Exhibit 4.02
THIRD AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
This THIRD AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this
"Agreement") is entered into as of July 5, 2002 by and among LEAPFROG
ENTERPRISES, INC. (formerly Knowledge Kids Enterprises, Inc.), a Delaware
corporation (the "Company"), the persons identified on the Schedule of
Stockholders attached hereto as Exhibit A (the "Schedule of Stockholders") as
Class A Common Stockholders (the "Class A Common Stockholders"), the persons
identified on the Schedule of Stockholders as Class B Stockholders (the "Class B
Common Stockholders" and, together with the Class A Common Stockholders, the
"Common Stockholders") and the persons identified on the Schedule of
Stockholders as Series A Preferred Stockholders (such identified persons and any
other persons who acquire any Shares (as defined below) initially owned by any
of such identified persons (or acquired upon conversion of such Shares) directly
in a Qualified Transfer or indirectly through a series of transfers all of which
are Qualified Transfers, the "Series A Preferred Stockholders" and, together
with Common Stockholders, the "Stockholders").
RECITALS
In connection with an investment in the Company by Knowledge Kids,
L.L.C., a Delaware limited liability company ("Kids"), the Company, Kids and
FrogPond, LLC, a California limited liability company formerly known as LeapFrog
XXX, LLC ("FrogPond") entered into that certain Stockholders Agreement dated as
of September 24, 1997 (as amended by a First Amendment to Stockholders Agreement
dated as of July 21, 1998, "Stockholders Agreement Number One").
In connection with the acquisition of assets of Explore Technologies,
Inc., a Delaware corporation ("Explore"), the Company, Kids and Explore entered
into that certain Stockholders Agreement Number Two dated as of July 22, 1998
("Stockholders Agreement Number Two"). Explore has transferred all of its
securities in the Company by operation of law to Explore Holdings LLC, a
Delaware limited liability company ("Explore Holdings").
In connection with the issuance and sale of shares of Series A
Preferred Stock pursuant to a Series A Preferred Stock Purchase Agreement dated
as of March 23, 2001 (the "Series A Purchase Agreement"), the Company and the
Stockholders entered into an Amended and Restated Stockholders Agreement dated
as of March 23, 2001 (the "First Amended and Restated Stockholders Agreement")
to regulate certain aspects of the Stockholders' relationship with regard to
each other and with the Company and to amend, restate and supersede Stockholders
Agreement Number One and Stockholders Agreement Number Two in their entirety. On
April 19, 2002, the Company and the Stockholders entered into a Second Amended
and Restated Stockholders Agreement (the "Second Amended and Restated
Stockholders Agreement") to regulate certain aspects of the Stockholders'
relationship with regard to each other and with the Company and to amend,
restate and supersede the First Amended and Restated Stockholders Agreement in
its entirety.
The Company and the Stockholders are entering into this Agreement to
acknowledge the transfer of shares from Explore to Explore Holdings and to
amend, restate and supersede the Second Amended and Restated Stockholders
Agreement in its entirety.
AGREEMENT
NOW THEREFORE, in consideration of the above recitals and the mutual
covenants herein contained and for other good and valuable consideration, the
parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
As used herein, the following terms shall have the following
meanings:
1.1. "Affiliate" shall mean as applied to any Person, any other Person
who, directly or indirectly, controls, is controlled by, or is under common
control with, such Person. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct the management and
policies of a Person, whether through the ownership of stock, by contract, or
otherwise; provided, however, that, in any event: (a) any Person which owns
directly or indirectly 10% or more of the securities having ordinary voting
power for the election of directors or other members of the governing body of a
Person or 10% or more of the partnership or other ownership interests of a
Person (other than as a limited partner of such Person) shall be deemed to
control such Person, (b) each director (or comparable manager) of a Person shall
be deemed to be an Affiliate of such Person, and (c) each partnership, limited
liability company or joint venture in which a Person is a partner, member or
joint venturer shall be deemed to be an Affiliate of such Person.
1.2. "Board" shall mean the Board of Directors of the Company.
1.3. "Buyer" shall mean KKE/Explore Acquisition Corp., a Delaware
corporation.
1.4. "Class A Common Stock" shall mean the Class A Common Stock of the
Company, par value $0.0001 per share.
1.5. "Class A/B Director" shall mean a member of the Board elected by
the vote of the Class A Common Stockholders, the Class B Common Stockholders and
the Series A Preferred Stockholders, voting as a single class, in accordance
with the provisions of the Company's Amended and Restated Certificate of
Incorporation.
1.6. "Class B Common Stock" shall mean the Class B Common Stock of the
Company, par value $0.0001 per share.
1.7. "Class B Warrants" shall mean the warrants issued to Kids and
FrogPond on July 21, 1998.
1.8. "Commission" shall mean the Securities and Exchange Commission.
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1.9. "Common Stock" shall mean common stock of the Company, par value
$0.0001 per share, including the Class A Common Stock and the Class B Common
Stock.
1.10. "Company Offering" shall have the meaning provided in Section
4.1(a).
1.11. "CSC" shall mean CSC LF Holdings, LLC, a Delaware limited
liability company, and any Person who has acquired any Shares from it directly
in a Qualified Transfer or indirectly in a series of transfers all of which were
Qualified Transfers.
1.12. "CSC Designee" shall have the meaning provided in Section 5.2.
1.13. "CSC Option" shall have the meaning provided in Section
4.1(a)(iii).
1.14. "Demanding Holders" shall have the meaning provided in Section
4.1(a).
1.15. "Demand Registration" shall have the meaning provided in Section
4.1(a).
1.16. "Demand Registration Notice" shall have the meaning provided in
Section 4.1(a).
1.17. "Drag-Along Notice" shall have the meaning provided in Section
5.4(a).
1.18. "Drag-Along Right" shall have the meaning provided in Section
5.4(a).
1.19. "Effective Period" shall have the meaning provided in Section
4.1.
1.20. "Eligible Explore Stockholder" shall mean any Person that was a
stockholder of Explore on July 22, 1998 and that, as of the date of and prior to
a Qualified Transfer to such stockholder: (i) is an "accredited investor" within
the meaning of Rule 501 of Regulation D under the Securities Act and applicable
state securities laws, and (ii) has signed an agreement in form and substance
satisfactory to the Company and Buyer pursuant to the provisions of Article 7 of
the Explore Purchase Agreement in the same manner as if such stockholder was a
party thereto in place of Explore.
1.21. "Eligible FrogPond Member" shall mean any Person that was a
member of FrogPond on September 24, 1997 and that, as of the date of and prior
to a Qualified Transfer to such stockholder, is an "accredited investor" within
the meaning of Rule 501 of Regulation D under the Securities Act and applicable
state securities laws.
1.22. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.23. "Exercise Notice" shall have the meaning provided in Section
5.3(b).
1.24. "Exercise Period" shall have the meaning provided in Section
5.3(b).
1.25. "Explore Purchase Agreement" shall mean that certain Asset
Purchase Agreement, dated as of June 29, 1998, by and among the Company, Buyer
and Explore.
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1.26. "Fully-Diluted Common Stock" shall mean all of the issued and
outstanding shares of Common Stock of the Company, assuming conversion, exercise
or exchange of all outstanding convertible, exercisable or exchangeable
securities, options, warrants and similar instruments into or for shares of
Common Stock (regardless of whether such convertible securities are at such time
convertible, exercisable or exchangeable). As provided in Section 6.7, all such
calculations shall be appropriately adjusted for stock dividends, splits,
reverse splits, combinations, recapitalizations and the like as described
therein.
1.27. "Holder" shall mean any Person owning or having the right to
acquire Registrable Securities.
1.28. "Indemnified Holder" shall have the meaning provided in Section
4.6(a).
1.29. "Kids Entity and Kids Entities" shall mean Kids and/or any
Affiliate of Kids, and any Person who has acquired any Shares from any of the
foregoing.
1.30. "Long-form Registration" shall mean a Demand Registration under
the Securities Act on Form S-1 or any similar long-form registration statement.
1.31. "PBL" shall mean Publishing and Broadcasting International
Limited, a Bahamas incorporated company, and any Person who has acquired any
Shares from it directly in a Qualified Transfer or indirectly in a series of
transfers all of which were Qualified Transfers.
1.32. "Person" shall mean natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts or other organizations.
1.33. "Piggyback Registration" shall have the meaning provided in
Section 4.2(a).
1.34. "Piggyback Notice" shall have the meaning provided in Section
4.2(a).
1.35. "Proposed Drag-Along Transfer" shall have the meaning provided in
Section 5.4(a).
1.36. "Proposed Issuance" shall have the meaning provided in Section
3.1.
1.37. "Proposed Transferor" shall have the meaning provided in Section
2.1.
1.38. "Prospectus" shall have the meaning provided in Section 4.3(a).
1.39. "Qualified IPO" shall mean an underwritten public offering of the
Company's Class A Common Stock pursuant to an effective registration statement
under the Securities Act in which (A) the public offering price equals at least
$18.75 per share (subject to equitable adjustments for stock dividends, splits,
reverse splits, combinations, recapitalizations and the like occurring after the
date hereof) and (B) the aggregate gross proceeds raised equals or exceeds $100
million.
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1.40. "Qualified Stockholder" shall mean a Class B Stockholder or
Series A Preferred Stockholder who is an "accredited investor" for purposes of
Rule 501 under the Securities Act (or such other comparable provision) and has a
similar status under applicable Blue Sky laws that permit such Stockholder to be
an offeree and purchaser in an offering exempt from registration and
qualification under such laws
1.41. "Qualified Trading Date" shall mean the first date subsequent to
a public offering of the Class A Common Stock which is not a Qualified IPO on
which the closing price of the Class A Common Stock has equaled or exceeded
$18.75 per share (subject to equitable adjustments for stock dividends, splits,
reverse splits, combinations, recapitalizations and the like occurring after the
date hereof) for thirty (30) consecutive trading days and the aggregate value of
all of the outstanding Class A Common Stock (excluding therefrom the aggregate
value of (a) any shares then owned by persons who are affiliates (as defined in
Rule 405 under the Securities Act) of the Company and (b) any "restricted
securities" (as defined in Rule 144 under the Securities Act) that cannot be
sold pursuant to Rule 144(k) under the Securities Act on the last such trading
day) equals or exceeds $100,000,000 (based on the closing price on the last such
trading day).
1.42. "Qualified Transfer" shall mean (i) any transfer of Shares by a
Stockholder to a trust created for the sole benefit of the Stockholder, the
Stockholder's spouse, lineal descendants or siblings, (ii) any transfer of
Shares by will or pursuant to the laws of descent and distribution to any
spouse, lineal descendant or sibling of a Stockholder, (iii) any transfer of
Shares by any Stockholder to Kids or any Kids Entity, (iv) any transfer of
Shares by FrogPond to any Eligible FrogPond Member, (v) any transfer of Shares
by Explore Holdings to any Eligible Explore Stockholder, (vi) any transfer of
Shares by any Series A Preferred Stockholder to any entity in which the ultimate
parent entity (as defined for purposes of the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976 as of the date hereof) of such Series A Preferred
Stockholder owns, directly or indirectly, 50% or more of the voting power or
equity interests or to such ultimate parent entity, (vii) any transfer of Shares
by any Series A Preferred Stockholder to any other Person unless the transferor
knows such other Person directly and materially competes with the Company as of
the date of such transfer or (vii) any other transfer of Shares by any
Stockholder with the consent of the Board which, in the case of a transfer by a
Series A Preferred Stockholder, shall not be unreasonably withheld or delayed;
provided that no such transfer shall constitute a "Qualified Transfer" unless
(a) the transferee agrees in writing to be bound by this Agreement as if such
transferee were a Stockholder hereunder, and (b) the transfer is a transaction
that is exempt from the registration and qualification requirements of Federal
and state securities laws and, if reasonably requested, the Company receives an
opinion of counsel reasonably acceptable to the Company that such transfer is
made in compliance with applicable Federal and state securities laws.
1.43. "Registrable Securities" shall mean (a) shares of Class A Common
Stock (i) issued or issuable to Stockholders upon conversion of shares of (A)
Series A Preferred Stock or (B) Class B Common Stock, or (ii) issued to Explore
in connection with the Company's acquisition of Explore (or any Person who
received Shares from Explore Holdings in a Qualified Transfer), or (iii) issued
or issuable to Wood and that are included in a Wood Demand pursuant to Section
4.1(a)(iii)(E) (it being understood that such shares shall not be Registrable
Securities
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for purposes of Section 4.1(b) and Section 4.2), or (b) other securities issued
or distributed, or issuable pursuant to rights or options distributed, with
respect to, shares of Common Stock or Series A Preferred Stock, or other
securities of the Company issued in exchange for shares of Common Stock or
Series A Preferred Stock; provided, however, that a Registrable Security shall
cease to be a Registrable Security at such time that (A) the Registrable
Security has been effectively registered under the Securities Act and disposed
of in accordance with the registration statement covering it or transferred
pursuant to Rule 144 under the Securities Act (or any successor provision then
in force), or (B) the Holder thereof is able to sell all Registrable Securities
held or entitled to be held upon conversion of such Holder under Rule 144 (or
any similar provision then in force) during any three-month period.
1.44. "Registration" shall have the meaning provided in Section 4.3.
1.45. "Registration Statement" shall have the meaning provided in
Section 4.3(a).
1.46. "Securities" shall have the meaning provided in Section 3.1.
1.47. "Securities Act" shall mean the Securities Act of 1933, as
amended.
1.48. "Series A Preferred Stock" shall mean the Series A Preferred
Stock of the Company, par value $0.0001 per share.
1.49. "Shares" shall mean shares of Common Stock of the Company, and
securities convertible into, or exercisable or exchangeable for, shares of
Common Stock of the Company.
1.50. "Short-form Registration" shall mean a Demand Registration under
the Securities Act on Form S-3 or any successor form thereto.
1.51. "Tag-Along Notice" shall have the meaning provided in Section
5.3(a).
1.52. "Tag-Along Offer" shall have the meaning provided in Section
5.3(a).
1.53. "Tag-Along Transfer" shall mean any transfer or series of related
transfers of (a) a majority of the Common Stock then outstanding, (b) Common
Stock representing a majority of the total voting power of the Common Stock then
outstanding (determined pursuant to Article VIII, Section 3(a) of the Company's
Amended and Restated Certificate of Incorporation) or (c) a majority of the
Common Stock then held by Kids and all Kids Entities.
1.54. "Termination Date" shall mean the earlier to occur of (a) the
date of a Qualified IPO or (b) the Qualified Trading Date.
1.55. "Transfer Notice" shall have the meaning provided in Section 2.2.
1.56. "Transferring Holder" shall have the meaning provided in Section
5.3(a).
1.57. "Wood" shall mean Xxxxxxx X. Xxxx.
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ARTICLE 2.
RIGHT OF FIRST REFUSAL
2.1. General Restriction on Transfer. No Stockholder other than Kids or
any Kids Entity (a "Proposed Transferor") may, directly or indirectly,
voluntarily or involuntarily, by operation of law or otherwise, transfer Shares
or any interest therein to any Person or Persons, other than pursuant to a
Qualified Transfer, without, in each case, first offering all such Shares to
Kids (and any other Kids Entities designated by Kids) and the Company in
accordance with the terms of this Article 2. As a condition to effecting any
such proposed transfer of Class B Common Stock to any Person or Persons, other
than pursuant to a Qualified Transfer or to Kids (or any other Kids Entities
designated by Kids), the Proposed Transferor shall convert such Class B Common
Stock into Class A Common Stock prior to such transfer in accordance with the
terms of the Company's Amended and Restated Certificate of Incorporation.
Notwithstanding the foregoing, the provisions of this Section 2.1 shall not
apply to the Series A Preferred Stockholders.
2.2. Notice. Prior to consummating any proposed transfer that is
subject to Section 2.1, the Proposed Transferor shall provide Kids and the
Company with written notice (the "Transfer Notice") of such proposed transfer,
which notice shall offer to transfer first to the Kids Entities and then to the
Company the number of Shares proposed to be transferred at the same price per
share and upon the same terms and conditions as the Proposed Transferor has
received in a bona fide offer for such Shares from the proposed purchaser. The
Transfer Notice shall set forth: (i) the name of the Proposed Transferor and the
number of Shares proposed to be transferred, (ii) the name and address of the
proposed purchaser, (iii) the proposed amount and form of consideration and
terms and conditions of payment to be made by such proposed purchaser, and (iv)
that the proposed purchaser has been informed of the right of first refusal
provided for in this Article 2 and has agreed to act in accordance with the
terms hereof.
2.3. Option to Purchase. Upon receipt of a Transfer Notice, Kids or any
Kids Entity designated by Kids shall have the option, for a period of thirty
(30) days following the date the Transfer Notice is given in accordance with
Section 6.5 below, to acquire all, but not less than all, of the Shares
specified in such notice at the same price per share and upon the same terms and
conditions as specified in such notice. Such option shall be exercised by
delivery of written notice of the exercise of the option to the Proposed
Transferor, a copy of which shall be sent by Kids to the Company. In the event
that such option is not exercised within such 30-day period, then the Company
shall have the right for a period of ten (10) days after the expiration of the
30-day period to acquire all, but not less than all, of the Shares specified in
the Transfer Notice at the same price per share and upon the same terms and
conditions as specified in such notice. Such option shall be exercised by
delivery of written notice of the exercise of the option to the Proposed
Transferor, a copy of which shall be sent by the Company to Kids. In the event
the options described above are not exercised within the periods described
above, then the Proposed Transferor shall have the right for a period of sixty
(60) days after the expiration of the 10-day period described above (or, if
sooner, after written waiver by Kids and the Company of their options to
purchase), to transfer to the proposed purchaser the Shares that were the
subject of the option, but only at the same price per share and upon the same
terms and conditions as set forth
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in the Transfer Notice; provided, however, that as a condition to the transfer
of the Shares to the proposed purchaser, such purchaser shall agree in writing
to be bound by this Agreement in accordance with the terms of Section 6.2
hereof. Any Shares that continue to be held by the Proposed Transferor after
such 60-day period shall again be subject to the restriction on transfer
contained in Section 2.1 hereof.
2.4. Closing. In the event that Kids, any Kids Entity designated by
Kids or the Company elects to acquire Shares from a Proposed Transferor pursuant
to this Article 2, the closing of such acquisition shall take place within ten
(10) business days after the notice of such election. At the closing, the
Proposed Transferor shall (i) execute any documents or instruments, including,
without limitation, representations and warranties, reasonably requested by the
party acquiring the Shares in order to effect the transfer of the Shares, and
(ii) deliver to the party acquiring the Shares certificates for the Shares being
sold, duly endorsed or accompanied by duly executed stock assignments separate
from certificate, free and clear of all claims and encumbrances, against
delivery by the party acquiring the Shares of the consideration for the Shares
being acquired. In the event such consideration is in a form other than cash,
the party acquiring the Shares shall have the right to substitute an equivalent
amount of cash, as determined by the Board.
2.5. Company Effecting Transfers. The Company agrees not to effect any
transfer of Shares by a Proposed Transferor until it has received evidence
reasonably satisfactory to it that this Article 2 has been complied with.
2.6. Priority of Rights. In the event that a sale by a Stockholder is
subject to the right of first refusal in this Section 2, the tag-along right in
Section 5.3 and also the drag-along right in Section 5.4 below, then the right
of first refusal procedures in this Section 2 shall be first applied and
completed, followed by the application and completion of the tag-along right in
Section 5.3 and then the application and completion of the drag-along right in
Section 5.4.
2.7. Termination of Right of First Refusal. The rights and restrictions
provided under this Article 2 shall automatically terminate and be of no further
force or effect upon a public offering of any class of the Company's Common
Stock under the Securities Act.
ARTICLE 3.
RIGHT TO CO-INVEST
3.1. General. If the Company proposes to newly-issue for cash (a
"Proposed Issuance") any equity securities or any securities convertible,
exercisable or exchangeable for equity securities (the "Securities"), then the
Company shall give written notice to the Class B Common Stockholders and the
Series A Preferred Stockholders of the Proposed Issuance. Such notice shall
describe the Proposed Issuance and shall contain an offer to sell to each
Qualified Stockholder such Qualified Stockholder's pro rata portion of the
Securities (which shall be a percentage equal to the percentage of the
outstanding Common Stock held by such Qualified Stockholder assuming the
conversion of all outstanding shares of Series A Preferred Stock into Common
Stock). If any such Qualified Stockholder fails to accept such offer by written
notice to
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the Company within fifteen (15) days following the date the Company's notice is
given in accordance with Section 6.5 below, the Proposed Issuance may be
consummated free of any right on the part of such Qualified Stockholder under
this Section 3.1 in respect thereof.
3.2. Exemptions. The purchase right granted by Section 3.1 shall not
apply to: (i) the issuance of Common Stock in connection with the exercise of
the Class B Warrants; (ii) any issuance of Securities in connection with an
underwritten public offering of Common Stock under the Securities Act; (iii) any
issuance of Securities in connection with a merger, consolidation, transfer of
assets or other business combination involving the Company; (iv) any issuance of
Securities pursuant to an employee benefit plan, a stock option plan or a stock
appreciation rights plan of the Company; (v) any issuance of Series A Preferred
Stock pursuant to the Series A Purchase Agreement or (vi) any issuance of
Securities upon conversion or exercise of any Securities issued in compliance
with Section 3.1 or issued in a transaction that is exempt from Section 3.1.
3.3. Termination of Co-Investment Right. The rights provided under this
Article 3 shall automatically terminate and be of no further force or effect on
the Termination Date.
ARTICLE 4.
REGISTRATION RIGHTS
4.1. Demand Registration Rights.
(a) Right to Demand. If the Company shall receive a written
request from (I) CSC, (II) PBL, (III) the holders of not less than a majority of
the then outstanding Registrable Securities held by Series A Preferred
Stockholders other than CSC and PBL, (IV) Kids or any Kids Entity, (V) Wood with
respect to not more than an aggregate of 1,000,000 shares of Class A Common
Stock held by Wood and/or FrogPond, which such request must be made by Wood not
later than one hundred and ninety five (195) days following the closing of the
Company's initial public offering of the Company's Class A Common Stock (a "Wood
Demand Registration Notice"), or (VI) the holders of not less than 33% of the
then outstanding Registrable Securities held by Common Stockholders, that the
Company register with the Commission, under and in accordance with the
provisions of the Securities Act, all or part of their Registrable Securities
(the Holders giving such written request, the "Demanding Holders", such request,
a "Demand Registration Notice" and such registration, a "Demand Registration"),
the Company shall have, except in the case of a Wood Demand Registration Notice,
twenty-one (21) days to determine whether to file a registration statement for
the offer and sale of securities for its own account. If during such twenty-one
day period, the Company in good faith determines to undertake or is undertaking
such an offering (a "Company Offering") and to file such a registration
statement and provides written notice to the Demanding Holder of such decision,
the Company shall have no obligation to register any Registrable Securities
except pursuant to and in accordance with Section 4.2 until the completion of
such Company Offering and the request made by the Holders shall not be counted
as a Demand Registration for the purposes of Section 4.1(a)(iii); provided that
the Company is actively employing in good faith all reasonable efforts to cause
such registration statement to become effective and, provided, further, that the
Company shall not
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have the right to undertake a Company Offering upon receipt of a Wood Demand
Registration Notice. If the Company determines not to undertake a Company
Offering and not to file a registration statement for its own account or upon
receipt of a Wood Demand Registration Notice, the Company will, no later than
ten (10) days after the expiration of such twenty-one (21) day period (or, in
the case of a Wood Demand Registration Notice, ten (10) days after the receipt
of a Wood Demand Registration Notice), send written notice to each Holder (other
than Wood) of such decision and its intention to comply with the Demand
Registration Notice and, subject to Section 4.1(b) below, to include in such
registration all Registrable Securities of the Holders (other than Wood) with
respect to which the Company has received written requests for inclusion therein
within twenty (20) days after the Company's giving of such notice. Once a Demand
Registration Notice has been delivered by any of the Demanding Holders other
than Wood, no other Demand Registration Notice may be delivered by any other
Holder other than Wood or be effective until (i) if the Company has elected to
undertake or is undertaking a Company Offering in compliance with the foregoing
requirements, such Company Offering is completed or abandoned or (ii) if the
Company has not so elected and is not so undertaking, the delivered Demand
Registration Notice has been withdrawn or ninety (90) days after the effective
date of the registration statement relating to such Demand Registration (or such
shorter period as may be agreed to by the managing underwriter or underwriters).
Once a Demand Registration Notice has been delivered by any of the Demanding
Holders other than Wood, unless it has elected to undertake or is undertaking a
Company Offering in compliance with the foregoing provisions, the Company will
not effect any public sale or distribution of its equity securities or
securities convertible into or exercisable or exchangeable for such equity
securities under the Securities Act, after such Demand Registration Notice has
been delivered until (i) such Demand Registration Notice has been withdrawn or
(ii) ninety (90) days after the effective date of the registration statement
relating to such Demand Registration (or such shorter period as may be agreed to
by the managing underwriter or underwriters). If the Demand Registration
involves a shelf registration statement pursuant to the penultimate paragraph of
Section 4.1(a), then the Demanding Holder shall give to the Company and the
other Holders (other than Wood) prior written notice of its intent to undertake
an underwritten offering under such registration statement and only the delivery
of such notice shall be deemed to be the delivery of a Demand Registration
Notice for the purposes of the preceding two sentences of this paragraph and
shall be deemed to be a Demand Registration Notice for purposes of the portions
of this paragraph preceding such two sentences. Any registration that involves a
shelf registration statement and any offerings under such shelf registration
statement shall be one and the same Demand Registration for the purposes of
clause (iii) below. A Demand Registration may be either a Long-form Registration
or, if the Company is then eligible to use Form S-3, a Short-form Registration.
All Demand Registrations shall be Short-form Registrations whenever the Company
is eligible to use any applicable short-form for registrations. All requests
made pursuant to this Section 4.1(a) will specify the aggregate number of
Registrable Securities requested to be registered and will also specify the
intended methods of disposition thereof; provided, however, that the Company
shall not be obligated to take any action to effect any such registration,
qualification or compliance pursuant to this Section 4.1(a):
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(i) unless the requesting Holders indicate a good faith
intention to register Registrable Securities of the Company having a reasonably
anticipated aggregate offering price, net of underwriting discounts and
commissions, of at least $5.0 million;
(ii) prior to the date which is six (6) months following the
effective date of the first public offering of the Company's Class A Common
Stock under the Securities Act;
(iii) after the Company has effected (A) in the case of CSC,
two (2) (or, if CSC has exercised its option to purchase all 1,200,000 shares
pursuant to Section 1.1(c) of the Series A Purchase Agreement (the "CSC
Option"), three (3)) Demand Registrations requested by CSC, (B) in the case of
PBL, one (1) Demand Registration requested by PBL, (C) in the case of Series A
Preferred Stockholders other than CSC and PBL, one (1) Demand Registration
requested by Holders of not less than a majority of the then outstanding
Registrable Securities held by such Holders, (D) in the case of Kids or any Kids
Entity, one (1) Demand Registration requested by Kids or any Kids Entity (E) in
the case of Wood, one (1) Demand Registration requested by Wood with respect to
not more than an aggregate of 1,000,000 shares of Class A Common Stock held by
Wood and/or FrogPond which such request must be made by Wood not later than one
hundred and ninety five (195) days following the closing of the Company's
initial public offering of the Company's Class A Common Stock (the "Wood
Demand"), it being understood that the Company's obligations to Wood under this
Section 4.1(a) shall terminate if Wood does not make a Wood Demand within one
hundred and ninety five (195) days following the closing of the Company's
initial public offering of the Company's Class A Common Stock, or (F) in the
case of holders of Common Stock, one (1) Demand Registration requested by not
less than 33% of the then outstanding Registrable Securities held by such
Holders, in each case pursuant to this Section 4.1(a); provided, however, that,
except in the case of a Wood Demand, in the event that less than all of the
Registrable Securities requested to be included in such Demand Registration by
the Holders exercising their demand registration rights hereunder are so
included pursuant to Section 4.1(b) hereof, the Company shall be required to
effect such additional Demand Registrations as may be necessary to register the
Registrable Securities that are not included in such registration pursuant to
Section 4.1(b); or
(iv) if the Company shall furnish to the Demanding Holders a
certificate, signed by the President of the Company, stating that in the good
faith judgment of the Board it would be detrimental to the Company or its
stockholders for a Registration Statement to be filed at such time. In such
event, the Company's obligation to use all reasonable efforts to register,
qualify or comply under this Section 4.1(a) shall be deferred for a single
period not to exceed ninety (90) days from the date of receipt of the Demand
Registration Notice by the Demanding Holders.
If the CSC Option is exercised, CSC may request in its Demand
Registration Notice that one of the Demand Registrations provided to CSC
pursuant to Section 4.1(a)(iii) be in the form of a shelf registration statement
that will permit the disposition of CSC's Registrable Securities in accordance
with CSC's intended method of distribution (which may include a delayed or
continuous offering pursuant to Rule 415 under the Securities Act).
11
A registration requested pursuant to this Section 4.1(a) shall
not be deemed to have been effected for purposes of clause (iii) above, (1)
unless a registration statement with respect thereto has become effective
(unless the Demand Registration has been withdrawn by the Demanding Holders and
such Demanding Holders either have paid expenses under Section 4.1(c) or were
not required to pay expenses under clause (i) of such Section), (2) if the
registration statement does not remain effective for a period of at least ninety
(90) days (or, in the case of a shelf registration statement, nine months) (as
applicable, the "Effective Period") and, except in the case of a Wood Demand,
all of the shares included in such registration have not been sold prior to the
expiration of the Effective Period, (3) if, after it has become effective, but
before all of the shares included in such registration have been sold prior to
the expiration of the Effective Period, such registration is subject to any stop
order, injunction or other order or requirement of the Commission or any other
governmental agency or court that permanently prevents the sale of the
Registrable Securities that were to have been registered for any reason not
attributable to the actions or omissions of the holders of such Registrable
Securities or (4) if the conditions to closing specified in the a purchase
agreement or underwriting agreement entered into in connection with such
registration are not satisfied and no such closing occurs, other than by reason
of some act or omission by the holders of the Registrable Securities that were
to have been registered.
(b) Priority on Demand Registrations. If in any Demand
Registration the managing underwriter or underwriters thereof advise the Company
in writing that in its or their reasonable opinion (or in the case of a Demand
Registration not being underwritten, the Demanding Holders shall reasonably
determine (and notify the selling Holders of such determination)) that the
number of securities proposed to be sold in such Demand Registration is
inconsistent with that which can be sold in such offering without having a
material adverse effect on the success of the offering (including, without
limitation, an adverse impact on the selling price or the number of Registrable
Securities that any participating Holder may sell), the Company will include in
such registration only the number of securities that, in the reasonable opinion
of such underwriter or underwriters (or the Demanding Holders, as the case may
be) can be sold without having a material adverse effect on the success of the
offering, in the following order of priority: (i) first, the Registrable
Securities requested to be included in such Demand Registration by the Demanding
Holders, (ii) second, any Registrable Securities held by any other Persons
(other than the Company) requested to be included in such Demand Registration,
in each case pro rata on the basis of the number of Registrable Securities
requested to be included by such Holders and (iii) third, any securities held by
any other Persons requested to be included in such Demand Registration, on a pro
rata basis. Notwithstanding the foregoing, no other Holder shall be entitled to
participate in any non-underwritten offering under a shelf registration
statement as to which CSC is the Demanding Holder.
(c) Withdrawal. A Demand Registration may be withdrawn by the
Demanding Holders holding a majority of the Registrable Securities included in
the Demand Registration Notice without the demand counting as a Demand
Registration hereunder; provided that the Demanding Holders reimburse the
Company for all reasonable out-of-pocket expenses incurred by the Company in
connection with the Demand Registration, except that no reimbursement shall be
required (i) if such withdrawal is based on material adverse information about
the Company of which such Holders were not aware at the time of the request or
(ii) if
12
such registration statement is not deemed to be effective pursuant to the final
paragraph of Section 4.1(a).
(d) Selection of Underwriters. The Demanding Holders shall
have the right to determine whether or not any Demand Registration shall be
underwritten. If any Demand Registration is an underwritten offering, the
Demanding Holders shall have the right to select the managing underwriter or
underwriters to administer the offering, subject to the Company's right to
approve any underwriters so selected, which approval shall not be unreasonably
withheld or delayed.
4.2. Piggyback Registration Rights.
(a) Right to Piggyback. If, at any time after the initial
public offering of shares of Common Stock under the Securities Act and whenever
the Company proposes to register any shares of Common Stock (or securities
convertible into or exchangeable for, or options to purchase, Common Stock) with
the Commission under the Securities Act, other than (i) a registration relating
solely to employee benefit plans, (ii) a registration relating solely to a Rule
145 transaction or (iii) a registration in which the only equity security being
registered is Class A Common Stock issuable upon conversion of convertible debt
securities which are also being registered, and the registration form to be used
may be used for the registration of the Registrable Securities (a "Piggyback
Registration"), the Company (A) will give written notice (the "Piggyback
Notice") to all Holders (other than Wood) no later than the later of (1)
forty-five (45) days prior to the anticipated filing date, or (2) promptly
following its decision to file, of its intention to effect such a registration,
which Piggyback Notice will specify the proposed offering price (or reasonable
range thereof), the kind and number of securities proposed to be registered, the
distribution arrangements and such other information that at the time would be
appropriate to include in such notice, and (B) will, subject to Section 4.2(b)
below, include in such Piggyback Registration all Registrable Securities (other
than any held by Wood) with respect to which the Company has received written
requests for inclusion therein within twenty (20) days after the date of the
Piggyback Notice.
(b) Priority on Piggyback Registrations. If the managing
underwriter or underwriters in any Piggyback Registration, if any, advise the
selling Holders in writing that in its or their reasonable opinion or, in the
case of a Piggyback Registration not being underwritten, the Company shall
reasonably determine (and notify the selling Holders of such determination),
based upon the advice of an independent investment banker of nationally
recognized standing, that the number or kind of securities proposed to be sold
in such registration (including Registrable Securities to be included pursuant
to Section 4.2(a) above) is inconsistent with that which can be sold in such
registration without having a material adverse effect on the success of the
offering (including, without limitation, an adverse impact on the selling price
or the number of securities that any participant may sell), the Company will
include in such registration the number of securities, if any, which, in the
opinion of such underwriter or underwriters, or the Company, based upon the
advice of an independent investment banker of nationally recognized standing, as
the case may be, can be sold, in the following order of priority: (i) first, the
shares the Company proposes to sell for its own account, (ii) second, the
Registrable Securities requested to be included in such registration by Holders
(pro rata based on the number of
13
Registrable Securities that each such Holder shall have requested to include
therein) and (iii) third, any securities held by any other Persons requested to
be included in such Piggyback Registration, on a pro rata basis.
(c) Withdrawal. A request for Piggyback Registration may be
withdrawn by any Holder making such a request; provided that such Holder
reimburse the Company for all reasonable incremental additional out-of-pocket
expenses incurred by the Company relating solely to such request, except that no
reimbursement shall be required if such withdrawal is based on material adverse
information about the Company of which such Holder was not aware at the time of
the request.
(d) Selection of Underwriters. If any Piggyback Registration
is an underwritten offering, the Company will (i) select a managing underwriter
or underwriters to administer the offering, which managing underwriter or
underwriters will be of nationally recognized standing, and (ii) determine the
terms under which such underwriting shall take place.
4.3. Registration Procedures. With respect to any registration of
Registrable Securities pursuant to this Article 4 (generically, a
"Registration"), the Company will, subject to Sections 4.1(b) and 4.2(b), as
expeditiously as practicable:
(a) prepare and file with the Commission, within one hundred
twenty (120) days after mailing the applicable Notice, a registration statement
or registration statements (the "Registration Statement") relating to the
applicable Registration on any appropriate form under the Securities Act, which
form shall be available for the sale of the Registrable Securities in accordance
with the intended method or methods of distribution thereof, and use its best
efforts to cause such Registration Statement to become effective; provided,
however, that before filing a Registration Statement or prospectus related
thereto (a "Prospectus") or any amendments or supplements thereto, the Company
will furnish to the Holders covered by such Registration Statement and the
underwriters, if any, copies of all such documents proposed to be filed, which
documents will be subject to the reasonable review of such Holders and
underwriters and their respective counsel, and the Company will not file any
Registration Statement or amendment thereto or any Prospectus or any supplement
thereto to which the Demanding Holder, the holders of a majority of the
Registrable Securities covered by such Registration Statement or the
underwriters, if any, shall reasonably object;
(b) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be necessary to
keep each Registration Statement effective for a period of not less than the
Effective Period (or such shorter period which will terminate when all
Registrable Securities covered by such Registration Statement have been sold or
withdrawn) or, if such Registration Statement relates to an underwritten
offering, such longer period as in the opinion of counsel for the underwriters a
Prospectus is required by law to be delivered in connection with sales of
Registrable Securities by an underwriter or dealer; cause each Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 under the Securities Act; and comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement during the applicable period
in accordance
14
with the intended method or methods of distribution by the sellers thereof set
forth in such Registration Statement or supplement to the Prospectus;
(c) notify the selling Holders and the managing underwriters,
if any, (A) when the Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to the Registration Statement or any
post-effective amendment, when the same has become effective, (B) of any request
by the Commission for amendments or supplements to the Registration Statement or
the Prospectus or for additional information, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose, (D) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, and (E) of the
happening of any event which makes any statement made in the Registration
Statement, the Prospectus or any document incorporated therein by reference
untrue or which requires the making of any changes in the Registration
Statement, the Prospectus or any document incorporated therein by reference in
order to make the statements therein not misleading;
(d) make reasonable efforts to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement at the earliest
possible moment;
(e) if reasonably requested by the managing underwriter or
underwriters or a holder of Registrable Securities being sold in connection with
an underwritten offering, incorporate in a Prospectus supplement or
post-effective amendment such information as the managing underwriters and the
Demanding Holders, and, if there are none, the holders of a majority of the
Registrable Securities being sold agree should be included therein relating to
the plan of distribution with respect to such Registrable Securities, including,
without limitation, information with respect to the number of Registrable
Securities being sold to such underwriters, the purchase price being paid
therefor by such underwriters and with respect to any other terms of the
underwritten offering of the Registrable Securities to be sold in such offering;
(f) deliver to each selling Holder and the underwriters, if
any, a reasonable number of copies of the Prospectus (including each preliminary
prospectus) and any amendment or supplement thereto;
(g) prior to any public offering of Registrable Securities,
register or qualify or cooperate with the selling Holders, the underwriters, if
any, and their respective counsel in connection with the registration or
qualification of such Registrable Securities for offer and sale under the
securities or "Blue Sky" laws of such jurisdictions as the selling Holders and
any underwriter reasonably requests in writing, considering the amount of
Registrable Securities proposed to be sold in each such jurisdiction; provided,
however, that the Company will not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified or to take any
action that would subject it to general service of process in any such
jurisdiction where it is not then so subject;
15
(h) cause all Registrable Securities covered by any
Registration Statement to be listed on each securities exchange on which similar
securities issued by the Company are then listed, or cause such Registrable
Securities to be authorized for trading on the Nasdaq National Market System if
any similar securities issued by the Company are then so authorized, if
requested by the Demanding Holders, the holders of a majority of such
Registrable Securities or the managing underwriters, if any;
(i) enter into such agreements (including an underwriting
agreement in usual and customary form) and take all such other actions in
connection therewith in order to facilitate the disposition of such Registrable
Securities as shall be reasonably necessary;
(j) if the offering is underwritten and at the reasonable
request of any Holder participating in such Registration use reasonable efforts
to furnish on the date that Registrable Securities are delivered for sale
pursuant to such registration: (A) an opinion, dated such date, of counsel
representing the Company for purposes of such Registration, in the usual and
customary form and substance; and (B) a letter, dated such date, from the
independent public accountants retained by the Company providing "comfort" on
financial matters with respect to such Registration in the usual and customary
form and substance;
(k) permit Holders and any underwriters participating in such
Registration to undertake such due diligence is as usual and customary under the
circumstances; provided that such selling Holders and any underwriters shall use
their best efforts to coordinate such due diligence to avoid additional expense
to the Company and delay of the offering; and
(l) keep each selling Holder of Registrable Securities advised
in writing as to the initiation and progress of any Registration hereunder.
As a condition to participating in a Registration, each Holder of Registrable
Securities as to which any Registration is being effected shall furnish to the
Company in writing such information regarding the Holder and the proposed
distribution of such securities as the Company may from time to time reasonably
request in writing.
Each Holder of Registrable Securities agrees by acquisition of such Registrable
Securities that, upon receipt of any notice from the Company of the happening of
any event of the kind described in Section 4.3(c)(B),(C), (D), or (E), such
Holder will forthwith discontinue disposition of Registrable Securities pursuant
to the Registration Statement until such Holder's receipt of copies of the
supplemented or amended Prospectus 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 that are incorporated by reference in
the Prospectus, and, if so directed by the Company, such Holder will deliver to
the Company all copies, other than permanent file copies then in such Holder's
possession, of the Prospectus covering such Registrable Securities.
4.4. Restrictions on Public Sale. To the extent not inconsistent with
applicable law, (i) each Stockholder agrees not to effect any public sale or
distribution of Shares, including a sale pursuant to Rule 144 (or any similar
provision then in force) under the Securities Act, during the
16
180-day period (or such shorter period as may be agreed to by the managing
underwriter or underwriters) following the initial underwritten public offering
of Common Stock under the Securities Act, and (ii) each Holder whose Registrable
Securities are included in a Registration Statement hereunder if requested by
the managing underwriter or underwriters for such Registration, agrees not to
effect any public sale or distribution of Registrable Securities, including a
sale pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act, during the fifteen (15) business days prior to, and during the
90-day period (or such shorter period as may be agreed to by such underwriter or
underwriters) beginning on, the effective date of a Registration Statement
pursuant to such Demand Registration or Piggyback Registration (except as part
of such Demand Registration or Piggyback Registration); provided that all
directors, officers and Holders of 1% or more of the then outstanding Shares of
the Company have agreed to the same restrictions.
4.5. Registration Expenses. All expenses incident to the Company's
performance of or compliance with this Article 4 will be borne by the Company
(including, without limitation, the reasonable fees and disbursements of not
more than one counsel selected by the selling Holders to represent such Holders
in connection with the Demand Registration, in an amount not to exceed $75,000);
provided, however, the Company shall not bear the costs and expenses of
underwriters' commissions, brokerage fees or transfer taxes for any selling
Holder or, except as provided in this Section 4.5, the fees and expenses of any
attorneys, accountants or other representatives retained by any selling Holder.
4.6. Indemnification.
(a) Indemnification by the Company. The Company agrees to
indemnify each Holder, its officers, directors and agents and each Person who
"controls" such Holder within the meaning of the Securities Act and the Exchange
Act (each, an "Indemnified Holder"), against losses, claims, damages, including
amounts incurred in settlement, liabilities and expenses (including, without
limitation, reasonable attorneys fees and expenses) arising out of, based upon
or resulting from any untrue statement or alleged untrue statement of a material
fact in the Registration Statement, Prospectus or preliminary Prospectus or any
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage, liability or expense arises out of or is based upon any
untrue statement or omission based upon information furnished in writing to the
Company by such Indemnified Holder or its representative expressly for use
therein. The Company also will indemnify underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution, their officers and directors and each Person who controls such
Persons (within the meaning of the Securities Act and the Exchange Act) to the
same extent as provided above, if requested.
(b) Indemnification by Holders of Registrable Securities. Each
Holder participating in a Registration agrees to indemnify the Company, its
directors, officers and agents and each Person who "controls" the Company
(within the meaning of the Securities Act and the Exchange Act) against losses,
claims, damages, liabilities and expenses resulting from any untrue
17
statement or alleged untrue statement of a material fact in the Registration
Statement, Prospectus or preliminary Prospectus or any omission or alleged
omission to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, to the extent, and only to the extent, that any such loss,
claim, damage, liability or expense arises out of, is based upon or results from
any untrue statement (or alleged untrue statement) or omission (or alleged
omission) based upon, in reliance on and in conformity in all material respects
with, information furnished in writing to the Company by such Holder or its
representative expressly for use therein. In no event shall the liability of any
selling Holder hereunder or under any underwriting agreement be greater in
amount than the dollar amount of the proceeds received by such Holder upon the
sale of the Registrable Securities giving rise to such indemnification
obligation. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, to the same extent as provided
above with respect to information so furnished in writing by such Persons
specifically for inclusion in any Registration Statement or Prospectus.
(c) Conduct of Indemnification Proceedings. Any Person
entitled to indemnification hereunder will: (i) give prompt written notice to
the indemnifying party after the receipt by the indemnified party of a written
notice of the commencement of any action, suit, proceeding or investigation or
threat thereof made in writing for which such indemnified party will claim
indemnification or contribution pursuant to this Agreement; provided, however,
that the failure of any indemnified party to give notice as provided herein
shall not relieve the indemnifying party of its obligations under the preceding
Section 4.6(a) or 4.6(b), as applicable, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice, and
(ii) unless in such indemnified party's reasonable judgment a conflict of
interest may exist between such indemnified and indemnifying parties with
respect to such claim, permit such indemnifying party to assume the defense of
such claim with counsel reasonably satisfactory to the indemnified party.
Whether or not such defense is assumed by the indemnifying party, the
indemnifying party will not be subject to any liability for any settlement made
without its consent (but such consent will not be unreasonably withheld or
delayed). No indemnifying party will or will be required to consent to the entry
of any judgment or to enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff of a release
from all liability in respect of such claim or litigation. An indemnifying party
who is not entitled to, or elects not to, assume the defense of a claim will not
be obligated to pay the fees and expenses of more than one counsel in any one
jurisdiction for all parties indemnified by such indemnifying party with respect
to such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties, in which event the indemnifying party shall be
obligated to pay the fees and expenses of such additional counsel or counsels.
(d) Contribution. If for any reason the indemnification
provided for in Sections 4.6(a) or 4.6(b), as applicable, is unavailable to an
indemnified party as contemplated by such Section, then the indemnifying party,
in lieu of indemnification, shall contribute to the amount paid or payable by
the indemnified party as a result of such loss, claim, damage, liability or
expense in such proportion as is appropriate to reflect not only the relative
benefits received by
18
the indemnified party and the indemnifying party, but also the relative fault of
the indemnified party and the indemnifying party, as well as any other relevant
equitable considerations.
4.7. Rule 144. The Company agrees that at all times after it has filed
a registration statement pursuant to the requirements of the Securities Act
relating to any class of equity securities of the Company, it will use its best
efforts to file in a timely manner all reports required to be filed by it
pursuant to the Securities Act and the Exchange Act and will take such further
action as any Holder may reasonably request in order that such Holder may effect
sales of Registrable Securities pursuant to Rule 144. At any reasonable time and
upon the reasonable request of a Stockholder, the Company will furnish such
Stockholder with such information as may be necessary to enable the Stockholder
to effect sales of Registrable Securities pursuant to Rule 144 under the
Securities Act and will deliver to such Stockholder a written statement as to
whether it has complied with such requirements. Notwithstanding the foregoing,
the Company may deregister any class of its equity securities under Section 12
of the Exchange Act or suspend its duty to file reports with respect to any
class of its securities pursuant to Section 15(d) of the Exchange Act if it is
then permitted to do so pursuant to the Exchange Act and the rules and
regulations thereunder.
4.8. Participation in Underwritten Registrations. No Holder may
participate in any underwritten registration hereunder unless such Holder (i)
agrees to sell its Registrable Securities on the basis provided in any
underwriting arrangements approved by the Company, and (ii) accurately completes
in a timely manner and executes all questionnaires, powers of attorney,
underwriting agreements and other documents customarily required under the terms
of such underwriting arrangements; provided that no Holder shall be required to
make any representations, warranties or indemnities that are not customarily
made by selling stockholders.
4.9. Certain Limitations in Connection with Registration Rights. From
and after the date hereof, without the prior written consent of each of the
Holders set forth in clauses (I), (II), (III), (IV) and (VI) of the first
sentence of Section 4.1(a), and except for the potential sale by six vice
presidents of the Company of up to 65,000 shares of Class A Common Stock each
(i.e., up to an aggregate of 390,000 shares of Class A Common Stock) in the
Company's initial public offering of Class A Common Stock, the Company shall not
enter into any agreement with any Person or Persons providing for the granting
to such Person or Persons of registration rights with a priority superior to, or
inconsistent in any material respect with, those granted to Holders pursuant to
this Article 4.
ARTICLE 5.
OTHER COVENANTS
5.1. Financial Information; Inspection.
(a) Financial Information. The Company shall deliver to each
Class B Common Stockholder and each Series A Preferred Stockholder:
19
(i) as soon as practicable after the end of each fiscal year,
and in any event within one hundred twenty (120) days thereafter, a consolidated
balance sheet of the Company and its subsidiaries, if any, as of the end of such
fiscal year, and a consolidated statement of income and a consolidated statement
of changes in financial position of the Company and its subsidiaries, if any,
for such year, prepared in accordance with generally accepted accounting
principles and setting forth in each case in comparative form the figures for
the previous fiscal year, all in reasonable detail and with an audit opinion
thereon from independent public accountants of recognized national standing;
(ii) as soon as practicable after the end of the first, second
and third quarterly accounting periods in each fiscal year of the Company, and
in any event within sixty (60) days thereafter, a consolidated balance sheet of
the Company and its subsidiaries, if any, as of the end of each such quarterly
period, and a consolidated statement of income and a consolidated statement of
changes in financial position of the Company and its subsidiaries, if any, for
such period and for the current fiscal year to date and setting forth in
comparative form the figures for the corresponding periods of the previous
fiscal year, prepared in accordance with generally accepted accounting
principles, with the exception that no notes need be attached to such statements
and year-end audit adjustments may not have been made; and
(iii) no later than ninety (90) days after the beginning of
each fiscal year of the Company, an annual budget for the Company for such
fiscal year.
(b) Inspection. Upon reasonable request, the Company shall permit each
Series A Preferred Stockholder or his or its designee to visit and inspect the
properties of the Company and examine its corporate and financial records (and
make copies thereof or extracts therefrom) during normal business hours
following reasonable notice.
(c) Confidentiality. Each Stockholder agrees that, except with the
prior written permission of the Company, it shall at all times keep confidential
and not divulge, furnish or make accessible to anyone any confidential
information, knowledge or data concerning or relating to the business or
financial affairs of the Company to which such Stockholder has been or shall
become privy by reason of this Agreement, discussions or negotiations relating
to this Agreement, the performance of its obligations hereunder or the ownership
of Shares, except that such Stockholder shall have the right to provide such
information to its employees, officers, directors, Affiliates and legal,
accounting and financial advisors, and any Person who is a prospective purchaser
of Shares from a Stockholder in a Qualified Transfer; provided that any such
recipient receives such information subject to the same restrictions as to
confidentiality set forth herein and that such Stockholder agrees to indemnify
the Company against any and all losses arising out of, based upon or resulting
from any release of such confidential information by such recipient. The
provisions of this Section 5.1 shall be in addition to, and not in substitution
for, the provisions of any separate nondisclosure agreement executed by the
parties hereto with respect to the transactions contemplated hereby.
Notwithstanding the foregoing, a Stockholder shall be permitted to disclose such
information if required to be disclosed pursuant to legal proceedings,
applicable law or the rules and regulation promulgated by the Commission or the
national securities exchange or market on which such Stockholder's shares are
then listed or quoted; provided that such Stockholder shall have provided notice
to the Company as
20
promptly as practicable and shall cooperate with the Company to the extent
reasonably practicable to oppose, at the Company's expense, such disclosure or
seek a protective order or confidential treatment with respect to such
confidential information.
(d) Termination of Information and Inspection Rights. The
rights provided by Section 5.1(a) and (b) shall automatically terminate and be
of no further force or effect upon the earlier to occur of (i) a public offering
of any class of the Company's Common Stock under the Securities Act or (ii) the
date upon which the Company becomes subject to the reporting provisions of the
Exchange Act; provided that such rights shall terminate earlier with respect to
any Series A Preferred Stockholder on the date such Series A Preferred
Stockholder (and its Affiliates) no longer hold Shares representing at least
200,000 shares of Common Stock (assuming conversion of all Series A Preferred).
In determining the number of Shares held by any Series A Preferred Stockholder
or its Affiliates, any Shares it has transferred to any Person other than its
Affiliates shall be ignored.
5.2. CSC Designee to the Board. For so long as CSC holds Shares
(excluding any Shares held by transferees of CSC who are not Affiliates of CSC)
representing at least seventy-five percent (75%) of the total number of shares
of Series A Preferred originally issued to CSC under the Series A Purchase
Agreement (after taking into account and equitably adjusting for any
conversions, reclassifications, combinations, reverse stock splits and the
like), CSC shall have the right to designate in writing one member of the Board
to serve as a Class A/B Director (the "CSC Designee") and, at any time, to
remove and replace the persons serving as the CSC Designee. Each Stockholder
agrees to vote its Shares to cause the CSC Designee to be so elected, removed
and replaced. The right provided by this Section 5.2 shall automatically
terminate and be of no further force or effect on the Termination Date.
5.3. Tag-Along Right.
(a) No holders of Common Stock shall effect a Tag-Along
Transfer (each, a "Transferring Holder") unless the proposed purchaser of such
shares shall offer to each of the Series A Preferred Stockholders (a "Tag-Along
Offer") the opportunity to include in the proposed transfer the same percentage
of its Shares as that percentage proposed to be transferred by the Transferring
Holders upon the same terms and conditions, and with the same price per share,
form of consideration and terms of payment offered by the proposed purchaser to
the Transferring Holders (which, if the transfer includes Class B Common Stock,
shall be determined for all Shares by reference to the price, form of
consideration and terms of payment applicable to the Class B Common Stock) .
Such Transferring Holders shall provide a notice (the "Tag-Along Notice") to
each Series A Preferred Stockholder and the Company setting forth: (i) the name
or names of each Transferring Holder proposing to transfer Shares and the
percentage of Shares of each Transferring Holder proposed to be transferred,
(ii) the name of the proposed purchaser, (iii) the proposed amount and form of
consideration and terms and conditions of payment offered by the proposed
purchaser and (iv) the proposed date of consummation of the proposed transfer.
In the event that the consideration to be paid in such Tag-Along Offer is not
comprised entirely of cash only Series A Preferred Stockholders who are
Qualified Stockholders may participate in the Tag-Along Offer.
21
(b) The Tag-Along Offer may be accepted by a Series A
Preferred Stockholder by delivery of a written notice (the "Exercise Notice") to
the Transferring Holders and to the Company within fifteen (15) days following
the date the Tag-Along Notice is given (the "Exercise Period"); provided that
the obligations, if any, of any Series A Preferred Stockholder who accepts any
such offer shall be subject to the consummation of the purchase described in the
Tag-Along Notice on the terms described therein. The Exercise Notice shall state
the maximum number of Shares that such Series A Preferred Stockholder proposes
to include in the transfer to the proposed purchaser, determined as set forth in
Section 5.3(a) above.
(c) In the event that the total number of Shares proposed to
be sold to the proposed purchaser by the Transferring Holders and the selling
Series A Preferred Stockholders exceeds the number of Shares which the proposed
purchaser is willing to purchase, the number of Shares to be sold by the
Transferring Holders and each selling Series A Preferred Stockholder shall be
reduced pro rata based on the total number of Shares then held by the
Transferring Holders and each selling Series A Preferred Stockholder.
(d) At the closing of the transfer to the proposed purchaser,
each selling Series A Preferred Stockholder shall (i) execute any documents or
instruments that are also being executed by the Transferring Holders, including,
without limitation, representations and warranties, reasonably requested by the
proposed purchaser, and (ii) deliver certificates for the Shares being sold,
duly endorsed or accompanied by duly executed stock assignments separate from
certificate, free and clear of all claims and encumbrances (other than any
arising pursuant to this Agreement) against delivery by the proposed purchaser
of the consideration for the Shares of such Series A Preferred Stockholder being
sold pursuant to this Section 5.3.
(e) In the event that a transfer by a Transferring Holder is
subject to one or more of (i) the right of first refusal in Section 2 above,
(ii) the tag-along right in this Section 5.3 or (iii) the drag-along right in
Section 5.4 below, then the priority for the application of such rights shall,
to the extent applicable to such transfer, be as follows: the first refusal
procedures in Section 2 shall be first applied and completed, followed by the
application and completion of the tag-along right in this Section 5.3 and then
the application and completion of the drag-along right in Section 5.4.
Notwithstanding the foregoing, nothing in this Section 5.3(e) shall be deemed to
imply that the provisions of Article 2 apply to the Series A Preferred
Stockholders.
(f) The rights provided under this Section 5.3 shall (i) not
apply to any transfer of Shares by Kids to any entity in which Knowledge
Universe, LLC, a Delaware limited liability company, owns directly or indirectly
50% or more of the equity interests or voting power and (ii) automatically
terminate and be of no further force or effect on the Termination Date.
5.4. Drag-Along Right.
(a) With respect to any proposed transfer of shares of Common
Stock representing not less than a majority of the voting power of the
Fully-Diluted Common Stock (determined pursuant to Article VIII, Section 3(a) of
the Company's Amended and Restated Certificate of Incorporation) in an arm's
length transaction to a proposed purchaser that is not an Affiliate of the
Company or of the holder of Common Stock proposing to transfer shares of
22
Common Stock (such proposed transfer being a "Proposed Drag-Along Transfer") the
Common Stockholders requesting such transfer shall have the right (the
"Drag-Along Right") so long as such Common Stockholders are transferring all of
their shares of Common Stock, to require the Series A Preferred Stockholders to
sell all (but not less than all) of their Shares in the Proposed Drag-Along
Transfer to the proposed purchaser at the greater of such price being paid by
the proposed purchaser in such Proposed Drag-Along Transfer or twelve dollars
and fifty cents ($12.50) per share of Series A Preferred Stock (subject to
equitable adjustments for stock dividends, splits, reverse splits, combinations,
recapitalizations and the like occurring after the date hereof), together with
all declared and unpaid dividends thereon and all accrued and unpaid Redemption
Dividends (as defined in Article VIII, Section 5(f) of the Amended and Restated
Certificate of Incorporation of the Company) thereon, and, otherwise, upon the
same terms and conditions as the transferring Common Stockholders in the
Proposed Drag-Along Transfer. If the transfer includes Class B Common Stock,
such price, terms and conditions shall be determined for all Shares by reference
to the price being paid by the proposed purchaser in such Proposed Drag-Along
Transfer, terms and conditions applicable to the Class B Common Stock. Such
transferring holders of Common Stock shall provide a notice (the "Drag-Along
Notice") to each Series A Preferred Stockholder and the Company setting forth:
(i) the name of the proposed purchaser, (ii) the proposed amount and form of
consideration and terms and conditions of payment offered by the proposed
purchaser and (iii) the proposed date of consummation of the proposed Drag-Along
Transfer.
(b) At the closing of the transfer of all Shares to the
proposed purchaser on the terms described above, each Common Stockholder and
Series A Preferred Stockholder shall (i) execute any documents or instruments,
including, without limitation, representations and warranties, reasonably
requested by the proposed purchaser and (ii) deliver certificates for the Shares
being sold, duly endorsed and accompanied by duly executed stock assignments
separate from certificate, free and clear of all claims and encumbrances,
against delivery to each Common Stockholder and Series A Preferred Stockholder
of the consideration for the Shares of such holder being sold pursuant to this
Section 5.4. Notwithstanding the foregoing, no Series A Preferred Stockholder
shall be required (A) to make any representation or warranty with respect to the
Company (as opposed to representations and warranties with respect to such
Series A Preferred Stockholder or the Shares being sold by such Series A
Preferred Stockholder), or otherwise have liability in connection with any
representations or warranties with respect to the Company, such that the Series
A Preferred Stockholder would have liability in connection with such
representations or warranties with respect to the Company in a proportion
greater than such Series A Preferred Stockholder's pro rata portion of the
aggregate sale proceeds received by all Stockholders party to the sale or (B) to
give any indemnities in an amount greater than the aggregate sale proceeds to be
received by such Series A Preferred Stockholder.
(c) In the event that a sale by a Stockholder is subject to
one or more of (i) the right of first refusal in Section 2 above, (ii) the
tag-along right in Section 5.3 above or (iii) the drag-along right in this
Section 5.4, then the priority for the application of such rights shall, to the
extent applicable to such transfer, be as follows: the first refusal procedures
in Section 2 shall be first applied and completed, followed by the application
and completion of the tag-along right in Section 5.3 and then the application
and completion of the drag-along right in this Section 5.4.
23
Notwithstanding the foregoing, nothing in this Section 5.4(c) shall be deemed to
imply that the provisions of Article 2 apply to the Series A Preferred
Stockholders.
(d) The rights provided under this Section 5.4 (including the
notice requirement set forth herein) shall automatically terminate and be of no
further force or effect upon a public offering of any class of the Company's
Common Stock under the Securities Act.
ARTICLE 6.
MISCELLANEOUS
6.1. Legend. In addition to any legends required by federal or state
securities laws, the certificates representing the Shares shall bear the
following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY
STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED
UNLESS THE SALE OR TRANSFER (X) IS COVERED BY AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT, (Y) IS MADE IN
COMPLIANCE WITH RULE 144 UNDER THE ACT OR (Z) QUALIFIES FOR
ANOTHER EXEMPTION FROM REGISTRATION UNDER THE ACT AND, IF
REASONABLY REQUESTED BY THE COMPANY, THERE IS DELIVERED TO THE
COMPANY AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE
COMPANY THAT REGISTRATION OF SUCH SALE OR TRANSFER IS NOT
REQUIRED UNDER THE ACT"
(b) In the case of Common Stock only - "THE SECURITIES REPRESENTED
BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON
TRANSFER SET FORTH IN AN AMENDED AND RESTATED STOCKHOLDERS
AGREEMENT DATED AS OF MARCH 23, 2001. A COPY OF SUCH AGREEMENT
MAY BE OBTAINED FROM THE COMPANY UPON REQUEST."
(c) In the case of Series A Preferred only - "THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
MANDATORY SALE PROVISIONS SET FORTH IN AN AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT DATED AS OF MARCH 23, 2001. A COPY OF
SUCH AGREEMENT MAY BE OBTAINED FROM THE COMPANY UPON REQUEST."
The legend set forth in paragraph (a) above shall be removed by the Company from
any certificate evidencing Shares (i) in connection with the any transfer
registered under the Securities Act, (ii) upon transfer of the Shares in
compliance with Rule 144 under the Securities Act or (iii) upon transfer
pursuant to another exemption, and if reasonably requested by the
24
Company, upon delivery to the Company of an opinion, in form and substance and
by counsel reasonably satisfactory to the Company, that such security can be
offered and sold without registration under the Securities Act and that such
offers and sales will not cause the exemption or exemptions from registration
pursuant to which the Shares were issued to be unavailable.
Each of the parties hereto agrees that absent (i) an effective registration
statement under the Securities Act and qualification under applicable state
securities laws or (ii) compliance with Rule 144 under the Securities Act, such
party will not sell, assign, transfer, pledge, hypothecate, distribute or
otherwise dispose of any or all of the Shares without first providing the
Company (if reasonably requested) with an opinion of counsel (which counsel and
opinion are reasonably satisfactory to the Company) stating that such
disposition is exempt from the registration and prospectus delivery requirements
of the Securities Act and has been registered or qualified under (or is exempt
from the registration and qualification requirements of) any applicable state
securities laws.
6.2. Transferees; Additional Restrictions on Transfer. Each transferee
of Shares from a Stockholder or a subsequent transferee (including the
transferee in a transfer from one Stockholder to another Stockholder but
excluding any purchaser under Section 5.4) shall take such Shares subject to the
same restrictions as existed in the hands of the transferor, including, without
limitation, the right of first refusal provided under Article 2 hereof, and no
such transfer shall be effective unless the transferee agrees in writing to be
bound by this Agreement as if such transferee were a Stockholder hereunder. No
transferee of Shares from a Common Stockholder or a subsequent transferee, other
than a transferee receiving Shares in a Qualified Transfer or from Kids or a
Kids Entity (or a subsequent transferee of Kids or a Kids Entity), shall be
entitled to the rights and benefits provided to the Common Stockholders
hereunder. Except as otherwise set forth in Section 5.1(d) and except for the
rights under Section 5.2, all transferees who receive Shares from a Series A
Preferred Stockholder pursuant to a Qualified Transfer shall be entitled to the
rights and benefits provided to the Series A Stockholders hereunder. Shares sold
to the public pursuant to an effective Registration Statement or pursuant to
Rule 144 under the Securities Act (or any successor provision) shall no longer
be subject to any of the provisions of this Agreement.
6.3. Future Stockholders. Subject to the restrictions contained herein,
any Person who acquires Shares of the Company may, at the option of the Company,
become a party to this Agreement by execution and delivery to the Company of a
counterpart of this Agreement. Upon delivery of such counterpart, (i) the
signature pages hereto shall be amended to reflect the name of such new party,
and (ii) such new party shall thereafter be deemed a "Stockholder" for purposes
of this Agreement.
6.4. Specific Performance, Etc. The Company and each Stockholder, in
addition to being entitled to exercise all rights provided herein, in the
Company's Amended and Restated Certificate of Incorporation or granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under this Agreement. Each party agrees that monetary damages would not
be adequate compensation for any loss incurred by reason of a breach by it of
the provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.
25
6.5. Notices. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered;
upon confirmation of transmission if transmitted by telecopy, electronic or
digital transmission method; the day after it is sent, if sent for next day
delivery to a domestic address by recognized overnight delivery service (e.g.,
Federal Express); and upon receipt, if sent by certified or registered mail,
return receipt requested. If notice is given in multiple fashions, the date of
first effective notice shall control. In each case notice shall be sent to:
If to the Company, addressed to:
LeapFrog Enterprises, Inc.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxx
With a copy to:
Maron & Sandler
000 Xxxxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
If to Kids, addressed to:
Knowledge Kids, L.L.C.
000 Xxxxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx
With a copy to:
Maron & Sandler
000 Xxxxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
26
If to any other Stockholder:
To the address set forth for such Stockholder on the
books and records of the Company.
or to such other place and with such other copies as any party may designate as
to itself by written notice to the others.
6.6. Entire Agreement; Amendments and Waivers. This Agreement
constitutes the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the parties hereto, including
Stockholders Agreement Number One, Stockholders Agreement Number Two, the First
Amended and Restated Stockholders Agreement, the Second Amended and Restated
Stockholders Agreement and any consent to grant of registration rights executed
by any Stockholder subsequent to March 23, 2001 and prior to the date of this
Agreement. Except as set forth in this Section 6.6, the provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers of or consents to departures from the
provisions hereof may not be given unless approved by the Company in writing and
the Company has obtained the written consent of Kids, on the one hand, and
Stockholders holding at least 50% of the outstanding Shares then held by
Stockholders other than Kids and any Kids Entities, on the other hand; provided,
however, such amendment, modification, supplement or waiver shall not require
the written consent of Kids unless (i) Kids and all of the Kids Entities
collectively own at least 50% of the voting power of the Shares outstanding on
the date of such modification or (ii) such modification adversely affects Kids
or any Kids Entity; and, provided, further, that (a) with respect to any
amendment, modification, supplement or waiver that adversely effects the Series
A Preferred Stockholders, such amendment, modification, supplement or waiver
shall require the written consent of each Series A Preferred Stockholder so
affected and (b) subject to the immediately preceding proviso, such amendment,
modification, supplement or waiver shall not require the consent of any holder
of Common Stock if it does not adversely affect such holder; and, provided,
further, with respect to any amendment, modification, supplement or waiver of
Section 4.1 that adversely effects the Wood Demand, such amendment,
modification, supplement or waiver shall require the written consent of Wood.
This Agreement may be amended, modified, waived or supplemented only by a
written instrument executed by all the parties hereto that are required to
execute the same. No action taken pursuant to this Agreement, including, without
limitation, any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action. The waiver by any party
hereto of a breach of any provision of this Agreement shall not operate or be
construed as waiver of any preceding or succeeding breach and no failure by any
party to exercise any right or privilege hereunder shall be deemed a waiver of
such party's rights or privileges hereunder or shall be deemed a waiver of such
party's rights to exercise the same at any subsequent time or times hereunder.
Notwithstanding any provision herein to the contrary, the addition of a party to
this Agreement at any time in connection with such party becoming a Stockholder
shall not constitute an amendment, modification or supplement of this Agreement
and shall only require the agreement of the Company and the Stockholder being
added as a party
27
to this Agreement; all such persons shall be considered to be Stockholders from
the date they become a signatory to this Agreement.
6.7. Recapitalizations, Exchange, Etc. Affecting the Company's Stock.
The provisions of this Agreement shall apply, to the full extent set forth
herein with respect to the Shares, to any and all shares of capital stock of the
Company that may be issued in respect of, in exchange for, or in substitution of
the Shares and shall be appropriately and equitably adjusted for any stock
dividends, splits, reverse splits, combinations, recapitalizations and the like
occurring after the date hereof. If such transactions occur, the parties agree
to amend this Agreement to the extent necessary so as to preserve the rights
granted to the parties hereunder.
6.8. Service of Process; Consent to Jurisdiction.
(a) Each of the parties hereto irrevocably consents to the
service of any process, pleading, notices or other papers by the mailing of
copies thereof by registered, certified or first class mail, postage prepaid, to
such party at such party's address set forth herein, or by any other method
provided or permitted under Delaware law.
(b) Each party hereto irrevocably and unconditionally (i)
agrees that any suit, action or other legal proceeding arising out of this
Agreement shall be brought in the Chancery Court of the State of Delaware or, if
such court does not have jurisdiction or does not accept jurisdiction, in any
state or federal court in the State of Delaware; (ii) consents to the
jurisdiction of any such court in any such suit, action or proceeding; and (iii)
waives any objection which such party may have to the laying of venue of any
such suit, action or proceeding in any such court.
6.9. Multiple Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.10. Headings. The headings of the Articles and Sections herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
6.11. Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Delaware, without regard to
principles of conflict of laws.
6.12. Construction. Differences in language as between similar
provisions covering similar matters may reflect differences in style rather than
a different substantive intent and should be construed accordingly.
6.13. Expenses. Except as otherwise specified in this Agreement, each
party hereto shall pay its own legal, accounting, out-of-pocket and other
expenses incident to this Agreement and to any action taken by such party in
preparation for carrying this Agreement into effect.
28
6.14. Invalidity. In the event that any one or more of the provisions
contained in this Agreement or in any other document or instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such document or instrument.
6.15. Cumulative Remedies. All rights and remedies of either party
hereto are cumulative of each other and of every other right or remedy such
party may otherwise have at law or in equity, and the exercise of one or more
rights or remedies shall not prejudice or impair the concurrent or subsequent
exercise of other rights or remedies.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
29
IN WITNESS WHEREOF, the parties have executed this Third Amended and
Restated Stockholders Agreement as of the day and year first written above.
"Company"
LEAPFROG ENTERPRISES, INC.,
a Delaware corporation
By: /s/ Xxxxx X. Xxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxx
---------------------------
Its: CFO
----------------------------
COUNTERPART SIGNATURE PAGE TO
THIRD AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
(All joint owners to sign)
STOCKHOLDER:
Xxxxxxx X. Xxxx
-----------------------------------
Print Name
/s/ Xxxxxxx X. Xxxx
-----------------------------------
Signature
STOCKHOLDER:
FrogPond LLC
-----------------------------------
Print Name
/s/ Xxxxxxx X. Xxxx
-----------------------------------
Signature
COUNTERPART SIGNATURE PAGE TO
THIRD AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
(All joint owners to sign)
STOCKHOLDER:
Explore Holdings LLC
-----------------------------------
Print Name
/s/ Xxxxx X. Xxxxxx
-----------------------------------
Signature
STOCKHOLDER:
-----------------------------------
Print Name
-----------------------------------
Signature
COUNTERPART SIGNATURE PAGE TO
THIRD AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
(All joint owners to sign)
STOCKHOLDER:
KNOWLEDGE UNIVERSE II LLC
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------
Xxxxxxx X. Xxxxx, Secretary
KNOWLEDGE KIDS, L.L.C.
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------
Xxxxxxx X. Xxxxx, Secretary
KNOWLEDGE UNIVERSE LEARNING GROUP,
LLC
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------
Xxxxxxx X. Xxxxx, Secretary
COUNTERPART SIGNATURE PAGE TO
THIRD AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
(All joint owners to sign)
STOCKHOLDER:
CSC LF Holdings, LLC
-----------------------------------
Print Name
/s/ Xxxxxxx Xxxx
-----------------------------------
Signature
STOCKHOLDER:
-----------------------------------
Print Name
-----------------------------------
Signature
COUNTERPART SIGNATURE PAGE TO
THIRD AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
(All joint owners to sign)
STOCKHOLDER:
Publishing and Broadcasting
International Limited
Guy Xxxxxx Xxxxxxxxx
-----------------------------------
Print Name
/s/ Xxx Xxxxxxxxx
-----------------------------------
Signature
STOCKHOLDER:
-----------------------------------
Print Name
-----------------------------------
Signature
COUNTERPART SIGNATURE PAGE TO
THIRD AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
(All joint owners to sign)
STOCKHOLDER:
Windsor Digital Studio, LLC
-----------------------------------
Print Name By: Windsor Media Inc.
, Manager
By: /s/ Xxxxx Sand, President
-----------------------------------
Signature
STOCKHOLDER:
-----------------------------------
Print Name
-----------------------------------
Signature
EXHIBIT A
SCHEDULE OF STOCKHOLDERS
Class A Common Stockholders
Explore Holdings LLC
Xxxxxxx X. Xxxx
Class B Common Stockholders
Knowledge Kids, L.L.C.
FrogPond LLC
Knowledge Universe Learning Group LLC
Knowledge Universe II LLC
Series A Preferred Stockholders
CSC LF Holdings, LLC
Publishing and Broadcasting International Limited
Windsor Digital Studio LLC
WAIVER OF BOARD MEMBER DESIGNATION RIGHT
THIS WAIVER OF BOARD MEMBER DESIGNATION RIGHT (the "Waiver), is being
executed and delivered as of July 3, 2002 by CSC LF Holdings, LLC ("CSC"). All
capitalized terms used herein that are not otherwise defined herein shall have
the meaning ascribed to them in that certain Second Amended and Restated
Stockholders Agreement, dated as of April 22, 2002 and as amended from time to
time (the "Stockholders Agreement"), by and among LeapFrog Enterprises, Inc., a
Delaware corporation (the "Company") and the Stockholders listed therein.
RECITALS
A. Whereas, CSC, pursuant to Section 5.2 of the Stockholders Agreement,
possesses the right to designate in writing one member of the Board to serve as
a Class A/B Director (the "CSC Designee") for so long as CSC holds Shares
representing at least seventy-five percent (75%) of the total number of shares
of Series A Preferred originally issued to CSC under the Series A Purchase
Agreement, and, at any time, to remove and replace the persons serving as the
CSC Designee;
B. Whereas, pursuant to Section 5.2 of the Stockholders Agreement, each
Stockholder agrees to vote its Shares to cause the CSC Designee to be elected,
removed and replaced in accordance with Section 5.2;
C. Whereas, pursuant to Section 6.6 of the Stockholders Agreement, CSC
is entitled to waive its rights under Section 5.2 of the Stockholders Agreement;
and
D. Whereas, in order to facilitate the initial public offering of the
Company's Class A Common Stock, CSC wishes to waive its rights pursuant to
section 5.2 of the Stockholders Agreement.
AGREEMENT
In consideration of the foregoing recitals and for other good and valuable
consideration, CSC agrees as follows:
1. WAIVER OF RIGHTS. CSC hereby waives any and all rights it has
pursuant to Section 5.2 of the Stockholders Agreement from the date of
this Waiver through the Termination Date. CSC's waiver of its rights
under Section 5.2 of the Stockholders Agreement is expressly limited to
its rights under Section 5.2 and does not constitute a waiver of any
other rights that CSC may have under the Stockholders Agreement.
2. MISCELLANEOUS. This Waiver and all rights, obligations and
liabilities hereunder shall be governed by and construed in accordance
with the internal laws of the State of Delaware, without regard to
principles of conflict of laws. The titles and subtitles used in this
Waiver are for convenience only and are not to be considered in
construing or interpreting this Waiver. This Waiver may be executed in
any number of counterparts,
each of which shall be an original, but all of which together shall
constitute one instrument.
IN WITNESS WHEREOF, CSC has duly executed and delivered this Waiver as
of the date first above written.
CSC LF HOLDINGS, LLC
By: /s/ Xxxxxxx Xxxx
-----------------------------------------
Name: Xxxxxxx Xxxx
--------------------------------------
Title: Vice Chairman
-------------------------------------
ACCEPTED AND APPROVED BY:
LEAPFROG ENTERPRISES, INC.
By: /s/ Xxxxx X. Xxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxx
----------------------------
Title: CFO
---------------------------
