EX-4.2 5 dex42.htm SECURITY HOLDERS AGREEMENT SECURITY HOLDERS AGREEMENT
Exhibit 4.2
This Security Holders Agreement (as amended, restated and modified from time to time, this “Agreement”), dated as of November 28, 2008, is by and among (i) Skullcandy, Inc., a Delaware corporation (the “Company”), (ii) the holders of Common Stock, Series A Preferred Stock and Series B Preferred Stock identified on Exhibit A attached hereto (the “Prior Stockholders”), (iii) ▇▇▇▇▇ Skullcandy Holdings LLC, a Delaware limited liability company (“▇▇▇▇▇”), and (iv) any other Person that from time to time becomes party to this Agreement by execution of a Joinder Agreement in substantially the form attached hereto as Exhibit B (a “Joinder Agreement”). Capitalized terms used in this Agreement have the meanings ascribed to them in Article I.
A. The Company and certain of the Non-Investor Security Holders are parties to the (i) Skullcandy, Inc. Amended and Restated Investor Rights Agreement, dated December 21, 2007 (the “Rights Agreement”), (ii) Skullcandy, Inc. Amended and Restated Voting Agreement, dated December 21, 2007 (the “Voting Agreement”), (iii) Skullcandy, Inc. Amended and Restated Right of First Refusal and Co-Sale Agreement, dated December 21, 2007 (the “ROFR Agreement”), (iv) Skullcandy, Inc. Series A Preferred Stock Purchase Agreement, dated January 15, 2006 (the “Series A SPA”) (v) Skullcandy, Inc. Series B Preferred Stock Purchase Agreement, dated as of December 21, 2007 (the “Series B SPA”), and (vi) Skullcandy Common Stock Purchase Agreement, dated September 18, 2007 (the “CSPA” and, together with the Rights Agreement, Voting Agreement, ROFR Agreement, Series A SPA, Series B SPA and CSPA, the “Original Agreements”).
B. On the date hereof, the Investor is being issued a convertible promissory note in the original principal amount of $29,823,926.46 (the “Convertible Note”) and 1,358 shares of Series C Preferred Stock pursuant to the Securities Purchase and Redemption Agreement, dated as of the date hereof, by and among the Company, the Investor and certain of the Non-Investor Security Holders (the “Purchase Agreement”).
C. The Prior Stockholders are the record and beneficial owners of an aggregate of 1,290,062 shares of Common Stock, 331,379 shares of Series A Preferred Stock and 68,517 shares of Series B Preferred Stock.
D. As of the date hereof, the Company has outstanding Warrants to purchase an aggregate of 5,000 shares of Common Stock and Options exercisable for an aggregate of 152,549 shares of Common Stock.
E. Immediately following the consummation of the transactions contemplated by the Purchase Agreement, the principal amount outstanding under the Convertible Notes and the face amount of the Series C Preferred Stock held by the Investor will be convertible into shares of Common Stock of the Company equal to approximately
12.5265% of the Securities on a Fully Diluted Basis as of the time immediately prior to the Initial Closing of the Purchase Agreement.
F. Immediately following the Redemption Closing, the principal amount outstanding under the Convertible Notes and the face amount of the Series C Preferred Stock held by the Investor will be convertible into shares of Common Stock of the Company equal to approximately 16.7138% of the Securities on a Fully Diluted Basis as of the time immediately prior to the Initial Closing of the Purchase Agreement.
G. After the date hereof, the Company may grant additional Options to purchase up to an aggregate of 184,751 shares of Common Stock, which shares would constitute 10% of the Securities, on a Fully Diluted Basis, which future grants will dilute the Securities of the Investors and Non-Investor Security Holders, including the potential interest of the Investors upon conversion of the Convertible Notes and the Series C Preferred Stock. In the event any Subsequent Closing occurs, the number of Options to purchase additional shares of Common Stock will increase provided that the total number of shares underlying such Options will not exceed 10% of the Securities, on a Fully Diluted Basis as of such Subsequent Closing.
H. The execution and delivery of this Agreement is a condition precedent to the closing of the transactions contemplated by the Purchase Agreement.
I. The Company and the Security Holders desire to amend, restate and replace the Original Agreements and thereby maintain certain restrictions and obligations on the ownership, retention and disposition of the Securities pursuant to the terms and conditions of this Agreement.
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or other subdivision of this Agreement. Without prejudice to any party’s rights and remedies for breach of a provision hereunder, this Agreement will not be interpreted or construed to require any Person to take any action, or fail to take any action, that would violate any applicable Law. All Exhibits and Schedules hereto will be deemed part of this Agreement and included in any reference to this Agreement.
“Affiliate” of a Person means any Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such first Person. The term “Affiliate” will also include any Person who is related by blood, adoption or marriage to the specified Person. The term “control” (including, with correlative meaning, the terms “controlled by” and “under common control with”) as used with respect to any Person means the possession, directly or indirectly, of the power to direct, or cause the direction of, the management and policies of the such Person, whether through the ownership of voting securities, by contract or otherwise.
“Approved Underwriter” means any nationally-recognized investment banking firm the Board determines in good faith to have experience in acting as a managing underwriter for issuers similarly situated as the Company.
“Arbitration Firm” means a nationally recognized accounting firm that is mutually agreeable to the Investor and the Representative Holders.
“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 New York, New York are authorized or required by Law to close.
“Bylaws” means the Amended and Restated Bylaws of the Company in effect as of the date hereof.
“Charter” means the Amended and Restated Certificate of Incorporation of the Company in effect as of the date hereof, as the same may be amended, restated and modified from time to time.
“Closing Date” means the date on which the consummation of the transactions contemplated by the Purchase Agreement occurs.
“Common Stock” means Common Stock, par value $0.0001 per share, of the Company, and any other common equity Securities now or hereafter authorized by the Board and issued pursuant to the Charter.
“Company Sale” means (a) the acquisition of the Company by another entity (other than the Investor or any of its members or its or their members, partners or
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shareholders) by means of any transaction or series of related transactions (including any acquisition of capital stock of the Company or Options or Warrants of the Company, reorganization, merger or consolidation, but excluding (x) any issuance and sale by the Company, in one transaction or a series of related transactions, of its capital stock or Options or Warrants having less than a majority of the total voting power represented by the outstanding voting securities of the Company or (y) any issuance and sale by the Company of its capital stock or Options or Warrants of the Company for capital raising purposes, provided that in connection with either clause (x) or (y) above no proceeds are distributed to security holders of the Company or are used to repurchase or redeem any securities of the Company in connection with such transaction or within 12 months thereafter) after the consummation of which the holders of the voting securities of the Company outstanding immediately prior to such transaction or series of related transactions own, directly or indirectly, less than a majority of the total voting power represented by the outstanding voting securities of the Company or such other surviving or resulting entity (or if the Company or such other surviving or resulting entity is a wholly owned subsidiary immediately following such acquisition, its parent) immediately after such transaction or series of related transactions; (b) a sale, lease or other disposition of all or more than 50% of the assets of the Company and its subsidiaries taken as a whole by means of any transaction or series of related transactions, except where such sale, lease or other disposition is to a wholly owned subsidiary of the Company; or (c) any liquidation, dissolution or winding up of the Company whether voluntary or involuntary.
“Confidential Information” shall have the meaning set forth in Section 8.3.
“Diluted Pro Rata Allotment” means, with respect to any Security Holder or the Investors, the ratio that the number of Securities (x) (i) then held by such Security Holder and (ii) in the case of the Investors, that may be acquired upon conversion of the Convertible Notes and the Series C Preferred Stock, bears to (y) the total number of Securities then held by all Security Holders and the Investors plus the number of shares into which the Convertible Notes and the Series C Preferred Stock are then convertible.
“EBITDA” means, for any period, (a) the consolidated net income (loss) of the Borrower and its consolidated Subsidiaries as reflected in the financial statements of the Borrower for such period, determined in accordance with GAAP (calculated treating Fiftyseven North as an unaffiliated third-party customer for the full 2008 calendar year, regardless of whether Fiftyseven North is acquired during the 2008 calendar year)), (b) plus, to the extent deducted in computing such net income, without duplication and in each case determined in accordance with GAAP, the sum of (i) interest expenses for money borrowed plus the cost of any fees for letters of credit issued, (ii) federal and state taxes based upon or measured against net income (but not ad valorem, sales, withholding, franchise or other taxes), (iii) depreciation and amortization of any intangible assets for the relevant period (but not the write-off of any intangible asset to the extent required by GAAP due to impairment of such asset), (iv) management, advisory and other similar fees actually paid to ▇▇▇▇▇ Partners LLC in the relevant period, and any other amounts payable pursuant to that certain Advisory Agreement
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dated as of the date of this Note by and between the Borrower and ▇▇▇▇▇ Partners LLC, (v) professional fees and expenses incurred in connection with the proposed acquisition of Fiftyseven North; (vi) the fees and expenses incurred in connection with the negotiation or consummation of the transactions contemplated by the Agreement (including non-cash compensation expenses incurred as a result of the transactions contemplated by the Agreement) and the debt financing contemplated thereby; and (vii) non-cash compensation expenses (not related to the transactions contemplated by the Agreement) arising out of the grant of stock awards to employees of the Borrower or any Subsidiary, (b) minus (but only to the extent added in computing such net income), without duplication and in each case determined in accordance with GAAP, the sum of (i) any extraordinary, unusual or non-recurring gains (including gains on sales of assets), (ii) any other amounts approved by the Board (which approval includes the vote or written consent of at least one Investor Director), and (iii) any interest or investment income (except to the extent applied to reduce interest expense under Clause (b)(i) of this definition).
“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations issued thereunder.
“Fiftyseven North” means Fiftyseven North AB, a Swedish company.
“Filing Date” means (a) with respect to any Registration Statement to be filed on Form S-1 (or any equivalent successor form), 45 days after receipt by the Company of a Demand Notice for such Registration Statement and (b) with respect to any Registration Statement to be filed on Form S-3 (or any equivalent successor form), 30 days after receipt by the Company of a Demand Notice for such Registration Statement.
“Fully Diluted Basis” means, with reference to a percentage of capital stock, the number of outstanding shares of such capital stock, plus the number of such shares issuable upon exercise of rights to acquire capital stock (whether any such right is exercisable immediately or only with the passage of time) pursuant to any arrangement or understanding or the exercise of conversion rights, exchange rights, other rights, Warrants, Options (including Options held by employees of the Company) or otherwise.
“GAAP” means United States generally accepted accounting principles in effect from time to time, applied on a consistent basis.
“Governmental Authority” means any government or political subdivision or regulatory authority, whether federal, state, local or foreign, or any agency or instrumentality of any such government or political subdivision or regulatory authority, or any federal state, local or foreign court or arbitrator.
“Indebtedness” means, without duplication, any liability (a) of the Company or any Subsidiary (i) for borrowed money (including the current portion thereof) whether short-term or long-term and whether secured or unsecured, (ii) under any reimbursement obligation relating to a letter of credit, bankers’ acceptance, note purchase facility or upon which interest charges are customarily paid, (iii) evidenced by
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a bond, note, debenture or similar instrument (including a purchase money obligation), (iv) for the payment of money relating to a lease that is required to be classified as a capitalized lease obligation in accordance with GAAP, (v) under conditional sale or title retention agreements relating to property or assets purchased by the Company or any Subsidiary, (vi) for all or any part of the deferred purchase price of property or services, including non-compete payments, all seller notes and “earn out” payments, (vii) pursuant to any contract to purchase, redeem, retire, defease or otherwise acquire for value any capital stock of the Company or any Subsidiary (other than pursuant to the Purchase Agreement), (viii) that in accordance with GAAP is required to be reflected as debt on the balance sheet of the Company or any Subsidiary, or (ix) for any unsatisfied obligation for “withdrawal liability” to a “multiemployer” plan as such terms are defined under the Employee Retirement and Security Act of 1974, as amended, and (b) of others described in the preceding clause (a) that the Company or any Subsidiary has guaranteed, directly or indirectly, that is recourse to the Company or any Subsidiary or any of their respective assets or that is otherwise their legal liability or that is secured in whole or in part by the assets of the Company or any Subsidiary whether or not the obligations secured thereby have been assumed. For purposes of this Agreement, Indebtedness will include any and all accrued interest, success fees, prepayment premiums, make-whole premiums or penalties and fees and expenses (including attorneys’ fees) associated with the prepayment of any Indebtedness and any renewals, extension, refundings, deferrals, restructurings, amendments and modifications of any such Indebtedness. Indebtedness will not, however, include accounts payable to trade creditors and accrued expenses arising in the ordinary course of business consistent with past practice and will not include the endorsement of negotiable instruments for collection in the ordinary course of business.
“Investors” shall mean ▇▇▇▇▇, until such time as ▇▇▇▇▇ has transferred or distributed its interests in the Convertible Notes and Series C Preferred Stock issued pursuant to the Purchase Agreement, and shall thereafter mean any holders of such securities originally issued to ▇▇▇▇▇ pursuant to the Purchase Agreement, along with each of their Affiliates and any other Person subsequently designated as an Investor by execution and delivery of a Joinder Agreement.
“Law” means any law, statute, code, ordinance, rule, regulation or other requirement of any Governmental Authority, including the common law.
“Lien” means any mortgage, pledge, lien, security interest or other charge or encumbrance.
“Major Security Holder” means the Investors and the Non-Investor Security Holders who or which, at the time in question, hold at least 30,000 shares of Common Stock issued or issuable upon conversion of Preferred Stock or Convertible Notes (as may be adjusted from time to time for stock splits, stock dividends, combinations, subdivisions, recapitalizations and the like). In the event of a distribution of Securities or Convertible Notes by an Investor or Non-Investor Security Holder to its owners, all shares held (or issuable pursuant to conversion of Convertible Notes) by such Security
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Holders and its owners will be aggregated for purposes of determining whether each of them will be treated as a Major Security Holder hereunder.
“Majority Investors” shall mean Investors holding in aggregate more than 50% of the outstanding shares of Common Stock issued or issuable pursuant to the Convertible Notes and Series C Preferred Stock issued pursuant to the Purchase Agreement, provided that in the event that Investors are requesting a registration of Registrable Securities under Article V on a Form S-3, and if such form is available to the Company at the time of such request, “Majority Investors” shall mean holders of at least 20% of the outstanding shares of Common Stock issued or issuable pursuant to the Convertible Notes and Series C Preferred Stock issued pursuant to the Purchase Agreement.
“Mercato” means Mercato Partners, L.P., a Delaware limited partnership, Mercato Partners QP, L.P., a Delaware limited partnership, and Gazelle Investments, LLC, a Utah limited liability company.
“Non-Investor Security Holders” means the Security Holders other than the Investors.
“Options” means options to purchase Common Stock outstanding as of the date of this Agreement or granted after the date hereof.
“Person” means an individual, corporation, association, joint venture, partnership, limited liability company, estate, trust, unincorporated organization and any other entity or organization, governmental or otherwise.
“Preferred Stock” means the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock and any other class or series of preferred stock hereinafter authorized by the Board and issued pursuant to the Charter.
“Preferred Stockholders” means the holders of Preferred Stock.
“Pro Rata Allotment” means, with respect to any Security Holder, the ratio that the number of Securities then held by such Security Holder bears to the total number of Securities then held by all Security Holders.
“Prospectus” means the prospectus included in any Registration Statement (including a prospectus that discloses information previously omitted from a prospectus filed as part of an effective Registration Statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and all other amendments and supplements to such prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such prospectus.
“Ptarmigan” means Ptarmigan LLC, a Utah limited liability company.
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“Public Offering” means any sale of shares of Common Stock to the public pursuant to a public offering registered (other than a registration effected solely to implement an employee benefit plan or a transaction to which Rule 145 or any other similar rule of the SEC under the Securities Act is applicable) under the Securities Act and underwritten by an Approved Underwriter.
“Qualified IPO” means the Company’s first Public Offering of Common Stock underwritten by an Approved Underwriter that is effected pursuant to a Registration Statement filed with, and declared effective by, the SEC under the Securities Act which results in net cash proceeds to the Company or any Security Holder of at least $50 million.
“Registrable Securities” means (a) shares of Common Stock now or hereafter issued and (b) shares of Common Stock issued or issuable upon conversion or exercise of the Convertible Notes and the Preferred Stock; provided, however, that any such Security will cease to be a “Registrable Security” when it is (i) effectively registered under the Securities Act and disposed of in accordance with the Registration Statement covering it or (ii) with respect to any Security Holder, such date, on or after the closing of the Company’s first registered public offering of Common Stock, on which all Registrable Securities held or entitled to be held upon conversion of Securities held by such Security Holder may immediately be sold under Rule 144 during any ninety (90)-day period.
“Registration Expenses” means (a) registration and filing fees, (b) fees and expenses of compliance with state securities or “blue sky” Laws (including fees and disbursements of counsel for the Approved Underwriters or selling holders in connection with “blue sky” qualifications of the Registrable Securities and determination of the eligibility of the Registrable Securities for investment under the Laws of such jurisdictions as the managing Approved Underwriters, if any, or holders of a majority of the Registrable Securities being sold may designate), (c) printing expenses (including printing of Prospectuses if requested by the holders of a majority of the Registrable Securities included in any Registration Statement), (d) messenger, telephone and delivery expenses, (e) fees and expenses of counsel for the Company, (f) fees and expenses of one counsel for the sellers of the Registrable Securities, (g) fees and expenses of all independent certified public accountants for the Company, (h) Securities Act liability insurance if the Company so desires such insurance, (i) rating agency fees, (j) fees and expenses of listing the Registrable Securities, if any, and (k) fees and expenses of all other Persons retained by the Company (other than Approved Underwriters’ fees and expenses); provided, however, that Registration Expenses will not include underwriting discounts and commissions relating to the offer and sale of Registrable Securities, which will be borne by the selling holders of Registrable Securities in proportion to the number of Securities being sold.
“Registration Statement” means any registration statement under the Securities Act that covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the related Prospectus, all amendments and supplements to such registration statement (including post-effective amendments), all exhibits and all
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material incorporated by reference or deemed to be incorporated by reference in such registration statement.
“Representative Holders” means holders of at least 50% of the Common Stock issued or issuable upon conversion of the outstanding Series A Preferred Stock and Series B Preferred Stock, taken together as a whole, provided that in the event that such holders are requesting a registration of Registrable Securities under Article V on a Form S-3, and if such form is available to the Company at the time of such request, “Representative Holders” shall mean holders of at least 20% of the Common Stock issued or issuable upon conversion of the outstanding Series A Preferred Stock and Series B Preferred Stock, taken together as a whole.
“Representative A&B Holders” means holders of Common Stock issued or issuable upon conversion of the outstanding Series A Preferred Stock and Series B Preferred Stock.
“Required Period” means (a) with respect to a shelf registration, the earlier to occur of (i) the date on which there ceases to be any Registrable Securities outstanding pursuant to such Registration Statement and (ii) the date which is two years after the date on which such Registration Statement was declared effective and (b) with respect to a Demand Registration, the earlier to occur of (i) the date on which all Registrable Securities covered by such Demand Registration are sold pursuant thereto and (ii) 180 days following the first day of effectiveness of the Registration Statement for such Demand Registration, in each case, subject to extension as set forth herein; provided, however, that in no event will the Required Period expire prior to the expiration of the applicable period referred to in Section 4(3) of the Securities Act and Rule 174 promulgated thereunder.
“Restricted Security Holder” shall mean Security Holders other than (i) Investors and (ii) holders of Series A Preferred Stock and Series B Preferred Stock that are not employees of the Company as of the date hereof but only with respect to the Series A Preferred Stock and Series B Preferred Stock held by such holders.
“SEC” means United States Securities and Exchange Commission.
“Securities” means, at any time, any shares of capital stock of the Company, including Common Stock and Preferred Stock now or hereafter issued by the Company, together with any Options or Warrants thereon and any other shares of capital stock directly or indirectly issued or issuable with respect thereto, whether by way of a stock dividend, stock split or other similar transaction or in exchange for or upon conversion of such shares or otherwise in connection with a combination of shares, recapitalization, merger, consolidation or other corporate reorganization, and any instrument convertible into or exercisable or exchangeable for (in each case, directly or indirectly) shares of capital stock of the Company, together with any shares of capital stock issued or issuable with respect thereto.
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“Securities Act” means the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations issued thereunder.
“Security Holders” means the Prior Stockholders, Convertible Note holders, holders of Preferred Stock, holders of Common Stock, holders of Options and holders of Warrants that have executed this Agreement or transferees from a party to this Agreement that agree in writing to be bound to the terms hereof.
“Senior Credit Facility” shall mean the Business Loan Agreement (Asset Based), dated as of August 29, 2008, by and between the Company and Zions First National Bank, as such may be amended, amended and restated, supplemented, extended, refinanced, renewed, replaced or otherwise modified from time to time.
“Series A Preferred Stock” means Series A Preferred Stock, par value $0.0001 per share, of the Company, with the rights, preferences and privileges set forth in the Charter.
“Series B Preferred Stock” means Series B Preferred Stock, par value $0.0001 per share, of the Company, with the rights, preferences and privileges set forth in the Charter.
“Series C Preferred Stock” means Series C Preferred Stock, par value $0.0001 per share, of the Company, with the rights, preferences and privileges set forth in the Charter.
“Special Representative Holders” means Mercato, Ptarmigan and ▇▇▇▇▇▇ ▇▇▇▇▇▇ and any Permitted Transferee of any of the foregoing.
“Stock Option Plan” means the Skullcandy, Inc. Amended and Restated 2008 Stock Plan, as the same may hereafter be amended, restated or modified from time to time or any other stock option plan in effect from time to time.
“Subsidiary” means, with respect to any Person, a corporation, partnership, limited liability company or other entity of which such Person owns, directly or indirectly, such number of outstanding shares or other equity interests as to have more than 50% of the ordinary voting power for the election of directors or other managers of such corporation, partnership, limited liability company or other entity. Unless the context indicates otherwise, each reference to a Subsidiary or Subsidiaries herein will be a reference to a Subsidiary or the Subsidiaries of the Company.
“Transfer” means any direct or indirect offer, transfer, donation, sale, assignment, conveyance, encumbrance, mortgage, gift, pledge, hypothecation, grant of a security interest in or other disposal or attempted disposal of all or any portion of a security or of any rights connected thereto or interests therein, with or without consideration, whether voluntary or involuntary, including any Transfer by operation of Law, by court order, by judicial process or by foreclosure, levy or attachment. “Transferred” means the accomplishment of a Transfer, and “Transferee” means the recipient of a Transfer.
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“Trigger Factor” means a number equal to the following: (i) if the aggregate investment in Convertible Notes and Series C Preferred Stock issued under the Purchase Agreement is equal to or greater than $85,000,000, then the Trigger Factor shall be 1.0, (ii) if the aggregate investment in Convertible Notes and Series C Preferred Stock issued under the Purchase Agreement is less than $85,000,000, then the Trigger Factor shall be 0.75 plus (a) the product of 0.25 times the quotient of (X) the amount by which the aggregate investment in Convertible Notes and Series C Preferred Stock issued under the Purchase Agreement exceeds $30,000,000, divided by (Y) $55,000,000.
“Trigger Threshold” means the Trigger Factor multiplied by the EBITDA calculation as finally determined pursuant to the terms of this Agreement for the four consecutive calendar quarters ended December 31, 2008.
“Warrants” means warrants to purchase Common Stock outstanding as of the date of this Agreement or issued after the date hereof.
II. REPRESENTATIONS AND WARRANTIES
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the Company, or require the Company to obtain any approval, consent or waiver of, or to make any filing with, any Person that has not been obtained or made and (ii) does not and will not result in a breach of, constitute a default under, accelerate any obligation under or give rise to a right of termination of any indenture or loan or credit agreement or any other agreement, contract, instrument, mortgage, lease, permit, authorization, order, writ, judgment, injunction, decree, determination or arbitration award to which the Company is a party or by which the Company is governed, or by which the property of the Company is bound or affected, or result in the creation or imposition of any Lien on any of the assets or properties of the Company.
III. RESTRICTIONS ON TRANSFER; RIGHT OF FIRST OFFER/REFUSAL;
TAG-ALONG RIGHTS; DRAG-ALONG RIGHTS
3.1. Restrictions on Transfer.
(a) Prior to the earlier of (i) the consummation of a Qualified IPO and (ii) the fourth anniversary of the Closing (such earlier date, the “Transfer Restriction Termination Date”), each Restricted Security Holder agrees that it will not Transfer all or any portion of the Securities now owned or hereafter acquired by such Restricted Security Holder, except in the case of Permitted Transferees set forth below.
Any Person described in the following clauses (i), (ii) or (iii) will be referred to herein as a “Permitted Transferee.”
(i) Transfers by any Restricted Security Holder who is a natural person to (i) the spouse, children or other lineal descendants of such Restricted Security Holder, (ii) any entity controlled by such Restricted Security Holder and/or such Restricted Security Holder’s lineal descendants (for so long as it remains as such), (iii) such Restricted Security Holder’s heirs, executors or administrators or to a trust or other legal entity under such Restricted Security Holder’s will or other estate planning documents upon the death of a Restricted Security Holder or to such Restricted Security Holder’s guardian or conservator upon the permanent disability of a Restricted Security Holder, (iv) a trust or other vehicle of which the transferor is and is required to remain the sole trustee or other Person having the right to vote or control the vote and to control the disposition of the Securities to which the Transfer relates, (v) any other Person with the prior written consent of the Board (which will include the consent of at least one Investor Director), which consent may be withheld, conditioned or delayed in its sole discretion, and (vi) any Transfers not falling within the prior categories (i) through (v) that, when taken together with all other Transfers made by such Restricted Security Holder, do not exceed 10% of the Securities (on an as-exercised and as-converted to Common Stock basis) held by such Transferring Restricted Security Holder as of the date of this Agreement, after taking into account the Redemption Closing (as defined in the Purchase Agreement) if the Redemption Closing occurs;
(ii) Transfers by any Restricted Security Holder that is an entity to (i) any of its Affiliates, (ii) any of its partners or members to the extent such Restricted Security Holder is a partnership or limited liability company, (iii) any other Person with
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the prior written consent of the Board (which will include the consent of at least one Investor Director), which consent may be withheld, conditioned or delayed in its sole discretion, and (vi) any Transfers not falling within the prior categories (i) through (iii) that, when taken together with all other Transfers made by such Restricted Security Holder, do not exceed 10% of the Securities (on an as-exercised and as-converted to Common Stock basis) held by such Transferring Restricted Security Holder as of the date of this Agreement, after taking into account the Redemption Closing (as defined in the Purchase Agreement) if the Redemption Closing occurs; and
(iii) Transfers effected pursuant to Sections 3.3 and 3.4 and Article V, in each case, in accordance with the procedures set forth therein.
(b) Notwithstanding anything to the contrary in this Agreement, any Permitted Transferee or other transferee of Securities or all or a portion of the Convertible Notes (and the spouse of any such transferee if the transferee is residing in a community property jurisdiction) shall have entered into a Joinder Agreement such that all such Securities or Convertible Notes so Transferred will continue to be subject to all provisions of this Agreement as if such Securities or Convertible Notes were still held by the Transferring Security Holder (as a Non-Investor Security Holder, Restricted Security Holder and/or Investor, as applicable). The Company will not be required to (i) transfer on its books any Securities or Convertible Notes that have been sold, gifted or otherwise Transferred in violation of any provisions of the previous sentence or (ii) to treat as owner of such Securities or Convertible Notes, or accord the right to vote or pay interest or dividends (or otherwise afford the rights of such Securities or Convertible Notes) to any purchaser, donee or other transferee to whom such Securities or Convertible Notes may have been so Transferred
(c) Notwithstanding anything to the contrary in this Agreement,
(i) ▇▇▇▇ ▇▇▇▇▇ shall not be subject to the restriction set forth in 3.1(a) but shall otherwise be deemed to be a “Restricted Security Holder” for purposes of the remainder of this Agreement and the interpretation of other provisions herein (including, for the avoidance of doubt, determining Permitted Transferees with respect to ▇▇▇▇ ▇▇▇▇▇), provided that, for purposes of Section 3.3, the “Transfer Restriction Termination Date” shall be deemed to have occurred on the date of this Agreement; and
(ii) For Non-Investor Security Holders not bound by the terms of Section 3.1(a) (which includes, for the avoidance of doubt, holders of Series A Preferred Stock and Series B Preferred Stock that are not employees of the Company as of the date hereof, but only with respect to the Series A Preferred Stock and Series B Perferred Stock held by such holders), the provisions above related to “Permitted Transferees” of a “Restricted Security Holder” shall apply to such Non-Investor Security Holders for purposes of the remainder of this Agreement (and such Non-Investor Security Holders shall be deemed to be “Restricted Security Holders” only for the purpose of interpretation of the determining Permitted Transferees for such Non-Investor Security Holders), provided that, the provisions of Section 3.3 of this
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Agreement shall apply to transfers by such Non-Investor Security Holders as if the “Transfer Restriction Termination Date” occurred on the date of this Agreement.
(d) Notwithstanding anything to the contrary in this Agreement, Non-Investor Security Holders shall not be permitted to transfer any Securities to competitors or potential competitors of the Company, as determined in the reasonable and good faith discretion of the Board.
(e) Notwithstanding anything to the contrary in this Agreement, holders of Series A Preferred Stock and Series B Preferred Stock that are not employees of the Company as of the date hereof shall be entitled to make share Transfers free and clear of the restrictions on such Transfers set forth in Sections 3.1(a) hereof if the shares so Transferred are shares of Common Stock issued in connection with the conversion of shares of Series A Preferred Stock or Series B Preferred Stock held by such Security Holder.
3.2. Right of First Offer/Right of First Refusal.
(i) Notwithstanding any other provision of this Section 3.2(a), if the Investor accepts an Offer pursuant to Section 3.2(a), but the Company, Mercato, Alden or ▇▇▇▇▇▇, as applicable, has not entered into definitive documentation with the Investor with respect to a Transfer within 30 days after the date of the Decision Notice, the Investor will nonetheless be entitled to Transfer the Sale Securities referenced in the Sale Notice to the Third Party, provided that the Investor will then be obligated to comply with the requirements of Section 3.3 of this Agreement.
(ii) Notwithstanding any other provision of this Section 3.2(a), neither the Company, Mercato, Alden nor ▇▇▇▇▇▇ will have any right to a Sale Notice or to provide an Offer pursuant to this Section 3.2(a) with respect to any Transfer by the
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Investor (i) to any of its Affiliates (provided that such Person has entered into a Joinder Agreement), (ii) to any of its partners or members (provided that such Person has entered into a Joinder Agreement) or (iii) pursuant to Article V.
(b) Right of First Refusal on Transfers by Certain Non-Investor Security Holders.
(A) “Eligible Investor Purchasers” means the Investors.
(B) “Eligible Non-Investor Purchasers” means Non-Investor Security Holders who or which, at the time in question, hold at least 30,000 shares of Common Stock issued or issuable upon conversion of Preferred Stock (as may be adjusted from time to time for stock splits, stock dividends, combinations, subdivisions, recapitalizations and the like). In the event of a distribution of Securities by a Non-Investor Security Holder to its owners, all shares held by such Security Holders and its owners will be aggregated for purposes of determining whether each of them will be treated as an Eligible Non-Investor Purchaser hereunder.
(C) “Seller” means a Non-Investor Security Holder holding Series A Preferred Stock or Series B Preferred Stock, Alden or Ptarmagin.
(D) “Seller Shares” means all shares of the capital stock of the Company owned as of the date hereof or hereafter acquired by any of the Sellers (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations and the like); provided that shares of Common Stock issued or issuable upon conversion of Preferred Stock or acquired pursuant to this Section 3.2(b) shall not be deemed Seller Shares.
(iii) Initial Exercise by the Eligible Non-Investor Purchasers
(A) For a period of twenty (20) days (the “Initial Exercise Period”) after the last date on which the Transfer Notice is, pursuant to Section 10.4
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hereof, deemed to have been delivered to the Company, all Eligible Non-Investor Purchasers and all Eligible Investor Purchasers, each of the Eligible Non-Investor Purchasers shall have the right to purchase in the aggregate all or any part of the ROFR Shares on the terms and conditions set forth in this Section 3.2(b)(iii). To the extent the aggregate number of shares that the Eligible Non-Investor Purchasers desire to purchase (as evidenced in the written notices delivered to Seller) exceeds the ROFR Shares, each Eligible Non-Investor Purchaser so exercising will be entitled to purchase its pro rata share of the ROFR Shares, which shall be that number of the ROFR Shares equal to the product obtained by multiplying (x) the number of ROFR Shares by (y) a fraction, (i) the numerator of which shall be the number of shares of Common Stock (assuming conversion of all Securities into Common Stock) held by such Eligible Non-Investor Purchaser on the date of the Transfer Notice and (ii) the denominator of which shall be the number of shares of Common Stock (assuming conversion of all Securities into Common Stock) held on the date of the Transfer Notice by all Eligible Non-Investor Purchasers exercising their Rights of First Refusal (“Pro Rata ROFR Share”). In order to exercise their rights hereunder, such Eligible Non-Investor Purchasers must deliver written notice to Seller within the Initial Exercise Period.
(B) The Eligible Non-Investor Purchasers shall be deemed to have made their election with respect to the ROFR Shares upon the earlier to occur of (a) the expiration of the Initial Exercise Period (at which time any Eligible Non-Investor Purchasers who have not delivered written confirmation to Sellers shall be deemed not to have exercised their respective Rights of First Refusal) or (b) the time when Seller has received written confirmation from all the Eligible Non-Investor Purchasers regarding their exercise of their respective Rights of First Refusal.
(C) Within five (5) days after the expiration of the Initial Exercise Period, Seller will give written notice to the Company and each Eligible Non-Investor Purchasers specifying the number of ROFR Shares to be purchased by each Eligible Non-Investor Purchasers exercising its Right of First Refusal (the “ROFR Confirmation Notice”). The Company shall, at the time the Confirmation Notice is sent to the Eligible Non-Investor Purchasers, send to the Eligible Investor Purchasers a Remaining Shares Notice (the “Remaining Shares Notice”) specifying the number of ROFR Shares not purchased by the Eligible Non-Investor Purchasers, if any, pursuant to Section 3.2(b)(iii)(A) hereof (the “Remaining Shares”).
(iv) Subsequent Exercise by the Eligible Investor Purchasers. For a period of twenty (20) days (the “Second Exercise Period”) after the last date on which the Remaining Shares Notice is, pursuant to Section 10.4 hereof, deemed to have been delivered to the Company, all Eligible Investor Purchasers, each of the Eligible Investor Purchasers shall have the right to purchase in the aggregate all or any part of the Remaining Shares on the terms and conditions set forth in this Section 3.2(b)(iv). To the extent the aggregate number of shares that the Eligible Investor Purchasers desire to purchase (as evidenced in the written notices delivered to Seller) exceeds the Remaining Shares, each Eligible Investor Purchaser so exercising will be entitled to purchase its pro rata share of the Remaining Shares, which shall be
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that number of the Remaining Shares equal to the product obtained by multiplying (x) the number of Remaining Shares by (y) a fraction, (i) the numerator of which shall be the number of shares of Common Stock (assuming conversion of all Securities and Convertible Notes into Common Stock) held by such Eligible Investor Purchaser on the date of the Transfer Notice and (ii) the denominator of which shall be the number of shares of Common Stock (assuming conversion of all Securities and Convertible Notes into Common Stock) held on the date of the Transfer Notice by all Eligible Investor Purchasers exercising their Rights of First Refusal (“Pro Rata Remaining Share”). In order to exercise their rights hereunder, such Eligible Investor Purchasers must deliver written notice to Seller within the Second Exercise Period.
(i) The Eligible Investor Purchasers shall be deemed to have made their election with respect to the Remaining Shares upon the earlier to occur of (a) the expiration of the Second Exercise Period (at which time any Eligible Investor Purchasers who have not delivered written confirmation to Sellers shall be deemed not to have exercised their respective Rights of First Refusal) or (b) the time when Seller has received written confirmation from all the Eligible Investor Purchasers regarding their exercise of their respective Rights of First Refusal.
(ii) Within five (5) days after the expiration of the Second Exercise Period, Seller will give written notice to the Company and each Eligible Investor Purchasers specifying the number of Remaining Shares to be purchased by each Eligible Investor Purchasers exercising its Right of First Refusal (the “Remaining Confirmation Notice”).
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purchase price will be made, at the option of the party exercising its Right of First Refusal, (i) in cash (by check), (ii) by wire transfer or (iii) by cancellation of all or a portion of any outstanding indebtedness of Seller to the Eligible Investor Purchaser or Eligible Non-Investor Purchaser, or (iv) by any combination of the foregoing. At each such Right of First Refusal Closing, Seller shall deliver to each of the Eligible Investor Purchasers and Eligible Non-Investor Purchasers exercising their Rights of First Refusal, one or more certificates, properly endorsed for transfer, representing such ROFR Shares or Remaining Shares so purchased.
(a) Prior to the consummation of a Qualified IPO, and after having complied with the provisions of Section 3.2 with respect to any proposed Transfer, if (i) an Investor proposes to Transfer Securities (which, for purposes of this Section 3.3 only, will include the Common Stock issuable upon the conversion of the Convertible Notes as if the Convertible Notes had been converted) to a Person that is not a Security Holder or an Affiliate thereof, or (ii) following the Transfer Restriction Termination Date, any Non-Investor Security Holder receives a bona fide offer to purchase all or a portion of the Securities held by such Non-Investor Security Holder (each, a “Transaction Offer”) from a Person who is not a Permitted Transferee of such Security Holder (the “Offeror”), such Security Holder (a “Transferring Security Holder”) may Transfer such Securities pursuant to the provisions of this Section 3.3. If any Transferring Security Holder proposes to Transfer (other than pursuant to Article V or to a Permitted Transferee) any of its Securities pursuant to a Transaction Offer from an Offeror, such Transferring Security Holder will cause the Transaction Offer to be reduced to writing and will notify the Company and each Major Security Holder (collectively, the “Eligible Security Holders”) of such Transferring Security Holder’s desire to accept the Transaction Offer and otherwise comply with the provisions of this Section 3.3 not later than 20 days prior to the proposed date of such Transfer (such notice, the “Offer Notice”). The Offer Notice will be accompanied by a true copy of the Transaction Offer which will identify the Offeror, the number of Securities proposed to be purchased, the proposed consideration and all other material terms and conditions of such Transaction Offer. For purposes of this Section 3.3, the consideration offered by the Offeror will be deemed to include any escrow, holdback, earnout or other contingent payment, and any amount allocated to or payable under non-competition agreements to be entered into in connection with the consummation of the Transaction Offer, and any amount allocated to or payable under employment agreements with any such Transferring Security
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Holder to be entered into in connection with the consummation of the Transaction Offer in excess of 110% of the amount allocated to or payable under any employment agreements with any such Transferring Security Holder in existence as of the date of the Transaction Offer. If the Transaction Offer price consists in whole or in part of consideration other than cash (including any rights, fees or payments for services that may be offered to the Transferring Security Holder or its Affiliates by the Offeror or its Affiliates in connection with such Transaction Offer, to the extent such rights, fees or payments exceed the higher of 110% of (i) the fair value of such services and (ii) the usual and customary fee charged by the Transferring Security Holder or its Affiliates for such services), the Transferring Security Holder will provide such information, to the extent reasonably available to the Transferring Security Holder, relating to such consideration as the Company or any Eligible Security Holder may reasonably request in order to evaluate such non-cash consideration.
(b) Each Eligible Security Holder will have the right, exercisable as set forth below, to participate in the Transaction Offer for up to the number of Securities determined pursuant to Section 3.3(d). The Eligible Security Holders electing to participate in the Transaction Offer will, within 14 days after receipt of the Offer Notice from the Transferring Security Holder, provide the Transferring Security Holder with an irrevocable written notice specifying the number and type of Securities such Eligible Security Holder agrees to Transfer on the terms and conditions set forth in the Transaction Offer (the “Acceptance Notice”), not to exceed the number as contemplated above, and will simultaneously provide a copy of such notice to the Company. If an Eligible Security Holder does not deliver an Acceptance Notice within 14 days following receipt of the Offer Notice from the Transferring Security Holder, such Eligible Security Holder will, except as set forth in Section 3.3(f), be deemed to have waived any and all rights under this Section 3.3 with respect to the Transfer of Securities pursuant to such Transaction Offer. An Eligible Security Holder electing to participate in the Transaction Offer will, to the extent the Securities consist of Convertible Notes, acquire a corresponding number of shares of Series C Preferred Stock such that the Company’s right pursuant to Section 9.4 would not be applicable.
(c) If an Eligible Security Holder delivers an Acceptance Notice, at least seven days prior to the proposed date of any Transfer described in the Offer Notice, the Transferring Security Holder will notify such Eligible Security Holder of the proposed date of such Transfer. Not less than two Business Days prior to such proposed date, the participating Eligible Security Holder will deliver to the Company in escrow, or a third-party escrow agent mutually agreed upon by the Transferring Security Holder and the participating Eligible Security Holders (the costs of which escrow agent will be borne by the Transferring Security Holder and the participating Eligible Security Holders in proportion to the number of Securities Transferred by each such Security Holder in connection with such Transaction Offer), the duly endorsed certificate(s) (or notice to the Company that such certificate(s) have been lost, stolen or destroyed, along with an executed agreement reasonably acceptable in form and substance to the Company to indemnify the Company from any loss incurred by the Company in connection with such certificate(s)) or other instruments representing the Securities to
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be Transferred by such Eligible Security Holder and all other documents reasonably required to be executed in connection with such Transaction Offer.
(d) The Eligible Security Holders will have the right to Transfer, pursuant to the Transaction Offer (and the Transferring Security Holder will, to the extent necessary, reduce the number of Securities to be sold by the Transferring Security Holder by a corresponding amount) a number of Securities equal to the product of the total number of Securities offered to be purchased as set forth in such Transaction Offer multiplied by a fraction, the numerator of which is the aggregate number of Securities that such Eligible Security Holder holds (or, in the case of the Investors as an Eligible Security Holders, the number of Securities that any such Investor holds and may acquire upon conversion of the Convertible Notes and the Series C Preferred Stock) and the denominator of which is the aggregate number of such Securities deemed held by the Transferring Security Holder and all Eligible Security Holders (including the number of Securities issuable upon conversion of the Convertible Notes and the Series C Preferred Stock).
(e) The Transferring Security Holder will use its reasonable best efforts to notify the Eligible Security Holders in advance of any negotiations with the Offeror with respect to representations, warranties and indemnities to be made in connection with the Transaction Offer if the Eligible Security Holders will be required to sign any agreement containing such representations, warranties and indemnities and the Eligible Security Holders participating in such Transaction Offer will enter into agreements with the Offeror containing terms and conditions relating to the Transaction Offer that are the same as the terms and conditions applicable to the Transferring Security Holder in connection with the Transaction Offer and in accordance with the terms of the proposed Transaction as set forth in the Offer Notice; provided, however, that in no event will any Eligible Security Holder be required in connection with a Transfer pursuant to this Section 3.3 to make any representations and warranties in connection therewith other than representations and warranties with respect to the due authorization, execution and delivery of any agreement entered into in connection with such Transfer, its authority to enter into such agreement and consummate the transactions contemplated thereby without the consent or approval of any other Person, title to the Securities to be Transferred pursuant to such Transfer, and the absence of any Liens or other limitation or restriction on such Securities (including any restriction on the right to vote, sell or otherwise dispose of such Securities) or the Transfer thereof.
(f) The Transferring Security Holder will have 90 days from its mailing of the Offer Notice to the Eligible Security Holders in which to consummate the Transfer of Securities contemplated by the Transaction Offer at the prices and on the terms contained in such Offer Notice. If, at the end of such 90 day period, the Transferring Security Holder has not completed such Transfer, the right of the Transferring Security Holder to effect such Transfer will terminate (if the Transferring Security Holder is otherwise subject to restrictions on Transfer pursuant to this Agreement), and the Securities of such Transferring Security Holder subject to such proposed Transfer will again be subject to all the restrictions on sale or other disposition and other provisions
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contained in this Agreement and the certificates or instruments therefor will be returned to the appropriate Eligible Security Holder by the Company or the escrow agent, as appropriate.
(g) If an Eligible Security Holder has accepted the Transaction Offer, immediately after the consummation of the Transfer of Securities pursuant to the Transaction Offer, the Company or the escrow agent, as appropriate, will notify such Eligible Security Holder thereof and will remit to such Eligible Security Holder the total sales price attributable to the Securities of such Eligible Security Holder sold pursuant to the Transaction Offer available for distribution less such Eligible Security Holder’s pro rata portion of the expenses incurred in connection with such sale as calculated pursuant to Section 3.5. Thereafter, each Eligible Security Holder will receive such remaining proceeds in the same proportions and at the same time as the Transferring Security Holder.
(h) Notwithstanding anything to the contrary contained in this Section 3.3, there will be no liability on the part of any Transferring Security Holder to any other Security Holder if the Transfer of Securities pursuant to this Section 3.3 is not consummated for any reason. If any Eligible Security Holder fails to close any transaction after it accepted the Transaction Offer then, without limiting any other rights or obligations of the parties hereto, such Eligible Security Holder will no longer have any rights (but will be subject to all limitations and obligations) under this Section 3.3.
(a) Prior to the consummation of a Qualified IPO, if the Board (including the vote of at least one Investor Director) desires to accept a bona fide written offer (a “Purchase Offer”) from any Person or group of related Persons (other than an Affiliate of any Security Holder) (the “Acquirer”) to effect a Company Sale, then the Company will have the right (the “Drag-Along Right”), exercisable as set forth below, to require all Security Holders of the Company to vote or execute a written consent in favor of, and execute such other documents as may apply to all Security Holders, the sale of all of the Securities then held by each such Security Holder on the same terms and conditions as are set forth in the Purchase Offer and to sell their Securities pursuant to such Purchase Offer. For the avoidance of doubt, nothing herein will limit the rights of the Majority Investors pursuant to Article VII.
(b) If the Company (after action of the Board in accordance with Section 3.4(a)) elects to exercise its Drag-Along Right pursuant to this Section 3.4, the Company will deliver written notice of the Purchase Offer to each Security Holder of the Company, setting forth the identity of the Acquirer offering to purchase, the per share consideration and the estimated date of the closing of the Purchase Offer, as well as a copy of all documents providing for such transaction. It is understood and agreed that the proposed purchase price and proposed terms and conditions of any Purchase Offer may change in the course of negotiations and the Company will use reasonable efforts to keep the Security Holders apprised of such changes. For purposes of this Section 3.4, the consideration offered by the Acquirer will be deemed to include any escrow,
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holdback, earnout or other contingent payment, and any amount allocated to or payable under non-competition agreements to be entered into in connection with the consummation of the Purchase Offer, and any amount allocated to or payable under employment agreements with any Security Holder or Affiliate thereof to be entered into in connection with the consummation of the Purchase Offer in excess of 110% of the amount allocated to or payable under any employment agreements with any such Security Holder in existence as of the date of the Purchase Offer. If the Purchase Offer consists in whole or in part of consideration other than cash, the Company will provide such information, to the extent reasonably available to the Company, relating to such consideration as any Security Holder may reasonably request in order to evaluate such non-cash consideration, as well as information with regard to representations, warranties and indemnities to be made in connection with the Purchase Offer if the Security Holders will be required to sign any agreement containing such representations, warranties or indemnities. The Security Holders participating in such Purchase Offer will enter into agreements with the Acquirer containing terms and conditions relating to the Purchase Offer that are the same as the terms and conditions applicable to each other Security Holder in connection with the Purchase Offer and in accordance with the terms of the proposed transaction as set for in the notice with respect to such Purchase Offer; provided, however, that in no event will any Security Holder be required in connection with a Company Sale pursuant to this Section 3.4 to make any representations and warranties in connection therewith other than representations and warranties with respect to the due authorization, execution and delivery of any agreement entered into in connection with such Company Sale, its authority to enter into such agreement and consummate the transactions contemplated thereby without the consent or approval of any other Person, title to the Securities to be Transferred pursuant to such Company Sale and the absence of any Liens or other limitation or restriction on such Securities (including any restriction on the right to vote, sell or otherwise dispose of such Securities) or the Transfer thereof, although in connection with any such Purchase Offer a portion of the purchase price may be placed in escrow to serve as the sole source of indemnification with respect to other representations, warranties, covenants and indemnitees so long as each Security Holder bears only its Pro Rata Allotment thereof.
(c) Each Security Holder will deliver to the Company in escrow not less than five Business Days before the proposed date of the consummation of the Purchase Offer, the duly endorsed certificate(s) (or notice to the Company that such certificate(s) have been lost, stolen or destroyed, along with an executed agreement reasonably acceptable in form and substance to the Company to indemnify the Company from any loss incurred by the Company in connection with such certificate(s)) or other instruments representing the Securities owned by such Security Holder and sold pursuant to the Purchase Offer. If any Security Holder fails to deliver such certificate(s) or instruments (or the notice as described above) to the Company, the Company will cause the books and records of the Company to show that such Securities are subject to the provisions of this Section 3.4 and may be Transferred only to the Acquirer upon payment of the purchase price without interest and upon surrender of such certificate(s) or instruments (or the notice described above) for Transfer by such Security Holder to
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the Company. In addition, each Security Holder will, if requested by the Company, execute and deliver such instruments of conveyance and transfer and take such other action, including voting such Security Holder’s applicable Securities (or executing a written consent with respect to such Securities) in favor of consummation of the Purchase Offer, waiving all appraisal rights available to such Security Holder under applicable Law, and executing any purchase agreements, merger agreements, indemnity agreements, escrow agreements or related documents, as the Company or the Acquirer may reasonably require in order to carry out the terms and provisions of this Section 3.4.
(d) Within ten Business Days after the giving of the notice contemplated by Section 3.4(b), the Company will notify the Security Holders of the date set for the consummation of the Transfer of Securities contemplated by the Purchase Offer to the Acquirer (the “Drag-Along Closing Date”). The Drag-Along Closing Date will occur as promptly as practicable after the date the Company gives notice thereof. On the Drag-Along Closing Date, in addition to any other terms of Transfer provided in the notice contemplated by Section 3.4(b), the Company will deliver, to the extent received pursuant to Section 3.4(c), on behalf of each Security Holder, to the Acquirer (i) the certificates representing the shares of Securities to be Transferred which, upon delivery to the Acquirer, will vest in the Acquirer good and valid title to the shares to be Transferred, free and clear of all Liens, except those created by this Security Holders Agreement and (ii) stock powers duly endorsed, against delivery by the Acquirer of all of the consideration, net of all expenses allocated pro rata amongst the Security Holders, to be received by each such Security Holder. Upon notice of the consummation of the Transfers to the Acquirer, the Secretary of the Company will also cause such Transfers to be reflected on the books of the Company. Promptly after completion of a Company Sale pursuant to this Section 3.4, the Company will notify the Security Holders of such completion and will remit to each such Security Holder the total sales price attributable to the Securities of such Security Holder sold pursuant to the Purchase Offer available for distribution pursuant to Section 3.5, less such Security Holder’s pro rata portion of the expenses incurred in connection with such Company Sale.
3.5. Provisions Applicable to Tag-Along/Drag-Along Rights.
(a) Proceeds from any sale pursuant to 3.3 or 3.4 will be distributed in accordance with Article V, Section 3 of the Charter.
(b) The provisions of Sections 3.3 or 3.4 will apply to any Transfer for value to any Acquirer, including by way of merger, consolidation, recapitalization or other sale transaction.
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initio. The Company and the other parties hereto will have, in addition to any other legal or equitable remedies which they may have, the right to enforce the provisions of this Agreement by actions for specific performance to the extent permitted by Law, and the Company will have the right to refuse to recognize any Transferee as one of its security holders for any purpose. Without limiting the foregoing, each Security Holder further agrees that the provisions of Section 9.7 will apply in the event of any violation or threatened violation of this Agreement.
The provisions of this Article IV will terminate immediately prior to the consummation of a Qualified IPO and will not apply with respect to any Qualified IPO.
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days following the termination of the above referenced 30 day period, but only on the terms and conditions set forth in the initial offer. The Company will not offer, sell or issue any New Securities after such 120 day period or on terms and conditions other than those set forth in the original offer notice without renewed compliance with this Section 4.1.
4.3. A Preferred Stockholder shall be entitled to apportion its rights under this Article IV among the Preferred Stockholder and its partners and Affiliates in such proportions as it reasonably deems appropriate.
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V. REGISTRATION RIGHTS AND PROCEDURES
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making the Demand Request will be permitted to withdraw Registrable Securities from a Registration at any time prior to the third business day prior to the anticipated effective date of such Registration; provided, however, that such Demand Registration will be deemed a Demand Registration for purposes of this Section 5.1(a).
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(the “Maximum Offering Size”), the Company will include in such registration, in the following priority, up to the Maximum Offering Size:
(i) first, all Registrable Securities requested to be included in such registration by any Representative Holder and the Investors (allocated, if necessary, for the offering not to exceed the Maximum Offering Size, pro rata among such Representative Holders and the Investors on the basis of their relative ownership, which, for the Investors shall take into account any Securities issuable upon conversion of the Convertible Notes and the Series C Preferred Stock held by an Investor); and
(ii) second, if, in connection with a Demand Registration, the Company also proposes to register Securities, so much of such Securities proposed to be registered by the Company as would not cause the Public Offering to exceed the Maximum Offering Size.
(a) If the Company proposes to register any of its Securities under the Securities Act in order to effect a Public Offering, whether or not for sale for its own account, it will, each such time, give prompt written notice at least 15 Business Days prior to the anticipated filing date of the Registration Statement relating to such registration to each Representative A&B Holder and the Investors, which notice will set forth the Representative A&B Holders’ and the Investors’ rights under this Section 5.2 and will, subject to the provisions of Section 5.2(b), offer such Representative A&B Holders and the Investors the opportunity to include in such Registration Statement such number of Registrable Securities as each such Representative A&B Holder or the Investor may request (a “Piggy-Back Registration”). Subject to the foregoing, upon the written request of any Representative A&B Holders or the Investor made within 15 Business Days after the receipt of notice from the Company (which request will specify the number of Registrable Securities intended to be disposed of by such Representative A&B Holder or the Investor and the intended method of disposition thereof), the Company will use its reasonable best efforts to effect the registration under the Securities Act of all Registrable Securities which the Company has been so requested
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to register by such Representative A&B Holder or the Investor to the extent required to permit the disposition of the Registrable Securities so to be registered; provided, however, that (i) if such registration involves an underwritten Public Offering, all such Representative A&B Holders and Investors requesting to be included in the Company’s registration must sell their Registrable Securities to the Approved Underwriter on substantially the same terms and conditions as apply to the Company and (ii) if, at any time after giving written notice of its intention to register any Registrable Securities pursuant to this Section 5.2(a) and prior to the effective date of the Registration Statement filed in connection with such registration, the Company determines for any reason not to register such Registrable Securities, the Company will give written notice to all such Representative A&B Holders and Investors, as applicable, and, thereupon, will be relieved of its obligation to register any Registrable Securities in connection with such registration (without prejudice, however, to rights of the Investors under Section 5.1). No registration effected under this Section 5.2 will relieve the Company of its obligations to effect a Demand Registration to the extent required by Section 5.1. The Company will pay all Registration Expenses in connection with each registration of Registrable Securities requested pursuant to this Section 5.2. Each Representative A&B Holder and Investor or group thereof will be responsible on a pro rata basis (based on the number of shares of Registrable Securities of such entity or individual registered pursuant to a Piggy-Back Registration) for the payment of any discounts and/or commissions resulting from the engagement by such Representative A&B Holder or Investor of underwriters or placement agents in connection with resales of Registrable Securities subject to any registration pursuant to this Section 5.2.
(b) If a registration pursuant to this Section 5.2 involves an underwritten Public Offering and the managing Approved Underwriter advises the Company that, in its view, the number of shares of Registrable Securities that the Company and the Representative A&B Holders and Investors intend to include in such registration exceeds the Maximum Offering Size, the Company will include in such registration, in the following priority, up to the Maximum Offering Size:
(i) first, so much of the Securities proposed to be registered by the Company as would not cause the offering to exceed the Maximum Offering Size; and
(ii) second, all Registrable Securities requested to be included in such registration by the Representative A&B Holders and Investors pursuant to this Section 5.2 (allocated, if necessary, for the offering not to exceed the Maximum Offering Size, pro rata among the Representative A&B Holders and Investors on the basis of their relative ownership, which, for the Investors shall take into account the number of Securities issuable upon conversion of the Convertible Notes and the Series C Preferred Stock held by any such Investor).
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the applicable registration) during the 180 day period following the effective date of a Qualified IPO, provided that all officers and directors of the Company and all holders of at least 1% of the Company’s outstanding Securities are bound by and have entered into similar agreements. The obligations described in this Section 5.3 will not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a transaction on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions and may stamp each certificate of Common Stock (or other applicable Securities) with an appropriate legend subject to the foregoing restriction until the end of such 180 day period. Each Security Holder agrees that the 180 day period referenced above (or such shorter period to which the Company and the Approved Underwriter may agree, the “IPO Lockup Period”) may be extended by the Company or the managing Approved Underwriter for a period not to exceed 18 days from the issuance of an earnings release or the occurrence of material news or a material event if either (i) during the last 17 days of the IPO Lockup Period, the Company issues an earnings release or material news or a material event occurs relating to the Company, or (ii) prior to the expiration of the IPO Lockup Period, the Company announces it will release earnings results or becomes aware that material news or a material event will occur within the 16 day period beginning on the last day of the IPO Lockup Period. Each Security Holder agrees to execute a market standoff agreement with the Qualified IPO underwriters in customary form consistent with the provisions of this Section 5.3 and the restrictions contained in National Association of Securities Dealers Rule 2711(f)(4) or New York Stock Exchange Rule 472(f)(4), or any successor provisions or amendments thereto, provided that all officers and directors of the Company and all holders of at least 1% of the Company’s outstanding Securities are bound by and have entered into similar agreements.
(a) The Company will as expeditiously as possible prepare and file with the SEC a Registration Statement on any form for which the Company then qualifies and which counsel for the Company deems appropriate and available for the sale of the Registrable Securities to be registered thereunder in accordance with the intended method of distribution thereof, and use its commercially reasonable efforts to cause such filed Registration Statement to become and remain effective for the period specified herein.
(b) The Company will prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement continuously effective for the applicable period specified herein; cause the related Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or
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any similar provisions then in force) under the Securities Act; and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended methods of disposition by the sellers thereof set forth in such Registration Statement as so amended or to such Prospectus as so supplemented.
(c) The Company will, prior to filing such Registration Statement or any amendment or supplement thereto, furnish to the Registering Security Holder and each applicable managing Approved Underwriter, if any, copies thereof, and thereafter furnish to the Registering Security Holder and each such Approved Underwriter, if any, such number of copies of such Registration Statement, amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference therein) and the Prospectus included in such Registration Statement (including each preliminary Prospectus) as the Registering Security Holder or each such Approved Underwriter may reasonably request in order to facilitate the sale of the Registrable Securities.
(d) After the filing of the Registration Statement, the Company will promptly notify the Registering Security Holder of any stop order issued suspending the effectiveness of the Registration Statement or, to the Company’s knowledge, threatened to be issued by the SEC and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered.
(e) The Company will endeavor to qualify the Registrable Securities for offer and sale under such other securities or blue sky Laws of such jurisdictions in the United States as the Registering Security Holder or managing Approved Underwriter reasonably requests; provided, however, that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 5.4(e), (ii) subject itself to taxation in any such jurisdiction, or (iii) consent to general service of process in any such jurisdiction.
(f) The Company will as promptly as is practicable notify the Registering Security Holder at any time (and if requested by any such Person confirm such notice in writing), (i) when a Prospectus relating to the sale of the Registrable Securities is required by Law to be delivered in connection with sales by an Approved Underwriter or dealer, (ii) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has been declared or becomes effective, (iii) of the occurrence of any event requiring the preparation of a supplement or amendment to such Prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such Prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and promptly make available to the Registering Security Holder and to the Approved Underwriters any such supplement or amendment, (iv) if the representations and warranties of the Company contained in any agreement contemplated by Section 5.4(h) hereof (including any underwriting agreement) cease to
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be true and correct, (v) of any request by the SEC or any other Governmental Authority for amendments or supplements to a Registration Statement or related Prospectus or for additional information, (vi) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose and (vii) of the Company’s determination that a post-effective amendment to a Registration Statement would be appropriate. The Registering Security Holder agrees that, upon receipt of any notice from the Company of the occurrence of any event of the kind described in the preceding sentence, the Registering Security Holder will, if directed by the Company in such notice, forthwith discontinue the offer and sale of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until receipt by the Registering Security Holder and the Approved Underwriters of the copies of such supplemented or amended Prospectus and, if so directed by the Company, the Registering Security Holder will deliver to the Company all copies, other than permanent file copies then in the Registering Security Holder’s possession, of the most recent Prospectus covering such Registrable Securities at the time of receipt of such notice. In the event the Company gives such notice, the Company will extend the period during which such Registration Statement will be deemed effective as contemplated by Section 5.4(a) by the number of days during the period from and including the date of the giving of such notice to the date when the Company will make available to the Registering Security Holder such supplemented or amended Prospectus.
(g) The Company will use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement, or the lifting of any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest possible moment.
(h) The Company will enter into customary agreements (including an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the sale of such Registrable Securities.
(i) The Company will, upon the reasonable request of the Registering Security Holder and the managing Approved Underwriter, use its reasonable best efforts to cause to be furnished to the Registering Security Holder and to each Approved Underwriter a signed counterpart, addressed to the Registering Security Holder or such Approved Underwriter, of (i) an opinion or opinions of counsel to the Company and (ii) a comfort letter or comfort letters (and updates thereof) from the Company’s independent public accountants, each in customary form and covering such matters of the type customarily covered by opinions or comfort letters, as the case may be, as the Registering Security Holder or the managing Approved Underwriter may reasonably request.
(j) The Company will make generally available to its Security Holders an earnings statement satisfying the provisions of Section 11(a) of the Securities Act and the rules and regulations of the SEC thereunder applicable thereto.
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(k) The Company will use commercially reasonable efforts to cause all such Registrable Securities to be listed on each securities exchange on which similar Securities issued by the Company are then listed or, if not so listed, on a national securities exchange or quoted on any national quotation system.
(l) Each Security Holder who is an officer, director or employee of the Company will use reasonable best efforts to take all actions, including making himself or herself available to participate and, if requested by the Board (or its designee), participating in any roadshow or other investor presentation, necessary to expedite or facilitate the sale of such Registrable Securities.
5.5. Indemnification by the Company.
(a) The Company will indemnify and hold harmless each Registering Security Holder, its officers, directors, agents, Affiliates, brokers and employees, and each Person, if any, who “controls” each such Registering Security Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages, liabilities and expenses (including Registration Expenses) arising out of or based on (i) any untrue statement or alleged untrue statement of a material fact contained in or incorporated by reference into any Registration Statement or Prospectus relating to the Registrable Securities (as amended or supplemented if the Company will have furnished any amendments or supplements thereto) or any preliminary Prospectus, 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, in light of the circumstances under which they were made, not misleading, or (iii) any violation by the Company of the Securities Act, the Exchange Act, any state securities Law or any rule or regulation promulgated under any of the foregoing and relating to any action or inaction required of the Company in connection with any such registration, qualification or compliance, except insofar as such losses, claims, damages, liabilities or expenses are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information furnished in writing to the Company by or on behalf of such Registering Security Holder expressly for use therein; provided, however, that the foregoing indemnity agreement with respect to any preliminary Prospectus will not inure to the benefit of any Registering Security Holder if a copy of the current Prospectus was not provided to the applicable purchaser by such Registering Security Holder and such current copy of the Prospectus would have cured the defect giving rise to such loss, claim, damage or liability. The Company will also indemnify any Approved Underwriters of the Registrable Securities, their officers, directors, agents, Affiliates, brokers and employees, and each Person who controls such Approved Underwriters on substantially the same basis as that of the indemnification of the Registering Security Holder provided in this Section 5.5.
(b) The rights of any holder of Registrable Securities hereunder will not be exclusive of the rights of any holder of Registrable Securities under any other agreement or instrument of any holder of Registrable Securities to which the Company is a party. Nothing in such other agreement or instrument will be interpreted as limiting or otherwise adversely affecting a holder of Registrable Securities hereunder and
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nothing in this Agreement will be interpreted as limiting or otherwise adversely affecting the holder of Registrable Securities’ rights under any such other agreement or instrument; provided, however, that no indemnified party will be entitled hereunder to recover more than its indemnified losses.
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expenses of such counsel will be paid by the indemnifying party. It is understood that the indemnifying party will not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) at any time for all such indemnified parties, and that all such fees and expenses will be reimbursed as they are incurred. In the case of the retention of any such separate firm for the indemnified parties, such firm will be designated in writing by the indemnified parties. The indemnifying party will not be liable for any settlement of any proceeding effected without its consent, but if settled with such consent, or if there be a final judgment for the plaintiff, the indemnifying party will indemnify and hold harmless such indemnified parties from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment.
(a) If the indemnification provided for herein is for any reason unavailable to the indemnified parties in respect of any losses, claims, damages or liabilities referred to herein, then each such indemnifying party, in lieu of indemnifying such indemnified party, will contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect the relative fault of the Company, the Security Holders and any Approved Underwriter in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Company, the Registering Security Holders and the Approved Underwriter will 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 such Person, and such Person’s relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
(b) The Company and each Registering Security Holder agree that it would not be just and equitable if contribution pursuant to this Section 5.8 were determined by pro rata allocation (even if the Approved Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in Section 5.8(a). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities referred to in Section 5.8(a) will be deemed to include, subject to the limitations set forth below, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 5.8, no Registering Security Holder will be required to contribute any amount in excess of the net proceeds from such offering received by such Security Holder from such registration. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act but without regard to the limitation of the application of Section 11(f) to the persons specified in Section 11(a)) will be entitled to contribution from any Person who was not found guilty of such fraudulent misrepresentation.
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(c) The parties agree that any definitive agreement relating to the sale of Registrable Securities registered pursuant to Section 5.1 or 5.2 will contain other customary limitations on the obligations of the parties thereto to contribute as contemplated by this Section 5.8.
VI. ELECTION OF DIRECTORS; PROTECTIVE PROVISIONS
(a) At each election of directors, the Investors, voting as a separate class, is entitled to elect two individuals (each, an “Investor Director”) nominated by the Majority Investors, which Investor Directors will initially be ▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇., provided that at such time the aggregate investment in Convertible Notes and Series C Preferred Stock issued under the Purchase Agreement is equal or greater than $85,000,000 in aggregate, the number of Investor Directors shall be increased to
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three (and increase the number of Authorized Directors by one), which additional Investor Director will initially be ▇▇▇▇▇ ▇▇▇▇▇▇;
(b) At each election of directors in which the holders of Common Stock, voting as a separate class, are entitled to elect directors of the Company, the Prior Stockholders will elect two individuals (each, a “Non-Investor Common Director”) nominated by a majority in interest of the Securities held by the Non-Investor Security Holders, which Non-Investor Directors will initially be Alden and ▇▇▇▇ ▇▇▇▇▇;
(c) At each election of director in which the holders of Series A Preferred Stock and Series B Preferred Stock, voting as a separate class on a as-converted basis, are entitled to elect directors of the Company, and for so long as Mercato holds at least 10,000 shares (subject to adjustment for stock splits and combinations) of Common Stock (or securities convertible into Common Stock), then holders of Series A Preferred Stock and Series B Preferred Stock will elect a director nominated by Mercato (the “Non-Investor Preferred Director”) who will initially be ▇▇▇▇ ▇▇▇▇▇▇▇; and
(d) One Person who is an outside industry executive (the “Independent Director”) designated jointly by (i) the Majority Investors and (ii) a majority in interest of the Securities held by the Non-Investor Security Holders, which Independent Director position will not, until the designation of the initial Independent Director, be included in the Authorized Directors. In the event the Majority Investors and the holders of a majority in interest of the Securities held by Non-Investor Security Holders are unable to mutually select the Independent Director within 30 days following the Closing, the Company will engage either ▇▇▇▇▇▇▇▇ and Struggles or ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ to identify three qualified candidates for consideration. The Majority Investors and the holders of a majority in interest of the Securities held by the Non-Investor Security Holders will use their reasonable best efforts to select one of the three candidates to serve as the Independent Director within 30 days following the identification of the three qualified candidates. Upon the designation of the individual to serve as the initial Independent Director, the number of Authorized Directors shall be increased by one and such individual shall be appointed or elected to serve as the Independent Director in such newly created Authorized Director position. Unless otherwise removed in accordance with Section 6.3, the members of the Board will hold office until their respective successors have been duly appointed. For the avoidance of doubt, the Independent Director may be removed and replaced by the joint vote of (1) the Majority Investors and (2) a majority in interest of the Securities held by the Non-Investor Security Holders.
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long as Mercato holds at least 10,000 of Series B Preferred Stock (or shares of Common Stock issued upon conversion of the Series B Preferred Stock held by Mercato), Mercato will have the right to have one individual present at all meetings of the Board (each, a “Board Observer” and collectively, the “Board Observers”). The Board Observers will be (a) given notice by the Secretary of the Company of any meeting of the Board or any committee thereof at the same time as the directors, (b) entitled to be present at all meetings of the Board or any committee thereof, (c) provided copies of all minutes of Board meetings and Board committee meetings, and (d) provided copies of any reports, minutes or other documents distributed to the Board or any committee thereof at the time such materials are given to the Board; provided, however, that before any Confidential Information is distributed to any Board Observer pursuant to this Section 6.2, such Board Observer must execute a customary confidentiality agreement. If the Board or any committee thereof determines in good faith that exclusion of a Board Observer from any meeting, or the withholding of any information or materials from a Board Observer, is reasonably necessary in order to (i) avoid a conflict of interest between the Company or any Subsidiary, on one hand, and the Board Observer, on the other hand, (ii) preserve trade secrets or other confidential or proprietary information of the Company or any Subsidiary, or (iii) preserve the attorney-client privilege of the Company or any Subsidiary, then the Company will have the right to exclude the Board Observer only from those portions of any such meeting, or withhold only those portions of information or materials from a Board Observer, that is reasonably necessary to protect the Company’s or Subsidiary’s interest. The parties agree that the Board Observer of Mercato must be an individual who the Majority Investors conclude does not engage, directly or indirectly, in a business that competes with the Company.
6.4. [Omitted]
(a) A quorum of the Board will consist of at least four directors and one of the directors constituting such a quorum must be an Investor Director and one must be a Non-Investor Director. Notwithstanding the foregoing, in the event that a meeting has been duly noticed, called and convened in accordance with applicable Law and a director fails to attend or otherwise participate as permitted by Law, the other directors
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in attendance or otherwise participating will constitute a quorum. All actions of the Board will require (i) at least a majority of the votes entitled to be cast (pursuant to Section 6.5(b)) being cast in the affirmative at a meeting of the Board duly noticed and convened in accordance with applicable Law and otherwise in accordance with the terms of this Agreement and at which a quorum is present or (ii) the unanimous written consent of the Board; provided, however, that in the event there is a vacancy on the Board and an individual has been nominated to fill such vacancy, the first order of business will be to fill such vacancy.
(b) Each director will be entitled to one vote on all matters that are presented to the Board; provided, however, that if at any time after March 31, 2009 the EBITDA for the immediately preceding and completed four calendar quarters (the “EBITDA Calculation”) falls below the Trigger Threshold, as the same may hereafter be adjusted, for three consecutive months, then each Investor Director will be entitled to two votes on all such matters, and each of the other directors on the Board will be entitled to one vote on all such matters, until such time as the EBITDA Calculation exceeds the Trigger Threshold, as the same may hereafter be adjusted, for three consecutive months.
(c) Notwithstanding anything herein to the contrary, each of the parties hereto further agrees that, upon the affirmative vote of a majority of the Investor Directors (the “Investor Director Voters”), a management employee may be terminated for “Cause” under such management employee’s employment agreement if such management employee (i) breaches any non-solicitation, non-competition or other restrictive covenant applicable to such Person, (ii) commits any act of misappropriation, fraud, including with respect to the Company’s accounting and financial statements, embezzlement or conversion of the Company’s or any Subsidiary’s property, or (iii) is convicted or enters a plea of no contest for any felony or is indicted or subject to a similar formal charge for any felony or lesser crime involving fraud, moral turpitude, embezzlement or theft; provided, however, that such vote must be made in good faith. Notwithstanding the foregoing, in the event of a dispute between such management employee and the Investor Director Voters as to whether sufficient Cause exists to terminate such management employee’s employment, then such dispute will be determined exclusively by arbitration before a single arbitrator administered by the American Arbitration Association (the “AAA”) in accordance with its commercial rules then in effect. The arbitration will be commenced and take place in the regional office of AAA located in Los Angeles, California and the parties will use their commercially reasonable efforts to complete the arbitration as promptly as practicable. During the pendency of any such arbitration, such management employee will continue to serve in his then management position within the Company; provided, however, that if such arbitration is not finally concluded on or prior to the 30th day following the date on which the arbitration is commenced, such management employee will immediately be removed and be replaced by a designee of the Investor. Each party to the arbitration shall bear its own legal fees and expenses and shall evenly share the remaining costs of the arbitration.
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(a) In addition to such matters as to which Board approval is required by Law, without the approval of the Board, the Company will not, and will cause each of its Subsidiaries not to, take or consent to any of the following actions:
(i) adopt a capital budget or make capital expenditures in excess of $250,000 per item or project not specifically set forth on a capital budget approved by the Board;
(ii) approve the Company’s annual operating budget;
(iii) acquire, purchase or enter into capital leases for assets in excess of $250,000 in the aggregate;
(iv) make any investments, other than in short-term, government issued, liquid securities;
(v) change the name or fiscal year of the Company or any of its Subsidiaries; or
(vi) issue new equity Securities.
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(b) For so long as at least 25% of the shares of Common Stock issued or issuable upon conversion of the Series B Preferred Stock outstanding on the date of filing of the Charter remain outstanding and any shares of Series C Preferred Stock remain outstanding, without the approval of the holders of at least a majority of the votes represented by all outstanding Series B Preferred Stock and Series C Preferred Stock of the Company (as determined under Article V, Section 6 of the Charter); provided, however, that in the event there are not shares of Series B Preferred Stock outstanding that represent such 25% threshold or shares of Series C Preferred Stock outstanding, only the approval of the majority of the holders of such series of Preferred Stock as satisfies the threshold described above is required in connection herewith, the Company will not, and will cause each of its Subsidiaries not to, take or consent to any of the following actions:
(i) incur any Indebtedness in excess of $500,000 or become a party to or amend any indenture, mortgage, guaranty, lease (whether capital or operating), sublease, license or other contract, agreement or understanding, written or oral, which involves payments to or from the Company in excess of $500,000 in the aggregate, in each case, except for the Senior Credit Facility, the Convertible Notes and transactions contemplated by the Purchase Agreement;
(ii) enter into any transaction with its security holders, directors, officers, key management employees or Affiliates, or a relative or spouse of any such Person (including the hiring of or any changes in the employment terms or compensation of any such Person), including amendment, termination, renewal or non-renewal of any employment agreements with Security Holders or Affiliates thereof;
(iii) create, authorize or issue (or obligate itself to create, authorize or issue) any new class or series of shares (or reclassify any existing series of shares) or any other equity (or securities convertible into equity) having any rights, preferences or privileges senior to or on parity with Preferred Stock with respect to voting, dividends or rights upon liquidation;
(iv) increase the aggregate number of Options or other awards issued or issuable by the Company under the Stock Option Plan (by amendment of the Stock Option Plan or otherwise) (as appropriately adjusted for any stock split, combination, reorganization, recapitalization, reclassification, stock distribution, stock dividend or similar events), or make any changes to the Stock Option Plan or implement any new stock option plan or any equivalent thereto, or offer or grant any equity Options or other incentive awards, options, warrants or other rights in the Company or any Subsidiary;
(v) make any material change in its line of business, whether resulting from the acquisition of another business or otherwise;
(vi) acquire or sell, pledge, license, transfer, mortgage or encumber, except, in each case, in connection with the Senior Credit Facility and Convertible Notes, (A) any material intellectual property or other material asset of the
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Company, (B) any interest in any Subsidiary or Affiliate (other than the Investor or an Affiliate of the Investor) of the Company, or (C) all or substantially all of its assets;
(vii) sell all or substantially all of its assets or merge or consolidate with (or enter into any other form of business combination with) any other entity or effect a Company Sale;
(viii) amend, alter, waive or repeal any provision of, or add any provision to, its Charter or Bylaws or similar governing documents (including any amendment, alteration or repeal resulting from a merger, consolidation, share exchange or other transaction to which it is a party, by the filing of a certificate of designation or otherwise) other than any amendment, alteration, waiver or repeal required to (A) consummate a Company Sale approved pursuant to the terms hereof or (B) give effect to any new issuance contemplated by Article IV; or
(ix) dissolve, liquidate, terminate or wind-up its business and affairs, or institute proceedings to adjudicate the Company or any Subsidiary as bankrupt, or consent to the filing of a bankruptcy proceeding against the Company or any Subsidiary, or file a petition or answer or consent seeking reorganization of the Company or any Subsidiary under the United States Bankruptcy Code or any other similar applicable Law, or consent to the filing of any such petition against the Company or any Subsidiary, or consent to the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of the Company or any Subsidiary, or make an assignment for the benefit of creditors of the Company or admit in writing the Company’s or any Subsidiary’s inability to pay its debts generally as they become due.
(c) For so long as at least 25% of the shares of Common Stock issued or issuable upon conversion of the Series A Preferred Stock and Series B Preferred Stock outstanding on the date of filing the Charter remain outstanding and any shares of Series C Preferred Stock remain outstanding, without the approval of (i) the Board, (ii) the holders of at least a majority of the votes represented by all outstanding Series A Preferred Stock of the Company and Series B Preferred Stock of the Company, (in each case, as determined under Article V, Section 6 of the Charter and voting together as a class), and (iii) the holders of a majority of the votes represented by the outstanding Series C Preferred Stock of the Company (as determined under Article V, Section 6 of the Charter) provided, however, in the event there are not shares of Series A Preferred Stock and Series B Preferred Stock outstanding that represent such 25% threshold or shares of Series C Preferred Stock outstanding, the approval of the majority of the holders of such series, or series taken together, as applicable, of Preferred Stock as satisfies the threshold described above, the holders of such series or series taken together, will no longer have such approval right, the Company will not, and will cause each of its Subsidiaries not to, take or consent to any of the following actions:
(i) subject to Section 6(d) of Article V of the Charter and Section 6.1 hereof, increase or decrease the authorized number of directors constituting the Board, make any changes to the powers, structure or composition of the Board or establish any committees of the Board;
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(ii) purchase, acquire or obtain any equity securities or other proprietary interest, directly or indirectly, in any other entity, or enter into or commit to enter into or make any investment in any joint ventures or any partnerships, establish any Subsidiaries not in existence on the date hereof, or form any joint venture;
(iii) declare or pay any dividends or make any distributions of cash, property or securities in respect of the capital stock of the Company except as expressly contemplated by the Purchase Agreement, this Agreement or as set forth in the Charter, or apply any of its assets to the redemption, retirement, purchase or other acquisition of its capital stock, directly or indirectly, through Subsidiaries or otherwise, except as expressly contemplated by the Purchase Agreement, this Agreement or in a manner consistent with the rights, powers and privileges of the Series C Preferred Stock in the order of preference as set forth in the Charter;
(iv) alter or change the rights, preferences, privileges or powers of Preferred Stock in a manner adverse to the holders thereof;
(v) make any change in its corporate form for tax, accounting or other purposes; or
(vi) make any change in its independent certified public accounting firm which, in all events, will be a firm of national recognition or make any change to any of its material accounting principles or methods.
(d) Notwithstanding anything to the contrary in this Section 6.9, the consummation of a Company Sale (along with the transactions contemplated by the Company Sale) shall not require the consent of the Investors or the holders of Series C Preferred Stock if (i) such Company Sale does not alter the liquidation preferences of the Series C Preferred Stock in connection with such Company Sale and (ii) the consideration to be received by the holders of Series C Preferred Stock on a per share of Series C Preferred Stock basis (either as holders of the Series C Preferred Stock or underlying shares of Common Stock) is equal to the original price per share under which the Series C Preferred Stock was issued plus an amount equal to a compounding 15% annual rate of return on such original amount. This Section 6.9(d) shall terminate at the time that the aggregate investment in Convertible Notes and Series C Preferred Stock issued under the Purchase Agreement is equal or greater than $85,000,000 in aggregate, in which case, the consent of the Majority Investors will be required.
VII. PUT REQUEST RIGHT; COMPELLED SALE BY THE INVESTOR
7.1. Right to Request to Put Securities.
(a) Unless the Company shall have effected a Qualified IPO or Company Sale at any time prior to the May 28, 2012 (the “Anniversary Date”), commencing on the Anniversary Date, the Majority Investors will have the right but not the obligation (the “Put Right”) to request the Company to purchase all, but not less than all, of the shares of Common Stock then held by the Investors pursuant to conversion of
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the Convertible Notes and the Series C Preferred Stock (the “Put Shares”) at a price per Put Share (the “Put Price”) and on such other terms as are provided in this Section 7.1. The Put Price will be equal to the greater of (i) the Fair Market Value of the Put Shares held by the Investors as of the date of the Put Notice or (ii) the aggregate price paid by the Investors for the Put Shares acquired by it in connection with the conversion of the Convertible Notes plus (A) any interest that is due and payable in connection with the Conversion of the Note that remains unpaid as of the Put Closing and (B) any portion of the Aggregate PIK Amount (as defined in the Convertible Note) that was capitalized on the portion of the Convertible Note that was converted and that remains unpaid as of the Put Closing.
(b) In the event that the Company and the Majority Investors are not able to agree on the Put Price within 30 days following delivery of the Put Notice, the Company and the Majority Investors will each, within two Business Days after the expiration of such 30 day period, submit to the other party its final calculation of the Fair Market Value (each a “Final Offer”).
(c) Within five Business Days following the delivery of such Final Offers (the “Put Termination Period”), the Majority Investors will have the right, by written notice to the Company, to elect not to proceed with the transactions contemplated by the Put Notice (the “Put Termination Notice”); provided, however, that in the event that the Majority Investors deliver such a Put Termination Notice, the Majority Investors will only be entitled to deliver one further Put Notice, which may not be delivered prior to the first anniversary of the preceding Put Termination Notice.
(d) If the Majority Investors do not deliver a Put Termination Notice within the Put Termination Period, the Company will, within two Business Days after the expiration of the Put Termination Period, select an Approved Underwriter to determine the Fair Market Value, or such other firm as may be agreed to by the Investor (such firm, the “Appraiser”). The Appraiser will review the Final Offers, and will make a final determination as to which of the Final Offers most accurately represents the Fair Market Value in accordance with Section 7.1(f). The parties will request that the Appraiser deliver its written report as to the Fair Market Value (the “Appraiser’s Report”) to the Company and the Investors within 45 days from selection of such Appraiser. The fees and expenses of the Appraiser will be borne one-half by the Company and one-half by the Investors, pro-rata in accordance with the number of Securities held by such Investors.
(e) The Put Right may be exercised by delivery to the Company by the Majority Investors of a written notice (the “Put Notice”) requesting such purchase pursuant to this Section 7.1 (the “Put Offer”). The Put Notice will identify the aggregate number of Put Shares proposed to be purchased by the Company, the Put Price and any other material terms and conditions of the Put Offer, and, if accepted, will be binding upon all Investors. The Company will have the right to accept the Put Offer by providing all Investors with an irrevocable written notice of acceptance (the “Acceptance Notice”), along with a copy of the Put Notice, within ten Business Days following receipt of the Put Notice. If the Company does not accept the Put Offer within ten Business
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Days following receipt of the Put Notice (the “Expiration Date”), the Company will be deemed to have waived any and all rights under this Section 7.1 with respect to the Put Offer, and the provisions of Section 7.2 will control at all times following the Anniversary Date. If the Company has accepted the Put Offer, the consummation of the Transfer of the Put Shares contemplated by the Put Offer (the “Put Closing”) will occur within 30 days following the later of (x) the determination of the Put Price pursuant to the mutually agreement of the parties or (y) if an Appraiser is utilized pursuant to Section 7.1(d), the date of delivery of the Appraiser’s Report. The Put Closing will occur at such place in New York, New York as may be reasonably designated by the Majority Investors in a written notice provided to the Company and the Investors at least 10 business days prior to the Put Closing. At the Put Closing, (i) the Investors will deliver to the Company duly endorsed certificates evidencing all of the Put Shares held by the Investors and (ii) the Company will deliver to each Investor an aggregate amount equal to the product of the Put Price and the number of such Put Shares so delivered by such Investor, which will be payable by wire transfer of immediately available funds to one or more accounts designated by such Investor.
(f) For purposes of this Section 7.1, the “Fair Market Value” of the Put Shares held by the Investors means the Investors’ pro rata percentage, on a Fully Diluted Basis (assuming the Company has received the cash proceeds from the exercise of all outstanding “in-the-money” Options and Warrants used in the Fully Diluted Basis calculation), of the equity value implied by the total enterprise value that a willing buyer and a willing seller, both well informed as to the facts, but neither under any compulsion to act, would arrive at in an arm’s length purchase of 100% of the Company. In determining such total enterprise value, the Appraiser will take into consideration all of the then relevant factors, including: (i) the Company’s history and management, (ii) the financial condition, Indebtedness and capitalization of the Company, (iii) the Company’s historical operating results, (iv) the prospects of the Company, (v) relevant economic and market trends, (vi) comparisons between the Company and comparable publicly traded companies that could be used as a valuation guideline, including valuation ratios of the guideline companies based on such companies’ financial results and market price, and (vii) comparable private transactions within the industry. The Appraiser will assume that the management of the Company would remain in place and that such management is committed to executing the Company’s then long term plan. The Appraiser will not discount any calculation of Fair Market Value based on the fact that the Company may borrow money or issue other securities to pay part or all of the Put Price.
(b) Procedure. Upon receipt of a Sale Request:
45
(i) The Company will use its reasonable best efforts to effect a Company Sale in an expeditious manner, but in no event later than nine months from the date of the Sale Request unless otherwise waived by the Majority Investors. In connection therewith, the Board will engage, within 30 days of a Sale Request, an Approved Underwriter to act as financial advisor, legal counsel and other advisors and agents as the Board (including the affirmative vote of at least one Investor Director) determines in good faith are appropriate to assist the Company in effectuating the Company Sale.
(ii) Each Security Holder will take all reasonable and customary actions to cause the consummation of the Company Sale proposed by the Company, including (A) executing and delivering such documents as are reasonably requested by the Investor in connection with the Company Sale, including written consents of Security Holders, proxies, letters of transmittal, purchase agreements and stock powers, (B) if applicable, voting in favor of, consenting to and raising no objection against the Company Sale, (C) if applicable, waiving any dissenter’s, appraisal and other similar rights, (D) bearing their proportionate ownership percentage of any escrows, holdbacks, indemnities or adjustments in purchase price as the same may be negotiated by the Company in connection with the Company Sale and as are customary or typical for a transaction of the type proposed by the Company, (E) accepting the proposal acceptable to the Majority Investors, so long as the purchaser is not an Affiliate of the Investors or if otherwise, as recommended by the Approved Underwriter, and (F) otherwise taking all reasonable and customary actions to cause the consummation of the Company Sale. Notwithstanding the foregoing, in no event will any Security Holder be required in connection with a Company Sale pursuant to this Section 7.2 to (x) make any representations and warranties in connection therewith other than representations and warranties made by the Investor and on a several, but not joint basis, or (y) undertake any indemnity or other obligation in connection with such transaction unless the liability for indemnification, if any, of such Security Holder (I) is limited to breach of the representations and warranties made under (x) above, (II) is several and not joint with any other Person, (III) is pro rata in proportion to the amount of consideration paid to such Security Holder in connection with such transaction, and (IV) in no event exceeds the amount of consideration actually paid to such Security Holder.
(iii) For purposes of this Section 7.2, the purchase price to be paid in a Company Sale will be deemed to include any escrow, holdback, earnout or other contingent payment, and any amount allocated to or payable under non-competition agreements to be entered into in connection with the consummation of the Company Sale, and any amount allocated to or payable under employment agreements with any Non-Investor Security Holder to be entered into in connection with the consummation of the Company Sale in excess of 110% of the amount allocated to or payable under any employment agreements with any such Security Holder in existence as of the date of the Company Sale.
46
47
consolidated statements of income, stockholders’ equity and cash flows to be for such month and for the period from the beginning of the fiscal year to the end of such month, in each case with comparative statements for the prior fiscal year;
48
Confidential Information under this Agreement. “Confidential Information” means any nonpublic information disclosed by the Company to any Security Holder pursuant to this Agreement or pursuant to the exercise of rights hereunder other than information that (i) was publicly known and made generally available in the public domain prior to the time of disclosure by the disclosing party; (ii) becomes publicly known and made generally available after disclosure by the Company to any of the Security Holders through no action or inaction of the Security Holders; (iii) is already in the possession of any of the Security Holders at the time of disclosure by the Company as shown by such Security Holder’s files and records immediately prior to the time of disclosure; (iv) is obtained by any of the Security Holders from a third party lawfully in possession of such information and without a breach of such third party’s obligations of confidentiality; or (v) is independently developed by any of the Security Holders without use of or reference to the Company’s Confidential Information, as shown by documents and other competent evidence in the receiving party’s possession.
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IX. SPECIAL CONVERSION OR REPURCHASE OF SERIES C PREFERRED STOCK
50
“Repurchase Price”). Such repurchase option shall be exercised by the Company by delivering written notice to the Investor and by delivering to the Investor a check in the amount of the aggregate Repurchase Price for the Repurchase Shares. Upon delivery of such notice and the payment of the aggregate Repurchase Price, the Company shall become the legal and beneficial owner of Repurchase Shares and all rights and interests therein or relating thereto, and the Company shall have the right to retain and transfer to its own name the Repurchase Shares.
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successors and assigns, whether so expressed or not. All such covenants, agreements, representations and warranties will inure to the benefit of the parties’ successors and permitted assigns, whether so expressed or not. Nothing in this Agreement, express or implied, is intended to confer upon any Person other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement.
“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES OR BLUE SKY LAWS AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT PURSUANT TO (A) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER THE ACT OR (B) AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES AND BLUE SKY LAWS. THESE SECURITIES ARE ALSO SUBJECT TO THE PROVISIONS OF A SECURITY HOLDERS AGREEMENT, DATED AS OF NOVEMBER 28, 2008, INCLUDING CERTAIN RESTRICTIONS ON TRANSFER SET FORTH THEREIN. A COPY OF SUCH SECURITY HOLDERS AGREEMENT IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE.”
52
when sent by facsimile or email, or (c) one Business Day after being sent by overnight delivery providing receipt of delivery, to:
(i) if to the Company:
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No. ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
with copies (which will not constitute notice) to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
One Market Street, Spear Tower, Suite 3300
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No. ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇’▇▇▇▇▇▇;
(ii) if to the Investors:
c/o Goode Partners LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No. ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
with copies (which will not constitute notice) to:
▇▇▇▇▇ Day
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No. 212-755-7306
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇; and
(iii) if to any other Security Holder, at such Security Holder’s address set forth on the books and records of the Company, or at such other address, notice of which is given by such Security Holder to the Company in accordance with the provisions of this Section 9.4.
53
10.10. Governing Law. This Agreement will be deemed to be made under, and will be construed in accordance with, the Laws of the State of Delaware, without giving effect to the of conflict of law principles thereof.
10.11. Jurisdiction; Consent to Service of Process.
(a) Each party hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of a Delaware state (a “Delaware Court”), and any appellate court from any such court, in any suit, action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment resulting from any such suit, action or proceeding, and each party hereby irrevocably
54
and unconditionally agrees that all claims in respect of any such suit, action or proceeding may be heard and determined in the Delaware Court.
(b) It will be a condition precedent to each party’s right to bring any such suit, action or proceeding that such suit, action or proceeding, in the first instance, be brought in the Delaware Court (unless such suit, action or proceeding is brought solely to obtain discovery or to enforce a judgment), and if each such court refuses to accept jurisdiction with respect thereto, such suit, action or proceeding may be brought in any other court with jurisdiction; provided, however, that the foregoing will not apply to any suit, action or proceeding by a party seeking indemnification or contribution pursuant to this Agreement or otherwise in respect of a suit, action or proceeding against such party by a thirty party if such suit, action or proceeding by such party seeking indemnification or contribution is brought in the same court as the suit, action or proceeding against such party.
(c) No party may move to (i) transfer any such suit, action or proceeding from the Delaware Court to another jurisdiction, (ii) consolidate any such suit, action or proceeding brought in the Delaware Court with a suit, action or proceeding in another jurisdiction, or (iii) dismiss any such suit, action or proceeding brought in the Delaware Court for the purpose of bringing the same in another jurisdiction.
(d) Each party hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, (i) any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in the Delaware Court, (ii) the defense of an inconvenient forum to the maintenance of such suit, action or proceeding in any such court, and (iii) the right to object, with respect to such suit, action or proceeding, that such court does not have jurisdiction over such party. Each party irrevocably consents to service of process in any manner permitted by Law.
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respect to this Agreement and the transactions contemplated hereby, including such reasonable fees and expenses of attorneys and accountants, which will include all fees, costs and expenses of appeals.
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the Investors, Mercato or any of their respective Affiliates have any obligation to act or refrain from acting (including presenting any opportunity or other matter to the Company or any Security Holder for them to consider or pursue) by reason of any relationship with, or actual or alleged duty to, the Company, any Subsidiaries or any Security Holder. None of the Company, any Subsidiaries or any Security Holder will have any rights by virtue of this Agreement in and to such independent ventures of the Investors, Mercato and their respective Affiliates or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the Company’s business, will not be deemed wrongful or improper. Each party hereto agrees that, in any such case, to the extent a court might otherwise hold that the conduct of such activity is a breach of this Agreement, the Purchase Agreement or any other agreement entered into in connection with the transactions contemplated by the Purchase Agreement, it has hereby irrevocably waived any and all rights of recovery it may otherwise have by reason thereof.
[Signature pages follow]
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IN WITNESS WHEREOF, the parties have executed this Security Holders Agreement as of the date first above written.
| SKULLCANDY, INC. | ||
| By: | /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇ | |
| Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇ | ||
| Title: Chief Executive Officer |
| ▇▇▇▇▇ SKULLCANDY HOLDINGS LLC | ||
| By: | /s/ ▇▇▇▇▇ ▇. ▇▇▇▇ | |
| Name: ▇▇▇▇▇ ▇. ▇▇▇▇ | ||
| Title: Manager |
[Signature Page to Security Holders Agreement]
| PRIOR STOCKHOLDERS:
| ||
| [Entity Name] | ||
| By: | ||
| Name: | ||
| Title: | ||
| [Individual Name] |
[Signature Page to Security Holders Agreement]
| Joining for the limited purpose set forth in Section 9.20 |
| /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇ |
| ▇▇▇▇▇▇▇ ▇▇▇▇▇ |
[Signature Page to Security Holders Agreement]
EXHIBIT A
Prior Stockholders
Stockholder Name
Ptarmigan LLC (▇▇▇▇ ▇▇▇▇▇)
Alden, ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ & Asa Superannuation Fund
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇▇▇
Dry Dog, LLC (▇▇▇▇▇ ▇▇▇▇▇▇)
▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇
The Family Trust UTA The Kent & ▇▇▇ ▇▇▇▇▇▇ Family Trust
▇▇▇▇▇▇, ▇▇▇▇▇▇
Gazelle Investments LLC
▇▇▇▇▇▇, ▇▇▇▇▇
▇▇ Cropston, LLC
Jacabowski, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇ Trust
▇▇▇▇▇▇, ▇▇▇▇▇
LAC, LC (▇▇▇ ▇▇▇▇▇▇▇)
▇▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ (Dedicated Sales)
Mercato Partners, L.P.
Mercato Partners QP, L.P.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ (Dedicated Sales)
Monarch Partners
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇ Companies, LC/▇▇▇▇▇▇ ▇▇▇▇▇▇▇
The Sandstone Trust, ▇▇▇▇▇ ▇▇▇▇▇▇, TTEE
▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇
The Survivors Trust UTA The Kent & ▇▇▇ ▇▇▇▇▇▇ Family Trust
▇▇▇▇▇▇▇, ▇▇▇▇▇ (▇▇▇▇▇)
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇