EXHIBIT B FORM OF INVESTORS’ RIGHTS AGREEMENT
Exhibit 4.2
EXHIBIT B
FORM OF INVESTORS’ RIGHTS AGREEMENT
This Investors’ Rights Agreement (this
“Agreement”) is entered into by and among SharpSpring,
Inc., a Delaware corporation (the “Company”), SHSP
Holdings, LLC, a Delaware limited liability company (“SHSP Holdings”),
Evercel Holdings LLC, a Delaware limited liability company and an
affiliate of SHSP Holdings (“Evercel Holdings”), and
the stockholders of the Company signatory hereto (the
(“Management Stockholders”).
BACKGROUND
A.
Concurrently with
the execution of this Agreement, the Company and SHSP Holdings are
entering into a Convertible Note Purchase Agreement (the
“Note Purchase Agreement”) pursuant to which the
Company is issuing to SHSP Holdings a Convertible Promissory Note
in the principal amount of $8,000,000 (the “Note”)
which is convertible on the terms and conditions set forth therein
into shares of the Company’s common stock par value $0.001
per share (“Common Stock”).
B. The
Management Stockholders are members of the senior management team
of the Company and own certain shares of Common Stock.
C.
The
execution of this Agreement by the parties hereto is material to
SHSP Holdings’s willingness to enter into the Note Purchase
Agreement and to acquire the Note.
D. In
consideration of the benefits that will be derived by the parties
hereto from the issuance of the Note to SHSP Holdings, the parties
hereto desire to enter into this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises and covenants hereinafter set forth and for other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as
follows:
1. Registration
Rights.
1.1 Definitions.
As used in this Agreement, the following terms shall have the
following meanings:
“1933
Act” means the Securities Act of 1933, as
amended.
“1934
Act” means the Securities Exchange Act of 1934, as
amended.
“Investors” means, collectively, (i) SHSP
Holdings, (ii) the members of SHSP Holdings, (iii) Evercel
Holdings, and (iv) the members of Evercel Holdings, and
“Investor” means any of the Investors who may hold
shares of Common Stock at any time.
1
“Notes”
means the Note and any PIK Notes (as such term is defined in the
Note), that may be outstanding at any time.
“Person”
means a corporation, a limited liability company, an association, a
partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental
agency.
“Register,”
“Registered,” and “Registration” refer to
the registration effected by preparing and filing one (1) or more
Registration Statements in compliance with the 1933 Act and
pursuant to Rule 415 under the 1933 Act or any successor rule
providing for offering securities on a continuous basis
(“Rule 415”), and the declaration or ordering of
effectiveness of such Registration Statement(s) by the
SEC.
“Registrable
Securities” means (i) the shares of Common Stock issued or
issuable upon conversion of the Notes; (ii) after the first to
occur of (A) the Company's failure to obtain Stockholder Approval
(as defined in the Note) in accordance with Section 2.12 of the Note within
two years of the date of the Note, or (B) the conversion of a
majority of the original aggregate principal amount of the Notes,
any shares of Common Stock held by any Investor; and (iii) any
shares of capital stock issued or issuable with respect to the
shares of Common Stock described in clauses (i) and (ii), if any,
as a result of any stock split, stock dividend, recapitalization,
exchange or similar event or otherwise, which have not been (x)
included in a Registration Statement that has been declared
effective by the SEC, or (y) sold under circumstances meeting all
of the applicable conditions of Rule 144 (or any similar provision
then in force) under the 1933 Act.
“Registration
Statement” means the registration statement or statements of
the Company filed under the 1933 Act covering the Registrable
Securities.
“SEC”
means the United States Securities and Exchange
Commission.
1.2 Requests
for Registration.
(a) Investors
may at any time request registration under the Securities Act of
any portion of the Registrable Securities that is equal to or
greater than 25% of the aggregate number of Registrable Securities
issuable upon conversion of the Note (i) on Form S-1 or any similar
long-form registration statement (each, a “Long Form
Registration”) or (ii) on Form S-3 or any similar short-form
registration statement, if available. Investors may also request
that the registration be made pursuant to Rule 415. The Company
shall use its best efforts to cause any Registration Statement to
be declared effective under the 1933 Act as soon as practicable
after filing. The Company shall not be required to effect a
Long-Form Registration under this Section 1.2(a) more than
two times; provided, that a Registration Statement shall not count
as a Long-Form Registration requested under this Section 1.2(a) unless and until
it has become effective and Investors are able to register and sell
at least 85% of the Registrable Securities requested to be included
in such Registration.
(b) The
Company shall not include in any Registration requested by any
Investor pursuant to Section 1.2(a) any securities
that are not Registrable Securities without the prior written
consent of such Investor.
2
(c) The
Company shall not be obligated to effect any Registration within
ninety (90) days after the effective date of a previous
Registration in which Registrable Securities were included. The
Company may postpone, for up to ninety (90) days from the date of
any request for any Registration, the filing or the effectiveness
of a Registration Statement for such Registration or suspend the
use of a prospectus that is part of a shelf Registration for up to
ninety (90) days if the Board reasonably determines that such
postponement or suspension is in the best interests of the
Company.
(d) If,
in connection with a Registration requested by Investors pursuant
to Section 1.2(a),
Investors wish to engage in an underwritten offering with respect
to the Registrable Securities, Investors shall have the right to
select the investment banker(s) and manager(s) to administer such
underwritten offering, subject to the Company’s approval,
which shall not be unreasonably withheld, conditioned or
delayed.
(e) Whenever
the Company proposes to register any of its securities under the
1933 Act (other than (i) in connection with registrations on Form
S-4 or Form S-8 promulgated by the SEC or any successor or similar
forms or (ii) a registration on any form that does not include
substantially the same information as would be required to be
included in a registration statement covering the sale of
Registrable Securities), and the registration form to be used may
be used for the registration of Registrable Securities (a
“Piggyback Registration”), the Company shall give
prompt written notice and shall, subject to the limitations in
Section 1.2(f),
include in such Piggyback Registration (and in all related
registrations or qualifications under blue sky laws and in any
related underwriting) all Registrable Securities which Investors
request be included in such Piggyback Registration.
(f) If
a Piggyback Registration is an underwritten primary Registration on
behalf of the Company, and the managing underwriters advise the
Company in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number
which can be sold in such offering without adversely affecting the
marketability, proposed offering price, timing or method of
distribution of the offering, the Company shall include in such
registration (i) first, the securities the Company proposes to
sell, (ii) second, the Registrable Securities requested to be
included in such registration which, in the opinion of the
underwriters, can be sold without any such adverse effect, and
(iii) third, other securities requested to be included in such
registration which, in the opinion of the underwriters, can be sold
without any such adverse effect.
1.3 Related
Obligations. At such time as the Company is obligated to
prepare and file the Registration Statement with the SEC pursuant
to Section 1.2, the
Company shall have the following obligations with respect to the
Registration Statement:
(a) The
Company shall use all commercially reasonable efforts to cause such
Registration Statement to remain effective until the date on which
Investors shall have sold all the Registrable Securities (the
“Registration Period”).
3
(b) The
Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they
were made, not misleading. The Company shall use all commercially
reasonable efforts to respond to all SEC comments within ten (10)
business days from receipt of such comments by the
Company.
(c) The
Company shall use all commercially reasonable efforts to cause such
Registration Statement to become effective no later than five (5)
business days after notice from the SEC that the Registration
Statement may be declared effective. Investors agree to provide in
writing all information which it is required by law to provide to
the Company, including the intended method of disposition of the
Registrable Securities, and the Company’s obligations set
forth above shall be conditioned on the receipt of such
information.
(d) The
Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with
such Registration Statement, which prospectus is to be filed
pursuant to Rule 424 promulgated under the 1933 Act, as may be
necessary to keep such Registration Statement effective during the
Registration Period, and, during such period, comply with the
provisions of the 1933 Act with respect to the disposition of all
Registrable Securities covered by such Registration Statement until
such time as all of such Registrable Securities shall have been
disposed of in accordance with the intended methods of disposition
by Investors as set forth in such Registration
Statement.
(e) The
Company shall make available to Investors and their legal counsel
without charge (i) if requested by Investors, promptly after the
same is prepared and filed with the SEC at least one (1) copy of
such Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated
therein by reference and all exhibits, the prospectus included in
such Registration Statement (including each preliminary prospectus)
and, with regards to such Registration Statement(s), any
correspondence by or on behalf of the Company to the SEC or the
staff of the SEC and any correspondence from the SEC or the staff
of the SEC to the Company or its representatives; and (ii) upon the
effectiveness of any Registration Statement, the Company shall make
available copies of the prospectus, via XXXXX, included in such
Registration Statement and all amendments and supplements
thereto.
(f) The
Company shall use commercially reasonable efforts to (i) register
and qualify the Registrable Securities covered by the Registration
Statement under such other securities or “blue sky”
laws of such states in the United States as Investors reasonably
request; (ii) prepare and file in those jurisdictions, such
amendments (including post-effective amendments) and supplements to
such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period;
(iii) take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the
Registration Period; and (iv) take all other actions reasonably
necessary or advisable to qualify the Registrable Securities for
sale in such jurisdictions; provided, however, that the Company
shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it
would not otherwise be required to qualify but for its obligations
under this Agreement, or (y) subject itself to general taxation in
any such jurisdiction. The Company shall promptly notify Investors
of the receipt by the Company of any notification with respect to
the suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or “blue
sky” laws of any jurisdiction in the United States or its
receipt of actual notice of the initiation or threatening of any
proceeding for such purpose.
4
(g) As
promptly as practicable after becoming aware of such event, the
Company shall notify Investors in writing of the happening of any
event as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue
statement of a material fact or omission to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading (“Registration Default”) and use all
diligent efforts to promptly prepare a supplement or amendment to
such Registration Statement and take any other necessary steps to
cure the Registration Default (which, if such Registration
Statement is on Form S-3, may consist of a document to be filed by
the Company with the SEC pursuant to Section 13(a), 13(c), 14 or
15(d) of the 1934 Act (as defined below) and to be incorporated by
reference in the prospectus) to correct such untrue statement or
omission, and make available copies of such supplement or amendment
to Investors.
(h) The
Company shall also promptly notify Investors (i) when a prospectus
or any prospectus supplement or post-effective amendment has been
filed, and when the Registration Statement or any post-effective
amendment has become effective (Investors’ access to such
documents via the SEC’s XXXXX website shall constitute
sufficient notice hereunder); (ii) of any request by the SEC for
amendments or supplements to the Registration Statement or related
prospectus or related information, (iii) of the Company’s
reasonable determination that a post-effective amendment to the
Registration Statement would be appropriate, (iv) in the event the
Registration Statement is no longer effective, or (v) if the
Registration Statement is stale as a result of the Company’s
failure to timely file its financials or otherwise.
(i) The
Company shall use all commercially reasonable efforts to prevent
the issuance of any stop order or other suspension of effectiveness
of the Registration Statement, or the suspension of the
qualification of any of the Registrable Securities for sale in any
jurisdiction and, if such an order or suspension is issued, to
obtain the withdrawal of such order or suspension at the earliest
possible moment and to notify any Investor holding Registrable
Securities being sold of the issuance of such order and the
resolution thereof or its receipt of actual notice of the
initiation or threat of any proceeding concerning the effectiveness
of the Registration Statement.
(j) The
Company shall permit Investors and one (1) legal counsel,
designated by Investors, to review and comment upon the
Registration Statement and all amendments and supplements thereto
at least one (1) calendar day prior to their filing with the SEC.
The Company shall consider in good faith any comments received from
Investors and such designated legal counsel in connection with such
review, but shall be under no obligation to make revisions in
response thereto.
5
(k) The
Company shall hold in confidence and not make any disclosure of
information concerning Investors unless (i) in the opinion of the
Company or upon the advice of its legal counsel, disclosure of such
information is necessary to comply with federal or state securities
laws, (ii) in the opinion of the Company or upon the advice of its
legal counsel, the disclosure of such information is necessary to
avoid or correct a misstatement or omission in any Registration
Statement, (iii) the release of such information is ordered
pursuant to a subpoena or other final, non-appealable order from a
court or governmental body of competent jurisdiction, (iv) such
information has been made generally available to the public other
than by disclosure in violation of this Agreement or any other
agreement, or (v) Investors has consented to such disclosure. The
Company agrees that it shall, upon learning that disclosure of such
information concerning any Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means,
give prompt written notice to such Investor and allow such
Investor, at such Investor’s expense, to undertake
appropriate action to prevent disclosure of, or to obtain a
protective order covering such information.
(l) The
Company shall use all commercially reasonable efforts to maintain
designation and quotation of all the Registrable Securities covered
by any Registration Statement on all markets on which the Common
Stock is traded and shall pay all fees and expenses in connection
therewith.
(m) The
Company shall provide a transfer agent for all the Registrable
Securities not later than the effective date of the first
Registration Statement filed pursuant hereto.
(n) If
requested by Investors, the Company shall (i) as soon as reasonably
practical incorporate in a prospectus supplement or post-effective
amendment such information as Investors reasonably determine should
be included therein relating to the sale and distribution of
Registrable Securities, including, without limitation, information
with respect to the offering of the Registrable Securities to be
sold in such offering; and (ii) make all required filings of such
prospectus supplement or post-effective amendment as soon as
reasonably possible after being notified of the matters to be
incorporated in such prospectus supplement or post-effective
amendment.
(o) The
Company shall otherwise use all commercially reasonable efforts to
comply with all applicable rules and regulations of the SEC in
connection with any registration hereunder.
(p) Within
one (1) business day after the Registration Statement which
includes Registrable Securities is declared effective by the SEC,
the Company shall deliver to the transfer agent for such
Registrable Securities, with a copy to Investor, a written
notification that such Registration Statement has been declared
effective by the SEC.
1.4 Obligations
of Investors.
(a) At
least five (5) calendar days prior to the first anticipated filing
date of the Registration Statement the Company shall notify each
Investor in writing of the information the Company requires from
such Investor for the Registration Statement. It shall be a
condition precedent to the obligations of the Company to complete
the registration pursuant to this Agreement with respect to the
Registrable Securities and Investors agree to furnish to the
Company that information regarding itself, the Registrable
Securities and the intended method of disposition of the
Registrable Securities as shall reasonably be required to effect
the registration of the resale of such Registrable
Securities,
and Investors shall execute such documents in connection with such
registration as the Company may reasonably request. Investors
covenant and agree that, in connection with any sale of Registrable
Securities by it pursuant to the Registration Statement, they shall
comply with the “Plan of Distribution” section of the
then current prospectus relating to such Registration
Statement.
6
(b) Investors
shall cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of any
Registration Statement hereunder.
(c) Upon
receipt of written notice from the Company of the happening of any
event of the kind described in Section 1.2(g), Investors will immediately
discontinue disposition of Registrable Securities pursuant to any
Registration Statement(s) covering the resale of such Registrable
Securities until Investors’ receipt of the copies of the
supplemented or amended prospectus contemplated
hereby.
1.5 Expenses
of Registration. All reasonable expenses, other than
underwriting discounts and commissions, incurred by the Company in
connection with registrations including comments, filings or
qualifications pursuant to Section 1.2 and Section 1.3, including, without
limitation, all registration, listing and qualifications fees,
printing and accounting fees, and fees and disbursements of counsel
for the Company,
shall be paid by the Company.
1.6 Indemnification.
In the event any Registrable Securities are included in a
Registration Statement pursuant to this Agreement:
(a) To
the fullest extent permitted by law, the Company, under this
Agreement, will, and hereby does, indemnify, hold harmless and
defend Investors, the directors, officers, partners, employees,
counsel, agents, representatives of, and each person, if any, who
controls Investors within the meaning of the 1933 Act or the 1934
Act (each, an “Indemnified Person”), against any
losses, claims, damages, liabilities, judgments, fines, penalties,
charges, costs, attorneys’ fees, amounts paid in settlement
or expenses, joint or several (collectively, “Claims”),
incurred in investigating, preparing or defending any action,
claim, suit, inquiry, proceeding, investigation or appeal taken
from the foregoing by or before any court or governmental,
administrative or other regulatory agency, body or the SEC, whether
pending or threatened, whether or not an indemnified party is or
may be a party thereto (“Indemnified Damages”), to
which any of them may become subject insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon: (i) any untrue statement
or alleged untrue statement of a material fact in the Registration
Statement or any post-effective amendment thereto or in any filing
made in connection with the qualification of the offering under the
securities or other “blue sky” laws of any jurisdiction
in which Investors have requested in writing that the Company
register or qualify the Shares (“Blue Sky Filing”), or
the omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein,
in light of the circumstances under which the statements therein
were made, not misleading, (ii) any untrue statement or alleged
untrue statement of a material fact contained in the final
prospectus for the offer of the Registrable Securities (as amended
or supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which
the statements therein were made, not misleading, or (iii) any
violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without limitation, any state
securities law, or any rule or regulation thereunder relating to
the offer or sale of the Registrable Securities pursuant to the
Registration Statement (the matters in the foregoing clauses (i)
through (iii) being, collectively, “Violations”).
Subject to the restrictions set forth in Section 1.6(e), the
Company shall reimburse each Indemnified Person, promptly as such
expenses are incurred and are due and payable, for any reasonable
and documented legal fees or other reasonable out-of-pocket
expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this
Section 1.6(a): (i)
shall not apply to a Claim arising out of or based upon a Violation
which is due to the inclusion in the Registration Statement of the
information furnished to the Company by any Indemnified Person
expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement
thereto; (ii) shall not be available to the extent such Claim is
based on (A) a failure of any Investor to deliver or to cause to be
delivered the prospectus made available by the Company; (B) the
Indemnified Person’s use of an incorrect prospectus despite
being promptly advised in advance by the Company in writing not to
use such incorrect prospectus; (C) the manner of sale of the
Registrable Securities by Investors or of Investors’ failure
to register as a dealer under applicable securities laws; (D) any
omission of any Investor to notify the Company of any material fact
that should be stated in the Registration Statement or prospectus
relating to such Investor or the manner of sale; and (E) any
amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld; and (iii) shall not be
available to the extent the Claim arises out of the gross
negligence or willful misconduct of the Indemnified Person. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and
shall survive the resale of the Registrable Securities by any
Investor pursuant to the Registration Statement.
7
(b) In
connection with any Registration Statement in which any Investor is
participating, such Investor shall indemnify, hold harmless and
defend, to the same extent and in the same manner as is set forth
in Section 1.6(a),
the Company, each of its directors, officers, employees, counsel,
agents and representatives and each Person, if any, who controls
the Company within the meaning of the 1933 Act or the 1934 Act
(each, an “Indemnified Party”), against any Claim or
Indemnified Damages to which any of them may become subject, under
the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or
Indemnified Damages arise out of or are based upon any Violation,
in each case to the extent, and only to the extent, that such
Violation is due to (i) the inclusion in the Registration Statement
of the written information furnished to the Company by such
Investor expressly for use in connection with such Registration
Statement; (ii) a failure of any Investor to deliver or to cause to
be delivered the prospectus made available by the Company or such
Investor’s use of an incorrect prospectus despite being
timely advised by the Company in writing not to use such incorrect
prospectus; (iii) such Investor’s gross negligence or willful
misconduct; or (iv) any omission of such Investor to notify the
Company of any material fact that should be stated in the
Registration Statement or prospectus relating to such Investor or
the manner of sale; and, subject to Section 1.6(e), such Investor
will reimburse any documented legal or other out-of-pocket expenses
reasonably incurred by them in connection with investigating or
defending any such Claim; provided, however, that the indemnity
agreement contained in this Section 1.6(b) and the
agreement with respect to contribution contained herein shall not
apply to amounts paid in settlement of any Claim if such settlement
is effected without the prior written consent of Investor, which
consent shall not be unreasonably withheld. Such indemnity shall
remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive
the resale of the Registrable Securities by such Investor pursuant
to the Registration Statement.
(c)
Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 1.6 of notice of the
commencement of any action or proceeding (including any
governmental action or proceeding) involving a Claim, such
Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under
this Section 1.6,
deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the
right to participate in, and, to the extent the indemnifying party
so desires, jointly with any other indemnifying party similarly
noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified
Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party, as the
case may be, shall have the right to retain its own counsel with
the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the Indemnified
Person or Indemnified Party, the representation by counsel of the
Indemnified Person or Indemnified Party and the indemnifying party
would be inappropriate due to actual or potential differing
interests between such Indemnified Person or Indemnified Party and
any other party represented by such counsel in such proceeding. The
indemnifying party shall pay for only one (1) separate legal
counsel for the Indemnified Persons or the Indemnified Parties, as
applicable, and such counsel shall be selected by Investors, if
Investors are entitled to indemnification hereunder, or the
Company, if the Company is entitled to indemnification hereunder,
as applicable. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or Claim by the
indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the Indemnified Party or
Indemnified Person which relates to such action or Claim. The
indemnifying party shall keep the Indemnified Party or Indemnified
Person fully apprised at all times as to the status of the defense
or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any
action, claim or proceeding affected without its written consent;
provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No
indemnifying party shall, without the consent of the Indemnified
Party or Indemnified Person, consent to entry of any judgment or
enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant
or plaintiff to such Indemnified Party or Indemnified Person of a
release from all liability in respect to such Claim. Following
indemnification as provided for hereunder, the indemnifying party
shall be subrogated to all rights of the Indemnified Party or
Indemnified Person with respect to all third parties, firms or
corporations relating to the matter for which indemnification has
been made. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of
any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this
Section 1.6, except
to the extent that the indemnifying party is prejudiced by such
failure in its ability to defend such action.
8
(d) The
indemnity agreements contained herein shall be in addition to (i)
any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and
(ii) any liabilities the indemnifying party may be subject to
pursuant to the law.
(e) To
the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make
the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 1.6 to the fullest extent
permitted by law; provided, however, that: (i) no contribution
shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth
in Section
1.6; (ii) no seller
of Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any seller of Registrable Securities
who was not guilty of fraudulent misrepresentation; and (iii)
contribution by any seller of Registrable Securities shall be
limited in amount to the net amount of proceeds received by such
seller from the sale of such Registrable Securities.
1.7 Reports
Under the 0000 Xxx.
(a) With
a view to making available to Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit Investors to sell
securities of the Company to the public without registration
(“Rule 144”), provided that any Investor holds any
Registrable Securities which are eligible for resale under Rule 144
and such information is necessary in order for such Investor to
sell such Securities pursuant to Rule 144, the Company agrees
to:
(i)
make and keep public information available, as those terms are
understood and defined in Rule 144;
(ii)
file with the SEC in a timely manner all reports and
other documents required of the Company under the 1933 Act and the
1934 Act so long as the Company remains subject to such
requirements and the filing of such reports and other documents is
required for the applicable provisions of Rule 144;
and
(iii)
furnish to such Investor, promptly upon request, (A) a written
statement by the Company that it has complied with the reporting
requirements of Rule 144, the 1933 Act and the 1934 Act applicable
to the Company, (B) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed
by the Company, and (C) such other information as may be reasonably
requested to permit such Investor to sell such securities pursuant
to Rule 144 without registration.
1.8 No
Assignment of Registration Rights. This Agreement and the
rights, agreements or obligations hereunder may not be assigned, by
operation of law, merger or otherwise, and without the prior
written consent of the other party hereto, and any purported
assignment by a party without prior written consent of the other
party will be null and void and not binding on such other party.
Subject to the preceding sentence, all of the terms, agreements,
covenants, representations, warranties and conditions of this
Agreement are binding upon, and inure to the benefit of and are
enforceable by, the parties and their respective successors and
assigns.
9
2. Right
to Nominate a Director. For so long as SHSP Holdings
continues to hold any Notes, SHSP Holdings shall have the right to
designate one person for election to the Company’s Board of
Directors (the “Board”) and the Company shall use its
reasonable best efforts to cause such person (the “Investor
Nominee”) to be elected to the Board at each annual meeting
of the stockholders of the Company, commencing with the first
annual meeting of stockholders to be held after the date of such
designation. The Investor Nominee shall be subject to the
Company’s ordinary background check procedures prior to his
or her initial election to the Board. The Investor Nominee shall be
entitled to the same compensation, indemnification rights and other
benefits that are provided to any other non-management director. If
at any time the Notes are held by more than one person or legal
entity, the holder(s) of a majority in aggregate principal amount
of the Notes shall have the right to nominate a director pursuant
to this Section 2.
If the Board at any time reasonably determines that the Investor
Nominee is not positively contributing to the achievement of the
Company’s goals and objectives and the Board requests the
resignation of the Investor Nominee, SHSP Holdings shall cause the
Investor Nominee to resign from the Board and SHSP Holdings shall
designate a new person as the Investor Nominee to fill the vacancy
created by such resignation and to stand for election in future
elections of directors, subject to the same conditions set forth in
this Section 2 with
respect to the initial Investor Nominee.
3. Restrictions
on Sales of Stock by the Management Stockholders. For so
long as SHSP Holdings continues to hold any Notes, and for so long
as each such individual remains employed by the Company, (i)
Xxxxxxx Xxxxxxx shall not, without the prior written consent of
Investor, sell shares of Common Stock with an aggregate gross sale
price of (A) more than $250,000 prior to the eighteen- (18-) month
anniversary of the date of this Agreement, or (B) more than
$1,000,000 in total and (ii) Xxxxxx Xxxxxxx shall not, without the
prior written consent of Investor, sell shares of Common Stock with
an aggregate gross sale price of (A) more than $250,000 prior to
the eighteen- (18-) month anniversary of the date of this Agreement
or (B) more than $500,000 in total.
4. Limitations
on Additional Senior Debt. So long as any Notes are outstanding,
except as SHSP Holdings may otherwise agree in writing, the Company
shall at no time (i) have outstanding senior indebtedness in an
aggregate amount exceeding 18.6% of the Company’s trailing
twelve-month revenue, (ii) incur any indebtedness that is both
junior in right of payment to the obligations of the Company to its
senior secured lender and senior to the Company’s obligations
under the Notes or (iii) enter into any agreement with any lender
or other third party that would (A) prohibit the Company from
issuing PIK Notes (as such term is defined in the Note) at any time
or under any circumstances or (B) prohibit the conversion of the
Notes in accordance with their terms at any time or under any
circumstances.
5. Miscellaneous.
5.1 Governing
Law. This Agreement shall be governed by and construed in
accordance with laws of the State of Delaware, without giving
effect to any choice of law or conflict of laws rules or
provisions.
5.2 Amendment
and Waiver. Any provision of this Agreement may be amended
and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), and
this Agreement may be terminated, only with the written consent of
all of the parties hereto.
10
5.3 Entire
Agreement. This Agreement, the Note Purchase Agreement and
the Note constitute the entire agreement among the parties relative
to the specific subject matter hereof and thereof and supersede any
and all previous agreements among the parties or any of them
relative to the specific subject matter hereof and
thereof.
5.4 Notices.
All notice or other communication required or permitted to be given
under this Agreement shall be in writing and shall be given by (i)
personal delivery, which notice shall be effective when actually
delivered, (ii) private overnight courier, which notice shall be
effective on the day of delivery, (iii) by facsimile or electronic
mail, which notice shall be effective upon confirmation of
transmission, or (iv) certified or registered mail, which notice
shall be effective three business days after being deposited in the
mail, postage prepaid. Any such notice, to be valid, must be
addressed (x) if sent to the Company, to the Company’s
principal executive offices, (y) if sent to SHSP Holdings or to
Evercel Holdings, at such party’s notice address, facsimile
number or electronic mail address set forth on the signature page
to this Agreement or to such other address as such Investor has
specified by prior written notice to the other parties hereto after
the date hereof and (z) if sent to a Management Stockholder, to
such Management Stockholder’s address, facsimile number or
electronic mail address as is in the Company’s personnel
records for such Management Stockholder.
5.5 Severability.
Any provision of this Agreement which is invalid or unenforceable
in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering
unenforceable the remaining provisions hereof, and any such
invalidity or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
5.6 Counterparts.
This Agreement may be executed in two or more counterparts
(including by means of facsimile or electronically scanned copies),
each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5.7 Successors
and Assigns. This Agreement may not be assigned by any party
hereto without the prior written consent of the other parties.
Subject to the foregoing, this Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective
successors and assigns.
5.8 No
Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person or entity other than the
Company and the Stockholders and their respective successors and
permitted assigns.
5.9 Specific
Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this
Agreement were not performed by them in accordance with the terms
hereof and that each party shall be entitled to specific
performance of the terms hereof, in addition to any other remedy at
law or equity.
[Remainder
of Page Intentionally Left Blank; Signature Page
Follows.]
11
IN
WITNESS WHEREOF, the undersigned have executed this
Investors’ Right Agreement as of the date first above
written.
|
THE COMPANY:
|
|
INVESTORS:
|
|
|
|
|
|
|
|
|
SHSP
HOLDINGS, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
/s/
|
|
By:
/s/
|
|
|
Name:
|
|
Name:
|
|
|
Title:
|
|
Title:
|
|
|
|
|
|
|
|
MANAGEMENT STOCKHOLDERS:
|
|
Notice Address for
SHSP Holdings:
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
|
|
000 Xxxx Xxxxxx
Xxxxx, Xxxxx 00000
|
|
|
XXXXXXX
X. XXXXXXX
|
|
Xxxxxx
Xxxxxxx
|
|
|
|
|
Xxx Xxxx, Xxx Xxxx
00000
|
|
|
|
|
Xxxx
Xxxxx
Zip
|
|
|
|
|
|
|
|
/s/
|
|
E-Mail
Address:
|
|
|
XXXXXX
XXXXXXX
|
|
|
|
|
|
|
Facsimile
No.:
|
|
|
|
|
|
|
|
|
|
EVERCEL
HOLDINGS, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
/s/
|
|
|
|
|
Name:
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
Notice Address for
Evercel Holdings:
|
|
|
|
|
|
|
|
|
|
000 Xxxx Xxxxxx Xxxxx, Xxxxx
00000
|
|
|
|
|
Xxxxxx
Xxxxxxx
|
|
|
|
|
|
|
|
|
|
Xxx Xxxx, Xxx Xxxx
00000
|
|
|
|
|
Xxxx
Xxxxx
Zip
|
|
|
|
|
|
|
|
|
|
E-Mail
Address:
|
|
|
|
|
|
|
|
|
|
Facsimile
No.:
|
|
12
