased pursuant to this paragraph shall be made. The
Selling Holder shall deliver to the Offeree(s) at the Company's principal
office, at least one day prior to the payment date, wire transfer instructions,
and on the payment date specified in such notice, the certificate or
certificates representing such shares, properly endorsed for transfer, against
payment of the purchase price therefor by the Offeree(s) in immediately
available funds.
(iii) In the event that all of the shares of Restricted Stock
proposed to be transferred are not purchased by the Offerees, the Company shall
have the right and option to purchase the balance of the shares proposed to be
sold for cash at the purchase price per share specified in the Notice,
exercisable for 15 business days after expiration of the option period set forth
in paragraph 2B(i). Failure of the Company to respond to such Notice within such
15 business day period shall be deemed to constitute a notification to the
Selling Holder of the Company's decision not to exercise the first right and
option to purchase such shares under this paragraph.
(iv) The Company may exercise its right and option to purchase such
Restricted Stock by giving written notice of exercise to the Selling Holder
within such 15 business day period, specifying the date (not later than seven
business days from the date of such notice) upon which payment of the purchase
price for the shares shall be made. The Selling Holder shall deliver to the
Company's principal office, on or before the payment date specified in such
notice, the certificate or certificates representing the shares being purchased
by the Company, properly endorsed for transfer, against payment of the purchase
price therefor by the Company in immediately available funds.
(v) If all the shares of Restricted Stock proposed to be
transferred are not purchased by the Offerees and the Company in accordance with
this paragraph 2B, the Selling Holder shall not be required to sell any of the
shares of Restricted Stock proposed to be transferred to the Offerees or to the
Company, and during the 60-day period commencing on the expiration of the rights
and options provided for in this paragraph 2B, may sell all (but not less than
all) of such shares to the transferee named in the Notice for a consideration
equal to or greater than the consideration specified in the Notice, free of the
restrictions contained in paragraph 2B (but subject to the other terms and
conditions hereof).
(vi) Whenever and as often as any Common Stockholder shall receive a
bona fide offer to purchase any shares of Restricted Stock from a prospective
purchaser which the Selling Holder wishes to accept, each Offeree shall have the
right, at such Offeree's option, either to exercise its rights of first refusal
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under paragraph 2B(i) or to participate in the sale to the prospective purchaser
pursuant to this paragraph 2B(vi). The Selling Holder will use reasonable best
efforts to arrange for the sale to the prospective purchaser of the number of
shares of Restricted Stock owned by such Offeree which bears the same proportion
to the total number of shares of Restricted Stock owned by such Offeree as the
number of shares of Restricted Stock being sold by the Selling Holder bears to
the total number of shares of Restricted Stock owned by the Selling Holder on
the terms and conditions specified in the Notice. For purposes of this paragraph
2B(vi), an Offeree may elect to sell Common Stock at the purchase price per
share specified for the Common Stock in the Notice, and may elect to sell Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock or Series E Preferred Stock at the purchase price per share of
Common Stock specified for the Common Stock in the Notice multiplied by the
number of shares of Common Stock into which a share of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or
Series E Preferred Stock, as applicable, is then convertible. If the prospective
purchaser will not purchase all the shares of Restricted Stock which the Selling
Holder and the Offerees wish to sell pursuant to this paragraph 2B(vi), the
number of shares of Restricted Stock which the Selling Holder and each Offeree
shall be entitled to sell to such prospective purchaser shall be a number of
shares equal to the number of shares which the prospective purchaser desires to
purchase times a fraction, the numerator of which is the number of shares of
Restricted Stock owned by the Selling Holder or each such selling Offeree, and
the denominator of which is the aggregate number of shares of Restricted Stock
owned by the Selling Holder and all such selling Offerees. An Offeree may
exercise his or its right under this paragraph by written notice given within 15
business days after receipt of the Notice. If any Offeree fails to exercise its
co-sale right, the Selling Holder shall give written notice to each of the other
Offerees who has elected to sell his or her or its pro rata share of the shares
of Restricted Stock proposed to be transferred, and each such Offeree shall in
such event, have the right, exercisable for a period of seven business days from
the date of receipt of such notice, to sell the remaining shares of Restricted
Stock, pro rata according to the Restricted Stock held by all such electing
Offerees or in such other proportion as they may agree upon.
2C. Right of First Refusal - Sales by Purchasers.
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(i) Whenever and as often as any Purchaser desires to sell any shares
of Restricted Stock pursuant to a bona fide written offer to purchase such
shares, such holder (the "Selling Holder" for purposes of this paragraph 2C)
shall give written notice (the "Notice," for purposes of this paragraph 2C) to
each other Purchaser (each an "Offeree" for purposes of this paragraph 2C) and
to the
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Company to such effect, enclosing a copy of such offer and specifying the number
of shares of Restricted Stock which the Selling Holder desires to sell, the name
of the person or persons to whom the Selling Holder desires to make such sale
and the consideration per share which has been offered in connection with such
offer. Upon receipt of the Notice, the Offerees initially shall have the first
right and option to purchase the shares of Restricted Stock proposed to be sold
for cash at the purchase price per share specified in the Notice, pro rata
according to their respective holdings of shares of Restricted Stock,
exercisable for 15 business days after receipt of the Notice. Failure of an
Offeree to respond to such notice within such 15 business day period shall be
deemed to constitute a notification to the Selling Holder of such Offeree's
decision not to exercise the first right and option to purchase such shares of
Restricted Stock under this paragraph 2C. If any Offeree fails to exercise its
first right and option, the Selling Holder shall give written notice to each of
the other Offerees who has elected to purchase its pro rata share of the shares
of Restricted Stock proposed to be transferred, and each such Offeree shall have
the right, exercisable for a period of seven business days from the date of
receipt of such notice, to purchase the remaining shares of Restricted Stock,
pro rata according to the shares of Restricted Stock held by all such electing
Offerees or in such other proportions as they may agree.
(ii) In the event all of the shares of Restricted Stock proposed to
be transferred are not purchased by the Offerees, the Company shall have the
right and option to purchase the balance of the shares of Restricted Stock on
the same terms as offered to the Offerees, exercisable for 15 business days
after expiration of the option period set forth in paragraph 2C(i). Failure of
the Company to respond to the Notice within such 15 business day period shall be
deemed to constitute a notification by the Company of the Company's decision not
to exercise its first right and option to purchase the shares of Restricted
Stock under this paragraph. The Company may assign its first right and option to
purchase shares of Restricted Stock under this paragraph to any person or
persons.
(iii) The Company may exercise its right and option to purchase Shares
under this paragraph 2C by giving written notice of exercise to the Selling
Holder within the period specified above, specifying the date (not later than
seven business days after the expiration of all applicable first refusal rights
and options under this paragraph 2C) upon which payment of the purchase price
for the shares to be purchased by the Company shall be made. The Selling Holder
shall deliver to the Company's principal office, on or before the payment date
specified in such notice, the certificate or certificates representing the
Shares being purchased by the Company, properly endorsed for transfer, against
payment of the purchase price therefor by the Company in immediately available
funds.
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(iv) If all the shares of Restricted Stock proposed to be transferred
are not purchased by the Offerees and the Company in accordance with this
paragraph 2C, the Selling Holder shall not be required to sell any of the shares
of Restricted Stock proposed to be transferred to the Offerees or to the
Company, and during the 60-day period commencing on the expiration of the rights
and options provided for in this paragraph 2C, may sell all (but not less than
all) of such shares to the transferee named in the Notice for a consideration
equal to or greater than the consideration specified in the Notice, free of all
restrictions contained in paragraph 2C (but subject to the other terms and
conditions hereof).
2D. Purchasers or Transferees of Restricted Stock. Except as otherwise
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specifically provided herein, any Permitted Transferee or other person who shall
acquire (either voluntarily or involuntarily, by operation of law or otherwise)
any shares of Restricted Stock shall be bound by all the terms and conditions of
this Agreement to the same extent as the parties hereto and, prior to
registration of the transfer of any such securities on the books of the Company,
any purchaser or other transferee shall execute an agreement with the parties
hereto agreeing to be bound hereby.
3. Preemptive Rights.
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3A. Preemptive Rights of Common Stockholders and Purchasers
(i) If, prior to a Qualified Public Offering (as defined in the
Restated Certificate of Incorporation), the Company shall issue any Equity
Securities (as defined in the Certificate of Designation) consisting of Common
Stock or other Equity Securities, each Common Stockholder and each Purchaser
shall be entitled to purchase the portion of such Common Stock or Equity
Securities to be issued necessary in order that the aggregate shares of Common
Stock held by such holder and issuable upon the conversion of all Shares of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock held by such holder
constitute the same percentage of the outstanding Common Stock (assuming the
conversion of all outstanding Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred
Stock and the conversion, exercise or exchange of all other outstanding Equity
Securities but without giving effect to the exercise of any Series C Warrants or
H&Q Warrants which have not been exercised) after the issuance of such Common
Stock or Equity Securities as before the issuance thereof; provided, however,
that such preemptive right shall not apply to (a) issuances of Common Stock or
Equity Securities pursuant to an Approved
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Plan (including the issuance of Common Stock or Equity Securities upon exercise,
conversion or exchange of Equity Securities issued pursuant to an Approved
Plan), (b) issuances of Common Stock or Equity Securities upon the conversion,
exercise or exchange or Equity Securities to which the preemptive right was
applicable, (c) issuances of Common Stock or Equity Securities in connection
with an exercise of the preemptive rights granted hereunder, (d) the issuance of
the H&Q Series E Warrants in connection with the Closing of transactions
contemplated by the Purchase Agreement and issuances of Series D Preferred Stock
upon exercise of the H&Q Series D Warrants and Series E Preferred Stock upon
exercise of the H&Q Series E Warrants, (e) issuances of Shares pursuant to the
Purchase Agreement, (f) issuances of Series C Preferred Stock upon exercise of
the Series C Warrants, (g) issuances of Series C-1 Preferred Stock upon
conversion of Series C-2 Preferred Stock, (h) issuances of Common Stock upon
conversion of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock or Series E Preferred Stock, (i)
issuances of Common Stock or Equity Securities in connection with strategic
relationships and acquisitions approved by a two-thirds majority of the Board of
Directors or (j) issuances of Equity Securities issued to investment banks,
financial institutions, equipment lessors or other commercial lenders in
connection with financing activities approved by a two-thirds majority of the
Board of Directors.
(ii) Holders of Shares electing to purchase Equity Securities
pursuant to this paragraph 3A shall also be entitled to purchase (pro rata
according to their respective holdings of Shares, without giving effect to the
exercise of any Series C Warrants or H&Q Warrants which have not been exercised)
Equity Securities that other holders of Shares or other stockholders decline to
purchase.
3B. Preemptive Rights of Series E Preferred Stock in a Public Offering
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(i) If the Company shall issue any Equity Securities (as defined in
the Certificate of Incorporation) consisting of Common Stock or other Equity
Securities pursuant to a Qualified Public Offering, each holder of Shares of
Series E Preferred Stock (including Shares of Common Stock into which the Shares
of Series E Preferred Stock may be converted) shall be entitled to purchase 25%
of that number of the Common Stock or Equity Securities so offered that is equal
to the portion of such Common Stock or Equity Securities to be issued necessary
in order that the aggregate shares of Common Stock held by such holder and
issuable upon the conversion of all Shares of Series E Preferred Stock held by
such holder constitute the same percentage of the outstanding Common Stock
(assuming the conversion of all outstanding Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock and
12
the conversion, exercise or exchange of all other outstanding Equity Securities
but without giving effect to the exercise of any Series C Warrants or H&Q
Warrants which have not been exercised) after the issuance of such Common Stock
or Equity Securities as before the issuance thereof. The preemptive rights set
forth in this paragraph 3B shall terminate immediately after the completion of
the Company's first Qualified Public Offering.
(ii) Holders of Shares of Series E Preferred Stock electing to
purchase Equity Securities pursuant to this paragraph 3B shall also be entitled
to purchase (pro rata according to their respective holdings of Shares of Series
E Preferred Stock) Equity Securities that other holders of Shares of Series E
Preferred Stock decline to purchase.
3C. General Provisions Relating to Preemptive Rights
(i) The price of securities which each holder shall become entitled
to purchase by reason hereof shall be the same price at which such securities
are offered to others. A holder may exercise its right under this paragraph 3 to
purchase Equity Securities by paying the purchase price therefor at the
principal office of the Company within ten days after receipt of written notice
from the Company (which written notice by the Company shall describe the type of
Equity Securities, the price and the general terms upon which the Company
proposes to issue such Equity Securities and shall be given at least 15 business
days before the issuance of the Equity Securities) stating the number or amount
of Equity Securities it intends to issue and the price and characteristics
thereof. The holder shall pay such purchase price in cash or by check; provided,
however, that if the Company is indebted to such holder, the holder shall be
entitled, at the holder's sole option, to credit against the purchase price all
or any portion of the Company's indebtedness to such holder which is then due
(accrued but unpaid dividends on the Series A Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock or
the Series E Preferred Stock shall not be deemed to be indebtedness for purposes
of such credit).
(ii) A holder's contractual preemptive rights hereunder shall be
deemed to be exercised immediately prior to the close of business on the day of
payment of the purchase price in accordance with the foregoing provisions, and
at such time such holder shall be treated for all purposes as the record holder
of the Equity Securities, provided, however, that if the Company does not issue
the Equity Securities which trigger the preemptive rights hereunder, the Company
will not be required to sell, and the holders will not be required to purchase,
the Equity Securities offered pursuant to the preemptive rights hereunder and
the Company
13
will promptly return the purchase price to each holder hereunder. As promptly as
practicable (and in any event within ten business days) on or after the purchase
date, the Company shall issue and deliver at its principal office a certificate
or certificates for the number of full shares of Common Stock or the number of
full shares or amount, whichever is applicable, of Equity Securities together
with cash for any fraction of a share or portion of an Equity Security at the
purchase price to which the holder is entitled hereunder.
(iii) In the event that a Purchaser fails to exercise in full its
preemptive rights hereunder within the ten business day period specified above,
the Company shall have 60 days thereafter to sell the Equity Securities with
respect to which the preemptive rights were not exercised (or enter into an
agreement pursuant to which the sale of such Equity Securities shall be closed,
if at all, within 30 days from the date of such agreement) at a price and upon
terms no more favorable to the purchasers thereof than specified in the
Company's notice. In the event the Company does not sell and issue the Equity
Securities within such 60 day period (or 30 days after the date of such an
agreement entered into within such 60 day period), the Company shall not
thereafter issue or sell any Equity Securities without first offering such
Equity Securities to the Purchasers in the manner provided by this paragraph 3.
4. General Provisions.
------------------
4A. Legends on Certificate. During the term of this Agreement, each
----------------------
certificate representing shares of Common Stock or Shares will bear a legend in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SALE,
ASSIGNMENT, TRANSFER, PLEDGE OR OVER DISPOSITION AND VOTING THEREOF
ARE SUBJECT TO CERTAIN RESTRICTIONS AND AGREEMENTS CONTAINED IN A
STOCKHOLDERS AGREEMENT DATED AS OF APRIL 13, 1999 AMONG THE COMPANY
AND CERTAIN STOCKHOLDERS. A COPY OF THE STOCKHOLDERS AGREEMENT AND
ALL APPLICABLE AMENDMENTS THEREOF WILL BE FURNISHED BY THE COMPANY TO
THE RECORD HOLDER OF THIS CERTIFICATE WITHOUT CHARGE UPON WRITTEN
REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS OR
REGISTERED OFFICE."
14
The Company shall make a notation on its records and give instructions to any
transfer agent of the Preferred Stock or Common Stock in order to implement the
restrictions on transfer established in this Agreement.
4B. Termination; Amendment.
-----------------------
(i) This Agreement shall terminate upon the earliest to occur of
(a) the completion of a Qualified Public Offering (as defined in the Restated
Certificate of Incorporation), (b) the written agreement of the holders of at
least 66-2/3% of the Shares of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock, voting together as
a single class, the holders of a majority of the Series E Preferred Stock
outstanding and the holders of a majority of the Common Stock held by the Common
Stockholders, or (c) the acquisition by a single person of all of the issued and
outstanding shares of the Common Stock and the Shares.
(ii) This Agreement may be amended by the written agreement of the
holders of at least 66-2/3% of the Shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, voting
together as a single class, the holders of a majority of the Series E Preferred
Stock outstanding and the holders of a majority of the Common Stock held by the
Common Stockholders; provided, however, that no person designated as a Purchaser
Director pursuant to this Agreement may be removed, whether by amendment to this
Agreement or otherwise, without the consent of the holders of a majority of the
Shares entitled to designate that Purchaser Director.
(iii) Any amendment to this Agreement that is detrimental to a holder
of Series E Preferred Stock in a manner different from other holders of Series E
Preferred Stock shall require the written consent of such holder.
(iv) Paragraph 3B of this Agreement may not be amended or terminated
without the written agreement of the holders of at least a majority of the
Shares of Series E Preferred Stock and the Shares of Common Stock into which the
Shares of Series E Preferred Stock have been converted, voting together as a
single class.
4C. Notices. All notices, requests, consents, and other communications
-------
under this Agreement shall be in writing and shall be deemed to be delivered
when delivered personally or by facsimile transmission or by overnight delivery
service or 72 hours after having been mailed by first class certified or
registered mail, return receipt requested, postage prepaid:
15
If to the Company, at Xxxxxx.xxx, Inc., 000 Xxxx 0xx Xxxxxx, Xxxxxx, Xxxxx
00000, Attention: President, (000) 000-0000 (fax (000) 000-0000), or at such
other address or addresses as may have been furnished in writing by the Company
to the Purchasers, with a copy to Xxxxxx X. XxXxxxxxxx, Reinhart, Boerner, Van
Deuren, Xxxxxx & Rieselbach, S.C., 0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxxxx, Xxxxxxxxx 00000 (fax (000) 000-0000).
If to a Purchaser, at its address set forth on Exhibit A to the Purchase
---------
Agreement, or at such other address or addresses as may have been furnished to
the Company in writing by such Purchaser, with a copy to Xxxx Xxxxx, Buchalter,
Nemer, Fields & Younger, 000 Xxxxx Xxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxxxxx,
Xxxxxxxxxx 00000 (fax (000) 000-0000), and a copy to Xxxxxx Xxxxx, Xxxxxxx
Berlin Shereff Xxxxxxxx, X.X., 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (fax
(000) 000-0000).
If to a Common Stockholder, at his or her address set forth below his or
her signature to this Agreement.
4D. Governing Law. The construction, validity and interpretation of this
-------------
Agreement will be governed by the internal laws of the State of Delaware without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Delaware or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Delaware.
4E. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
shall be one and the same document. Facsimile signatures of this Agreement shall
be deemed of equal validity and as fully enforceable as original signatures
hereof.
4F. Reorganization. The provisions of this Agreement shall apply to any
--------------
shares or other securities resulting from any stock split or reverse split,
stock dividend, reclassification, subdivision, consolidation or reorganization
of any shares or other equity securities of the Company and to any shares or
other securities of the Company or of any successor company which may be
received by any of the parties hereto by virtue of their record ownership of any
shares of Common Stock and Preferred Stock of the Company.
4G. Headings. The headings of this Agreement are for convenience only and
--------
do not constitute a part of this Agreement.
16
4H. Severability. The invalidity or unenforceability of any provision of
------------
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
4I. Binding Effect. The rights and obligations of each purchaser under
--------------
this Agreement, may be assigned by such Purchaser to any person or entity to
which Shares are transferred by such Purchaser, and such transferee shall be
deemed a "Purchaser" for purposes of this Agreement, provided that the
transferee provides written notice of such assignment to the Company.
4J. Entire Agreement. This Agreement embodies the entire agreement of the
----------------
parties with respect to the subject matter hereof and supersedes all prior
agreements relating to such subject matter. This Agreement amends and restates,
in its entirety, the Prior Stockholders Agreement.
17
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the first written above.
COMPANY:
XXXXXX.XXX, INC.
By: /s/ Xxxxxxxx X. Xxxxxxxx
-------------------------------------
PURCHASERS:
P/A FUND III, L.P.
By APA Pennsylvania Partners III, L.P.,
General Partner
By Patricof & Co. Managers, Inc., General
Partner
By: /s/ Xxxxx Xxxxxx
-------------------------------------
Name: Xxxxx Xxxxxx
Title: Vice President
APA EXCELSIOR V, L.P.
By APA Excelsior V Partners, L.P.,
General Partner
By Patricof & Co. Managers, Inc., General
Partner
By: /s/ Xxxxx Xxxxxx
-------------------------------------
Name: Xxxxx Xxxxxx
Title: Vice President
[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]
18
PATRICOF PRIVATE INVESTMENT
CLUB II, L.P.
By APA Excelsior V Partners, L.P.,
General Partner
By Patricof & Co. Managers, Inc.,
General Partner
By: /s/ Xxxxx Xxxxxx
------------------------------------
Name: Xxxxx Xxxxxx
Title: Vice President
ATTRACTOR LP
By Attractor Ventures LLC, General
Partner
By: /s/ Xxxx Xxxxxxx
------------------------------------
Name: Xxxx Xxxxxxx
Title: Managing Member
ATTRACTOR INSTITUTIONAL LP
By Attractor Ventures LLC, General
Partner
By: /s/ Xxxx Xxxxxxx
------------------------------------
Name: Xxxx Xxxxxxx
Title: Managing Member
COMCAST INTERACTIVE CAPITAL
GROUP, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------------
Xxxxxx X. Xxxxxxxx, Managing Director
19
[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]
GLOBAL RETAIL PARTNERS, L.P.
By Global Retail Partners, Inc., General
Partner
By: /s/ Xxxxx X. Xxxxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Vice President
DLJ DIVERSIFIED PARTNERS, L.P.
By DLJ Diversified Partners, Inc., General
Partner
By: /s/ Xxxxx X. Xxxxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Vice President
DLJ DIVERSIFIED PARTNERS-A, L.P.
By DLJ Diversified Partners, Inc., General
Partner
By: /s/ Xxxxx X. Xxxxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Vice President
GRP PARTNERS, L.P.
By Global Retail Partners, Inc., General
Partner
By: /s/ Xxxxx X. Xxxxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Vice President
20
[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]
GLOBAL RETAIL PARTNERS
FUNDING, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Vice President
DLJ ESC II L.P.
By DLJ LBO Plans Management
Corporation, General Partner
By: /s/ Xxxxx X. Xxxxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Vice President
PEQUOT PRIVATE EQUITY FUND, LP
By Pequot Capital Management, Inc.,
Investment Advisor
By: /s/ Xxxxx X. Xxxxx
------------------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Financial Officer
PEQUOT OFFSHORE PRIVATE
EQUITY FUND, INC.
By Pequot Capital Management, Inc.,
Investment Advisor
By: /s/ Xxxxx X. Xxxxx
------------------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Financial Officer
21
[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]
NEXUS CAPITAL PARTNERS I, LP
By Nexus Group LLC, General Partner
By: /s/ Xxxxx Xxxxxx
------------------------------------
Name: Xxxxx Xxxxxx
Title: General Partner
XXX XXXXXXX CAPITAL
MANAGEMENT, INC.
By: /s/ Xxxxxxx Xxx Xxxxxxx
------------------------------------
Name: Xxxxxxx Xxx Xxxxxxx
Title: President
XXXXXXXXX & XXXXX CALIFORNIA
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Its: Tax Director, Attorney-in-Fact
--------------------------------
H & Q GARDEN ESCAPE INVESTORS, LP
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Its: Tax Director, Attorney-in-Fact
--------------------------------
XXXXXXXXX & XXXXX EMPLOYEE
VENTURE FUND, X.X. XX
By H&Q Venture Management, L.L.C., Its
General Partner
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Its: Tax Director, Attorney-in-Fact
--------------------------------
22
[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]
/s/ Xxxxxx X. Xxxxxxx
----------------------------------------
Xxxxxx X. Xxxxxxx
/s/ Xxxxxx X. Xxxxxx
----------------------------------------
Xxxxxx X. Xxxxxx
/s/ Xxxx Xxxxxxx
----------------------------------------
Xxxx Xxxxxxx
SCRIPPS VENTURES, LLC
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: President and Chief Executive
Officer
XXXXXXXX-XXXXX SPECIALTY RETAIL
GROUP III, L.P.
By Xxxxxxxx-Xxxxx Management
Company, L.P., General Partner
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: General Partner
/s/ Xxxxx X. Xxxxx
----------------------------------------
Xxxxx X. Xxxxx
23
[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]
AUSTIN VENTURES IV-A, L.P.
By AV Partners IV, L.P., General Partner
By: /s/ Xxxx X. Xxxxxxxx
-------------------------------------
Xxxx X. Xxxxxxxx, Partner
AUSTIN VENTURES IV-B, L.P.
By AV Partners IV, L.P., General Partner
By: /s/ Xxxx X. Xxxxxxxx
-------------------------------------
Xxxx X. Xxxxxxxx, Partner
OAK INVESTMENT PARTNERS, VII,
LIMITED PARTNERSHIP
By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------------
Xxxxxx X. Xxxxxxxxx, Managing Member
of Oak Associates, VII, LLC
The General Partner of Oak Investment
Partners VII, Limited Partnership
OAK VII AFFILIATES FUND, LIMITED
PARTNERSHIP
By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------------
Xxxxxx X. Xxxxxxxxx, Managing Member
of Oak VII Affiliates, LLC
The General Partner of Oak VII
Affiliates Fund, Limited Partnership
24
[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]
/s/ Xxxxxxxx X. Xxxxxxxx
-------------------------------------
Xxxxxxxx X. Xxxxxxxx
/s/ Xxxxx X. X'Xxxxx
-------------------------------------
Xxxxx X. X'Xxxxx
/s/ Xxxx W.A. Xxxxxxxx
-------------------------------------
Xxxx W.A. Xxxxxxxx
25
[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]
ATTRACTOR VENTURES LP
By Attractor Ventures LLC, General
Partner
By: /s/ Xxxx Xxxxxxx
------------------------------------
Name: Xxxx Xxxxxxx
Title: Managing Member
26
[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]
NEXUS PARTNERS LLC
By Nexus Group LLC, Its General Partner
By: /s/ Xxxxx Xxxxxx
------------------------------------
Name: Xxxxx Xxxxxx
Title: General Partner
/s/ Xxxxx Xxxxxxx
-------------------------------------
Xxxxx Xxxxxxx
27
