INVESTOR’S RIGHTS AGREEMENT
Exhibit
10.17
INVESTOR’S
RIGHTS AGREEMENT
This
INVESTOR’S
RIGHTS AGREEMENT
(this
“Agreement”)
dated
as of June 8, 2006, is entered into by and among Immediatek, Inc., a Nevada
corporation (the “Company”),
Radical Holdings LP, a Texas limited partnership (the “Purchaser”),
Xxxx
Xxxx, an individual residing in the State of Texas (“Xxxx”),
and
Xxxx Xxxxx, an individual residing in the State of Texas (“Marin,”
and
together with Xxxx, collectively, the “Founders”).
A. The
Company has filed a Certificate of Designation, Rights and Preferences
establishing a series of convertible preferred stock, namely, the Series A
Convertible Preferred Stock, par value $0.001 per share (the “Series
A Preferred Stock”);
and
B. The
Company, the Founders and the Purchaser are parties to that certain Securities
Purchase Agreement dated as of January 24, 2006 (the “Purchase
Agreement”)
pursuant to which the Company has agreed to sell, and the Purchaser has agreed
to purchase, 4,392,286 shares of the Series A Preferred Stock (the “Series
A Shares”)
of the
Company at the closing on the date hereof; and
C. The
Company’s and the Purchaser’s respective obligations under the Purchase
Agreement are conditioned upon the execution and delivery of this
Agreement.
AGREEMENT
NOW,
THEREFORE,
in
consideration of the foregoing recitals and the mutual promises hereinafter
set
forth, the parties hereto agree as follows.
ARTICLE
I
REGISTRATION
RIGHTS
Section
1.1 Definitions.
For
purposes of this Agreement:
(a) “Affiliate”
means,
with respect to any Person, (i) any other Person of which securities or
other ownership interests representing more than twenty percent (20%) of the
voting interests are, at the time such determination is being made, owned,
Controlled or held, directly or indirectly, by such Person or (ii) any
other Person which, at the time such determination is being made, is
Controlling, Controlled by or under common Control with, such Person. As used
herein, “Control”,
whether used as a noun or verb, refers to the possession, directly or
indirectly, of the power to direct, or cause the direction of, the management
or
policies of a Person, whether through the ownership of voting securities or
otherwise.
(b) “Holder”
means
(i) the Purchaser, (ii) a Person that is a permitted transferee under
Section
1.11
hereof
and (iii) a Person that owns Registrable Securities; provided,
however,
that
for purposes of this Agreement, Holders of Registrable Securities will not
be
required to convert their Preferred Shares into Common Stock in order to
exercise the registration rights granted hereunder, until immediately before
the
closing of the offering to which the registration relates.
(c) “NASD”
means
the National Association of Securities Dealers, Inc.
(d) “Participating
Holders”
means
Holders participating, or electing to participate, in an offering of Registrable
Securities.
(e) “Person”
means
any individual, firm, corporation, company, partnership, trust, incorporated
or
unincorporated association, limited liability company, joint venture, joint
stock company, government (or an agency or political subdivision thereof) or
other entity of any kind, and shall include any successor (by merger or
otherwise) of any such entity.
(f) “Preferred
Shares”
means
the Series A Shares.
(g) “Registrable
Securities”
means
any shares of common stock of the Company (“Common
Stock”)
(i)
issued or issuable upon conversion of the Preferred Shares; (ii) otherwise
held
or deemed held by conversion by the Purchaser or acquired pursuant to any other
right; and (iii) issued or issuable with respect to the securities referred
to
in clauses (i) and (ii) above by virtue of any stock split, combination, stock
dividend, merger, consolidation or other similar event; provided,
however,
that
shares of Common Stock that are considered to be Registrable Securities shall
cease to be Registrable Securities (A) upon the sale thereof pursuant to an
effective registration statement, (B) upon the transfer thereof in a private
transaction where the transferor’s rights under this Agreement are not assigned,
or (C) when such securities cease to be outstanding.
(h) “Registration
Expenses”
mean
all expenses (other than underwriting discounts and commissions) arising from,
or incident to, the performance of, or compliance with, this Agreement,
including, without limitation, (i) SEC, stock exchange, NASD and other
registration and filing fees, (ii) all fees and expenses incurred in connection
with complying with any securities or blue sky laws (including, without
limitation, fees, charges and disbursements of counsel in connection with blue
sky qualifications of the Registrable Securities), (iii) all printing, messenger
and delivery expenses, (iv) the fees, charges and disbursements of counsel
to
the Company and of its independent public accountants and any other accounting
and legal fees, charges and expenses incurred by the Company (including, without
limitation, any expenses arising from any special audits or “comfort letters”
required in connection with or incident to any registration), (v) the fees,
charges and disbursements of any special experts retained by the Company in
connection with any registration pursuant to the terms of this Agreement, (vi)
all internal expenses of the Company (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), (vii) the fees and expenses incurred in connection with
the
listing of the Registrable Securities on any securities exchange or Nasdaq
and
(viii) Securities Act liability insurance (if the Company elects to obtain
such
insurance), regardless of whether any Registration Statement filed in connection
with such registration is declared effective. “Registration Expenses” shall also
include fees, charges and disbursements of one (1) firm of counsel to all of
the
Participating Holders participating in any underwritten public offering pursuant
to this Agreement (which shall be selected by a majority, based on the number
of
Registrable Securities to be sold, of the Participating Holders).
2
(i) “Registration
Statement”
shall
mean any registration statement of the Company filed with the SEC on the
appropriate form pursuant to the Securities Act that covers any of the shares
of
Common Stock and any other Registrable Securities pursuant to the provisions
of
this Agreement and all amendments and supplements to any such Registration
Statement, including post-effective amendments, in each case including the
prospectus contained therein, all exhibits thereto and all materials
incorporated by reference therein.
(j) “SEC”
or
“Commission”
means
the United States Securities and Exchange Commission.
(k) “Securities
Act”
means
the Securities Act of 1933, as amended,
or any
similar federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect at the
time.
(l) “Selling
Expenses”
shall
mean the underwriting fees, discounts, selling commissions and stock transfer
taxes applicable to all Registrable Securities registered by the Participating
Holders.
Section
1.2. Demand
Registration.
(a) Request
by Holders.
If the
Company receives at any time a written request from Holders that hold at least
twenty percent (20%) of the Registrable Securities then outstanding (the
“Requesting
Holders”)
that
the Company register Registrable Securities held by Requesting Holders (a
“Demand
Request”),
then
the Company shall, within ten (10) days after receipt of such Demand Request,
give written notice of such request (“Request
Notice”)
to all
Holders. Each Demand Request shall (x) specify the number of Registrable
Securities that the Requesting Holders intend to sell or dispose of, (y) state
the intended method or methods of sale or disposition of the Registrable
Securities and
(z)
specify the expected price range (net of underwriting discounts and commissions)
acceptable to the Requesting Holders to be received for such Registrable
Securities. Following receipt of a Demand Request, the Company
shall:
(i) cause
to
be filed, as soon as practicable, but within ninety (90) days of the date of
delivery to the Company of the Demand Request, a Registration Statement covering
such Registrable Securities that the Company has been so requested to register
by the Requesting Holders and other Holders who request to the Company that
their Registrable Securities be registered within twenty (20) days
of
the mailing of the Request Notice, providing for the registration under the
Securities Act of such Registrable Securities to the extent necessary to permit
the disposition of such Registrable Securities in accordance with the intended
method of distribution specified in such Demand Request;
(ii) use
its
best efforts to have such Registration Statement declared effective by the
SEC
as soon as practicable thereafter; and
(iii) refrain
from filing any other Registration Statements, other than pursuant to a
Registration Statement on Form S-4 or S-8 (or similar or successor forms),
with
respect to any other securities of the Company until such date that is one
hundred and eighty (180) days following effectiveness of the Registration
Statement filed in response to the Demand Request.
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(b) Effective
Registration Statement.
A
registration requested pursuant to this Agreement shall not be deemed to have
been effected (i) unless a Registration Statement with respect thereto has
become effective and remained effective in compliance with the provisions of
the
Securities Act with respect to the disposition of all Registrable Securities
covered by such Registration Statement until such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the Holders thereof set forth in such Registration
Statement; (ii) if, after it has become effective, such registration is
interfered with by any stop order, injunction or other order or requirement
of
the SEC or other governmental agency or court and has not thereafter become
effective, or if the offering of Registrable Securities is not consummated
for
any reason, including, without limitation, if the underwriters of an
underwritten public offering advise the Participating Holders that the
Registrable Securities cannot be sold at a net price per share equal to or
above
the net price disclosed in the preliminary prospectus; (iii) if the conditions
to closing specified in the underwriting agreement, if any, entered into in
connection with such registration are not satisfied or waived; or (iv) if the
Requesting Holders are cut back regarding the Registrable Securities requested
to be registered.
(c) Selection
of Underwriters.
In the
event that the Company is required to file a Registration Statement covering
any
Registrable Securities of any Requesting Holders pursuant to Section
1.2(a)
hereof
and the proposed public offering is to be an underwritten public offering,
the
managing underwriter shall be one or more reputable, nationally recognized
investment banks selected by a majority in interest of the Requesting Holders
and reasonably acceptable to the Company, which consent shall not be
unreasonably withheld, delayed or conditioned.
(d) Priority
for Demand Registration.
Notwithstanding any other provision of this Agreement, if the managing
underwriter of an underwritten public offering determines and advises the
Participating Holders and the Company in writing that the inclusion of all
securities proposed to be included by the Company and any other Holders in
the
underwritten public offering would materially and adversely interfere with
the
successful marketing of the Requesting Holders’ Registrable Securities, then the
Company and other Holders shall not be permitted to include any securities
in
excess of the amount, if any, of securities that the managing underwriter of
such underwritten public offering shall reasonably and in good faith agree
in
writing to include in such public offering in addition to the amount of
Registrable Securities to be registered for the Requesting Holders. The Company
will be obligated to include in such Registration Statement, as to each Holder,
only a portion of the Registrable Securities such Holder has requested be
registered equal to the ratio which such Holder’s requested Registrable
Securities bears to the total number of Registrable Securities requested to
be
included in such Registration Statement by all Holders who have requested that
their Registrable Securities be included in such Registration Statement. It
is
acknowledged by the parties hereto that pursuant to the foregoing provision,
the
securities to be included in a registration requested by the Requesting Holders
pursuant to Section
1.2
shall be
allocated:
(i) first,
to
the Participating Holders; and
(ii) second,
to the Company and any other shareholders of the Company requesting registration
of securities of the Company.
4
(e)
Limitations
on Demand Registrations.
(i) The
Company may delay making a filing of a Registration Statement or taking action
in connection therewith by not more than ninety (90) days
if
the Company provides a written certificate signed by the President and Chief
Executive Officer of the Company to the Holders,
prior to the time it would otherwise have been required to file such
Registration Statement or take such action pursuant to this Section
1.2,
stating
that the Board has determined in good faith that the filing of such Registration
Statement would be seriously detrimental to the Company or would otherwise
materially adversely affect a financing, acquisition, disposition, merger or
other material transaction (collectively, a “Valid
Business Reason”)
and
that it is therefore essential to defer the filing of the Registration
Statement; provided,
however,
that
such right to delay a Demand Request shall be exercised by the Company not
more
than once in any twelve (12) month period and the Company shall only have the
right to delay a Demand Request so long as such Valid Business Reason exists,
and during such time, the Company may not file a Registration Statement for
securities to be issued and sold for its own account or for that of anyone
other
than the Holders.
(ii) The
Company shall only be obligated to effect two (2) Demand Requests pursuant
to
this Section
1.2.
(iii) The
Company shall not be required to comply with a Demand Request unless the
reasonably anticipated aggregate gross proceeds to be raised (before any
underwriting discounts and commissions) would be equal to or exceed
$1,000,000.
(f) Cancellation
of Registration.
A
majority in interest of
the
Participating Holders shall have the right to cancel a proposed registration
of
Registrable Securities pursuant to this Section
1.2
when,
(i) in their discretion, market conditions are so unfavorable as to be seriously
detrimental to an offering pursuant to such registration or (ii) the request
for
cancellation is based upon material adverse information relating to the Company
that is different from the information known to the Participating Holders at
the
time of the Demand Request. Such cancellation of a registration shall not be
counted as one of the two (2) Demand
Requests, and notwithstanding anything to the contrary in the Agreement, the
Company shall be responsible for the expenses of the Participating Holders
incurred in connection with the registration prior to the time of
cancellation.
Section
1.3. Piggyback
Registrations.
(a) Right
to Include Registrable Securities.
Each
time that the Company proposes for any reason to register any of its Common
Stock under the Securities Act, either for its own account or for the account
of
a stockholder or stockholders exercising demand registration rights other than
Demand Requests pursuant to Section
1.2
hereof
or pursuant to a Registration Statement on Forms S-4 or S-8 (or similar or
successor forms) (a “Proposed
Registration”),
the
Company shall promptly give written notice of such Proposed Registration to
all
of the Holders of Registrable Securities (which notice shall be given not less
than thirty (30) days prior to the expected effective date of the Company’s
Registration Statement) and shall offer such Holders the right to request
inclusion of any of such Holder’s Registrable Securities in the Proposed
Registration. No registration pursuant to this Section
1.3
shall
relieve the Company of its obligation to register Registrable Securities
pursuant to a Demand Request, as contemplated by Section
1.2
hereof.
The rights to piggyback registration may be exercised an unlimited number of
occasions.
5
(b) Piggyback
Procedure.
Each
Holder of Registrable Securities shall have twenty (20) days from the date
of
receipt of the Company’s notice referred to in Section
1.3(a)
above to
deliver to the Company a written request specifying the number of Registrable
Securities such Holder intends to sell and such Holder’s intended method of
disposition. Any Holder shall have the right to withdraw such Holder’s request
for inclusion of such holder’s Registrable Securities in any Registration
Statement pursuant to this Section
1.3
by
giving written notice to the Company of such withdrawal. Subject to Section
1.3(d)
below,
the Company shall use its best efforts to include
in such Registration Statement all such Registrable Securities so requested
to
be included therein; provided,
however,
that
the Company may at any time withdraw or cease proceeding with any such Proposed
Registration if it shall at the same time withdraw or cease proceeding with
the
registration of all other shares of Common Stock originally proposed to be
registered.
(c) Selection
of Underwriters.
The
managing underwriter for any Proposed Registration that involves an underwritten
public offering shall be one or more reputable, nationally recognized investment
banks selected by the Company and reasonably acceptable to a majority
in interest of the
Holders.
(d) Priority
for Piggyback Registration.
Notwithstanding any other provision of this Agreement, if the managing
underwriter of an underwritten public offering determines and advises the
Company and the Holders in writing that the inclusion of all Registrable
Securities proposed to be included by the Holders of Registrable Securities
in
the underwritten public offering would materially and adversely
interfere with the successful marketing of the Company’s securities, then the
Holders of Registrable Securities shall not be permitted to include any
Registrable Securities in excess of the amount, if any, of Registrable
Securities that the managing underwriter of such underwritten public offering
shall reasonably and in good faith agree in writing to include in such public
offering in addition to the amount of securities to be registered for the
Company. The Company will be obligated to include in such Registration
Statement, as to each Holder, only a portion of the Registrable Securities
such
Holder has requested be registered equal to the ratio which such Holder’s
requested Registrable Securities bears to the total number of Registrable
Securities requested to be included in such Registration Statement by all
Holders who have requested that their Registrable Securities be included in
such
Registration Statement. It is acknowledged by the parties hereto that, pursuant
to the foregoing provision, the securities to be included in a registration
initiated by the Company shall be allocated:
(i) first,
to
the Company; and
(ii) second,
pari passu among the Holders and all other holders of securities of the Company
with piggyback registration rights.
6
If
as a
result of the provisions of this Section
1.3(d),
any
Holder shall not be entitled to include all of
its
Registrable Securities in a registration that such Holder has requested to
be so
included, such Holder may withdraw such Holder’s request to include Registrable
Securities in such Registration Statement.
(e) Underwritten
Offering.
In the
event that the Proposed Registration by the Company is, in whole or in part,
an
underwritten public offering of securities of the Company, any request under
this Section
1.3
shall
specify that the Registrable Securities be included in the underwriting on
the
same terms and conditions as the shares, if any, otherwise being sold through
underwriters under such registration.
Section
1.4 Form
S-3 Registration. Any
Holder (an “Initiating
Form S-3 Holder”)
may
request, at any time, that the Company file a Registration Statement under
the
Securities Act on Form S-3 (or similar or successor form) covering the sale
or
other distribution of all or any portion of the Registrable Securities held
by
such Initiating Form S-3 Holder pursuant to Rule 415 under the Securities Act
(“Form
S-3 Demand”)
if (i)
the reasonably anticipated aggregate gross proceeds would equal or exceed
$5,000,000, (ii)
the
Company is a registrant qualified to use Form S-3 (or any similar or successor
form) to register such Registrable Securities and (iii) the plan of distribution
of the Registrable Securities is other than pursuant to an underwritten public
offering. If such conditions are met, the Company shall use its best efforts
to
register under the Securities Act on Form S-3 (or any similar or successor
form)
at the earliest practicable date, for sale in accordance with the method of
disposition specified in the Form S-3 Demand, the number of Registrable
Securities specified in such Form S-3 Demand. In connection with a Form S-3
Demand, the Company agrees to include in the prospectus included in any
Registration Statement on Form S-3, such material describing the Company and
intended to facilitate the sale of securities being so registered as is
reasonably requested for inclusion therein by the Initiating Form S-3 Holders,
whether or not the rules applicable to preparation of Form S-3 require the
inclusion of such information. Notwithstanding the foregoing, if the Company
shall furnish to the Initiating Form S-3 Holders a certificate signed by the
Chief Executive Officer and Chief Financial Officer of the Company stating
that
in the good faith opinion of the Board of Directors of the Company, a Valid
Business Reason exists, the Company shall have the right to delay or defer
taking action with respect to such filing for a period of ninety (90) days
after
receipt of the Form S-3 Demand; provided,
however,
that
such right to delay or defer a Form S-3 Demand shall be exercised by the Company
not more than once in any twelve (12) month period, the Company shall only
have
the right to delay a Form S-3 Demand so long as such Valid Business Reason
exists, and during such time the Company may not file a Registration Statement
for securities to be issued and sold for its own account or for that of any
other Holders. Form S-3 Demands will not be deemed to be Demand Requests as
described in Section
1.2
hereof
and Holders shall have the right to request an unlimited number of Form S-3
Demands. Notwithstanding the foregoing, the Company shall not be obligated
to
file more than one (1) Registration Statement on Form S-3 pursuant to this
Section
1.4
in any
given six (6) month period.
7
Section
1.5. Registration
Procedures.
(a) Obligations
of the Company.
Whenever registration of Registrable Securities is required pursuant to this
Agreement, the Company shall use its best efforts to effect the registration
and
sale of such Registrable Securities in accordance with the intended method
of
distribution thereof as promptly as possible, and in connection with any such
request, the Company shall, as expeditiously as possible:
(i) Preparation
of Registration Statement; Effectiveness.
Prepare
and file with the SEC (in any event not later than ninety (90) days after
receipt of a Demand Request to file a Registration Statement with respect to
Registrable Securities), a Registration Statement on any form on which the
Company then qualifies, which counsel for the Company shall deem appropriate
and
pursuant to which such offering may be made in accordance with the intended
method of distribution thereof (except that the Registration Statement shall
contain such information as may reasonably be requested for marketing or other
purposes by the managing underwriter), and use its best efforts to
cause
any registration required hereunder to become effective as soon as practicable
after the initial filing thereof and remain effective for a period of not less
than one hundred and eighty (180) days (or such shorter period in which all
Registrable Securities have been sold in accordance with the methods of
distribution set forth in the Registration Statement); provided,
however,
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 eighty
(180) day period shall be extended, if necessary, to keep the Registration
Statement effective until all such Registrable Securities are sold, provided
that
Rule 415, or any successor rule under the Securities Act, permits an offering
on
a continuous or delayed basis;
(ii) Participation
in Preparation.
Provide
any Participating Holder, any underwriter participating in any disposition
pursuant to a Registration Statement and any attorney, accountant or other
agent
retained by any Participating Holder or underwriter (each, an “Inspector”
and,
collectively, the “Inspectors”),
the
opportunity to reasonably participate (including, but not limited to, reviewing,
commenting on and attending all meetings) in the preparation of such
Registration Statement, each prospectus included therein or filed with the
SEC
and each amendment or supplement thereto;
(iii) Due
Diligence.
For a
reasonable period prior to the filing of any Registration Statement pursuant
to
this Agreement, make available for inspection and copying by the Inspectors
such
financial and other information and books and records, pertinent corporate
documents and properties of the Company and its subsidiaries and cause the
officers, directors, employees, counsel and independent registered public
accountants of the Company and its subsidiaries to respond to such inquiries
and
to supply all information reasonably requested by any such Inspector in
connection with such Registration Statement, as shall be reasonably necessary,
in the judgment of the respective counsel referred to in Section
1.5(a)(ii),
to
conduct a reasonable investigation within the meaning of the Securities
Act;
(iv) General
Notifications.
Promptly notify in writing the Participating Holders, the sales or placement
agent, if any, therefor and the managing underwriter of the securities being
sold, (A) when such Registration Statement or the prospectus included therein
or
any prospectus amendment or supplement or post-effective amendment has been
filed, and, with respect to any such Registration Statement or any
post-effective amendment, when the same has become effective, (B) when the
SEC
notifies the Company whether there will be a “review” of such Registration
Statement and (C) of any comments (oral or written) by the SEC and by the blue
sky or securities commissioner or regulator of any state with respect thereto
or
(D) of any request by the SEC for any amendments or supplements to such
Registration Statement or the prospectus or for additional
information;
8
(v) 10b-5
Notification.
Promptly notify in writing the Participating Holders, the sales or placement
agent, if any, therefor and the managing underwriter of the securities being
sold pursuant to any Registration Statement at any time when a prospectus
relating thereto is required to be delivered under the Securities Act upon
discovery that, or upon the happening of any event as a result of which, any
prospectus included in such Registration Statement (or amendment or supplement
thereto) contains an untrue statement of a material fact or omits to state
any
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they were
made,
and the Company shall promptly prepare a supplement or amendment to such
prospectus and file it with the SEC (in any event no later than ten
(10) days
following notice of the occurrence of such event to each Participating Holder,
the sales or placement agent and the managing underwriter) so that after
delivery of such prospectus, as so amended or supplemented, to the purchasers
of
such Registrable Securities, such prospectus, as so amended or supplemented,
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 in light of the circumstances under which they were
made;
(vi) Notification
of Stop Orders; Suspensions of Qualifications and Exemptions.
Promptly notify in writing the Participating Holders, the sales or placement
agent, if any, therefor and the managing underwriter of the securities being
sold of the issuance by the SEC of (A) any stop order issued or threatened
to be
issued by the SEC or (B) any notification with respect to the suspension of
the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of
any
proceeding for such purpose, and the Company agrees to use commercially
reasonable best efforts to
(x)
prevent the issuance of any such stop order, and in the event of such issuance,
to obtain the withdrawal of any such stop order and (y) obtain the withdrawal
of
any order suspending or preventing the use of any related prospectus or
suspending the qualification of any Registrable Securities included in such
Registration Statement for sale in any jurisdiction at the earliest practicable
date;
(vii) Amendments
and Supplements; Acceleration.
Prepare
and file with the SEC such amendments, including post-effective amendments
to
each Registration Statement as may be necessary to keep such Registration
Statement continuously effective for the applicable time period required
hereunder and, if applicable, file any Registration Statements pursuant to
Rule
462(b) under the Securities Act; cause the related prospectus to be supplemented
by any required prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force) promulgated
under
the Securities Act; and comply with the provisions of the Securities Act and
the
Exchange Act with respect to the disposition of all securities covered by such
Registration Statement during such period in accordance with the intended
methods of disposition by the sellers thereof set forth in such Registration
Statement as so amended or in such prospectus as so supplemented. If a majority
in interest of the
Participating Holders so request, to request acceleration of effectiveness
of
the Registration Statement from the SEC and any post-effective amendments
thereto, if any are filed; provided
that at
the time of such request, the Company does not in good faith believe that it
is
necessary to amend further the Registration Statement in order to comply with
the provisions of this subparagraph. If the Company wishes to further amend
the
Registration Statement prior to requesting acceleration, it shall have five
(5)
days to so amend prior to requesting acceleration;
9
(viii) Copies.
Furnish
as promptly as practicable to each Participating Holder and Inspector prior
to
filing a Registration Statement or any supplement or amendment thereto, copies
of such Registration Statement, supplement or amendment as it is proposed to
be
filed, and after such filing such number of copies of such Registration
Statement, each amendment and supplement thereto (in each case including all
exhibits thereto), the prospectus included in such Registration Statement
(including each preliminary prospectus) and such other documents as each such
Participating Holder or underwriter may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such
Participating Holder;
(ix) Blue
Sky.
Use
commercially reasonable efforts to,
prior
to any public offering of the Registrable Securities, register or qualify (or
seek an exemption from registration or qualifications) such Registrable
Securities under such other securities or blue sky laws of such jurisdictions
as
any Participating Holder or underwriter may request, and to continue such
qualification in effect in each such jurisdiction for as long as is permissible
pursuant to the laws of such jurisdiction, or for as long as a Participating
Holder or underwriter requests or until all of such Registrable Securities
are
sold, whichever is shortest, and do any and all other acts and things which
may
be reasonably necessary or advisable to enable any Participating Holder to
consummate the disposition in such jurisdictions of the Registrable
Securities;
(x) Other
Approvals.
Use
commercially reasonable efforts to
obtain
all other approvals, consents, exemptions or authorizations from such
governmental agencies or authorities as may be necessary to enable the
Participating Holders and underwriters to consummate the disposition of
Registrable Securities;
(xi) Agreements.
Enter
into customary agreements (including any underwriting agreements in customary
form), and take such other actions as may be reasonably required in order to
expedite or facilitate the disposition of Registrable Securities;
(xii) “Cold
Comfort”
Letter.
Obtain
a “cold comfort” letter from the Company’s independent public accountants in
customary form and covering such matters of the type customarily covered by
“cold comfort” letters as the managing underwriter may reasonably request, and
reasonably satisfactory to a majority in interest of the
Participating Holders;
(xiii) Legal
Opinion.
Furnish, at the request of any underwriter of Registrable Securities on the
date
such securities are delivered to the underwriters for sale pursuant to such
registration, an opinion, dated such date, of counsel representing the Company
for the purposes of such registration, addressed to the Holders, and the
placement agent or sales agent, if any, thereof and the underwriters, if any,
thereof, covering such legal matters with respect to the registration in respect
of which such opinion is being given as such underwriter may reasonably request
and as are customarily included in such opinions, and reasonably satisfactory
to
a majority in interest of the Participating Holders;
10
(xiv) SEC
Compliance, Earnings Statement.
Use its
best efforts to
comply
with all applicable rules and regulations of the SEC and make available to
its
shareholders, as soon as reasonably practicable, but no later than fifteen
(15)
months after the effective date of any Registration Statement, an earnings
statement covering a period of twelve (12) months beginning after the effective
date of such Registration Statement, in a manner which satisfies the provisions
of Section 11(a) of the Securities Act and Rule 158 thereunder;
(xv) Certificates,
Closing.
Provide
officers’ certificates and other customary closing documents;
(xvi) NASD.
Cooperate with each Participating Holder and each underwriter participating
in
the disposition of such Registrable Securities and underwriters’ counsel in
connection with any filings required to be made with the NASD;
(xvii) Road
Show.
Cause
appropriate officers as are requested by an managing underwriter to participate
in a “road show” or similar marketing effort being conducted by such underwriter
with respect to an underwritten public offering;
(xviii) Listing.
Use its
best efforts to cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and if not so listed, to be eligible for quotation on the NASD automated
quotation system;
(xix) Transfer
Agent, Registrar and CUSIP.
Provide
a transfer agent and registrar for all Registrable Securities registered
pursuant hereto and a CUSIP number for all such Registrable Securities, in
each
case, no later than the effective date of such registration;
(xx) Private
Sales.
Use its
best efforts to assist a Holder in facilitating private sales of Registrable
Securities by, among other things, providing officers’ certificates and other
customary closing documents; and
(xxi) Commercially
Reasonable Efforts.
Use
commercially reasonable efforts to take all other actions necessary to effect
the registration of the Registrable Securities contemplated hereby.
(b) Seller
Information.
The
Company may require each Participating Holder as to which any registration
of
such Holder’s Registrable Securities is being effected to furnish the Company
with such information regarding such Participating Holder and such Participating
Holder’s method of distribution of such Registrable Securities as the Company
may from time to time reasonably request in writing.
(c) Notice
to Discontinue.
Each
Participating Holder whose Registrable Securities are covered by a Registration
Statement filed pursuant to this Agreement agrees that, upon receipt of written
notice from the Company of the happening of any event of the kind described
in
Section
1.5(a)(v),
such
Participating Holder shall forthwith discontinue the disposition of Registrable
Securities until such Participating Holder’s receipt of the copies of the
supplemented or amended prospectus contemplated by Section
1.5(a)(v)
or until
it is advised in writing by the Company that the use of the prospectus may
be
resumed and has received copies of any additional or supplemental filings which
are incorporated by reference into the prospectus, and, if so directed by the
Company in the case of an event described in Section
1.5(a)(v),
such
Participating Holder shall deliver to the Company (at the Company’s expense) all
copies, other than permanent file copies then in such Participating Holder’s
possession, of the prospectus covering such Registrable Securities which is
current at the time of receipt of such notice. If the Company shall give any
such notice, the Company shall extend the period during which such Registration
Statement is to be maintained effective by the number of days during the period
from and including the date of the giving of such notice pursuant to
Section
1.5(a)(v)
to and
including the date when the Participating Holder shall have received the copies
of the supplemented or amended prospectus contemplated by, and meeting the
requirements of, Section
1.5(a)(v).
11
Section
1.6. Registration
Expenses.
Except
as
otherwise provided herein, all Registration Expenses shall be borne by the
Company. All Selling Expenses relating to Registrable Securities registered
shall be borne by the Participating Holders of such Registrable Securities
pro
rata on the basis of the number of shares so registered.
Section
1.7. Indemnification.
(a) Indemnification
by the Company.
The
Company agrees, notwithstanding termination of this Agreement, to indemnify
and
hold harmless to the fullest extent permitted by law, each Holder, each of
its
directors, officers, employees, advisors, agents and general or limited partners
(and the directors, officers, employees, advisors and agents thereof), their
respective Affiliates and each Person who controls (within the meaning of the
Securities Act or the Exchange Act) any of such Persons, and each underwriter
and each Person who controls (within the meaning of the Securities Act or the
Exchange Act) any underwriter (collectively, “Holder
Indemnified Parties”)
from
and against any and all losses, claims, damages, expenses (including, without
limitation, reasonable costs of investigation and fees, disbursements and other
charges of counsel, any amounts paid in settlement effected with the Company’s
consent, which consent shall not be unreasonably withheld or delayed and any
costs incurred in enforcing the Company’s indemnification obligations hereunder)
or other liabilities (collectively, “Losses”)
to
which any such Holder Indemnified Party may become subject under the Securities
Act, Exchange Act, any other federal law, any state or common law or any rule
or
regulation promulgated thereunder or otherwise, insofar as such Losses (or
actions or proceedings, whether commenced or threatened, in respect thereof)
are
resulting from or arising out of or based upon (i) any untrue, or alleged
untrue, statement of a material fact contained in any Registration Statement,
prospectus or preliminary prospectus (as amended or supplemented) or any
document incorporated by reference in any of the foregoing or resulting from
or
arising out of or based upon any omission, or alleged omission, to state therein
a material fact required to be stated therein or necessary to make the
statements therein (in the case of a prospectus, in light of the circumstances
under which they were made), not misleading or (ii) any violation by the Company
of the Securities Act, Exchange Act, any other federal law, any state or common
law or any rule or regulation promulgated thereunder or otherwise incident
to
any registration, qualification or compliance and in any such case, the Company
will promptly reimburse each such Holder Indemnified Party for any legal and
any
other Losses reasonably incurred in connection with investigating, preparing
or
defending any such claim, loss, damage, liability, action or investigation
or
proceeding (collectively, a “Claim”); provided,
however,
that
the Company shall not be liable to any Holder Indemnified Party for any Losses
that arise out of or are based upon written information provided by a Holder
Indemnified Party specifically stating it is for use in the Registration
Statement. Such
indemnity obligation shall remain in full force and effect regardless of any
investigation made by or on behalf of the Holder Indemnified Parties and shall
survive the transfer of Registrable Securities by such Holder Indemnified
Parties.
12
(b) Indemnification
by Holders.
In
connection with any proposed registration in which a Holder is participating
pursuant to this Agreement, each such Holder shall furnish to the Company in
writing such information with respect to such Holder as the Company may
reasonably request or as may be required by law for use in connection with
any
Registration Statement or prospectus or preliminary prospectus to be used in
connection with such registration and each Holder agrees, severally and not
jointly, to indemnify and hold harmless the Company, any underwriter retained
by
the Company and their respective directors, officers, partners, employees,
advisors and agents, their respective Affiliates and each Person who controls
(within the meaning of the Securities Act or the Exchange Act) any of such
Persons to the same extent as the foregoing indemnity from the Company to the
Holders as set forth in Section
1.7(a)
(subject
to the exceptions set forth in the foregoing indemnity, the proviso to this
sentence and applicable law), but only with respect to any such information
furnished in writing by such Holder expressly for use therein; provided,
however,
that
the liability of any Holder under this Section
1.7(b)
shall be
limited to the amount of the net proceeds
received by such Holder in the offering giving rise to such liability. Such
indemnity obligation shall remain in full force and effect regardless of any
investigation made by or on behalf of the Holder Indemnified Parties (except
as
provided above) and shall survive the transfer of Registrable Securities by
such
Holder.
(c) Conduct
of Indemnification Proceedings.
Any
Person entitled to indemnification hereunder (the “Indemnified
Party”)
agrees
to give prompt written notice to the indemnifying party (the “Indemnifying
Party”)
after
the receipt by the Indemnified Party of any written notice of the commencement
of any action, suit, proceeding or investigation or threat thereof made in
writing for which the Indemnified Party intends to claim indemnification or
contribution pursuant to this Agreement; provided,
however,
that,
the failure to so notify the Indemnifying Party shall not relieve the
Indemnifying Party of any liability that it may have to the Indemnified Party
hereunder unless and to the extent such Indemnifying Party is materially
prejudiced by such failure. If notice of commencement of any such action is
given to the Indemnifying Party as above provided, the Indemnifying Party shall
be entitled to participate in and, to the extent it may wish, jointly with
any
other Indemnifying Party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably satisfactory
to such Indemnified Party. The Indemnified Party shall have the right to employ
separate counsel in any such action and participate in the defense thereof,
but
the fees and expenses of such counsel shall be paid by the Indemnified Party
unless (i) the Indemnifying Party agrees to pay the same, (ii) the Indemnifying
Party fails to assume the defense of such action with counsel satisfactory
to
the Indemnified Party in its reasonable judgment or (iii) the named parties
to
any such action (including, but not limited to, any impleaded parties)
reasonably believe that the representation of such Indemnified Party and the
Indemnifying Party by the same counsel would be inappropriate under applicable
standards of professional conduct. In the case of clause (ii) above and (iii)
above, the Indemnifying Party shall not have the right to assume the defense
of
such action on behalf of such Indemnified Party. No Indemnifying Party shall
be
liable for any settlement entered into without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the written consent of the Indemnified Party, effect the settlement of,
compromise or consent to the entry of any judgment with respect to, any pending
or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the Indemnified Party
is an
actual or potential party to such action or claim) unless such settlement,
compromise or judgment (A) includes an unconditional release of the Indemnified
Party from all liability arising out of such action or claim and (B) does not
include a statement as to, or an admission of, fault, culpability or a failure
to act by or on behalf of any Indemnified Party. The rights afforded to any
Indemnified Party hereunder shall be in addition to any rights that such
Indemnified Party may have at common law, by separate agreement or
otherwise.
13
(d) Contribution.
If the
indemnification provided for in this Section
1.7
from the
Indemnifying Party is unavailable or insufficient to hold harmless an
Indemnified Party in respect of any Losses referred to herein, then the
Indemnifying Party, in lieu of indemnifying the Indemnified Party, shall
contribute to the amount paid or payable by the Indemnified Party as a result
of
such Losses in such proportion as is appropriate to reflect the relative fault
of the Indemnifying Party and the Indemnified Party, as well as any other
relevant equitable considerations. The relative faults of the Indemnifying
Party
and Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact,
was
made by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the Indemnifying Party’s and Indemnified Party’s relative
intent, knowledge, access to information and opportunity to correct or prevent
such action; provided,
however,
that
the liability of any Holder under this Section
1.7(d)
shall be
limited to the amount of the net proceeds
received by such Holder in the offering giving rise to such liability. The
amount paid or payable by a party as a result of the Losses or other liabilities
referred to above shall be deemed to include, subject to the limitations set
forth in Sections
1.7(a),
1.7(b)
and
1.7(c),
any
legal or other fees, charges or expenses reasonably incurred by such party
in
connection with any investigation or proceeding.
The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section
1.7(d)
were
determined by pro rata allocation or by any other method of allocation that
does
not take account of the equitable considerations referred to in the immediately
preceding paragraph. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution pursuant to this Section
1.7(d).
Section
1.8. Rule
144 and Rule 144A; Other Exemptions.
With a
view to making available to the Holders the benefits of Rule 144 and Rule 144A
promulgated under the Securities Act and other rules and regulations of the
SEC
that may at any time permit a Holder to sell securities of the Company to the
public without registration, the Company covenants that it shall (i) file in
a
timely manner all reports and other documents required to be filed by it under
the Securities Act and the Exchange Act and the rules and regulations
promulgated by the SEC thereunder and (ii) take such further action as each
Holder may reasonably request (including, but not limited to, providing any
information necessary to comply with Rule 144 and Rule 144A, if available with
respect to resales of the Registrable Securities under the Securities Act),
all
to the extent required from time to time to enable such Holder to sell
Registrable Securities without registration under the Securities Act within
the
limitation of the exemptions provided by (x) Rule 144 and Rule 144A (if
available with respect to resales of the Registrable Securities) under the
Securities Act, as such rules may be amended from time to time or (y) any other
rules or regulations now existing or hereafter adopted by the SEC. Upon the
written request of a Holder, the Company shall deliver to the Holder a written
statement as to whether it has complied with such requirements.
14
Section
1.9. Certain
Limitations On Registration Rights.
No
Holder may participate in any Registration Statement hereunder unless such
Holder completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements and agrees to sell such
Holder’s Registrable Securities on the basis provided in any underwriting
agreement approved by the Holder or Holders entitled hereunder to approve such
arrangements; provided,
however,
that no
such Holder shall be required to make any representations or warranties to
the
Company or the underwriters in connection with any such registration other
than
representations and warranties as to (i) such Holder’s ownership of its
Registrable Securities to be sold or transferred, (ii) such Holder’s power and
authority to effect such transfer and (iii) such matters pertaining to
compliance with securities laws as may be reasonably requested. Such Holders
of
Registrable Securities to be sold by such underwriters may, at their option,
require that any or all of the representations and warranties by, and the other
agreements on the part of the Company to and for the benefit of such
underwriters, shall also be made to and for the benefit of such Holders and
that
any or all of the conditions precedent to the obligations of the underwriters
under the underwriting agreement be conditions precedent to the obligations
of
the Holders.
Section
1.10. Limitations
on Subsequent Registration Rights.
The
Company agrees that from and after the date of this Agreement, it shall not,
without the prior written consent of the Holders of at least 51% of the
Registrable Securities then outstanding, enter into any agreement (or amendment
or waiver of the provisions of any agreement) with any holder or prospective
holder of any securities of the Company that would grant such holder
registration rights that are more favorable, pari passu or senior to those
granted to the Purchaser hereunder.
Section
1.11. Transfer
of Registration Rights. The
rights of a Holder hereunder may be transferred or assigned in connection with
a
transfer of Registrable Securities to (i) any Affiliate of a Holder, (ii) any
subsidiary, parent, partner, limited partner, shareholder or member of
a
Holder or (iii) any party or parties to a transaction or series of related
transactions who, after such transaction, holds or collectively hold at least
1,000,000 shares of Registrable Securities (as adjusted for any stock
dividends, stock splits, combinations and reorganizations and similar events).
Notwithstanding the foregoing, such rights may only be transferred or assigned
provided that all of the following additional conditions are satisfied: (a)
such
transfer or assignment is effected in accordance with applicable securities
laws; (b) such transferee or assignee agrees in writing to become subject to
the
terms of this Agreement; and (c) the Company is given written notice by such
Holder of such transfer or assignment, stating the name and address of the
transferee or assignee and identifying the Registrable Securities with respect
to which such rights are being transferred or assigned.
15
ARTICLE
II
COVENANTS
OF THE COMPANY
The
Company hereby covenants with the Purchaser as follows:
Section
2.1 Rights
to Appoint Directors; Notice. For
so long as any shares of the Series A Preferred Stock originally issued under
the Purchase Agreement remain outstanding, the holders of a majority-in-interest
of the shares of the Series A Preferred Stock originally issued under the
Purchase Agreement then outstanding shall have the right to designate all the
Persons to serve as directors on the Board of Directors of the Company and
its
subsidiaries. If the holders of the shares of the Series A Preferred Stock
originally issued under the Purchase Agreement then outstanding choose not
to
designate any directors, the holders of a majority-in-interest of the shares
of
the Series A Preferred Stock originally issued under the Purchase Agreement
then
outstanding may appoint a designee to serve as an observer at all meetings
of
the Company’s or its subsidiaries’ Board of Directors and committees thereof,
and such designee will be (a) entitled to all notices of meetings of the
Board of Directors and committees thereof and all instruments in which action
is
proposed to be taken by written consent in lieu of a meeting, each as and when
provided to the directors, and (b) furnished with the materials furnished
to the directors for such meetings or written consents in lieu of a meeting.
Notwithstanding anything herein to the contrary, for so long as the Purchaser
owns any of the shares of the Series A Preferred Stock then issued and
outstanding, the directors or any committee of directors of the Company or
its
subsidiaries shall not hold a meeting or take any action by written consent,
unless written notice thereof, which contains a reasonable description of the
matters to be acted upon, is sent to the Purchaser at least ten calendar days
in
advance of the action proposed to be taken.
Section
2.2 Protective
Provisions.
Unless
the directors designated by the holders of the shares of the Series A Preferred
Stock originally issued under the Purchase Agreement control the Board of
Directors of the Company with respect to all actions, for so long as any shares
of the Series A Preferred Stock originally issued under the Purchase Agreement
remain outstanding, the Company shall not, and the Company shall cause its
subsidiaries not to, without the approval of the holders of at least 75% of
the
shares of the Series A Preferred Stock originally issued under the Purchase
Agreement then outstanding:
(a) amend
the
charter or bylaws in any manner that would alter or change any of the rights,
preferences, privileges or restrictions of the Series A Preferred Stock or
the
Preferred Stock Conversion Shares (as defined in the Purchase
Agreement);
(b) reclassify
any outstanding securities into securities having rights, preferences or
privileges senior to, or on a parity with, the Series A Preferred
Stock;
(c) authorize
or issue any additional shares of capital stock (other than to Purchaser in
accordance with this Agreement or the Purchase Agreement);
(d) merge
or
consolidate with or into any corporation or other Person;
16
(e) sell
all
or substantially all their respective assets in a single transaction or series
of related transactions;
(f) license
all or substantially all of their respective intellectual property in a single
transaction or series of related transactions;
(g) liquidate
or dissolve; or
(h) alter
any
rights of the holders of the Series A Preferred Stock or change the size of
the
Board of Directors.
(i) declare
or pay any dividends (other than dividends payable to the Company or its
subsidiaries) on or declare or make any other distribution, directly or
indirectly, on account of any shares of Common Stock now or hereafter
outstanding;
(j) repurchase
any outstanding shares of capital stock (other than repurchases or redemptions
of the Series A Preferred Stock in accordance with its terms);
(k) approve
or modify by 10% or more the aggregate amount of any annual or other operating
or capital budget, or approve or modify by 50% or more any single line item
of
any such operating or capital budget;
(l) increase
the salary of any officer or employee or pay any bonus to any officer, director
or employee not contemplated in a budget or bonus plan approved by directors
designated by the holders of the shares of the Series A Preferred Stock
originally issued under the Purchase Agreement then outstanding;
(m) retain,
terminate or enter into any salary or employment negotiations or employment
agreement with any employee or any future employee;
(n) incur
indebtedness (other than trade payables) or enter into contracts or leases
that
require payments in excess of $5,000 in the aggregate;
(o) make
or
incur any single capital expenditure;
(p) award
stock options, stock appreciation rights or similar employee benefits or
determine vesting schedules, exercise prices or similar features;
(q) make
any
material change in the nature of its business or enter into any new line of
business, joint venture or similar arrangement;
(r) pledge
its assets or guarantee the obligations of any other individual or
entity;
(s) recommend
approval of any new equity incentive plan;
(t) form
or
acquire any subsidiary, joint venture or similar business entity;
or
17
(u) directly
or indirectly enter into, or permit to exist, any material transaction with
any
affiliate of the Company, any Founder or any affiliate of a Founder, or
transfer, pay, loan or otherwise obligate the Company to give cash, services,
assets or other items of value to affiliates, Founders or any affiliate of
a
Founder or commit to do any of the preceding after the date hereof, except
for
employee compensation or for reimbursement of ordinary business
expenses.
Section
2.3 Budget;
Other Information. Unless
the directors designated by the holders of the shares of the Series A Preferred
Stock originally issued under the Purchase Agreement control the Board of
Directors of the Company with respect to all actions, for so long as any shares
of the Series A Preferred Stock originally issued under the Purchase Agreement
remain outstanding, the Company will provide to the holders of the Series A
Preferred Stock originally issued under the Purchase Agreement the proposed
budget for each fiscal year at least sixty (60) days prior to the start of
such fiscal year and such budget shall be subject to the approval of the holders
of the majority-in-interest of the shares of the Series A Preferred Stock
originally issued under the Purchase Agreement then outstanding. The Company
also will provide to the Purchaser all other information relating to the
financial condition, business, prospects, or corporate affairs of the Company
as
updated or as the Purchaser may from time to time reasonably
request.
Section
2.4 Inspection,
Consultation and Advice. The
Company shall permit the Purchaser and such Persons as it may designate, at
the
Purchaser’s expense, to visit and inspect any of the properties of the Company,
examine their books and take copies and extracts therefrom, discuss the affairs,
finances and accounts of the Company with their officers, employees and public
accountants (and the Company hereby authorizes said accountants to discuss
with
the Purchaser and its designees such affairs, finances and accounts), and
consult with and advise the management of the Company as to the Company’s
affairs, finances and accounts, all at reasonable times and upon reasonable
notice.
ARTICLE
III
FOUNDER
AND COMPANY COVENANTS
Section
3.1 Right
of First Refusal.
(a) If a
Founder (the “Offering
Founder”)
proposes to make or allow a Transfer (as defined herein) to any Person
(other
than
a
Transfer related to an Involuntary Transfer, which is covered by Section 3.2
below),
of all or any part of the securities of the Company now owned or hereafter
acquired by him, her or it (“Option
Shares”),
then
the Offering Founder shall give written notice thereof (the “Notice”)
to the
Purchaser. The Notice shall contain an offer to sell the Option Shares to the
Purchaser in accordance with the terms of this Agreement, and shall, as
applicable:
|
(i)
|
State
the name and address of the proposed
transferee;
|
|
(ii)
|
State
the amount, type and fair market value of the consideration to be
received
for the Option Shares and the other terms of the proposed Transfer
as are
necessary to fully understand the terms of the offer to Transfer;
and
|
|
(iii)
|
Include
a copy of the executed agreement, if any, between the Offering Founder
and
any such third party purchaser covering the Option
Shares.
|
18
(b) For
15
calendar days after receipt of the Notice (the “Offer
Period”),
the
Purchaser shall have the right, but shall not be obligated, to elect to purchase
all or any portion of the Option Shares. This right may be exercised by the
Purchaser by giving written notice of exercise to the Offering Founder before
expiration of the Offering Period.
(c) If
the
Purchaser elects to purchase all or a portion of the Option Shares, the purchase
of the Option Shares so elected to be purchased shall be consummated within
a
period of 30 calendar days following the expiration of the Offering Period.
The
Offering Founder shall have the right to Transfer all of the Option Shares
not
so elected to be purchased by the Purchaser pursuant to this Section
3.1
to the
transferee named in the Notice upon the terms stated therein. Any Option Shares
not so Transferred, and any Option Shares reacquired by the Offering Founder
subsequent to its Transfer, shall be subject to the provisions and conditions
of
this Agreement.
(d) The
purchase price of the Option Shares purchased by the Purchaser pursuant to
the
terms of this Section 3.1
shall be
the same price as offered by the proposed transferee as described in the Notice,
or an equivalent amount of cash as reasonably determined by the parties (unless
there is a dispute as to the determination of such amount, in which case it
shall be determined in good faith by a majority of the directors).
(e) For
purposes of this Agreement, “Transfer” and any derivations thereof shall mean a
conveyance, sale, disposition, pledge, hypothecation or other transfer. For
purposes of this Agreement, when “Transfer” or any derivations thereof is used
in relation to Company securities, it shall include the sale, conveyance,
disposition, pledge or other transfer of any rights, voting powers or other
interests in such securities.
(f) Notwithstanding
the foregoing, shares of capital stock of the Company beneficially owned by
Founders that are used to settle obligations of the Company or its subsidiaries
shall be excluded from the provisions of this Section
3.1
to the
extent that Purchaser is provided with reasonable written evidence that said
shares are being used for such purpose.
Section
3.2 Option
to Purchase on Involuntary Transfers.
(a) An
“Involuntary Transfer” shall mean:
(i) a
Transfer to the transferor Founder’s spouse or former spouse, or heirs of such
spouse or former spouse, in connection with a division of their community or
other property upon divorce or the death of such spouse;
(ii) a
general
assignment for the benefit of creditors, or any assignment to a creditor
resulting from the creditor's foreclosure upon or execution against such
shares;
(iii) a
transferor Founder (A) voluntarily commences any proceeding or files any
petition seeking liquidation, reorganization or other relief under any federal,
state or foreign bankruptcy, insolvency, receivership or similar law now or
hereafter in effect, (B) applies for, or consents to, the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar official
for
such Founder or for a substantial part of his assets, (B) files an answer
admitting the material allegations of a petition filed against it in any such
proceeding;
19
(iv) the
entry
of a judicial order granting the relief requested by the petitioner in an
involuntary proceeding filed against the transferor Founder; or
(v) any
other
transfer by operation of law or by foreclosure of any security interest,
excluding the death of a Founder.
(b) If
an
Involuntary Transfer occurs, the Founder subject to such Involuntary Transfer
(or the Person receiving such shares upon an Involuntary Transfer, as
applicable) (each the “Transferring
Person”)
shall
give written notice thereof (the “Transfer
Notice”)
to the
Purchaser. The Transfer Notice shall specify the Involuntary Transfer and
contain an offer to sell the Transferring Person’s shares (or the portion of the
shares subject to the Involuntary Transfer), referred to as the “Subject
Shares”)
to the
Purchaser in accordance with the terms of this Agreement.
(c) The
Purchaser shall have the option to acquire the Subject Shares according to
procedures comparable to those contained in Section 3.1,
with
the notice of exercise of such option being given to the Transferring
Person.
(d) If
the
Purchaser elects to purchase all or a portion of the Subject Shares, the
purchase of the Subject Shares so elected to be purchased shall be consummated
within a period of 30 calendar days following the expiration of the Offering
Period.
(e) The
Transferring Person shall continue to hold the Subject Shares not so elected
to
be purchased by the Purchaser pursuant to this Section
3.2.
(f) The
purchase price per share of the Subject Shares elected to be purchased by the
Purchaser pursuant to the terms of this Section 3.2
shall be
the average closing price per share of Company Common Stock, as reported by
the
exchange or quotation system on which shares of Company Common Stock are then
listed or quoted, for the ten (10) consecutive trading days three trading days
immediately prior to their purchase by the Purchaser; provided, however, if
Company Common Stock is not then listed or quoted, the purchase price shall
be
determined by mutual agreement of the Purchaser and the Transferring
Person.
Section
3.3 Lock-Up.
Notwithstanding
anything herein to the contrary, each Founder hereby severally agrees not to,
directly or indirectly, sell, contract to sell,
make any
short sale of, loan, grant any option for the purchase of, mortgage, hypothecate
or otherwise transfer or dispose of any
of
the securities of the Company now beneficially owned or hereafter acquired
by
such Founder until the fifth (5th)
anniversary of the date of this Agreement without the prior written consent
of
the Purchaser, which consent may be withheld in its sole discretion;
provided,
however,
that on
the third (3rd)
anniversary of the date of this Agreement, one-half of the securities of the
Company beneficially owned by such Founder on such date shall be released from
the provisions of this Section
3.3; provided
further,
in the
event that a Founder is terminated otherwise than for “cause” (as defined in
that certain Employment Agreement by and between the Company and such Founder),
such Founder shall be entitled to Transfer, publicly or otherwise, in any given
month, an aggregate of ten percent (10%) of the securities beneficially owned
by
such Founder (calculated at the date of this Agreement and adjusted for stock
splits, combinations and similar events), subject to applicable securities
laws.
Notwithstanding the foregoing, shares of Common Stock beneficially owned by
Founders that are issued to Dolman Technology Capital, Inc. pursuant to the
exercise of those certain Warrants, dated as of June 22, 2004, by and between
Dolman Technology Capital, Inc. and such Founder, shall be excluded from the
provisions of this Section
3.3;
provided that such Warrants shall not be amended, modified or altered in manner
whatsoever without the prior written consent of the Purchaser nor shall a
settlement of such Warrants be effected on any terms different than those
contained in such Warrants.
20
ARTICLE
IV
GENERAL
PROVISIONS
Section
4.1 Entire
Agreement.
This
Agreement constitutes the entire agreement and understanding of the parties
in
respect of the subject matter hereof and supersedes all prior understandings,
agreements or representations by or among the parties, written or oral, to
the
extent they relate in any way to the subject matter hereof.
Section
4.2 Successors
and Assigns. All
of
the terms, agreements, covenants, representations, warranties and conditions
of
this Agreement are binding upon, and inure to the benefit of and are enforceable
by, the parties and their respective successors, legal representatives, heirs
and permitted assigns.
Section
4.3.
Notices.
All
notices, requests and other communications provided for or permitted to be
given
under this Agreement must be in writing and shall be given by personal delivery,
by certified or registered United States mail (postage prepaid, return receipt
requested), by a nationally recognized overnight delivery service for next
day
delivery, or by facsimile transmission, as follows (or to such other address
as
any party may give in a notice given in accordance with the provisions
hereof):
If
to the
Purchaser:
Radical
Holdings LP
c/o
Radical Management LLC
0000
Xxxxxxxx Xxxxxx
Xxxxxx,
Xxxxx 00000
Fax:
(000)
000-0000
Attn:
President
21
With
a
copy to (which does not constitute notice):
Xxxxxx
X.
Xxxx
0000
Xxxxxxxx Xxxxxx
Xxxxxx,
Xxxxx 00000
Fax:
(000) 000-0000
and
Jenkens
& Xxxxxxxxx, P.C.
0000
Xxxx
Xxxxxx, Xxxxx 0000
Xxxxxx,
Xxxxx 00000
Phone:
(000) 000-0000
Fax:
(000) 000-0000
Attn:
Xxxxxx X. Xxxxxxx, Esq.
If
to the
Company:
Immediatek,
Inc.
0000
Xxxxx Xxxxxxx Xxxxxxxxxx, Xxxxx 0000
Xxxxxxxxxx,
Xxxxx 00000
Phone:
(000) 000-0000
Fax:
(000) 000-0000
Attn:
Xxxx Xxxx, President
With
a
copy to (which does not constitute notice):
Vial,
Hamilton, Xxxx & Xxxx, LLP
0000
Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx,
Xxxxx 00000
Phone:
(000) 000-0000
Fax:
(000) 000-0000
Attn:
Xxxxx X. Xxxxxx, Esq.
If
to the
Founders:
Xxxx
Xxxx
0000
Xxxxx Xxxxxxx Xxxxxxxxxx, Xxxxx 0000
Xxxxxxxxxx,
Xxxxx 00000
Fax:
(000) 000-0000
Xxxx
Xxxxx
0000
Xxxxx Xxxxxxx Xxxxxxxxxx, Xxxxx 0000
Xxxxxxxxxx,
Xxxxx 00000
Fax:
(000) 000-0000
22
With
a
copy to (which does not constitute notice):
Vial,
Hamilton, Xxxx & Xxxx, LLP
0000
Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx,
Xxxxx 00000
Phone:
(000) 000-0000
Fax:
(000) 000-0000
Attn:
Xxxxx X. Xxxxxx, Esq.
All
notices, requests or other communications will be effective and deemed given
only as follows: (i) if given by personal delivery, upon such personal delivery,
(ii) if sent by certified or registered mail, on the fifth business day after
being deposited in the United States mail, (iii) if sent for next day delivery
by overnight delivery service, on the date of delivery as confirmed by written
confirmation of delivery, (iv) if sent by facsimile, upon the transmitter’s
confirmation of receipt of such facsimile transmission, except that if such
confirmation is received after 5:00 p.m. (in the recipient’s time zone) on a
business day, or is received on a day that is not a business day, then such
notice, request or communication will not be deemed effective or given until
the
next succeeding business day. Notices, requests and other communications sent
in
any other manner, including by electronic mail, will not be
effective.
Section
4.4 Governing
Law.
This
Agreement will be governed by, and construed in accordance with, the laws of
the
State of Texas, without giving effect to any choice of law
principles.
Section
4.5 Submission
to Jurisdiction; Waiver of Jury Trial.
(a) Submission
to Jurisdiction.
Any
action, suit or proceeding seeking to enforce any provision of, or based on
any
matter arising out of or in connection with, this Agreement shall only be
brought in any federal court located in Dallas County, Texas or any Texas state
court located in Dallas County, Texas, and each party consents to the exclusive
jurisdiction and venue of such courts (and of the appropriate appellate courts
therefrom) in any such action, suit or proceeding and irrevocably waives, to
the
fullest extent permitted by law, any objection that it may now or hereafter
have
to the laying of the venue of any such action, suit or proceeding in any such
court or that any such action, suit or proceeding brought in any such court
has
been brought in an inconvenient forum. Process in any such action, suit or
proceeding may be served on any party anywhere in the world, whether within
or
without the jurisdiction of any such court. Without limiting the foregoing,
service of process on such party as provided in Section
4.3
shall be
deemed effective service of process on such party.
(b) Waiver
of Jury Trial.
EACH
PARTY ACKNOWLEDGES THAT ANY DISPUTE THAT MAY ARISE OUT OF OR RELATING TO THIS
AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE
SUCH PARTY HEREBY EXPRESSLY WAIVES ITS RIGHT TO JURY TRIAL OF ANY DISPUTE BASED
UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER AGREEMENTS RELATING HERETO
OR
ANY DEALINGS AMONG THEM RELATING TO THE MATTERS CONTEMPLATED HEREIN. THE SCOPE
OF THIS WAIVER IS INTENDED TO ENCOMPASS ANY AND ALL ACTIONS, SUITS AND
PROCEEDINGS THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT AND CONTEMPLATED
HEREBY, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND
ALL
OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HEREBY REPRESENTS THAT
(i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT IN THE
EVENT OF ANY ACTION, SUIT OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER,
(ii) SUCH PARTY UNDERSTANDS, AND WITH THE ADVICE OF COUNSEL HAS CONSIDERED,
THE IMPLICATIONS OF THIS WAIVER, (iii) SUCH PARTY MAKES THIS WAIVER
VOLUNTARILY AND (iv) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND REPRESENTATIONS IN
THIS
SECTION
4.5(b).
23
Section
4.6 Headings.
The
article and section headings contained in this Agreement are inserted for
convenience only and will not affect in any way the meaning or interpretation
of
this Agreement.
Section
4.7 Amendments. This
Agreement may be amended only by a written instrument signed by the Company,
the
Purchaser and the Holders of at least a majority of the Registrable Securities,
except for Article
III,
which
may be amended only by a written instrument signed by the Company, the Purchaser
and the Founders.
Section
4.8 Extensions;
Waivers.
Any
party
may, for itself only, (a) extend the time for the performance of any of the
obligations of any other party under this Agreement, (b) waive any inaccuracies
in the representations and warranties of any other party contained herein or
in
any document delivered pursuant hereto and (c) waive compliance with any of
the
agreements or conditions for the benefit of such party contained herein. Any
such extension or waiver will be valid only if set forth in a writing signed
by
the party to be bound thereby. No
waiver
by any party of any default, misrepresentation or breach of warranty
or
covenant hereunder, whether intentional or not, may be deemed to extend to
any
prior or subsequent default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising because of any prior or
subsequent such occurrence. Neither
the failure nor any delay on the part of any party to exercise any right or
remedy under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any right or remedy preclude any other or further
exercise of the same or of any other right or remedy.
Section
4.9 Severability.
The
provisions of this Agreement will be deemed severable and the invalidity or
unenforceability of any provision will not affect the validity or enforceability
of the other provisions hereof; provided that if any provision of this
Agreement, as applied to any party or to any circumstance, is judicially
determined not to be enforceable in accordance with its terms, the parties
agree
that the court judicially making such determination may modify the provision
in
a manner consistent with its objectives such that it is enforceable, and/or
to
delete specific words or phrases, and in its modified form, such provision
will
then be enforceable and will be enforced.
24
Section
4.10 Counterparts;
Effectiveness.
This
Agreement may be executed in two or more counterparts, each of which will be
deemed an original but all of which together will constitute one and the same
instrument. This Agreement will become effective when one or more counterparts
have been signed by each of the parties and delivered to the other parties.
For
purposes of determining whether a party has signed this Agreement or any
document contemplated hereby or any amendment or waiver hereof, only a
handwritten original signature on a paper document or a facsimile copy of such
a
handwritten original signature shall constitute a signature, notwithstanding
any
law relating to or enabling the creation, execution or delivery of any contract
or signature by electronic means.
Section
4.11 Specific
Performance; Remedies. Each
party acknowledges and agrees that the other parties would be damaged
irreparably if any provision of this Agreement were not performed in accordance
with its specific terms or were otherwise breached. Accordingly, the parties
will be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and
its
provisions in any action or proceeding instituted in any court of the United
States or any state thereof having jurisdiction over the parties and the matter,
in addition to any other remedy to which they may be entitled, at law or in
equity. Except as expressly provided herein, the rights, obligations and
remedies created by this Agreement are cumulative and in addition to any other
rights, obligations or remedies otherwise available at law or in equity. Except
as expressly provided herein, nothing herein will be considered an election
of
remedies.
Section
4.12 Construction.
This
Agreement has been freely and fairly negotiated among the parties. If an
ambiguity or question of intent or interpretation arises, this Agreement will
be
construed as if drafted jointly by the parties and no presumption or burden
of
proof will arise favoring or disfavoring any party because of the authorship
of
any provision of this Agreement. Any reference to any law will be deemed to
refer to such law as in effect on the date hereof and all rules and regulations
promulgated thereunder, unless the context requires otherwise. The words
“include,” “includes,” and “including” will be deemed to be followed by “without
limitation.” Pronouns in masculine, feminine and neuter genders will be
construed to include any other gender, and words in the singular form will
be
construed to include the plural and vice versa, unless the context otherwise
requires. The words “this Agreement,” “herein,” “hereof,” “hereby,” “hereunder,”
and words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The parties intend that
each
representation, warranty and covenant contained herein will have independent
significance. If any party has breached any covenant contained herein in any
respect, the fact that there exists another covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
party has not breached will not detract from or mitigate the fact that the
party
is in breach of the first covenant.
SIGNATURE
PAGE FOLLOWS
25
IN
WITNESS WHEREOF, the parties hereto have executed this Investor’s Rights
Agreement as of the date first above written.
|
COMPANY:
|
IMMEDIATEK,
INC. a Nevada corporation |
|
| |
|
|
| By: | /s/ XXXX XXXX | |
| Name: |
Xxxx Xxxx |
|
| Title: | President & Chief Executive Officer | |
| By: | /s/ XXXX XXXXX | ||
| Name: |
Xxxx Xxxxx |
||
| Title: | President |
| FOUNDERS: | ||
| |
|
|
| /s/ XXXX XXXX | ||
|
Xxxx Xxxx |
||
| /s/ XXXX XXXXX | ||
|
Xxxx
Xxxxx
|
||
