U.S. WIRELESS DATA, INC. REGISTRATION RIGHTS AGREEMENT February 2, 2007
TABLE OF CONTENTS
| Page | ||||||||
| Section 1 Definitions | 1 | |||||||
| 1.1 | Certain Definitions | 1 | ||||||
| Section 2 Registration Rights | 4 | |||||||
| 2.1 | Requested Registration | 4 | ||||||
| 2.2 | Company Registration | 6 | ||||||
| 2.3 | Registration on Form S-3 | 7 | ||||||
| 2.4 | Expenses of Registration | 8 | ||||||
| 2.5 | Registration Procedures | 9 | ||||||
| 2.6 | Indemnification | 10 | ||||||
| 2.7 | Information by Investor | 12 | ||||||
| 2.8 | Restrictions on Transfer | 12 | ||||||
| 2.9 | Rule 144 Reporting | 14 | ||||||
| 2.10 | Market Stand-Off Agreement | 14 | ||||||
| 2.11 | Delay of Registration | 15 | ||||||
| 2.12 | Transfer or Assignment of Registration Rights | 15 | ||||||
| 2.13 | Limitations on Subsequent Registration Rights | 15 | ||||||
| Section 3 Miscellaneous | 15 | |||||||
| 3.1 | Amendment | 15 | ||||||
| 3.2 | Notices | 16 | ||||||
| 3.3 | Governing Law | 16 | ||||||
| 3.4 | Successors and Assigns | 17 | ||||||
| 3.5 | Entire Agreement | 17 | ||||||
| 3.6 | Delays or Omissions | 17 | ||||||
| 3.7 | Severability | 17 | ||||||
| 3.8 | Titles and Subtitles | 17 | ||||||
| 3.9 | Counterparts | 17 | ||||||
| 3.10 | Telecopy Execution and Delivery | 17 | ||||||
| 3.11 | Jurisdiction; Venue | 18 | ||||||
| 3.12 | Further Assurances | 18 | ||||||
| 3.13 | Termination Upon Change of Control | 18 | ||||||
| 3.14 | Conflict | 18 | ||||||
| 3.15 | Attorneys’ Fees | 18 | ||||||
| 3.16 | Aggregation of Stock | 18 | ||||||
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U.S. WIRELESS DATA, INC.
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this “Agreement”) is made as of ___, 2007, by and
among U.S. Wireless Data, Inc., a Delaware corporation (the “Company”), and the persons and
entities (each, an “Investor” and collectively, the “Investors”) listed on Exhibit A
hereto. Unless otherwise defined herein, capitalized terms used in this Agreement have the
meanings ascribed to them in Section 1.
RECITALS
WHEREAS: the Company has entered into that certain Agreement and Plan of Merger (the “Merger
Agreement”), dated as of June 14, 2006, by and among the Company, StarVox Acquisition, Inc.
(“Merger Sub”), a wholly owned subsidiary of USWD, and StarVox Communications, Inc. (“StarVox”);
WHEREAS: pursuant to the Merger Agreement the Company, Merger Sub and StarVox have agreed to
enter into a business combination transaction by means of a merger (the “Merger”) of Merger Sub
with and into StarVox, whereby upon completion of the Merger StarVox will be the surviving
corporation and a wholly owned subsidiary of the Company;
WHEREAS: certain existing investors (the “Existing Investors”) of the Company and StarVox
hold registration rights with respect to certain securities of the Company and/or StarVox held by
them;
WHEREAS: in connection with the Merger, the Company, StarVox and the Existing Investors
desire to amend, modify and consolidate such registration rights under the Agreement;
WHEREAS: in connection with the Merger, the Company desires to grant such Existing Investors
the respective registration rights provided in this Agreement:
NOW, THEREFORE: In consideration of the mutual promises and covenants set forth herein, and
other consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
Section 1
Definitions
Definitions
1.1 Certain Definitions. As used in this Agreement, the following terms shall have the meanings set forth below:
(a) “Commission” shall mean the Securities and Exchange Commission or any other federal agency
at the time administering the Securities Act.
(b) “Common Stock” means the Common Stock of the Company.
(c) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, or any similar
successor federal statute and the rules and regulations thereunder, all as the same shall be in
effect from time to time.
(d) “Existing Investors” shall have the meaning set forth in the Recitals hereto.
(e) “Holder” shall mean any Investor who holds Registrable Securities and any holder of
Registrable Securities to whom the registration rights conferred by this Agreement have been duly
and validly transferred in accordance with Section 2.12 of this Agreement.
(f) “Indemnified Party” shall have the meaning set forth in Section 2.6(c) hereto.
(g) “Indemnifying Party” shall have the meaning set forth in Section 2.6(c) hereto.
(h) “Initiating Holders” shall mean any Holder or Holders who in the aggregate hold not less
than fifty percent (50%) of the outstanding Registrable Securities.
(i) “Investors” shall mean the persons and entities listed on Exhibit A hereto.
(j) “Merger Agreement” shall have the meaning set forth in the Recitals hereto.
(k) “Registrable Securities” shall mean (i) the shares of Common Stock owned or held by
any Investor; (ii) Warrants exercisable for Warrant Shares; (iii) the Warrant Shares and (iv)
shares of Common Stock issuable upon conversion of convertible securities held by an Investor, in
each case whether or not issued or issuable as of the date of this agreement. Registrable
Securities include any warrants, shares of capital stock or other securities of the Company issued
as a dividend or other distribution with respect to or in exchange for or in replacement of such
Registrable Securities. As to any particular Registrable Securities, such securities shall cease
to be Registrable Securities when: (a) a Registration Statement with respect to the sale of such
securities shall have become effective under the Securities Act and such securities shall have been
sold, transferred, disposed of or exchanged in accordance with such Registration Statement; (b)
such securities shall have been otherwise transferred pursuant to Rule 144 of the Securities Act
(or any similar provisions thereunder, but not Rule 144A), new certificates for them not bearing a
legend restricting further transfer shall have been delivered by the Company and subsequent public
distribution of them shall not require registration under the Securities Act; (c) the Securities
and Exchange Commission makes a definitive determination to the Company that the Registrable
Securities are salable under Rule 144(k) or (d) such securities shall have ceased to be
outstanding.
(l) The terms “register,” “registered” and “registration” shall refer to a registration
effected by preparing and filing a registration statement in compliance with the Securities Act and
applicable rules and regulations thereunder, and the declaration or ordering of the effectiveness
of such registration statement.
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(m) “Registration Expenses” shall mean all expenses incurred in effecting any registration
pursuant to this Agreement, including, without limitation, all registration, qualification, and
filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company,
blue sky fees and expenses, and expenses of any regular or special audits incident to or required
by any such registration, but shall not include Selling Expenses, fees and disbursements of counsel
for the Holders and the compensation of regular employees of the Company, which shall be paid in
any event by the Company.
(n) “Restricted Securities” shall mean any Registrable Securities required to bear the first
legend set forth in Section 2.8(c) hereof.
(o) “Rule 144” shall mean Rule 144 as promulgated by the Commission under the Securities Act,
as such Rule may be amended from time to time, or any similar successor rule that may be
promulgated by the Commission.
(p) “Rule 145” shall mean Rule 145 as promulgated by the Commission under the Securities Act,
as such Rule may be amended from time to time, or any similar successor rule that may be
promulgated by the Commission
(q) “Securities Act” shall mean the Securities Act of 1933, as amended, or any similar
successor federal statute and the rules and regulations thereunder, all as the same shall be in
effect from time to time.
(r) “Selling Expenses” shall mean all underwriting discounts, selling commissions and stock
transfer taxes applicable to the sale of Registrable Securities and fees and disbursements of
counsel for any Holder (other than the fees and disbursements of one special counsel to the Holders
included in Registration Expenses).
(s) “Series A Preferred Stock” shall mean the shares of Series A Preferred Stock of the
Company.
(t) “Shares” shall mean the Company’s Series A Preferred Stock held by an Investor as
indicated on Exhibit A hereto.
(u) “Warrant Shares” shall mean (i) shares of Common Stock issued or issuable upon exercise of
the any outstanding warrants held by an Investor as indicated on Exhibit A hereto and (ii)
any Common Stock issued as a dividend or other distribution with respect to or in exchange for or
in replacement of the shares referenced in (i) above; provided, however, that
Warrant Shares shall not include any shares of Common Stock described in clause (i) or (ii) above
which have previously been registered or which have been sold to the public either pursuant to a
registration statement or Rule 144, or which have been sold in a private transaction in which the
transferor’s rights under this Agreement are not validly assigned in accordance with this
Agreement.
(v) “Withdrawn Registration” shall mean a forfeited demand registration under Section 2.1 in
accordance with the terms and conditions of Section 2.4.
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Section 2
Registration Rights
Registration Rights
2.1 Requested Registration.
(a) Request for Registration. Subject to the conditions set forth in this Section
2.1, if the Company shall receive from Initiating Holders a written request signed by such
Initiating Holders that the Company effect any registration with respect to all or a part of the
Registrable Securities (such request shall state the number of shares of Registrable Securities to
be disposed of and the intended methods of disposition of such shares by such Initiating Holders),
the Company will:
(i) promptly give written notice of the proposed registration to all other Holders; and
(ii) as soon as practicable, file and use its commercially reasonable efforts to effect such
registration (including, without limitation, filing post-effective amendments, appropriate
qualifications under applicable blue sky or other state securities laws, and appropriate compliance
with the Securities Act) and to permit or facilitate the sale and distribution of all or such
portion of such Registrable Securities as are specified in such request, together with all or such
portion of the Registrable Securities of any Holder or Holders joining in such request as are
specified in a written request received by the Company within twenty (20) days after such written
notice from the Company is mailed or delivered.
(b) Limitations on Requested Registration. The Company shall not be obligated to
effect, or to take any action to effect, any such registration pursuant to this Section 2.1:
(i) If the Initiating Holders, together with the holders of any other securities of the
Company entitled to inclusion in such registration statement, propose to sell Registrable
Securities and such other securities (if any) if the aggregate proceeds (after deduction for
underwriter’s discounts and expenses related to the issuance) are less than $1,000,000;
(ii) In any particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration, qualification, or compliance,
unless the Company is already subject to service in such jurisdiction and except as may be required
by the Securities Act;
(iii) After the Company has initiated two such registrations pursuant to this Section 2.1
(counting for these purposes only (x) registrations which have been declared or ordered effective
and pursuant to which securities have been sold, and (y) Withdrawn Registrations;
(iv) During the period starting with the date sixty (60) days prior to the Company’s good
faith estimate of the date of filing of, and ending on a date one hundred eighty
(180) days after the effective date of, a Company-initiated registration (or ending on the
subsequent date on which all market stand-off agreements applicable to the offering have
terminated)]; provided
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that the Company is actively employing in good faith commercially
reasonable efforts to cause such registration statement to become effective; or
(v) If the Initiating Holders propose to dispose of shares of Registrable Securities which may
be immediately registered on Form S-3 pursuant to a request made under Section 2.3 hereof.
(vi) If the Initiating Holders do not request that such offering be firmly underwritten by
underwriters selected by the Initiating Holders (subject to the consent of the Company, which
consent shall not be unreasonably withheld); or
(vii) If the Company and the Initiating Holders are unable to obtain the commitment
of the underwriter described in clause (b)(vii) above to firmly underwrite the offer.
(c) Deferral. If (i) in the good faith judgment of the Board of Directors of the
Company, the filing of a registration statement covering the Registrable Securities would be
materially detrimental to the Company and the Board of Directors of the Company concludes, as a
result, that it is in the best interests of the Company to defer the filing of such registration
statement at such time, and (ii) the Company shall furnish to such Holders a certificate signed by
the President of the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be materially detrimental to the Company for such registration statement to
be filed in the near future and that it is, therefore, in the best interests of the Company to
defer the filing of such registration statement, then (in addition to the limitations set forth in
Section 2.1(b)(v) above) the Company shall have the right to defer such filing for a period of not
more than one hundred eighty (180) days after receipt of the request of the Initiating Holders,
and, provided further, that the Company shall not defer its obligation in this manner more than
twice in any twelve-month period.
(d) Other Shares. The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of Section 2.1(e), include securities of the
Company being sold for the account of the Company.
(e) Underwriting. If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to this Section 2.1 and the Company shall include such
information in the written notice given pursuant to Section 2.1(a)(i). In such event, the right of
any Holder to include all or any portion of its Registrable Securities in such registration
pursuant to this Section 2.1 shall be conditioned upon such Holder’s participation in such
underwriting and the inclusion of such Holder’s Registrable Securities to the extent provided
herein. If the Company shall request inclusion in any registration pursuant to Section 2.1 of
securities being sold for its own account, or if other persons shall request inclusion in any
registration pursuant to Section 2.1, the Initiating Holders shall, on behalf of all Holders, offer
to include such securities in the underwriting and such offer shall be conditioned upon the
participation of the Company or such other persons in
such underwriting and the inclusion of the Company’s and such person’s other securities of the
Company and their acceptance of the further applicable provisions of this Section 2 (including
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Section 2.10). The Company shall (together with all Holders and other persons proposing to
distribute their securities through such underwriting) enter into an underwriting agreement in
customary form with the representative of the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders, which underwriters are reasonably
acceptable to the Company.
Notwithstanding any other provision of this Section 2.1, if the underwriters advise the
Initiating Holders in writing that marketing factors require a limitation on the number of shares
to be underwritten, the number of Registrable Securities that may be so included shall be allocated
as follows: (i) first, among all Holders requesting to include Registrable Securities in such
registration statement based on the pro rata percentage of Registrable Securities held by such
Holders, assuming conversion and (ii) second, to the Company, which the Company may allocate, at
its discretion, for its own account, or for the account of other holders or employees of the
Company.
If a person who has requested inclusion in such registration as provided above does not agree
to the terms of any such underwriting, such person shall be excluded therefrom by written notice
from the Company, the underwriter or the Initiating Holders. The securities so excluded shall also
be withdrawn from registration. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall also be withdrawn from such registration. If shares are so
withdrawn from the registration and if the number of shares to be included in such registration was
previously reduced as a result of marketing factors pursuant to this Section 2.1(e), then the
Company shall then offer to all Holders who have retained rights to include securities in the
registration the right to include additional Registrable Securities in the registration in an
aggregate amount equal to the number of shares so withdrawn, with such shares to be allocated among
such Holders requesting additional inclusion, as set forth above.
2.2 Company Registration.
(a) Company Registration. If the Company shall determine to register any of its
securities either for its own account or the account of a security holder or holders, other than a
registration pursuant to Section 2.1 or 2.3, a registration relating solely to employee benefit
plans, a registration relating to the offer and sale of debt securities, a registration relating to
a corporate reorganization or other Rule 145 transaction, or a registration on any registration
form that does not permit secondary sales, the Company will:
(i) promptly give written notice of the proposed registration to all Investors; and
(ii) use its commercially reasonable efforts to include in such registration (and any related
qualification under blue sky laws or other compliance), except as set forth in Section 2.2(b)
below, and in any underwriting involved therein, all of such Registrable Securities or
Warrant Shares as are specified in a written request or requests made by any Investor or
Investors received by the Company within ten (10) days after such written notice from the Company
is mailed or delivered. Such written request may specify all or a part of an Investor’s
Registrable Securities or Warrant Shares as the case may be.
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(b) Underwriting. If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so advise the Investors as
a part of the written notice given pursuant to Section 2.2(a)(i). In such event, the right of any
Investor to registration pursuant to this Section 2.2 shall be conditioned upon such Investor’s
participation in such underwriting and the inclusion of such Investor’s Registrable Securities or
Warrant Shares, as the case may be, in the underwriting to the extent provided herein. All
Investors proposing to distribute their securities through such underwriting shall (together with
the Company and the other holders of securities of the Company with registration rights to
participate therein distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the underwriter or underwriters
selected by the Company.
Notwithstanding any other provision of this Section 2.2, if the underwriters advise the
Company in writing that marketing factors require a limitation on the number of shares to be
underwritten, the underwriters may (subject to the limitations set forth below) exclude all
Registrable Securities and Warrant Shares from, or limit the number of Registrable Securities and
Warrant Shares to be included in, the registration and underwriting. The Company shall so advise
all holders of securities requesting registration, and the number of shares of securities that are
entitled to be included in the registration and underwriting shall be allocated, as follows: (i)
first, to the Company for securities being sold for its own account, and (ii) second, to the
Investors requesting to include Registrable Securities or Warrant Shares, as the case may be, in
such registration statement based on the pro rata percentage of the aggregate amount of Registrable
Securities and Warrant Shares held by such Investors, assuming conversion.
If a person who has requested inclusion in such registration as provided above does not agree
to the terms of any such underwriting, such person shall also be excluded therefrom by written
notice from the Company or the underwriter. The Registrable Securities or Warrant Shares shall
also be withdrawn from such registration. Any Registrable Securities or Warrant Shares excluded or
withdrawn from such underwriting shall be withdrawn from such registration. If shares are so
withdrawn from the registration and if the number of shares of Registrable Securities and Warrant
Shares to be included in such registration was previously reduced as a result of marketing factors
pursuant to Section 2.2(b), the Company shall then offer to all persons who have retained the right
to include securities in the registration the right to include additional securities in the
registration in an aggregate amount equal to the number of shares so withdrawn, with such shares to
be allocated among the persons requesting additional inclusion, in the manner set forth above.
(c) Right to Terminate Registration. The Company shall have the right to terminate or
withdraw any registration initiated by it under this Section 2.2 prior to the effectiveness of such
registration whether or not any Investor has elected to include securities in such registration.
2.3 Registration on Form S-3.
(a) Request for Form S-3 Registration. After its initial public offering, the Company
shall use its commercially reasonable efforts to qualify for registration on Form S-3 or any
comparable or successor form or forms. After the Company has qualified for the use of Form S-3, in
addition to the rights contained in the foregoing provisions of this Section 2 and subject to the
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conditions set forth in this Section 2.3, if the Company shall receive from a Holder or Holders of
Registrable Securities a written request that the Company effect any registration on Form S-3 or
any similar short form registration statement with respect to all or part of the Registrable
Securities (such request shall state the number of shares of Registrable Securities to be disposed
of and the intended methods of disposition of such shares by such Holder or Holders), the Company
will take all such action with respect to such Registrable Securities as required by Section
2.1(a)(i) and (ii).
(b) Limitations on Form S-3 Registration. The Company shall not be obligated to
effect, or take any action to effect, any such registration pursuant to this Section 2.3:
(i) In the circumstances described in either Sections 2.1(b)(i), 2.1(b)(iii) or 2.1(b)(v);
(ii) If the Holders, together with the holders of any other securities of the Company entitled
to inclusion in such registration, propose to sell Registrable Securities and such other securities
(if any) on Form S-3 at an aggregate price to the public of less than $l,000,000; or
(iii) If, in a given twelve-month period, the Company has effected one (1) such registration
in such period.
(c) Deferral. The provisions of Section 2.1(c) shall apply to any registration
pursuant to this Section 2.3.
(d) Underwriting. If the Holders of Registrable Securities requesting registration
under this Section 2.3 intend to distribute the Registrable Securities covered by their request by
means of an underwriting, the provisions of Sections 2.1(e) shall apply to such registration.
Notwithstanding anything contained herein to the contrary, registrations effected pursuant to this
Section 2.3 shall not be counted as requests for registration or registrations effected pursuant to
Section 2.1.
2.4 Expenses of Registration. All Registration Expenses incurred in connection with registrations pursuant to Sections
2.1, 2.2 and 2.3 hereof shall be borne by the Company; provided, however, that the
Company shall not be required to pay for any expenses of any registration proceeding begun pursuant
to Sections 2.1 and 2.3 if the registration request is subsequently withdrawn at the request of the
Holders of a majority of the Registrable Securities to be registered or because a sufficient number
of Holders shall have withdrawn so that the minimum offering conditions set forth in Sections 2.1
and 2.3 are no longer satisfied (in which case all participating Holders shall bear such
expenses pro rata among each other based on the number of Registrable Securities requested to
be so registered), unless the Holders of a majority of the Registrable Securities agree to forfeit
their right to a demand registration pursuant to Section 2.1. All Selling Expenses relating to
securities registered on behalf of the Holders shall be borne by the holders of securities included
in such registration pro rata among each other on the basis of the number of Registrable Securities
so registered.
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2.5 Registration Procedures. In the case of each registration effected by the Company pursuant to Section 2, the Company
will keep each Holder or Investor, as the case may be, advised in writing as to the initiation of
each registration and as to the completion thereof. At its expense, the Company will use its
commercially reasonable efforts to:
(a) Keep such registration effective for a period of ending on the earlier of the date which
is sixty (60) days from the effective date of the registration statement or such time as the
Holders or Investors, as the case may be, have completed the distribution described in the
registration statement relating thereto;
(b) Prepare and file with the Commission such amendments and supplements to such registration
statement and the prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement for the period set forth in subsection (a)
above;
(c) Furnish such number of prospectuses, including any preliminary prospectuses, and other
documents incident thereto, including any amendment of or supplement to the prospectus, as a Holder
or Investor, as the case may be, from time to time may reasonably request;
(d) Use its reasonable best efforts to register and qualify the securities covered by such
registration statement under such other securities or Blue Sky laws of such jurisdiction as shall
be reasonably requested by the Holders or Investors, as the case may be; provided, that the
Company shall not be required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states or jurisdictions;
(e) Notify each seller of Registrable Securities or Warrant Shares, as the case may be,
covered by such registration statement at any time when a prospectus relating thereto is required
to be delivered under the Securities Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or incomplete in light of the circumstances then
existing, and following such notification promptly prepare and furnish to such seller a reasonable
number of copies of a supplement to or an amendment of such prospectus as may be necessary so that,
as thereafter delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to be stated therein
or necessary
to make the statements therein not misleading or incomplete in light of the circumstances then
existing;
(f) Provide a transfer agent and registrar for all Registrable Securities or Warrant Shares,
as the case may be, registered pursuant to such registration statement and a CUSIP number for all
such Registrable Securities or Warrant Shares, as the case may be, in each case not later than the
effective date of such registration;
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(g) Cause all such Registrable Securities or Warrant Shares, as the case may be, registered
pursuant hereunder to be listed on each securities exchange on which similar securities issued by
the Company are then listed; and
(h) In connection with any underwritten offering pursuant to a registration statement filed
pursuant to Section 2.1 hereof, enter into an underwriting agreement in form reasonably necessary
to effect the offer and sale of Common Stock, provided such underwriting agreement contains
reasonable and customary provisions, and provided further, that each Holder or Investor, as the
case may be, participating in such underwriting shall also enter into and perform its obligations
under such an agreement.
2.6 Indemnification.
(a) To the extent permitted by law, the Company will indemnify and hold harmless each
Investor, each of its officers, directors and partners, legal counsel and accountants and each
person controlling such Investor within the meaning of Section 15 of the Securities Act, with
respect to which registration, qualification or compliance has been effected pursuant to this
Section 2, and each underwriter, if any, and each person who controls within the meaning of Section
15 of the Securities Act any underwriter, against all expenses, claims, losses, damages and
liabilities (or actions, proceedings or settlements in respect thereof) arising out of or based on:
(i) any untrue statement (or alleged untrue statement) of a material fact contained or incorporated
by reference in any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such registration, qualification
or compliance, (ii) any omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading, or (iii) any
violation (or alleged violation) by the Company of the Securities Act, any state securities laws or
any rule or regulation thereunder applicable to the Company and relating to action or inaction
required of the Company in connection with any offering covered by such registration, qualification
or compliance, and the Company will reimburse each such Investor, each of its officers, directors,
partners, legal counsel and accountants and each person controlling such Investor, each such
underwriter and each person who controls any such underwriter, for any legal and any other expenses
reasonably incurred in connection with investigating and defending or settling any such claim,
loss, damage, liability or action; provided that the Company will not be liable in any such
case to the extent that any such claim, loss, damage, liability, or action arises out of or is
based on any untrue statement or omission based upon written information furnished to the Company
by such Investor, any of such Investor’s officers, directors,
partners, legal counsel or accountants, any person controlling such Investor, such underwriter
or any person who controls any such underwriter, and stated to be specifically for use therein; and
provided, further that, the indemnity agreement contained in this Section 2.6(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent shall not be
unreasonably withheld).
(b) To the extent permitted by law, each Investor will, if Registrable Securities or Warrant
Shares, as the case may be, held by such Investor are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify and hold harmless the
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Company, each of its directors, officers, partners, legal counsel and accountants and each
underwriter, if any, of the Company’s securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of Section 15 of the
Securities Act, each other such Investor, and each of their officers, directors and partners, and
each person controlling each other such Investor, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on: (i) any untrue statement
(or alleged untrue statement) of a material fact contained or incorporated by reference in any
prospectus, offering circular or other document (including any related registration statement,
notification, or the like) incident to any such registration, qualification or compliance, or (ii)
any omission (or alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse the Company and such
Investors, directors, officers, partners, legal counsel and accountants, persons, underwriters, or
control persons for any legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement, prospectus, offering
circular or other document in reliance upon and in conformity with written information furnished to
the Company by such Investor and stated to be specifically for use therein; provided,
however, that the obligations of such Investor hereunder shall not apply to amounts paid in
settlement of any such claims, losses, damages or liabilities (or actions in respect thereof) if
such settlement is effected without the consent of such Investor (which consent shall not be
unreasonably withheld); and provided that in no event shall any indemnity under this
Section 2.6 exceed the gross proceeds from the offering received by such Investor, except in the
case of fraud or willful misconduct by such Investor.
(c) Each party entitled to indemnification under this Section 2.6 (the “Indemnified Party”)
shall give notice to the party required to provide indemnification (the “Indemnifying Party”)
promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to assume the defense of such claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or any litigation2 resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at such party’s expense; and provided further that
the failure of any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 2.6, to the extent such failure is not
prejudicial. No Indemnifying Party, in the defense of any such claim or litigation, shall, except
with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or litigation. Each
Indemnified Party shall furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 2.6 is held by a court of competent
jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability,
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claim, damage, or expense referred to herein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage, or expense in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the
Indemnified Party on the other in connection with the statements or omissions that resulted in such
loss, liability, claim, damage, or expense as well as any other relevant equitable considerations.
The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the Indemnifying Party
or by the Indemnified Party and the parties’ relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission. No person or entity will be required
under this Section 2.6(d) to contribute any amount in excess of the gross proceeds from the
offering received by such person or entity, except in the case of fraud or willful misconduct by
such person or entity.] No person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.
(e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in connection with the
underwritten public offering are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.
2.7 Information by Investor. Each Investor holding Registrable Securities or Warrant Shares, as the case may be, shall
furnish to the Company such information regarding such Investor and the distribution proposed by
such Investor as the Company may reasonably request in writing and as shall be reasonably required
in connection with any registration, qualification, or compliance referred to in this Section 2.
2.8 Restrictions on Transfer.
(a) The holder of each certificate representing Registrable Securities or Warrant Shares, as
the case may be, by acceptance thereof agrees to comply in all respects with the provisions of this
Section 2.8. Each Investor agrees not to make any sale, assignment, transfer,
pledge or other disposition of all or any portion of the Restricted Securities, or any
beneficial interest therein, unless and until (x) the transferee thereof has agreed in writing for
the benefit of the Company to take and hold such Restricted Securities subject to, and to be bound
by, the terms and conditions set forth in this Agreement, including, without limitation, this
Section 2.8 and Section 2.10, except for transfers permitted under Section 2.8(b), and (y):
(i) There is then in effect a registration statement under the Securities Act covering such
proposed disposition and such disposition is made in accordance with such registration statement;
or
(ii) Such Investor shall have given prior written notice to the Company of such Investor’s
intention to make such disposition and shall have furnished the Company with a
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detailed description
of the manner and circumstances of the proposed disposition, and, if requested by the Company, such
Investor shall have furnished the Company, at its expense, with (i) an opinion of counsel,
reasonably satisfactory to the Company, to the effect that such disposition will not require
registration of such Restricted Securities under the Securities Act or (ii) a “no action” letter
from the Commission to the effect that the transfer of such securities without registration will
not result in a recommendation by the staff of the Commission that action be taken with respect
thereto, whereupon the holder of such Restricted Securities shall be entitled to transfer such
Restricted Securities in accordance with the terms of the notice delivered by the Investor to the
Company.
(b) Permitted transfers include (i) a transfer not involving a change in beneficial ownership,
or (ii) in transactions involving the distribution without consideration of Restricted Securities
by any Investor to (x) a parent, subsidiary or other affiliate of Investor that is a corporation,
(y) any of its partners, members or other equity owners, or retired partners, retired members or
other equity owners, or to the estate of any of its partners, members or other equity owners or
retired partners, retired members or other equity owners, or (z) a venture capital fund that is
controlled by or under common control with one or more general partners or managing members of, or
shares the same management company with, such Investor, or (iii) transfers in compliance with Rule
144(k), as long as the Company is furnished with satisfactory evidence of compliance with such
Rule; provided, in each case, that the Investor thereof shall give written notice to the
Company of such Investor’s intention to effect such disposition and shall have furnished the
Company with a detailed description of the manner and circumstances of the proposed disposition.
(c) Each certificate representing Registrable Securities or Warrant Shares, as the case may
be, shall (unless otherwise permitted by the provisions of this Agreement) be stamped or otherwise
imprinted with a legend substantially similar to the following (in addition to any legend required
under applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS
OF CERTAIN STATES. THESE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED UNDER THE ACT AND
APPLICABLE STATE
SECURITIES LAWS PURSUANT TO REGISTRATION OR AN EXEMPTION THEREFROM. THE
ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE, INCLUDING A LOCK-UP PERIOD IN THE EVENT OF A
PUBLIC OFFERING, AS SET FORTH IN A REGISTRATION RIGHTS
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AGREEMENT, A COPY OF
WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE COMPANY.
The Holders consent to the Company making a notation on its records and giving instructions to
any transfer agent of the Restricted Securities and Warrant Shares in order to implement the
restrictions on transfer established in this Section 2.8.
(d) The first legend referring to federal and state securities laws identified in Section
2.8(c) hereof stamped on a certificate evidencing the Restricted Securities or Warrant Shares, as
the case may be, and the stock transfer instructions and record notations with respect to such
Restricted Securities shall be removed and the Company shall issue a certificate without such
legend to the holder of such Restricted Securities if (i) such securities are registered under the
Securities Act, or (ii) such holder provides the Company with an opinion of counsel reasonably
acceptable to the Company to the effect that a public sale or transfer of such securities may be
made without registration under the Securities Act, or (iii) such holder provides the Company with
reasonable assurances, which may, at the option of the Company, include an opinion of counsel
satisfactory to the Company, that such securities can be sold pursuant to Section (k) of Rule 144
under the Securities Act.
2.9 Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the
Commission that may permit the sale of the Restricted Securities to the public without
registration, the Company agrees to use its commercially reasonable efforts to:
(a) Make and keep public information regarding the Company available as those terms are
understood and defined in Rule 144 under the Securities Act, at all times from and after ninety
(90) days following the effective date of the first registration under the Securities Act filed by
the Company for an offering of its securities to the general public;
(b) File with the Commission in a timely manner all reports and other documents required of
the Company under the Securities Act and the Exchange Act at any time after it has become subject
to such reporting requirements; and
(c) So long as an Investor owns any Restricted Securities or Warrant Shares, furnish to the
Investor forthwith upon written request a written statement by the Company as to its compliance
with the reporting requirements of Rule 144 (at any time from and after ninety (90) days following
the effective date of the first registration statement filed by the Company for an offering of its
securities to the general public), and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed as an Investor may
reasonably request in availing itself of any rule or regulation of the Commission allowing an
Investor to sell any such securities without registration.
2.10 Market Stand-Off Agreement. If requested by the Company and an underwriter of Common Stock (or other securities) of the
Company, each Investor shall not sell or otherwise transfer, make any short sale of, grant any
option for the purchase of, or enter into any hedging or
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similar transaction with the same economic
effect as a sale, of any Common Stock (or other securities) of the Company held by such Investor
(other than those included in the registration) during the one hundred eighty (180) day period
following the effective date of a registration statement of the Company filed under the Securities
Act (or such other period as may be requested by the Company or an underwriter to accommodate
regulatory restrictions on (i) the publication or other distribution of research reports and (ii)
analyst recommendations and opinions, including, but not limited to, the restrictions contained in
NASD Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto).
The obligations described in this Section 2.10 shall not apply to a registration relating solely to
employee benefit plans on Form S-l 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
such certificate with the second legend set forth in Section 2.8(c) hereof with respect to the
shares of Common Stock (or other securities) subject to the foregoing restriction until the end of
such one hundred eighty (180) day (or other) period. Each Investor agrees to execute a market
standoff agreement with said underwriters in customary form consistent with the provisions of this
Section 2.10.
2.11 Delay of Registration . No Investor shall have any right to take any action to restrain, enjoin, or otherwise delay
any registration as the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 2.
2.12 Transfer or Assignment of Registration Rights. The rights to cause the Company to register securities granted to an Investor by the
Company under this Section 2 may be transferred or assigned by an Investor only to a transferee or
assignee of not less than 100,000 shares of Registrable Securities or Warrant Shares, as the case
may be, (as presently constituted and subject to subsequent adjustments for stock splits, stock
dividends, reverse stock splits, and the like); provided that (i) such transfer or
assignment of Registrable Securities or Warrant Shares is effected in accordance with the terms of
Section 2.8 hereof and
applicable securities laws, (ii) the Company is given written notice prior to said transfer or
assignment, stating the name and address of the transferee or assignee and identifying the
securities with respect to which such registration rights are intended to be transferred or
assigned and (iii) the transferee or assignee of such rights assumes in writing the obligations of
such Investor under this Agreement, including without limitation the obligations set forth in
Section 2.10.
2.13 Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written
consent of a majority in interest of the Holders, enter into any agreement with any holder or
prospective holder of any securities of the Company giving such holder or prospective holder any
registration rights the terms of which are pari passu with or senior to the registration rights
granted to the Holders hereunder.
Section 3
Miscellaneous
Miscellaneous
3.1 Amendment. Except as expressly provided herein, neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
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referencing this
Agreement and signed by the Company and the Holders holding a majority of the Registrable
Securities (excluding any of such shares that have been sold to the public or pursuant to Rule
144); provided, that if any amendment, waiver, discharge or termination operates in a
manner that treats any Holder different from other Holders, the consent of such Holder shall also
be required for such amendment, waiver, discharge or termination. Each Investor holding Warrant
Shares acknowledges that any amendment that does not diminish such Investor’s right to participate
in a Company registration pursuant to Section 2.2 hereof shall not be deemed to operate in manner
that treats such Investor different from other Investors. Any such amendment, waiver, discharge or
termination effected in accordance with this paragraph shall be binding upon each Investor and each
future holder of all such securities of such Investor. Each Investor acknowledges that by the
operation of this paragraph, the holders of a majority of the Registrable Securities (excluding any
of such shares that have been sold to the public or pursuant to Rule 144) will have the right and
power to diminish or eliminate all rights of such Investor under this Agreement.
3.2 Notices. All notices and other communications required or permitted hereunder shall be in writing
and shall be mailed by registered or certified mail, postage prepaid, sent by facsimile or
electronic mail or otherwise delivered by hand or by messenger addressed:
(a) if to an Investor, at the Investor’s address, facsimile number or electronic mail address
as shown in the Company’s records, as may be updated in accordance with the provisions hereof;
(b) if to any Holder, at such address, facsimile number or electronic mail address as shown in
the Company’s records, or, until any such holder so furnishes an address, facsimile number or
electronic mail address to the Company, then to and at the address of the last holder of such
shares for which the Company has contact information in its records; or
(c) if to the Company, one copy should be sent to StarVox Communications, Inc., 0000 Xxxxxxx
Xxxxxxx, Xxx Xxxx, Xxxxxxxxxx 00000-0000, (000) 000-0000, Attn: Chief Executive Officer, or at such
other address as the Company shall have furnished to the Investors, with a copy to Xxxxxxx X.
Xxxxxx, Esq., Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C., 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx
00000.
Each such notice or other communication shall for all purposes of this Agreement be treated as
effective or having been given when delivered if delivered personally, or, if sent by mail, at the
earlier of its receipt or 72 hours after the same has been deposited in a regularly maintained
receptacle for the deposit of the United States mail, addressed and mailed as aforesaid or, if sent
by facsimile, upon confirmation of facsimile transfer or, if sent by electronic mail, upon
confirmation of delivery when directed to the electronic mail address set forth on Exhibit
A.
3.3 Governing Law. This Agreement shall be governed in all respects by the internal laws of the State of
California] as applied to agreements entered into among California residents to be performed
entirely within California, without regard to principles of conflicts of law.
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3.4 Successors and Assigns. This Agreement, and any and all rights, duties and obligations hereunder, shall not be
assigned, transferred, delegated or sublicensed by any Investor without the prior written consent
of the Company. Any attempt by an Investor without such permission to assign, transfer, delegate
or sublicense any rights, duties or obligations that arise under this Agreement shall be void.
Subject to the foregoing and except as otherwise provided herein, the provisions of this Agreement
shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto.
3.5 Entire Agreement. This Agreement and the exhibits hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof. No party hereto shall be liable
or bound to any other party in any manner with regard to the subjects hereof or thereof by any
warranties, representations or covenants except as specifically set forth herein.
3.6 Delays or Omissions. Except as expressly provided herein, no delay or omission to exercise any right, power or
remedy accruing to any party to this Agreement upon any breach or default of any other party under
this Agreement shall impair any such right, power or remedy of such non-defaulting party, nor
shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or
of or in any similar breach or default thereafter occurring, nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Agreement, or any waiver on the part of any party of any
provisions or conditions of this Agreement, must be in writing and shall be effective only to the
extent specifically set forth in such writing. All remedies, either under this Agreement or by law
or otherwise afforded to any party to this Agreement, shall be cumulative and not alternative.
3.7 Severability. If any provision of this Agreement becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, portions of such provision, or such provision in
its entirety, to the extent necessary, shall be severed from this Agreement, and such court will
replace such illegal, void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the same economic, business and
other purposes of the illegal, void or unenforceable provision. The balance of this Agreement
shall be enforceable in accordance with its terms.
3.8 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not
to be considered in construing or interpreting this Agreement. All references in this Agreement to
sections, paragraphs and exhibits shall, unless otherwise provided, refer to sections and
paragraphs hereof and exhibits attached hereto.
3.9 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be
enforceable against the parties that execute such counterparts, and all of which together shall
constitute one instrument.
3.10 Telecopy Execution and Delivery. A facsimile, telecopy or other reproduction of this Agreement may be executed by one or
more parties hereto and delivered by such party by facsimile or any similar electronic transmission
device pursuant to which the signature of or on behalf of such
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party can be seen. Such execution
and delivery shall be considered valid, binding and effective for all purposes. At the request of
any party hereto, all parties hereto agree to execute and deliver an original of this Agreement as
well as any facsimile, telecopy or other reproduction hereof.
3.11 Jurisdiction; Venue. With respect to any disputes arising out of or related to this Agreement, the parties
consent to the exclusive jurisdiction of, and venue in, the state courts in Santa Xxxxx County in
the State of California (or in the event of exclusive federal jurisdiction, the courts of the
Northern District of California).
3.12 Further Assurances. Each party hereto agrees to execute and deliver, by the proper exercise of its corporate,
limited liability company, partnership or other powers, all such other and additional instruments
and documents and do all such other acts and things as may be necessary to more fully effectuate
this Agreement.
3.13 Termination Upon Change of Control. Notwithstanding anything to the contrary herein, this Agreement (excluding any then-existing
obligations) shall terminate upon (a) the acquisition of the Company by another entity by means of
any transaction or series of related transactions to which the Company is party (including, without
limitation, any stock acquisition, reorganization, merger or consolidation but excluding any sale
of stock for capital raising purposes) other than a transaction or series of transactions in which
the holders of the voting securities of the Company outstanding immediately prior to such
transaction continue to retain (either by such voting securities remaining outstanding or by such
voting securities being converted into voting securities of the surviving entity), as a result of
shares in the Company held by such holders prior to such transaction, at least fifty percent (50%)
of the total voting power represented by the voting securities of the Corporation or such surviving
entity outstanding immediately after such transaction or series of transactions; or (b) a sale,
lease or other conveyance of all substantially all of the assets of the Company.
3.14 Conflict. In the event of any conflict between the terms of this Agreement and the Company’s
Certificate or its Bylaws, the terms of the Company’s Certificate or its Bylaws, as the case may
be, will control.
3.15 Attorneys’ Fees. In the event that any suit or action is instituted to enforce any provision in this
Agreement, the prevailing party in such dispute shall be entitled to recover from the losing party
such reasonable fees and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
3.16 Aggregation of Stock. All securities held or acquired by affiliated entities (including affiliated venture
capital funds) or persons shall be aggregated together for purposes of determining the availability
of any rights under this Agreement.
(Remainder of Page Intentionally Left Blank)
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IN WITNESS WHEREOF, the parties hereto have executed this Investors’ Rights Agreement
effective as of the day and year first above written.
