Exhibit 10.22.1
SECURITYHOLDERS' AGREEMENT
This SECURITYHOLDERS' AGREEMENT, dated as of October 26, 1999, among
PRICELINE WEBHOUSE CLUB, INC., a Delaware corporation (the "Company"),
XXXXXXXXX.XXX INCORPORATED, a Delaware corporation ("Priceline"), XXXXXX
DIGITAL, LLC, a Delaware limited liability company ("Xxxxxx Digital"), and the
Persons listed on the signature pages hereto and each subsequent investor in the
Company's Common Stock (or derivatives thereof) who shall hereafter become
signatory hereto (each an "Investor" and, together with Xxxxxx Digital,
collectively the "Investors"),
W I T N E S S E T H:
WHEREAS, Priceline is an internet-based company with significant
name recognition of its trademarked "priceline" name and patented "demand
collection system" for selling products over the Internet;
WHEREAS, Xxxxxx Digital is a research and development company
containing certain trade secrets, know-how and other intellectual property;
WHEREAS, in connection with the establishment of the Company's
business of the sale of retail products in a "name your price" format over the
Internet, Xxxxxx Digital is (A) contributing certain know-how, and other assets
and liabilities used in or incurred during the initial development of the
Company's business, pursuant to an asset contribution agreement dated as of the
date hereof between Xxxxxx Digital and the Company (the "Asset Contribution
Agreement") and (B) licensing certain intellectual property pursuant to a
license agreement between Xxxxxx Digital and Priceline dated as of the date
hereof, which intellectual property shall in turn be sublicensed by Priceline to
the Company (the "Xxxxxx Digital License Agreement"), (ii) Xxxxxx Digital
Corporation, a research and development company, is contributing certain
employees to the Company under the Asset Contribution Agreement, and (iii)
Priceline is (A) licensing and sublicensing, as applicable, the use of the
"priceline" name, certain patent rights and other intellectual property rights
for use in connection with the Company's business, pursuant to an intellectual
property license agreement between Priceline and the Company dated as of the
date hereof (the "Priceline License Agreement"), (B) providing certain
accounting, legal and other services to the Company pursuant to a services
agreement between Priceline and the Company dated as of the date hereof (the
"Services Agreement"), and (C) providing certain marketing and technical
services to the Company pursuant to a marketing and technical services agreement
between Priceline and the Company dated as of the date hereof (the "Marketing
Agreement");
WHEREAS, in consideration for cash and the assets it has contributed
pursuant to the Asset Contribution Agreement, Xxxxxx Digital is receiving a
promissory note in the amount of $14,592,185.60, payable on April 26, 2000 (the
"Xxxxxx Digital Note");
WHEREAS, in consideration of their cash contributions, Xxxxxx
Digital and certain other investors (the "Investors") are receiving a total of
23,500,000 shares of the Company's common stock, par value $.01 per share (the
"Common Stock"), pursuant to the subscription agreement (the "Subscription
Agreement") dated as of the date hereof between the Company and the Investors;
WHEREAS, in consideration for its execution and deliveries pursuant
to the Priceline License Agreement, Priceline is receiving a warrant to purchase
under certain circumstances up to 137.5 million shares of Common Stock pursuant
to an agreement between Priceline and the Company dated as of the date hereof
(the "Priceline Warrant") and desires to have certain rights to participate in
the Company's corporate governance;
WHEREAS, in connection with the establishment of the Company,
Priceline is agreeing, pursuant to the Services Agreement and the Marketing
Agreement, to provide services to and to coordinate marketing activities with
the Company in exchange for arm's-length consideration;
WHEREAS, the parties hereto believe it is in their mutual best
interest to enter into certain agreements concerning the composition of the
Company's Board of Directors, corporate governance, transfer restrictions on the
Common Stock and registration rights, as set forth herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, the parties hereby agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Accepting Party" has the meaning specified in Section 5.04(b)(iii).
"Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
Controls, is Controlled by, or is under common Control with, such specified
Person.
"Agreement" means this Securityholders' Agreement, dated as of
October 26, 1999, and all amendments made hereto in accordance with the
provisions hereof.
"Ancillary Agreements" means the License Agreement, the Asset
Contribution Agreement, the Marketing Agreement, the Priceline Warrant and the
Services Agreement.
"Arista Capital" has the meaning specified in Section 4.03.
"Asset Contribution Agreement" has the meaning specified in the
Preamble.
"Beneficial Owner" or "Beneficially Own" has the meaning given such
term in Rule 13d-3 under the Exchange Act, provided that Beneficial Ownership
under Rule 13d-3(1)(i) shall be determined based on whether a Person has a right
to acquire Beneficial Ownership irrespective of whether such right is
exercisable within 60 days of the time of determination.
"Board" means the board of directors of the Company.
"Business Day" means any day except a Saturday, Sunday or other day
on which commercial banks in the State of New York are authorized or required by
law or executive order to close.
"Capital Stock" means, with respect to any Person at any time, any
and all shares, interests, participations or other equivalents (however
designated, whether voting or non-voting) of capital stock, partnership
interests (whether general or limited), limited liability company interests or
equivalent ownership interests in such Person.
"Cash Equivalents" means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof, (b)
marketable direct obligations issued by any state of the United States or any
political subdivision of any such state or any public instrumentality thereof
maturing within one year from the date of acquisition thereof and, at the time
of acquisition, having the highest rating obtainable from any of Standard &
Poor's Ratings Services, Xxxxx'x Investors Service, Inc. or Duff & Xxxxxx Credit
Rating Co. or (c) commercial paper maturing not more than one year from the date
of issuance thereof and, at the time of acquisition, having the highest rating
obtainable from either Standard & Poor's Corporation or Xxxxx'x Investors
Service, Inc.
"Closing" means the date of the closing of the Subscription
Agreement.
"Commission" means the Securities and Exchange Commission.
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"Common Stock" has the meaning specified in the Preamble.
"Company" has the meaning specified in the Preamble.
"Company Indemnitee" has the meaning specified in Section 8.01(b).
"Control" (including the terms "Controlled by" and "under common
Control with") means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, as trustee or executor, by
contract or otherwise, including, without limitation, the ownership, directly or
indirectly, of securities having the power to elect a majority of the board of
directors or similar body governing the affairs of such Person.
"Encumbrance" means any security interest, pledge, mortgage, lien,
charge, adverse claim of ownership or use, or other encumbrance of any kind.
"Escrow Agreement" has the meaning specified in the Preamble.
"Exchange Act" means the United States Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
"Xxxxxxx Xxxxx" means The Xxxxxxx Sachs Group, Inc., a Delaware
corporation.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Indemnified Party" has the meaning specified in Section 8.01(c).
"Indemnifying Party" has the meaning specified in Section 8.01(c).
"Independent Directors" has the meaning specified in Section 4.03(a)
"Initial Offer Period" has the meaning specified in Section
5.04(b)(i).
"Initial Public Offering" means the first underwritten public
offering of the Common Stock resulting in aggregate net proceeds (after expenses
and underwriting commissions and discounts) to the Company and any selling
stockholders of at least $50,000,000; provided that, following such offering the
Common Stock is listed on a United States or foreign national securities
exchange or quoted on any United States or foreign automated securities
quotation system.
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"Initial Shares" has the meaning specified in Section 6.03(d).
"Insolvency Event" means, in respect of the Company, that time when
the sum of the Company's debts exceeds the sum of its assets, valued at fair
market value; or that the Company shall not pay its debts as such debts become
due, or shall admit in writing its inability to pay its debts, or shall make a
general assignment for the benefit of creditors; or any proceeding shall be
instituted by it or against it seeking to adjudicate it a bankrupt or insolvent,
or seeking liquidation, winding-up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee or other
similar official for it or for any substantial part of its property and, in the
case of any such proceeding instituted against it (but not instituted by it)
that is being diligently contested by it in good faith, either such proceeding
shall remain undismissed or unstayed for a period of 30 days or any of the
actions sought in such proceeding (including, without limitation, the entry of
an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or any substantial part of its
property) shall occur; or the Company shall take any corporate action to
authorize any of the actions set forth above.
"Investors" has the meaning specified in the Preamble.
"License Agreement" has the meaning specified in the Preamble.
"Losses" has the meaning specified in Section 8.01(a).
"Majority Directors" has the meaning specified in Section 4.03(b).
"Marketable Securities" means securities that are (a) (i) securities
of or other interests in any Person that are traded on a United States national
securities exchange or reported on by the National Association of Securities
Dealers Automated Quotation System or (ii) debt securities on market terms of an
issuer that has debt or equity securities that are so traded or so reported on
and in which Marketable Securities a nationally recognized securities firm has
agreed to make a market, and (b) not subject to restrictions on transfer as a
result of any applicable contractual provisions or the provisions of the
Securities Act or, if subject to such restrictions under the Securities Act, are
also subject to registration rights reasonably acceptable to the Person
receiving such Marketable Securities as consideration in a transaction pursuant
to Article V hereof.
"Marketing Agreement" has the meaning specified in the Preamble.
"Material Adverse Effect" means any event, condition, change or
effect that (a) materially and adversely affects the assets, liabilities,
business, financial condition or results
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of operations of the Company, taken as a whole, or (b) prevents or materially
delays the consummation of the transactions contemplated by this Agreement or
the Ancillary Agreements.
"New Securities" means any Capital Stock of the Company, whether now
authorized or not, and rights, options or warrants to purchase such Capital
Stock, and securities of any type whatsoever that are, or may become,
convertible into or exchangeable or exercisable for Capital Stock of the
Company; provided that the term "New Securities" does not include (i) securities
of the Company issued to its employees, consultants, officers or directors of
the Company, or which have been reserved for issuance, pursuant to any employee
stock option, stock purchase, stock bonus plan, or other similar stock agreement
or arrangement approved by the Board of Directors, (ii) securities of the
Company issued in connection with any stock split, stock dividend or
recapitalization of the Company, (iii) securities of the Company issued in an
Initial Public Offering, (iv) securities of the Company issued upon the
conversion or exchange of convertible or exchangeable securities of the Company
that are outstanding as of the date of this Agreement, (v) Warrant Shares or
(vi) any right, option or warrant to acquire any security convertible into or
exchangeable or exercisable for the securities excluded from the definition of
New Securities pursuant to subclause (i) above if issued pursuant to any
employee stock option, stock purchase, stock bonus plan or other similar stock
agreement or arrangement approved by the Board of Directors.
"Non-Company Indemnitees" has the meaning specified in Section
8.01(a).
"Notice of Election" has the meaning specified in Section
5.04(b)(i).
"Notice of Issuance" shall have the meaning assigned in Section
7.02(b).
"Offer" has the meaning specified in Section 5.04(a)(i).
"Offer Notice" has the meaning specified in Section 5.04(a)(i).
"Offer Price" has the meaning specified in Section 5.04(a)(i).
"Offered Shares" has the meaning specified in Section 5.04(a)(i).
"Option Shares" has the meaning specified in Section 6.03(d).
"Other Securityholder" has the meaning specified in Section
5.04(a)(i).
"Permits" has the meaning specified in Section 2.05(b)(i).
"Permitted Transferee" means, with respect to a specified Person,
(i) any Affiliate of such Person, provided such Person is not a competitor of
the Company, as reasonably
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determined by the Board, (ii) a donee of Shares who is a member of the family of
such Person or any trust for the benefit of any such family member and (iii) a
transferee of Shares who receives such Shares by will or the laws of descent and
distribution. For purposes of this definition, the word "family" shall include
any spouse, lineal ancestor or descendant, brother or sister; and any Affiliate
of Xxxxxxx Sachs that is primarily engaged in brokerage, investment advisory,
financial advisory, anti-raid advisory, merger advisory, financing, asset
management, trading, market making, arbitrage, and other similar activities
shall not be deemed to be a competitor of the Company.
"Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as well as any
syndicate or group that would be deemed to be a person under Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended.
"Price Determination Date" means in connection with any Sale of
Shares to the Company or an Other Securityholder pursuant to Section 5.04
hereof, the date on which the Prospective Seller receives a Notice of Election
indicating such Other Securityholder's interest in purchasing such Shares.
"Priceline" has the meaning specified in the Preamble.
"Priceline Warrant" has the meaning specified in the Preamble.
"Prospective Seller" has the meaning specified in Section
5.04(a)(i).
"Prospective Transferee" has the meaning specified in Section 5.05.
"Recapitalization" means any stock split, dividend or combination,
or any recapitalization, merger, consolidation, exchange or other similar
reorganization.
"Registrable Securities" means (i) shares of Common Stock held by
Securityholders, (ii) any Common Stock which may be issued or distributed in
respect thereof by way of any Recapitalization and (iii) shares of Common Stock
issuable upon exercise or conversion of any then exercisable options, warrants
or other derivative securities. All Registrable Securities shall cease to be
Registrable Securities when they (a) are registered, (b) are sold pursuant to
Rule 144 or (c) are eligible to be sold without volume restrictions under Rule
144.
"Registration Expenses" means all expenses incurred by the Company
in its performance of or compliance with Article VI, including, without
limitation, all registration and filing fees (including filing fees with respect
to the National Association of Securities Dealers, Inc.), all fees and expenses
of complying with state securities or "blue sky" laws (including reasonable fees
and disbursements of underwriters' counsel in connection with the preparation of
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any "blue sky" memorandum or survey), all printing and distribution expenses,
all listing fees, all registrars' and transfer agents' fees, the fees and
disbursements of counsel for the Company and of its independent public
accountants, including, without limitation, the expenses of any special audits
or "cold comfort" letters required by or incident to such performance and
compliance, but excluding underwriting discounts and commissions and applicable
transfer taxes, if any, which shall be borne by the sellers of the Registrable
Securities being registered in all cases.
"Remainder Notice" has the meaning specified in Section 5.04(b)(ii).
"Restricted Period" shall mean the period commencing on the third
anniversary of the Closing and ending upon the closing of an Initial Public
Offering by the Company.
"Restricted Shares" means all Shares other than (a) Shares that have
been registered under a registration statement pursuant to the Securities Act,
(b) Shares with respect to which a Sale has been made in reliance on and in
accordance with Rule 144 or (c) Shares with respect to which the holder thereof
shall have delivered to the Company either (i) an opinion, in form and substance
reasonably satisfactory to the Company, of counsel, who shall be reasonably
satisfactory to the Company, or (ii) a "no action" letter from the staff of the
Commission, to the effect that subsequent transfers of such Shares may be
effected without registration under the Securities Act or compliance with Rule
144.
"Rule 144" means Rule 144 (or any successor provision) under the
Securities Act.
"Sale" means any sale, assignment, transfer, distribution or other
disposition of Shares or of a participation therein, whether voluntarily or by
operation of law.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated by the Commission thereunder.
"Securityholder" means each holder or Beneficial Owner of Common
Stock or any security convertible into, or exchangeable for, Common Stock
(including the Priceline Warrant) who is or hereafter becomes a party to this
Agreement or the rightful and permitted assign or successor of such a party.
"Services Agreement" has the meaning specified in the Preamble.
"Share" means any share of Common Stock.
"Subscription Agreement" has the meaning specified in the Preamble.
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"Subsidiary" means any and all corporations, partnerships, joint
ventures, associations and other entities Controlled by the Company directly or
indirectly through one or more intermediaries.
"Third Party" means, with respect to any Securityholder, any other
Person (other than a Permitted Transferee of such Securityholder).
"Third Party Claim" has the meaning specified in Section 8.01(c).
"unexercised", with respect to the Priceline Warranty, means that
Priceline has acquired none of the Warrant Shares it is entitled to pursuant to
the Priceline Warrant.
"Voting Interest" of the Company means one Share of Common Stock and
any other share or unit of Capital Stock issued by the Company, the holders of
which are ordinarily, in the absence of contingencies, entitled to one vote in
the election of the Company's directors (or Persons performing similar
functions), or the approval of its management and policies, even if the right to
vote has been suspended by the occurrence of a contingency.
"Vulcan" has the meaning specified in the Preamble.
"Xxxxxx Digital" has the meaning specified in the Preamble.
"Warrant Shares" means the Shares for which the Priceline Warrant is
exercisable, as adjusted in accordance with the Warrant Agreement.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Securityholders as
follows:
SECTION 2.01. Due Organization and Authority. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all necessary power and authority to enter into
this Agreement, to carry out its obligations hereunder and to perform the
actions contemplated hereby. The Company is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which the properties
owned or leased by it or the operation of its business makes such licensing or
qualification necessary, except to the extent that the failure to be so licensed
or qualified would not materially and adversely affect the Company's assets,
liabilities or results of operations or prevent or materially hinder the
performance of the actions contemplated by this Agreement. The execution and
delivery of this Agreement by the Company, the performance by the Company of its
obligations hereunder and the performance by the Company of the actions
contemplated hereby have been duly authorized by all requisite action on the
part of the Company. This Agreement has been duly executed and delivered by the
Company, and (assuming due authorization, execution and delivery by the other
parties thereto) this Agreement constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
SECTION 2.02. Capital Stock of Company. The Common Stock to be
issued by the Company pursuant to this Agreement has been duly authorized and,
when issued and delivered in accordance with the terms of this Agreement, will
have been validly issued and will be fully paid and nonassessable, and will be
free from restrictions on transfer other than restrictions on transfer under
this Agreement or the Securityholders' Agreement and under applicable state and
federal securities laws. No Person has any preemptive or similar rights with
respect to the Common Stock, and neither the parties hereto nor subsequent
holders in due course of such Common Stock will be entitled to any such
preemptive or similar rights other than as set forth in this Agreement. The
authorized capital stock of the Company consists of 300,000,000 shares of Common
Stock, of which 23,500,000 shares will be issued and outstanding following the
Closing, and 50,000,000 shares of preferred stock, of which none has been
designated or issued by the Company. The Company has reserved Common Stock for
issuance in the amounts and for the purposes that follow:
(i) 137.5 million shares of Common Stock have been reserved for
issuance upon exercise of the Priceline Warrant; and
(ii) 666,667 shares of Common Stock have been reserved for issuance
upon exercise of the warrant held by BDS Business Center, Inc.;
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(iii) 65,000 shares of Common Stock have been reserved for issuance
upon exercise of the warrant held by Xxxxxxx Xxxxxxx; and
(iv) 17,333,333 shares of Common Stock have been reserved for
issuance upon the exercise of certain employee options to be granted
pursuant to the Company's Omnibus Employee Equity Plan, of which
12,911,749 shares relate to options that have been granted as of the date
thereof.
Except as set forth above, (i) no shares of Capital Stock of the
Company have been reserved for issuance for any reason; (ii) no subscription,
warrant, option, convertible security, or other right (contingent or other) to
purchase or otherwise acquire Capital Stock of the Company is authorized or
outstanding; and (iii) the Company has made no commitment to issue shares,
subscription, warrants, options, convertible securities, or other such rights or
to distribute to holders of any of its Capital Stock any evidence of
indebtedness or asset.
SECTION 2.03. No Conflict. Assuming that all consents, approvals,
authorizations and other actions described in Section 2.04 have been obtained,
the execution, delivery and performance of this Agreement by the Company do not
and will not (a) violate, conflict with or result in the breach of any provision
of its Certificate of Incorporation or By-laws, (b) conflict with or violate any
law, governmental regulation or governmental order applicable to it or any of
its assets, properties or businesses or (c) conflict with, result in any breach
of, constitute a default (or event which with the giving of notice or lapse of
time, or both, would become a default) under, require any consent under, or give
to others any rights of termination, amendment, acceleration, suspension,
revocation or cancellation of, or result in the creation of any Encumbrance on
any of the Company's assets or properties pursuant to, any note, bond, mortgage
or indenture, contract, agreement, lease, sublease, license, permit, franchise
or other instrument or arrangement to which the Company is a party or by which
any of its assets or properties is bound or affected; except to the extent that
any conflict under (b) or (c) above would not have a Material Adverse Effect.
SECTION 2.04. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement by the Company do not and will not
require any consent, approval, authorization or other order of, action by,
filing with or notification to, any governmental authority, except such as may
be required by the HSR Act, if applicable.
SECTION 2.05. Compliance with Laws. (a) The Company is in compliance
with all requirements of applicable law and all orders issued by any court or
governmental authority against the Company in all respects, except to the extent
that the failure to comply with such requirements of law or orders would not
have a Material Adverse Effect.
(b) (i) The Company has all material licenses, permits and approvals
of any governmental authority (collectively, "Permits") that are necessary for
the conduct of the business
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of the Company; (ii) such Permits are in full force and effect; and (iii) no
violations are or have been recorded in respect of any Permit, except where the
failure of any of the foregoing would not have a Material Adverse Effect.
(c) No expenditure is presently required by the Company to comply
with any existing requirement of law or order, except where such expenditure
would not have a Material Adverse Effect.
SECTION 2.06. Investment Company Status. The Company is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SECURITYHOLDERS
Each Securityholder severally, but not jointly, represents and
warrants to the Company and each other Securityholder as follows:
SECTION 3.01. Organization and Authority. To the extent such
Securityholder is not a natural person, it is a corporation, limited liability
company or partnership duly incorporated or organized, validly existing and in
good standing under the laws of the state of its incorporation or organization
and has all necessary power and authority to enter into this Agreement, to carry
out its obligations hereunder and to perform the actions contemplated hereby.
Such Securityholder is duly licensed or qualified to do business and is in good
standing in each jurisdiction in which the properties owned or leased by it or
the operation of its business makes such licensing or qualification necessary,
except to the extent that the failure to be so licensed or qualified would not
prevent or materially hinder the performance of the actions contemplated by this
Agreement. The execution and delivery of this Agreement by such Securityholder,
the performance by it of its obligations hereunder and the performance by it of
the actions contemplated hereby have been duly authorized by all requisite
action on its part. This Agreement has been duly executed and delivered by such
Securityholder, and (assuming due authorization, execution and delivery by the
other Persons signatory thereto) this Agreement constitutes a legal, valid and
binding obligation of such Securityholder enforceable against it in accordance
with its terms.
SECTION 3.02. No Conflict. Assuming that all consents, approvals,
authorizations and other actions described in Section 3.03 have been obtained,
the execution, delivery and performance of this Agreement by such Securityholder
do not and will not (a) violate, conflict with or result in the breach of any
provision of its Charter or By-laws (or similar organizational documents), to
the extent it has such, (b) conflict with or violate any law,
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governmental regulation or governmental order applicable to such party or any of
its assets, properties or businesses or (c) conflict with, result in any breach
of, constitute a default (or event which with the giving of notice or lapse of
time, or both, would become a default) under, require any consent under, or give
to others any rights pursuant to, any contract, agreement or arrangement by
which such party is bound; except to the extent that any conflict under (b) or
(c) above would not prevent or materially hinder the performance of the actions
contemplated by this Agreement.
SECTION 3.03. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement by such party do not and will not
require any consent, approval, authorization or other order of, action by,
filing with or notification to, any governmental authority, except such as may
be required by the HSR Act, applicable.
ARTICLE IV
CORPORATE GOVERNANCE
SECTION 4.01. Agreement to Vote. The Securityholders agree to vote
their shares, and the Company agrees to take all necessary measures, in order to
carry out the agreements set forth in this Article IV, and to prevent any action
by the Company's Securityholders that is inconsistent with such agreements,
until the Priceline Warrant expires unexercised. Thereafter, the Agreements
contained in this Article IV shall be of no further effect.
SECTION 4.02. Size of Board. Initially, the Board shall consist of
seven (7) directors. If Priceline shall exercise the Priceline Warrant for not
less than 75% of the Warrant Shares, and as a result shall hold a majority of
the then outstanding Shares, the number of directors on the Board shall be
increased to nine (9). The number of directors shall not exceed nine (9), unless
the Board of Directors shall vote to increase the number in accordance with
Section 4.06.
SECTION 4.03. Composition of Board. (a) Initially, Priceline shall
be represented by one (1) director, Xxxxxx Digital shall be represented by one
(1) director, Xxxxxxxx Xxxx shall be represented by one (1) director, Vulcan
shall be represented by one (1) director and Xxxxxxx Xxxxx shall be represented
by one (1) director. In addition, there shall be two independent directors (the
"Independent Directors"), elected by Xxxxxxx Sachs, Arista Capital Partners, LP
("Arista Capital"), Xxxxxxx Xxxx and Xxxxxxxx Xxxx, voting on an equal basis
without reference to proportionate Shares ownership. Both such directors shall
qualify as "independent directors" pursuant to the definition set forth in Rule
4200(a)(14) of the National Association of Securities Dealers, substituting the
word "affiliate" for "subsidiaries" therein.
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(b) If and when the Board is expanded to nine (9) members, as
provided in Section 4.02, Priceline shall be represented by five (5) directors,
Xxxxxx Digital by one (1) director and Vulcan by one (1) director. The remaining
two (2) directors (the "Majority Directors") shall be elected by all the
Securityholders (excluding Priceline), voting cumulatively in proportion to
Share ownership. A representative of each of Xxxxxxx Xxxxx, Xxxxxxxx Xxxx and
Arista Capital may attend meetings of the Board in a nonvoting capacity and at
their own expense; provided that (i) no such representative shall serve in a
similar capacity or as a director or employee for any other company that is in a
business similar to that of the Company or that could be considered a competitor
of the Company and (ii) such representative shall keep all business of the Board
in the strictest confidence and, or requested by the Company, enter into a
confidentiality agreement.
SECTION 4.04. Nomination and Election of Directors. The
Securityholders' initial nominees for the Board shall be as set forth in
Schedule III hereto. If not already named by the Company's existing Board, the
Securityholders shall act to elect such nominees as directors as soon as
practicable by unanimous written consent or at a shareholders' meeting to be
held hereafter. Hereafter, the Securityholders shall make the nominations to
which they are entitled hereunder not later than 30 days prior to each annual
meeting of the Company's shareholders, and the Board shall be elected at such
meeting or by unanimous written consent in accordance herewith.
SECTION 4.05. Vacancies. If, as a result of death, disability,
retirement, resignation, removal (with or without cause) or otherwise, there
shall exist or occur any vacancy in the Board:
(a) if the departed director was nominated by Priceline, then
Priceline,
(b) if the departed director was nominated by Xxxxxx Digital, then
Xxxxxx Digital,
(c) if the departed director was nominated by Xxxxxxxx Xxxx, then
Xxxxxxxx Xxxx,
(d) if the departed director was nominated by Xxxxxxx Sachs, then
Xxxxxxx Xxxxx,
(e) if the departed director was nominated by Vulcan, then Vulcan,
and
(f) if the departed director was an independent director nominated
by Xxxxxxx Sachs, Arista Capital, Xxxxxxx Xxxx and Xxxxxxxx Xxxx, then
Xxxxxxx Sachs, Arista Capital, Xxxxxxx Xxxx and Xxxxxxxx Xxxx,
collectively,
14
shall be entitled to designate in writing one nominee for election to fill such
vacancy. The Securityholders shall as soon as practicable after such nomination
is made act to elect such nominee to the Board. Any director elected pursuant to
this Section 4.05 shall serve until the next annual election of directors.
SECTION 4.06. Voting. The Company's By-Laws shall provide that,
prior to the expiration unexercised of the Priceline Warrant, the affirmative
vote of the director or directors nominated by Priceline is required to approve
any of the following actions:
(a) prior to the third anniversary of the Closing, any
Recapitalization, business combination or sale of all or substantially all
of the assets of the Company in which more than 50% of Company's Voting
Interests are transferred;
(b) any amendment, supplement or modification of any kind whatsoever
to the Company's Certificate of Incorporation or By-laws, including any
increase in the number of directors on the Board;
(c) prior to the third anniversary of the Closing, the filing of a
registration statement under the Securities Act or the making of any other
public disclosure in connection with the commencement of an Initial Public
Offering (excluding, for purposes of this paragraph only, the requirement
that proceeds therefrom exceed $50 million); provided that such vote shall
not be required in connection with an Initial Public Offering pursuant to
Section 6.02(a);
(d) any transactions with an Affiliate of the Company other than at
fair market value in the ordinary course of business;
(e) the dissolution and winding up of the Company; and
(f) the voluntary initiation of an Insolvency Event in respect of
the Company.
The Securityholders shall vote their Shares in accordance with
Priceline's request on the above issues at any meeting of the Securityholders
where any of the above items are voted upon. Moreover, the Securityholders
hereby agree not to vote their shares in favor of any change to the By-laws of
the Company inconsistent with this Section 4.06.
SECTION 4.07. Audit Committee. The Company shall establish and
maintain an Audit Committee, which shall consist of three members of the Board,
including the director nominated by Vulcan, the director nominated by Xxxxxx
Digital and, prior to an increase in the size of the Board pursuant to Section
4.03, one Independent Director, or, following an increase in the size of the
Board pursuant to Section 4.03, one Majority Director.
15
SECTION 4.08. Compensation Committee. The Company shall establish
and maintain a Compensation Committee of the Board. The Compensation Committee
shall make recommendations to the full Board for such matters as management
compensation, Company benefit plans, and matters relating to the Company's
option plans, if any. The Compensation Committee shall consist of three members
of the Board, including the director nominated by Vulcan, the director nominated
by Xxxxxx Digital and, prior to an increase in the size of the Board pursuant to
Section 4.03, one Independent Director, or, following an increase in the size of
Board pursuant to Section 4.03, one Majority Director.
ARTICLE V
TRANSFER OF SHARES
SECTION 5.01. General Restriction. No Securityholder shall, directly
or indirectly, make or solicit any Sale of, or create, incur, solicit or assume
any Encumbrance with respect to, any Share, except in compliance with the
Securities Act and this Agreement.
SECTION 5.02. Legends. (a) The Company shall affix to each
certificate evidencing Shares issued to Securityholders a legend in
substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933 OR AN EXEMPTION THEREFROM
AND, IN EACH CASE, IN COMPLIANCE WITH APPLICABLE STATE SECURITIES
LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AS SET FORTH IN A SECURITYHOLDERS_
AGREEMENT DATED AS OF _______, 1999, AS IT MAY BE AMENDED FROM TIME
TO TIME, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE
OFFICES OF THE ISSUER. NO REGISTRATION OF TRANSFER OF THESE SHARES
WILL BE MADE ON THE BOOKS OF THE ISSUER UNLESS AND UNTIL SUCH
RESTRICTIONS SHALL HAVE BEEN COMPLIED WITH."
16
(b) Any Securityholder with Shares issued prior to the date hereof
has delivered to the Company its certificates representing such Shares in
exchange for certificates representing such Shares bearing the legend set forth
in Section 5.02(a).
(c) In the event that any Shares shall cease to be Restricted
Shares, the Company shall, upon the written request of the holder thereof, issue
to such holder a new certificate evidencing such Shares without the first
paragraph of the legend required by Section 5.02(a) endorsed thereon. In the
event that the Shares shall cease to be subject to the restrictions on transfer
set forth in this Agreement, the Company shall, upon the written request of the
holder thereof, issue to such holder a new certificate evidencing such Shares
without the legend required by the second paragraph of Section 5.02(a). Before
issuing a new certificate omitting part or all of the legend set forth in
Section 5.02(a), the Company may request an opinion of counsel reasonably
satisfactory to it to the effect that the restrictions discussed in the legend
to be omitted no longer apply to the Shares represented by such certificate.
SECTION 5.03. Certain Restrictions on Transfer. (a) No
Securityholder shall, directly or indirectly (through the transfer of capital
stock of any Person that holds, or controls any Person that holds, such Shares)
make or solicit any Sale of, or create, incur or assume any Encumbrance with
respect to, any Share of Common Stock Beneficially Owned by such Securityholder,
other than
(i) any Sale to a Permitted Transferee,
(ii) during the Restricted Period, any Sale of Common Stock that is
made in compliance with the procedures, and subject to the limitations,
set forth in Sections 5.04 and 5.05,
(iii) subject to compliance with Section 6.03(b), any Sale of Common
Stock subsequent to the date that is 180 days after closing of the
Company's Initial Public Offering,
(iv) any Sale in connection with a merger of the Company or a Sale
of all or substantially all of its assets or other similar business
combination that has been approved by the Company's Board of Directors,
(v) any Sale in connection with the merger of Priceline or a Sale of
all or substantially all of its assets or other similar business
combination that has been approved by Priceline's Board of Directors, or
(vi) any Sale in connection with a public offering of equity
securities of any Securityholder.
17
Notwithstanding the foregoing, except as otherwise expressly
provided in this Agreement, all Sales permitted by the foregoing clauses (i)
through (iv) shall be subject to, and shall not be made other than in compliance
with, the provisions of Sections 5.01, 5.02, 5.03(b), 5.06 and 5.07.
(b) No Sale of Shares to a Permitted Transferee shall be effective
if a purpose or effect of such transfer shall have been to circumvent the
provisions of this Section 5.03, Section 5.04 or Section 5.05. Each
Securityholder shall remain responsible for the performance of this Agreement by
each Permitted Transferee of such Securityholder to which Shares are
transferred, except if such Permitted Transferee received such Shares by will or
the laws of descent and distribution or if such Permitted Transferee is a
natural Person. If any Permitted Transferee to which Shares are transferred
pursuant to clause (i) of Section 5.03(a) is not a natural Person and ceases to
be a Permitted Transferee of the Securityholder from which or whom it acquired
such Shares pursuant to such provision, such Person shall reconvey such Shares
to such transferring Securityholder immediately before such Person ceases to be
a Permitted Transferee of such transferring Securityholder so long as such
Person knows of its upcoming change of status immediately prior thereto. If such
change of status is not known until after its occurrence, the former Permitted
Transferee shall make such transfer to such transferring Securityholder as soon
as practicable after the former Permitted Transferee receives notice thereof.
(c) All restrictions on transfers of Shares imposed by this Article
V shall terminate 180 days after the closing of the Company's Initial Public
Offering or, if earlier, upon the expiration unexercised of the Priceline
Warrant.
SECTION 5.04. Rights of First Refusal. (a) (i) If at any time during
the Restricted Period any Securityholder receives from or otherwise negotiates
with a Third Party a bona fide offer (an "Offer") to purchase for cash, Cash
Equivalents or Marketable Securities any of the Shares of Common Stock
Beneficially Owned or held by such Securityholder, and such Securityholder
intends to sell such Shares to such Third Party, such Securityholder (the
"Prospective Seller") shall provide the Company and each Securityholder other
than the Prospective Seller (each, an "Other Securityholder") with written
notice of such Offer (an "Offer Notice"). The Offer Notice shall identify the
Third Party making the Offer, the number of Shares covered by the Offer (the
"Offered Shares"), the price per Share at which a Sale is proposed to be made
(the "Offer Price"), the form of consideration proposed to be paid and all other
material terms and conditions of the Offer.
(ii) If the Offer Price includes
(A) any Marketable Securities, the value of such securities shall be
determined by calculating a volume-weighted average of the closing prices
of such securities over the ten trading-day period ending on the Price
Determination Date on the market with the largest trading volume in such
securities; or
18
(B) any Cash Equivalents, the value of such Cash Equivalents shall
be determined by reference to the closing price thereof on the market with
the largest trading volume in such securities on the Price Determination
Date.
(b) (i) The receipt of an Offer Notice by the Company from a
Prospective Seller shall constitute an exclusive offer by such Prospective
Seller to sell to the Company any or all of the Offered Shares at the Offer
Price. Such offer shall remain open and irrevocable until expiration of thirty
days after receipt of such Offer Notice by the Company and the Other
Securityholders (the "Offer Period"). At any time prior to expiration of the
Offer Period, the Company shall have the right to accept the Prospective
Seller's offer as to any or all of the Offered Shares by giving a written notice
of election (the "Notice of Election") to the Prospective Seller with a copy to
the Other Securityholders.
(ii) The receipt of an Offer Notice by the Other Securityholders
(excluding Priceline, whose rights are governed by subparagraph (b)(iii) below)
from a Prospective Seller shall constitute an offer by such Prospective Seller
to sell to such other Securityholders any or all of the Offered Shares not
purchased by the Company pursuant to subparagraph (b)(i) above at the Offer
Price pro rata, in accordance with the following formula. Each such Other
Securityholder shall be entitled to purchase, upon the terms specified in the
Offer Notice, a number of Shares equal to (x) the number of Offered Shares plus
the number of Shares being sold pursuant to Section 5.05 hereof, if any, less
the number of Shares the Company purchases pursuant to subparagraph (b)(i) above
multiplied by (y) a fraction, the numerator of which is the number of Voting
Interests Beneficially Owned by such Other Securityholder and the denominator of
which is the number of Voting Interests Beneficially Owned by all Other
Securityholders (excluding Priceline) who wish to purchase Offered Shares. If
any Other Securityholder wishes to purchase less than all the Shares such Other
Securityholder is entitled to purchase in accordance with the preceding
sentence, the Shares such Other Securityholder declines to purchase shall be
allocated among the Other Securityholders who wish to purchase such additional
Shares according to the same formula, mutatis mutandis. Each Other
Securityholder who wishes may accept the offer by sending a Notice of Election
to the Prospective Seller and the Company with a copy to the Other
Securityholders prior to expiration of the Offer Period. The Notice of Election
shall specify the maximum number of Shares an Other Securityholder is willing to
buy pursuant to this Section 5.04, if any, the number of Shares it wishes and is
entitled to sell pursuant to Section 5.05, if any, and any other terms and
conditions not inconsistent with this Agreement.
(iii) The receipt of an Offer Notice by Priceline from a Prospective
Seller shall constitute an offer by such Prospective Seller to sell to Priceline
any or all of the Offered Shares at the Offer Price, to the extent such Shares
shall not have been purchased by the Company or the Other Securityholders
pursuant to subparagraphs (b)(i) and (b)(ii) above. Priceline may accept the
Prospective Seller's offer at any time prior to expiration of the Offer Period
by sending a
19
Notice of Election to the Prospective Seller and the Company, with a copy to the
Other Securityholders.
(iv) If the Company or any Other Securityholder accepts the
Prospective Seller's offer in accordance with this Section 5.04(b) (an
"Accepting Party"), such Accepting Party shall purchase from the Prospective
Seller, and the Prospective Seller shall sell to such Accepting Party, such
number of Offered Shares as to which such Accepting Party shall have accepted
the Prospective Seller's offer pursuant to subparagraph (b)(i), (ii) or (iii)
above. The price per Share to be paid by such Accepting Party shall be the Offer
Price specified in the Offer Notice, payable in accordance with the terms of the
Offer; provided that the Accepting Party may pay the Offer Price with any
combination of cash, Cash Equivalents and Marketable Securities, to be valued as
provided in subparagraph (a)(ii) above.
(c) The Prospective Seller and each Accepting Party shall select,
for consummation of the Sale of Offered Shares to such Accepting Party, a date
not later than 30 days (or longer, if the HSR Act so requires) after expiration
of the Offer Period. At the consummation of such Sale, the Prospective Seller
shall, against delivery by the relevant Accepting Party of the Offer Price
multiplied by the number of Shares being purchased by such Accepting Party, (i)
deliver to the Accepting Party certificates evidencing the Offered Shares being
sold plus the Shares being sold pursuant to Section 5.05, if any, duly endorsed
in blank or accompanied by written instruments of transfer in form satisfactory
to such Accepting Party duly executed by the Prospective Seller (or the selling
Other Securityholder, as the case may be) free and clear of any and all
Encumbrances (other than this Agreement), and (ii) assign all its rights under
this Agreement with respect to the Offered Shares being sold pursuant to an
instrument of assignment reasonably satisfactory to such Accepting Party.
(d) In the event that (i) each Other Securityholder and the Company
shall have received an Offer Notice from a Prospective Seller but the
Prospective Seller shall not have received Notices of Acceptance indicating a
desire to purchase, in the aggregate, all the Offered Shares prior to expiration
of the Offer Period or (ii) an Accepting Party shall have given a Notice of
Election to the Prospective Seller but shall have failed to consummate, other
than as a result of the fault of the Prospective Seller, a purchase of the
Offered Shares he elected to purchase in such Notice of Election within the time
frame specified in paragraph (c) above (and neither the Company nor any Other
Securityholder shall have indicated an interest upon any such failure to buy
such Shares within ten Business Days of their receipt of a notice of such
failure from the Prospective Seller), then nothing in this Section 5.04 shall
limit the right of the Prospective Seller to make thereafter a Sale of, or
create an Encumbrance on, all Offered Shares not accepted for purchase by the
Company or the Other Securityholders pursuant to a Notice of Election; provided
that
20
(A) the total number of Shares sold to the Company, the Other
Securityholders and the Third Party who made the Offer shall be not less
than the number of Offered Shares specified in the Offer Notice;
(B) the total number of Shares sold by the Prospective Seller for
his own account (i.e., not including Shares Beneficially Owned by Other
Securityholders) to the Third Party who made the Offer shall be not more
than the number of Offered Shares specified in the Offer Notice; and
(C) all the Shares that are sold or otherwise disposed of by the
Prospective Seller are sold (1) within 30 days (or longer, if the HSR Act
so requires) after expiration of the Offer Period, (2) at an amount not
less than the Offer Price included in such Offer Notice, (3) on the terms
specified in the Offer Notice and (4) to the Third Party that made the
Offer.
(e) In the event that each Other Securityholder and the Company
shall have received an Offer Notice from a Prospective Seller, the Prospective
Seller shall not have received Notices of Acceptance indicating a desire to buy
all the Offered Shares prior to the expiration of the Offer Period and such
Prospective Seller shall not have sold the remaining Offered Shares before the
expiration of the period specified in subclause (d)(ii)(C)(1) above, then such
Prospective Seller shall not give another Offer Notice for a period of one year
from the day the Offer Notice was delivered.
(f) Anything in this Section 5.04 or in Section 5.03 to the contrary
notwithstanding, the provisions of this Section 5.04 shall not be applicable to
any Sale or Encumbrance described in clause (i), (iii) or (iv) of Section
5.03(a).
SECTION 5.05. Right to Participate in Certain Dispositions. (a) (i)
If, at any time during the Restricted Period, a Prospective Seller shall receive
an Offer from a Third Party or Parties, and shall propose to sell Common Stock
representing 25% or more of the Company's then outstanding Voting Interests, the
Prospective Seller shall provide the Offer Notice defined in Section 5.04 to the
Company and each of the Other Securityholders. Each of the Other Securityholders
shall have the right and option, for a period of 30 days concurrent with the
Offer Period specified in Section 5.04, to sell, pursuant to the Offer, up to
the same percentage of Voting Interests held or Beneficially Owned by it as the
Prospective Seller proposes to sell; provided that such right shall vest only
(i) if less than all the Offered Shares are sold to the Company, Other
Securityholders and Priceline pursuant to Section 5.04 and the Prospective
Seller consummates a Sale to the Third Party who made the Offer or an Affiliate
thereof or (ii) the Prospective Seller receives Notices of Election which, in
the aggregate, represent offers to buy all the Offered Shares and all the Shares
tendered by Other Securityholders pursuant to this Section 5.05. Each Other
Securityholder desiring to exercise such right shall, prior to the expiration of
the Offer Period, provide the Prospective Seller with a Notice of Election
21
specifying the number of Shares which such Other Securityholder has an interest
in selling pursuant to the Offer, and shall deliver to the Prospective Seller
(A) the certificate or certificates evidencing the Shares to be sold or
otherwise disposed of pursuant to such Offer by such Other Securityholder duly
endorsed in blank or accompanied by written instruments of transfer in form
satisfactory to the Prospective Seller executed by such Other Securityholder and
(B) an instrument of assignment reasonably satisfactory to the Prospective
Seller assigning, as of the consummation of the sale or other disposition to the
Third Party, all such Other Securityholder's rights under this Agreement with
respect to the Shares to be sold, and the instrument of assignment shall
constitute an irrevocable election by such Other Securityholder to authorize and
permit the Prospective Seller to sell such Shares, on behalf of such Other
Securityholder, pursuant to the Offer and in accordance herewith.
(ii) If the Third Party making the Offer is unwilling to buy all the
Offered Shares plus all the Shares tendered by Other Securityholders in their
Notices of Election, then the Prospective Seller and each Other Securityholder
who wishes to sell shall be entitled to sell a number of Shares equal to (x) the
number of Shares the Third Party offeror is willing to buy (which shall not be
less than the number of Offered Shares), multiplied by (y) a fraction, the
numerator of which is the number of Voting Interests Beneficially Owned by such
Other Securityholder and the denominator of which is the total number of Voting
Interests Beneficially Owned by all Other Securityholders who wish to sell
Shares pursuant to the Offer. If any Other Securityholder wishes to sell less
than all the Shares he is entitled to sell in accordance with the preceding
sentence, the Shares he declines to sell shall be allocated among the
Prospective Seller and the Other Securityholders who wish to sell additional
Shares according to the same formula, mutatis mutandis. The Prospective Seller
shall not effect the Sale of any Shares pursuant to the Offer unless all the
Offered Shares and all of the Shares tendered to the Prospective Seller and
entitled to be sold pursuant to this Section 5.05 are simultaneously sold.
(iii) As promptly as practicable after the consummation of any Sale
or other disposition of Shares to the Third Party pursuant to this Section 5.05,
the Prospective Seller shall remit to each of the Other Securityholders the
total sales price of the Shares of such Other Securityholders sold pursuant
thereto and return all certificates evidencing the unsold Shares that such Other
Securityholders delivered for Sale pursuant to this Section 5.05 and such Other
Securityholders' related instruments of assignment.
(iv) If at the end of the Offer Period any Other Securityholder
shall not have given a Notice of Election indicating an interest in selling all
of the Shares such Other Securityholder would have been entitled to sell in
accordance with subparagraphs (a)(i) and (a)(ii) above (and delivered all other
required documents with respect thereto), such Other Securityholder shall be
deemed to have waived all its rights under this Section 5.05 with respect to the
Sale pursuant to the Offer of such Shares.
22
(v) If at any time the Prospective Seller abandons the proposed Sale
pursuant to the Offer, or the Prospective Seller has not completed the Sale
pursuant to this Section 5.05 of the Offered Shares and the Shares which Other
Securityholders shall have tendered for Sale pursuant to this Section 5.05
within 30 days following expiration of the Offer Period, the Prospective Seller
shall promptly return to such Other Securityholders all certificates evidencing
the unsold Shares that such Other Securityholders delivered for Sale and such
Other Securityholders' related instruments of assignment.
(vi) Except as expressly provided in this Section 5.05, no
Prospective Seller shall have any obligation to any Other Securityholder with
respect to the Sale or other disposition of any Shares owned by such Other
Securityholder in connection with this Section 5.05. Anything herein to the
contrary notwithstanding and irrespective of whether any Notice of Election
shall have been given, no Prospective Seller shall have any obligation to any
Other Securityholder to sell or otherwise dispose of any Offered Shares pursuant
to this Section 5.05 as a result of any decision by such Prospective Seller not
to accept or consummate any Offer or Sale or other disposition with respect to
the Offered Shares (it being understood that any and all such decisions shall be
made by such Prospective Seller in its sole discretion). No Other Securityholder
shall be entitled to sell or otherwise dispose of Shares directly to any Third
Party pursuant to an Offer (it being understood that all such Sales and other
dispositions shall be made only on the terms and pursuant to the procedures set
forth in this Article V).
(b) Anything in this Section 5.05 or in Section 5.03 to the contrary
notwithstanding, the provisions of this Section 5.05 shall not be applicable to
any transfer described in clause (i), (iii) or (iv) of Section 5.03(a). Nothing
in this Section 5.05 shall affect any of the rights or obligations of any of the
Securityholders under any other provision of this Agreement.
SECTION 5.06. Transferees to Execute Agreement. Each Securityholder
agrees that it will not, during the Restricted Period, directly or indirectly,
make any Sale of, or create, incur or assume any Encumbrance with respect to,
any Shares Beneficially Owned by such Securityholder unless prior to the
consummation of any such Sale or the creation, incurrence or assumption of such
Encumbrance, the Person to whom such Sale is proposed to be made or the Person
in whose favor such Encumbrance is proposed to be created, incurred or assumed
(a "Prospective Transferee") (i) executes and delivers this Agreement to the
Company and each Securityholder, and (ii) unless such Prospective Transferee is
a recognized institutional investor, delivers to the Company an opinion of
counsel, satisfactory in form and substance to the Company, to the effect that
the execution of this Agreement by such Prospective Transferee makes this
Agreement a legal, valid and binding obligation of such Prospective Transferee
enforceable against such Prospective Transferee in accordance with its terms.
Upon the execution and delivery by such Prospective Transferee of this Agreement
and, if required, the delivery of the opinion of counsel referred to in clause
(ii) of the preceding sentence, such Prospective Transferee shall be deemed a
"Securityholder" for purposes of this Agreement and
23
shall have the rights and be subject to the obligations of a Securityholder
under this Agreement, in each case with respect to the Shares Beneficially Owned
by such Prospective Transferee or in respect of which such Encumbrance shall
have been created, incurred or assumed.
SECTION 5.07. Improper Sale or Encumbrance. Any attempt not in
compliance with this Agreement to make any Sale of, or create, incur or assume
any Encumbrance with respect to, any Shares shall be null and void and of no
force and effect, the purported transferee shall have no rights or privileges in
or with respect to the Company, and the Company shall not give any effect in the
Company's stock records to such attempted Sale or Encumbrance.
ARTICLE VI
REGISTRATION RIGHTS
SECTION 6.01. Incidental Registration. (a) If the Company at any
time proposes to register any Shares under the Securities Act for Sale in a
public offering, whether or not for its own account, on a form and in a manner
that would permit registration of Registrable Securities under the Securities
Act for Sale in such public offering, it shall each such time give prompt
written notice to all holders of Registrable Securities of its intention to do
so, specifying the form and manner and the other relevant facts involved in such
proposed registration (including, without limitation, the identity of the
managing underwriter, if applicable). Upon the written request of any such
holder of Registrable Securities delivered to the Company within 30 days after
such notice shall have been given to such holder (which request shall specify
the Registrable Securities intended to be disposed of by such holder and the
intended method of disposition thereof), the Company shall use its reasonable
best efforts to include in the registration statement relating to such public
offering all Registrable Securities that the Company has been so requested to
register by the holders of Registrable Securities, to the extent requisite to
permit the Sale of the Registrable Securities to be so registered in such public
offering; provided that:
(i) no holder of Registrable Securities shall be entitled to
register or sell Shares in the Company's Initial Public Offering;
(ii) if, at any time after giving such written notice of its
intention to register any of such Shares proposed to be registered by the
Company and prior to the effective date of the registration statement
filed in connection with such registration, the Company shall determine
for any reason not to register such Shares, the Company may, at its
election, give written notice of such determination to each holder of
Registrable Securities that has requested to register Registrable
Securities and thereupon the Company shall be relieved of its obligation
to register any Registrable Securities in
24
connection with such registration (but not from its obligation to pay the
Registration Expenses in connection therewith to the extent provided in
Section 6.01(b));
(iii) if the proposed registration relates to an underwritten public
offering and the managing underwriter or underwriters of such public
offering shall advise the Company that, in its judgment, the number of
Shares proposed to be included in such public offering should be limited
because the inclusion of Registrable Securities is likely to materially
and adversely affect the success of such public offering, then the Company
shall promptly advise each such holder of Registrable Securities thereof
and may require, by written notice to each such holder accompanying such
advice, that, to the extent necessary to meet such limitation, all holders
of Registrable Securities proposing to sell Shares in such public offering
shall share pro rata in the number of Shares to be excluded from such
offering, such sharing to be based on the respective numbers of
Registrable Securities as to which registration has been requested by such
holders; provided that all Registrable Securities that Priceline proposes
to sell shall be excluded from such public offering before the Registrable
Securities of any other party hereto; and provided further that the
Company shall in no event be required to exclude Shares that it proposes
to sell in such public offering; and
(iv) the Company shall not be obligated to effect any registration
of Registrable Securities under this Section 6.01 that is incidental to
the registration of any of its Shares or other securities in connection
with any merger, acquisition, exchange offer, dividend reinvestment plan
or stock option or other employee benefit plan.
(b) The Company shall pay all Registration Expenses in connection
with each registration of Registrable Securities effected by it pursuant to this
Section 6.01.
SECTION 6.02. Registration on Request. (a) After the third
anniversary of the Closing, upon the written request of a Securityholder or
group of Securityholders (not including Priceline or Xxxxxx Digital) holding not
less than 25% of the then outstanding Shares (excluding any Warrant Shares
outstanding, whether held by Priceline or any transferee of Priceline),
requesting the Company to make an Initial Public Offering pursuant to a firm
commitment underwriting with a nationally recognized investment bank as lead
underwriter, the Company shall promptly give written notice of such request to
all Securityholders, and thereupon shall, as expeditiously as possible, use its
reasonable best efforts to register its Shares of Common Stock under the
Securities Act or, if so requested, register such Shares for listing on a
foreign securities exchange, and, in both cases, take such other actions as
shall be necessary to complete the Company's Initial Public Offering in
accordance with such request; provided that:
(i) no holder of Registrable Securities shall be entitled to
register or sell Shares in the Initial Public Offering;
25
(ii) if, with respect to such Initial Public Offering, the managing
underwriter, the Commission, the Securities Act or the rules and
regulations thereunder, any other applicable laws, domestic or foreign, or
the form on which any registration statement or similar document is to be
filed, would require the conduct of an audit other than the regular audit
conducted by the Company at the end of its fiscal year, the filing may be
delayed until the completion of such regular audit (unless the party or
parties requesting the Initial Public Offering agree to pay the expenses
of the Company in connection with such an audit other than the regular
audit); and
(iii) if the Company, in its sole discretion, determines that the
filing of a registration statement or commencement of an Initial Public
Offering in the near future pursuant to this paragraph (a) would interfere
with any financing, acquisition, corporate reorganization or other similar
transaction involving the Company or any Subsidiary or that such
registration or Initial Public Offering would require disclosure of
non-public information that the Company deems advisable not to disclose,
then the Company's obligation to file a registration statement or commence
an Initial Public Offering shall be deferred for a period not to exceed 90
days; provided that the Company shall not obtain such a deferral more than
once in any twelve-month period.
(b) If the Company has any class of securities registered under
Section 12 or 15(d) of the Exchange Act, upon the written request of Priceline,
or of a Securityholder or group of Securityholders holding not less than 25% of
the then outstanding Shares (excluding any Warrant Shares outstanding, whether
held by Priceline or any transferee of Priceline), requesting that the Company
effect the registration under the Securities Act of all or part of the
Registrable Securities held by such Securityholder or group of Securityholders
and specifying the intended method of disposition thereof, the Company shall
promptly give written notice of such requested registration to all other holders
of Registrable Securities, and thereupon shall, as expeditiously as possible,
use its reasonable best efforts to effect the registration under the Securities
Act of:
(i) the Registrable Securities which the Company has been so
requested to register by such Securityholder or Securityholders; and
(ii) all other Registrable Securities that the Company has been
requested to register by the holders of Registrable Securities by written
request delivered to the Company within 30 days after the giving of such
written notice by the Company (which request shall specify the intended
method of disposition of such Registrable Securities);
provided that:
(A) the Company shall be obligated to fulfill only two such
registration requests by Priceline and one such registration request by
each other holder of Registrable Securities (and for purposes of this
clause (A), each holder of Registrable Securities
26
whose Registrable Securities form part of a block as to which registration
has been requested pursuant to this subsection (b) shall be deemed to have
used its right to one registration request);
(B) the Company shall not be obligated to file a registration
statement relating to any registration request under this Section 6.02(b)
within a period of nine months after the effective date of any other
registration statement relating to any registration request under this
Section 6.02(b) which was not effected on Form S-3 (or any successor or
similar short-form registration statement) or relating to any registration
effected under Section 6.01;
(C) if, with respect to such registration statement, the managing
underwriter, the Commission, the Securities Act or the rules and
regulations thereunder, or the form on which the registration statement is
to be filed, would require the conduct of an audit other than the regular
audit conducted by the Company at the end of its fiscal year, the filing
may be delayed until the completion of such regular audit (unless the
holders of the Registrable Securities to be registered agree to pay the
reasonable expenses of the Company in connection with such an audit other
than the regular audit); and
(D) if the Company, in its sole discretion, determines that the
filing of a registration statement in the near future pursuant to this
paragraph (b) would interfere with any financing, acquisition, corporate
reorganization or other similar transaction involving the Company or any
Subsidiary or that such registration would require disclosure of
non-public information that the Company deems advisable not to disclose,
then the Company's obligation to file a registration statement shall be
deferred for a period not to exceed 90 days; provided that the Company
shall not obtain such a deferral more than once in any twelve-month
period.
(c) If any registration requested pursuant to paragraph (b) which is
proposed by the Company to be effected by the filing of a registration statement
on Form S-3 (or any successor or similar short-form registration statement)
shall be in connection with an underwritten public offering, and if the managing
underwriter or underwriters shall advise the Company in writing that, in its
opinion, the use of another form of registration statement is of material
importance to the success of such proposed offering, then such registration
shall be effected on such other form.
(d) An Initial Public Offering requested pursuant to paragraph (a)
shall be deemed to have been fulfilled when sufficient Shares have been sold to
meet the definition of Initial Public Offering hereunder and the Company's
Common Stock is trading on a major domestic or foreign securities exchange or
automated securities quotation system. A registration requested pursuant to
paragraph (b) shall be deemed to have been effected when the registration
statement pertaining thereto has become effective; provided that if, prior to
the earlier of the
27
completion of the distribution thereunder and 90 days after it has become
effective, the offering of Registrable Securities pursuant to such registration
is interfered with by any stop order, injunction or other order or requirement
of the Commission or other governmental agency or court, such registration will
be deemed not to have been effected, unless such order or requirement is
subsequently lifted and either the distribution is completed or 90 days from the
date of initial effectiveness (not counting the period during which such order
or requirement was in effect and interfered with the offering) expire.
(e) If a requested Initial Public Offering or registration pursuant
to paragraph (b) involves an underwritten offering, the Company shall have the
right to select in good faith the investment banker or bankers and managers to
administer the offering, provided that such investment banker or bankers and
managers shall be satisfactory to (i) holders of a majority of the Shares, in
the case of paragraph (a) above, or (ii) holders of a majority of the
Registrable Securities which the Company has been requested to register, in the
case of paragraph (b) above.
(f) If a requested registration pursuant to paragraph (b) involves
an underwritten offering and the managing underwriter or underwriters advise the
Company that, in their opinion, the number of securities requested to be
included in such registration (including securities of the Company which are not
Registrable Securities) exceeds the number which can be sold in such offering,
the Company shall include in such registration only the Registrable Securities
requested to be included in such registration pursuant to such paragraph (b). In
the event that the number of Registrable Securities requested to be included in
such registration exceeds the number which, in the opinion of such managing
underwriter or underwriters, can be sold, the number of such Registrable
Securities to be included in such registration shall be allocated pro rata among
the holders requesting registration pursuant to such paragraph (b) on the basis
of the relative number of Registrable Securities then requested for registration
by each such holder; provided that all Registrable Securities that Priceline
proposes to sell shall be excluded from such public offering before the
Registrable Securities of any other party hereto; and provided further that the
Company shall in no event be required to exclude Shares that it proposes to sell
in such public offering.
SECTION 6.03. Registration Procedures. (a) If and whenever the
Company is required to use its reasonable best efforts to effect the
registration of any Registrable Securities under the Securities Act for Sale in
a public offering as provided in Section 6.01 or 6.02(b), the Company shall as
expeditiously as is reasonably practicable:
(i) prepare and file with the Commission on any appropriate form a
registration statement with respect to such Registrable Securities and use
its reasonable best efforts to cause such registration statement to become
effective;
28
(ii) prepare and file with the Commission such amendments (including
post-effective amendments) and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to
keep such registration statement effective and to comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities and other securities covered by such registration
statement until the earlier of (A) such time as all such Registrable
Securities and other securities have been disposed of in accordance with
the intended methods of disposition by the seller or sellers thereof set
forth in such registration statement and (B) the expiration of 90 days
from the date such registration statement first becomes effective;
(iii) furnish to each seller of such Registrable Securities such
number of conformed copies of such registration statement and of each such
amendment and supplement thereto (in each case including all exhibits),
such number of copies of the prospectus included in such registration
statement (including each preliminary prospectus and any summary
prospectus), in conformity with the requirements of the Securities Act,
such documents incorporated by reference in such registration statement or
prospectus, and such other documents, as such seller may reasonably
request in order to facilitate the sale or disposition of such Registrable
Securities;
(iv) use its reasonable best efforts to register or qualify all
Registrable Securities and other securities covered by such registration
statement under such other securities or "blue sky" laws of such
jurisdictions as each seller shall reasonably request, and do any and all
other acts and things that may be necessary to enable such seller to
consummate the disposition in such jurisdictions of its Registrable
Securities covered by such registration statement, except that the Company
shall not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it is not so
qualified, or to subject itself to taxation in respect of doing business
in any such jurisdiction, or to consent to general service of process in
any such jurisdiction;
(v) enter into such customary agreements (including an underwriting
agreement in customary form), which may include indemnification provisions
in favor of underwriters and other Persons in addition to, or in
substitution for the provisions of Section 6.05 hereof, and take such
other actions as sellers of a majority of shares of such Registrable
Securities or the underwriters, if any, reasonably request in order to
expedite or facilitate the disposition of such Registrable Securities;
(vi) furnish to each seller of Registrable Securities a copy of (A)
any opinion of counsel for the Company, dated the date of the closing
under the underwriting agreement with respect to such Public Offering, in
customary form and in form and scope reasonably satisfactory to the
underwriter and its counsel, and (B) a "cold comfort" letter signed by the
independent public accountants in customary form and covering matters of
29
the type customarily covered by "cold comfort" letters and otherwise in
such form and scope as the seller of such Registrable Securities shall
reasonably request (provided that Registrable Securities constitute at
least 25% of the securities covered by such registration statement, unless
such a "cold comfort" letter or letters are provided to the Company or
other selling holders or any underwriter in connection with such
registration);
(vii) immediately notify each seller of Registrable Securities
covered by such registration statement at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of
the happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing or if it is
necessary to amend or supplement such prospectus to comply with law, and
at the request of any such seller prepare and furnish to such seller a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities or other securities, such
prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the
circumstances then existing and shall otherwise comply in all material
respects with law;
(viii) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make available to
its security holders, as soon as reasonably practicable, an earnings
statement which shall satisfy the provisions of Section 11(a) of the
Securities Act and the rules and regulations thereunder;
(ix) use its reasonable best efforts to list such Shares on each
securities exchange or quotation system on which Shares are then listed or
quoted, if such Shares are not already so listed or quoted and if such
listing is then permitted under the rules of such exchange or quotation
system, and provide a transfer agent and registrar for such Registrable
Securities not later than the effective date of such registration
statement;
(x) cooperate with the holders of Registrable Securities covered by
the registration statement and the managing underwriter or agent, if any,
to facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing securities to be sold under
the registration statement, and enable such securities to be in such
denominations and registered in such names as the managing underwriter or
agent, if any, or such holders may request;
(xi) notify counsel for the holders of Registrable Securities
included in such registration statement and the managing underwriter or
agent, immediately, and confirm
30
the notice in writing (A) when the registration statement, or any
post-effective amendment to the registration statement, shall have become
effective, or any supplement to the prospectus or any amendment prospectus
shall have been filed, (B) of the receipt of any comments from the
Commission, (C) of any request of the Commission to amend the registration
statement or amend or supplement the prospectus or for additional
information, and (D) of the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or of any order
preventing or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the registration statement for offering
or sale in any jurisdiction, or of the institution or threatening of any
proceedings for any of such purposes;
(xii) use its reasonable best efforts to prevent the issuance of any
stop order suspending the effectiveness of the registration statement or
of any order preventing or suspending the use of any preliminary
prospectus and, if any such order is issued, to obtain the withdrawal of
any such order at the earliest possible moment;
(xiii) if requested by the managing underwriter or underwriters,
promptly incorporate in a prospectus supplement or post-effective
amendment such information as the managing underwriter or underwriters or
agent or such holder reasonably requests to be included therein,
including, without limitation, with respect to the number of Registrable
Securities being sold by such holder to such underwriter or underwriters
or agent, the purchase price being paid therefor by such underwriter or
underwriters or agent and with respect to any other terms of the
underwritten offering of the Registrable Securities to be sold in such
offering; and make all required filings of such prospectus supplement or
post-effective amendment as soon as practicable after being notified of
the matters incorporated in such prospectus supplement or post-effective
amendment;
(xiv) cooperate with each seller of Registrable Securities and each
underwriter or agent participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings
required to be made with the National Association of Securities Dealers,
Inc.; and
(xv) issue to any underwriter to which any holder of Registrable
Securities may sell such Registrable Securities in connection with any
such registration (and to any direct or indirect transferee of any such
underwriter) certificates evidencing Shares without the legends described
in Section 5.02(a).
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company with such information
regarding such seller and the distribution of such Registrable Securities as the
Company may from time to time reasonably request in writing and as shall be
required by law or by the Commission in connection therewith.
31
(b) Each holder of Registrable Securities agrees, if so required by
the managing underwriter or underwriters of an underwritten public offering of
Shares, not to effect any sale or distribution of Registrable Securities (other
than as part of a public offering other than the Initial Public Offering) during
the seven days prior to and 180 days after the effective date of the
registration statement with respect to such underwritten public offering;
provided that this Section 6.03(b) shall be applicable to the holders of
Registrable Securities only if all executive officers and directors and all
stockholders holding more than five percent (5%) of the then outstanding Common
Stock are subject to a similar restriction.
Notwithstanding anything herein or in the Ancillary Agreements to
the contrary, Xxxxxxx Sachs and it Affiliates shall not be restricted from
engaging in any brokerage, investment advisory, financial advisory, anti-raid
advisory, merger advisory, financing, asset management, trading, market making,
arbitrage and other similar activities conducted in the ordinary course of its
or its Affiliates' business.
(c) The Company agrees, if so required by the managing underwriter
or underwriters in connection with such public offering of Registrable
Securities pursuant to Section 6.01 or Section 6.02, not to effect any public
sale or distribution of any of its equity securities or securities convertible
into or exchangeable or exercisable for any of such equity securities during the
seven days prior to and the 180 days after the effective date of any
registration statement with respect to such public offering, except as part of
such public offering or except in connection with a stock option plan, stock
purchase plan, savings or similar plan, or an acquisition, merger or exchange
offer.
(d) It is understood that, in any public offering of Registrable
Securities, in addition to the Shares (the "Initial Shares") the underwriters
have committed to purchase, the underwriting agreement may grant the
underwriters an option to purchase a number of additional shares (the "Option
Shares") equal to up to 15% of the initial Shares (or such other maximum amount
as the National Association of Securities Dealers, Inc. may then permit), solely
to cover over-allotments. Shares proposed to be sold by the Company and the
requesting holders shall be allocated between Initial Shares and Option Shares
as agreed or, in the absence of agreement, in the same manner as the Initial
Shares.
SECTION 6.04. Preparation; Reasonable Investigation. In connection
with the preparation and filing of each registration statement registering
Registrable Securities under the Securities Act, the Company shall give the
holders of Registrable Securities on whose behalf such Registrable Securities
are to be so registered and their underwriters, if any, and their respective
counsel, accountants and other agents, upon reasonable prior notice and
according to a schedule acceptable to the management of the Company in its sole
discretion, access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have issued a report on its financial statements as shall
32
be necessary, in the opinion of such holders and such underwriters or their
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act.
SECTION 6.05. Indemnification for Liabilities Under the Securities
Laws. (a) In the event of any registration of any equity securities of the
Company under the Securities Act, the Company shall indemnify and hold harmless
the seller of any Registrable Securities covered by such registration statement,
its directors and officers, managers, general and limited partners (and
directors and officers thereof and, if such seller is a portfolio or investment
fund, its investment advisors), each other Person who participates as an
underwriter in the public offering of such securities, each officer and director
of each such underwriter, and each other Person, if any, who Controls such
seller or any such underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any losses, claims,
damages, liabilities and expenses, joint or several, to which such seller or any
such director or officer or participating or Controlling Person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which such securities were registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus included therein, or any
amendment or supplement thereto, or any document incorporated by reference
therein, or (ii) any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading; and the Company shall reimburse such seller, and each such
director, officer, manager, partner, underwriter and Controlling Person for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability (or action or proceeding
in respect thereof) or expense arises out of or is based upon (i) an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company for use in the preparation
thereof by such seller or underwriter, as the case may be, or (ii) an untrue
statement or alleged untrue statement or omission or alleged omission made in
any preliminary prospectus but notified to such seller and underwriter prior to
any Sale of Registrable Securities and subsequently corrected by the Company in
any final prospectus, amendment or supplement made available to such seller or
underwriter but which final prospectus, amendment or supplement was not used by
such seller or underwriter in the Sale of Registrable Securities that gave rise
to such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller or any such
director, officer, underwriter or Controlling Person and shall survive the
transfer of such Shares by such seller.
(b) The Company may require, as a condition to including any
Registrable Securities in any registration statement filed pursuant to Section
6.01 or Section 6.02, that the
33
Company shall have received an undertaking satisfactory to it from (i) the
prospective seller of such Registrable Securities, to indemnify and hold
harmless (in the same manner and to the same extent as set forth in Section
6.05(a), except that any such prospective seller shall not in any event be
liable for an amount in excess of the net proceeds of sale of such prospective
seller's Registrable Securities so to be sold together with any amounts payable
under Section 6.06 hereof) the Company, each such underwriter of such Shares,
each officer and director of each such underwriter and each other Person, if
any, who controls the Company or any such underwriter within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, and (ii)
each such underwriter of such Shares, to indemnify and hold harmless (in the
same manner and to the same extent as set forth in Section 6.05(a)) the Company,
each officer and director of the Company, each prospective seller, each officer
and director of each prospective seller and each other Person, if any, who
Controls the Company or any such prospective seller within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, with respect
to any statement in or omission from such registration statement, any
preliminary prospectus, final prospectus or summary prospectus included therein,
or any amendment or supplement thereto, if such statement or omission was made
in reliance upon and in conformity with written information furnished by such
prospective seller or such underwriter, as the case may be, to the Company for
use in the preparation of such registration statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of the Company or any such director, officer or Controlling Person and
shall survive the transfer of such Shares by such seller.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action or proceeding (including any governmental
investigation) involving a claim referred to in Section 6.05(a) or (b), such
indemnified party shall, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action; provided that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding provisions of this Section 6.05, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim (in
which case, the indemnifying party shall not be liable for the fees and expenses
of more than one counsel for all sellers of Registrable Securities, or more than
one counsel for the underwriters in connection with any one action or separate
but similar or related actions), the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof. No indemnifying party shall
consent to entry of any
34
judgment or enter into any settlement which (i) does not include as an
unconditional term thereof, the giving by the claimant or plaintiff to the
Indemnified Party of a release from all liability in respect to such claim or
litigation or (ii) includes an admission of guilt on behalf of such Indemnified
Party.
SECTION 6.06. Contribution. (a) If the indemnification provided for
in Section 6.05 is unavailable to the indemnified parties in respect of any
losses, claims, damages or liabilities referred to therein, then each
indemnifying party shall contribute to the amounts paid or payable by such
indemnified parties as a result of such losses, claims, damages or liabilities
(i) as between the Company and the holders of Registrable Securities covered by
a registration statement, on the one hand, and the underwriters, on the other,
in such proportion as is appropriate to reflect the relative benefits received
by the Company and such holders, on the one hand, and the underwriters, on the
other, from the Public Offering of the Registrable Securities, or if such
allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits but also the relative
fault of the Company and such holders, on the one hand, and of the underwriters,
on the other, in connection with the statements or omissions that resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations, and (ii) as between the Company, on the one hand, and
each holder of Registrable Securities covered by a registration statement, on
the other, in such proportion as is appropriate to reflect the relative fault of
the Company and of each such holder in connection with such statements or
omissions, as well as any other relevant equitable considerations. The relative
benefits received by the Company and such holders, on the one hand, and the
underwriters, on the other, shall be deemed to be in the same proportion as the
total proceeds from the public offering (net of underwriting discounts and
commissions but before deducting expenses) received by the Company and such
holders bear to the total underwriting discounts and commissions received by the
underwriters. The relative fault of the Company and such holders, on the one
hand, and of the underwriters, on the other, shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company and such holders or by the
underwriters. The relative fault of the Company, on the one hand, and of each
such holder, on the other, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact
relates to information supplied by such party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(b) The Company and the holders of Registrable Securities agree that
it would not be just and equitable if contribution pursuant to this Section 6.06
were determined by pro rata allocation (even if the underwriters were treated as
one entity for such purpose) or by any other method of allocation that does not
take account of the equitable considerations referred to in the next preceding
paragraph. The amount paid or payable by an indemnifying party as a result of
the losses, claims, damages or liabilities referred to in the next preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses
35
reasonably incurred by the indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 6.06, no underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Registrable
Securities underwritten by it and distributed to the public were offered to the
public pursuant to such public offering exceeds the amount of any damages that
such underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no holder of
Registrable Securities shall be required to contribute any amount (together with
any amount payable under Section 6.05(b)) in excess of the amount by which the
net proceeds from the sale of Registrable Securities received by such holder
pursuant to such public offering exceeds the amount of any damages that such
holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. Each Securityholder's obligation to contribute
pursuant to this Section 6.06 is several in the proportion that the proceeds of
the public offering received by such Securityholder bears to the total proceeds
of the public offering received by all the Securityholders and not joint.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01. New Investors to Execute Agreement. The Company shall
not, at any time prior to its Initial Public Offering, issue any shares of
Common Stock, or resell any shares of Common Stock held in its treasury, or
issue or resell any security convertible or exchangeable into Common Stock,
other than Common Stock that is issued to Priceline upon exercise of the
Priceline Warrant and Common Stock issued to the employees of the Company upon
exercise of options granted pursuant to the Company's Omnibus Employee Equity
Plan, unless prior to the consummation of any such issuance or Sale, each Person
to whom such security is proposed to be issued or sold executes and delivers
this Agreement to the Company and each Securityholder. Upon the execution and
delivery by any Person of this Agreement, Schedule I hereto shall be revised to
include the name of such Person and such Person shall be deemed a
"Securityholder" for purposes of this Agreement and shall have the rights and be
subject to the obligations of a Securityholder as such under this Agreement.
SECTION 7.02. Rights to Purchase New Securities. (a) In the event
that the Company proposes to issue New Securities (prior to, and other than in
connection with, an Initial Public Offering), each Securityholder shall have the
right to purchase in lieu of the Person to whom the Company proposed to issue
such New Securities, in accordance with paragraph (b) below, a number of Shares
or other New Securities which the
36
Company proposes to issue equal to the product of (i) the total number or amount
of Shares or other New Securities which the Company proposes to issue at such
time and (ii) a fraction, the numerator of which shall be the total number of
Voting Interests which such Securityholder holds or beneficially owns at such
time, and the denominator of which shall be the sum of (i) the total number of
Voting Interests then outstanding plus (ii) the total number of Voting Interests
Priceline is entitled to purchase on the fifth anniversary date of the Priceline
Warrant or, if earlier, upon the occurrence of an Exercise Event under the
Priceline Warrant. The rights given by the Company under this Section 7.02 shall
terminate if unexercised within 30 days after receipt of the Notice of Issuance
referred to in paragraph (b) below.
(b) In the event that the Company proposes to undertake an issuance
of New Securities (prior to, and other than in connection with, an Initial
Public Offering), it shall give written notice (a "Notice of Issuance") of its
intention to each Securityholder, describing all material terms of the New
Securities, the price and all material terms upon which the Company proposes to
issue such New Securities. Each Securityholder shall have 30 days from the date
of the Notice of Issuance to agree to purchase all or any portion of its pro
rata share of such New Securities (as determined pursuant to paragraph (a)
above) for the same consideration, if such consideration shall consist solely of
cash, or for cash, cash equivalents or marketable securities having an
equivalent value to the consideration payable by the Person to whom the Company
proposes to issue such New Securities at the time of payment, and otherwise upon
the terms specified in the Notice of Issuance by giving written notice to the
Company, and stating therein the quantity of New Securities to be purchased by
such Securityholder.
SECTION 7.03. Further Assurances. Each of the parties hereto shall
use reasonable efforts to take, or cause to be taken, all appropriate action,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws to consummate and make effective the transactions contemplated
hereunder, including, without limitation, using reasonable efforts to obtain all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of the competent governmental entities. Without limiting the generality
of the foregoing, the parties shall, when required in order to effect the
transactions contemplated hereunder, make all necessary filings, and thereafter
make any other required or appropriate submissions, under the HSR Act and shall
supply as promptly as practicable to the appropriate governmental entity any
additional information and documentary material that may be requested pursuant
to the HSR Act. Each of the parties shall cooperate with the other when required
in order to effect the transactions contemplated hereunder. In case at any time
after the date hereof, any further action is necessary or desirable to carry out
the purposes of this Agreement, the proper officers and directors of each of the
parties shall use their reasonable best efforts to take all such action.
SECTION 7.04. Access to Management. In addition to the rights
granted pursuant to Article VI of the Subscription Agreement, each
Securityholder shall have the right to consult with members of the Company's
management to such degree and in such manner as shall be sufficient to meet the
needs of such Securityholders' venture capital operating company requirements
under ERISA.
37
SECTION 7.05. Nominees. Notwithstanding anything herein to the
contrary, any Investor may hold its shares in nominee form through a reputable
securities depository.
SECTION 7.06. Use of Names. Neither the Company nor any of its
Affiliates shall use the names of any Investor or any Affiliate of an Investor
in any press release, notice or other publication without the prior consent of
such Investor, which such consent shall not be unreasonably withheld; provided,
however, that each Investor acknowledges and agrees that the Company may issue a
press release upon the Closing under the Subscription Agreement stating the
total amount invested in the Company and a list of the Investors.
SECTION 7.07. Aggregation of Shares. All shares held by The Xxxxxxx
Xxxxx Group, Inc. shall be aggregated with the Shares held by its Affiliates,
whether such Shares were acquired hereunder or pursuant to a transfer permitted
under Article V hereof, for the purpose of determining the availability of any
rights under this Agreement and any other applicable transaction agreement.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. Indemnification of Parties. (a) The Company shall
indemnify each Securityholder or affiliate thereof, and their respective
directors, managers, officers and employees (collectively, "Non-Company
Indemnitees") against, and hold each Non-Company Indemnitee harmless from, all
claims, suits, judgments, losses, damages, fines or costs (including reasonable
legal fees and expenses) ("Losses") arising out of or resulting from the breach
of any representation or warranty made by the Company herein or the breach of or
failure to perform any agreement or covenant made by the Company and contained
herein.
(b) Each Securityholder shall indemnify the Company and its
directors, managers, officers and employees (collectively, the "Company
Indemnitees") and the other Non-Company Indemnitees against, and hold each
Company Indemnitee and other Non-Company Indemnitee harmless from, all Losses
resulting from or arising out of any breach of any representation or warranty
made by such party herein or the breach of or failure to perform any agreement
or covenant made by such party and contained herein.
(c) Non-Company Indemnitees and Company Indemnitees (each, an
"Indemnified Party") shall give the party hereto from whom indemnification is
sought (the "Indemnifying Party") prompt written notice of any Losses as to
which such Indemnified Party may request indemnification hereunder. If the
Indemnifying Party acknowledges in writing its obligation to indemnify the
Indemnified Party hereunder against any such Losses, then the Indemnifying Party
shall be entitled to assume and control the defense of any claim, suit, or
38
demand by any third party ("Third Party Claim") at its expense and through
counsel of its choice if it gives notice of its intention to do so to the
Indemnified Party within five (5) days of the receipt of such notice from the
Indemnified Party; provided that if there exists or is reasonably likely to
exist a conflict or interest that would make it inappropriate in the judgment of
the Indemnified Party, in its sole and absolute discretion, for the same counsel
to represent both the Indemnified Party and the Indemnifying Party, then the
Indemnified Party shall be entitled to retain its own counsel, at the expense of
the Indemnifying Party. In the event the Indemnifying Party exercises the right
to undertake any such defense against any such Third Party Claim as provided
above, the Indemnified Party shall cooperate with the Indemnifying Party in such
defense and make available to the Indemnifying Party, at the Indemnifying
Party's expense, all witnesses, pertinent records, materials and information in
the Indemnified Party's possession or under the Indemnified Party's control
relating thereto as is reasonably required by the Indemnifying Party. Similarly,
in the event the Indemnified Party is, directly or indirectly, conducting the
defense against any such Third Party Claim, the Indemnifying Party shall
cooperate with the Indemnified Party in such defense and make available to the
Indemnified Party, at the Indemnified Party's expense, all such witnesses,
records, materials and information in the Indemnifying Party's possession or
under the Indemnifying Party's control relating thereto as is reasonably
required by the Indemnified Party. No such Third Party Claim may be settled by
the Indemnifying Party without the prior written consent of the Indemnified
Party.
(d) In no event shall the Indemnifying Party be liable to an
Indemnified Party for any indirect, incidental, special, punitive, exemplary or
consequential damages arising out of or otherwise relating to this Agreement,
even if the Indemnifying Party has been advised of the possibility or likelihood
of such damages.
SECTION 8.02. Indemnification of Directors. The Company hereby
agrees to employ its reasonable efforts to enter into an agreement with each
director on the Board no later than December 31, 1999, pursuant to which
agreement the Company shall agree to indemnify such director for expenses and
liabilities arising in connection with legal proceedings to which such director
is named as a party as a result of her or his activities as director on the
Board in accordance with the By-Laws of the Company and this Agreement.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Termination. This Agreement shall terminate only:
(a) by virtue of a written agreement to that effect, signed by all
parties hereto or all parties then possessing any rights hereunder;
39
(b) upon the expiration of (i) all rights created hereunder and (ii)
all statutes of limitations applicable to the enforcement of claims
hereunder;
(c) at any time following the exercise in full or expiration
unexercised of the Priceline Warrant, if Securityholders holding not less
than 50% of the aggregate outstanding Shares held by the Securityholders
(excluding Shares held by Priceline, if any) shall vote to terminate this
Agreement at an earlier date;
provided that no termination of this Agreement pursuant to paragraph (a), (b) or
(c) above shall affect the right of any party to recover damages or collect
indemnification for any breach of the representations, warranties or covenants
herein that occurred prior to such termination.
SECTION 9.02. Expenses. Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses.
SECTION 9.03. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in Person, by courier service, by telecopy or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 9.03):
(a) if to the Company:
Priceline WebHouse Club, Inc.
Xxx Xxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxx Xxxxxx, Vice President--Corporate Finance
(b) if to Priceline:
xxxxxxxxx.xxx Incorporated
Five Xxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxx Xxxx, General Counsel
40
(c) if to Xxxxxx Digital:
Xxxxxx Digital Corporation
Xxx Xxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxx Xxxxxxxxxxxxxx, President
(d) if to any other Investor, then to the address or telecopy number
set forth opposite such Person's name on Schedule I or II hereto.
SECTION 9.04. Public Announcements. Except as required by law,
governmental regulation or by the requirements of any securities exchange on
which the securities of a party hereto are listed, no party to this Agreement
shall make, or cause to be made, any press release or public announcement in
respect of this Agreement or otherwise communicate with any news media without
the prior written consent of the other party, and the parties shall cooperate as
to the timing and contents of any such press release or public announcement.
SECTION 9.05. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 9.06. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any law,
governmental regulation or public policy, all other terms and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the greatest possible
extent.
SECTION 9.07. Entire Agreement. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and undertakings, both written and oral,
with respect to the subject matter hereof.
SECTION 9.08. Assignment. This Agreement shall not be assigned
without the express written consent of the parties (which consent may be granted
or withheld in the sole discretion of any party), except in connection with any
transfer of Shares permitted under Article V hereof; and except that Priceline
may assign its rights hereunder to an Affiliate, provided that any such
assignment shall not relieve Priceline of its obligations hereunder.
41
SECTION 9.09. No Third-Party Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of the parties hereto and their
permitted assigns and successors and nothing herein, express or implied, is
intended to or shall confer upon any other Person or entity, any legal or
equitable right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
SECTION 9.10. Amendment. This Agreement may not be amended or
modified except by an instrument in writing signed by, or on behalf of, each of
the parties.
SECTION 9.11. Governing Law. This Agreement shall be governed by the
laws of the State of New York. All actions and proceedings arising out of or
relating to this Agreement may be heard and determined in any New York State or
federal court sitting in the City of New York, County of Manhattan, and the
parties hereto hereby irrevocably submit to the nonexclusive jurisdiction of
such courts in any such action or proceeding and irrevocably waive any defense
of an inconvenient forum to the maintenance of any such action or proceeding.
SECTION 9.12. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement. Copies of executed
counterparts transmitted by telecopy or other electronic transmission service
shall be considered original executed counterparts for purposes of this Section
9.12; provided that receipt of copies of such counterparts is confirmed.
SECTION 9.13. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement were
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 9.14. Waiver of Jury Trial. Each of the parties hereto
irrevocably and unconditionally waives trial by jury in any legal action or
proceeding relating to this Agreement, the Ancillary Agreements or the
transactions contemplated hereby and thereby and for any counterclaim therein.
42
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized signatories hereunto duly
authorized as of the date first above written.
PRICELINE WEBHOUSE CLUB, INC.
By:
-------------------------------
Name:
Title:
XXXXXXXXX.XXX INCORPORATED
By:
-------------------------------
Name:
Title:
XXXXXX DIGITAL, LLC
By:
-------------------------------
Name: Xxx Xxxxxx
Title: Chairman
THE XXXXXXX XXXXX GROUP, INC.
By:
-------------------------------
Name:
Title:
XXXXX XXXXXX XXXX 0000, X.X.
By: Stone Street 1999 Corp., as
General Partner
By:
-------------------------------
Name:
Title:
VULCAN VENTURES INCORPORATED
By:
-------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President
ARISTA CAPITAL PARTNERS, LP
By:
-------------------------------
Name:
Title:
XXXXXXXX XXXX
-----------------------------------
XXXXXXX XXXX
-----------------------------------
XXXXXXX X. XXXXX
-----------------------------------
SCHEDULE I
LIST OF INVESTORS WHO BECOME SIGNATORIES
HERETO SUBSEQUENT TO THE DATE HEREOF
-------------------------------------------------------------------------------
Investor Address Date Signature
-------- ------- ---- ---------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
SCHEDULE II
ADDRESSES OF INVESTORS
Vulcan Ventures Incorporated
000-000xx Xxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx
The Xxxxxxx Xxxxx Group, Inc.
00 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxx Xxxxxxxx
Stone Street Fund 1999, L.P.
x/x Xxxxx Xxxxxx 0000 Xxxx.
00 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxx Xxxxxxxx
Arista Capital Partners, L.P.
c/o Dawntreader
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxx Xxxxxxxx
Xxxxxxxx Xxxx
c/o Priceline WebHouse Club, Inc.
Xxx Xxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
47
Xxxxxxx Xxxx
[Address]
Telecopy No.:
Xxxxxxx X. Xxxxx
000-000xx Xxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Telecopy No.:
48
SCHEDULE III
INITIAL NOMINEES TO BOARD OF DIRECTORS
Securityholder Nominee
-------------- -------
Priceline................................... Xxxxxxx Xxxxxxxx
Xxxxxx Digital.............................. Xxx Xxxxxx
Xxxxxxxx Xxxx............................... Xxxxxxxx Xxxx
Vulcan...................................... Xxxxx X. Dagatt
Xxxxxxx Sachs...............................
[Independent]...............................
[Independent]...............................
49
