EXHIBIT 10.9
ROWECOM INC.
SECOND AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
Dated as of December 11, 1998
TABLE OF CONTENTS
Page
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ARTICLE 1 3
INTERPRETATION 3
1.1 Definitions. 3
1.2 Headings 10
1.3 Construction. 10
1.4 Applicable Law 10
1.5 Severability 10
1.6 Currency 11
1.7 Entire Agreement 11
1.8 Amendment 11
1.9 Waiver 11
1.10 Time of Essence 12
1.11 Further Acts 12
1.12 Accounting Principles 12
1.13 Voting by Investors 12
1.14 Presumption of Exercise of Exchange Options 12
ARTICLE 2 12
TERM OF AGREEMENT 12
2.1 Term 12
ARTICLE 3 13
IMPLEMENTATION OF AGREEMENT 13
3.1 Stockholder Covenants 13
3.2 Conflict 13
3.3 Covenants by the Company 13
ARTICLE 4 14
COMPANY'S BUSINESS AND PURPOSE 14
4.1 Business and Purpose 14
ARTICLE 5 14
DIRECTORS AND STOCKHOLDERS 14
5.1 Number of Directors 14
5.2 Nomination and Election of Directors 14
5.3 Term of Office 16
5.4 Powers and Duties of Directors 16
5.5 Insurance 16
5.6 Board Meetings 16
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5.7 Committees 16
5.8 Senior Officers 16
5.9 Directors' Fees 17
5.10 Extraordinary Matters 17
5.11 Extraordinary Matters/Class A-1 Preferred Shares 19
5.12 Key Person Insurance 19
5.13 Dividends 20
ARTICLE 6 20
FINANCIAL AND ACCOUNTING PRACTICES 20
6.1 Financial Information 20
6.2 Maintain Books 22
6.3 Review of Books 22
6.4 Fiscal Year 22
6.5 Additional Items 22
6.6 Net Worth 22
ARTICLE 7 23
SALE AND ISSUANCE OF SHARES 23
7.1 Sale and Issue Restrictions 23
7.2 Offer 25
7.3 Tag-Along and Purchase Rights 25
7.4 Right of First Refusal 26
7.5 Transfer of Shares - Right of First Refusal Not Exercised 28
7.6 Drag-Along Rights 29
7.7 Put Option 29
7.8 Price Resolution 31
7.9 Substitute Purchaser 32
7.10 Exchange Options 33
7.11 Required Transfer 36
7.12 Reservation of Shares Issuable on Exercise of Exchange
Options 37
7.13 Conversion of Preferred Shares 37
7.14 Rights of Purchaser 37
7.15 Assignment to Permitted Transferees 37
7.16 Assignment to PV Securities Corp. 38
7.17 Assignment by Xxxxxx Xxxx, X.X.X. 00
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ARTICLE 8 38
REPRESENTATIONS AND WARRANTIES 38
8.1 General 38
8.2 The Company 39
8.3 Representations and Warranties Pertaining to PV Securities Corp 39
ARTICLE 9 39
ADDITIONAL CAPITAL 39
9.1 Related Party Loans 39
9.2 Future Debt Financings 41
9.3 Future Equity Financings 42
9.4 Exceptions to Pre-Emptive Rights 43
ARTICLE 10 43
GENERAL MATTERS 43
10.1 Noncompetition Agreements 43
10.2 Amendment to Bylaws 43
10.3 No Agency or Partnership 43
10.4 Notice 43
10.5 Endorsement of Share Certificates 44
10.6 Assignment 44
10.7 Counterparts 44
10.8 Publicity 44
ARTICLE 11 45
CONFIDENTIALITY 45
11.1 Confidentiality 45
11.2 Survival 45
EXHIBIT A 9
COMPLIANCE CERTIFICATE 9
EXHIBIT B 11
NONCOMPETITION AGREEMENT 11
SCHEDULE II 12
MINORITY STOCKHOLDERS 12
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THIS SECOND AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT (this
"Agreement") is made as of the 11th day of December, 1998, among RoweCom Inc., a
corporation organized under the laws of Delaware (the "Company"), the persons
listed on Schedule I (the "Class C Investors," and each a "Class C Investor"),
Xxxxxxx Xxxx, an individual ("Xxxx"), Highland Capital Partners III Limited
Partnership, a limited partnership organized under the laws of Delaware ("HCP"),
Highland Entrepreneurs' Fund III Limited Partnership, a limited partnership
organized under the laws of Delaware ("HEF"), Pai, Wei Xxxx Xxxxx, an individual
("Xxxxx"), Fu Kuan Investment Corp., a corporation incorporated under the laws
of Taiwan ("FKIC"), Puretech Profits Limited (BVI), a corporation incorporated
under the laws of the British Virgin Islands ("Puretech"), and the persons set
forth on Schedule II (the "Minority Stockholders," and each a "Minority
Stockholder"). Unless otherwise indicated herein, capitalized terms used herein
are defined in Section 1.1 hereof.
PRELIMINARY STATEMENTS:
A. Pursuant to a Stock Purchase Agreement, dated as of the date hereof among
the Class C Investors, the Company and RoweCan (the "Stock Purchase Agreement"),
the Class C Investors shall acquire Class C Preferred Shares.
B. The Stock Purchase Agreement provides that the purchase and sale
contemplated therein shall not take place unless the Stockholders enter into
this Agreement. The Parties hereto intend that this Agreement shall amend and
restate the Amended and Restated Stockholders' Agreement dated May 4, 1998 among
the Company, each of the Class B Investors, Xxxx and each of the Minority
Stockholders (the "Amended and Restated Stockholders' Agreement").
C. The authorized capital of the Company is 57,000,000 Shares consisting of
34,000,000 Common Shares, 5,000,000 Class A Preferred Shares, 5,000,000 Class X-
0 Xxxxxxxxx Shares, 8,000,000 Class B Preferred Shares and 5,000,000 Class C
Preferred Shares.
D. On the date hereof, the capitalization of the Company is as set forth on
Schedule 3.1(d) to the Stock Purchase Agreement.
E. The Stockholders are the registered and beneficial owners of all the
outstanding Shares in the capital of the Company.
F. On the date hereof, all of the issued and outstanding shares in the capital
of PV Securities Corp. are legally and beneficially owned by and recorded on PV
Securities Corp.'s books in the name of Xxxxxxxx Xxxxxxx.
G. The Company and the Stockholders have entered into this Agreement to
establish their respective rights and obligations in respect of the issued and
unissued shares of the Company, the management and conduct of its business, and
various other matters hereinafter set forth.
NOW, THEREFORE, the parties agree as follows:
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ARTICLE 1
INTERPRETATION
1.1 Definitions. As used in this Agreement, the following terms have the
following meanings:
"Act" means the Delaware General Corporation Law as may be amended from
time to time, and shall be deemed to be any act substituted therefor;
"Affiliate" - a corporation or other entity shall be deemed to be an
Affiliate of another corporation or other entity if, but only if, one of them is
the Subsidiary of the other or both are Subsidiaries of the same corporation or
other entity or each of them is Controlled by the same Person;
"Agreement" means this agreement and all schedules attached hereto and any
and all amendments made hereto by written agreement among the parties hereto;
"Amended and Restated Stockholders' Agreement" shall have the meaning
ascribed to such term in the preliminary statements;
"Amended RoweCan Shareholders' Agreement" means the Amended and Restated
Shareholders' Agreement, dated May 4, 0000, xxxxx XxxxXxx, XX and Xxxxxx Xxxxx.
"Ancillary Agreements" means all agreements, certificates and others
instruments delivered or given pursuant to the Stock Purchase Agreement
including, without limitation, this Agreement, the Second Amended and Restated
Registration Rights Agreement, of even date herewith, among the Company, RowCan
and the Investors, and the Stock Purchase Agreement, and the Amended Rowecan
Shareholders Agreement and "Ancillary Agreement" means any one of such
agreements, certificates or offer instruments;
"Annual Business Plan" has the meaning ascribed to such term in Section
6.1(b);
"Applicable Securities Legislation" means the Securities Act (Ontario) or
the Securities Act of 1933, as amended (U.S.);
"Appraiser" has the meaning ascribed to such term in Section 7.8;
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"Associate", where used to indicate a relationship with any Person, means
(i) any corporation of which such Person beneficially owns, directly or
indirectly, voting securities carrying more than 10% of the voting
rights attached to all voting securities of the corporation for the
time being outstanding,
(ii) any partner of that Person,
(iii) any trust or estate in which such Person has a substantial
beneficial interest or as to which such Person serves as trustee or
in a similar capacity,
(iv) any relative of that Person who resides in the same home as that
Person,
(v) any person of the opposite sex who resides in the same home as that
Person and to whom that person is married or with whom that Person
is living in a conjugal relationship outside marriage, or
(vi) any relative of a person mentioned in clause (v) who has the same
home as that Person;
"Bylaws" means the by-laws of the Company from time to time in force and
effect;
"Class A Exchange Option" means the right of WV to exchange its RoweCan
Class A Preferred Shares for Class A-1 Preferred Shares as described in Section
7.10.
"Class A Preferred Shares" means the shares of Class A Preferred Stock,
$.01 par value, of the Company;
"Class A-1 Preferred Shares" means the shares of Class A-1 Preferred Stock,
$.01 par value, of the Company;
"Class A-1 Investors" means WV;
"Class B Directors" has the meaning ascribed to such term in Section
5.2(a);
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"Class B Exchange Option" means the right of WV to exchange its RoweCan
Class B Preferred Shares for Class B Preferred Shares as described in Section
7.10;
"Class B Investors" means collectively CIVF, HCP, HEF, Xxxxx, FKIC, BVI and
Puretech, and "Class B Investor" means any one of them individually;
"Class B Preferred Shares" means the shares of Class B Preferred Stock,
$.01 par value, of the Company;
"Class B Stock Purchase Agreement" shall mean the Stock Purchase Agreement
dated as of May 4, 1998 among each of the Class B Investors and the Company;
"Class C Investors" and "Class C Investor" shall have the meaning ascribed
to each such term in the preliminary statements;
"Class C Preferred Shares" means the shares of Class C Preferred Stock,
$.01 par value, of the Company;
"Common Shares" means the shares of Common Stock, $.01 par value, of the
Company;
"Company's Business" has the meaning ascribed thereto in Section 4.1;
"Compounded Cash on Cash Return" means an annual return to WV on its
$4,000,000 investment in RoweCan Class A Preferred Shares calculated and
compounded annually from the date of investment to the date of actual return of
capital to WV as provided in Sections 7.10 and 7.11;
"Control" - a corporation, partnership, joint venture, limited liability
company, association or other business entity shall be deemed to be controlled
by another Person if, but only if:
(i) voting securities of such entity carrying more than 50% of the votes
for the election of directors are held, other than by way of security
only, by or for the benefit of such other Person, and
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(ii) the votes carried by such securities are sufficient, if exercised, to
elect, whether directly or indirectly, a majority of the board of
directors, partnership committee, board of managers or trustees or
other managerial body of such entity;
"Directors", "Board of Directors" and "Board" means the persons who are,
from time to time, duly elected as directors of the Company;
"Events of Non-Performance" shall mean (i) the failure of the Company to
perform, observe and comply with Section 5.10 herein; (ii) the sale, assignment,
disposition or transfer of any Shares other than pursuant to the terms of this
Agreement; (iii) the failure of the Company to comply with Section 6.6 herein;
(iv) if any representation or warranty made by the Company or RoweCan herein or
in any of the Ancillary Agreements or in any certificate, statement or report
furnished in connection with or pursuant to the Stock Purchase Agreement, the
Class B Stock Purchase Agreement, or the Original Purchase Agreement is found to
be false or incorrect in any way so as to make it materially misleading when
made or when deemed to have been made; (v) any breach of covenant of the Company
or of RoweCan herein (other than under clause (i), (ii) or (iii) above) or in
any of the Ancillary Agreements that shall continue for more than 15 days after
receipt of written notice from any Investor of such breach; and (vi) any
insolvency or bankruptcy proceedings, or any receivership, liquidation,
reorganization or other similar proceedings relative to the Company or to its
property or assets, or any proceedings for voluntary liquidation, dissolution or
other winding-up of the Company, whether or not involving insolvency or
bankruptcy, or any marshaling of the assets and liabilities of the Company;
"Exchange Options" shall mean, collectively, the Class A Exchange Option
and the Class B Exchange Option.
"Expert" means a national accounting firm to be agreed upon by the Company
and a Majority in Interest or, if a Majority in Interest are unable to agree,
then "Expert" means PriceWaterhouseCoopers LLP, Chartered Accountants, or an
affiliate thereof, or if none of the foregoing is able or willing to accept an
appointment to undertake any valuation of Shares under and as contemplated in
this Agreement, then "Expert" shall mean Deloitte & Touche, Chartered
Accountants, or an affiliate thereof;
"Fair Market Value" means, for the purposes of valuation hereunder, the
highest cash price in terms of money which would be obtained as at the date
specified in the applicable Section hereof if all the Stockholders of the
Company sold all of their respective Shares in an open and unrestricted market
(recognizing that the Shares are securities of a corporation which cannot offer
its securities to the public) without compulsion to a willing and knowledgeable
purchaser and where in determining such Fair Market Value: (i) the value of each
Share is based on the value of all Shares; (ii) no diminution or accretion in
value is attributed to any majority or
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minority interest (other than in determining Fair Market Value for a purchase by
the Company from a trustee in bankruptcy); (iii) the value of any insurance on
the life of any shareholder or employee and the proceeds of such insurance shall
be excluded; and (iv) the value of all intangible and unrecorded assets is
included;
"Fully Diluted" means all outstanding Shares and all Shares issuable upon
exercise, conversion or exchange of any warrant, option, convertible or
exchangeable security, or other similar instruments or rights then outstanding,
including without limitation, the Exchange Options.
"Funded Indebtedness" means indebtedness of the Company which matures or
which (including each renewal or extension, if any, in whole or in part) remains
unpaid for more than 12 months after the date originally incurred and includes,
without limitation (a) any indebtedness (regardless of its maturity) if it is
renewable or refundable in whole or in part solely at the option of the Company
(in the absence of default) to a date more than one year after the date of
determination, (b) any capitalized lease, (c) any guarantee of long-term
indebtedness owed by another person or entity and (d) any long-term indebtedness
secured by a Lien encumbering any property owned or being acquired by the
Company even if the full faith and credit of the Company is not pledged to the
payment thereof.
"GAAP" means at any time, generally accepted accounting principles from
time to time approved by the Financial Accounting Standards Board or any
successor institute, applicable as at the date on which a given calculation is
made or required to be made in accordance with generally accepted accounting
principles;
"Guarantor" means any Person who enters into any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any indebtedness
or other obligation of any other Person and, without limiting the generality of
the foregoing, any obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply funds for the purchase
or payment of) such indebtedness or other obligation (whether arising by virtue
of partnership arrangements, by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for the purpose of
assuring in any other manner the obligee of such indebtedness or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part).
"Independent" means, with respect to any member of the Board of Directors,
either of Xxxxxx Xxxxxxx or Xxxxxx Xxxxx or a person who is not (i) a
shareholder of the Company or of RoweCan other than a director who has become a
shareholder through the exercise of options or rights granted to him as a result
of being a director, or (ii) a shareholder of an Affiliate of (i), or
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(iii) a professional adviser to, director, officer, employee of or party to any
written or oral contract with the Company, Xxxx or RoweCan or a shareholder or
an Affiliate of any of them, or (iv) any person related by blood, adoption or
marriage to any of the foregoing;
"Initial Public Offering" means an underwritten public offering of Shares
pursuant to an effective registration statement or a receipted prospectus as
contemplated in the Applicable Securities Legislation;
"Investors" means collectively each of the Class A-1 Investors, the Class B
Investors and the Class C Investors, and "Investor" means any one of them
individually.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of this Agreement, the
Company or any Subsidiary shall be deemed to own subject to a Lien any asset
which it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement relating to such asset.
"License Agreement" means the marketing intangible license agreement
between the Company and RoweCan dated April 1, 1997;
"Majority in Interest" means more than 50% of the Class A-1 Preferred
Shares, the Class B Preferred Shares and the Class C Preferred Shares,
collectively, on a Fully Diluted basis;
"Management Directors" has the meaning ascribed to such term in Section
5.2(a);
"Marketing Agreement" means the marketing intangible development agreement
between the Company and RoweCan dated April 1, 1997;
"Minority Stockholders" has the meaning ascribed to such term in the
preamble to this Agreement.
"Net Income" means net income as determined in accordance with GAAP, after
taxes and after extraordinary items, but without giving effect to any gain
resulting from any reappraisal or write-up of any asset.
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"Net Worth" means the excess (as determined in accordance with GAAP) of the
value of the assets of the Company and its Subsidiaries as reflected on the
books and records of the Company (after deducting all applicable valuation
reserves) over Total Liabilities, all on a consolidated basis.
"Original Purchase Agreement" means the Share Purchase Agreement dated
April 1, 1997 among WV, RoweCan, and RoweCom LLC, a Delaware limited liability
company and predecessor of the Company.
"Original Stockholders' Agreement" shall mean the Unanimous Shareholders'
Agreement dated April 25, 1997 among the Company, WV and the other stockholders
of the Company at that time.
"Permitted Transferee" shall, in respect of a Person, mean:
(i) a corporation or other entity that (y) is an Affiliate of such
Person or (z) if such Person is an individual, all of the shares of
which are held by such Person and a member or members of such
Person's immediate family, provided such Person maintains Control of
such corporation or entity,
(ii) a trust, the beneficiaries of which are such Person and/or a member
or members of such Person's immediate family, the trustee of which
is (A) if such Person is an individual, such Person, or (B) if such
Person is a corporation, the Person which Controls such Person,
(iii) a member of such Person's immediate family upon the death of such
Person, or
(iv) in the case of a partnership or a limited liability company, the
partners or members of such entity and any of their respective
affiliates.
For the purposes of this Agreement, the phrase "members of such Person's
immediate family" shall mean such Person's spouse, brothers, sisters,
parents, children, grandchildren and nieces and nephews.
"Person" means an individual, partnership, corporation or other entity;
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"Preferred Shares" means, collectively, shares of Class A Preferred Shares,
Class A-1 Preferred Shares, Class B Preferred Shares and Class C Preferred
Shares;
"Purchaser" has the meaning ascribed thereto in Section 7.7;
"Put Option" has the meaning ascribed thereto in Section 7.7;
"Qualifying Public Offering"means an Initial Public Offering (i) at an
offering price to the public of $5.11 per share or greater and (ii) resulting in
gross proceeds to the Company of at least $20,000,000;
"Related Parties" means Stockholders and Persons which are Affiliates or
Associates of Stockholders; and "Related Party" shall mean any one of such
parties;
"Required Financing" has the meaning ascribed thereto in Section 9.2;
"Xxxx" has the meaning ascribed to such term in the preamble to this
Agreement;
"RoweCan" means Xxxx Communications Ltd., a corporation incorporated under
the laws of the Province of Ontario;
"RoweCan Class A Preferred Shares" means the Class A Preferred Shares of
RoweCan;
"RoweCan Class B Preferred Shares" means the Class B Preferred Shares of
RoweCan;
"Sale Event" has the meaning ascribed to such term in the Second Amended
Certificate of Incorporation.
"Second Amended Certificate of Incorporation" means the Second Restated and
Amended Certificate of Incorporation of the Company, as may be amended or
restated from time to time;
"Selling Investor" has the meaning ascribed to such term in Section 7.2(b);
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"Selling Stockholder" has the meaning ascribed to such term in Section
7.2(a);
"Senior Management Group" means Xxxx, Xxxxxx Xxxxx, Xxxxx Xxxxxxxxx and any
other employee of the Company or of RoweCan who earns in excess of $100,000 per
annum;
"Shares" means collectively the Exchange Options, Stock Options, the Common
Shares, the Warrants and the Preferred Shares;
"Stock Option" means an option to subscribe for Shares;
"Stock Purchase Agreement" has the meaning ascribed thereto in the
recitals;
"Stockholders" means, collectively, Xxxx, each of the Minority
Stockholders, and each of the Investors, and any person to whom a Stockholder
transfers any Shares, or to whom Shares are issued, in accordance with the terms
of this Agreement and "Stockholder" means, individually, any one of them;
"Subsidiary" means, with respect to any Person, a corporation, partnership,
joint venture, limited liability company, association or other business entity
Controlled by such Person;
"Supermajority Interest" means, (i) as to the Common Shares, at least 75%
of such shares and (ii) as to any indicated class or classes or series of the
Preferred Shares, at least 75% of such shares, collectively, on a Fully Diluted
basis;
"Technology Agreement" means the technology license agreement between the
Company and RoweCan dated April 1, 1997;
"Total Liabilities" means the aggregate (without duplication) of all
liabilities of the Company and its Subsidiaries and includes, without
limitation, (a) any indebtedness which is secured by any Lien on any of their
property even if the full faith and credit of the Company or of any Subsidiary
is not pledged to the payment thereof, (b) any indebtedness for borrowed money
or Funded Indebtedness if the Company or any Subsidiary is a Guarantor thereof;
provided, that there shall be excluded any liability under a reimbursement
agreement relating to a letter of credit issued to finance the importation or
exportation of goods;
"Transfer" has the meaning ascribed thereto in Section 7.1;
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"Warrants" means the Stock Purchase Warrant, dated April 25, 1997 issued by
the Company to Xxxxxxxx Xxxxxxx and the Stock Purchase Warrant, dated April 25,
1997 issued by the Company to Xxxxxx Xxxxx.
1.2 Headings. The division of this Agreement into Articles and Sections and
the insertion of headings are for convenience of reference only and shall not
affect the construction and interpretation of this Agreement.
1.3 Construction. Words importing the singular number only shall include the
plural and vice versa, and words importing the masculine gender shall include
the feminine gender and neuter.
1.4 Applicable Law. This Agreement shall be construed and governed by the laws
of the Commonwealth of Massachusetts.
1.5 Severability. Each provision of this Agreement is intended to be
severable. If any provision hereof is illegal or invalid, such provision shall
be deemed to be severed and deleted herefrom and such illegality and invalidity
shall not affect the validity or enforceability of the remainder hereof.
1.6 Currency. All references to dollars in this Agreement shall be to United
States dollars unless otherwise specified herein.
1.7 Entire Agreement. This Agreement (and, (i) with respect to the Company,
RoweCan, and the Class C Investors, the other Ancillary Agreements and (ii) with
respect to the Company, RoweCan, Xxxxxx Xxxxx and the Class B Investors, the
Amended RoweCan Shareholders' Agreement and the Class B Purchase Agreement)
constitutes the entire agreement among the parties hereto with regard to the
subject matter hereof and supersedes all prior agreements, understandings,
representations or warranties, negotiations and discussions, whether oral or
written, among the parties hereto with respect thereto, including without
limitation the Original Stockholders' Agreement, the Amended and Restated
Stockholders' Agreement and any other agreements among the stockholders of the
Company entered into prior to the date hereof, which are hereby terminated.
Notwithstanding the foregoing or any other provision of this Agreement or of the
other agreements being executed in connection with the transactions contemplated
by the Stock Purchase Agreement, and for the avoidance of any doubt, the parties
hereby acknowledge and agree that the warrants held by Xxxxxxxxx Xxxxxxx or
Xxxxxx Xxxxx, as listed in Schedule 3.1(e) to the Stock Purchase Agreement, will
not be affected by any of such agreements or transactions, and will continue in
full force and effect following the execution and delivery of
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such agreements and the consummation of such transactions and that any shares
received upon such exercise will be subject to this Agreement.
1.8 Amendment. No amendment of this Agreement shall be binding unless in
writing and signed by the Company, the holders of a majority of the Common
Shares and a Majority in Interest; provided, however, that (i) no amendment of
any provision that would disparately and negatively impact one or more classes
or series of Preferred Shares shall be made without the written consent of the
holders of a Supermajority Interest of each such class or series, (ii) no
provision granting rights specific to any holder can be amended without the
written consent of such holder, (iii) the obligations of any holder may not be
increased without the written consent of such holder and (iv) this Section 1.8
and Section 1.9 cannot be amended without the written consent of a Supermajority
Interest of each of the Class A-1 Preferred Shares, the Class B Preferred Shares
and the Class C Preferred Shares.
1.9 Waiver. No waiver by any party hereto of any breach of any of the
provisions of this Agreement shall take effect or be binding upon such party
unless such waiver was consented to in writing by such party; provided, however,
that with respect to rights of the Stockholders generally, the written consent
of the holders of a majority of the Common Shares and a Majority in Interest
shall be binding upon all of the Stockholders; provided further, however, that
(i) if the consent of the holders of a Supermajority Interest of any class of
Preferred Shares shall be required to exercise any right or enforce any
covenant, the consent of the holders of a Supermajority Interest of each such
class of Preferred Shares shall be required to bind the holders of such class of
Preferred Shares and (ii) if the waiver of any right or covenant will
disparately and negatively impact one or more classes of Preferred Shares, a
Supermajority Interest of each such class of Preferred Shares shall be required
to bind the holders of such class of Preferred Shares. No waiver of the rights
specific of any holder shall be binding upon such holder without the written
consent of such holder. Unless otherwise provided therein, such waiver shall
not limit or affect the rights of such party with respect to any other breach.
1.10 Time of Essence. Time shall be of the essence of this Agreement.
1.11 Further Acts. The parties hereto agree to execute and deliver such further
and other documents and perform and cause to be performed such further and other
acts and things as may be necessary or desirable in order to give full effect to
this Agreement and every part hereof.
1.12 Accounting Principles. References in this Agreement to generally accepted
accounting principles shall be deemed to be the generally accepted accounting
principles from time to time approved by the Financial Accounting Standards
Board or any successor institute, applicable as of the date on which such
calculation is made or required to be made in accordance with generally accepted
accounting principles.
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1.13 Voting by Investors. Unless otherwise required in this Agreement, the
exercise by the Investors of any rights to be exercised collectively under this
Agreement shall require the approval of a Majority in Interest.
1.14 Presumption of Exercise of Exchange Options. For purposes of the
exercising of any rights pursuant to this Agreement, it shall be presumed that
WV has exercised the Exchange Options.
ARTICLE 2
TERM OF AGREEMENT
2.1 Term. Subject to Section 11.2, this Agreement shall come into force and
effect on the date hereof and shall terminate (with the exception of the
Exchange Options and the obligations of WV under Section 7.11) on the earlier
of:
(a) the date on which only one Stockholder holds Shares;
(b) the date this Agreement is terminated by written agreement of the
holders of a majority of the Common Shares and a Supermajority
Interest of each class of Preferred Shares;
(c) the date upon which there shall occur a Qualifying Public Offering;
provided, that from and after the date on which there occurs any
Initial Public Offering (regardless of whether it is a Qualifying
Public Offering), the provisions of this Agreement will lapse and be
of no further force or effect with respect to Xxxxxxxx Xxxxxxx, Xxxxxx
Xxxxx and PV Securities Corp., or any Permitted Transferee of any of
them; or
(d) the sale of all of the Shares of the Company to a third party in
compliance with this Agreement.
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ARTICLE 3
IMPLEMENTATION OF AGREEMENT
3.1 Stockholder Covenants. Each of the Stockholders covenants and agrees that
it shall vote or cause to be voted the Shares of the Company owned by it to
accomplish and give effect to the terms and conditions of this Agreement and
that it shall otherwise act in accordance with the provisions and intent of this
Agreement.
3.2 Conflict. Subject to the provisions of the Act, in the event of any
conflict between the provisions of this Agreement and the Second Amended
Certificate of Incorporation and the Bylaws, the provisions of this Agreement
shall govern. The parties hereto acknowledge and agree that, as the date
hereof, conflicts may exist between this Agreement and the Second Amended
Certificate of Incorporation and the Bylaws. Each of the Stockholders agrees to
vote or cause to be voted the Shares owned by it so as to cause the Second
Amended Certificate of Incorporation or the Bylaws to be amended to resolve each
such conflict, and any other conflicts, in favor of the provisions of this
Agreement.
3.3 Covenants by the Company. The Company consents to the terms of this
Agreement and hereby covenants with each of the other parties hereto that it
will at all times during the term of this Agreement be governed by the terms and
provisions hereof in carrying on its business and affairs, and shall duly comply
with, perform or otherwise satisfy all representations, warranties, covenants
and agreements contained in each of the Stock Purchase Agreement and the Class B
Stock Purchase Agreement on its part to be complied with, performed or otherwise
satisfied, and each of the Stockholders shall vote or cause to be voted their
respective Shares of the Company to cause the Company to fulfill its foregoing
covenants.
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ARTICLE 4
COMPANY'S BUSINESS AND PURPOSE
4.1 Business and Purpose. The business and purpose of the Company shall be the
provision of secure electronic commerce products and services (the "Company's
Business").
ARTICLE 5
DIRECTORS AND STOCKHOLDERS
5.1 Number of Directors. The Company shall, subject to Section 5.2, have eight
Directors who shall be nominated and elected as provided for in Section 5.2.
5.2 Nomination and Election of Directors.
(a) Nomination: The Board of Directors shall consist of (i) two
----------
individuals appointed by the holders of the Class B
Preferred Shares, one of whom shall be a representative from
CIVF and one of whom shall be a representative of HCP; (ii)
one individual appointed by WV (the Directors appointed
pursuant to clauses (i) and (ii) shall be referred to herein
as the "Class B Directors"); (iii) two individuals appointed
by the holders of Common Shares, one of whom shall be the
Chief Executive Officer of the Company (such Directors shall
be referred to herein as the "Management Directors"); (iv)
one individual appointed by at least sixty-six percent (66%)
of the Class C Preferred Shares (the "Class C Director") if,
and only if, the Company has not completed a Qualifying
Public Offering within one hundred twenty (120) days of the
date of this Agreement; and (v) two individuals, each of
whom shall be an Independent, proposed by the Management
Directors and approved by the unanimous approval of the
Class B Directors and any Class C Director, which approval
shall not be unreasonably withheld or delayed. Initially,
the Directors appointed pursuant to (A) clause (i) shall be
Xxxxxxx Xxxx and another person to be designated by HCP
subsequent to the date hereof, (B) clause (ii) shall be
Xxxxx Xxxxxxxx, (C) clause (iii) shall be Xxxxxxx Xxxx and
Xxxxxxxx Xxxxxxx, (D) clause (iv) shall be a person
designated by Axiom (and provided that Axiom may
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replace such designee with another person affiliated with
Axiom at any time until such time as at least sixty-six
percent (66%) of the Class C Preferred Shares shall have
appointed a person not affiliated with Axiom as the Class C
Director in accordance with Section 5.2(b)), and (E) clause
(v) shall be Xxxxxx Xxxxxxx and Xxxxxx Xxxxx. Each Investor
holding at least 250,000 Shares (subject to adjustment for
stock splits and stock combinations) shall be entitled to
have a representative attend Board meetings.
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(b) Replacement: The party or parties who appointed a
-----------
Director shall have the right to appoint a replacement for
such Director, at any time and from time to time in
accordance with the requirements of subsection 5.2(a). Any
such party or parties who wishes to replace a Director may
have such Director replaced at any duly constituted meeting
of the Stockholders of the Company or shall forward a
written resolution to that effect, signed by that
Stockholder or those Stockholders, as the case may be, to
the Stockholders. Upon receipt of such written resolution,
the Stockholders shall execute the resolution and promptly
return it to the party initiating the same, who, upon
receipt thereof, shall forward the signed resolution to the
Company for filing in the corporate minute book. The
removal of a Director appointed in accordance with Section
5.2(a)(v) shall require the approval of the Management
Directors and the unanimous approval of the Class B
Directors and any Class C Directors, voting separately as a
group. The replacement for any such Director shall be
appointed in accordance with Section 5.2(a)(v).
(c) Sale of Shares: In the event that any Stockholder sells all of its
--------------
Shares in accordance with this Agreement, the Directors appointed by
such Stockholder shall resign and the purchaser shall be entitled to
the same rights, if any, to nominate Directors as such Stockholder
had.
(d) Indemnity: The Company hereby indemnifies each Director and his or
---------
her heirs and legal representatives against all costs, charges and
expenses, including an amount paid to settle an action or satisfy a
judgment, reasonably incurred by him or her in respect of any civil,
criminal or administrative proceeding to which he or she is made a
party by reason of being or having been a director of the Company
provided (i) he or she acted honestly and in good faith with a view to
the best interests of the Company; and (ii) in the case of a criminal
or administrative proceeding that is enforced by a monetary penalty,
he or she had reasonable grounds for believing that his or her conduct
was lawful.
(e) Event of Non-Performance: Notwithstanding anything to the contrary
------------------------
contained in this Section 5.2, upon the occurrence of any Event of
Non-Performance, the Board shall be increased by five Directors
(resulting in a Board of up to thirteen Directors), with each of (i)
WV, (ii) HCP and (iii) CIVF appointing one such Director, and a
majority of the Class C Preferred Shares appointing two such
Directors. The Company covenants to take all necessary action upon
any Event of Non-Performance to amend the Bylaws to increase the
maximum number of
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permitted Directors, if and as necessary. If, upon the occurrence of
any Event of Non-Performance, a Majority in Interest agree, then the
Put Option specified under Section 7.7 and the Substitute Purchaser
provision specified under Section 7.9 hereunder shall be triggered.
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5.3 Term of Office. The term of office of a Director shall commence on
the date of that individual's election to the Board and
shall terminate at the close of the next following annual
meeting of the Stockholders, or until their successors are
elected, or at any time prior thereto if the Stockholder
nominating a Director replaces such Director in accordance
with subsection 5.2(b) or otherwise in accordance with
subsection 5.2(a).
5.4 Powers and Duties of Directors. Subject to the Act and the provisions
hereof, the Directors shall manage or supervise the
Company's Business except as such authority may be delegated
by the Directors from time to time.
5.5 Insurance. The Company shall arrange director's insurance coverage
for the Directors of the Company on terms and conditions and
in an amount acceptable to a Majority in Interest of the
Investors.
5.6 Board Meetings. Until the date that is 18 months from the date
hereof, the Board shall meet at least once every six weeks,
and thereafter the Board shall meet at least once every
three months. Any Director shall be entitled to convene a
meeting of Directors upon the requisite notice as required
by the Second Amended Certificate of Incorporation.
5.7 Committees.
(a) Compensation Committee: The Board shall appoint a Compensation
----------------------
Committee and the Compensation Committee shall make recommendations to
the Board relating to compensation of all members of the Senior
Management Group to the Board. The Board shall vote on such
recommendations and, in order to be effective, such recommendations
must be approved by a majority of the Board, and the Board shall have
no other authority with respect to making decisions relating to
compensation of members of the Senior Management Group. The
Compensation Committee shall consist of three members, one of which
shall be appointed by HCP and one of which shall be appointed by WV.
In order to be effective, all recommendations of the Compensation
Committee shall be made by a majority vote of its members at a meeting
or in writing, with the exception that any changes to the compensation
of Xxxx or any employee of the Company or of RoweCan related to Xxxx
shall require the written approval of each of the Class B Investors.
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(b) Audit Committee: The Board shall appoint an Audit Committee that
---------------
shall consist of three members, one of which shall be appointed by the
CIVF and one of which shall be appointed by WV.
5.8 Senior Officers. Throughout the term of this Agreement, members of
the Senior Management Group shall be compensated as set out
in Schedule 3.1(ac)(vii) to the Stock Purchase Agreement.
All changes to such compensation shall be made in accordance
with subsection 5.7(a) hereof.
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5.9 Directors' Fees. Any Director who is an Independent of the Company,
other than any Director who is an employee of an Investor or
any of its affiliates, shall be entitled to such
remuneration acceptable to the Board of Directors for each
meeting, plus reasonable expenses incurred in attending such
meeting, upon presentation of receipts therefor. Any
representative of an Investor that is permitted to attend
Board meetings or any Director who is a nominee of an
Investor shall be entitled to be reimbursed for any
reasonable expenses incurred in attending such meetings.
5.10 Extraordinary Matters. Notwithstanding any provision to the contrary
in the Second Amended Certificate of Incorporation, the
Bylaws or this Agreement, so long as at least 2,500,000
Class B Preferred Shares are issued and outstanding, which
Shares shall include Shares that would be issued upon
exercise of the Exchange Options or so long as at least
1,500,000 Class C Preferred Shares are issued and
outstanding, the following matters shall require the written
approval of a Majority in Interest, in addition to any
requirements required by law and/or this Agreement:
(a) the taking or institution of any proceedings for the liquidation,
winding up, reorganization or dissolution of the Company or any of its
Affiliates;
(b) the amalgamation, consolidation, merger of, or the entering into of
any agreement to amalgamate, consolidate or merge, the Company with
any corporation, partnership, joint venture or firm, or the
continuance or corporate reorganization of the Company of any kind or
the purchase of any securities of any Person;
(c) the sale, lease, exchange or other disposition of all or substantially
all of the assets of the Company or of any of its Affiliates or any
sale, lease, exchange, or other disposition of any such assets out of
the ordinary course of business;
(d) the sale of any shares held by the Company in any of its Subsidiaries;
(e) the purchase or redemption by the Company of any Shares other than as
expressly provided in this Agreement;
(f) the declaration, payment or setting aside for payment of any dividend,
the distribution of any surplus or earnings, the return of any
capital, the repayment or
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retirement of any indebtedness of the Company to any Stockholder, or
any other payment or distribution of assets of the Company to any
Stockholder;
(g) the amendment of the Second Amended Certificate of Incorporation
(other than as contemplated by Section 3.2 hereof);
(h) the guarantee or indemnification by the Company of, or the grant of
security by the Company for, the debts or obligations of any
corporation, partnership, joint venture, firm or person;
(i) the making of any loans with, the granting of any other financial
assistance to or the entering into of any agreements with any
Stockholder or Associate of such Stockholder;
(j) any material change in the Company's Business or the taking of any
action which may lead to or result in such material change;
(k) the incorporation or acquisition of any corporation or other entity
that would be an Affiliate of the Company or the acquisition of assets
from any Person for consideration in excess of $50,000;
(l) the hypothecation, mortgage, pledge or any act otherwise encumbering
the Company's assets or any of them except as may be required by
bankers in connection with the Company's normal banking activities and
financing of capital expenditures in the normal course of business;
(m) the issuance or allotment of Shares or the granting of any right,
option or privilege to acquire any Shares, other than with respect to
the Exchange Options or the Stock Options set forth on Schedule 3.1(e)
to the Class B Stock Purchase Agreement and provided that
notwithstanding this subsection 5.10(m), the Company shall be
permitted to issue Stock Options to any of its or RoweCan's employees,
with the exception of Xxxxxxx Xxxx, without the approval required by
this Section 5.10, provided that (i) the Board of Directors has
approved such issuance, (ii) the number of Shares that may be acquired
on the exercise in full of such options (including options issued
prior to the date hereof) is not greater than 2,620,371 Common Shares,
and (iii) the vesting of options granted to such persons' after the
date hereof shall not be at a rate in excess of 25% per annum, unless
approved by all Directors, subject to acceleration upon a Sale Event
or a
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Qualified Public Offering in a manner and to the extent approved
by the Board of Directors.
(n) any change in the number of issued and outstanding shares in the
capital of the Company or any increase or reduction in the
capitalization of the Company, including, without limitation, by way
of any split, conversion or exchange of Shares or the issuance or sale
of any shares with any rights on parity with or senior to the rights
of the Preferred Shares, excluding the exercise of the Exchange
Options;
(o) the appointment of any firm-chartered accountants to act as auditor
other than PricewaterhouseCoopers, Chartered Accountants;
(p) the amendment or termination of any of the Marketing Agreement, the
License Agreement or the Technology Agreement;
(q) the creation or assumption at any time by the Company or any
Subsidiary of any indebtedness for borrowed money or any Funded
Indebtedness of any kind in excess of $25,000 on a per item basis to
the extent not provided for in the Annual Business Plan; and
(r) the creation of any material joint venture in which the Company is a
party.
The Company, WV and the other parties hereto agree that the foregoing
covenants shall also apply to RoweCan and that any such
actions shall not be taken by RoweCan without the prior
written approval of a Majority in Interest.
5.11 Extraordinary Matters/Class A-1 Preferred Shares. Notwithstanding
any provision to the contrary in the Second Amended
Certificate of Incorporation, the Bylaws or this Agreement,
so long as any Class A-1 Preferred Shares are deemed to be
issued and outstanding, the following matters shall require
the written approval of WV, in addition to any requirements
required by law and/or this Agreement:
(a) any change in the terms, rights or privileges attaching to the Class
A-1 Preferred Shares set forth in the Second Amended Certificate of
Incorporation, excluding
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any change to such rights or privileges in connection with the
issuance of securities that have rights or privileges that are on
parity with or senior to the Class C Preferred Shares, which change is
required in order to recognize the seniority to the Class A-1
Preferred Shares;
(b) the creation or issue of any class of shares which would rank junior
to the Class C Preferred Shares and senior to the Class A-1 Preferred
Shares; and
(c) any change to the conditions, rights or privileges attaching to the
Class B Preferred Shares or the Class C Preferred Shares set forth in
the Second Amended Certificate of Incorporation, the effect of which
would be to increase the dividend paid thereon, adjust the conversion
privilege, provide for a redemption privilege in favor of the Company
or retraction privilege in favor of the holder, the liquidation
provisions, or voting privileges.
5.12 Key Person Insurance. The Company covenants as between it and
RoweCan, that they will insure and keep insured the lives of
Xxxx and Xxxxxx Xxxxx under a policy of "key person life
insurance" in the amounts of $2,000,000 for Xxxx and
$1,000,000 for Xxxxxx Xxxxx with the Company or RoweCan, as
the case may be, as the sole beneficiary under such policy;
provided, however, that the Board of Directors by unanimous
vote may cease to insure the life of Xxxxxx Xxxxx without
the consent of the Investors.
5.13 Dividends. As provided in the Second Amended Certificate of
Incorporation, the determination of whether a dividend shall
be payable in cash or in additional Shares shall be made in
the discretion of the Board of Directors. At any time and
from time to time after the third anniversary of the date
hereof, (i) the Investors holding a Supermajority Interest
of the Class A-1 Preferred Shares and the Class B Preferred
Shares, collectively, may determine whether dividends
declared on the Class B Preferred Shares and the Class A-1
Preferred Shares shall be payable in cash or in additional
Shares, and (ii) the Investors holding a Supermajority of
the Class C Preferred Shares may determine whether dividends
declared on the Class C Preferred Shares shall be payable in
cash or in additional Shares; provided, that the dividends
with respect to each of the Class B Preferred Shares and the
Class A-1 Preferred Shares must be payable in the same form.
If the Board of Directors declares dividends on the Class B
Preferred Shares in securities of
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the capital of the Company, it shall also declare dividends
in securities of the capital of the Company on the Class A-1
Preferred Shares. In addition, to the extent that a dividend
in any form other than securities in the capital of the
Company is declared on the Class A-1 Preferred Shares or the
Class B Preferred Shares at any time prior to the time that
WV has exercised the Exchange Options, the Company shall
cause RoweCan to pay a dividend to WV with respect to the
RoweCan Class A Preferred Shares or the RoweCan Class B
Preferred Shares, as applicable, in an amount equal to the
amount WV would have received from the Company had WV
exercised the Exchange Options prior to the declaration of
such dividends. As further provided in the Second Amended
Certificate of Incorporation, commencing on the date of
issuance of the Class C Preferred Shares, the holders of the
Class C Preferred Shares shall be entitled to a fixed,
preferential, cumulative dividend in the amount of $ .230
per annum for each Class C Preferred Share. Dividends on the
Class C Preferred Shares shall be payable only in the event
of a liquidation, dissolution or winding up of the Company
(as set forth in the Second Amended Certificate of
Incorporation), or if a dividend is to be paid on any other
Shares in which case such dividends on the Class C Preferred
Shares shall be payable in preference and prior to any
payment of any dividend on the Class A Preferred Shares,
Class A-1 Preferred Shares, or Class B Preferred Shares or
the payment of any dividend on the RoweCan Class A Preferred
Shares or the RoweCan Class B Preferred Shares.
ARTICLE 6
FINANCIAL AND ACCOUNTING PRACTICES
6.1 Financial Information.
(a) The Company shall deliver to each Investor holding at least 250,000
Shares within 90 days of the financial year end of the Company one
copy of its annual financial statements, which shall be prepared on a
consolidated basis and be audited by auditors from
PricewaterhouseCoopers or a successor thereto, and appointed pursuant
to subsection 5.10(o), including the balance sheet and statements of
income, retained earnings and statements of cash flows, together
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with all supporting schedules. Such financial statements shall be
signed by an authorized officer of the Company and shall be
accompanied by a detailed report of the auditors of the Company (which
report shall not be qualified). The Company shall furnish to each
Investor, with the annual consolidated financial statements, a
certificate signed by the chief financial officer of the Company or
another senior officer satisfactory to each of the Investors to the
effect that such annual financial statements have been prepared in
accordance with generally accepted accounting principles and present
fairly the financial position of the Company and its Subsidiaries at
the date thereof and to the effect that neither the Company nor its
Subsidiaries is in breach of any of the covenants or representations
and warranties contained herein, or, if such is not the case, detailed
particulars of all breaches of covenants or representations and
warranties, together in either case with reasonably detailed evidence
of compliance with all financial covenants contained herein.
(b) The Company shall furnish to each Investor holding at least 250,000
Shares, no later than 30 days prior to the end of each financial year,
the Annual Business Plan (which shall be acceptable to a Majority in
Interest, acting reasonably) for the next financial year which shall
consist of the detailed budget and capital expenditures budget for
such financial year. For the purposes of this Agreement, "Annual
Business Plan" means, for any financial year, monthly detailed pro
forma balance sheets, income statements, statements of cash flows for
the Company prepared in accordance with generally accepted accounting
principles on a consolidated basis each as approved by its Board of
Directors together with such explanations, notes and information
which, in the reasonable opinion of the Company, explain and
supplement the information so provided and a capital expenditure plan
indicating the nature and amount of capital expenditures proposed to
be incurred in such financial year.
(c) The Company shall provide in a form acceptable to each Investor
holding at least 250,000 shares a monthly financial report to each
Investor within 25 days after the end of each month consisting of the
monthly and year-to-date financial statements on a consolidated basis
in a form consistent with the Annual Business Plan and as normally
prepared by management for its own use, which shall contain a
comparison of budget to actual and to the prior year for the same
period.
(d) The Company shall provide to the Investors within 25 days of the end
of each financial quarter, a certificate signed by the duly appointed
president, vice-president or chief executive officer of the Company in
the form of Exhibit A. The Company shall provide to each Investor,
its representatives and agents, any other
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information concerning its financial position and business operations
which the Investors, their representatives and agents, may from time
to time request.
6.2 Maintain Books. The Company shall maintain accurate and complete
books and records of all transactions, receipts, expenses,
assets and liabilities of the Company in accordance with
generally accepted accounting principles, consistently
applied, as approved and adopted by the Board.
6.3 Review of Books. The Stockholders agree that the Investors shall, at
their expense unless otherwise agreed by the parties hereto,
be entitled to appoint a representative, agent or designee
to review, on reasonable notice, all books, documents and
records of the Company and shall be entitled to make copies
thereof for their own purposes. The Investors and their
representatives, agents and designees shall have the right
to discuss at any time with management personnel of the
Company such matters pertaining to the financial position,
operations, investments and financings as may be of interest
to the Investors or such representative, agent or designee
from time to time.
6.4 Fiscal Year. The fiscal year of the Company shall end on the 31st day
of December in each year, or such other date as is agreed to
by the Board.
6.5 Additional Items.
(a) The Company will promptly give written notice to each Investor of all
claims or proceedings pending or threatened against the Company which
may have a material adverse effect on the business or operations of
the Company and will supply each Investor with all information
reasonably requested in respect of any such claim.
(b) The Company will provide each Investor with 60 days' prior written
notice of any merger, combination, sale of assets out of the ordinary
course of business, or the Company's receipt of any serious inquiry
regarding any of the foregoing events, or any other events which might
reasonably prompt WV to exercise its Exchange Options.
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(c) The Company shall provide each Investor with copies of all
correspondence issued by any independent auditor to either of the
management of the Company and RoweCan relating to any examination of
books and records of the Company.
6.6 Net Worth. The Company will not suffer or permit Net Worth at any
time to be less than the required minimum amount in effect
at the time in question. The required minimum amount shall
be $500,000 for the calendar year 1998 and $7,500,000 for
the calendar year 1999; and with respect to each calendar
year thereafter, the required minimum Net Worth for each
calendar year shall be determined by a Majority in Interest.
Such determination shall be made after the Annual Business
Plan for the applicable year has been received and approved
in accordance with Section 6.1(b) but prior to January 1st
of the applicable calendar year and shall be delivered to
the Company in writing prior to January 1st of the
applicable calendar year; provided, however that such
determination of Net Worth shall not be greater than the Net
Worth that would be achievable by the Company if its actual
operations are consistent with the projections set forth in
the applicable Annual Business Plan approved in accordance
with Section 6.1(b).
ARTICLE 7
SALE AND ISSUANCE OF SHARES
7.1 Sale and Issue Restrictions.
(a) None of the Stockholders may sell, grant an option to sell, encumber,
pledge or create a security interest in or otherwise deal with (each a
"Transfer") any of its Shares in the Company; provided, however, that
(i) Shares may be pledged to the banker of the Company from time to
time as security for indebtedness of the Company owed to such
banker,and (ii) the foregoing restriction shall not apply to Transfers
made in accordance with the provisions of this Agreement.
(b) No proposed Transfer of any Shares (including the issuance thereof) in
violation of this Agreement shall be valid, and the Company shall not
record or Transfer any of the Shares dealt with in violation of this
Agreement in the records of the Company, nor shall any voting rights
attached to such Shares be exercised, nor
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shall any dividends be paid on such Shares during the period of such
violation. Such disqualification shall be in addition to and not in
lieu of any other remedies to enforce the provisions of this
Agreement.
(c) Notwithstanding anything else herein contained other than Section 7.6,
prior to May 4, 2003, no Shares held by Stockholders other than the
Investors may be Transferred without the prior written consent of a
Majority in Interest, which consent may be arbitrarily withheld;
provided, however, that the restrictions contained in this Section
7.1(c) shall terminate when both (i) the holders of Class B Preferred
Shares shall have redeemed or converted more than 3,000,000 Class B
Preferred Shares and (ii) the holders of Class C Preferred Shares
shall have redeemed or converted more than 2,750,000 Class C Preferred
Shares.
(d) Notwithstanding any provision in this Agreement to the contrary, no
Transfer of all or any portion of the Shares or any other equity
securities of the Company or rights or warrants exercisable,
exchangeable or convertible into any equity securities of the Company
may be made (i) to any third party, if such third party is engaged,
directly or indirectly, whether as an owner or an employee, in a
business that is similar to or in competition with the business of the
Company, (ii) unless the transferor provides, if required by the
Company, evidence and assurances satisfactory to the Company in its
reasonable discretion (which may include an opinion of counsel and/or
appropriate representations and warranties from the transferor and
transferee) that such Transfer is made in compliance with all
applicable securities laws and regulations promulgated thereunder, and
(iii) unless the transferee and the Company (on behalf of itself and
the Stockholders) execute and deliver a written instrument
acknowledging the receipt of a copy of the provisions and restrictions
contained in this Agreement agreeing to comply herewith and be bound
hereby. For greater certainty, but without limiting the foregoing,
each of the Stockholders shall be bound by the provisions of this
Agreement in respect of any Shares which may be acquired by such
Stockholder after the date hereof in accordance with the provisions of
this Agreement.
(e) Any transferee of Shares, other equity securities of the Company or
rights or warrants exercisable, exchangeable or convertible into
equity securities of the Company, by reason of such Transfer, shall
become a party to and be bound by this Agreement, as the same may be
amended from time to time, and if and when a transferee becomes the
owner of any Shares, this Agreement shall be amended by the
Stockholders in any reasonable manner required to continue to provide
the rights and protections contemplated herein in substantially the
same manner in which such rights and protections were provided prior
to such transferee becoming an owner of Shares. Any transferee of
Shares shall have all of the
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rights and obligations under this Agreement of the transferring
Stockholder that Transferred such Shares to that transferee.
(f) Notwithstanding anything else herein contained, on any Transfer of
Shares by the Investors pursuant to Section 7.7, each Investor shall
be required to represent and warrant only that (i) its Shares are
owned by it with a good and marketable title thereto, free and clear
of any liens, charges, mortgages and encumbrances and (ii) it has the
power to convey the Shares.
(g) The Company shall (i) cause all holders of Stock Options and Warrants
issued after the date hereof, and (ii) use its best efforts to cause
all holders of Stock Options or Warrants issued prior to the date
hereof, to execute and deliver a written instrument acknowledging the
receipt of a copy of the provisions and restrictions contained in this
Agreement and agreeing to comply herewith and be bound hereby.
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7.2 Offer.
(a) If at any time a Stockholder, other than an Investor, or group of
Stockholders other than a group of Investors, acting in concert
(hereinafter collectively referred to as the "Selling Stockholder"),
desires to Transfer to a third party all, but not less than all, of
the Shares of the Selling Stockholder, the Selling Stockholder shall
obtain from the third party a bona fide offer in writing, which offer
shall be irrevocable for a period of 60 days (hereinafter in this
Section 7.2 and Sections 7.3 and 7.4 referred to as the "Offer"),
which it is ready and willing to accept, to purchase all of the Shares
of the Selling Stockholder for the amount thereof set forth in the
Offer by cash or certified cheque and shall give notice in writing to
the other Stockholders of the receipt of the Offer within 10 days
thereof together with a copy thereof. The Offer may but need not also
provide for the purchase of indebtedness owed by the Company to the
Selling Stockholder.
(b) If at any time an Investor, or group of Stockholders including an
Investor, acting in concert (hereinafter collectively referred to as
the "Selling Investor"), desires to Transfer to a third party all, but
not less than all, of the Shares of the Selling Investor, the Selling
Investor shall obtain from the third party a bona fide offer in
writing, which offer shall be irrevocable for a period of 60 days
(hereinafter in this Section 7.2 and 7.4 referred to as the "Investor
Offer"), which it is ready and willing to accept, to purchase all of
the Shares of the Selling Investor for the amount thereof set forth in
the Investor Offer by cash or certified cheque and shall give notice
in writing to the other Investors of the receipt of the Investor Offer
within 10 days thereof together with a copy thereof. The Investor
Offer may but need not also provide for the purchase of indebtedness
owed by the Company to the Selling Investor.
7.3 Tag-Along and Purchase Rights. Each Investor shall have the right to
elect, by notice in writing to the Selling Stockholder,
within 30 days from the date of receipt of a copy of the
Offer, to:
(a) as a condition precedent to any Transfer of the Shares by the Selling
Stockholder, require the third party to amend the Offer to provide for
the purchase of that number of Shares (which shall include, for
greater certainty, in the case of WV, Shares acquired pursuant to the
exercise of the Exchange Options both before and after the receipt of
notice pursuant to Section 7.2) which are the subject matter of the
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Offer such that each of the Selling Stockholder and each Investor
exercising its rights pursuant to this Section 7.3 shall sell from
their respective holdings of Shares a fraction of the number of Shares
which are the subject matter of the Offer, which fractions shall have
as their numerators, in the case of the Selling Stockholder, the
number of Shares held by the Selling Stockholder, and in the case of
an Investor, the number of Shares held by such Investor, and the
denominator of both such fractions shall be the sum of the number of
Shares held by the Selling Stockholder and the Investors exercising
their rights pursuant to this Section 7.3, for the same price per
Share, and at the same time and on the same terms and conditions as
contained in the Offer, in which case such Investors shall become a
"Selling Stockholder" for purposes of this Article 7; or
(b) if the Selling Stockholder is Xxxx, as a condition precedent to any
Transfer of the Shares by the Selling Stockholder, each Investor shall
have the right to require the third party to amend the Offer to
provide for the purchase of all of the Shares (or such Investor's pro
rata portion (determined by the quotient of the number of Shares held
by such Investor divided by the number of Shares held by all Investors
exercising their rights under this Section 7.3(b)) of such lesser
number as is the subject matter of the Offer) held by such Investor,
prior to any purchase of Xxxx'x Shares, for the same price per Share,
and at the same time and on the same terms and conditions as contained
in the Offer, in which case such Investor shall become a "Selling
Stockholder" for purposes of this Article 7.
The restrictions set forth in this Section 7.3 shall not apply to any
Transfer by an Investor.
7.4 Right of First Refusal.
(a) Except in the case where Section 7.6 shall apply, the Investors shall
have the irrevocable right, exercisable by written notice given to the
Selling Stockholder within 30 days after the giving of the notice by
the Selling Stockholder, to purchase all but not less than all of the
Shares of the Selling Stockholder or, if an Investor has exercised its
option set forth in Section 7.3, the number of Shares of the initial
Selling Stockholder and of such Investor which are the subject matter
of the Offer (in either case, the "Selling Stockholder Shares"), and,
if provided for in the Offer, indebtedness owed by the Company to the
Selling Stockholder on the terms and conditions and for the amount set
forth in the Offer by cash or certified cheque pro rata in proportion
to their respective holdings of Shares (or in such other proportions
as they may agree among themselves). In the event that one or more of
the Investors elects to purchase his or its pro rata proportion of the
Selling Stockholder Shares and, if applicable, indebtedness owed to
the Selling Stockholder and one or more of the Investors declines to
elect to so purchase, the Investor(s) electing to so purchase shall
have the further right and option, exercisable by notice in writing
within five days of being notified by the Selling
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Stockholder that one or more of the Investors has declined to so
purchase, to purchase the remaining Selling Stockholder Shares and, if
applicable, indebtedness owed to the Selling Stockholder, on the same
terms and conditions and for the amount set forth in the Offer by cash
or certified cheque pro rata in proportion to their respective
holdings of Shares of such Investors (or in such other proportions as
they may agree among themselves). The foregoing procedure shall be
repeated as often as is necessary until either one or more of the
Investors have elected to acquire all of the Selling Stockholder
Shares and, if applicable, the indebtedness owed to the Selling
Stockholder or until there remain Shares which no Investor has elected
to purchase. If there shall remain Shares which no Investor has
elected to purchase, the other Stockholders shall have the right and
option, exercisable by notice in writing within 15 days of being
notified by the Selling Stockholder that the Investors have declined
to purchase all of the Selling Stockholder Shares, to purchase the
remaining Selling Stockholder Shares and, if applicable, indebtedness
owed to the Selling Stockholder on the same terms and conditions and
for the amount set forth in the Offer by cash or certified cheque pro
rata in proportion to their respective holdings of Shares of such
Stockholders (or in such other proportions as they may agree among
themselves). Where one or more of the Investors and/or Stockholders
have elected to purchase all of the Selling Stockholder Shares, the
Offer of the Investors and/or the Stockholders so electing for the
Selling Stockholder Shares and, if applicable, the indebtedness owed
to the Selling Stockholder shall be completed in accordance with its
terms. If there shall remain Selling Stockholder Shares which no
Investor or Stockholder has elected to purchase, notwithstanding that
one or more Investors or Stockholders has elected to purchase Selling
Stockholder Shares pursuant to this Section 7.4, the right of any
Investor to acquire the Selling Stockholder Shares and, if applicable,
the indebtedness owed to the Selling Stockholder shall be null and
void and the provisions of Section 7.5 shall apply.
(b) Except in the case where Section 7.6 shall apply, the Investors shall
have the irrevocable right, exercisable by written notice given to the
Selling Investor within 30 days after the giving of the notice by the
Selling Investor, to purchase all but not less than all of the Shares
of the Selling Investor (the "Selling Investor Shares"), and, if
provided for in the Investor Offer, indebtedness owed by the Company
to the Selling Investor on the terms and conditions and for the amount
set forth in the Investor Offer by cash or certified cheque pro rata
in proportion to their respective holdings of Shares (or in such other
proportions as they may agree among themselves). In the event that
one or more of the Investors elects to purchase his or its pro rata
proportion of the Selling Investor Shares and, if applicable,
indebtedness owed to the Selling Investor and one or more of the
Investors declines to elect to so purchase, the Investor(s) electing
to so purchase shall have the further right and option, exercisable by
notice in writing within five
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days of being notified by the Selling Investor that one or more of the
Investors has declined to so purchase, to purchase the remaining
Selling Investor Shares and, if applicable, indebtedness owed to the
Selling Investor, on the same terms and conditions and for the amount
set forth in the Investor Offer by cash or certified cheque pro rata
in proportion to their respective holdings of Shares of such Investors
(or in such other proportions as they may agree among themselves). The
foregoing procedure shall be repeated as often as is necessary until
either one or more of the Investors have elected to acquire all of the
Selling Investor Shares and, if applicable, the indebtedness owed to
the Selling Investor or until there remain Shares which no Investor
has elected to purchase. Where one or more of the Investors have
elected to purchase all of the Selling Investor Shares, the Investor
Offer of the Investors so electing for the Selling Investor Shares
and, if applicable, the indebtedness owed to the Selling Investor
shall be completed in accordance with its terms. If there shall remain
Selling Investor Shares which no Investor has elected to purchase,
notwithstanding that one or more Investors has elected to purchase
Selling Investor Shares pursuant to this Section 7.4, the right of any
Investor to acquire the Selling Investor Shares and, if applicable,
the indebtedness owed to the Selling Investor shall be null and void
and the provisions of Section 7.5 shall apply.
7.5 Transfer of Shares - Right of First Refusal Not Exercised.
(a) If, following compliance with Section 7.4(a), there shall remain
Selling Stockholder Shares which no Stockholder has elected to
purchase, the Selling Stockholder shall accept the Offer and complete
the transaction with the said third party in accordance with the terms
and conditions of such third party's Offer and the parties hereby
agree to take all steps and proceedings required to have such third
party entered on the books of the Company as a shareholder and, if
applicable, as a debtholder of the Company, provided that if the
Transfer of such Shares to the third party is not completed, the
provisions of Article 7 shall again apply to any proposed Transfer of
Shares. The Selling Stockholder is hereby irrevocably appointed the
agent and attorney of the Stockholders and each of them for the
purposes of effecting registration of the third party as a Stockholder
of the Company. The Board of Directors or the Stockholders (including
the Selling Stockholder), as the case may be, before consenting to the
Transfer of the purchased Shares to the third party, shall require
proof that the Transfer took place in accordance with the third
party's Offer, and the Board of Directors shall refuse the recording
of the Transfer of the purchased Shares which may have been
Transferred otherwise than in accordance with the provisions of such
Offer and of this Agreement.
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(b) If following compliance with Section 7.4(b) there shall remain Selling
Investor Shares which no Investor has elected to purchase, the Selling
Investor shall accept the Investor Offer and complete the transaction
with the said third party in accordance with the terms and conditions
of such third party's Investor Offer and the parties hereby agree to
take all steps and proceedings required to have such third party
entered on the books of the Company as a shareholder and, if
applicable, as a debtholder of the Company, provided that if the
Transfer of such Shares to the third party is not completed, the
provisions of Article 7 shall again apply to any proposed Transfer of
Shares. The Selling Investor is hereby irrevocably appointed the
agent and attorney of the Investors and each of them for the purposes
of effecting registration of the third party as a Stockholder of the
Company. The Board of Directors or the Stockholders (including the
Selling Investor), as the case may be, before consenting to the
Transfer of the purchased Shares to the third party, shall require
proof that the Transfer took place in accordance with the third
party's Investor Offer, and the Board of Directors shall refuse the
recording of the Transfer of the purchased Shares which may have been
Transferred otherwise than in accordance with the provisions of the
Investor Offer and of this Agreement.
7.6 Drag-Along Rights. If any of the Stockholders receives a Take-Over
Bid, as hereinafter defined, which such Stockholder(s) wish
to accept, such recipient Stockholder(s) shall forthwith
provide a copy of the Take-Over Bid to the other
Stockholders together with a notice that he, she or it
wishes to invoke the provisions of this Section 7.6, in
which case if Stockholders holding not less than 75% of the
total number of the aggregate issued and outstanding Shares
(which shall include Shares which would be issued if the
Exchange Options were exercised), including a Supermajority
of each of the Class A-1 Preferred Shares, the Class B
Preferred Shares and the Class C Preferred Shares, wish to
accept such Take-Over Bid, such Stockholders shall have the
right to require the other Stockholders, on 10 days' notice
in writing to such other Stockholders, to sell all of the
Shares held by them to the third party pursuant to the terms
of the Take-Over Bid for the amount set forth in the Take-
Over Bid by cash or certified cheque; provided, however,
that, unless all of the holders of Preferred Shares agree
otherwise, the holders of Preferred Shares shall receive an
amount at least as great as the amount that such holders
would have received upon a liquidation of the Company
pursuant to Article V(B)(1) of the Second Amended
Certificate of Incorporation. The Company is hereby
irrevocably appointed the agent and attorney of all the
Stockholders and each of them for the purposes of effecting
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registration of the third party as a Stockholder and, if
applicable, debtholder of the Company in completing the sale
of the Shares of such other Stockholders to the third party
in accordance with this Section 7.6. For purposes hereof,
"Take-Over Bid" shall mean an offer for all of the Shares
made by a third party in which the liability of the
Stockholders under the purchase agreement including, without
limitation, liability for a breach of representation or
warranty or for a claim under an indemnity shall be several,
and not joint and several, and shall not, under any
circumstances, exceed the lesser of its pro rata proportion
of any claim and the purchase price payable to the
Stockholders.
7.7 Put Option. The Investors shall have the right to require the Company
to purchase from the Investors all, but not less than all,
of the Investors' Shares (the "Put Option") (which in the
case of WV shall include Shares which would be issued if the
Exchange Options were exercised) (A) at any time after the
date that is five years from the date hereof and before the
date that is seven years from the date hereof; or (B) at the
option of a Majority in Interest in accordance with Section
5.2(e), in the event there occurs an Event of Non-
Performance. If the Put Option is exercised, the Company
shall purchase the Investors' Shares at a purchase price
equal to the greater of (1) the Fair Market Value for such
Shares or (2) the purchase price paid to the Company by the
Investors for such Shares, plus all accrued but unpaid
dividends with respect to such Shares. Any purchase of the
Investors' Shares in accordance with this Section by the
Company, or, if the Stockholders elect in accordance with
subsection 7.7(c), by the Stockholders (such Stockholders or
the Company, as the case may be, being hereinafter referred
to in this Section as the "Purchaser(s)"), shall be subject
to the following terms and conditions, notwithstanding the
provisions of Sections 7.1(c), 7.1(d), 7.1(e) or 7.2:
(a) if Investors holding a Majority in Interest agree to exercise the Put
Option, the Put Option shall be exercised by such Investors giving to
the Company and each of the other Stockholders notice in writing (in
this Section 7.7 called the "Notice") of the Investors' intention to
exercise the Put Option;
(b) the Notice shall also set forth (i) such Investors' best estimate,
stated in dollars, of the Fair Market Value for their Shares and (ii)
the purchase price paid to the Company for their Shares, plus all
accrued but unpaid dividends with respect to
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their Shares; the greater of which, subject to Section 7.8, shall be
the purchase price payable by the Purchaser(s);
(c) the Stockholders other than the Investors shall have the option,
exercisable in writing, to purchase the Investors' Shares, in place of
or in addition to the Company, in such proportions as may be specified
in a notice given by the Stockholders other than the Investors to the
Investors and to the Company within 30 days of receipt of the Notice.
If the Stockholders other than such Investors so elect, such of them
who have elected to be Purchasers shall be obligated to purchase the
Investors' Shares, but the Company shall not thereby be relieved of
its obligation to purchase the Investors' Shares if the Stockholders
who are the Purchasers fail to complete the transaction in accordance
with this Section;
(d) the purchase price shall be payable in full in cash or by certified
cheque or bank draft at the time of completion of the transaction;
(e) upon the completion of the transaction, the Investors shall cause
their nominee(s) to resign from all offices and positions with the
Company;
(f) the completion of the transaction shall take place at the offices of
Xxxxxxx Xxxx LLP in Boston, Massachusetts (or such other firm which is
acting as counsel for the Company) before or on the date being 120
days after the date on which the Investors delivered the Notice; and
(g) subject to Section 7.9(d), in the event that the requisite Investors
exercise the Put Option and the Company cannot purchase, and the
Stockholders did not elect to purchase, all of the Investors' Shares
in accordance with this Section 7.7, (i) the Company shall purchase
all of the Class C Preferred Shares before it purchases any Class A-1
Preferred Shares or Class B Preferred Shares, and if the Company
cannot purchase all of the Class C Preferred Shares, it shall purchase
a pro rata portion from each holder of Class C Preferred Shares, (ii)
the Company shall purchase all of the Class B Preferred Shares before
it purchases any Class A-1 Preferred Shares, and if the Company cannot
purchase all of the Class B Preferred Shares, it shall purchase a pro
rata portion from each holder of Class B Preferred Shares, and (iii)
without prejudice to any other rights the Investors may have, the
provisions of Section 7.9 shall apply.
7.8 Price Resolution. In the event that the Purchasers holding more than
50 percent of the Shares held by all Purchasers (a
"Purchaser Majority")
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disagree with the Fair Market Value of such Shares contained
in the Put Notice given by the Investors under Section 7.7,
such Purchaser(s) shall have 15 days from the date the Put
Notice is received within which to give written notice of
such disagreement (in this Article called the "Dispute
Notice") to the Investors and any other Purchasers. If no
Dispute Notice is given by a Purchaser Majority within the
prescribed time period, each of the Purchasers shall be
deemed to have accepted the estimate of the Fair Market
Value for such Shares set forth in the Put Notice. If the
Investors receive a Dispute Notice within the prescribed
time period, then within 20 business days thereafter, a
Majority in Interest and a Purchaser Majority shall select a
nationally recognized investment banking firm or appraiser
(an "Appraiser") to determine the Fair Market Value of such
Shares. If either a Majority in Interest or a Purchaser
Majority shall fail to designate its Appraiser within said
20 business day period and thereafter shall fail to do so
within three business days after written notice by the other
party requesting such designation, then such Appraiser shall
be appointed by the office of the American Arbitration
Association or its successor. The two Appraisers shall
separately complete their determinations of Fair Market
Value of such Shares within 30 days after the date that the
later of them is designated. The two Appraisers shall then
meet together with the Investors and the Purchasers, or
their representatives, and at such meeting each firm shall
present to the other a sealed letter setting forth the
Appraiser's judgment as to the Fair Market Value of such
Shares and attempt to persuade all Investors and the
Purchasers to reach agreement as to the Fair Market Value of
such Shares. If a Majority in Interest and a Purchaser
Majority do not reach agreement, then the two Appraisers
shall designate a third Appraiser having the same minimum
qualifications as the first two. If the first two Appraisers
shall fail to agree upon the designation of a third
Appraiser, then the third Appraiser shall be appointed by
the American Arbitration Association. The third Appraiser
shall conduct such investigations and hearings as he shall
deem appropriate and within 30 days after his date of
designation shall choose either the amount set forth in the
letter of the Investor's Appraiser or that of the
Purchaser's Appraiser, and no other amount, as the Fair
Market Value of such Shares. The decision of the third
Appraiser shall be in writing and shall be binding upon all
the Investors and the Purchasers. The Company shall provide
each of the three Appraisers with identical information
regarding the Company and the Shares. All costs and expenses
relating to the
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valuation of the Shares by the Appraisers shall be borne by
the Company.
7.9 Substitute Purchaser. If at any particular time, the Investors have
exercised the Put Option and the transaction contemplated by
the Put Option has not been completed in accordance with the
terms thereof, (i) the Stockholders other than the Investors
shall lose their right to nominate any Director, (ii) the
Directors nominated by the Stockholders other than the
Investors shall immediately resign, (iii) the Investors
shall have the further right to nominate and have elected an
additional five Directors (one (1) to be appointed by WV,
one (1) to be appointed by HCP, one (1) to be appointed by
CIVF and two (2) to be appointed by a majority of the Class
C Preferred Shares), exercisable immediately, (iv) the
Investors shall not be bound by the provisions of Section
7.2 and may at the particular time proceed to sell their
Shares, and (v) a Majority in Interest may require the sale
of the Shares of the other Stockholders as follows:
(a) The Investors shall, at the Company's expense, retain an investment
adviser and instruct such investment adviser to solicit offers for all
of the shares or assets of the Company.
(b) All of the Stockholders shall (i) accept the first offer recommended
for acceptance by the investment adviser and approved by a Majority in
Interest within such period; (ii) execute and deliver the purchase and
sale agreement, in the form recommended by the investment adviser and
approved by the Investors holding a Majority in Interest, to such
purchaser who makes such offer; and (iii) execute and deliver all
other documents necessary to transfer the shares or assets of the
Company, as the case may be, to such purchaser.
(c) The Company is hereby irrevocably appointed the agent and attorney of
all of the Stockholders and each of them for the purposes of accepting
such offer, executing and delivering the sale agreement and executing
and delivering all other documents necessary to transfer the shares or
assets of the Company and effect registration of the purchaser as a
shareholder of the Company, if applicable, on the condition that the
Stockholders' portion of the purchase price is deposited in an account
in each Stockholder's name with the Company's banker.
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(d) In the event that the Company cannot purchase all of the Class C
Preferred Shares, the Class B Preferred Shares and the Class A-1
Preferred Shares as required under Section 7.7, then the provisions of
this Section 7.9 shall apply for a period of six months prior to any
purchase of the Class C Preferred Shares by the Company as provided
under Section 7.7(g). If a sale does not occur within such six month
period then the Company shall purchase the Class C Preferred Shares,
the Class B Preferred Shares and the Class A-1 Preferred Shares as
provided in Section 7.7(g). For greater certainty, without regard to
this Section 7.9(d), if the Company fails to purchase the Class C
Preferred Shares, the Class B Preferred Shares and the Class A-1
Preferred Shares, the provisions of this Section 7.9, except 7.9(d),
shall apply.
7.10 Exchange Options.
(a) WV shall have the right (subject to a pro rata adjustment if WV shall
have transferred any of its RoweCan Class A Preferred Shares or its
RoweCan Class B Preferred Shares, as applicable) at any time and from
time to time after the date hereof, to require the Company to exchange
all, but not less than all, of its:
(i) RoweCan Class A Preferred Shares into such number of fully paid
and non-assessable Class A-1 Preferred Shares as is determined in
accordance with the next sentence. The number of Class A-1
Preferred Shares that may be acquired as a result of such
exchange shall be the number of Class A-1 Preferred Shares that
WV would have held on the date of exchange assuming for such
purposes that WV were issued 3,163,306 Class A-1 Preferred Shares
on May 4, 1998 plus (to the extent that WV has not otherwise
received equivalent value as a result of its holdings of RoweCan
Class A Preferred Shares) any additional shares or assets
(including dividends, whether declared or accumulated) which WV
would have acquired (or subsequently received) had WV held such
number of Class A-1 Preferred Shares from May 4, 1998; and
(ii) RoweCan Class B Preferred Shares into such number of fully paid
and non-assessable Class B Preferred Shares as is determined in
accordance with the next sentence. The number of Class B
Preferred Shares that may be acquired as a result of such
exchange shall be the number of Class B Preferred Shares that WV
would have held on the date of exchange assuming for such
purposes that WV were issued 1,186,240 Class B Preferred Shares
on May 4, 1998 plus (to the extent that WV has not otherwise
received equivalent value as a result of its holdings of RoweCan
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Class B Preferred Shares) any additional shares or assets
(including dividends, whether declared or accumulated) which WV
would have acquired (or subsequently received) had WV held such
number of Class B Preferred Shares from May 4, 1998.
Notwithstanding the foregoing, WV may exchange a lesser amount of
RoweCan Class A Preferred Shares or RoweCan Class B
Preferred Shares, as applicable, in order to participate in
subsection 7.3(a).
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(b) If WV exercises the Class A Exchange Option, WV shall
transfer a total of 889,187 (subject to adjustment for stock
splits and stock combinations) Class A-1 Preferred Shares
(or any Common Shares received upon conversion thereof) in
the event that either one of the following events occurs:
(i) (A) prior to April 25, 2000, there is an Initial Public Offering
which public offering is made at a price per share which will
yield not less than $35,000,000 of gross proceeds to the Company,
Shares are listed on The Toronto Stock Exchange, New York Stock
Exchange, NASDAQ or other stock exchange acceptable to WV, and
the "market price" of such shares, as determined in accordance
with the Applicable Securities Legislation then in effect, would
yield to WV, if WV were to sell all of its Class A-1 Preferred
Shares at the time of such Initial Public Offering, or if WV were
to have converted such Class A-1 Preferred Shares at the time of
such Initial Public Offering, all of its Common Shares that WV
shall have acquired as a result of its conversion of its Class X-
0 Xxxxxxxxx Shares, a minimum 45% Compounded Cash on Cash Return
after taking into account the reduced number of Shares which
would be received by WV as a result of the application of this
Section; and (B) prior to April 25, 2002, Shares to be received
by WV as a result of the exercise of the Class A Exchange Option
are not subject to an underwriters' lock-up and are otherwise
freely tradeable (xx) in the United States either pursuant to
Rule 144 of the United States Securities Act of 1933, as amended,
without the requirement to file a registration statement, or as a
result of the fact that a registration statement qualifying the
WV Shares for trading shall have been filed by the Company,
whether voluntarily or at the request of WV, or (xy) in Canada by
reason of the Shares being listed and the requisite hold periods
having expired, and in either case, the "market price" of such
Shares, as determined in accordance with the Applicable
Securities legislation then in effect, would yield to WV, if WV
were then to sell all of its portion of such Shares, a minimum
45% Compounded Cash on Cash Return taking into account the
reduced number of Shares which would be received by WV as a
result of the application of this Section; or prior to April 25,
2000, there is a cash sale of either the combined assets of the
Company and RoweCan or the shares of the Company and/or RoweCan
which: (A) provides for payment in full of the purchase price in
cash or by certified cheque or bank draft at the closing of the
transaction; (B) provides for no continuing liability with
respect to either of the Company and RoweCan on the part of WV;
and (C) provides WV with proceeds with respect to its Class A-1
Preferred Shares, or if at the relevant time WV were to have
converted its Class A-1 Preferred Shares into Common
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Shares, with respect to its Common Shares, which are the greater
of (1) $8,000,000, or (2) a minimum 45% Compounded Cash on Cash
Return after taking into account the reduced number of Shares
which would be received by WV as a result of the application of
this Section; or
(ii) prior to April 25, 2000, there is a cash sale of either the
combined assets of the Company and RoweCan or the shares of the
Company and/or RoweCan which: (A) provides for payment in full of
the purchase price in cash or by certified cheque or bank draft
at the closing of the transaction; (B) provides for no continuing
liability with respect to either of the Company and RoweCan on
the part of WV; and (C) provides WV with proceeds with respect to
its Class A-1 Preferred Shares, or if at the relevant time WV
were to have converted its Class A-1 Preferred Shares into Common
Shares, with respect to its Common Shares, which are the greater
of (1) $8,000,000, or (2) a minimum 45% Compounded Cash on Cash
Return after taking into account the reduced number of Shares
which would be received by WV as a result of the application of
this Section.
The transfer of the 889,187 Shares (Class A-1 Preferred Shares or Common
Shares, as applicable) shall be for no additional consideration to the
Stockholders listed in Schedule 7.11 (and in such proportions noted in
Schedule 7.11).
(c) Any exercise of the Exchange Options shall be subject to the following
terms and conditions:
(i) each Exchange Option shall be exercised by WV, giving to the
Company and each of the other Stockholders, notice in writing
of WV's intention to exercise such Exchange Option;
(ii) on closing the Company shall be deemed to represent and warrant
that the Preferred Shares to be issued have been issued as
fully paid and non-assessable;
(iii) the completion of the transaction shall take place at the
offices of WV in Toronto, Ontario, on or before or on the date
being 10 days after the date on which WV exercises such
Exchange Option; and
(iv) upon the completion of the transaction, WV shall cause its
nominee(s) to resign from all offices and positions with
RoweCan.
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(d) In the event of (i) any liquidation, dissolution, winding up, or
merger of the Company or RoweCan or (ii) the vote of a majority of the
Directors (A) WV's RoweCan Class A Preferred Shares shall be exchanged
into that number of fully paid and non-assessable Class A-1 Preferred
Shares determined in accordance with Section 7.10(a), and (B) WV's
RoweCan Class B Preferred Shares shall be exchanged into that number
of fully paid and non-assessable Class B Preferred Shares determined
in accordance with Section 7.10(a); and such exchanges shall be
subject to the terms and conditions set forth in Sections 7.10(c)(ii),
7.10(c)(iii) and 7.10(c)(iv).
7.11 Required Transfer. If and only if WV has exercised the Class A
Exchange Option and the number of Shares which may be
acquired pursuant to the exercise thereof has not been
reduced by reason of the application of subsection 7.10(b)
and either of the following apply:
(a) (i) prior to April 25, 2000, there is an Initial Public Offering which
public offering is made at a price per share which will yield not less
than $35,000,000 of gross proceeds to the Company, Shares are listed
on the Toronto Stock Exchange, New York Stock Exchange, NASDAQ or
other stock exchange acceptable to WV, and the "market price" of such
shares, as determined in accordance with the Applicable Securities
Legislation then in effect, would yield to WV, if WV were to sell all
of its Class A-1 Preferred Shares at the time of such Initial Public
Offering, or if WV were to have converted such Class A-1 Preferred
Shares at the time of such initial Public Offering, all of its Common
Shares that WV shall have acquired as a result of its conversion of
its Class A-1 Preferred Shares, a minimum 45% Compounded Cash on Cash
Return after taking into account the reduced number of Shares which
would be received by WV as a result of the application of this
Section; and (ii) prior to April 25, 2002, Shares held by WV are not
subject to an underwriters' lock-up and are otherwise freely tradeable
(xx) in the United States either pursuant to Rule 144A of the United
States Securities Act of 1933, as amended, without the requirement to
file a registration statement, or as a result of the fact that a
registration statement qualifying the WV Shares for trading shall have
been filed by the Company, whether voluntarily or at the request of
WV, or (xy) in Canada by reason of the Shares being listed and the
requisite hold periods having expired, and in either case, the "market
price" of such Shares, as determined in accordance with the Applicable
Securities Legislation then in effect, would yield to WV, if WV were
then to sell all of its portion of such Shares, a minimum 45%
Compounded Cash on Cash Return after taking into amount the reduced
number of Shares which would be held by WV as a result of the
application of this Section, or
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(b) prior to April 25, 2000, there is either a cash sale of the combined
assets of the Company and RoweCan or the shares of the Company and/or
RoweCan which: (i) provides for payment in full of the purchase price
in cash or by certified cheque or money order at the closing of the
transaction; (ii) provides for no continuing liability with respect to
either of the Company and RoweCan on the part of WV; and (iii)
provides WV with proceeds with respect to its Class A-1 Preferred
Shares, or if at the relevant time WV were to have converted its Class
A-1 Preferred Shares into Common Shares, with respect to its Common
Shares, which are the greater of (A) $8 million, or (B) a minimum 45%
Compounded Cash on Cash Return after taking into account the reduced
number of Shares which would be held by WV as a result of the
application of this Section,
then WV will transfer a total of 889,187 (subject to adjustment for
stock splits and stock combinations) of its Shares (Class X-
0 Xxxxxxxxx Shares or Common Shares, as applicable) for no
additional consideration to the Stockholders listed in
Schedule 7.11 (and in such proportions noted in Schedule
7.11).
7.12 Reservation of Shares Issuable on Exercise of Exchange Options.
The Company at all times and from time to time shall reserve
and keep available, solely for issuance and delivery on the
exercise of the Exchange Options, a number of Shares equal
to the aggregate number of Shares issuable upon exercise of
the Exchange Options. If at any time the Company does not
have sufficient authorized Shares to comply with the
foregoing sentence, the Company promptly shall take all
steps necessary to amend its Second Amended Certificate of
Incorporation to provide a reserved number of Shares
sufficient to effect the exercise in full of the Exchange
Options.
7.13 Conversion of Preferred Shares. In accordance with Article
VI(A)(2) of the Second Amended Certificate of Incorporation,
the Class A Preferred Shares shall be converted into Common
Shares at the same time as any Class A-1 Preferred Shares,
Class B Preferred Shares or Class C Preferred Shares shall
be converted into Common Shares.
7.14 Rights of Purchaser. Any purchaser of Shares from any
Stockholder in accordance with the provisions of this
Agreement shall be entitled
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to all of the benefits accruing to such Stockholder
hereunder and shall be subject to the obligations of such
Stockholder hereunder.
7.15 Assignment to Permitted Transferees. Any Stockholder may assign
all, or any portion of, the Shares held by such Stockholder
to a Permitted Transferee, provided that:
(a) the Permitted Transferee which is a corporation or a trust has agreed,
in form and terms satisfactory to a Majority in Interest, acting
reasonably, that as long as it shall hold such Shares it shall (i)
remain a corporation or trust, as applicable, (ii) have no assets
other than the Shares, the rights attached to such Shares and any
dividend or interest paid in connection with such Shares, and (iii)
not conduct any business other than that of holding the Shares;
(b) the assignor has agreed prior to such assignment, in form and terms
satisfactory to a Majority in Interest, acting reasonably, that as
long as the Permitted Transferee holds such Shares the assignor shall
(i) not transfer to any Person the legal and/or beneficial ownership
of any issued and outstanding share, equity security or ownership,
participatory or profit interest in the Permitted Transferee or
otherwise deal with any interest, the effect of which would result in
a change in the Control of the Permitted Transferee by any mechanism
whatsoever, (ii) not be relieved of its obligations hereunder and
continue to be bound by this Agreement as if it continued to be a
Stockholder, (iii) represent the Permitted Transferee in all of the
Permitted Transferee's dealings with the Company and other
Stockholders, and (iv) jointly and severally with the Permitted
Transferee (each waiving the benefit of division and discussion) be
liable to the other Parties for the obligations of the Permitted
Transferee under this Agreement; and
(c) without limiting the generality of Section 7.1(e), the Permitted
Transferee shall first enter into an agreement with the other parties
hereto to be bound hereby.
7.16 Assignment to PV Securities Corp. PV Securities Corp. may
assign all (but not less than all) of the Shares held by it
to Xxxxxxxx Xxxxxxx, provided that, without limiting the
generality of Section 7.1(e), Xxxxxxxx Xxxxxxx shall first
enter into an agreement with the other parties hereto to be
bound hereby.
7.17 Assignment by Azalea Mall, L.L.C. Azalea Mall, L.L.C. may
assign the shares held by it to one or more of its
Affiliates, provided that,
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without limiting the generality of Section 7.1(e), such
Affiliates shall first enter into an agreement with the
other parties hereto to be bound hereby.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES
8.1 General. Each Stockholder hereby represents and warrants to each
other Stockholder and to the Company that such Stockholder:
(a) is neither a party to nor bound by any agreement regarding the
ownership of its Shares, other than this Agreement, the Ancillary
Agreements or an agreement to effect a transfer of Shares in
accordance with the terms of this Agreement;
(b) is not a party to, bound by or subject to any indenture, mortgage,
lease, agreement, instrument, charter or bylaw provision, statute,
regulation, order, judgment, decree or law which would be violated,
contravened or breached by, or under which any default would occur as
a result of the execution and delivery by such Stockholder of this
Agreement or the performance by such Stockholder of any of the terms
hereof; and
(c) assuming the accuracy of the representations of the Company in Section
3.1(d) of the Stock Purchase Agreement, owns its Shares beneficially
and as of record with good and marketable title thereto free and clear
of all legal rights and encumbrances.
8.2 The Company. The Company hereby represents and warrants to each
Stockholder that, as at the date of this Agreement:
(a) there are no outstanding options or agreements by the Company to issue
securities in the capital of the Company and no understandings capable
of becoming such agreements other than those listed in Schedule 3.1(e)
of the Stock Purchase Agreement; and
(b) the recitals to this Agreement are true and correct.
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8.3 Representations and Warranties Pertaining to PV Securities Corp.
Xxxxxxxx Xxxxxxx represents and warrants that:
(a) the assets of PV Securities Corp. include shares in the capital of the
Company which are owned by PV Securities Corp. free and clear of all
Liens, charges and encumbrances; and
(b) Xxxxxxxx Xxxxxxx owns all of the outstanding shares of PV Securities
Corp. free and clear of all Liens, charges and encumbrances.
ARTICLE 9
ADDITIONAL CAPITAL
9.1 Related Party Loans. All loans to any Related Party shall be
made on commercially reasonable terms and conditions.
(a) Such loans are hereby expressly subordinated, to the extent and in the
manner provided in this Section 9.1, without any further action or
documentation whatsoever being necessary to give effect to such
subordination, in right of payment to the prior payment in full of all
other obligations of the Company for borrowed money, all charges and
security interests created thereby and all indebtedness, liabilities
and obligations secured thereby (collectively, the "Other
Indebtedness").
(b) In the event of any insolvency or bankruptcy proceedings, or any
receivership, liquidation, reorganization or other similar proceedings
relative to the Company or to its property or assets, or in the event
of any proceedings for voluntary liquidation, dissolution or other
winding-up of the Company, whether or not involving insolvency or
bankruptcy, or any marshaling of the assets and liabilities of the
Company (collectively referred to as a "Proceeding"), the holders of
Other Indebtedness shall be entitled to receive payment in full of all
the Other Indebtedness before any lending Related Party shall be
entitled to receive any payment or distribution of any kind or
character, whether in cash, property or securities which may be
payable or deliverable in any such event in respect of his, her or its
Related Party loan.
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(c) Upon any payment or distribution of assets of the Company referred to
in this Section 9.1, any lending Related Party shall be entitled to
call for and rely upon a certificate, addressed to such lending
Related Party, of the person making any such payment or distribution
for the purpose of ascertaining the persons entitled to participate in
such distribution, the holders of Other Indebtedness and other
indebtedness of the Company, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Section 9.1.
(d) Subject to the payment in full of all Other Indebtedness, any lending
Related Party shall be subrogated to the rights of the holders of
Other Indebtedness to receive payments and distribution of assets of
the Company in respect of and on account of Other Indebtedness, to the
extent of the application thereto of moneys or other assets which
would have been received by such lending Related Party but for the
provisions of Section 9.1, until the principal of and interest on the
Other Indebtedness shall be paid in full. No payment or distribution
of assets of the Company to the lending Related Party which would be
payable or distributable to the holder of Other Indebtedness pursuant
to this Section 9.1 shall (to the extent paid over to or held for the
account of holders of Other Indebtedness), as between the Company, its
creditors (other than the holders of Other Indebtedness) and such
lending Related Party, be deemed to be a payment by the Company to or
on account of such lending Related Party, it being understood that the
provisions of this Section 9.1 are, and are intended, solely for the
purpose of defining the relative rights of the lending Related Party,
on the one hand, and the holders of the Other Indebtedness on the
other hand. Nothing contained in this Section 9.1 is intended to or
shall impair, as between the Company and its creditors (other than the
holders of Other Indebtedness and the lending Related Party), the
obligation of the Company, which is unconditional and absolute, to pay
to the lending Related Party the principal of and interest on his, her
or its Related Party loan and any other amounts payable under his, her
or its Related Party loan as and when the same shall become due and
payable in accordance with the terms hereof, or to affect the relative
rights of the lending Related Party and creditors of the Company,
other than the holders of the Other Indebtedness, nor shall anything
herein or therein prevent the lending Related Party from exercising
all remedies otherwise permitted by applicable law upon default under
his, her or its Related Party loan subject to the rights, if any under
this Section 9.1, of the holders of Other Indebtedness upon the
exercise of any such remedy.
(e) In the event that, notwithstanding the foregoing provisions of this
Section 9.1, the lending Related Party shall have received any payment
after a Proceeding has commenced before all Other Indebtedness has
been paid in full, the lending Related Party shall hold such payment
in trust for the benefit of the holders of
-53-
Other Indebtedness and shall forthwith, upon the completion of the
Proceeding, pay such payment over to such holders of Other
Indebtedness for application against unpaid Other Indebtedness.
(f) For greater certainty, this Section 9.1 shall not be construed so as
to prevent the lending Related Party from receiving and retaining any
payments on account of his, her or its Related Party loan which are
made (i) in a manner that is consistent with the terms of his, her or
its Related Party loan and (ii) at any time when no event of default,
as defined in any Other Indebtedness or the instrument creating the
same, has occurred and is continuing and in respect of which notice
has been given by or on behalf of the holders of Other Indebtedness to
the Company and the Related Party. Until written notice shall be
given to the Related Party by or on behalf of any holder of any Other
Indebtedness of the occurrence of any default with respect to such
Other Indebtedness or the existence of any other facts which would
have the result that any payment with respect of any Related Party
loan would be in contravention of the provisions of this Section 9.1,
the lending Related Party shall be entitled to assume that no such
default has occurred, or that no such facts exist.
(g) The holders of Other Indebtedness shall be entitled to rely and shall
be third-party beneficiaries of the provisions of this Section 9.1.
(h) The provisions of this Section 9.1 shall have no application to loans
made by the Investors to the Company.
9.2 Future Debt Financings. If the Company requires additional
capital by way of debt, it shall first advise the Investors
of its requirements in writing (the "Required Financing").
Upon receiving such notice, each of the Investors shall have
45 days within which to notify the Company if they wish to
provide the Required Financing. If more than one Investor
elects to provide such financing to the Company, each such
Investor shall provide a portion of the Required Financing
which shall be determined by multiplying the amount of the
Required Financing by a fraction, the numerator of which is
the number of Shares held by such Investor and the
denominator of which is the number of Shares held by all
Investors who elect to provide the Required Financing. The
Required Financing shall be on the terms and conditions as
may be negotiated between such parties. During that time,
the Company shall provide to each of the Investors, at such
Investor's request, all such information as such
-54-
Investor may reasonably require to make its determination.
In the event that the parties are unable to agree upon the
terms of the Required Financing within such 45 day period,
the Company shall deliver to the Investors, within 5 days
following the expiry of such 45 day period, a term sheet
outlining the terms and conditions upon which it would be
prepared to proceed with the Required Financing. The
Investors shall have a further period of 10 days within
which to accept or reject the terms of the Required
Financing. In the event that either all Investors reject the
terms of financing or fail to give notice within the
prescribed time period as aforesaid, the Company shall be
free to pursue obtaining its debt financing with other
Persons on terms no less favorable to the Company or more
favorable to such Persons than those set forth in the term
sheet provided to the Investors.
9.3 Future Equity Financings. (a) If the Company requires additional
capital by way of equity, the Company shall provide written
notice to the Stockholders specifying the terms and
conditions of the proposed equity issue including the amount
of financing to be raised, the type of security to be
issued, the price per security to be issued and the target
completion date. Each Stockholder shall have the
irrevocable right, exercisable by written notice given to
the Company within 30 days after the giving of the above
notice by the Company, to participate in the equity
financing on a pro rata basis (determined by the ratio of
the Stockholder's then existing holdings of Shares to the
total holdings of all Stockholders on a Fully Diluted basis)
on the terms and conditions set forth by the Company. In
the event that one or more Stockholders elects to subscribe
for his or its pro rata proportion of the proposed equity
issue and one or more Stockholders declines to so subscribe,
the Stockholder(s) electing to so subscribe shall have the
further right and option, exercisable by notice in writing
within five days of being notified by the Company that one
or more Stockholders has declined to so subscribe, to
subscribe for the remaining equity on the same terms and
conditions as set forth by the Company in proportion to
their respective holdings of Shares (or in such other
proportions as they may agree among themselves). The
foregoing procedure shall be repeated as often as is
necessary until the equity issue is fully subscribed or
until there remains equity which no Stockholder has elected
to subscribe for. If there remains equity which no
Stockholder has elected to subscribe for, the Company may
elect to proceed with the equity financing in an amount
equal
-55-
to the amount subscribed for under this Section 9.3 or
decline to proceed and to pursue its equity capital
requirements through other sources on terms and conditions
no more favorable than the terms and conditions specified to
the Stockholders. Nothing contained in this Section 9.3
shall affect the requirement that requisite Investors
provide written approval to the proposed equity financing in
accordance with Section 5.10 of this Agreement.
(b) The parties hereto agree and acknowledge that the provisions
of this Section 9.3 and Section 9.2 of the Amended and
Restated Stockholders' Agreement do not apply to the
transactions contemplated by the Stock Purchase Agreement.
9.4 Exceptions to Pre-Emptive Rights. Notwithstanding Section 9.3
hereof, no Stockholder shall have any rights thereunder in
respect of:
(a) the issue of any options or shares of the Company pursuant to a stock
option plan for employees and other persons approved by the Board of
Directors and consented to in accordance with Section 5.10 hereof;
(b) shares issued as a stock dividend or pursuant to the exercise of
conversion privileges, options or rights previously granted by the
Company in accordance with Section 9.3;
(c) shares issued to WV pursuant to the Exchange Options;
(d) shares issued in connection with the Company's acquisition of another
Person; or
(e) shares offered to the public pursuant to a Qualifying Public Offering.
ARTICLE 10
GENERAL MATTERS
10.1 Noncompetition Agreements. The Company shall cause each current
and future vice-president of the Company to sign a
-56-
Noncompetition Agreement in the form attached hereto as
Exhibit B.
10.2 Amendment to Bylaws. The Company shall not amend or restate the
Bylaws without the prior written consent of a Majority in
Interest.
10.3 No Agency or Partnership. Nothing contained in this Agreement
shall make or constitute any party the representative,
agent, principal or partner of any other party and it is
understood that no party has the capacity to make
commitments of any kind whatsoever or incur obligations or
liabilities binding upon any other party.
10.4 Notice. Any notice, request, consent or other communication
hereunder to any party will be in writing and will be either
personally delivered, or sent by certified mail, return
receipt requested, or sent by facsimile, confirmation of
receipt requested, or sent by reputable overnight courier
service (charges prepaid) to the address set forth below
such party's signature on the signature pages hereto.
Notices will be deemed to have been given hereunder when
delivered personally; five business days after deposit in
the mail; when confirmation of receipt is received; and one
day after deposit with a reputable overnight courier
service.
-57-
10.5 Endorsement of Share Certificates. Any and all certificates
representing Shares now or hereafter beneficially owned by
the Stockholders during the term of this Agreement shall
have endorsed thereon, in bold type, the following legends
(or, in place of the first legend below, the legend required
by the Original Stockholders' Agreement or the Amended and
Restated Stockholders' Agreement):
"The securities evidenced by this certificate are subject to the terms
of, and disposition and transfer of such securities is restricted in
accordance with, the provisions of an agreement dated as of December
11, 1998 made between the Company and each and all of the holders of
shares. A copy of the said agreement, together with all amendments
and supplements thereto, is available for inspection from the
Secretary of the Company on request and without charge at its
registered office."
"The securities evidenced by this certificate have not been registered
under the Securities Act of 1933, as amended, or the securities laws
of any state and may not be sold or otherwise disposed of except
pursuant to an effective registration statement under such Act and
applicable state securities laws or there is presented to the Company
an opinion of counsel to the effect that such registration is not
necessary."
10.6 Assignment. Neither this Agreement nor any rights or
obligations hereunder are assignable by the parties hereto
without the prior written consent of the other parties
hereto, subject to the rights of Stockholders to sell their
Shares pursuant to the terms of this Agreement and provided
that the purchaser of such Shares agrees to be bound hereby.
This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs,
executors, legal personal representatives, successors and
permitted assigns.
10.7 Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts each of which when so
executed and delivered shall be an original, but all such
counterparts shall together constitute one and the same
instrument. This Agreement may be executed by any Party by
facsimile signature.
-58-
10.8 Publicity. Notwithstanding Section 11.1, the Investors and the
Company shall be permitted reasonable publicity with regard
to the transactions contemplated herein. Such publicity
shall be reviewed and approved by the other Investors and
the Company prior to release.
ARTICLE 11
CONFIDENTIALITY
11.1 Confidentiality. The parties hereto agree to treat all
information, data, reports and other records ("information")
relating to the Company's Business as confidential and will
not disclose such information to any third party, other than
their legal advisors, Permitted Transferees or auditors
(and, in the case of WV, the auditors appointed under the
Labour Sponsored Venture Capital Corporations Act, 1992
(Ontario), as amended, and, in the case of Azalea Mall,
L.L.C. and its Affiliates, the National Association of
Insurance Commissioners) or any representative of any
partner or equity holder of any of the Investors, without
the prior written consent of the other parties; provided,
however, no Stockholder shall be liable for any such
disclosure if such information:
(a) becomes generally available to the public other than as a result of a
disclosure by a Stockholder or its representatives in violation of
this Agreement;
(b) was available to a Stockholder on a non-confidential basis without
violation of this Agreement prior to its disclosure by the Company or
its representatives;
(c) becomes available to a Stockholder on a non-confidential basis without
violation of this Agreement from a source other than the Company or
its representatives provided that such source is not bound by a
confidentiality agreement with the Company or a duty of
confidentiality to or in respect of the Company to the knowledge of
the Stockholder; or
(d) is required by law or regulatory authority to be disclosed, provided
that a Stockholder first notifies the Company that it believes it is
required to disclose
-59-
such information and, if possible, it allows the Company a reasonable
period of time to contest the disclosure of such information.
11.2 Survival. The terms of this Article 11 shall survive any
termination of this Agreement without limit as to time.
[Signature pages follow.]
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Amended and Restated Stockholders' Agreement
Signature Page 61
IN WITNESS WHEREOF the parties hereto have executed this
Agreement as of the day and year first above written.
ROWECOM INC.
By:____________________________________
Name:
Title:
By:____________________________________
Name:
Title:
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx
XXX 00000
Attn: Dr. Xxxxxxx Xxxx, Xx. Xxxxx Xxxxxxxxx
Facsimile: 000-000-0000
-61-
Amended and Restated Stockholders' Agreement
Signature Page 62
WORKING VENTURES CANADIAN
FUND INC.
By:_____________________________________________
Name:
Title:
000 Xxxxx Xxxxxx Xxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx X0X 0X0
Facsimile: 000-000-0000
Attn: Xxxxxx Xxxxxxxx and W. Xxxxx Xxxxxxxx
AXIOM VENTURE PARTNERS II
LIMITED PARTNERSHIP
By Axiom Venture Associates II Limited Liability
Company, its General Partner
By:____________________________________________
Name:
Title:
CityPlace II - 17th Floor
000 Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Facsimile: 000-000-0000
Attn: Xxx XxXxx
ZERO STAGE CAPITAL VI, L.P.
By Zero Stage Capital Associates VI, LLC, its
General Partner
By:____________________________________________
Name: Xxxxxxx Xxxx
Title: Managing Member
000 Xxxx Xxxxxx - 00xx Xxxxx
Xxxxxxxxx, XX 00000
Facsimile: 000-000-0000
Attn: Xxxxxxx Xxxx
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Amended and Restated Stockholders' Agreement
Signature Page 63
Attn: Xxxxxxx Xxxx
[ADDITIONAL INVESTORS]
HIGHLAND CAPITAL PARTNERS III
LIMITED PARTNERSHIP
By: Highland Management Partners III
Limited Partnership
Title: General Partner
By:____________________________________________
Name:
Title:
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Facsimile: 000-000-0000
Attn:
HIGHLAND ENTREPRENEURS' FUND III
LIMITED PARTNERSHIP
By: HEF III LLC
Title: General Partner
By:____________________________________________
Name:
Title:
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Facsimile: 000-000-0000
Attn:
-63-
Amended and Restated Stockholders' Agreement
Signature Page 64
PV SECURITIES CORP.
By:_____________________________________________
c/o: XXXXXXXX XXXXXXX
20 Whits Ends
Xxxxxxx, Xxxxxxxxxxxxx 00000
_____________________________________________________________
XXXXXXX XXXX XXXXX XXXXXX
00 Xxxxxx Xxxxxx 000 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000 Xxxxxxxxx, Xxxxxxx X0X0X0
Xxxxxx
_____________________________________________________________
XXXXX XXXXX XXXXXX X. XXXXX
00 Xxxxxxx Xxxx. 000 Xxxxxx Xxxxx Xxxx
Xxxxxx, Xxxxxxx X0X0X0 Xxxx Point
Canada Xxxxxxxxx, Xxxxxxxxxxx 00000
____________________________________________________________
XXXXXX XXXXX XXX XXXXXXX
000 Xxxxxxxxx Xxxx, #0000 00 Xxxxx Xxxxx
Xxxxxx, Xxxxxxx XxX0X0 Xxxxxx, Xxxxxxxxxxxxx 00000
Xxxxxx
_____________________________________________________________
XXXXX XXXXXXX XXXXX XXXXXXX
000 Xxxxx Xxxx Six Montchanin Court
Ottowa, Ontario K1H 5C8 Xxxxxxxxxx, Xxxxxxxx 00000
Xxxxxx
_____________________________________________________________
XXXXX XXXXXXXXX XXXXXXX XXXXXX
0 Xxxxxxx Xxxxx Xxxxxx Xxxxxxxxx fur l' Xxxxxxxx
Xxxxxx, Xxxxxxx X0X0X0 32100 Gers
Canada France
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Amended and Restated Stockholders' Agreement
Signature Page 65
____________________________________________________________
XXXXXXXXX XXXXXXX XXXXX XXXXX
00 Xxxxxx Xxxx 000 Xxxxxxxxx Xxxxx
Xxxx Xxxxxxx, Xxxxxxxxxxxxx 00000 Xxxxxxxxx, Xxxxxxx X0X000
Xxxxxx
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Amended and Restated Stockholders' Agreement
Signature Page 66
PAI, WEI XXXX XXXXX
By: CIVF Management, Ltd.,
attorney in fact pursuant to Power
of Attorney dated _________, 1998
By: ______________________________
Name: Xxxxxx Xxxxxxx
Title:
2 FL, Xx. 000
Xx-xxxxxx X. Xxxx
Xxxxxx, Xxxxxx ROC
Facsimile: 011-886-22-517-6418
FU KUAN INVESTMENT CORP.
By: CIVF Management, Ltd.,
attorney in fact pursuant to Power
of Attorney dated _________, 1998
By: ______________________________
Name: Xxxxxx Xxxxxxx
Title:
14FL, Xx. 00
Xx Xxx X. Xxxx
Xxxxxx, Xxxxxx ROC
Facsimile: 011-886-22-397-2106
Attn: Xxxxx Xx
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Amended and Restated Stockholders' Agreement
Signature Page 67
PURETECH PROFITS LIMITED (BVI)
By: CIVF Management, Ltd.,
attorney in fact pursuant to Power
of Attorney dated _________, 1998
By: ______________________________
Name: Xxxxxx Xxxxxxx
Title:
x/x Xx. X.X. Xxxx
Xxxxx 0000
26FL
000 Xxxxxxx Xxxx
Xxx. 0
Xxxxxx, Xxxxxx ROC
Facsimile: 011-886-22-757-6931
Attn: Mr. Y.L. Xxxx
XXXXXXX INTERNET VENTURE FUND, L.P.
By: ______________________________
Name:
Title:
0000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxx 00000
Facsimile: 000-000-0000
Attn: Xxxxxx Xxxxxxx
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