INVESTOR'S RIGHTS AGREEMENT
THIS INVESTOR'S RIGHTS AGREEMENT (the "Agreement") is made as of June
30, 2000, by and between iEntertainment Network, Inc., a corporation organized
under the laws of the State of North Carolina (the "Company"), and the persons
listed on Exhibit A hereto (the "Investors").
RECITALS
WHEREAS, the Company and the Investors are parties to that certain
Stock Purchase Agreement of even date herewith (the "Stock Purchase Agreement");
WHEREAS, to induce the Investors to invest funds in the Company
pursuant to the Stock Purchase Agreement, the Investors and the Company hereby
agree that this Agreement shall govern the rights of the Investors to cause the
Company to register shares of Common Stock purchased by the Investors pursuant
to the Stock Purchase Agreement, and certain other matters as set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereto agree as follows:
1. REGISTRATION RIGHTS. THE COMPANY COVENANTS AND AGREES AS FOLLOWS:
1.1 Definitions.
(a) "Act" means the Securities Act of 1933, as amended.
(b) "Common Stock" means shares of the Common Stock of the
Company, par value $.10 per share (the "Common Stock").
(c) "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance
with Section 1.12 hereof.
(d) "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(e) "Register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement
in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement.
(f) "Registrable Securities" means (i) the Common Stock, (ii) any
shares of Common Stock issued upon conversion of the Company's Series
B Preferred Stock, and (iii) 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
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distribution with respect to, or in exchange for or in replacement of
the shares referenced in (i) and (ii) above, excluding in all cases,
however, any Registrable Securities sold by a person in a transaction
in which his rights under this Section 1 are not assigned, or any
shares of Common Stock which have previously been registered or which
have been sold to the public either pursuant to a registration
statement or Rule 144 promulgated under the Act.
(g) "SEC" shall mean the Securities and Exchange Commission.
1.2 Request for Registration.
(a) If the Company shall receive, at any time commencing ninety
(90) days after the date of this Agreement, a written request from the
Investors holding at least fifty percent (50%) of the then outstanding
Registrable Securities held by the Investors that the Company file a
registration statement under the Act covering the registration of
Registrable Securities, the Company shall:
(i) within ten (10) days of the receipt thereof, give
written notice, in accordance with Section 3.5 hereof, of
such request to all Holders; and
(ii) file as soon as practicable, and in any event
within sixty (60) days of the receipt of such request, and
use its best efforts to cause to become effective as soon as
practicable, the registration under the Act of all
Registrable Securities which the Holders request to be
registered as specified in a written request received by the
Company within twenty (20) days after such written notice
from the Company is mailed or delivered, subject to the
limitations of Subsection 1.2(b).
(b) If the Holders initiating the registration request hereunder
("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
Subsection 1.2(a) and the Company shall include such information in
the written notice referred to in Subsection 1.2(a). The underwriter
will be selected by the Company and shall be acceptable to a majority
in interest of the Initiating Holders. In such event, the right of any
Holder to include his 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 (unless otherwise mutually agreed by a majority in
interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company as provided
in Subsection 1.4(e)) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting. Whenever a registration is demanded pursuant to this
Section 1.2, the Company may not include in such registration
securities for offering by the Company and any
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other holder of securities without the prior written consent of the
Holders holding at least fifty percent (50%) of the Registrable
Securities covered by their request. Notwithstanding any other
provision of this Section 1.2, if the underwriter advises the
Initiating Holders in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the
Company shall exclude from such underwriting (x) first, the maximum
number of securities, if any, other than Registrable Securities, as is
necessary to reduce the size of the offering and (y) then the minimum
number of Registrable Securities, pro rata to the extent practicable,
on the basis of the number of Registrable Securities requested to be
registered among the participating holders of Registrable Securities,
as is necessary in the opinion of the managing underwriter(s) to
reduce the size of the offering.
(c) In addition, the Company shall not be obligated to effect, or
to take any action to effect, any registration pursuant to this
Section 1.2:
(i) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of
process in effecting such registration, qualification, or
compliance, unless the Company is already subject to service in
such jurisdiction and except as may be required by the Act;
(ii) After the Company has effected one (1) registration
pursuant to this Section 1.2, excluding any registrations
effected on Form S-3, and such registration has been declared or
ordered effective;
(iii) 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 1.11
below;
(iv) If the Company delivers to the Initiating Holders an
opinion, in form and substance acceptable to such Initiating
Holders, of counsel satisfactory to the Initiating Holders that
the Registrable Securities requested to be registered by the
Initiating Holders may be sold or transferred without restriction
pursuant to Rule 144(k) of the Act;
(v) During the period starting with the date sixty (60) days
prior to the Company's good faith estimate of the date of filing
of, and ending on (A) a date ninety (90) days after the effective
date or (B) the date of abandonment of, a Company-initiated
registration statement relating to the offering of any of the
Company's securities; provided, that the Company is actively
employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(vi) If the Company reasonably anticipates that it will
consummate, within sixty (60) days after the date of receipt of
any request pursuant to this Section 1.2, a significant business
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transaction that would be materially adversely affected, to the
material detriment of the Company, by a registration pursuant to
this Section 1.2 (all in the good faith determination of the
Company's Board of Directors); provided, that the registration
statement relating to the request pursuant to this Section 1.2
shall be filed no later than sixty (60) days after the closing
(or any such similar event) of agreements or documents
consummating such transaction or the abandonment of such
transaction, but in any event not later than 120 days after the
receipt of the request pursuant to this Section 1.2; and
provided, further, that the Company shall not be permitted to
delay, pursuant to this Section 1.2(c)(vi) or Section 1.2(c)(v),
its obligations pursuant to this Section 1.2 more than once in
any twelve month period.
1.3 Company Registration. If (but without any obligation to do so) the
Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock or other securities under the Act in connection with the public
offering of such securities (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, a
registration relating solely to a Rule 145 transaction, a registration on
any form which does not include substantially the same information as would
be required to be included in a registration statement covering the sale of
the Registrable Securities, a registration in which the only Common Stock
being registered is Common Stock issuable upon conversion of debt
securities which are also being registered, or a registration on any
registration form that does not permit secondary sales), the Company shall,
at such time, promptly give each Holder written notice of such
registration. Upon the written request of each Holder given within twenty
(20) days after giving of such notice by the Company in accordance with
Section 3.5, the Company shall, subject to the provisions of Section 1.8,
use its best efforts to cause to be registered under the Act all of the
Registrable Securities that each such Holder has requested to be
registered.
1.4 Obligations of the Company. Whenever required under this Section 1
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, and keep such
registration statement effective for a period of up to one hundred
twenty (120) days or until the distribution contemplated in the
Registration Statement has been completed, whichever first occurs;
provided, however, that such one hundred twenty (120) day period shall
be extended for a period of time equal to the period the Holder
refrains from selling any securities included in such registration at
the request of an underwriter of Common Stock (or other securities) of
the Company, and provided further that in the case of any registration
of Registrable Securities on Form S-3 that are intended to be offered
on a continuous or delayed basis, such one hundred twenty (120) day
period shall be extended until all such Registrable Securities are
sold, if applicable rules under the Act governing the obligation to
file a post-effective amendment permit, in lieu of filing a
post-effective amendment which (i) includes any prospectus required by
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Section 10(a)(3) of the Act or (ii) reflects facts or events
representing a material or fundamental change in the information set
forth in the registration statement, the incorporation by reference of
information required to be included in (i) and (ii) above to be
contained in periodic reports filed pursuant to Section 13 or 15(d) of
the 1934 Act in the registration statement.
(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, in the opinion of counsel to the
Company, may be necessary to comply with the provisions of the Act
with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 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 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, unless the Company is already subject to
service in such jurisdiction and except as may be required by the Act.
(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 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 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.
(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar
securities issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective
date of such registration.
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(i) Use its best efforts to furnish, on the date that such
Registrable Securities are delivered to the underwriters for sale in
connection with the registration pursuant to this Section 1, if such
Registrable Securities are being sold through underwriters, (i) an
opinion, dated such date, of 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, and (ii) a letter, dated 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,
addressed to the underwriters.
1.5 Furnish Information. It shall be a condition precedent to the
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obligations of the Company to take any action pursuant to this Section 1
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition
of such securities as shall be required to effect the registration of such
Holder's Registrable Securities.
1.6 Expenses of Demand Registration. All expenses other than
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underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for the
Company and the reasonable fees and disbursements of one counsel for the
selling Holders shall be borne by the Company; provided, that the Company
shall not be responsible for fees and disbursements of counsel for the
selling Holders to the extent that they exceed $5,000.
1.7 Expenses of Company Registration. The Company shall bear and pay
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all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder, including (without limitation) all
registration, filing, and qualification fees, printers' and accounting fees
relating or apportionable thereto and, for one such registration only, the
reasonable fees and disbursements of one counsel for the selling Holders,
but excluding underwriting discounts and commissions relating to
Registrable Securities.
1.8 Underwriting Requirements. In connection with any offering
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involving an underwriting of shares of the Company's capital stock pursuant
to Section 1.3, the Company shall not be required under Section 1.3 to
include any of a Holder's securities in such underwriting unless such
Holder accepts the terms of the underwriting as agreed upon between the
Company and the underwriters (or by other persons entitled to select the
underwriters), and then only in such quantity as the underwriters determine
in their sole discretion will not jeopardize the success of the offering by
the Company. If the total amount of securities, including Registrable
Securities, requested by stockholders and the Company to be included in
such offering exceeds the amount of securities that the underwriters
determine in their sole discretion is compatible with the success of the
offering, then the following priorities shall govern:
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(a) If the underwritten offering has been initiated by the
Company, the Company shall include in such underwriting (x) first, the
securities the Company proposes to sell, (y) second, the Registrable
Securities, any other securities entitled to the benefit of
registration rights existing on the date of this Agreement ("Third
Party Registrable Securities") requested to be included in such
registration and up to 15% of the then outstanding shares of Common
Stock to the extent that such shares are owned by directors or
employees of the Company ("Management Registrable Securities") and are
requested to be included in such registration, pro rata to the extent
practicable, on the basis of the number of Registrable Securities,
Third Party Registrable Securities and Management Registrable
Securities requested to be registered among the participating holders
of such securities, and (z) third, any other securities, including
Management Registrable Securities that exceed the 15% threshold above,
requested to be included in such registration, all as is necessary in
the opinion of the managing underwriter(s) to reduce the size of the
offering; and
(b) If the underwritten offering has been initiated by any holder
of Third Party Registrable Securities entitled to the benefit of any
duly exercised demand registration right, the Company shall include in
such underwriting (x) first, the securities requested to be included
therein by the holder of Third Party Registrable Securities requesting
such registration, (y) second, the Registrable Securities and any
other Third Party Registrable Securities or Management Registrable
Securities (provided, that such Management Registrable Securities
shall not exceed 15% of the then outstanding shares of Common Stock)
requested to be included in such registration, pro rata to the extent
practicable, on the basis of the number of Registrable Securities and
such other Third Party Registrable Securities and Management
Registrable Securities requested to be registered among the
participating holders of such securities, and (z) third, any other
securities, including Management Registrable Securities that exceed
the 15% threshold above, requested to be included in such
registration, all as is necessary in the opinion of the managing
underwriter(s) to reduce the size of the offering.
1.9 Indemnification. In the event any Registrable Securities are
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included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the officers and directors of each
Holder participating in such registration, any underwriter (as defined
in the Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Act or the 1934 Act,
against any losses, claims, damages, or liabilities (joint or several)
to which they may become subject under the Act or state securities and
blue sky laws, or otherwise insofar as such losses, claims, damages,
or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a "Violation"): (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 and any
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document filed in connection therewith or in connection with any
registration or qualification under the state securities and blue sky
laws, (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 Act or state securities and blue sky
laws or any rule or regulation promulgated under the Act or state
securities and blue sky laws and the Company will pay to each such
Holder, underwriter or controlling person, as incurred, any legal or
other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability,
expense or action; provided, however, that the Company shall not 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 strict conformity with
written information furnished expressly for use in connection with
such registration by any such Holder, underwriter or controlling
person.
(b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the
securities as to which registration is being effected, indemnify and
hold harmless the Company, each of its directors, each of its officers
who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter,
any other Holder selling securities in such registration statement and
any controlling person of any such underwriter or other Holder,
against any losses, claims, damages, or liabilities (joint or several)
to which any of the foregoing persons may become subject, under the
Act, 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 strict conformity with
written information furnished by such Holder expressly for use in
connection with such registration; provided, however, that the
indemnity agreement contained in this Subsection 1.9(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; and
provided, further, that in no event shall any selling Holder's
liability under this Subsection 1.9(b) exceed the proceeds received by
such Holder from the offering (net of any underwriting discounts and
commissions).
(c) Promptly after receipt by an indemnified party under this
Section 1.9 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 1.9, 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 (together
with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate
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counsel, with the fees and expenses 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
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 prejudicial to its ability to
defend such action, shall relieve such indemnifying party of its
liability under this Section 1.9, but (i) only to the extent of the
liability actually resulting from the failure to deliver written
notice and (ii) 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 1.9.
The indemnifying party will not be subject to any liability under this
Section 1.9 for any settlement made by the indemnified party without
its consent (which consent shall not be unreasonably withheld).
(d) If the indemnification provided for in this Section 1.9 is
held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage,
or expense referred to therein, then the indemnifying party, in lieu
of indemnifying such indemnified party hereunder, shall contribute to
the amount paid or payable by such indemnified party as a result of
such loss, liability, claim, damage, or expense in such proportion as
is appropriate to reflect the relative fault of the indemnifying party
on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such
loss, liability, claim, damage, or expense as well as any other
relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access
to information, and opportunity to correct or prevent such statement
or omission; provided, that in no event shall any selling Holder's
liability under this Section 1.9(d) exceed the proceeds received by
such Holder from the offering (net of any underwriting discounts and
commissions).
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with the
underwritten public offering are in conflict with the foregoing
provisions, the provisions in the underwriting agreement shall
control.
(f) The obligations of the Company and Holders under this Section
1.9 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and
otherwise.
1.10 Reports Under Securities Exchange Act of 1934. With a view to
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making available to the Holders the benefits of Rule 144 promulgated under
the Act and any other rule or regulation of the SEC that may at any time
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permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees
to use its best efforts to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144;
(b) file with the SEC in a timely manner and make and keep
available all reports and other documents required of the Company
under the Act and the 1934 Act so long as the Company remains subject
to such requirements and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon written request (i) a written
statement by the Company as to its compliance with the reporting
requirements of SEC Rule 144, the Act and the 1934 Act, (ii) a copy of
the most recent annual or quarterly report of the Company and such
other reports and documents so filed by the Company, and (iii) such
other information as may be reasonably requested in availing any
Holder of any rule or regulation of the SEC which permits the selling
of any such securities without registration or pursuant to such form.
1.11 Form S-3 Registration. In case the Company shall receive at any
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time after the completion of the first registration statement for a public
offering of securities of the Company (other than a registration statement
relating either to the sale of securities to employees of the Company
pursuant to a stock option, stock purchase or similar plan or an SEC Rule
145 transaction), a written request from the Holders of at least twenty
five percent (25%) of the Registrable Securities then outstanding that the
Company effect a registration on Form S-3 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) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, 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 twenty (20) 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 1.11: (1) if Form S-3 is not available for such offering
by the Holders; or (2) 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; (3) if, during any twelve month period,
the Company has already effected two registrations pursuant to this
Section 1.11; or (4) during the periods set forth in Sections
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1.2(c)(v) and (vi), if the provisions of such sections are applicable
to such proposed registration.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after
receipt of the request or requests of the Holders. All expenses
incurred in connection with a registration requested pursuant to this
Section 1.11, including, without limitation, all registration, filing,
qualification, printers' and accounting fees, the reasonable fees and
disbursements of one (1) counsel for the selling Holder or Holders and
the fees and disbursements of counsel for the Company, but excluding
any underwriting discounts or commissions associated with Registrable
Securities, shall be borne by the Company; provided, that the Company
shall not be responsible for fees and disbursements of counsel for the
selling Holders to the extent that they exceed $15,000. Registrations
effected pursuant to this Section 1.11 shall not be counted as
registrations effected pursuant to Sections 1.2 or 1.3.
1.12 Assignment of Registration Rights. The rights to cause the
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Company to register Registrable Securities pursuant to this Section 1 may
be assigned (but only with all related obligations) by a Holder to any
transferee or assignee who acquires at least 25% of the Registrable
Securities held by such Holder immediately prior to such transfer or
assignment, provided: (a) the Company is, within a reasonable time after
such transfer, furnished with 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 (b) such transferee or assignee
agrees in writing to be bound by and subject to the terms and conditions of
this Agreement. In no event shall the Company be obligated to effect more
than one (1) registration pursuant to Section 1.2 hereof in the aggregate
except as otherwise provided in Section 1.2(c)(ii) hereof. Notwithstanding
anything herein to the contrary, the Investor shall be permitted to assign
the rights to cause the Company to register Registrable Securities pursuant
to this Section 1 to certain assignees of the Investor who may participate
in the initial purchase of the Common Stock.
1.13 "Market Stand-Off" Agreement. The Investors hereby agree that,
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during the period of duration specified by the Company and an underwriter
of Common Stock or other securities of the Company, following the effective
date of a registration statement of the Company filed under the Act, it
shall not, to the extent requested by the Company and such underwriter,
directly or indirectly sell, offer to sell, contract to sell (including,
without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of (other than to donees who agree to be
similarly bound) any securities of the Company held by it at any time
during such period except Common Stock included in such registration;
provided, however:
(a) that such market stand-off time period shall not exceed one
hundred eighty (180) days following the effective date of the
Company's registration of Common Stock or other securities under the
Act; and
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(b) all officers and directors of the Company and all five
percent (5%) or greater stockholders of the Company enter into similar
agreements. In order to enforce the foregoing covenant, the Company
may impose stop-transfer instructions with respect to the Registrable
Securities of the Investors (and the shares or securities of every
other person subject to the foregoing restriction) until the end of
such period.
2. COVENANTS OF THE COMPANY.
2.1 Positive Covenants. So long as any shares of the Common Stock are
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outstanding, the Company agrees as follows:
(a) The Company will retain Ernst & Young LLP or, in the event
Ernst & Young LLP is terminated by the Company, such other independent
public accountants reasonably acceptable to the Investors in its
discretion who shall certify the Company's financial statements at the
end of each fiscal year. In the event the services of the independent
public accountants so selected, or any firm of independent public
accountants hereafter employed by the Company are terminated, the
Company will promptly thereafter notify the Investors and will request
the firm of independent public accountants whose services are
terminated to deliver to the Investors a letter from such firm setting
forth the reasons for the termination of their services. In the event
of such termination, the Company will promptly thereafter engage
another firm of independent public accountants of recognized national
standing. In its notice to the Investors the Company shall state
whether the change of accountants was recommended or approved by the
Board of Directors of the Company or any committee thereof.
(b) The Company shall maintain in full force and effect, fire,
casualty, workmen's compensation and liability insurance policies,
with extended coverage, in such amounts and with such coverage as are
carried by companies in a position similar to that of the Company.
2.2 Negative Covenants. The Company shall not without first obtaining
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the written consent of the Investors:
(a) engage in any spin-out, distribution or sale of any business
unit of the Company;
(b) enter into any transactions with affiliates of the Company
except on arms-length terms; or
(c) redeem or repurchase any outstanding equity securities of the
Company except for: repurchases of unvested or restricted shares of
Common Stock at cost from employees, consultants, or members of the
Board of Directors pursuant to repurchase options of the Company (i)
currently outstanding or (ii) hereafter entered into pursuant to a
stock option plan or restricted stock plan approved by the Company's
Board of Directors.
14
3. MISCELLANEOUS.
3.1 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties
(including transferees of any shares of Registrable Securities). Nothing in
this Agreement, express or implied, is intended to confer upon any party
other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.
3.2 Governing Law. This Agreement shall be governed by and construed
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under the laws of the State of North Carolina, disregarding North Carolina
principles of conflicts of laws which would otherwise provide for the
application of the substantive laws of another jurisdiction.
3.3 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4 Titles and Subtitles. The titles and subtitles used in this
---------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 Notices. Unless otherwise provided, any notice required or
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permitted under this Agreement shall be given in writing and shall be
deemed effectively given upon personal delivery to the party to be notified
upon delivery by registered or certified mail, postage prepaid, return
receipt requested and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other
address as such party may designate by ten (10) days' advance written
notice to the other parties with a copy for the Company to:
Xxxxxxxxxx Xxxxxxxx LLP
0000 Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxx Xxxxxxxx, Esq.,
3.6 Expenses. If any action at law or in equity is necessary to
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enforce or interpret the terms of this Agreement, the prevailing party
shall be entitled to reasonable attorneys' fees actually incurred, costs
and necessary disbursements in addition to any other relief to which such
party may be entitled.
3.7 Amendments and Waivers. Any term of this Agreement may be amended
----------------------
and the observance of any term of this Agreement 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 a majority of the Registrable Securities then outstanding. Any
amendment or waiver effected in accordance with this Section 3.7 shall be
15
binding upon each holder of any Registrable Securities then outstanding,
each future holder of all such Registrable Securities, and the Company.
3.8 Severability. If one or more provisions of this Agreement are held
------------
to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted
as if such provision were so excluded and shall be enforceable in
accordance with its terms.
3.9 Entire Agreement. This Agreement constitutes the full and entire
----------------
understanding and agreement between the parties with regard to the subjects
hereof.
16
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
IENTERTAINMENT NETWORK, INC.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chief Executive Officer
Address: 000 Xxxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxxxxxx, XX 00000
VERTICAL FINANCIAL HOLDINGS
By: /s/ Xxxxx Xxxx
---------------
Name: Xxxxx Xxxx
Title: Chairman
Address: Vertical Financial Holdings
C/o Orida Capital USA, Inc.
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn.: Xxxx X. Xxxxxxxx
