Exhibit 10.4
COOLSAVINGS, INC.
SHAREHOLDERS' AGREEMENT
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THIS SHAREHOLDERS' AGREEMENT, dated as of this ___ day of ___, 2001
(this "Agreement") among the investors listed on Schedule I hereto (the "Series
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B Investors"); the investors listed on Schedule II (the "Series C Investors");
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the individuals whose names and addresses appear from time to time on Schedule
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III hereto (the "Management/Founding Investors" and with respect to Xxxxxx
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Golden and his affiliates thereon, "Golden," and with respect to Xxxxxxx Xxxx
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and his affiliates thereon, "Moog"); the investors listed on Schedule IV (the
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"Significant Investors"); and CoolSavings, Inc., a Delaware corporation (the
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"Company"). The Series B Investors, the Series C Investors, the
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Management/Founding Investors and the Significant Investors are hereinafter
collectively referred to as the "Investors".
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R E C I T A L S
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WHEREAS, the Series B Investors have, pursuant to the terms of a
Securities Purchase Agreement, dated July 30, 2001, with the Company (the
"Purchase Agreement"), agreed to purchase shares of Series B Convertible
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Preferred Stock of the Company (the "Series B Preferred Stock"), a 12% Senior
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Secured Note executed by the Company (as may be amended from time to time) (the
"Senior Secured Note"), and certain warrants (the "Warrants") to purchase shares
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of Common Stock (as defined below); and
WHEREAS, the Series C Investors hold shares of Series C Convertible
Preferred Stock of the Company (the "Series C Preferred Stock," and,
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collectively with the Series B Preferred Stock, the "Preferred Stock"); and
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WHEREAS, the Management/Founding Investors and the Significant
Investors hold Common Stock $0.001 per share of the Company (the "Common Stock"
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and, together with the Preferred Stock, the "Shares"); and
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WHEREAS, the Investors and the Company desire to promote their mutual
interests by agreeing to certain matters relating to the operations of the
Company and the disposition and voting of Shares.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto hereby agree as follows:
1. COVENANTS OF THE PARTIES.
(a) Legends. The certificates evidencing the Shares acquired by the
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Series B Investors pursuant to the Purchase Agreement and those evidencing the
Shares held by the Series C Investors, Management/Founding Investors and the
Significant Investors, if certificated, will bear the following legend
reflecting the restrictions on the transfer of such securities contained in this
Agreement:
"The securities evidenced hereby are subject to the terms of that
certain Shareholders' Agreement, dated as of _______ __, 2001, by and
among the Company and certain investors identified therein, which
includes certain voting agreements and restrictions on transfer. A
copy of this Agreement has been filed with the Secretary of the
Company and is available upon request."
As promptly as practicable after the date hereof, the Investors shall
deliver all certificates representing any Shares to the Company to enable the
Company to place the foregoing legend on such certificates. The Company may
remove such legend upon request for a Transfer effected pursuant to this
Agreement other than a Transfer to a Permitted Transferee.
(b) Additional Investors. The parties hereto acknowledge that
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executive officers of the Company may become shareholders of the Company after
the date hereof. As a condition to the issuance of shares of capital stock of
the Company to them, the Company's compensation committee may require such
executive officers to execute and deliver an agreement containing restrictions
substantially similar to those set forth in Sections 1(a), 3(a) and 3(b) hereof
in favor of the Company. In such event, the Company shall require such
agreements to include terms that entitle the Series B Investors, at their option
and in their discretion, to exercise the same rights as held by the Company in
the event the Company does not exercise such rights.
2. BOARD OF DIRECTORS.
(a) Election of Directors.
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(i) As of the date hereof, the Board of Directors of the
Company (the "Board") shall consist of Xxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxx, Xxxx
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X. Xxxxx, Xxxxxx Xxxxxx, Xxxxxxx Xxxx and Xxxxxx X. Xxxxxxxxxx and up to seven
(7) representatives designated by the Series B Investors that own a majority of
the Series B Preferred Stock (each such representative and any additional
representatives designated by the Series B Investors, a "Series B Director").
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(ii) From the date hereof, and at all times while the Series B
Preferred Stock is outstanding, the Investors and the Company shall take all
reasonable action within their respective power, including but not limited to,
the voting (as permitted by law) of all shares of capital stock of the Company
owned by them or over which they have voting control, required (A) to cause the
Board to consist of no less than seven (7) and no more than the applicable Whole
Board Limit (or Reset Board Limit (each as defined in the articles of
incorporation of the Company, as may be amended and restated from time to time
(the "Charter")) and (B) to appoint and elect the number of Series B Directors
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required to fill the Reserved Series B Seats (as defined in the Charter) upon
receipt of a written consent from the holders of a majority of the Series B
Preferred Stock (the "Acting Series B Holders").
(iii) If the Acting Series B Holders exercise their right to
designate and elect a Series B Director or multiple Series B Directors pursuant
to this Section 2(a) and there are no vacancies on the Board of Directors for
such additional director or directors, then the existing At-Large Directors (as
defined below) shall within five (5) business days after receipt of written
notice from the Acting Series B Holders (the "Resignation Period") meet and
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decide which of
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such At-Large Directors will resign (each a "Departing Director"). Assuming
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such decision is voluntarily made, each Departing Director shall immediately
resign. Upon the creation of such vacancy or vacancies, the Acting Series B
Holders may immediately designate and elect the additional Series B Director(s)
pursuant to this Section 2(a). If none of the At-Large Directors resigns or not
enough resign to create the vacancies for the additional Series B Director
Seat(s), the Investors shall take all action within their respective power as
stockholders to cause the removal of the requisite number of At-Large Directors
(the "Removed Directors"). The foregoing shall not be deemed to preclude any
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right of any holder of the Series B Preferred Stock under the Charter.
(iv) In the event (each a "Default") that the Company fails for
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any reason (i) to pay any quarterly dividend with respect to the Series B
Preferred Stock as required by the Charter, (ii) to make any redemption payment
required pursuant to the Charter, or (iii) an At-Large Director fails to resign
or is not otherwise removed within a Resignation Period as required under
Section 2(a)(v) above, then, in any such case, upon five (5) days written notice
to the Company given at any time following and during the continuance of any
Default, the holders of Series B Preferred Stock shall as a class become
entitled to "Special Voting Rights" as defined and described in the Charter and
the Investors and the Company shall take all action within their respective
power to effect the change in Board composition required by the Special Voting
Rights provision of the Charter.
(v) From and after the date hereof, the Series B Investors shall
be allowed to vote on an as-converted basis in the general election of Board
members (the "At-Large Directors") for those Board seats that are not Reserved
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Series B Seats or otherwise required for Series B Directors (the "At-Large
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Seats"); provided, however, that with respect to the election of directors to
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such At-Large Seats, the Series B Investors shall vote all shares of capital
stock of the Company owned by such Series B Investors for the persons nominated
by the incumbent At-Large Directors or, after May 31, 2003 (and in the sole
discretion of the Series B Investors), as proposed by any other holders of
Common Stock, excluding the Series B Investors and any Affiliates (as defined in
the Purchase Agreement).
(vi) The Company shall provide the Investors with thirty (30)
days' prior written notice of any intended mailing of a notice to shareholders
for a meeting at which directors are to be elected. The Company agrees to
nominate and recommend for election to the Reserved Series B Seats or the seats
otherwise required for the Series B Directors only those representatives
designated by the Series B Investors that own a majority of the Series B
Preferred Stock. If the Series B Investors fail to give notice to the Company of
their nominees for the Series B Directors, the designees then serving as Series
B Directors shall be deemed designated for reelection; provided, such deemed
designation shall not preclude the Series B Investors from otherwise acting with
respect to the designation and election of Reserved Series B Seats at any time
and from time to time as permitted by the Charter.
(b) Replacement Directors. In the event that any Series B Director
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or At-Large Director (a "Withdrawing Director") designated in the manner set
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forth in Section 2(a) hereof is unable to serve, or once having commenced to
serve, is removed, resigns or withdraws from the Board, such Withdrawing
Director's replacement (the "Substitute Director") will be designated by the
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Series B Investors with respect to the Series B Directors (and each Departing
Director and/or Removed Director) or, subject to Section 2(a)(v) above, the
persons nominated by the incumbent At-Large Directors with respect to the At-
Large Directors. The Investors and the Company agree to take all reasonable
action within their respective power, including but not limited to, the voting
(as permitted by law) of capital stock of the Company owned by them (i) to cause
the election of such Substitute Director promptly following his or her
nomination pursuant to this Section 2(b), (ii) upon the written request of the
Series B Investors, to remove, with or without cause, a Series
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B Director, or (iii) upon the written request of the majority of the incumbent
At-Large Directors, to remove, with or without cause, an At-Large Director.
(c) Committees and Subsidiary Boards. In the event the Board
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establishes any committee (including, without limitation any Executive, Audit or
Compensation Committees) ("Committee"), at least one of the Series B Directors
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shall be entitled to serve on any such Committee. At the request of the Series B
Investor made at any time and from time to time, the Investors shall take all
reasonable actions to cause the Company to cause the board of directors of any
subsidiary of the Company (a "Subsidiary Board") to include the same number of
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representatives designated by the Series B Investors on such Subsidiary Board as
there are Series B Directors then entitled to serve on the Board pursuant to
subsections (ii), (iii), (iv) and (vi) of Section 2(a) above.
(d) No Revocation; Termination. The voting agreements contained in
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this Section 2 are coupled with an interest and may not be revoked, except by an
amendment, modification or termination effected in accordance with the terms of
this Agreement. The voting agreement contained in this Section 2 shall terminate
immediately upon the redemption or conversion of all shares of Series B
Preferred Stock. In addition, the voting agreements of individual investors
that are Management/Founding Investors, Series C Investors or Significant
Investors shall not survive any Transfer permitted under this Agreement (nor
shall the voting agreements made by the Series B Investors to such Investors
inure to the benefit of such transferees) unless such Transfer is to a Permitted
Transferee.
(e) Observer Rights. In addition to the foregoing, the holders of
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a majority of the shares of Series B Preferred Stock shall be entitled to have
(and the Company shall permit) to at least one additional person attend meetings
of the Board of Directors in an observational capacity (an "Observer"), and
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if the holders of the Series B Preferred Stock choose not to fill any of the
Reserved Series B Seats reserved for the Series B Directors, then the holders of
a majority of the shares of Series B Preferred Stock shall be entitled to have
(and the Company shall permit) an additional Observer for each unfilled seat. If
a Series B Director is not able to attend a Board of Directors meeting or a
meeting of a committee on which such Directors serve, such Director may
designate any Person to attend in their place as an Observer.
(f) Nothing in this Section 2 shall be deemed to preclude any right
of any holder of the Series B Preferred Stock under the Charter.
3. CERTAIN TRANSFERS OF STOCK AND OTHER COVENANTS.
(a) Resale of Securities. No Management/Founding Investor shall
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Transfer any Shares other than in accordance with the provisions of this Section
3. Any Transfer or purported Transfer made in violation of this Section 3 shall
be null and void and of no effect.
(b) Rights of First Refusal - Share Transfers.
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(i) Limitations on Transfer. No Management/Founding Investor
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shall Transfer any of the Shares owned by him unless the Management/Founding
Investor desiring to make the Transfer (hereinafter referred to as the
"Transferor") shall have first made the offers to sell to the Series B
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Investors as contemplated by this Section 3(b), and such offers shall not have
been accepted in accordance with the terms of this Section 3(b).
(ii) Offer by Transferor. The Transferor shall provide the
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Series B Investors with a copy of a bona fide offer received by the Transferor
from a third party together with (A) a written offer from the Transferor to sell
to the Series B Investors all of the shares then
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proposed to be transferred by the Transferor (the "Subject Shares") to the
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third party, (B) a statement of intention by the Transferor to Transfer the
Subject Shares to the third party, (C) the name and address of the third party,
(D) the number of Subject Shares involved in the proposed Transfer, and (E) the
terms of such Transfer; provided, however, if the Subject Shares are to be sold
through a broker in the open market, the Transferor may, in lieu of identifying
a specific third party and price, identify the broker and covenant that the
Subject Shares shall be sold through a "limit order" at a specified minimum
price ("Minimum Price") that shall not continue for more than sixty (60) days
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(the Subject Shares to be sold through the limit order with respect to Moog
only, shall not exceed in number more than 20% of the average daily volume of
the Company's shares traded during the immediately preceding thirty days). In no
event will a Transferor be entitled to pursue a limit order transaction more
than six (6) times in any twelve-month period.
(iii) Acceptance of Offer.
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(A) Within fifteen (15) business days (four (4) business days
in the case of a limit order transaction) after the receipt of the
offer described in Section 3(b)(ii), the Series B Investors may, at
their option, elect to purchase all of the Subject Shares (or any part
if a limit order transaction is proposed). The Series B Investors
shall give notice of their intention to exercise, or that they do not
intend to exercise their option hereunder, to the Transferor within
such 15-day (or 4-day) period. The Series B Investors shall purchase
all (or any part, as applicable) of the Subject Shares as they shall
agree upon among themselves.
(B) The notice required to be given by the purchasing party
(the "Purchaser") shall specify a date for the closing of the purchase
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which shall not be more than thirty (30) days after the date of the
giving of such notice.
(iv) Purchase Price. The purchase price per share for the
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Subject Shares shall be the price per share offered to be paid by the
prospective transferee described in the offer (or the Minimum Price, as
applicable), which price shall be paid in cash or, if so provided in the offer
of the prospective transferee, cash plus deferred payments of cash in the same
proportions, and with the same terms of deferred payment as therein set forth.
(v) Consideration Other Than Cash. If the offer of Subject
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Shares under this Section 3(b) is for consideration other than cash or cash plus
deferred payments of cash, the Purchaser shall pay the cash equivalent of such
other consideration. If the Transferor and the Purchaser cannot agree on the
amount of such cash equivalent within ten (10) days after the beginning of the
15-day (or 4-day) period under Section 3(b)(iii)(A), any of such parties may, by
three (3) days' written notice to the other, initiate appraisal proceedings
under Section 3(b)(vi) for determination of the cash equivalent. The Purchaser
may give written notice to the Transferor revoking an election to purchase the
Subject Shares within five (5) days after determination of the appraised value,
if it chooses not to purchase the Subject Shares.
(vi) Appraisal Procedure. If any party shall initiate an
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appraisal procedure to determine the amount of the cash equivalent of any
consideration for Subject Shares under Section 3(b)(v), then the Transferor, on
the one hand, and the Purchaser, on the other hand,
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shall each promptly appoint as an appraiser an individual who shall be a member
of a nationally-recognized investment banking firm. Each appraiser shall, within
thirty (30) days of appointment, separately investigate the value of the
consideration for the Subject Shares as of the proposed transfer date and shall
submit a notice of an appraisal of that value to each party. Each appraiser
shall be instructed to determine such value without regard to income tax
consequences to the Transferor as a result of receiving cash rather than other
consideration. If the appraised values of such consideration (the "Earlier
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Appraisals") vary by less than ten percent (10%), the average of the two
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appraisals on a per share basis shall be controlling as the amount of the cash
equivalent. If the appraised values vary by more than ten percent (10%), the
appraisers, within ten (10) days of the submission of the last appraisal, shall
appoint a third appraiser who shall be member of a nationally recognized
investment banking firm. The third appraiser shall, within thirty (30) days of
his appointment, appraise the value of the consideration for the Subject Shares
(without regard to the income tax consequences to the Transferor as a result of
receiving cash rather than other consideration) as of the proposed transfer date
and submit notice of his appraisal to each party. The value determined by the
third appraiser shall be controlling as the amount of the cash equivalent unless
the value is greater than the two Earlier Appraisals, in which case the higher
of the two Earlier Appraisals will control, and unless that value is lower than
the two Earlier Appraisals, in which case the lower of the two Earlier
Appraisals will control. If any party fails to appoint an appraiser or if one of
the two initial appraisers fails after appointment to submit his appraisal
within the required period, the appraisal submitted by the remaining appraiser
shall be controlling. The Transferor and the Purchaser shall each bear the cost
of its respective appointed appraiser. The cost of the third appraisal shall be
shared one-half by the Transferor and one-half by the Purchaser.
(vii) Closing of Purchase. The closing of the purchase shall
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take place at the office of the Company or such other location as shall be
mutually agreeable and the purchase price, to the extent comprised of cash,
shall be paid at the closing, and cash equivalents and documents evidencing any
deferred payments of cash permitted pursuant to Section 3(b)(iv) above shall be
delivered at the closing. At the closing, the Transferor shall deliver to the
Purchaser the certificates evidencing the Subject Shares to be conveyed, duly
endorsed and in negotiable form with all the requisite documentary stamps
affixed thereto.
(viii) Release from Restriction; Termination of Rights. If the
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offer to sell is not accepted by the Series B Investors within the applicable
time provided for acceptance, the Transferor may make a bona fide Transfer to
the prospective transferee named (or pursuant to the qualifying limit order
described) in the statement attached to the offer in accordance with the agreed
upon terms of such Transfer and the Transferee shall acquire the Subject Shares
free and clear of the terms of this Agreement, provided, that such Transfer
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shall be made only in strict accordance with the terms therein stated. If the
Transferor shall fail to make such Transfer within sixty (60) days following the
expiration of the time hereinabove provided for the election by the Series B
Investors or, in the event the Purchaser revokes an election to purchase the
Subject Shares pursuant to Section 3(b)(v), within sixty (60) days of the date
of such notice of revocation, such Shares shall again become subject to all the
restrictions of this Section 3.
(ix) Limitations. The provisions of this Section 3 shall not
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apply to (i) sales by Tag-Along Investors (as defined below) pursuant to Section
3(c) hereof, (ii) Transfers to Permitted Transferees or to the Company, (iii)
Transfers by Moog made subsequent to thirty (30)
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days after his employment with the Company has been terminated by the Company
without cause or upon his death or permanent disability (where applicable as
defined in Moog's employment agreement) (iv) Transfers by Golden's estate or
personal representative after his death or (v) Transfers by any
Management/Founding Investor which, when aggregated with all other Transfers by
such Management/Founding Investor, result in the Transfer of less than the
greater of (A) five percent (5%) of the Shares owned by the Management/Founding
Investor as of the date hereof and (B) fifty thousand (50,000) of the Shares
owned by the Management/Founding Investor.
(x) Assignment. The rights granted to the Series B Investors
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under this Section 3(b) may be freely assigned or otherwise transferred
severally by the Series B Investors to any Person acquiring at least twenty
percent (20%) of the shares of Series B Preferred Stock originally owned by the
original holder of the Series B Preferred Stock.
(c) Tag-Along Rights. In the event the Series B Investors do not
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exercise their rights of first refusal as to all of the Subject Shares pursuant
to Section 3(b) hereto and any Management/Founding Investor intends to
consummate the Transfer of any of its Shares (other than Transfers to any
Permitted Transferee or to the Company), such Management/Founding Investor (the
"Selling Investor") shall notify the Series B Investors (the "Tag-Along
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Investors") and the Company in writing, of such proposed Transfer and its terms
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and conditions in the notice specified in Section 3(b) above. Each Tag-Along
Investor that so notifies the Selling Investor (pursuant to the same terms and
conditions regarding notice set forth in Section 3(b) above) shall have the
right to sell, at the same price and on the same terms and conditions as the
Selling Investor, an amount of Shares equal to the Shares the third party
actually proposes to purchase multiplied by a fraction, the numerator of which
shall be the number of Shares owned by such Tag-Along Investor on the date of
notice and the denominator of which shall be the aggregate number of Shares
owned by the Selling Investor and each Tag-Along Investor exercising its rights
under this Section 3(c) on the date of notice; provided, however, that if any
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Tag-Along Investor has, on the date of notice, the ability to immediately
liquidate pursuant to Rule 144 of the Securities Act of 1933, as amended, at a
price above the then applicable Conversion Price, a number of Shares equal to
the number of Shares such Tag-Along Investor would otherwise be entitled to sell
pursuant to the rights granted under this Section 3(c), then such Tag-Along
Investor shall not be entitled to the benefit of this Section 3(c). The rights
granted to the Series B Investors under this Section 3(c) may be freely assigned
or otherwise transferred severally by the Series B Investors to any Person
acquiring at least twenty percent (20%) of the shares of Series B Preferred
Stock originally owned by the original holder of the Series B Preferred Stock.
(d) Right of First Offer - Equity or Debt Financings.
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(i) If at any time after the date hereof, the Company proposes
to issue any Debt or Equity other than (i) the issuance of the Series B
Preferred Stock to the Series B Investors, the Series C Preferred Stock, the
Notes, the Warrants, or any shares issuable as a result of the conversion or
exercise thereof, (ii) pursuant to the acquisition of another person by the
Company, whether by purchase of stock, merger, consolidation, purchase of all or
substantially all of the assets of such person or otherwise, or (iii) pursuant
to an employee stock option plan, stock bonus plan, stock purchase plan or other
management equity program approved by the
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Company's Board of Directors including the affirmative vote of at least one
Series B Director (collectively, "Exempt Issuances"), the Company shall:
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(A) give written notice setting forth in reasonable detail (1)
the designation and all of the terms and provisions of the securities
(whether Debt or Equity) proposed to be issued (the "Proposed
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Securities"), including, where applicable, the voting powers,
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preferences and relative participating, optional or other special
rights, and the qualification, limitations or restrictions thereof and
interest rate and maturity; (2) the price and other terms of the
proposed sale of such securities; (3) the amount of such securities
proposed to be issued; and (4) such other information as the Investors
may reasonably request in order to evaluate the proposed issuance; and
(B) offer to issue to the Series B Investors the Proposed
Securities.
(ii) The Series B Investors must exercise their purchase rights
hereunder within fifteen (15) business days after receipt of such notice from
the Company. The Series B Investors shall purchase the Proposed Securities as
they shall agree among themselves.
(iii) If the Series B Investors shall not have elected to
exercise their purchase rights hereunder prior to the expiration of the offering
period described above, the Company will be free to sell the Proposed Securities
during the ninety (90) days following such expiration on terms and conditions no
more favorable to the purchasers thereof than those offered to the Series B
Investors. Any Proposed Securities offered or sold by the Company after such 90-
day period must be reoffered to the Series B Investors pursuant to this Section
3(d).
(iv) The election by the Series B Investors not to exercise
their right of first refusal under this Section 3(d) in any one instance shall
not affect their right (other than in respect of a reduction in their percentage
holdings) as to any subsequent proposed issuance. Any sale of such Debt or
Equity by the Company without first giving the Series B Investors the rights
described in this Section 3(d) shall be void and of no force and effect.
(v) The rights granted to the Series B Investors under this
Section 3(d) may be freely assigned or otherwise transferred severally by the
Series B Investors to any Person acquiring at least twenty percent (20%) of the
shares of Series B Preferred Stock originally owned by the original holder of
the Series B Preferred Stock.
(e) Subscription Right.
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(i) Notwithstanding the foregoing, if the Company issues such
Proposed Securities pursuant to Section 3(d) in a transaction other than an
Exempt Issuance after the Series B Investors have failed to exercise their
purchase rights under such section, the Company shall nonetheless:
(A) offer to sell to each such Series B Investor, on the same
terms and subject to the same conditions as the sale of the Proposed
Securities to non-Series B Investors, a portion of the Proposed
Securities equal to a percentage determined by dividing (x) the number
of shares of Common Stock owned by such Series B
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Investor (calculated in the same manner as provided in Section 2(a)
above), by (y) the total number of shares of Common Stock then
outstanding, including for purposes of this calculation all shares of
Common Stock issuable upon conversion in full of any then outstanding
convertible or exercisable securities.
(ii) Each such Series B Investor must exercise its purchase
rights under this Section 3(e) within five (5) business days after receipt of
such notice from the Company of such subscription right. If all of the Proposed
Securities offered to such Series B Investors are not fully subscribed by such
Series B Investors, the remaining (unsubscribed) Proposed Securities will be
reoffered to the Series B Investors purchasing their full allotment upon the
terms set forth in this Section 3(e), until all such Proposed Securities are
fully subscribed for or until all such Series B Investors have subscribed for
all such Proposed Securities which they desire to purchase, except that such
Series B Investors must exercise their purchase rights within five days after
receipt of all such reoffers. To the extent that the Company offers two or more
securities in units, Series B Investors must purchase such units as a whole and
will not be given the opportunity to purchase only one of the securities making
up such unit.
(iii) Upon the expiration of the offering periods described
above, the Company will be free to sell such Proposed Securities that the Series
B Investors have not elected to purchase during the ninety (90) days following
such expiration on terms and conditions no more favorable to the purchasers
thereof than those offered to such holders. Any Proposed Securities offered or
sold by the Company after such 90-day period must be reoffered to the Investors
pursuant to this Section 3(e)
(iv) The election by a Series B Investor not to exercise its
subscription rights under this Section 3(e) in any one instance shall not affect
its right (other than in respect of a reduction in its percentage holdings) as
to any subsequent proposed issuance. Any sale of such securities by the Company
without first giving the Series B Investors the rights described in this Section
3(e) shall be void and of no force and effect.
(v) The rights granted to the Series B Investors under this
Section 3(e) may be freely assigned or otherwise transferred severally by the
Series B Investors to any Person acquiring at least twenty percent (20%) of the
shares of Series B Preferred Stock originally owned by the original holder of
the Series B Preferred Stock.
(f) The terms of this Section 3 shall terminate and be of no further
force and effect as of the date the Series B Investors and their Affiliates own
(on an as-converted and as-exercised basis) less than fifteen percent (15%) of
the Common Stock.
4. TERMINATION.
(a) The Agreement shall terminate on the earlier of (1) the date
which the Series B Investors and the Management/Founding Investors owning a
majority of the shares of Common Stock (excluding outstanding options) owned by
the Management/Founding Investors shall have agreed in writing to terminate this
Agreement or (2) ten (10) years from the date hereof.
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5. BLOCKING RIGHTS.
(a) In addition to any other rights provided by law, the Company
shall not, and shall not permit any subsidiary (a "Subsidiary") to, without
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first obtaining the affirmative vote or written consent of the Series B
Investors that own a majority of the outstanding shares of Series B Preferred
Stock:
(i) amend the Company's articles of incorporation or bylaws in
any manner.
(ii) merge, consolidate, or otherwise combine the Company with
or into any other entity, or effect any sale, lease, license, assignment (for
the benefit of creditors or otherwise), transfer or other conveyance or
disposition of any material portion of the assets of the Company or any of its
Subsidiaries, or any consolidation, merger or share exchange involving the
Company or any Subsidiary or any reclassification or other change of any stock,
or any recapitalization, or any dissolution, liquidation or winding up of the
Company;
(iii) acquire, by purchase, exchange, merger, consolidation or
other business combination, lease, assignment, or other transfer or conveyance,
or series of transfers or conveyances, of, all or substantially all of the
properties or assets of any other corporation, entity or business (as determined
in accordance with Rule 11-01(d) of Regulation S-X promulgated by the Securities
and Exchange Commission), or enter into a joint venture or partnership with any
other entity, in each case involving the payment of consideration or
contribution by the Company or any Subsidiary in an aggregate amount or value in
excess of $1,000,000;
(iv) purchase, redeem or otherwise acquire for value (or pay
into or set aside as a sinking fund for such purpose) any of the capital stock
of the Company; provided, that this provision shall not apply to the repurchase
of shares of capital stock from directors, officers, employees or consultants or
of advisers to the Company or any Subsidiary pursuant to agreements under which
the Company has the option to repurchase such shares upon the occurrence of
certain events, including the termination of employment by or service to the
Company or any Subsidiary;
(v) permit any Subsidiary to issue or sell, or obligate itself
to issue or sell, except to the Company or a wholly owned Subsidiary, any stock
of such Subsidiary, if after giving effect to such issuance or sale, the Company
or a wholly owned Subsidiary would own less than eighty percent (80%) of the
outstanding stock of such Subsidiary on a fully diluted basis;
(vi) authorize, issue or obligate itself to issue any stock or
similar security, including, without limitation, securities containing equity
features and securities containing profit participation features, or any
security convertible or exchangeable, with or without consideration, into or for
any stock or similar security, or any security carrying any warrant or right to
subscribe for or purchase any stock or similar security, or any such warrant or
right (an "Equity Security") except in exchange for (a) cash (if otherwise
permitted), (b) shares issuable upon exercise or conversion of the Series B
Preferred Stock, the Series C Preferred Stock or the warrants to purchase common
stock issued to Landmark Communications, Inc. or
-10-
certain of its affiliates or transferees (collectively, "Landmark") (the
"Warrants") in connection with the Company's issuance and sale of a Senior
Secured Note to Landmark in the aggregate principal amount of $5,000,000 dated
July 30, 2001 (as may be amended, the "Senior Secured Note"), or (c) shares of
Common Stock or options to purchase Common Stock pursuant to an option or
incentive plan approved by the Board of Directors, provided such approval
included the affirmative vote of one of the Series B Directors (an "Approved
Plan") provided the aggregate number of options, warrants or any other type of
rights or equity securities issued and outstanding under any such Approved Plan
shall not exceed 7,953,954 plus up to 1,800,000 options issued in connection
with the cancellation of options issued under the Company's 1997 Stock Option
Plan and reissuance under an Approved Plan as contemplated by the Purchase
Agreement;
(vii) authorize or issue, or obligate itself to issue (a) any
shares of Series B Preferred Stock or capital stock exchangeable or convertible
into Series B Preferred Stock to any person other than to a Series B Investor or
(b) Equity Securities ranking senior to or on a parity with the Series B
Preferred Stock as to dividend or redemption rights, liquidation preferences,
conversion rights, voting rights or otherwise, or reclassify any Equity Security
such that it ranks senior to or on a parity with the Series B Preferred Stock as
to dividend or redemption rights, liquidation preferences, conversion rights,
voting rights or otherwise;
(viii) increase or decrease (other than by the redemption or
conversion of the Series B Preferred Stock as provided herein) the total number
of authorized shares of Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock or issue any additional shares of any such series of
Preferred Stock or declare or pay any dividends or declare or make any other
distribution, direct or indirect (other than a dividend payable solely in shares
of Common Stock or paid in kind on the Series B Preferred Stock) on account of
any Equity Security or set apart any sum for any such purpose;
(ix) adopt any stock option, stock purchase or similar
incentive plan or arrangement other than an Approved Plan, amend any Approved
Plan or amend any stock option, restricted stock award, stock purchase right or
other incentive award or grant issued or granted pursuant to an Approved Plan;
(x) enter into or permit any Subsidiary to enter into any
agreement, indenture or other instrument which contains any provisions
restricting the Company's obligation to make prepayments or payments in kind
under or redemptions of the Senior Secured Note or pay dividends, make payments
in kind or effect redemptions of the Series B Preferred Stock;
(xi) enter into any transaction with an officer, director,
employee or holder of more than five percent (5%) of the Company's capital stock
(other than with the holders of the Series B Preferred Stock or Landmark or its
affiliates) or any affiliate thereof other than in the ordinary course of
business;
(xii) enter into any agreement which restricts the Company from
engaging in any business practice without the approval of the majority of the
Board of Directors, including the affirmative vote of the Series B Directors;
-11-
(xiii) create any Subsidiary;
(xiv) amend, alter or rescind any term of the Forbearance
Agreement between the Company and American National Bank dated as of June 15,
2001, as amended July 27, 2001, or the Forbearance Agreement between the Company
and Midwest Guaranty Bank dated as of July 27, 2001;
(xv) create, incur or become or remain liable with respect to
any indebtedness in an aggregate amount in excess of $500,000, or make (or
permit any Subsidiary to make) any loan or advance to, or own any stock or other
securities of, any corporation, partnership, or other entity other than a
Subsidiary which is at least eighty percent (80%) owned by the Company;
(xvi) make any loan or advance to any person, including,
without limitation, any employee or director of the Company or any Subsidiary,
except travel advances and similar expenditures in the ordinary course of
business or under the terms of an Approved Plan, or guarantee directly or
indirectly any indebtedness, except for trade accounts of any Subsidiary arising
in the ordinary course of business;
(xvii) amend, modify or waive compliance with the terms of any
employment agreements with employees of the Company, including without
limitation any non-competition, non-solicitation or non-disclosure clauses
contained therein or elsewhere;
(xviii) hire, terminate or replace the Chief Executive Officer,
the President/Chief Operating Officer, Chief Financial Officer, Chief Technology
Officer, or Executive Vice President--Business Development;
(xix) enter into any material agreements, joint venture
agreements, license agreements revenue sharing agreements, or other arrangements
which allocate revenues to a third party or obligate the Company to pay any kind
of fees which, individually, would exceed $250,000 per year, or $750,000 over
the term of such arrangement, or which when combined with all similar
arrangements would involve fees in excess of $2,000,000; or
(xx) enter into any material agreements, joint venture
agreements, license agreements revenue sharing agreements, alliances or other
arrangements which allocate revenues to a third party or obligate the Company to
perform any services which on an arms length basis calculated at fair market
value, individually would exceed $250,000 per year, or $750,000 over the term of
such arrangement, or which when combined with all similar arrangements would
involve in kind services on an arms length basis calculated at fair market value
in excess of $2,000,000.
6. CONVERSION COVENANT.
The Series B Investors hereby agree not to request the conversion of
their shares of Series B Preferred Stock until the earliest of (i) the first
anniversary of the date hereof, (ii) a Change of Control (as defined under the
Charter), and (iii) any breach under the Purchase Agreement or any default under
the Senior Secured Note or that certain Amended and Restated
-12-
Loan and Security Agreement between the Company and Landmark Communications,
Inc. dated as of July 30, 2001.
7. INTERPRETATION OF THIS AGREEMENT.
(a) Terms Defined. As used in this Agreement, the following terms
-------------
have the respective meaning set forth below:
Affiliate: shall mean any Person or entity, directly or indirectly
---------
controlling, controlled by or under common control with such Person or entity.
Debt shall mean any indenture, mortgage, deed of trust, credit
----
agreement, loan, note or any other evidence of indebtedness.
Equity shall mean a grant by the Company at any time and in any manner
------
of Common Stock or any rights to subscribe for or to purchase, or any options
for the purchase of, Common Stock or any stock or other securities convertible
into or exchangeable for Common Stock (whether directly or by assumption in a
merger or otherwise).
Exchange Act: shall mean the Securities Exchange Act of 1934, as
------------
amended, and the rules and regulations promulgated thereunder.
Permitted Transferee: shall mean, in the case of any Investor other
--------------------
than a Management/Founding Investor, any Affiliate of such Investor and, in the
case of Management/Founding Investors, members of such Management/Founding
Investor's family, heirs, executors or legal representatives trusts or any other
person formed or used for the benefit of such Management/Founding Investor's
family for purposes of estate planning; provided, in each instance, that such
--------
transferee agrees to be bound by the provisions of this Agreement as if such
transferee were an original signatory hereto.
Person: shall mean an individual, partnership, joint-stock company,
------
corporation, limited liability company, trust or unincorporated organization,
and a government or agency or political subdivision thereof.
Securities: shall have the meaning set forth in Section 2(1) of the
----------
Securities Act.
Securities Act: shall mean the Securities Act of 1933, as amended,
--------------
and the rules and regulations promulgated thereunder.
Transfer: shall mean any sale, assignment, pledge, hypothecation, or
--------
other disposition or encumbrance.
(b) Accounting Principles. Where the character or amount of any
---------------------
asset or amount of any asset or liability or item of income or expense is
required to be determined or any consolidation or other accounting computation
is required to be made for the purposes of this Agreement, this shall be done in
accordance with U.S. generally accepted accounting principles at the time in
effect, to the extent applicable, except where such principles are inconsistent
with the requirements of this Agreement.
-13-
(c) Directly or Indirectly. Where any provision in this Agreement
----------------------
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether such action is taken
directly or indirectly by such Person.
(d) Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed entirely within such State.
(e) Section Headings. The headings of the sections and subsections
----------------
of this Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof.
8. MISCELLANEOUS.
(a) Notices.
-------
(i) All communications under this Agreement shall be in writing
and shall be delivered by hand or facsimile or mailed by overnight courier or by
registered or certified mail, postage prepaid:
(A) if to any of the Investors, at the address or facsimile
number of such Investor shown on Schedule I, Schedule II or Schedule
III, or at such other address as the Investor may have furnished the
Company and the other Investors in writing, with a copy to Xxxxxxx
Xxxx & Xxxxxxxxx, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, XX 00000 (facsimile:
(000) 000-0000), Attention: Xxxxxxx X. Xxxxx, Xx., and a copy to
Xxxxxxx & Xxxxxx, P.C., 0000 Xxxx xx Xxxxxxx Xxxxxx, Xxxxxxx, XX 00000
(facsimile: (000) 000-0000), Attention: Xxxxxx X. Xxxxxxx; and
(B) if to the Company, at 000 X. Xxxxxxxx Xxxxxx, 00xx Xxxxx,
Xxxxxxx, XX 00000 (facsimile: (000) 000-0000), Attention: Xxxxxx
Xxxxxx, or at such other address as it may have furnished in writing
to each of the Investors, with a copy to Jaffe, Raitt, Heuer & Xxxxx,
P.C., Xxx Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, XX 00000 (facsimile:
(000) 000-0000), Attention: Xxxxx Sugar.
(ii) Any notice so addressed shall be deemed to be given: if
delivered by hand or facsimile, on the date of such delivery; if mailed by
courier, on the first business day following the date of such mailing; and if
mailed by registered or certified mail, on the third business day after the date
of such mailing.
(b) Reproduction of Documents. This Agreement and all documents
-------------------------
relating thereto, including, without limitation, (i) consents, waivers and
modifications which may hereafter be executed, (ii) documents received by a
party pursuant hereto, and (iii) financial statements, certificates and other
information previously or hereafter furnished to a party, may be reproduced by
such party by photographic, photostatic, microfilm, microcard, miniature
photographic or other similar process and such party may destroy any original
document so reproduced. All parties hereto agree and stipulate that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by each Investor in the
-14-
regular course of business) and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
(c) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and assigns of each of the
parties.
(d) Entire Agreement; Amendment and Waiver. This Agreement and the
--------------------------------------
Purchase Agreement constitute the entire understanding of the parties hereto
relating to the subject matter hereof and supersede all prior understandings
among such parties. This Agreement may be amended, and the observance of any
term of this Agreement may be waived, with (and only with) the written consent
of each Series B Investor and the Management/Founding Investors and Significant
Investors owning a majority of the shares of Common Stock (excluding outstanding
options) owned by the Management/Founding Investors and Significant Investors.
This Agreement shall not become effective and the terms and provisions herein
shall be of no force and effect unless and until all parties hereto have
executed and delivered the Agreement.
(e) Severability. In the event that any part or parts of this
------------
Agreement shall be held illegal or unenforceable by any court or administrative
body of competent jurisdiction, such determination shall not affect the
remaining provisions of this Agreement which shall remain in full force and
effect.
(f) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
(g) Injunctive Relief. The Company and the Investors hereby declare
-----------------
that it is impossible to measure in money the damages which will accrue to the
parties hereto by reason of the failure of any Investor or the Company to
perform any of its obligations set forth in this Agreement. Therefore, in
addition to and not in limitation of any other rights and remedies, the Company
and each of the Investors shall have the right to specific performance of such
obligations (without the showing of special, imminent or irreparable damages and
without any obligation to post bond or other security or Surety), and if any
party hereto shall institute any action or proceeding to enforce the provisions
hereof, each of the Company and the Investors hereby waives the claim or defense
that the party instituting such action or proceeding has an adequate remedy at
law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK-
SIGNATURE PAGES FOLLOW]
-15-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
COOLSAVINGS, INC.
By: ________________________________
Name:
Title:
LANDMARK VENTURES VII, LLC
By: ________________________________
Name:
Title:
XXXX X. XXXXX
____________________________________
XXXXXXX X. XXXXX
____________________________________
XXXXXX X. XXXX, M.D.
____________________________________
XXXXXX X. XXXXXX
____________________________________
[Shareholders Agreement]
XXXXXX X. XXXXXX REVOCABLE LIVING TRUST DATED
3/3/98
By:_______________________________________
Name:
Title:
XXXXXX X. XXXXXX L.L.C.
By:_______________________________________
Name:
Title:
XXXXXXX XXXX
___________________________________________
MOOG INVESTMENT PARTNERS LP
By:_______________________________________
Name:
Title:
XXXXXX X. XXXXXXXXXX
__________________________________________
-17-
HLBL FAMILY PARTNERS LP
By:_______________________________________
Name:
Title:
XXXX AND XXXXX XXXXX FOUNDATION
By:_______________________________________
Name:
Title:
XXXXXXX XXXXX LIMITED PARTNERSHIP
By:_______________________________________
Name:
Title:
XXXXXXX X. XXXXX REVOCABLE LIVING
TRUST DATED 3/21/90
By:_______________________________________
Name:
Title:
XXXXXXX XXXXX -- CHARITABLE
REMAINDER TRUST
By:_______________________________________
Name:
Title:
-18-
SCHEDULE 1
Series B Investors
------------------
Name Address
---- -------
Landmark Ventures VII, LLC 000 X. Xxxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxx X. Xxxxxxxx, III
Executive Vice President
and General Counsel
________________________________________________________________________________
SCHEDULE II
Series C Investors
------------------
Name Address
---- -------
Xxxx X. Xxxxx M.D. Sass Investor Services, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Xxxxxxx X. Xxxxx 416 Shooting Star
X.X. Xxx 0000
Xxxx, Xxxxxxxx 00000
Xxxxxx X. Xxxx, M.D. 00000 X. Xxxxxx Xxxx Xxxx
Xxxxxxx Xxxxxxx, XX 00000
________________________________________________________________________________
SCHEDULE III
Management/Founding Investors
-----------------------------
Name Address
---- -------
Xxxxxx X. Xxxxxx 000 X. Xxxxxxxx Xxx., 00/xx/ Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Xxxxxx X. Xxxxxx Revocable 000 X. Xxxxxxxx Xxx., 19/th/ Floor
Living Trust dated 3/3/98; Xxxxxxx, Xxxxxxxx 00000
Xxxxxx X. Xxxxxx as Trustee
Xxxxxx X. Xxxxxx L.L.C. 000 X. Xxxxxxxx Xxx., 00/xx/ Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Xxxxxxx Xxxx 000 X. Xxxxxxxx Xxx., 00/xx/ Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Moog Investment Partners LP 000 X. Xxxxxxxx Xxx., 00/xx/ Xxxxx
Xxxxxxx, Xxxxxxxx 00000
________________________________________________________________________________
SCHEDULE IV
Significant Investors
---------------------
Name and Address
----------------
Xxxxxx X. Xxxxxxxxxx
HLBL Family Partners LP M.D. Sass Investor Services, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Xxxx and Xxxxx Xxxxx Foundation M.D. Sass Investor Services, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Xxxxxxx Xxxxx Limited Partnership] 416 Shooting Star
X.X. Xxx 0000
Xxxx, Xxxxxxxx 00000
Xxxxxxx X. Xxxxx Revocable Living 416 Shooting Star
Trust dated 3/21/90 X.X. Xxx 0000
Xxxx, Xxxxxxxx 00000
Xxxxxxx Xxxxx -- Charitable Remainder 416 Shooting Star
Trust X.X. Xxx 0000
Xxxx, Xxxxxxxx 00000
________________________________________________________________________________
