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EXHIBIT 10.16
NETLIBRARY, INC.
SECOND AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
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TABLE OF CONTENTS
PAGE
SECTION 1.GENERAL...............................................................................................2
1.1 Definitions...................................................................................2
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER...............................................................3
2.1 Restrictions on Transfer......................................................................3
2.2 Demand Registration...........................................................................4
2.3 Piggyback Registrations.......................................................................6
2.4 Form S-3 Registration.........................................................................8
2.5 Expenses of Registration......................................................................9
2.6 Obligations of the Company....................................................................9
2.7 Termination of Registration Rights............................................................11
2.8 Delay of Registration; Furnishing Information.................................................11
2.9 Indemnification...............................................................................12
2.10 Assignment of Registration Rights.............................................................14
2.11 Amendment of Registration Rights..............................................................14
2.12 Limitation on Subsequent Registration Rights..................................................14
2.13 "Market Stand-Off" Agreement; Agreement to Furnish Information................................15
2.14 Rule 144 Reporting............................................................................15
SECTION 3. COVENANTS OF THE COMPANY.............................................................................16
3.1 Basic Financial Information and Reporting.....................................................16
3.2 Inspection Rights.............................................................................17
3.3 Confidentiality of Records....................................................................17
3.4 Reservation of Common Stock...................................................................17
3.5 Stock Vesting.................................................................................18
3.6 Board of Directors Meetings...................................................................18
3.7 Proprietary Information and Inventions Agreement..............................................18
3.8 Approval......................................................................................18
3.9 Directors' Expenses...........................................................................18
3.10 Directors' Liability and Indemnification......................................................18
3.11 Compensation Committee........................................................................18
3.12 Indemnification and Advancement...............................................................19
3.13 Real Property Holding Corporation.............................................................20
3.14 Restrictions..................................................................................20
3.15 Management Non-Compete Agreements.............................................................21
3.16 Visitation Rights.............................................................................21
3.17 Termination of Covenants......................................................................21
SECTION 4. REEMPTIVE RIGHTS....................................................................................21
4.1 Subsequent Offerings..........................................................................21
4.2 Exercise of Rights............................................................................22
4.3 Issuance of Equity Securities to Other Persons................................................22
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4.4 Termination and Waiver of Preemptive Rights...................................................22
4.5 Transfer of Rights of Preemptive Rights.......................................................22
4.6 Excluded Securities...........................................................................22
SECTION 5. MISCELLANEOUS.......................................................................................24
5.1 Governing Law.................................................................................24
5.2 Survival......................................................................................24
5.3 Successors and Assigns........................................................................24
5.4 Entire Agreement..............................................................................24
5.5 Severability..................................................................................24
5.6 Amendment and Waiver..........................................................................24
5.7 Remedies; Delays or Omissions.................................................................25
5.8 Notices.......................................................................................25
5.9 Attorneys' Fees...............................................................................25
5.10 Titles and Subtitles..........................................................................26
5.11 Counterparts..................................................................................26
5.12 Waiver and Consent............................................................................26
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NETLIBRARY, INC.
SECOND AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
THIS SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (this
"Agreement") is entered into as of October 8, 1999, by and among NETLIBRARY,
INC., a Delaware corporation (the "Company"), the purchasers of the Company's
Series A Preferred Stock, $.001 par value per share ("Series A Stock"), the
purchasers of the Company's Series B Preferred Stock, $.001 par value per share
("Series B Stock"), and the purchasers of the Company's Series C Preferred
Stock, $.001 par value per share ("Series C Stock") set forth on Exhibit A
hereto, as it may be amended from time to time. The purchasers of the Series A
Stock, Series B Stock and Series C Stock shall be referred to hereinafter as the
"Investors" and each individually as an "Investor."
RECITALS
WHEREAS, the Company sold to certain Investors five million two hundred
twenty-five thousand (5,225,000) shares of its Series A Stock pursuant to a
certain Series A Preferred Stock Purchase Agreement (the "Series A Purchase
Agreement"), dated August 20, 1998 and as amended January 8, 1999 (the "Series A
Financing");
WHEREAS, the Company sold to certain Investors six million eight
hundred twenty-eight thousand one hundred seventy-six (6,828,176) shares of its
Series B Stock pursuant to a certain Series B Preferred Stock Purchase Agreement
(the "Series B Purchase Agreement"), dated May 17, 1999 (the "Series B
Financing");
WHEREAS, in connection with the Series B Financing, the Company and the
Investors in the Series A Financing and the Series B Financing entered into a
certain Amended and Restated Investors' Rights Agreement, dated May 17, 1999
(the "Investors' Rights Agreement");
WHEREAS, the Company proposes to sell shares of its Series C Stock to
certain Investors pursuant to the Series C Preferred Stock Purchase Agreement
(the "Series C Purchase Agreement") of even date herewith (the "Series C
Financing"); and
WHEREAS, in connection with the consummation of the Series C Financing
and as a condition of entering into the Series C Purchase Agreement, the Company
and the Investors desire to amend and restate the Investors' Rights Agreement to
extend to the Investors registration rights, information rights and other rights
as set forth below.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and in the Series A Purchase Agreement, Series B Purchase Agreement
and the Series C Purchase Agreement, the parties mutually agree as follows:
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SECTION 1 GENERAL
1.1 DEFINITIONS. As used in this Agreement the following terms shall
have the following respective meanings:
"AFFILIATE" of a Person shall mean any other person
controlling, controlled by or under common control with such Person, where
"control" means the possession, directly or indirectly, of the power to direct
the management and policies of a Person whether through the ownership or voting
securities, by contract or otherwise.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FORM S-3" means such form under the Securities Act as in
effect on the date hereof or any successor registration form under the
Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
"HOLDER" means any Person owning of record Registrable
Securities that have not been sold to the public or any assignee of record of
such Registrable Securities in accordance with Section 2.10 hereof.
"INITIAL OFFERING" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
"PERSON" means any natural person, or any association,
corporation, partnership, limited partnership, limited liability company, firm
or any other entity.
"QUALIFIED PUBLIC OFFERING" means a public offering of the
Company's Common Stock where the per-share public offering price is at least
twenty dollars ($20.00) per share (as adjusted for stock dividends, stock
splits, reverse stock splits, recapitalizations and the like), the net cash
proceeds to the Company are at least thirty million dollars ($30,000,000) and
the Company's Common Stock is listed on a national securities exchange or on the
NASDAQ National Market System of the NASDAQ Stock Market.
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing with the SEC a registration
statement in compliance with the Securities Act, and the declaration or ordering
of effectiveness of such registration statement or document by the SEC.
"REGISTRABLE SECURITIES" means (a) Common Stock of the Company
issued or issuable upon conversion of the Shares; and (b) any Common Stock of
the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
above-described securities. Notwithstanding the foregoing, Registrable
Securities shall not include any securities sold by a Person to the public
either pursuant to a registration statement
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or Rule 144 or sold in a private transaction in which the transferor's rights
under Section 2 of this Agreement are not assigned to the transferee.
"REGISTRABLE SECURITIES THEN OUTSTANDING" shall mean, at any
time, the number of shares determined by calculating the total number of shares
of the Company's Common Stock that are Registrable Securities and that either
(a) are then issued and outstanding or (b) are issuable pursuant to
then-exercisable or then-convertible securities.
"REGISTRATION EXPENSES" shall mean all expenses incurred by
the Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of underwriters and counsel for the Company, reasonable fees
and disbursements of a single special counsel for the Holders, blue sky fees and
expenses and the expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company).
"SEC" or "COMMISSION" means the Securities and Exchange
Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities.
"SHARES" shall mean the Company's Series A Stock issued
pursuant to the Series A Purchase Agreement, the Series B Stock issued pursuant
to the Series B Purchase Agreement and the Series C Stock issued pursuant to the
Series C Purchase Agreement and held by the Investors listed on Exhibit A hereto
and their permitted assigns.
2. REGISTRATION; RESTRICTIONS ON TRANSFER
2.1 RESTRICTIONS ON TRANSFER.
(a) Each Investor agrees not to make any disposition of all or
any portion of the Shares or Registrable Securities unless and until:
(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 this Agreement and such
registration statement; or
(ii) (A) The transferee has agreed in writing to be
bound by the terms of this Agreement, (B) such Investor shall have
notified the Company of the proposed disposition and shall have
furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition, and (C) if reasonably requested
by the Company, such Investor shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of
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such shares under the Securities Act. It is agreed that the Company
will not require opinions of counsel for transactions made pursuant to
Rule 144 except in unusual circumstances.
Notwithstanding the provisions of paragraphs (i) and (ii) above, no such
registration statement or opinion of counsel shall be necessary for a transfer
of Registrable Securities or Shares (A) by an Investor which is a partnership to
its partners or former partners in accordance with their partnership interests,
(B) by an Investor which is a corporation to its stockholders in accordance with
their interests in the corporation, (C) by an Investor which is a limited
liability company to its members or former members in accordance with their
interests in the limited liability company, (D) by an Investor to the Investor's
family member or trust, family limited partnership or family limited liability
company for the benefit of an individual Investor or members of the Investor's
family or (E) by an Investor to the Investor's Affiliates; provided that in each
case the transferee will be subject to the terms of this Agreement to the same
extent as if he, she or it were an original Investor hereunder.
(b) Each certificate representing Shares or Registrable
Securities 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 (THE "ACT") AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR
UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
(c) The Company shall reissue promptly unlegended certificates
at the request of any Investor thereof if the Investor shall have obtained an
opinion of counsel (which counsel may be counsel to the Company) reasonably
acceptable to the Company to the effect that the securities proposed to be
disposed of may lawfully be so disposed of without registration, qualification
or legend.
(d) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with respect
to such securities shall be removed upon receipt by the Company of an order of
the appropriate state securities (i.e., "Blue Sky") law, regulators or other
authority authorizing such removal.
2.2 DEMAND REGISTRATION.
(a) Subject to the conditions of this Section 2.2, if the
Company shall receive a written request from the Holders of twenty percent (20%)
or more of the Registrable Securities then outstanding (the "Initiating
Holders") that the Company file a registration statement under
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the Securities Act on Form S-1 or a similar form covering the registration of
Registrable Securities having an aggregate offering price to the public of at
least thirty million dollars ($30,000,000) (valued at the time of the request),
then the Company shall, within thirty (30) days of the receipt thereof, give
written notice of such request to all Holders, and subject to the limitations of
this Section 2.2, use its best efforts to effect, as soon as practicable, the
registration under the Securities Act of all Registrable Securities that the
Holders request to be registered.
(b) 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 2.2 or any request pursuant to Section 2.4 and the Company shall
include such information in the written notice referred to in Section 2.2(a) or
Section 2.4(a), as applicable. In such event, the right of any Holder to include
its Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company. Notwithstanding any
other provision of this Section 2.2 or Section 2.4, if the underwriter advises
the Company that marketing factors require a limitation of the number of
securities to be underwritten (including Registrable Securities) then the
Company shall so advise all Holders of Registrable Securities that would
otherwise be underwritten pursuant hereto, and the number of shares that may be
included in the underwriting shall be allocated among such Holders on a pro rata
basis based on the number of Registrable Securities held by each such Holder
compared to the number held by all Holders who have elected to participate
(including the Initiating Holders); provided, however, that the number of shares
of Registrable Securities to be included in such underwriting and registration
shall not be reduced unless all other securities of the Company are first
entirely excluded from the underwriting and registration. Any Registrable
Securities excluded or withdrawn from such underwriting shall be withdrawn from
the registration.
(c) The Company shall not be required to effect a registration
pursuant to this Section 2.2:
(i) until the earlier of October 8, 2002 or at least
one hundred eighty (180) days following the effective date of the
registration statement pertaining to the Initial Offering;
(ii) after the Company has effected three (3)
registrations pursuant to this Section 2.2, and such registrations have
been declared or ordered effective and no stop order was issued with
respect thereto;
(iii) during the period starting with the date of
filing of, and ending on the date ninety (90) days (or, in the case of
an underwritten offering, one hundred eighty (180) days) following the
effective date of, the registration statement pertaining to a
registered offering; provided that the Company uses commercially
reasonable good faith efforts to cause such registration statement to
become effective;
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(iv) if within thirty (30) days of receipt of a
written request from Initiating Holders pursuant to Section 2.2(a), the
Company gives notice to the Holders of the Company's intention to file
the Registration Statement for its Initial Offering within ninety (90)
days;
(v) if the Company shall furnish to Holders
requesting a registration statement pursuant to this Section 2.2, a
certificate signed by the Chairman of the Board stating that in the
good faith judgment of the Board of Directors of the Company (the
"Board"), it would be seriously detrimental to the Company and its
stockholders for such registration statement to be effected at such
time, in which event the Company shall have the right to defer such
filing for a period of not more than ninety (90) days after receipt of
the request of the Initiating Holders; provided that such right to
delay a request hereunder or pursuant to Section 2.4(b)(iii) below
shall be exercised by the Company not more than once in any twelve (12)
month period; or
(vi) if the Initiating Holders propose to dispose of
shares of Registrable Securities that may be immediately registered on
Form S-3 pursuant to a request made pursuant to Section 2.4 below.
(d) Notwithstanding anything to the contrary in this
Agreement, if the one hundred eighty (180)-day period following the effective
date of the registration statement pertaining to the Initial Offering described
in Section 2.2(c)(i) (the "Lock-up Period") ends before October 8, 2000, Holders
may provide the request described in Section 2.2(a) at any time at least ninety
(90) days after the date of the closing of the Initial Offering. Upon receipt of
such request, the Company shall give written notice of such request to all
Holders as described in Section 2.2(a), and the other Holders shall have the
participation rights set forth in Section 2.2(a). The Company shall use its best
efforts to effect, by a date no later than the first business day after the end
of the Lock-up Period, and to keep effective for a period of 90 days or until
October 8, 2000, whichever is the later, a registration under the Securities Act
of all Registrable Securities that the Holders request to be registered, subject
to the limitations in this Section 2.2(d). The Company shall file a registration
statement with 30 days after receipt of such request by the Initiating Holders,
and shall be obligated to include Registrable Securities of Holders in the
registration under this Section 2.2(d) only to the extent that, if the Company
desires to raise additional capital through registration at the same time, in
the sole discretion of the Company's investment bankers, the Company will be
able to complete an offering at an aggregate size sufficient to satisfy the
Company's requirements for additional capital and the requirements of the
Holders requesting to participate. To the extent that the Registrable Securities
of all Holders requesting to participate cannot be included in the offering, the
number of Registrable Securities that may be included shall be allocated among
the Holders requesting to participate in the same manner as provided in Section
2.2(b). The Company shall have no obligation to keep the registration statement
filed under this Section 2.2(d) effective beyond the later of the last day of
the 90-day period following the end of the Lock-up Period and October 8, 2000.
2.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registrable Securities in writing at least fifteen (15) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
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Company, but excluding registration statements relating to employee benefit
plans or with respect to corporate reorganizations or other transactions under
Rule 145 of the Securities Act) and will afford each such Holder an opportunity
to include in such registration statement all or part of such Registrable
Securities held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
shall, within fifteen (15) days after the above-described notice from the
Company, so notify the Company in writing. Such notice shall state the intended
method of disposition of the Registrable Securities by such Holder. If a Holder
decides not to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, such Holder shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
(a) UNDERWRITING. If the registration statement under which
the Company gives notice under this Section 2.3 is for an underwritten offering,
the Company shall so advise the Holders. In such event, the right of any such
Holder to be included in a registration pursuant to this Section 2.3 shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their Registrable
Securities through such underwriting shall enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting by the Company. Notwithstanding any other provision of the
Agreement, if the underwriter determines in good faith that marketing factors
require a limitation of the number of shares to be underwritten, the number of
shares that may be included in the underwriting shall be allocated, first, to
the Company; second, to the Holders on a pro rata basis based on the number of
Registrable Securities held by each such Holder compared to the number held by
all Holders who have elected to participate; and third, to any stockholder of
the Company (other than a Holder) on a pro rata basis. No such reduction shall
reduce the securities being offered by the Company for its own account to be
included in the registration and underwriting. In no event will shares of any
other selling stockholder be included in such registration that would reduce the
number of shares that may be included by Holders without the written consent of
Holders of not less than two-thirds (2/3) of the Registrable Securities proposed
to be sold in the offering. If any Holder disapproves of the terms of any such
underwriting, such Holder may elect to withdraw from such registration by
written notice to the Company and the underwriter, delivered at least ten (10)
business days prior to the effective date of the registration statement. Any
Registrable Securities excluded or withdrawn from such underwriting shall be
excluded and withdrawn from the registration. For any Holder which is a
partnership or corporation, the partners, retired partners and stockholders of
such Holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing Persons shall be
deemed to be a single "Holder", and any pro rata reduction with respect to such
"Holder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"Holder," as defined in this sentence.
(b) RIGHT TO TERMINATE REGISTRATION. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
Section 2.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in
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such registration. The Registration Expenses of such withdrawn registration
shall be borne by the Company in accordance with Section 2.5 hereof.
2.4 FORM S-3 REGISTRATION. In case the Company shall receive from any
Holder or Holders a written request or requests that the Company effect a
registration on Form S-3 (or any successor to Form S-3) or any similar
short-form registration statement and any related qualification or compliance
with respect to all or a part of the Registrable Securities owned by such Holder
or Holders, the Company will:
(a) within five business days give written notice of the
proposed registration, and any related qualification or compliance, to all other
Holders; and
(b) as soon as practicable, but no later than 20 business days
after receipt of such request, file with the SEC a registration statement on
Form S-3 and use its best efforts to effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.4:
(i) if Form S-3 (or any successor or similar form) is
not available for such offering by the Holders (other than due to an
act or omission of the Company, in which case the Company will be
required to effect the registration contemplated by this Section by
using Form S-1 or a similar form), or
(ii) if the Holders, together with the holders of any
other securities of the Company that are entitled to inclusion in such
registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public of less than
five million dollars ($5,000,000) (valued at the time of the request),
or
(iii) if the Company shall furnish to the Holders a
certificate signed by the Chairman of the Board of the Company stating
that in the good faith judgment of the Board of the Company, it would
be seriously detrimental to the Company and its stockholders for such
Form S-3 registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than ninety (90) days
after receipt of the request of the Holder or Holders under this
Section 2.4; provided, that such right to delay a request hereunder or
pursuant to Section 2.2(c)(v) above shall be exercised by the Company
not more than once in any twelve (12) month period, or
(iv) if the Company has, within the twelve (12) month
period preceding the date of such request, already effected two (2)
registrations on Form S-3 for the Holders pursuant to this Section 2.4,
or
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(v) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a
general consent to service of process in effecting such registration,
qualification or compliance.
(c) Subject to the foregoing, the Company shall file a Form
S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable (but no later
than 20 business days) after receipt of the request or requests of the Holders.
Registrations effected pursuant to this Section 2.4 shall not be counted as
demands for registration or registrations effected pursuant to Sections 2.2 or
2.3, respectively. All such Registration Expenses incurred in connection with
registrations requested pursuant to this Section 2.4 after the first two (2)
registrations shall be paid by the selling Holders pro rata in proportion to the
number of Registrable Securities sold by each.
2.5 EXPENSES OF REGISTRATION. Except as specifically provided herein,
all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 or any registration under
Section 2.3 or Section 2.4 herein shall be borne by the Company. All Selling
Expenses incurred in connection with any registrations hereunder shall be borne
by the Holders of the securities so registered pro rata on the basis of the
number of shares so registered by each such Holder compared to the total number
of Registrable Securities sold pursuant to the registration. The Company shall
not, however, be required to pay for expenses of any registration proceeding
begun pursuant to Section 2.2 or 2.4, the request for which has been
subsequently withdrawn by the Initiating Holders unless (a) the withdrawal is
based upon material adverse information concerning the Company of which the
Initiating Holders were not aware at the time of such request or a material
adverse change in market conditions or (b) the Holders of a majority of
Registrable Securities agree to forfeit their right to one requested
registration pursuant to Section 2.2 or Section 2.4, as applicable, in which
event such right shall be forfeited by all Holders. If the Holders are required
to pay the Registration Expenses, such expenses shall be borne by the holders of
securities (including Registrable Securities) requesting such registration pro
rata on the basis of the number of Registrable Securities for which registration
was requested as compared to the total number of securities registered. If the
Company is required to pay the Registration Expenses of a withdrawn offering
pursuant to clause (a) above, then the Holders shall not forfeit their rights
pursuant to Section 2.2 or Section 2.4 to a demand registration.
2.6 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective (provided that before filing a
registration statement or prospectus or any amendments or supplements thereto,
the Company shall furnish to the counsel selected by the holders of a majority
of the Registrable Securities covered by such registration statement a list
(and, if requested within five (5) days thereof, copies) of all such documents
proposed to be filed, and, upon the request of the Holders of a majority of the
Registrable Securities registered thereunder, keep such registration statement
effective for up to ninety (90) days or, if earlier, until the Holder or Holders
have completed the distribution related thereto. Unless otherwise provided in
this Agreement, the Company shall not be required to file, cause to become
effective or maintain the
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effectiveness of any registration statement that contemplates a distribution of
securities on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act.
(b) Prepare and file with the SEC 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
paragraph (a) above.
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(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 jurisdictions as shall be reasonably
requested by the Holders; 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) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing and, at the request of the majority of such Holders, the Company shall
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall 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 not misleading.
(g) Use its best efforts to furnish, on the date that such
Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters, (i) an opinion, dated as of such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and (ii)
a letter addressed to the underwriters dated as of such date, from the
independent certified public accountants of the Company, in form and substance
as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering.
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(h) Cause all Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the NASD automated quotation
system and, if listed on the NASD automated quotation system, use its reasonable
best efforts to secure designation of all such Registrable Securities covered by
such registration statement as a NASDAQ "national market system security" within
the meaning of Rule 11Aa2-1 of the SEC or, failing that, to secure NASDAQ
authorization for such Registrable Securities and, without limiting the
generality of the foregoing, to arrange for at least two market makers to
register as such with respect to such Registrable Securities with the NASD.
(i) Make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement, in each case
subject to the requirement that recipients execute appropriate confidentiality
agreements.
(j) Take all such other actions as the Holders of a majority
of the Registrable Securities being sold or the underwriters, if any, reasonably
request in order to expedite or facilitate the disposition of such Registrable
Securities (including effecting a stock split or a combination of shares) and
otherwise use its reasonable best efforts to comply with all applicable rules
and regulations of the SEC.
2.7 TERMINATION OF REGISTRATION RIGHTS. The right of any Holder to
request inclusion of Registrable Securities in any registration pursuant to this
Section 2 shall terminate if and when either (a) both of the following
conditions are satisfied with respect to such Holder: (i) such Holder (together
with its Affiliates, partners and former partners) holds less than 1% of the
Company's outstanding Common Stock (treating all shares of convertible Preferred
Stock on an as converted basis) and (ii) all Registrable Securities held by and
issuable to such Holder (and its Affiliates, partners, former partners, members
and former members) may be sold under Rule 144 (without regard to Paragraph (k)
of Rule 144) during any ninety (90) day period, or (b) all Registrable
Securities held by such Holder may be sold under Paragraph (k) of Rule 144.
2.8 DELAY OF REGISTRATION; FURNISHING INFORMATION.
(a) No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the
selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities.
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(c) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.2 or Section 2.4 if, due to the
operation of subsection 2.2(b), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in Section 2.2 or Section 2.4,
whichever is applicable.
2.9 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the partners, officers and directors of each
Holder, any underwriter (as defined in the Securities Act) for such Holder and
each person, if any, who controls such Holder or underwriter within the meaning
of the Securities Act or the Exchange Act, against any losses, claims, damages,
or liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or violations
(collectively a "Violation") by the Company: (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the 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, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by such registration statement; and the Company will pay as incurred to
each such Holder, partner, officer, director, underwriter or controlling person
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this Section 2.9(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 or delayed, nor shall
the Company be liable in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Holder, partner, officer, director, underwriter or controlling person of
such Holder.
(b) To the extent permitted by law, each Holder will,
severally and not jointly, if Registrable Securities held by such Holder are
included in the securities as to which such registration, qualifications or
compliance is being effected, indemnify and hold harmless the Company, each of
its directors, its officers and each person, if any, who controls the Company
within the meaning of the Securities Act, any underwriter and any other Holder
selling securities under such registration statement or any of such other
Holder's partners, directors or officers or any person who controls such Holder,
against any losses, claims, damages or liabilities (joint or several) to which
the Company or any such director, officer, controlling person, underwriter or
other such Holder, or partner, director, officer or controlling person of such
other Holder may
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become subject under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder under an
instrument duly executed by such Holder and stated to be specifically for use in
connection with such registration; and each such Holder will pay as incurred its
percentage share of any legal or other expenses reasonably incurred by the
Company or any such director, officer, controlling person, underwriter or other
Holder, or partner, officer, director or controlling person of such other Holder
in connection with investigating or defending any such loss, claim, damage,
liability or action if it is judicially determined that there was such a
Violation; provided, however, that the indemnity agreement contained in this
Section 2.9(b) 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 Holder, which consent shall not be unreasonably withheld;
provided further, that in no event shall the aggregate amount of any indemnity
under this Section 2.9 payable by any Holder exceed the net proceeds from the
offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses of such
counsel to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if and to the
extent materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of liability to the indemnified party under this
Section 2.9, but the omission so to deliver written notice to the indemnifying
party will not relieve it of any liability that it may have to any indemnified
party otherwise than under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability 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 Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law 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,
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knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by a
Holder hereunder exceed the net proceeds from the offering received by such
Holder.
(e) The obligations of the Company and the Holders under this
Section 2.9 shall survive completion of any offering of Registrable Securities
in a registration statement and the termination of this Agreement. 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 which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation.
2.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company
to register Registrable Securities pursuant to this Section 2 may be assigned by
a Holder to a transferee or assignee of Registrable Securities that (a) is a
subsidiary, parent, general partner, affiliate, limited partner, retired
partner, member or retired member of a Holder, (b) is a Holder's family member
or trust for the benefit of an individual Holder, (c) acquires at least two
hundred thousand (200,000) shares of Registrable Securities (as adjusted for
stock splits and combinations), or (d) is already an existing Holder; provided,
however, (i) the transferor shall furnish to the Company written notice of the
name and address of such transferee or assignee and the securities with respect
to which such registration rights are being assigned and (ii) such transferee
shall agree in writing to be subject to all restrictions set forth in this
Agreement.
2.11 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 2
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of at least two-thirds (2/3) of
the Registrable Securities then outstanding; provided, that if an amendment does
not treat all Holders in the same fashion, it shall not be effective against
Holders who are materially adversely affected (relative to other Holders) by the
amendment unless such amendment is approved in writing by such adversely
affected Holders. Any amendment or waiver effected in accordance with this
Section 2.11 shall be binding upon each Holder and the Company. By acceptance of
any benefits under this Section 2, Holders of Registrable Securities hereby
agree to be bound by the provisions hereunder.
2.12 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. The Company
represents and warrants that it is not a party to, or otherwise subject to, any
other agreement granting registration rights to any other Person with respect to
any securities of the Company. After the date of this Agreement, the Company
shall not, without the prior written consent of the Holders of two-thirds (2/3)
of the Registrable Securities then outstanding, enter into any agreement with
any holder or prospective holder of any securities of the Company that would
grant such holder registration rights pari passu or senior to those granted to
the Holders hereunder.
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2.13 "MARKET STAND-OFF" AGREEMENT; AGREEMENT TO FURNISH INFORMATION.
(a) Each Holder hereby agrees that such Holder shall not sell
or otherwise transfer or dispose of any Common Stock (or other securities) of
the Company held by such Holder (other than those included in any registration
pursuant to this Agreement) for a period specified by the representative of the
underwriters of Common Stock (or other securities) of the Company not to exceed
one hundred eighty (180) days following the effective date of a registration
statement of the Company filed under the Securities Act (other than a
registration statement on Form S-4 or S-8); provided, that the Company has
caused all officers and directors of the Company and holders of at least one
percent (1%) of the Company's voting securities to enter into similar
agreements, and that the underwriter will not release any single party from the
provisions of such agreements unless all such parties are released.
(b) The Company hereby agrees that it shall (i) not effect any
public sale or distribution of any Common Stock (or other securities) of the
Company (other than those included in the registration) for a period specified
by the representative of the underwriters of Common Stock (or other securities)
of the Company not to exceed one hundred eight (180) days following the
effective date of any registration statement filed by the Company under the
Securities Act (other than on Form S-4 or S-8), subject to the right of the
underwriter's representative to waive such restriction, and (ii) use reasonable
efforts to cause each officer and director and each holder of at least 50,000
shares of Common Stock (or other securities, and including in such calculation
any options (whether vested or unvested) for Common Stock or any other
securities of the Company) purchased from the Company at any time after the date
hereof (other than in a registered public offering) to agree not to sell or
otherwise transfer or dispose of any such securities during such period (except
as part of such underwritten registration, if otherwise permitted) unless the
underwriters managing the registered public offering otherwise agree.
(c) Each Holder agrees to execute and deliver such other
agreements as may be reasonably requested by the Company or the underwriter
which are consistent with the foregoing or which are necessary to give further
effect thereto. In addition, if requested by the Company or the representative
of the underwriters of Common Stock (or other securities) of the Company, each
Holder shall provide, within ten (10) days of such request, such information as
may be required by the Company or such representative in connection with the
completion of any public offering of the Company's securities pursuant to a
registration statement filed under the Securities Act. The obligations described
in this Section 2.13 shall 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 Commission
Rule 145 transaction on Form S-4 or similar forms that may be promulgated in the
future. The Company may impose stop-transfer instructions with respect to the
shares of Common Stock (or other securities) subject to the foregoing
restriction until the end of said one hundred eighty (180) day period.
2.14 RULE 144 REPORTING. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC, which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:
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(a) Make and keep public information available, as those terms
are understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(b) File with the SEC, in a timely manner, all reports and
other documents required of the Company under the Exchange Act; and
(c) So long as a Holder owns any Registrable Securities,
furnish to such Holder forthwith upon request: a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144 of
the Securities Act, and of 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 as a
Holder may reasonably request in availing itself of any rule or regulation of
the SEC allowing it to sell any such securities without registration.
SECTION 3. COVENANTS OF THE COMPANY
3.1 BASIC FINANCIAL INFORMATION AND REPORTING.
(a) The Company will maintain true books and records of
account in which full and correct entries will be made of all its business
transactions pursuant to a system of accounting established and administered in
accordance with generally accepted accounting principles consistently applied,
and will set aside on its books all such proper accruals and reserves as shall
be required under generally accepted accounting principles consistently applied.
(b) As soon as practicable after the end of each fiscal year
of the Company, and in any event within one hundred twenty (120) days
thereafter, the Company will furnish each Investor an audited balance sheet of
the Company, as at the end of such fiscal year, and an audited statement of
income, an audited statement of cash flows and an audited statement of
stockholders' equity of the Company, for such year, all prepared in accordance
with generally accepted accounting principles consistently applied and setting
forth in each case in comparative form the financial information for the
previous fiscal year, all in reasonable detail. Such financial statements shall
be accompanied by a (i) report and opinion thereon by the Company's independent
public accountants and (ii) a narrative report prepared by the management of the
Company describing the progress, status and future plans of the Company as of
such date.
(c) The Company will furnish each Investor, as soon as
practicable after the end of the first, second and third quarterly accounting
periods in each fiscal year of the Company, and in any event within forty-five
(45) days thereafter, an unaudited balance sheet of the Company as of the end of
each such quarterly period, an unaudited statement of income, and an unaudited
statement of cash flows of the Company for such period and for the current
fiscal year to date, prepared in accordance with generally accepted accounting
principles, with the exception that no notes need be attached to such statements
and year-end audit adjustments may not have been made.
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(d) The Company shall prepare and furnish each Investor an
annual budget and operating plan for approval by the Board at least thirty (30)
days prior to the beginning of each fiscal year. In addition, the Company agrees
to prepare and furnish each Investor a revised annual budget and operating plan
for the fiscal year ending March 31, 2000 (prepared on a monthly basis) within
forty-five (45) days of the date hereof.
(e) The Company shall furnish each Investor, as soon as
practicable after the end of each month, and in any event within twenty (20)
days thereafter, a balance sheet of the Company as of the end of each such
month, and a statement of income and a statement of cash flows of the Company
for such month and for the current fiscal year to date, including a comparison
to budgeted figures for such period, prepared in accordance with generally
accepted accounting principles consistently applied, with the exception that no
notes need be attached to such statements and year-end audit adjustments may not
have been made.
(f) The Company shall furnish each Investor holding, by itself
or together with its Affiliates, 390,000 or more Shares (as adjusted for stock
splits, recapitalizations and the like), promptly upon receipt thereof, any
additional reports, management letters and other detailed information concerning
significant aspects of the Company's operations or financial affairs given to
the Company by its independent accountants (and not otherwise contained in other
materials provided hereunder) and such other information and financial data
concerning the Company as any Investor may reasonably request.
3.2 INSPECTION RIGHTS. Each Investor, and its authorized
representatives, shall have the right to visit and inspect any of the properties
of the Company or any of its subsidiaries, and to discuss the affairs, finances
and accounts of the Company or any of its subsidiaries with its officers, and to
review such information as is reasonably requested all at such reasonable times
and as often as may be reasonably requested; provided, however, that the Company
shall not be obligated under this Section 3.2 with respect to a competitor of
the Company or with respect to information which the Board determines in good
faith is confidential and should not, therefore, be disclosed.
3.3 CONFIDENTIALITY OF RECORDS. Each Investor agrees to use, and to use
its best efforts to insure that its authorized representatives use, the same
degree of care as such Investor uses to protect its own confidential information
to keep confidential any information furnished to it which the Company
identifies as being confidential or proprietary (so long as such information is
not in the public domain), except that such Investor may disclose such
proprietary or confidential information (a) to any partner, subsidiary or parent
of such Investor for the purpose of evaluating its investment in the Company as
long as such partner, subsidiary or parent is advised of the confidentiality
provisions of this Section 3.3, and (b) as may be required by law or in
connection with the institution or defense of any claim pursuant to this
Agreement or other claims which may be the subject of judicial proceedings.
3.4 RESERVATION OF COMMON STOCK. The Company will at all times reserve
and keep available, solely for issuance and delivery upon the conversion of the
Shares, all Common Stock issuable from time to time upon such conversion.
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3.5 STOCK VESTING. Unless otherwise approved by the Board (including at
least one Series A Preferred Designee and one Series B Preferred Designee (as
defined in the Second Amended and Restated Stockholders Agreement, dated as of
the date hereof, by and among the Company, the Investors and certain
stockholders of the Company)) all stock options and other stock equivalents
issued after the date of this Agreement to employees, directors, consultants and
other service providers shall be subject to vesting that is no less favorable to
the Company than as follows: (a) twenty-five percent (25%) of such stock shall
vest at the end of the first year following the earlier of the date of issuance
or such person's services commencement date with the Company, and (b)
seventy-five percent (75%) of such stock shall vest monthly over the succeeding
three (3) years. With respect to any shares of stock purchased by any such
person, the Company's repurchase option shall provide that upon such person's
termination of employment or service with the Company, with or without cause,
the Company or its assignee (to the extent permissible under applicable
securities laws and other laws) shall have the option to purchase at cost any
unvested shares of stock held by such person.
3.6 BOARD OF DIRECTORS MEETINGS. The Board shall hold at least six (6)
in-person meetings each year.
3.7 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. The Company shall
require all of its employees and consultants to execute and deliver a
Proprietary Information and Inventions Agreement substantially in the form
attached to the Series C Purchase Agreement as Exhibit F or in an alternative
form providing substantially the same or better protection to the Company as
such form.
3.8 APPROVAL. The Company shall not without the approval of a majority
of the non-interested members of the Board, with all non-interested Directors
voting, authorize or enter into any transactions with any director or management
employee, or members of such director's or employee's immediate family, or any
entity that is an Affiliate of any director or employee or members of his or her
family.
3.9 DIRECTORS' EXPENSES. The reasonable out-of-pocket and travel
expenses of each Director incurred to attend Board or Board Committee meetings
shall be reimbursed by the Company.
3.10 DIRECTORS' LIABILITY AND INDEMNIFICATION. The Company's Third
Amended and Restated Certificate of Incorporation and Bylaws shall provide (a)
for elimination of the liability of directors to the maximum extent permitted by
law and (b) for indemnification of directors for acts on behalf of the Company
to the maximum extent permitted by law.
3.11 COMPENSATION COMMITTEE. Promptly after the date hereof, the Board
will establish a compensation committee and shall delegate those duties and
powers as are customarily performed by such committee, including the power to
review and approve compensation arrangements with the Company's officers. Such
compensation committee shall not include any representative or member of the
Company's management.
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3.12 INDEMNIFICATION AND ADVANCEMENT.
(a) The Company hereby agrees to hold harmless and indemnify
the Investors, the Investors' direct and indirect subsidiaries, affiliated
entities and corporations, and each of their partners, officers, directors,
employees, stockholders, agents, and representatives (collectively, referred to
as the "Investor Indemnitees") against any and all expenses (including
attorneys' fees), damages, judgments, fines, amounts paid in settlements, or any
other amounts that an Investor Indemnitee incurs as a result of any claim or
claims made against it in connection with any threatened, pending or completed
action, suit, arbitration, investigation or other proceeding arising out of, or
relating to the Investors' actions in connection with any transaction undertaken
in connection with this Agreement and the Related Agreements executed
simultaneously herewith; provided, however, that no Investor Indemnitee shall be
entitled to be held harmless or indemnified by the Company for acts, conduct or
omissions as to which there has been a final adjudication that such Investor
Indemnitee engaged in intentional misconduct or in knowing and culpable
violation of the law.
(b) The Company shall reimburse, promptly following request
therefor, all reasonable expenses incurred by an Investor Indemnitee in
connection with any threatened, pending or completed action, suit, arbitration,
investigation or other proceeding arising out of, or relating to, the Investors'
actions in connection with any transaction undertaken in connection with this
Agreement and the Related Agreements executed simultaneously herewith; provided,
however, that no Investor Indemnitee shall be entitled to reimbursement in
connection with acts, conduct or omissions as to which there has been a final
adjudication that such Investor Indemnitee engaged in intentional misconduct, in
knowing and culpable violation of the law.
(c) The Company's indemnity obligations set forth above are
subject to the applicable Investors providing prompt written notice of a claim,
to the extent any delay in providing notice is prejudicial to the Company. The
Company shall control the defense of any such action and, at its discretion, may
enter into a stipulation of discontinuance or settlement thereof; provided, that
the Company may not discontinue any action or settle any claim in a manner that
does not unconditionally release the applicable Investors from any and all
liabilities without such Investors' prior written approval. The Investors shall,
at the Company's expense and reasonable request, cooperate with the Company in
any such defense and shall make available to the Company at the Company's
expense all those persons and documents (excluding attorney/client or attorney
work product materials) reasonably required by the Company in the defense of any
such action. The Investors may, at their expense, assist in such defense.
(d) The Company's liability to any Investor Indemnitee under
this section shall be limited to the amount received by the Company from such
Investor Indemnitee, and the Company's aggregate cumulative liability under this
Section shall be limited to the amount received by the Company pursuant to the
transaction contemplated by this Agreement.
(e) The indemnity obligation of the Company under this Section
3.12 is in addition to the Company's indemnity obligations under Section 2.9.
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3.13 REAL PROPERTY HOLDING CORPORATION. The Company covenants that it
will operate in a manner such that it will not become a "United States real
property holding corporation" ("USRPHC") as that term is defined in Section
897(c)(2) of the Internal Revenue Code of 1986, as amended, and the regulations
thereunder ("FIRPTA"). The Company agrees to make determinations as to its
status as a USRPHC, and will file statements concerning those determinations
with the Internal Revenue Service, in the manner and at the times required under
Reg. Section 1.897-2(h), or any supplementary or successor provision thereto.
Within thirty (30) days of a request from an Investor or any of its partners,
the Company will inform the requesting party, in the manner set forth in Reg.
Section 1.897- 2(h)(1)(iv) or any supplementary or successor provision thereto,
whether that party's interest in the Company constitutes a United States real
property interest (within the meaning of Internal Revenue Code Section 897(c)(1)
and the regulations thereunder) and whether the Company has provided to the
Internal Revenue Service all required notices as to its USRPHC status.
3.14 RESTRICTIONS. So long as any Series A Stock or Series B Stock or
Series C Stock remains outstanding, the Company shall not, without the prior
written consent of the holders of at least a majority of the outstanding Series
A Stock, the Series B Stock and the Series C Stock (voting collectively):
(a) make any loans or advances to, guarantees for the benefit
of, or investments in, any Person, except for (i) reasonable advances to
employees in the ordinary course of business (which such advances shall not
exceed $100,000 at any time); (ii) investments or deposits having a stated
maturity no longer than one year from the date the Company makes such investment
in (A) obligations of the United States government or any agency thereof or
obligations guaranteed by the United States government, (B) certificates of
deposit of commercial banks having combined capital and surplus of at least $50
million, (C) commercial paper with a rating of at least "Prime-1" by Xxxxx'x
Investors Service, Inc.; or (D) a money market fund investing primarily in the
investments described in clauses (A), (B) and/or (C); (iii) advances to
publishers, software licensors, conversion contractors or other contractors,
trade shows, vendors, etc. in the ordinary course of business; (iv) deposits or
advances in connection with office or other leases approved by the Board and
related tenant finish work; and (v) deposits (not to exceed $1.0 million at any
one time) with advertising agencies or similar organizations in the ordinary
course of business.
(b) liquidate, dissolve, merge or effect a recapitalization or
reorganization in any form of transaction (including, without limitation, any
reorganization into a limited liability company, a partnership or any other
non-corporate entity which is treated as a partnership for federal income tax
purposes); or
(c) acquire any interest in any Person or business (whether by
a purchase of assets, purchase of stock, merger or otherwise), or enter into any
joint venture, involving an aggregate consideration (including, without
limitation, the assumption of liabilities, whether direct or indirect) exceeding
$1,000,000 in any twelve-month period.
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3.15 MANAGEMENT NON-COMPETE AGREEMENTS. The Company shall use its best
efforts to cause each employee of the Company holding a position of Executive
Vice President or higher to execute a non-competition agreement in a form
reasonably satisfactory to the Board.
3.16 VISITATION RIGHTS. Each Investor who owns, together with its
Affiliates, at least 390,000 shares of either Series A Stock, Series B Stock or
Series C Stock shall be entitled to the rights under this Section 3.16. The
Company shall provide a representative of each Investor entitled to the rights
under this Section 3.16 with copies of all notices, minutes, consents, and all
other materials that the Company provides to its directors as and when such
materials are delivered to the directors, and shall allow a representative of
such Investor to attend all meetings of the Board of Directors in a nonvoting
observer capacity, except that such Investor may be excluded from access to any
meeting or portion thereof if such meeting or portion constitutes and executive
session limited to Board members or if such access would adversely affect the
attorney-client privilege between the Company and its counsel. Upon reasonable
notice and at a scheduled meeting of the Board or such other reasonable time, if
any, as the Board may determine, such Investor's representative may address the
Board of Directors with respect to the Investor's concerns regarding significant
business issues facing the Company. Each Investor agrees, and shall cause any
representative under this Section 3.16 to agree, to hold in confidence and trust
in a fiduciary capacity and not disclose any confidential information provided
to or learned by it in connection with its rights under this Section 3.16.
3.17 TERMINATION OF COVENANTS. All covenants of the Company contained
in Section 3 of this Agreement shall expire and terminate as to each Investor
upon the earlier of (i) the effective date of the registration statement
pertaining to a Qualified Public Offering or (ii) the sale of all or
substantially all of the assets of the Company, other than in a restructuring
transaction.
SECTION 4 PREEMPTIVE RIGHTS.
4.1 SUBSEQUENT OFFERINGS. Each Investor shall have a preemptive right
to purchase, on the same terms and conditions as offered to other purchasers,
its pro rata share of all Equity Securities, as defined below, that the Company
may, from time to time, propose to sell and issue after the date of this
Agreement, other than the Equity Securities excluded by Section 4.6 hereof. Each
Investor's pro rata share is equal to the ratio of (a) the number of shares of
the Company's Common Stock (including all shares of Common Stock issued or
issuable upon conversion of the Shares) of which such Investor is deemed to be a
holder immediately prior to the issuance of such Equity Securities to (b) the
total number of shares of the Company's outstanding Common Stock (including all
shares of Common Stock issued or issuable upon conversion of the Shares or upon
the exercise of any outstanding warrants or options) immediately prior to the
issuance of the Equity Securities. The term "Equity Securities" shall mean (i)
any Common Stock, Preferred Stock or other security of the Company, (ii) any
security convertible, with or without consideration, into any Common Stock,
Preferred Stock or other security (including any option to purchase such a
convertible security), (iii) any security carrying any warrant or right to
subscribe to or purchase any Common Stock, Preferred Stock or other security or
(iv) any such warrant or right.
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4.2 EXERCISE OF RIGHTS. If the Company proposes to issue any Equity
Securities, it shall give each Investor written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. Each Investor shall have fifteen
(15) days from the giving of such notice to agree to purchase its pro rata share
of the Equity Securities for the price and upon the terms and conditions
specified in the notice by giving written notice to the Company and stating
therein the quantity of Equity Securities to be purchased. Notwithstanding the
foregoing, the Company shall not be required to offer or sell such Equity
Securities to any Investor who would cause the Company to be in violation of
applicable federal securities laws by virtue of such offer or sale.
4.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If not all of the
Investors elect to purchase their pro rata share of the Equity Securities, then
the Company shall promptly notify in writing such Investors who do so elect and
shall offer such Investors the right to acquire such unsubscribed shares. Each
such Investor shall have five (5) days after receipt of such notice to notify
the Company of its election to purchase all or a portion thereof of the
unsubscribed shares. If any of the Investors fails to exercise in full its
preemptive rights, the Company shall have ninety (90) days thereafter to sell
the Equity Securities in respect of which such Investor's rights were not
exercised, at a price and upon general terms and conditions materially no more
favorable to the purchasers thereof than specified in the Company's notice to
the Investors pursuant to Section 4.2 hereof. If the Company has not sold such
Equity Securities within one hundred twenty (120) days of the initial notice
provided pursuant to Section 4.2, the Company shall not thereafter issue or sell
any Equity Securities, without first offering such securities to the Investors
in the manner provided above.
4.4 TERMINATION AND WAIVER OF PREEMPTIVE RIGHTS. The preemptive rights
established by this Section 4 shall terminate upon the closing of the Company's
Qualified Public Offering. Notwithstanding the foregoing, the preemptive rights
established by this Section 4 shall terminate as to any Investor, and shall not
apply to any Investor, who, together with any Affiliates, holds less than
500,000 shares of Registrable Securities in the case of a Holder who holds
Series A Stock of Series B Stock, or 390,000 shares of Registrable Securities in
the case of a Holder who holds Series C Stock (in each case, as adjusted for
stock splits, recapitalizations and the like).
4.5 TRANSFER OF RIGHTS OF PREEMPTIVE RIGHTS. The preemptive rights of
each Investor under this Section 4 may be transferred to the same parties,
subject to the same restrictions, as any transfer of registration rights
pursuant to Section 2.10.
4.6 EXCLUDED SECURITIES. The preemptive rights established by this
Section 4 shall have no application to any of the following Equity Securities:
(a) shares of Common Stock (and/or options, warrants or other
Common Stock purchase rights issued pursuant to such options, warrants or other
rights) issued or to be issued to employees, officers or directors of, or
consultants, vendors, suppliers, customers, clients or advisors to the Company
or any subsidiary, pursuant to stock purchase or stock option or stock incentive
plans or other arrangements that are approved by the Board, but only if and to
the extent the aggregate fair market value of all such Common Stock issued to
any single Person (or,
22
26
in the case of stock options, warrants or similar rights, the aggregate fair
market value of the Common Stock subject to options, warrants or similar rights
granted to any single Person, determined at the time of the grant), together
with its Affiliates, pursuant to this Section 4.6(a) within any twelve-month
period (other than shares issued on the exercise of stock options granted under
the Company's Stock Option Plan) is less than $500,000;
(b) stock issued pursuant to any rights or agreements
outstanding as of the date of this Agreement or options and warrants outstanding
as of the date of this Agreement; and stock issued pursuant to any such rights
or agreements granted after the date of this Agreement; provided that in the
case of rights or agreements granted after the date of this Agreement, this
exception applies only if the preemptive rights established by this Section 4
were exercised or were waived with respect to the initial sale or grant by the
Company of such rights or agreements;
(c) any Equity Securities issued pursuant to any merger,
consolidation with, or other acquisition of another company approved by the
Board;
(d) any Equity Security issued pursuant to any strategic
alliance (meaning an arrangement for the joint use, development or pursuit of
content, technology, market opportunities, for the provision of services or for
the use of or access to websites or transmission capacity), acquisition of
technology or intellectual property rights, or similar business combination
approved by the Board, but only if and to the extent that the number of shares
of Common Stock (or the number of Equity Securities convertible into shares of
Common Stock) (as adjusted for stock splits, recapitalizations and the like) do
not exceed 20,000 in any single transaction or 50,000 in the aggregate;
(e) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
(f) shares of Common Stock issued upon conversion of the
Shares;
(g) any Equity Securities issued pursuant to any equipment
leasing arrangement, or debt financing from a bank or similar financial
institution approved by the Board to the extent the aggregate fair market value
of all such Equity Securities issued (or pursuant to this Section 4.6(f))
(determined upon issuance of the Equity Securities) is less than $500,000; and
(h) any Equity Securities that are issued by the Company in
conjunction with an offering subject to a registration statement filed under the
Securities Act (except that in the case of the Company's Initial Offering, the
preemptive rights established by this Section 4 shall apply only to a number of
shares of Equity Securities representing ten percent of the total number of
shares of Equity Securities (excluding over-allotment shares) offered in the
Initial Offering, and shall in all events be subject to requirements imposed by,
and may be cancelled by, the underwriters in the Initial Offering).
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SECTION 5. MISCELLANEOUS
5.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Colorado as applied to agreements among Colorado
residents entered into and to be performed entirely within Colorado, without
giving effect to any choice of law or conflict of law rules or provisions
(whether of the State of Colorado or any other jurisdiction), that would cause
the application of the laws of any jurisdiction other than the State of
Colorado.
5.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Holder and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
5.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, affiliates, heirs, executors, and administrators
of the parties hereto and shall inure to the benefit of and be enforceable by
each Person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the Person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.
5.4 ENTIRE AGREEMENT. This Agreement supercedes the Investors' Right
Agreement in its entirety. This Agreement and the Exhibits hereto, the Series A
Purchase Agreement (to the extent applicable), the Series B Purchase Agreement
(to the extent applicable) and the Series C Purchase Agreement (to the extent
applicable) and the Second Amended and Restated Stockholders Agreement and other
documents delivered pursuant hereto and thereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and no party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically set
forth herein and therein.
5.5 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
5.6 AMENDMENT AND WAIVER.
(a) Except as otherwise expressly provided, this Agreement may
be amended or modified only upon the written consent of the Company and, as to
any Registrable Securities representing a particular class or series of the
Company's stock, by the holders of at least two-thirds (2/3) of such class or
series.
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(b) Except as otherwise expressly provided, the obligations of
the Company and the rights of the Holders under this Agreement may be waived
only with the written consent of the Holders of at least two-thirds (2/3) of the
Registrable Securities.
(c) Notwithstanding the foregoing, this Agreement may be
amended in connection with the closing of any purchase of the Company's Series C
Preferred Stock so as to add any such purchaser of the Series C Preferred Stock
as a party hereto, and as an Investor as defined above, by having each such
purchaser execute a counterpart copy of this Agreement and modifying Exhibit A
to include such person. All shares of Series C Preferred Stock acquired by any
such purchaser shall be Shares under this Agreement.
5.7 REMEDIES; DELAYS OR OMISSIONS.
(a) All remedies under this Agreement or otherwise afforded to
any party shall be cumulative and not alternative. Any Person having any rights
under any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
(b) It is agreed that no delay or omission to exercise any
right, power or remedy accruing to any party, upon any breach, default or
noncompliance by another party under this Agreement shall impair any such right,
power or remedy, nor shall it be construed to be a waiver of any such breach,
default or noncompliance, or any acquiescence therein, or of or in any similar
breach, default or noncompliance thereafter occurring. It is further agreed that
any waiver, permit, consent or approval of any kind or character on any
Investor's part of any breach, default or noncompliance under this Agreement or
any waiver on such party's part of any provisions or conditions of the Agreement
must be in writing and shall be effective only to the extent specifically set
forth in such writing.
5.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the party
to be notified at the address as set forth on the signature pages hereof or
Exhibit A hereto or at such other address as such party may designate by ten
(10) days advance written notice to the other parties hereto.
5.9 ATTORNEYS' FEES. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
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5.10 TITLES AND SUBTITLES. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
5.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
5.12 WAIVER AND CONSENT. Subject to the terms of the Series C Purchase
Agreement, each Investor who is a party to the Investors' Rights Agreement
hereby waives any rights or notice it may have or be entitled to thereunder in
connection with the Series C Financing, grants any consent required by the
Investors' Rights Agreement with respect to the Series C Financing, and waives
any breach or default as may have occurred under the Investors' Rights
Agreement.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this SECOND AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT as of the date set forth in the first
paragraph hereof.
COMPANY:
NETLIBRARY, INC.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
After October 31, 1999:
0000 Xxxxxx Xxxxx Xxxxx
Xxxxxxx, XX 00000
By: /s/ XXXXXXX X. XXXXXXX
------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President
INVESTORS:
SEQUEL LIMITED PARTNERSHIP SEQUEL EURO LIMITED PARTNERSHIP
By: Sequel Venture Partners, L.L.C. By: Sequel Venture Partners, L.L.C.
Its: General Partner Its: General Partner
By: /s/ XXXXXX WASHING By: /s/ XXXXXX WASHING
------------------------------ ----------------------------------
Manager Manager
ANSCHUTZ FAMILY INVESTMENT
COMPANY LLC
By: Anschutz Company
By: /s/ XXXXX XXXXXXXXX
------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Vice President
27
31
REPERTOIRE CAPITAL UNIVERSITY OF COLORADO FOUNDATION, INC.
VENTURES RLLLP
By: /s/ XXXX XXXXXXXX By: /s/ XXX XXXXXX
------------------------------- --------------------------------
Name: Xxxx Xxxxxxxx Name: Xxx Xxxxxx
Title: General Partner Title: C.F.O., Treasurer
WORLD VENTURE PARTNERS, INC. MARKET STREET PARTNERS NL
By: /s/ XXXXXX XXXXXXXX By: /s/ XXXXXXX X. XXXXXXX
------------------------------- --------------------------------
Name: Xxxxxx Xxxxxxxx Name: Xxxxxxx X. Xxxxxxx
Title: Agent Title: Managing General Partner
/s/ XXXXX X. XXXXXXXX /s/ XXXXX XXXXXXX
----------------------------------- ------------------------------------
XXXXX X. XXXXXXXX XXXXX XXXXXXX
DLJ CAPITAL CORP. DLJ ESC II, L.P.
By: DLJ LBO Plans Management Corporation
Its: Manager
By: /s/ XXXXXX XXXXX
-------------------------------
Name: Xxxxxx Xxxxx By: /s/ XXXXXX XXXXX
Its: Attorney in Fact --------------------------------
Name: Xxxxxx Xxxxx
Its: Attorney in Fact
SPROUT CAPITAL VIII, L.P. SPROUT VENTURE CAPITAL, L.P.
By: DLJ Capital Corp. By: DLJ Capital Corp.
Its: Managing General Partner Its: Managing General Partner
By: /s/ XXXXXX XXXXX By: /s/ XXXXXX XXXXX
-------------------------- ---------------------------
Name: Xxxxxx Xxxxx Name: Xxxxxx Xxxxx
Its: Attorney in Fact Its: Attorney in Fact
28
00
XXXXX XXXXXX TRUST BOWANA FOUNDATION
By: /s/ XXXXX X. XXXX By: /s/ XXXX X. XXXXXXX
------------------ ----------------------
Name: Xxxxx X. Xxxx Name: Xxxx X. Xxxxxxx
Title: President/CEO Title: President
MARQUETTE VENTURE PARTNERS III, L.P. COVESTCO-MEDEURA, LLC
By: Marquette III, L.L.C. By: Medeura Limited
Its: General Partner Its: Manager
By: /s/ XXXX XXXX By: /s/ XXXXX X. XXXXXX
------------------------ ----------------------
Name: Xxxx Xxxx Name: Xxxxx X. Xxxxxx
Title: Authorized Signatory Title: Director
/s/ XXXX XXXXXXX
--------------------------- -------------------------
XXXX XXXXXXX XXXXXXX XXXXXX
/s/ XXXXX X. XXXXXXXX /s/ XXXXXX XXXX
--------------------------- -------------------------
XXXXX X. XXXXXXXX XXXXXX XXXX
ABC-CLIO THE MCGRAW HILL
COMPANIES, INC.
By: /s/ XXXXXX X. XXXXX By: /s/ XXXXXX X. XXXXXX
------------------------ ----------------------
Name: Xxxxxx X. Xxxxx Name: Xxxxxx X. Xxxxxx
Title: CEO Title: Executive VP & CFO
29
33
XXXXXX NEW GENERATION LDIG NL, INC.
FUND, A SERIES OF THE
XXXXXX INVESTMENT
PORTFOLIO TRUST
By: /s/ XXXX X. XXXXXXXXXX By:
------------------------------- ---------------------------------
Name: Xxxx X. Xxxxxxxxxx Name:
Title: Senior Vice President, -------------------------------
Port. Manager Title:
------------------------------
----------------------------------- ------------------------------------
XXX XXXXXXX XXXXXX XXXXXXX
WPG NETWORKING FUND, LP WPG SOFTWARE FUND, LP
By: Xxxxx, Xxxx & Xxxxx, LLC, By: Xxxxx, Xxxx & Xxxxx, LLC,
its General Partner its General Partner
By: /s/ XXXXXXX XXXXXXX By: /s/ XXXXXXX XXXXXXX
------------------------------- --------------------------------
Member Member
WPG INSTITUTIONAL WPG INSTITUTIONAL
NETWORKING FUND, LP SOFTWARE FUND, LP
By: Xxxxx, Xxxx & Xxxxx, LLC, By: Xxxxx, Xxxx & Xxxxx, LLC,
its General Partner its General Partner
By: /s/ XXXXXXX XXXXXXX By: /s/ XXXXXXX XXXXXXX
------------------------------- --------------------------------
Member Member
WPG RAYTHEON WPG RAYTHEON
NETWORKING FUND, LP SOFTWARE FUND, LP
By: Xxxxx, Xxxx & Xxxxx, LLC, By: Xxxxx, Xxxx & Xxxxx, LLC,
its attorney-in-fact its attorney-in-fact
By: /s/ XXXXXXX XXXXXXX By: /s/ XXXXXXX XXXXXXX
------------------------------- --------------------------------
Member Member
30
34
XXXXXX ASSOCIATES, INC. LDIG NL, INC.
By: By: /s/ XXXXX XXXXXXXXX
---------------------------- ----------------------------
Name: Name: Xxxxx Xxxxxxxxx
------------------------- Title: Vice President
Title:
-------------------------
/s/ XXXXXX XXXXXXX
--------------------------------
XXXXXX XXXXXXX
/s/ XXX XXXXXXX
XXXXX XXXX & XXXXX --------------------------------
XXX XXXXXXX
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
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35
EBSCO INDUSTRIES, INC. XXXXXXX CORPORATION
By: /s/ XXXXXXX X. XXXXXXXX By: /s/ XXXXXXX X. XXXX
------------------------------- ----------------------
Name: Xxxxxxx X. Xxxxxxxx Name: Xxxxxxx X. Xxxx
Title: VP & CFO Title: Chairman/CEO
HOUGHTON MIFFLIN XXXXXX & SON LIMITED
By: /s/ XXXXX X. XXXXXXXXXX By: /s/ XXX XXXXXXX
------------------------------- ----------------------
Name: Xxxxx X. Xxxxxxxxxx Name: Xxx Xxxxxxx
Title: Chairman, President and CEO Title: Director/Secretary
/s/ XXX XXXXX /s/ XXXXX XXXX
---------------------------------- --------------------------
XXX XXXXX XXXXX XXXX
XXXXXX XXXXXX, INC. EPIXTECH, INC. FORMERLY KNOWN AS
AMERITECH LIBRARY SERVICES
By: /s/ XXXXX XXXXXX By: /s/ XXXX XXXXXX
------------------------------- ----------------------
Name: Xxxxx Xxxxxx Name: Xxxx Xxxxxx
Title: COO Title: President & CEO
COMCAST INTERACTIVE BCI INVESTMENTS II, LLC
CAPITAL, LP
By: CIC Partners, LP, its general partner By: /s/ XXXXXXX X. XXXXXX
----------------------
By: CIC Venture Management, LLC, Name: Xxxxxxx X. XxXxxx
its general partner Title: Manager
XXXXXXXXX, LTD.
By: /s/ XXXXX X. XXXXXXX By:
------------------------------- ----------------------
Name: Xxxxx X. Xxxxxxx Name:
Title: Vice President --------------------
Title:
-------------------
32
00
XXXX XXXXXXX XXXX XX, X.X.
By: Xxxx Capital Partners VI, L.P.,
its General Partner
By: Xxxx Capital Investors VI, Inc.,
its General Partner
By: /s/ XXXXXX XXXXXXXXXX
------------------------------
Name: Xxxxxx Xxxxxxxxxx
Title: Managing Director
BROOKSIDE CAPITAL PARTNERS SANKATY HIGH YIELD ASSET
FUND, L.P. PARTNERS, L.P.
By: /s/ XXXXXXX XXXXXXXX By: /s/ XXXXXX XXXXXXXXXX
------------------------- --------------------------
Name: Xxxxxxx Xxxxxxxx Name: Xxxxxx Xxxxxxxxxx
Title: Managing Director Title: Managing Director
PEP INVESTMENTS PTY LTD BCIP ASSOCIATES II
By: Xxxx Capital, Inc., By: Xxxx Capital, Inc.,
its attorney-in-fact its Managing Partner
By: /s/ XXXXXX XXXXXXXXXX By: /s/ XXXXXX XXXXXXXXXX
------------------------- ----------------------
Name: Xxxxxx Xxxxxxxxxx Name: Xxxxxx Xxxxxxxxxx
Title: Managing Director Title: Managing Director
BCIP ASSOCIATES II-B
By: Xxxx Capital, Inc.,
its Managing Partner
By: /s/ XXXXXX XXXXXXXXXX
----------------------
Name: Xxxxxx Xxxxxxxxxx
Title: Managing Director
33
37
/s/ R. XXXXXXX XXXXXXXX
----------------------------------
R. Xxxxxxx Xxxxxxxx
/s/ XXXXXX X. XXXXXXX, XX.
----------------------------------
Xxxxxx X. Xxxxxxx, Xx.
GRAND CENTRAL HOLDINGS, LLC
By: /s/ XXXXXX X. XXXXX, XX.
------------------------------
Name: Xxxxxx X. Xxxxx, Xx.
Title: Member
GCH PEANUT PRESS, LLC
By: Grand Central Holdings, LLC,
Its Managing Member
By: /s/ XXXXXX X. XXXXX, XX.
------------------------------
Name: Xxxxxx X. Xxxxx, Xx.
Title: Member
XXXXXX VENTURE PARTNERS, L.P.
By: Xxxxxx Partners, L.P.
Its General Partner
By: /s/ XXXXXXX XXXXXX
------------------------------
Name: Xxxxxxx Xxxxxx
Title: General Partner
34
38
February 24, 2000
Parthenon Investors, L.P. PCIP Investors, L.P.
000 Xxxxx Xxxxxx, 0xx Xxxxx 000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000 Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Mr. Xxxx Xxxxxxxxxx Attention: Mr. Xxxx Xxxxxxxxxx
Re: netLibrary Series D Investment
Dear Xx. Xxxxxxxxxx:
As you may recall, in connection with your investment in the Series D Preferred
Stock of netLibrary, Inc. (the "Company"), you executed the Amendment to Second
Amended and Restated Stockholders Agreement and the Amendment to Second Amended
and Restated Investors' Rights Agreement. Through an oversight, the amendment
did not include standard language to the effect that you agreed to be bound by
the terms of the Second Amended and Restated Stockholders Agreement and the
Second Amended and Restated Investors' Rights Agreement (collectively, the
"Agreements").
netLibrary requests that you indicate your agreement to becoming a party to the
Agreements in the space provided below.
Sincerely,
Xxxx X. Xxxxx
General Counsel
Accepted and agreed to this
28th day of February, 2000:
PARTHENON INVESTORS, L.P. PCIP INVESTORS, L.P.
/s/ XXXX XXXXXXXXXX /s/ XXXX XXXXXXXXXX
--------------------------- ----------------------------
Xxxx Xxxxxxxxxx Xxxx Xxxxxxxxxx
Title: General Partner Title: General Partner
