EXHIBIT 4.7
SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
THIS SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT is made
as of January 22 2003, by and among CAPELLA EDUCATION COMPANY, a Minnesota
corporation (the "Company"), XXXXXX XXXXXXX, a resident of Minnesota, and the
INVESTORS LISTED ON SCHEDULE 1 attached hereto (collectively, the "Investors"
and each an "Investor"), and shall supersede and replace that certain Amended
and Restated Investor Rights Agreement dated February 21, 2002 by and among the
Company, Xxxxxx Xxxxxxx and the Investors listed on Schedule 1 attached thereto
(collectively, the "Prior Investors") (the "Prior Investor Rights Agreement")
and be effective as of the date of this Agreement. The Prior Investor Rights
Agreement is hereby cancelled and terminated in its entirety and shall be of no
further force and effect.
RECITALS
A. The Company proposes to sell and issue up to 683,452.20 shares
(the "Class G Preferred Shares") of its Class G Convertible Preferred Stock (the
"Class G Preferred") pursuant to that certain Maveron Class G Convertible
Preferred Stock Purchase Agreement dated January 15, 2003 (the "Class G Purchase
Agreement") to certain purchasers (the "Class G Purchasers").
B. The Company sold and issued 1,425,457 shares (the "Class F
Preferred Shares") of its Class F Preferred Convertible Preferred Stock (the
"Class F Preferred") pursuant to that certain Class F Convertible Preferred
Stock Purchase Agreement dated January 31, 2002 (the "Class F Purchase
Agreement") to certain purchasers.
C. Equity-VII, MBO-VIII, Xxxxxx, Think Equity Investment Partners
LLC, DRW Venture Partners LP, Xxxxxx Xxxxxxx, the Management Investors listed on
Schedule 1.1 to the Class F Purchase Agreement and the S. Xxxxxx and Xxxxxx X.
Xxxxx Issue Trust (collectively referred to as the "Class F Investors") have
entered into an Exchange Agreement (the "Exchange Agreement"), pursuant to which
the Class F Investors agree to exchange (the "Exchange") each of the outstanding
shares of Class F Preferred held by such investor for shares of Class G
Preferred.
D. The Investors which are parties to the Class G Purchase Agreement
have requested that the Company grant to them certain rights as set forth below.
E. The execution and delivery of this Agreement by each Investor is
a condition to the purchase of the Class G Preferred by the Class G Purchasers
and to the Exchange.
F. The Investors desire that the Class G Purchasers consummate the
purchase of Class G Preferred contemplated by the Class G Purchase Agreement and
that the Class F Investors consummate the Exchange and are willing to enter into
this Agreement as an
inducement to the Class G Purchasers to complete the purchase of the Class G
Preferred and the Class F Investors to consummate the Exchange.
AGREEMENT
In consideration of the premises hereof, the mutual promises made
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
1. REGISTRATION RIGHTS.
1.1. Certain Definitions. As used in this Section 1 and elsewhere in
this Agreement, the following terms shall have the following respective
meanings:
"Board" means the Company's board of directors, as it may exist from time
to time.
"Class E Purchase Agreement" means the Class E Convertible Preferred Stock
Purchase Agreement, dated as of April 20, 2000, by and among the Company,
Equity-VI and SmartForce plc.
"Commission" means the Securities and Exchange Commission, or any other
federal agency at the time administering the Securities Act (as defined below).
"Common Stock" means the Company's common stock $.10 par value per share,
and any stock or equity security issued in exchange or substitution therefor or
into which such Common Stock may change after the date hereof.
"Conversion Shares" means shares of Common Stock issued or issuable upon
conversion of the Shares.
"Equity-VI" means Forstmann Little & Co. Equity Partnership-VI, L.P., a
Delaware limited partnership.
"Equity-VII" means Forstmann Little & Co. Equity Partnership-VII, L.P., a
Delaware limited partnership.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any similar federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.
"Forstmann Little Entities" means the collective reference to Equity-VI,
Equity-VII and MBO-VIII.
"Initial Public Offering" means the initial public offering by the Company
of its Common Stock which is registered with the Commission under the provisions
of the Securities Act.
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"Maveron Entities" means the collective reference to Maveron Equity
Partners 2000, L.P., Maveron Equity Partners 2000-B, L.P. and MEP 2000
Associates LLC.
"MBO-VIII" means Forstmann Little & Co. Subordinated Debt and Equity
Management Buyout Partnership-VIII, L.P., a Delaware limited partnership.
"Xxxxxx" means the collective reference to those certain funds and
accounts managed by affiliates of Xxxxxx Investments, LLC, a Delaware limited
liability company, that are listed on Schedule 1 hereto.
"Qualified Public Offering" means the underwritten public offering meeting
the requirements for automatic conversion of Class G Preferred set forth in
Section 6(b) of the Certificate of Designation for the Class G Preferred (the
"Class G Certificate"), as filed with the Secretary of State of Minnesota.
"Registration Statement" means a registration statement filed by the
Company with the Commission for a public offering and sale of securities of the
Company (other than a registration statement on Form S-8 or Form S-4, or their
successors, or any other similar form, or any registration statement covering
only securities proposed to be issued in exchange for securities or assets of
another corporation).
"Registrable Shares" means (a) any Conversion Shares, (b) any shares of
Common Stock acquired by the Stockholders pursuant to any preemptive right they
have by virtue of owning the Shares or Conversion Shares, and (c) any other
shares of Common Stock issued in respect of the shares of Common Stock described
in subparagraphs (a) and (b) above (because of stock splits, stock dividends,
reclassifications, recapitalizations, or similar events); provided, however,
that shares of Common Stock which are Registrable Shares shall cease to be
Registrable Shares upon any public sale pursuant to a Registration Statement,
Section 4(1) of the Securities Act, or Rule 144 under the Securities Act, or
such time as they shall be eligible for sale under Rule 144(k), as to any
original Investor hereunder, or, as to any other Stockholder, Rule 144 without
limitation as to volume, or any sale or transfer in any manner to a person or
entity which, by virtue of Section 1.13 of this Agreement, is not entitled to
the rights provided by this Section 1.
"Registration Expenses" means the expenses described in Section 1.6.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission issued
under such Act, as they each may, from time to time, be in effect.
"Shares" means the collective reference to the Company's Class E Preferred
Stock, par value $.01 per share (the "Class E Preferred"), the Class G Preferred
and all shares of capital stock of the Company issued in exchange or
substitution for or in respect of the Class E Preferred or the Class G
Preferred.
"Stockholders" means the Investors and any persons or entities to whom the
rights granted under this Section 1 are transferred pursuant to Section 1.13
hereof.
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1.2. Sale or Transfer of Shares; Legend.
(a) Restriction. The Shares and the Registrable Shares and shares
issued in respect of the Shares or the Registrable Shares shall not be sold or
transferred unless such sale or transfer is made in accordance with the Third
Amended and Restated Co-Sale and Board Representation Agreement of even date
herewith to which any Stockholder who proposes to make such transfer is a party
(the "Co-Sale Agreement") and either (i) they first shall have been registered
under the Securities Act and under any applicable state securities or blue sky
laws or sold pursuant to Rule 144 under the Securities Act or (ii) the Company
first shall have been furnished with an opinion of legal counsel, reasonably
satisfactory to the Company, to the effect that such sale or transfer is exempt
from such registration requirements.
(b) Legend. Each certificate representing the Shares and the
Registrable Shares and shares issued in respect of the Shares or the Registrable
Shares shall bear a legend substantially in the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF ANY STATE, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL SUCH SHARES ARE
REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY IS OBTAINED TO THE EFFECT
THAT SUCH REGISTRATION IS NOT REQUIRED."
The foregoing legend shall be removed from the certificates representing
any Registrable Shares, at the request of the holder thereof, at such time as
they become eligible for resale pursuant to Rule 144(k) under the Securities
Act.
1.3. Required Registrations.
(a) On Demand. Subject to Section 1.3(d), at any time after the end
of the six-month period commencing upon the consummation of the Initial Public
Offering pursuant to a Registration Statement, each of (i) Xxxxxx, (ii)
Equity-VII and MBO-VIII, (iii) the Maveron Entities, and (iv) a Stockholder or
Stockholders holding in the aggregate at least 10% of the Registrable Shares
originally issued pursuant to the Class E Purchase Agreement, may request, in
writing, that the Company effect the registration on Form S-1 (or any successor
form), including by means of a shelf registration pursuant to Rule 415, of
Registrable Shares owned by such Stockholder or Stockholders having an aggregate
offering price of at least $1 million (based on the then current market price or
fair value). If the holder or holders initiating the registration intend to
distribute the Registrable Shares by means of an underwriting, such holder or
holders shall so advise the Company in their request of such intention and of
their selection of an underwriter (which selection shall be made by a majority
in interest of the holders initiating the registration and subject to the
consent of the Company, which consent shall not be unreasonably withheld). In
the event such registration is underwritten, the right of other Stockholders to
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participate shall be conditioned on such Stockholders' participation in such
underwriting. Upon receipt of any such request, the Company shall promptly give
written notice of such proposed registration to all Stockholders (other than
Xxxxxx, in which case the Company will not give such prior notice and as a
substitute for such prior notice will either: (a) issue a press release
conforming with Rule 135 under Securities Act describing such proposed
registration or (b) provide notice upon the initial filing of a registration
statement to effect such registration request and, if requested by Xxxxxx within
three days after receipt of such notice, agree to amend any registration
statement to effect such registration request to include such amount of
Registrable Shares as Xxxxxx desires to include in such Registration, subject to
Section 1.3(c) below). Such Stockholders shall have the right, by giving written
notice to the Company within 10 days after the Company provides its notice (or,
in the case of Xxxxxx, within three days after the issuance of the Company press
release or three days after receipt of the notice after filing of the
registration statement as described above) to elect to have included in such
registration such of their Registrable Shares as they may request in such notice
of election. Thereupon, the Company shall, as expeditiously as possible, use its
best efforts to effect the registration of all Registrable Shares which the
Company has been requested to so register.
(b) Short Form Registration. Subject to Section 1.3(d), at any time
after the Company becomes eligible to file a Registration Statement on Form S-3
(or any successor form relating to secondary offerings), a Stockholder or
Stockholders holding in the aggregate (i) at least 15% of the Registrable Shares
originally issued pursuant to the Class G Purchase Agreement and the Exchange
Agreement, or (ii) at least 10% of the Registrable Shares originally issued
pursuant to the Class E Purchase Agreement, may request the Company, in writing,
to effect the registration on Form S-3 (or such successor form) including by
means of shelf registration pursuant to Rule 415, of Registrable Shares having
an aggregate offering price of at least $1 million (based on the current public
market price). Upon receipt of any such request, the Company shall promptly give
written notice of such proposed registration to all Stockholders (other than
Xxxxxx, in which case the Company will not give such prior notice and as a
substitute for such prior notice will either: (a) issue a press release
conforming with Rule 135 under Securities Act describing such proposed
registration or (b) provide notice upon the initial filing of a registration
statement to effect a Registration Request and, if requested by Xxxxxx within
three days after receipt of such notice, agree to amend any registration
statement to effect such registration request to include such amount of
Registrable Shares as Xxxxxx desires to include in such Registration, subject to
Section 1.3(c) below). Such Stockholders shall have the right, by giving written
notice to the Company within 30 days after the Company provides its notice (or,
in the case of Xxxxxx, within three days after the issuance of the Company press
release or three days after receipt of the notice after filing of the
registration statement as described above) to elect to have included in such
registration such of their Registrable Shares as such Stockholders may request
in such notice of election. Thereupon, the Company shall, as expeditiously as
possible, use its best efforts to effect the registration of all Registrable
Shares which the Company has been requested to register.
(c) Underwriter's Cut-back. If, in the good faith judgment of the
managing underwriter of any underwritten offering undertaken under this Section
1.3, the registration of all of the Registrable Shares which holders have
requested to be included in a registration under this Section 1.3 would
materially and adversely affect such public offering, then there shall be
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included in the underwriting only that number of Registrable Shares which the
underwriter believes may be sold without causing such material adverse effect.
If the number of Registrable Shares to be included in the underwriting in
accordance with the foregoing is less than the total number of shares which the
holders of Registrable Shares have requested to be included, then the
Stockholders shall be entitled to participate on a pro rata basis based on the
number of shares included in the request for registration including shares of
the demanding party. The Company and any other Company stockholders that have
not expressly been given pari passu or senior rights of participation in
accordance with Section 1.11 hereof shall have no right to participate in that
event, without the consent of the holders of at least a majority of the
Registrable Shares participating in such offering.
(d) Number and Timing Limitations. The Company shall not be required
to effect more than: (A) one registration pursuant to clause (i) of the first
sentence of Section 1.3(a), (B) one registration pursuant to clause (ii) of the
first sentence of Section 1.3(a), (C) one registration pursuant to clause (iii)
of the first sentence of Section 1.3(a), (D) two registrations pursuant to
clause (iv) of the first sentence of Section 1.3(a), (E) three registrations
pursuant to clause (i) of the first sentence of Section 1.3(b) and (F) three
registrations pursuant to clause (ii) of the first sentence of Section 1.3(b).
(e) Delay by Company. The Company shall be entitled to (x) postpone
the filing of any Registration Statement otherwise required to be prepared and
filed by the Company pursuant to this Section 1.3 (and may suspend the
completion of any requested registration pursuant to this Section 1.3 which has
been initiated so long as the Registration Statement has not yet been declared
effective) for a reasonable period of time, but not in excess of 60 consecutive
days (a "Delay Period") or (y) suspend the use of any effective Registration
Statement under this Section 1.3 for a reasonable period of time, but not in
excess of 60 consecutive days (a "Suspension Period") if (i) such postponement
or suspension is required by applicable law arising from events outside of the
control of the Company or (ii) the Company determines that in its reasonable
good faith judgment the registration and distribution of the Registrable Shares
covered or to be covered by such Registration Statement would interfere with any
pending material financing, acquisition, corporate reorganization or business
combination, involving the Company or any of its subsidiaries or would require
premature disclosure thereof and promptly gives such Stockholder written notice
of such determination (setting forth in reasonable detail the facts and
circumstances resulting in such delay where such detail would not otherwise
require such premature disclosure), and an approximation of the period of the
anticipated delay or suspension; provided, however, that (i) the aggregate
number of days included in all Delay Periods or Suspension Periods during any
consecutive 12 months shall not exceed 90 days and (ii) the Company may not
delay or suspend any registration more than one time in any 12-month period.
(f) Right to Withdraw. In the event that the holders initiating a
registration pursuant to Section 1.3 determine for any reason not to proceed
with a registration at any time before the Registration Statement has been
declared effective by the Commission, and such Registration Statement, if
theretofore filed with the Commission, is withdrawn with respect to the
Registrable Shares covered thereby, and the holders agree to bear their own
expenses incurred in connection therewith and to reimburse the Company for the
expenses incurred by it
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attributable to registration of such Registrable Shares, then such holders shall
not be deemed to have exercised their right to require the Company to register
Registrable Shares pursuant to Section 1.3. If a Registration Statement filed by
the Company pursuant to Section 1.3 is withdrawn at the initiative of the
Company, then the holders initiating such registration shall not be deemed to
have exercised their right to require the Company to register Registrable Shares
pursuant to Section 1.3. If a registration is prohibited from becoming or
remaining effective so as to permit the sale of Registrable Shares proposed to
be sold by any stop order, injunction or other order or requirement of the
Commission or any other governmental authority, such registration shall be
deemed not to have been effected unless such stop order, injunction or other
order shall subsequently have been vacated or otherwise removed.
1.4. Incidental Registration.
(a) Notice by Company. Whenever the Company proposes at any time
from time to time to file (including without limitation upon a Qualified Public
Offering) a Registration Statement (other than pursuant to Section 1.3) that
contemplates the sale of Common Stock, it will, prior to such filing, give
written notice to all Stockholders of its intention to do (other than Xxxxxx, in
which case the Company will not give such prior notice and as a substitute for
such prior notice will either: (a) issue a press release conforming with Rule
135 under Securities Act describing such proposed registration or (b) provide
notice upon the initial filing of the Registration Statement and, if requested
by Xxxxxx within three days after receipt of such notice, agree to amend any
registration statement to effect such registration request to include such
amount of Registrable Shares as Xxxxxx desires to include in such registration,
subject to Section 1.4(b) below) and, upon the written request of the
Stockholders given within 10 days after the Company provides such notice (or, in
the case of Xxxxxx, given within three days after the issuance of the Company
press release or three days after receipt of the notice after filing of the
registration statement as described above) the Company shall use its best
efforts to cause all Registrable Shares which the Company has been requested by
such Stockholders to register to be registered under the Securities Act to the
extent necessary to permit their sale or other disposition in accordance with
the intended methods of distribution specified in the request of the
Stockholders; provided, however, that the Company shall have the right to
postpone or withdraw any registration proposed pursuant to this subsection
1.4(a) without obligation to any Stockholder.
(b) Underwriter's Cut-back. In connection with any offering under
subsection 1.4(a) involving an underwriting, the Company shall not be required
to include any Registrable Shares in such underwriting unless the holders
thereof accept the terms of the underwriting as agreed upon between the Company
and the underwriters selected by it, and then only in such quantity as will not,
in the opinion of the underwriters, jeopardize the success of the offering by
the Company. If in the good faith judgment of the managing underwriter the
registration of all, or part of, the Registrable Shares which the holders have
requested to be included would materially and adversely affect such public
offering, then the Company shall be required to include in the underwriting only
that number of Registrable Shares, if any, which the managing underwriter
believes may be sold without causing such material adverse effect. If the number
of Registrable Shares to be included in the underwriting in accordance with the
foregoing is less than the total number of shares which the holders of
Registrable Shares have requested to be
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included, then, (A) in the case of a Registration Statement whose filing was
initiated by the Company, the Registrable Shares to be included in such
underwriting shall be allocated (x) first to the Company and (y) second among
the Stockholders who have requested registration on a pro rata basis based on
the number of shares included in the request for registration and (B) in the
case of a Registration Statement whose filing was initiated by a selling
stockholder, the Registrable Shares to be included in such underwriting shall be
allocated among the Stockholders who have requested registration on a pro rata
basis based on the number of shares included in the request for registration.
The Company (in the case of a Registration Statement whose filing was initiated
by a selling stockholder) and any other Company stockholders (in the case of a
Registration Statement whose filing was initiated by the Company or by a selling
stockholder) shall have no right to participate in that event, without the
consent of the holders of at least a majority of the Registrable Shares
participating in such offering, unless otherwise approved in accordance with
Section 1.11.
1.5. Registration Procedures. If and whenever the Company is
required by the provisions of this Agreement to use best efforts to effect the
registration of any of the Registrable Shares under the Securities Act, the
Company shall:
(a) Filing. Prepare and file with the Commission, as promptly as
practicable, a Registration Statement with respect to such securities and use
its best efforts to cause such Registration Statement to become and remain
continuously effective until the earlier to occur of 180 days from the effective
date or the distribution described in the Registration Statement has been
completed; provided that before filing a Registration Statement or prospectus or
any amendments or supplements thereto, the Company shall furnish copies thereof
to the holders' counsel and, in an underwritten offering, to counsel for the
underwriters. A registration pursuant to Section 1.3 shall be effected pursuant
to Rule 415 (or any similar provision then in force) under the Securities Act,
to the extent the Company is eligible therefor, if the manner of distribution
contemplated by the holders participating in such registration shall include an
offering on a delayed or continuous basis and, notwithstanding anything to the
contrary in this Section 1.5(a), the Company shall use its best efforts to cause
such Registration Statement to become and remain continuously effective until
the earlier to occur of 365 days from the effective date or the distribution
described in the Registration Statement has been completed;
(b) Amendments. As expeditiously as possible prepare and file with
the Commission any amendments and supplements to the Registration Statement and
the prospectus included in the Registration Statement as may be necessary to
keep the Registration Statement effective as set forth in 1.5(a);
(c) Furnish Copies. As expeditiously as possible furnish to each
selling Stockholder and to any underwriters participating in such registration
such reasonable numbers of copies of the prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as the selling Stockholder may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Shares owned
by the selling Stockholder. The Company shall furnish to each holder
participating in such registration drafts of the Registration Statement and the
prospectus and each
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amendment thereof or supplement thereto for its timely review prior to the
filing thereof with the Commission;
(d) Blue Sky Registration. As expeditiously as possible use its best
efforts to register or qualify the Registrable Shares covered by the
Registration Statement under the securities or blue sky laws of such states as
the selling Stockholders shall reasonably request, and do any and all other acts
and things that may be necessary or desirable to enable the selling Stockholders
to consummate the public sale or other disposition within such states of the
Registrable Shares owned by the selling Stockholders; provided, however, that
the Company shall not be required in connection with this paragraph (d) to
qualify as a foreign corporation in any jurisdiction, execute a general consent
to service of process in any jurisdiction, or subject itself to taxation in any
jurisdiction;
(e) List on Exchange. Use best efforts to cause the Registrable
Shares to be listed on the principal securities exchange on which similar
securities of the Company are then listed, if any, if the listing of such shares
is then permitted under the rules of such exchange, provide a transfer agent,
and register a CUSIP number for all Registrable Shares not later than the
effective date of the Registration Statement;
(f) Customary Agreements. Enter into such customary agreements
(including an underwriting agreement in customary form) and take all such other
actions as the Stockholders may reasonably request in order to expedite or
facilitate the disposition of such Registrable Shares;
(g) Inspection. Subject to appropriate arrangements concerning
confidentiality, make available for inspection by the Stockholders, any
underwriter participating in any disposition pursuant to such Registration
Statement, and any attorney, accountant or other agent retained by any such
seller or underwriter (collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of the Company as shall be
necessary to enable them to exercise their due diligence responsibility, and
cause the Company's officers, directors and employees to supply all information
requested by any such Inspector in connection with such Registration Statement;
(h) Securities Act Compliance. Otherwise comply with all applicable
rules and regulations of the Commission, and make available to the Stockholders,
as soon as reasonably practicable, an earnings statement covering a period of 12
months, beginning within three months after the effective date of the
Registration Statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder;
(i) Road Shows. At the request and expense (if the Company is not
otherwise a participant in the offering) of any stockholder or underwriter
participating in any disposition pursuant to a Registration Statement, cause its
officers to use their reasonable best efforts to support the marketing of the
Registrable Shares covered by the Registration Statement (including, without
limitation, the participation in "road shows," at the request of the managing
underwriter) taking into account the Company's business needs;
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(j) Amendments. Notify each selling Stockholder promptly of any
request by the Commission for the amending or supplementing of such Registration
Statement or prospectus or for additional information; prepare and file with the
Commission, promptly upon the request of any selling Stockholder, any amendments
or supplements to such Registration Statement or prospectus which, in the
opinion of counsel for such holders (and concurred in by the Company and counsel
for the Company), is required under the Securities Act or the rules and
regulations thereunder in connection with the distribution of the Registrable
Shares by such holder; and prepare and promptly file with the Commission and
promptly notify each selling Stockholder of the filing of such amendment or
supplement to such Registration Statement or prospectus as may be necessary to
correct any statements or omissions if, at the time when a prospectus relating
to such securities is required to be delivered under the Securities Act, any
event shall have occurred as the result of which any such prospectus or any
other prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they were made,
not misleading. The Company may determine to delay filing of any such amendment
or supplement, and request suspension by a selling Stockholder of offers and
sales pursuant to the prospectus under the circumstances contemplated by Section
1.3(e) hereof;
(k) Suspension of Effectiveness. Advise each selling Stockholder,
promptly after it receives notice or obtains knowledge thereof, of the issuance
of any stop order by the Commission suspending the effectiveness of such
Registration Statement or the initiation or threatening of any proceeding for
that purpose and promptly use its best efforts to prevent the issuance of any
stop order or to obtain its withdrawal if such stop order should be issued;
(l) Compliance. Not file any amendment or supplement to such
Registration Statement or prospectus to which a majority in interest of the
selling Stockholders shall have reasonably objected on the grounds that such
amendment or supplement does not comply in all material respects with the
requirements of the Securities Act or the rules and regulations thereunder,
after having been furnished with a copy thereof at least five business days
prior to the filing thereof, unless in the opinion of counsel for the Company
the filing of such amendment or supplement is reasonably necessary to protect
the Company from any liabilities under any applicable federal or state law and
such filing will not violate applicable law; and
(m) Opinions. At the request of any selling Stockholder, furnish:
(i) an opinion, dated as of the closing date, of the counsel representing the
Company for the purposes of such registration, addressed to the underwriters, if
any, and to the holder or holders making such request, covering such matters as
such underwriters (in the case of an underwritten offering) or such holder or
holders (in the case of an offering that is not underwritten) may reasonably
request; and (ii) letters dated as of the effective date of the Registration
Statement and as of the closing date, from the independent certified public
accountants of the Company, addressed to the underwriters, if any, and to the
holder or holders making such request, covering such matters as such
underwriters and holder or holders may reasonably request.
If the Company has delivered preliminary or final prospectuses to the selling
Stockholders and after having done so the prospectus is amended to comply with
the requirements of the Securities Act, the Company shall promptly notify the
selling Stockholders and, if requested, the selling
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Stockholders shall immediately cease making offers of Registrable Shares and
return all prospectuses to the Company. The Company shall promptly provide the
selling Stockholders with revised prospectuses and, following receipt of the
revised prospectuses and compliance with any related requirements of the
Securities Act and any applicable state securities or blue sky laws, the selling
Stockholders shall be free to resume making offers of the Registrable Shares.
1.6. Allocation of Expenses. (a) The Company will pay all
Registration Expenses of all registrations under this Agreement; provided,
however, that if a registration is withdrawn at the request of the Stockholders
requesting such registration (other than as a result of information concerning
the business or financial condition of the Company which is made known to the
Stockholders after the date on which such registration was requested) and if the
requesting Stockholders elect not to have such registration counted as a
registration requested under Section 1.3, the requesting Stockholders shall pay
the Registration Expenses of such registration pro rata in accordance with the
number of their Registrable Shares included in such registration. For purposes
of this Section 1.6, the term "Registration Expenses" shall mean all expenses
incurred by the Company in complying with this Section 1, including, without
limitation, all registration and filing fees, exchange listing fees, printing
expenses, fees of accountants for the Company, fees and disbursements of counsel
for the Company, the fees and expenses of one counsel selected by the selling
Stockholders to represent the selling Stockholders (not to exceed $50,000 with
respect to any one registration and $200,000 in the aggregate for all
registrations pursuant to this Section 1), state securities or blue sky fees and
expenses, and the expense of any special audits incident to or required by any
such registration, but excluding underwriting discounts, selling commissions or
any other brokerage or underwriting fees and expenses, and the fees and expenses
of the selling Stockholders' own counsel (other than the one counsel selected to
represent all selling Stockholders) or other advisors.
(b) Notwithstanding the foregoing, the provisions of this Section
1.6 shall be deemed amended to the extent necessary to cause these expense
provisions to comply with "blue sky" laws of each state or the securities laws
of any other jurisdiction in the United States and its territories in which the
offering is made.
1.7. Indemnification and Contribution.
(a) By Company. In the event of any registration of any of the
Registrable Shares under the Securities Act pursuant to this Agreement, the
Company will indemnify and hold harmless the seller of such Registrable Shares,
and each stockholder of the Company, and each officer, director and partner of
such seller and stockholder, each underwriter of such Registrable Shares, and
each other person, if any, who controls such seller, stockholder or underwriter
within the meaning of the Securities Act or the Exchange Act (each an
"Indemnified Person") against any losses, claims, damages or liabilities, joint
or several, to which such Indemnified Person may become subject under the
Securities Act, the Exchange Act, state securities or blue sky laws, or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement
under which such Registrable Shares were registered under the Securities Act,
any preliminary prospectus, or final prospectus contained in the Registration
Statement, or any amendment or supplement to such
11
Registration Statement, or arise out of or are based upon the omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and the Company will
reimburse such Indemnified Person for any legal or any other expenses reasonably
incurred by such Indemnified Person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage, or liability arises out of or is based upon (i) any untrue
statement or omission made in such Registration Statement, preliminary
prospectus, or prospectus, or any such amendment or supplement, in reliance upon
and in conformity with information furnished to the Company, in writing, by or
on behalf of such Indemnified Person specifically for use in the preparation
thereof or (ii) the failure of such Indemnified Person to deliver copies of the
prospectus in the manner required by the Securities Act.
(b) By Seller. In the event of any registration of any of the
Registrable Shares under the Securities Act pursuant to this Agreement, each
seller of Registrable Shares, severally (and not jointly or jointly and
severally), will indemnify and hold harmless the Company, each of its directors
and officers, each underwriter, if any, each person, if any, who controls the
Company or any such underwriter within the meaning of the Securities Act or the
Exchange Act, each other such stockholder and each of their officers, directors
and partners and each person controlling such stockholder, against any losses,
claims, damages or liabilities, joint or several, to which the Company, such
directors and officers, underwriter, controlling person or such stockholder may
become subject under the Securities Act, Exchange Act, state securities or blue
sky laws, or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement under which such Registrable Shares were registered under
the Securities Act, any preliminary prospectus, or final prospectus contained in
the Registration Statement, or any amendment or supplement to the Registration
Statement, or arise out of or are based upon any omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, if the statement or omission was made in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of such seller, specifically for use in connection with
the preparation of such Registration Statement, prospectus, amendment, or
supplement; provided, however, that the sellers of Registrable Shares will not
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or
prospectus to the extent that prior to the filing of such Registration
Statement, preliminary prospectus or final prospectus such seller has furnished
to the Company information expressly for use in such Registration Statement or
prospectus, or amendment thereof or supplement thereto, which corrected or made
not misleading information previously furnished to the Company and provided
further that the obligations of a Stockholder hereunder shall be limited to an
amount equal to the net proceeds to the Stockholder arising from the sale of
Registrable Shares as contemplated herein.
(c) Notice. Each party entitled to indemnification under this
Section 1.7 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") within a reasonable period of
time after such Indemnified Party has actual
12
knowledge of any claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claim or any litigation
resulting therefrom, but the omission to so notify the Indemnifying Party will
not relieve it from any liability which it may have to any Indemnified Party
otherwise than hereunder; provided, however, that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be withheld
unreasonably). The Indemnified Party may participate in such defense at such
party's expense; provided, however, that the Indemnifying Party shall pay such
expense if representation of such Indemnified Party by the counsel retained by
the Indemnifying Party would be inappropriate due to actual or potential
differing interests between the Indemnified Party and any other party
represented by such counsel in such proceeding. No Indemnifying Party in the
defense of any such claim or litigation shall, except with the prior written
consent of each Indemnified Party (which consent shall not be unreasonably
withheld), consent to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
of such claim or litigation, and no Indemnified Party shall consent to entry of
any judgment or settle such claim or litigation without the prior written
consent of the Indemnifying Party (which consent shall not be unreasonably
withheld).
(d) Contribution. If the indemnification provided for in this
Section 1.7 from the Indemnifying Party is unavailable to an Indemnified Party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages, liabilities or
expenses (i) in such proportion as is appropriate to reflect the relative fault
of the Indemnifying Party, on the one hand, and the Indemnified Party, on the
other, in connection with the actions which resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant equitable
considerations, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable Law or if the allocation provided in this clause (ii)
provides a greater amount to the Indemnified Party than clause (i) above, in
such proportion as shall be appropriate to reflect not only the relative fault
but also the relative benefits received by the Indemnifying Party and the
Indemnified Party from the offering of the securities covered by such
Registration Statement as well as any other equitable considerations. The
relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include any fees, charges or expenses (including fees,
disbursements and other charges of legal counsel) reasonably incurred by such
party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 1.7(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the
13
immediately preceding paragraph. Notwithstanding the provisions of this Section
1.7(d), a holder of Registrable Shares shall not be required to contribute any
amount in excess of the amount by which the net proceeds received by such holder
in the offering to which such Registration Statement relates exceeds the amount
of any damages that such holder has otherwise been required to pay. 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. No person
shall be obligated to contribute hereunder any amounts in payment for any
settlement of any action or claim effected without such person's consent, which
consent shall not be unreasonably withheld.
1.8. Indemnification Payments. The indemnification and contribution
required by Section 1.7 will be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred; provided, however,
that if an Indemnified Party is adjudged to be not entitled to such payments in
a final non-appealable judgment of a court of competent jurisdiction, it shall
promptly return such payments to the Indemnifying Party.
1.9. Information by Holder. Each Stockholder whose Registrable
Shares are included in any registration shall furnish to the Company such
information regarding such Stockholder and the distribution proposed by such
Stockholder as the Company may reasonably request in writing if it is required
in connection with any registration, qualification or compliance referred to in
this Section 1.
1.10. "Lock-Up" Agreement. Each Stockholder, if requested by the
underwriter, of Common Stock or other securities of the Company, shall agree not
to sell or otherwise transfer or dispose of any Registrable Shares or other
securities of the Company held by such Stockholder for a specified period of
time (not to exceed 180 days) following the effective date of a Registration
Statement; provided, however, that:
(a) Application. Such agreement shall only apply to the first
Registration Statement filed for an underwritten public offering by the Company;
(b) Others Covered. Such agreement shall only apply if all
Stockholders, any holders of more than 5% of the then outstanding Common Stock
on an as converted basis, and all officers and directors of the Company, enter
into similar agreements; and
(c) Not Apply to Registrable Shares. Such agreement shall not apply
to (i) any Registrable Shares (or other securities of the Company) held by such
Stockholder if they are to be included in the Registration Statement and (ii)
any transfers of Registrable Shares or other securities of the Company by any
Maveron Entity, Xxxxxx or any Forstmann Little Entity to their respective
partners, limited partners, members, investors or other affiliates (including
without limitation affiliated investment funds or accounts), so long as the
transferee assumes in writing the obligations of such Stockholder under this
Agreement and agrees to be treated as a "Stockholder" for all purposes of this
Agreement.
14
Such agreement shall be in writing in a form satisfactory to the Company and
such underwriter and shall contain commercially standard terms and exceptions
for such underwritten offerings. The Company may impose stop transfer
instructions with respect to the Registrable Shares or other securities subject
to the foregoing restriction until the end of the lock-up period.
1.11. Limitations on Subsequent Registration Rights; Existing Pari
Passu Rights. From and after the date hereof until the first to occur of (i) the
third anniversary of such date and (ii) the Qualified Public Offering, the
Company shall not, without the prior written consent of the holders of a
majority of the Registrable Shares then outstanding, enter into any agreement
with any holder or prospective holder of any securities of the Company giving
such holder or prospective holder demand or incidental registration rights
containing cut-back provisions that are by their terms not subordinate to the
registration rights granted in this Section 1. The Investors acknowledge and
agree to the pari passu participation with Stockholders hereunder by holders of
registration rights granted by the Company to (i) NCS Xxxxxxx, Inc. under that
certain Registration Rights Agreement dated June 16, 1998, as amended as of
April 20, 2000, February 21, 2002 and the date hereof and (ii) Xxxx Xxxxx Xxxx
Xxxxxx, Incorporated under that certain Warrant dated June 16, 1998, and amended
as of April 20, 2000, February 21, 2002, and the date hereof and under that
certain warrant dated May 11, 2000, as amended as of February 21, 2002 and the
date hereof.
1.12. Rule 144 Requirements. After the earliest of (i) the closing
of the sale of securities of the Company pursuant to a Registration Statement,
or (ii) the registration by the Company of a class of securities under Section
12 of the Exchange Act, the Company agrees to:
(a) Public Information. At all times, make and keep public
information available, as those terms are understood and defined in Rule 144
under the Securities Act;
(b) Reports. File with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements); and
(c) Compliance Statement. Furnish to any holder of Registrable
Shares upon request a written statement by the Company as to its compliance with
the reporting requirements of said Rule 144 (at any time after 90 days following
the closing of the first sale of securities by the Company pursuant to a
Registration Statement), and of the Securities Act and the Exchange Act (at any
time after it has become subject to such reporting requirements), and such other
reports and documents of the Company and other information in the possession of
or reasonably obtainable by the Company and not reasonably publicly available as
such Holder may reasonably request in availing itself of any rule or regulation
of the Commission allowing such Holder to sell any such securities without
registration.
1.13. Transfer of Registration Rights. The registration rights set
forth in this Section 1 may be transferred and assigned by a Stockholder to any
transferee of Registrable Shares; provided that the Company is given written
notice prior to such transfer, stating the name and address of the transferee
and identifying the securities with respect to which such registration rights
are being transferred; and provided further the transferee assumes in writing
the
15
obligations of such Stockholder under this Agreement and agrees to be treated as
a "Stockholder" for all purposes of this Agreement.
1.14. Notice to Xxxxxx. With respect to any Registration Statement
that covers Registrable Shares owned by Xxxxxx, the Company shall provide
same-day notice to Xxxxxx of (i) the filing of such Registration Statement, (ii)
the filing of an amendment to such Registration Statement, and (iii) receipt of
notice of a stop order by the Commission suspending the effectiveness of such
Registration Statement; provided, however, that the issuance of a same-day press
release shall constitute same-day notice to Xxxxxx for purposes of this Section
1.14.
2. PRE-EMPTIVE RIGHT.
2.1. Pre-Emptive Right. The Company hereby grants to each Investor
(collectively referred to as the "Pre-Emptive Purchasers") the right to purchase
a pro rata portion of New Securities (as defined in Section 2.2) which the
Company may, from time to time, propose to sell and issue after the date hereof
(the "Pre-Emptive Right"). Such Pre-Emptive Purchaser's pro rata share for
purposes of this Pre-Emptive Right is the ratio of the number of shares of
Common Stock owned by such Pre-Emptive Purchaser (on an as-converted basis)
immediately prior to the issuance of New Securities, to the total number of
shares of Common Stock outstanding immediately prior to the issuance of New
Securities, assuming full conversion of all securities and full exercise of all
outstanding rights, options and warrants to acquire Common Stock of the Company.
Each Pre-Emptive Purchaser exercising their portion of the Pre-Emptive Right in
full (an "Exercising Pre-Emptive Purchaser") shall have a right of
over-allotment such that if any other Pre-Emptive Purchaser fails to exercise
its right hereunder to purchase its pro rata share of New Securities (a
"Non-Purchasing Pre-Emptive Purchaser"), such Exercising Pre-Emptive Purchaser
may purchase such portion, on a pro rata basis, by giving written notice to the
Company within ten (10) calendar days from the date that the Company provides
written notice of the amount of New Securities such Non-Purchasing Pre-Emptive
Purchaser has failed to exercise its Pre-Emptive Right hereunder. This
Pre-Emptive Right shall be subject to the following provisions of this Section
2.
2.2. New Securities. "New Securities" shall mean any capital stock
of the Company whether now authorized or not and any rights, options or warrants
to purchase such capital stock, and securities of any type whatsoever that are,
or may become, convertible into capital stock; provided that the term "New
Securities" does not include (i) securities purchased under the Class G Purchase
Agreement or issued pursuant to Exchange Agreement; (ii) securities issuable
upon conversion of the securities purchased under the Class G Purchase
Agreement, conversion of the securities issued pursuant to the Exchange
Agreement or conversion of shares of any other class of preferred stock
outstanding at the date of this Agreement to the extent set forth on Schedule
2.4 of the Class G Purchase Agreement; (iii) securities issued pursuant to the
acquisition of another business entity or business segment of any such entity by
the Company by merger, purchase of substantially all the assets or other
reorganization whereby the Company will own more than fifty percent (50%) of the
voting power of such business entity or business segment of any such entity;
(iv) any borrowing, direct or indirect, from financial institutions or other
persons by the Company, whether or not currently authorized, including any type
of loan or payment evidenced by any type of debt instrument, provided such
borrowing does not have any
16
equity features including warrants, options or other rights to purchase capital
stock and are not convertible into capital stock of the Company; (v) shares of
Common Stock awarded, or issued upon the exercise hereafter of options granted,
pursuant to employee, director and consultant benefit plans, agreements or
arrangements adopted by the Company, and the grant of such options themselves,
if either (A) set forth on Schedule 2.4 of the Class G Purchase Agreement or (B)
issuance of such securities is approved by affirmative vote of the Board of
Directors, or the compensation committee thereof; (vi) securities issued to
vendors or customers or to other persons in similar commercial situations with
the Company if such issuance is approved by the Board of Directors and not, in
the aggregate, in excess of two percent of the outstanding equity of the Company
on a fully diluted basis calculated on the date such securities are issued;
(vii) securities issued in a public offering pursuant to a registration under
the Securities Act; (viii) securities issued in connection with any stock split,
stock dividend or recapitalization of the Company; (ix) shares of Common Stock
issued upon exercise of any warrant outstanding at the date of this Agreement to
the extent set forth on Schedule 2.4 of the Class G Purchase Agreement; (x)
securities issued to the employee stock ownership plan of the Company; provided
such contribution is approved by the compensation committee of the Board of
Directors of the Company and does not exceed that number of shares the fair
market value of which is three percent (3%) of annual compensation (as measured
by applicable benefit plan rules); or (xi) any right, option or warrant to
acquire any security convertible into the securities excluded from the
definition of New Securities pursuant to subsections (i) through (x) above.
2.3. Notice. In the event the Company proposes to undertake an
issuance of New Securities, it shall give each Pre-Emptive Purchaser written
notice of its intention, describing the type of New Securities, and their price
and the general terms upon which the Company proposes to issue the same. Each
such Pre-Emptive Purchaser shall have 20 calendar days after any such notice is
mailed or delivered to agree to purchase such Pre-Emptive Purchaser's pro rata
share of such New Securities for the price and upon the terms specified in the
notice by giving written notice to the Company and stating therein the quantity
of New Securities to be purchased. Each such holder shall have a right of over
allotment such that if any other holder fails to exercise his, her or its right
hereunder to purchase the holder's total pro rata portion of the New Securities,
such holder may purchase such portion, on a pro rata basis, by giving written
notice to the Company within 10 days after the date that the Company provides
written notice to the Exercising Pre-Emptive Purchaser of the amount of New
Securities with respect to which the Non-Purchasing Pre-Emptive Purchasers have
failed to exercise their rights hereunder.
2.4. Selling Period. In the event any Pre-Emptive Purchaser or
Exercising Pre-Emptive Purchaser fails to exercise fully the Pre-Emptive Right
within said 20 day period and after the expiration of the 10 day period for the
exercise of the over-allotment provisions of Section 2.1, the Company shall have
90 calendar days thereafter to sell or enter into an agreement (pursuant to
which the sale of New Securities covered thereby shall be closed, if at all,
within 90 calendar days from the date of said agreement) to sell the New
Securities respecting which any Pre-Emptive Purchasers' or Exercising
Pre-Emptive Purchasers' Pre-Emptive Right option set forth in this Section 2 was
not exercised, at a price and upon terms no more favorable to the purchasers
thereof than specified in the Company's notice to the Pre-Emptive Purchasers
pursuant to Section 2.3. In the event the Company has not sold the New
Securities within said 90
17
day period or entered into an agreement to sell the New Securities in accordance
with the foregoing within said 90 day period from the date of said agreement,
the Company shall not thereafter issue or sell any New Securities, without first
again offering such securities to the Pre-Emptive Purchasers in the manner
provided in Section 2.3 above.
2.5. Termination of Pre-Emptive Right. The Pre-Emptive Right granted
under this Agreement shall expire upon, and shall not be applicable to, the
first sale of securities of the Company to the public effected pursuant to a
Qualified Public Offering.
2.6. Transfer of Pre-Emptive Right. The Pre-Emptive Right set forth
in this Section 2 may be transferred and assigned (i) by a Pre-Emptive Purchaser
to a transferee of not less than 50% of the Conversion Shares or 50% of the
Shares or any combination thereof (in each case, as currently constituted and
subject to subsequent adjustments for stock splits, stock dividends, reverse
stock splits, and the like) held by a Pre-Emptive Purchaser as of the date
hereof or (ii) by Xxxxxx, any Maveron Entity or any Forstmann Little Entity to
any of their respective affiliated investment funds, provided that in either
case the Company is given written notice prior to said transfer, stating the
name and address of the transferee and identifying the securities with respect
to which such pre-emptive rights are being transferred, and, provided further,
that the transferee assumes in writing the obligations of such Stockholder under
this Agreement and agrees to be treated as a "Stockholder" for all purposes of
this Agreement.
3. REPORTING; INSPECTION; USE OF PROCEEDS.
3.1. Inspection. The Company covenants and agrees that the Company
will permit (i) Equity-VI, so long as Equity-VI is the beneficial owner of no
less than 5% of the outstanding capital stock of the Company on a fully diluted
basis and (ii) each Investor holding not less than 337,230 shares of Class G
Preferred (or shares of Common Stock acquired upon conversion thereof) (as
adjusted from time to time to reflect stock splits, dividends,
recapitalizations, combinations or the like) (a "Major Shareholder") and any of
its partners, officers or employees, or any outside representatives designated
by such Major Shareholder and reasonably satisfactory to the Company, to visit
and inspect at such Major Shareholder's expense any of the properties of the
Company or its subsidiaries, including their books and records (and to make
photocopies thereof or make extracts therefrom), and to discuss their affairs,
finances, and accounts with their officers, lawyers and accountants, except with
respect to trade secrets and similar confidential information, all to such
reasonable extent and at such reasonable times and intervals as such Major
Shareholder may reasonably request. For the purposes of determining if Xxxxxx,
any Maveron Entity or any Forstmann Little Entity is a Major Shareholder, all
shares of capital stock of the Company held by their respective affiliated
investment funds shall be aggregated together.
3.2. Preparation and Approval of Budgets. The Company covenants and
agrees that at least 15 days prior to the beginning of each fiscal year of the
Company, the Company shall prepare and submit to its Board of Directors, for its
review and approval, an annual plan for such year, which shall include monthly
capital and operating expense budgets, cash flow statements and profit and loss
projections itemized in such detail as the Board of Directors may reasonably
request. Each annual plan shall be modified as often as is necessary in
18
the judgment of the Board of Directors to reflect changes required as a result
of operating results and other events that occur, or may be reasonably expected
to occur, during the year covered by the annual plan, and copies of each such
modification shall be submitted to the Board of Directors. The Company will,
simultaneously with the submission thereof to the Board of Directors, deliver a
copy of each such annual plan and modification thereof to each Major
Shareholder.
3.3. Application of Proceeds. The Company covenants and agrees that,
unless otherwise approved by 66 2/3% of the shares of Class G Preferred, the net
proceeds received by the Company from the sale of the Class G Preferred Shares
and Class F Preferred Shares shall be used as set forth in Schedule 2 hereto.
The Company covenants and agrees that, pending use of the proceeds in the
business, they shall be invested in accordance with the Company's investment
policy. In addition, each Investor consents and agrees that the proceeds of the
sale of the Class G Preferred Shares or other funds of the Company may be used
in satisfaction of any obligation of the Company to any holder of shares arising
under the Minnesota Business Corporation Act, Sections 471 and 473, as a result
of the transactions contemplated by the Class G Purchase Agreement and related
amendments to the certificate of designation of the Class E Preferred.
4. MISCELLANEOUS.
4.1. Waivers and Amendments. With the written consent of the Company
and the record holders of a majority of the Conversion Shares, (i) the
obligations of the Company under this Agreement and the rights of the holders of
the Conversion Shares under this Agreement may be waived (either generally or in
a particular instance, either retroactively or prospectively, and either for a
specified period of time or indefinitely) or (ii) this Agreement may be amended,
changed, waived, discharged or terminated. Notwithstanding the foregoing, if any
amendment or waiver of any provision of this Agreement would uniquely affect any
Stockholder, then such amendment or waiver shall require a vote of the holders
of a majority of the Conversion Shares, and the Conversion Shares held by the
Stockholders that would be so affected. Neither this Agreement nor any
provisions hereof may be amended, changed, waived, discharged or terminated
orally, but only by a signed statement in writing.
4.2. Confidentiality. Each Stockholder agrees that it will keep
confidential and will not disclose or divulge any confidential, proprietary or
secret information about the Company or Capella University, Inc. (the "School")
that such Stockholder obtains from the Company or the School pursuant to this
Agreement (including the diligence in connection with, and negotiation of, this
Agreement) unless (a) such information is or becomes publicly available other
than as a result of a disclosure in breach of this Agreement by the Stockholder
or anyone to whom the Stockholder transmitted such confidential information, (b)
is or was known by the Stockholder on a non-confidential basis from a source
other than the Company or the School who is not known by the Stockholder to be
bound by a confidentiality agreement or other obligation of secrecy with respect
to such confidential information or (c) is or was available to the Stockholder
on a non-confidential basis prior to its disclosure to such Stockholder by the
Company or the School. Notwithstanding the foregoing, information that is
already in the public domain will not constitute confidential, proprietary or
secret information with respect to any Stockholder for purposes of this
Agreement. In addition, if, in the Stockholder's good faith
19
judgment, the Stockholder is requested or becomes legally compelled (by oral
questions, interrogatories, requests for information or documents, subpoena,
civil or criminal investigative demand or similar process), or must, in order to
defend against or assert a claim in connection with this Agreement or the
Transaction Documents (as defined in the Class E Purchase Agreement, the Class F
Purchase Agreement, the Class G Purchase Agreement and the Exchange Agreement),
disclose any confidential information, the Stockholder agrees to provide the
Company with prompt written notice so that the Company may seek, at its expense,
a protective order or other appropriate remedy and/or waive compliance with the
provisions of this Agreement and, in the event that such protective order or
other remedy is not timely obtained, or that the Company waives compliance with
the provisions of this Agreement, the Stockholder may, without liability under
this Section 4.2, furnish that portion of the confidential information which is,
in the Stockholder's good faith judgment, required for such purpose and will
exercise its best efforts, at the Company's expense, to obtain reliable
assurance that confidential treatment will be accorded the confidential
information. Notwithstanding the foregoing, the Maveron Entities may disclose to
their limited partners summary financial information and a narrative description
of the Company, provided that any such disclosing Maveron Entity instructs its
limited partners that the information is confidential and may not be shared with
any third party without the consent of the Maveron Entities and the Company. The
Maveron Entities further agree to confer with the Company in good faith
regarding the content of the Maveron Entities' updates to their limited partners
regarding the Company before such updates are mailed. Each Stockholder
acknowledges its responsibilities under federal and state securities laws with
respect to trading in securities while aware of material non-public information
obtained from the Company and with respect to providing such information to
other persons who purchase or sell securities of the Company. The provisions of
this Section 4.2 shall survive the termination of this Agreement and shall
terminate with respect to any Stockholder on the date which is two years after
the date on which such Stockholder no longer holds any shares of capital stock
of the Company.
4.3. Governing Law. This Agreement shall be governed in all respects
by the laws of the State of Minnesota, without regard to the conflict-of-laws
rules and principles of such state.
4.4. Waiver of Jury Trial. Each party irrevocably waives any and all
right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby.
4.5. Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects addressed herein.
4.6. Notices. All notices and other communications required or
permitted hereunder shall be effective upon receipt and shall be in writing and
may be delivered in person, by telecopy, electronic mail, overnight delivery
service, or U.S. mail (in which event it may be mailed by first-class, certified
or registered, postage prepaid), addressed (a) if to the Stockholders, at such
address as the Stockholders shall have furnished the Company in writing, or,
until any such holder so furnishes an address to the Company, then to and at the
address of the last holder of such securities who has so furnished an address to
the Company, (b) if to Xxxxxx,
20
at Xxxxxx Investment Management, Xxx Xxxx Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx
00000, attention Xxxxxxx XxXxx and Xxxxx Xxxxxxxx, or such other address as
Xxxxxx shall have furnished to the Company in writing, or (c) if to the Company,
at 000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000-0000, or at
such other address as the Company shall have furnished to the each Stockholder
in writing. Notwithstanding the foregoing, all notices and communications to
addresses outside the United States shall be given by telecopier and confirmed
in writing sent by overnight or two-day courier service.
4.7. Titles and Subtitles. The titles of the sections and paragraphs
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
4.8. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
4.9. Assignment. Subject to the limitations set forth in Section
1.13, Section 2.6 and Section 3, this Agreement will bind and inure to the
benefit of any subsequent holders of Shares or Conversion Shares (in which
event, and upon execution and delivery of this Agreement, a transferee shall be
deemed an Investor and/or Stockholder, as the case may be, for purposes of this
Agreement) and successors and assigns of the Company.
4.10. Effective Time. This Agreement shall become effective at the
time of Closing (as defined in the Class G Purchase Agreement).
4.11. Massachusetts Business Trusts. A copy of the Agreement and
Declaration of Trust of each Xxxxxx fund or series investment company (each, a
"Fund") that is a Massachusetts business trust is on file with the Secretary of
State of The Commonwealth of Massachusetts, and notice is hereby given that this
Agreement is executed on behalf of such Fund by the Trustees of the relevant
Fund as Trustees, and not individually, and that the obligations of this
Agreement are not binding upon any of the Trustees, officers or shareholders of
the Fund individually but are binding only upon the assets and property of such
Fund.
4.12. Class E Preferred and Class G Preferred Consent and Waiver.
The Prior Investors, as parties to the Prior Investor Rights Agreement, hereby
consent to the Company's offering, sale and issue of the Class G Preferred
Shares pursuant to the Class G Purchase Agreement and the Company's issuance of
shares of Class G Preferred in exchange for shares of Class F Preferred pursuant
to the Exchange Agreement. The Prior Investors do hereby waive any and all
rights to purchase Class G Preferred under section 2 of the Prior Investor
Rights Agreement in connection with the Company's offering, sale and issue of
the Class G Preferred Shares pursuant to the Class G Purchase Agreement and the
Company's issuance of shares of Class G Preferred in exchange for shares of
Class F Preferred pursuant to the Exchange Agreement. Equity-VI and SmartForce
plc do hereby acknowledge that the aggregate fair market value of the Class F
Preferred exchanged for the Class G Preferred in accordance with the Exchange
Agreement is $16,692,101.47 (the aggregate amount paid for the Class F Preferred
sold pursuant to the Class F Purchase Agreement) for purposes of calculating the
reduction in the
21
Class E Conversion Price (as defined in the Class E Convertible Preferred Stock
Certificate of Designation) pursuant to Section 6(c)(ii)of the Class E
Convertible Preferred Stock Certificate of Designation as a result of the sale
of the Class G Preferred under the Class G Purchase Agreement and the issuance
of the Class G Preferred under the Exchange Agreement.
4.13. Individual Retirement Accounts. Xxxxxx Xxxxxxx agrees, and
agrees to cause USB Xxxxx Xxxxxxx as Custodian FBO Xxxxxx Xxxxxxx XXX Account
#00000000 ("Xxxxxxx XXX") and any other party necessary, to perform all of the
obligations of Xxxxxxx XXX under this Agreement. Any notice given to Xxxxxxx XXX
under this Agreement shall also be given to Xxxxxx Xxxxxxx, c/o Capella
Education Company, 000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxxxxxx, Xxxxxxxxx
00000, telecopy: (000) 000-0000.
Xxxxxxx Xxxxx agrees, and agrees to cause USB Xxxxx Xxxxxxx as
Custodian FBO Xxxxxxx X. Xxxxx XXX Account #00000000 ("Xxxxx XXX") and any other
party necessary, to perform all of the obligations of Xxxxx XXX under this
Agreement. Any notice given to Xxxxx XXX under this Agreement shall also be
given to: Xxxxxxx Xxxxx, c/o Capella Education Company 000 Xxxxx Xxxxx Xxxxxx,
00xx Xxxxx, Xxxxxxxxxxx, XX 00000, telecopy: (000) 000-0000.
[The remainder of this page has been left blank intentionally.
Signature page follows.]
22
IN WITNESS WHEREOF, the parties have executed this Agreement
effective the date first above written.
COMPANY: CAPELLA EDUCATION COMPANY
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Its Chairman and CEO
INVESTORS: XXXXXX OTC AND EMERGING
GROWTH FUND
By Xxxxxx Investment Management, LLC
By: /s/
--------------------------------
Name:
Title:
XX XXX, XXXXXX XXXXXXXXXX XXXXX - XX XXX,
XXXXXX EMERGING OPPORTUNITIES PORTFOLIO
By TH Xxx, Xxxxxx Capital Management, LLC
By: /s/
--------------------------------
Name:
Title:
FORSTMANN LITTLE & CO. EQUITY
PARTNERSHIP-VI, L.P.
By: FLC XXXII Partnership, L.P.
its general partner
By: /s/
-------------------------------
A General Partner
23
FORSTMANN LITTLE & CO. EQUITY
PARTNERSHIP-VII, L.P.
By: FLC XXXII Partnership, L.P.
its general partner
By: /s/
--------------------------------
A General Partner
FORSTMANN LITTLE & CO. SUBORDINATED
DEPARTMENT AND EQUITY MANAGEMENT
BUYOUT PARTNERSHIP-VIII, L.P.
By: FLC XXXIII Partnership, L.P.
its general partner
By: /s/
--------------------------------
A General Partner
SMARTFORCE PLC
By: /s/
--------------------------------
Its: CFO
/s/ Xxxxxx Xxxxx
------------------------------------
XXXXXX XXXXX
/s/ Xxxxxxx Xxxxxxxx
------------------------------------
XXXXXXX XXXXXXXX
/s/ Xxxxxxx X. Xxxxx
------------------------------------
XXXXXXX X. XXXXX
/s/ Xxxxxxx X. Xxxxx
------------------------------------
XXXXXXX X. XXXXX
24
/s/ Xxxxxxxxx Xxxxxx
------------------------------------
XXXXXXXXX XXXXXX
/s/ Xxxxxxx Xxxxxxxx
------------------------------------
XXXXXXX XXXXXXXX
/s/ Xxxx Xxxxxxxxx
------------------------------------
XXXX XXXXXXXXX
/s/ Xxxxxx Xxxxxxx
------------------------------------
XXXXXX XXXXXXX
DRW VENTURE PARTNERS LP
By RBC XXXX XXXXXXXX CORP.
Its: General Partner
By: /s/ Xxxx Xxxxxx
--------------------------------
Xxxx Xxxxxx
Its: Director of Finance and
Administration,
RBC CMS
THINKEQUITY INVESTMENT
PARTNERS LLC
By: ThinkEquity Holdings LLC
Its: Manager
By: /s/ Xxxxx Xxxxx
--------------------------------
Name: Xxxxx Xxxxx
Its: Representative of the
Board of Managers
25
EXHIBIT 4.7
USB XXXXX XXXXXXX AS CUSTODIAN
FBO XXXXXXX X. XXXXX XXX
ACCOUNT #00000000
By: Xxxxxxx X. Xxxxx
--------------------------------
Xxxxxxx X. Xxxxx
Its: Managing Director
USB XXXXX XXXXXXX AS CUSTODIAN
FBO XXXXXX XXXXXXX XXX
ACCOUNT #00000000
By: Xxxxxxx X. Xxxxx
-------------------------------
Xxxxxxx X. Xxxxx
Its: Managing Director
MAVERON EQUITY PARTNERS 2000, L.P.
By: MAVERON GENERAL PARTNER 2000 LLC
By: /s/ Xxx Xxxxxxx
--------------------------------
Xxx Xxxxxxx
Its: Manager
MAVERON EQUITY PARTNERS 2000-B, L.P.
By: MAVERON GENERAL PARTNER 2000 LLC
By: /s/ Xxx Xxxxxxx
--------------------------------
Xxx Xxxxxxx
Its: Manager
MEP 2000 ASSOCIATES LLC
By: /s/ Xxx Xxxxxxx
--------------------------------
Xxx Xxxxxxx
Its: Manager
/c/ Xxxxx Xxxxx
------------------------------------
XXXXX XXXXX
26
SCHEDULE 1
INVESTORS
Forstmann Little & Co. Equity Partnership-VI, X.X.
Xxxxxxxxx Little & Co. Equity Partnership - VII, X.X.
Xxxxxxxxx Little & Co. Subordinated Debt and Equity Management Buyout
Partnership-VIII, X.X.
Xxxxxx OTC and Emerging Growth Fund
TH XXX, Xxxxxx Investment Trust - TH XXX, Xxxxxx Emerging
Opportunities Portfolio
SmartForce PLC
Xxxxxx Xxxxx
Xxxxxxx Xxxxxxxx
Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxx
Xxxxxxxxx Xxxxxx
Xxxxxxx Xxxxxxxx
Xxxx Xxxxxxxxx
USB Xxxxx Xxxxxxx as Custodian FBO Xxxxxx Xxxxxxx XXX Account
#36086299
USB Xxxxx Xxxxxxx as Custodian FBO Xxxxxxx X. Xxxxx XXX Account
#82694368
ThinkEquity Investment Partners LLC
DRW Venture Partners LP
Maveron Equity Partners 2000, L.P.
Maveron Equity Partners 2000-B, L.P.
MEP 2000 Associates LLC
Xxxxx Xxxxx
SCHEDULE 2
USE OF PROCEEDS
Business development and general corporate purposes $24,292,089.89
