1
EXHIBIT 2.2
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of September 10,
1999 is by and among eSoft, Inc., a Delaware corporation ("Parent"), the
stockholders executing the signature pages hereof (each, a "Stockholder" and
together, the "Stockholders"), each of whom is a Stockholder of Technologic,
Inc., a Georgia corporation (the "Company"), and, with respect solely to Article
II hereof, Croft & Xxxxxx LLC ("Xxxxx & Xxxxxx"), a consultant to the Company .
RECITALS
A. The Boards of Directors of Parent and the Company each have
determined that a business combination between Parent and the Company is fair
and in the best interests of their respective companies and Stockholders, and
accordingly have agreed to effect the merger (the "Merger") provided for in that
certain Agreement and Plan of Merger (the "Merger Agreement") between Parent,
the Company, and eSoft Acquisition Corporation, a Georgia corporation and wholly
owned subsidiary of Parent ("Merger Sub"), dated as of September 10, 1999 upon
the terms and subject to the conditions set forth in the Merger Agreement.
B. Each Stockholder will receive in the Merger shares of
common stock, $.01 par value, of Parent ("Parent Common Stock"), which Parent
Common Stock will not be registered with the Securities and Exchange Commission
(the "Commission") and will constitute Restricted Securities.
C. The Parent Common Stock issued to Stockholders in the
Merger shall be issued pursuant to an exemption from registration pursuant to
Rule 506 of the Securities Act of 1933, as amended (the "Securities Act").
D. In consideration of Parent's agreement to enter into the
Merger Agreement and consummate the transactions contemplated thereby, and grant
the Stockholders certain registration rights as set forth herein with respect to
the Parent Common Stock to be received by the Stockholders, the Stockholders
have agreed to make certain representations and warranties, and to indemnify
Parent and Merger Sub with respect to certain matters under the Merger
Agreement.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants, and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
INDEMNIFICATION
1.1 SURVIVAL OF REPRESENTATIONS, ETC. Each Stockholder agrees
that, notwithstanding any examination made by or on behalf of Parent or Merger
Sub, the knowledge of Parent or Merger Sub or any of the respective officers,
directors, Stockholders, employees, or agents of Parent or Merger Sub, or the
acceptance by any party of any certificate or opinion, in each case with respect
to the Company, the representations, warranties, covenants, and agreements of
the Company set forth the Merger Agreement, or in any writing delivered by the
Company in connection with the Merger Agreement, shall survive the consummation
of the transactions contemplated thereby and shall expire on the date that is
the earlier of twelve months from the Closing Date or the date on which Parent
publishes audited financial statements for the fiscal year ended December 31,
1999 (the "Survival Date"). Notwithstanding any examination made by or on behalf
of the Company, the knowledge of the Company or any of its officers, directors,
stockholders, employees, or agents of the Company, or the acceptance by any
party of any certificate or opinion, the representations, warranties, covenants,
and agreements of Parent or Merger Sub set forth in the Merger Agreement, or in
any writing delivered by Parent or Merger Sub
2
in connection with the Merger Agreement, shall survive the consummation of the
transactions contemplated hereby and shall expire on the date that is twelve
months after the Effective Date.
1.2 INDEMNITY. Subject to the terms and conditions of this
Article, each Stockholder shall indemnify and hold Parent harmless from and
against all demands, claims, causes of action, assessments, including any
Federal or state tax audits, losses, damages, liabilities, costs, and expenses,
including, without limitation, reasonable attorneys' fees and any expenses
incident to the investigation or enforcement of this Article 1 (collectively,
"Losses"), that Parent may suffer, sustain or become subject to by reason of or
arising out of (i) any breach of any covenant or agreement of the Company
contained in the Merger Agreement or (ii) any inaccuracy in any representation
or warranty of the Company contained in the Merger Agreement, the Company
Disclosure Schedule, or any other agreement or instrument executed by the
Company pursuant to the Merger Agreement. All of the foregoing are hereinafter
collectively referred to as "Claims." Subject to Sections 9.3 and 9.8 of the
Merger Agreement, Parent shall indemnify and hold each Stockholder harmless from
and against all demands, claims, causes of action, assessments, including any
Federal or state tax audits, losses, damages, liabilities, costs, and expenses,
including, without limitation, reasonable attorneys' fees and any expenses
incident to the investigation or enforcement of this Article 1, that such
Stockholder may suffer, sustain or become subject to by reason of or arising out
of (i) any breach of any covenant or agreement of Parent or Merger Sub contained
in the Merger Agreement or (ii) any inaccuracy in any representation or warranty
of Parent or Merger Sub contained in the Merger Agreement, the Parent Disclosure
Schedule, or any other agreement or instrument executed by Parent pursuant to
the Merger Agreement.
1.3 LIMITATIONS ON INDEMNIFICATION. The indemnification
provided for in Section 1.2 hereof shall be subject to the following limitations
and conditions:
(a) No Stockholder shall be liable for indemnification of
Parent under Section 1.2 of this Agreement for any Losses incurred by Parent
unless the aggregate amount of all Losses incurred by Parent and otherwise
subject to indemnification pursuant to said Section 1.2 exceeds $100,000 and
thereafter only for the amount of Losses in excess of $100,000.
(b) No Stockholder shall be liable for any Losses resulting
from any inaccuracy in any representation or warranty of the Company contained
in the Merger Agreement unless written notice of entitlement to make a Claim
(whether or not any monetary Losses have actually been suffered) with respect to
such Losses is given by Parent to Stockholder on or prior to the expiration of
the survival of the particular representation or warranty at issue, as set forth
in Section 1.1 above.
(c) Each Stockholder's aggregate liability for any and all
Losses shall not exceed such Shareholder's Pro Rata Share of the Deferred Merger
Consideration. Parent agrees that it shall seek to recover any Losses for which
Stockholder is liable pursuant to this Article I only from such Stockholder's
Pro Rata Share of the Deferred Merger Consideration without any right of
recourse against such Stockholder for any amount of Losses that exceed the
dollar amount of such Stockholder's Pro Rata Share of the Merger Consideration
as valued in paragraph (d) immediately following this paragraph.
(d) In the event that a Stockholder is required to make any
payment under this Agreement, Parent shall be entitled to recover the amount so
determined from the Deferred Merger Consideration in accordance with this
Agreement and the Escrow Agreement. Any Parent Common Stock so recovered by
Parent shall be valued at a price of $4.00 per share. If there should be a
dispute as to the amount or manner of determination of any indemnity obligation
owed under this Agreement, Parent shall be entitled to recover such portion, if
any, of the obligation as shall not be subject to dispute. The difference, if
any, between the amount of the obligation ultimately determined as properly
payable under this Agreement and the portion, if any, theretofore paid shall
bear interest at a rate of eight percent (8%) per annum. Upon the payment in
full of any claim, either by setoff or otherwise, Stockholder shall be
subrogated to the rights of Parent against any person, firm, corporation, or
other entity with respect to the subject matter of such claim.
(e) Notwithstanding anything to the contrary in the foregoing,
each Stockholder shall be severally liable for any Losses as a result of any
breach of the representation and warranty set forth in Section 5.24 of the
Merger
2
3
Agreement or the representation and warranty contained in the last sentence of
Section 5.29 of the Merger Agreement, and the limitations set forth in Section
1.3(a) through 1.3(d) above shall not apply with respect to any Claim regarding
such Losses.
1.4 CONDITIONS OF INDEMNIFICATION OF THIRD PARTY CLAIMS. The
obligations and liabilities of the parties hereunder with respect to Claims
resulting from the assertion of liability by third parties ("Third Party
Claims") shall be subject to the following terms and conditions:
(a) Each Stockholder hereby irrevocably makes, constitutes,
and appoints Xxxxx Xxxxx as its agent (the "Representative") and authorizes and
empowers him to fulfill the role of Representative hereunder. In the event of
the resignation of the Representative, the resigning Representative shall
appoint a successor either from among the Stockholders or who shall otherwise be
acceptable to Parent and who shall agree in writing to accept such appointment,
and the resigning Representative's resignation shall not be effective until such
a successor shall exist. If the Representative should die or become
incapacitated, his successor shall be appointed within 30 days of his death or
incapacity by a majority of the Stockholders, and such successor either shall be
a Stockholder or shall otherwise be reasonably acceptable to Parent. The choice
of a successor Representative appointed in any manner permitted above shall be
final and binding upon all of the Stockholders and Parent. The decisions and
actions of any successor Representative shall be, for all purposes, those of the
Representative as if originally named herein.
(b) Each Stockholder hereby irrevocably makes, constitutes,
and appoints the Representative as such person's true and lawful attorney in
fact and agent, for such person and in such person's name, (i) to receive all
notices and communications directed to such Stockholder under this Agreement and
to take any action (or to determine to take no action) with respect thereto as
he may deem appropriate as effectively as such Stockholder could act for himself
or herself, including without limitation, the settlement or compromise of any
dispute or controversy, and (ii) to execute and deliver all instruments and
documents of every kind incident to the foregoing to all intents and purposes
and with the same effect as such Stockholder could do personally, and each such
Stockholder hereby ratifies and confirms as his or her own act, all that the
Representative shall do or cause to be done pursuant to the provisions hereof.
All notices and all other communications directed to Stockholders under this
Agreement shall be given to the Representative.
(c) Each Stockholder irrevocably consents to the service of
any process, pleading, notices, or other papers by the mailing of copies thereof
by registered, certified, or first class mail, postage prepaid, to the
Representative at such person's address set forth herein.
(d) Except as otherwise provided by applicable law, the death
or incapacity of any Stockholder shall not terminate the authority and agency of
the Representative.
(e) Each Stockholder hereby agrees to indemnify the
Representative and to hold him harmless against any loss, liability, or expense
incurred without negligent conduct or bad faith on the part of the
Representative and arising out of or in connection with his duties as
Representative, including the costs and expenses (including, without limitation,
attorneys's fees) incurred by such Representative in defending against any claim
of liability in connection herewith.
(f) In the event that any claim or demand for which the
Stockholders would be liable to Parent or Merger Sub hereunder is asserted
against or sought to be collected by a third party, Parent shall promptly notify
the Representative of such claim or demand, specifying the nature of such claim
or demand and the amount or the estimated amount thereof to the extent then
feasible (which estimate shall not be conclusive of the final amount of such
claim or demand) (the "Claim Notice"). The Representative shall promptly provide
notice of each Claim Notice to each Stockholder owning more than 5% of the
Company Common Stock (as defined in the Merger Agreement) at the Effective Time
and shall consult with such holders concerning whether or not to dispute
liability to Parent hereunder with respect to such claim or demand. The
Representative shall have 10 business days from its receipt of the Claim Notice
(the "Notice Period") to notify Parent (i) whether or not the Stockholders
dispute their liability to Parent hereunder with respect to such claim or
demand, and (ii) if they do not dispute such liability, whether or not they
desire, at their sole cost and expense, to defend Parent against
3
4
such claim or demand; provided, however, Parent is hereby authorized prior to
and during the Notice Period to file any motion, answer, or other pleading that
it shall deem necessary or appropriate to protect its interests; provided
further, however, that Parent shall use its reasonable efforts to provide the
Representative with prior notice of any such filing and a reasonable opportunity
to comment thereon. In the event that the Representative notifies Parent within
the Notice Period that the Stockholders do not dispute such liability and desire
to defend against such claim or demand, then except as hereinafter provided, the
Representative shall have the right to defend by appropriate proceedings, which
proceedings shall be promptly settled or prosecuted to a final conclusion in
such a manner as to avoid any risk of Parent becoming subject to liability for
any other matter. If Parent desires to participate in, but not control, any such
defense or settlement it may do so at its sole cost and expense. If, in the
reasonable opinion of Parent, any such claim or demand involves an issue or
matter that could have a material adverse effect on the business, operations,
assets, properties, or prospects of the Company or Parent or an affiliate of
Parent, Parent shall have the right to control the defense or settlement of any
such claim or demand, and its reasonable costs and expenses thereof shall be
included as part of the indemnification obligations of the Stockholders
hereunder. If the Representative disputes the Stockholders' liability with
respect to such claim or demand or elects not to defend against such claim or
demand, whether by not giving timely notice as provided above or otherwise, then
the amount of any such claim or demand, or, if the same be contested by the
Representative or by Parent (but Parent shall not have any obligation to contest
any such claim or demand), then that portion thereof as to which such defense is
unsuccessful shall be conclusively deemed to be a liability of the Stockholders
hereunder (subject, if the Representative has timely disputed liability, to a
determination that the disputed liability is covered by these indemnification
provisions).
(g) In the event that Parent should have a claim against the
Stockholders hereunder that does not involve a claim or demand being asserted
against or sought to be collected from it by a third party, Parent shall
promptly send a Claim Notice with respect to such claim to the Representative.
If the Representative does not notify Parent within the Notice Period that he
disputes such claim, then the amount of such claim shall be conclusively deemed
a liability of the Stockholders hereunder.
(h) Nothing herein shall be deemed to prevent Parent from
making a claim hereunder for potential or contingent claims or demands provided
the Claim Notice sets forth the specific basis for any such potential or
contingent claim or demand and the estimated amount thereof to the extent then
feasible and Parent has reasonable grounds to believe that such a claim or
demand will be made.
1.5 ARBITRATION. Any dispute between the Representative and
Parent with respect to Parent's right to seek indemnification with respect to
any Claim pursuant to the provisions of this Article I shall be resolved by
binding arbitration in accordance with the following provisions of this Section
1.5; provided, however, that either the Representative or Parent may seek
injunctive relief or other equitable relief to preserve the status quo pending
arbitration.
(a) The Representative or Parent may submit any dispute that
is subject to arbitration under this Section 1.5 by giving written notice to the
other parties to such dispute. Within ten business days after receipt of such
notice by such other parties, the Representative shall appoint one arbitrator
and Parent shall appoint one arbitrator and within ten Business Days thereafter
the two arbitrators so appointed shall select a third arbitrator. If the
Representative or Parent shall fail to make such appointment within such ten-day
period, the other party may request the American Arbitration Association to
appoint the second arbitrator. The American Arbitration Association may
thereupon appoint the second arbitrator. If the two appointed arbitrators shall
fail to select a third arbitrator within said ten-day period, the Representative
and Parent shall mutually select the third arbitrator. If the Representative and
Parent are unable to agree upon the third arbitrator, then either party may,
upon at least five Business Days' prior written notice to the other party,
request the American Arbitration Association to appoint the third arbitrator.
The American Arbitration Association may thereupon appoint the third arbitrator.
All arbitrators shall be experienced in corporate and financial matters and
shall be impartial and unrelated, directly or indirectly, so far as employment
of services or ownership of interests is concerned to any of the parties or any
of their respective Affiliates. The arbitration shall be conducted in Denver,
Colorado in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, as then in effect, except as otherwise provided in this
Section 1.5.
(b) The three arbitrators shall investigate the facts and
shall hold hearings at which the parties may conduct limited discovery, present
evidence and arguments, be represented by counsel, and conduct cross
examination. The
4
5
three arbitrators shall render a written decision on the matter presented to
them by majority vote as soon as practicable after the appointment of the third
arbitrator and in any event not more than 45 days after such appointment. The
decision of the arbitrators, which may include equitable relief, shall be final
and binding on the parties hereto, and judgment upon the decision may be entered
in any court having jurisdiction thereof. If the three arbitrators shall fail to
render a decision within said 45-day period, either party may institute such
action or proceeding in such court as shall be appropriate in the circumstances
and upon the institution of such action, the arbitration proceeding shall be
terminated and shall be of no further force and effect. The prevailing party
shall be awarded reasonable attorneys' fees, expert and nonexpert witness costs
and expenses, and other costs and expenses incurred in connection with the
arbitration, and the fees and costs of the arbitrators shall be borne by the
nonprevailing party unless, in either case, the arbitrators for good cause
determine otherwise. In resolving any dispute, the arbitrators shall apply the
provisions of this Agreement, without varying therefrom in any respect. The
arbitrators shall not have the power to add to, modify, or change any of the
provisions of this Agreement.
ARTICLE 2
REGISTRATION RIGHTS; POOLING RESTRICTIONS
2.1 POOLING. Each Stockholder acknowledges that the Merger is
intended to be treated for financial accounting purposes as a "pooling of
interests" in accordance with generally accepted accounting principles. Each
Stockholder listed on Exhibit A hereto hereby represents, warrants and agrees
that Stockholder (i) will not make any sale, transfer or other disposition of
Company Common Stock owned by such Stockholder during the period from the date
hereof and ending at the earlier of the Effective Time and the termination of
the Merger Agreement, and (ii) will not make any sale, transfer or other
disposition of Parent Common Stock owned by such Stockholder after the Effective
Time until such time as financial statements that include at least 30 days of
combined operations of the Company and Parent after the Merger shall have been
publicly reported, unless Stockholder shall have delivered to Parent prior to
any such sale, transfer or other disposition, a written opinion from its
independent public accountants, in form and substance reasonably satisfactory to
Parent, to the effect that such sale, transfer or other disposition will not
cause the Merger not to be treated as a "pooling of interests" for financial
accounting purposes in accordance with generally accepted accounting principles
and the rules, regulations and interpretations of the Commission, and (iii) will
not make any sale, transfer or other disposition of any shares of Parent Common
Stock received by such Stockholder pursuant to the Merger in violation of the
Securities Act or the rules and regulations promulgated thereunder.
2.2 NOTICE OF PROPOSED DISPOSITIONS. Prior to any proposed
disposition of any Restricted Securities (unless there is in effect a
registration statement under the Securities Act covering such proposed
disposition and such disposition is made in accordance with such registration
statement) Stockholder shall give written notice to Parent of Stockholder's
intention to effect such disposition. Each such notice shall describe the manner
and circumstances of the proposed disposition, and shall be accompanied by
either (i) a written opinion of legal counsel addressed to Parent and reasonably
satisfactory in form and substance to Parent, to the effect that the proposed
disposition of Restricted Securities may be effected without registration of
such Restricted Securities or (ii) a "no action" letter from the Commission to
the effect that such disposition without registration of such Restricted
Securities will not result in a recommendation by the staff of the Commission
that enforcement action be taken with respect thereto, whereupon Stockholder
shall be entitled to transfer such Restricted Securities in accordance with the
terms of the notice delivered by Stockholder to Parent. The provisions of this
Section 2.2 shall not apply to any Restricted Securities which are then freely
tradeable pursuant to Rule 144(k) under the Securities Act, as amended from time
to time, or any similar successor rule that may be promulgated by the
Commission.
2.3 DEMAND REGISTRATION.
(a) Subject to the terms and provisions hereof, at any time
during the period after January 24, 2000 and ending on the second anniversary of
the Closing Date, if Parent shall receive a written request (specifying that it
is being made pursuant to this Section 2.3) from any holder or holders (a
"Holder") of at least 200,000 shares of Registrable Securities (as defined
herein) that Parent file a registration statement under the Securities Act
covering the registration of
5
6
at least 200,000 shares (as presently constituted and subject to subsequent
adjustments for stock splits, stock dividends, reverse stock splits, and the
like) of the Registrable Securities, then Parent shall promptly notify all other
Holders of such request and shall include all Registrable Securities that
Holders have requested within 30 days after receipt of Parent's notice of such
written request. Parent shall use its reasonable best efforts to file such
additional registration statements within 45 days of its receipt of a qualifying
original notice. Parent shall be obligated to effect no more than two
registrations pursuant to this Section 2.3. As used herein, the term
"Registrable Securities" means (i) all shares of Parent Common Stock issued
pursuant to the Merger, (ii) any Parent Common Stock issued as a dividend or
other distribution with respect to, or in exchange for, or in replacement of,
Parent Common Stock issued pursuant to the Merger, but shall not include any
shares of Parent Common Stock that (w) have been previously registered and sold
to the public, (x) that may be distributed to the public pursuant to Rule 144
(or any similar provision then in force), (y) that have been sold in a private
transaction in which the transferor's rights under this Agreement were not
transferred, or (z) that have been transferred and a new certificate or other
evidence of ownership for the same not bearing the legend set forth in Section
3.2 has been delivered by or on behalf of Parent and the shares evidenced
thereby are not subject to any stop transfer order or similar restriction on
resale.
(b) Notwithstanding the foregoing, Parent shall not be
obligated to effect a registration pursuant to Section 2.3(a) with respect to a
proposed distribution of Registrable Securities by a Holder thereof (i) during
the period starting with the date 30 days prior to the Parent's estimated date
of filing of, and ending on a date 90 days following the effective date of, a
registration statement pertaining to a public offering of securities for the
account of Parent, provided that Parent is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective and
that Parent's estimate of the date of filing of such Registration is made in
good faith, (ii) within a period of 90 days after the effective date of any
previous Registration by Parent with respect to which Holders of Registrable
Securities were given the opportunity pursuant to this Article 2 of this
Agreement to include therein Registrable Securities, or (iii) during a period of
up to 90 days if in the good faith judgment of the Board of Directors of Parent,
such Registration would materially interfere with a pending financing,
acquisition or disposition transaction, or other material transaction, and
provided further, that Parent may not defer its obligation in the manner
provided in this clause (iii) more than twice in any 12-month period. In
addition, in the event of a deferral of a registration requested by a Holder
pursuant to the provisions of this Section 2.3(b), the period provided for in
the first sentence of Section 2.3(a) shall be extended for a period of time
equal to the period of such deferral.
(c) Any registration statement filed pursuant to this Section
2.3 may include other securities of Parent, including securities with respect to
which registration rights have been granted.
2.4 "PIGGYBACK" REGISTRATION.
(a) If at any time after the date hereof, Parent registers
under the Securities Act any of its Parent Common Stock for sale on its own
account other than on Form S-4 or S-8 or their then equivalents, and if, within
20 days after the date of filing of the registration statement relating to such
Parent Common Stock, Holder(s) of at least 200,000 shares of Parent Common Stock
shall so request in writing, Parent, subject to the provisions of this
Agreement, shall use its best efforts to include in such registration statement
all or any part of the Registrable Securities such Holder requests to be
registered (a "Piggyback Registration") and to cause such registration statement
to become effective. Subject to the terms and provisions hereof, at any time
during the period after the Closing Date and ending on the second anniversary of
the Closing Date, the holders of Registrable Securities may make an unlimited
number of requests for inclusion of their Registrable Securities in Piggyback
Registrations.
(b) If a Piggyback Registration is an underwritten
registration initiated on behalf of Parent, and the managing underwriter advises
Parent in writing that in its opinion the number of securities requested to be
included in such registration exceeds the number that can be sold in such
offering, Parent will give priority for inclusion in such registration to (a)
first, the securities Parent proposes to sell, (b) second, securities that are
held by persons with registration rights that are superior to the Holders
pursuant to the issuance by Parent of its 5% Convertible Subordinated Debentures
due 2002, (c) third, securities that are Registrable Securities, pro rata among
the holders of such securities on the basis of the number of shares so requested
to be included therein, and (d) fourth, other securities requested to be
included in such registration, if any.
6
7
(c) The investment banker(s) and manager(s) who shall
administer an underwritten offering in which the Stockholders exercise piggyback
registration rights shall be selected by Parent.
(d) Any registration statement filed pursuant to this Section
2.4 may include other securities of Parent, including securities with respect to
which registration rights have been granted.
2.5 EXPENSES OF REGISTRATION. All expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for Parent, fees under Blue Sky
laws, and expenses of any regular or special audits incident to or required by
any such registration (but shall not include underwriting discounts and selling
commission applicable to the sale of Registrable Securities and fees and
disbursements of counsel to the Holders) ("Registration Expenses") incurred in
connection with any registration, qualification or compliance pursuant to
Section 2.2, 2.3 and 2.4 hereof shall be borne by Parent. All underwriting
discounts and selling commission applicable to the sale of Registrable
Securities (which discounts and selling commissions shall not exceed 10% of the
proceeds from the sale of the Registrable Securities) and fees and disbursements
of any counsel to the Holders ("Selling Expenses") relating to the Registrable
Securities so registered shall be borne by the Holders of such Registrable
Securities pro rata on the basis of the number of shares of Registrable
Securities so registered on their behalf.
2.6 REGISTRATION PROCEDURES. In the case of each registration
effected by Parent pursuant to this Article 2, Parent will keep each Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. At its expense, Parent will:
(a) Keep such registration effective until the Holder or
Holders have completed the distribution described in the registration statement
relating thereto or until the securities covered by such registration statement
cease to be "Registrable Securities" ;
(b) Notify each Holder of the need to, and prepare and file
with the Commission such amendments and supplements to such registration
statement and the prospectus used in connection with such registration statement
as may be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement;
(c) Timely make all appropriate filings as necessary to comply
with the provisions of the Securities and Exchange Act of 1934, as amended;
(d) Furnish such number of prospectuses and other documents
incident thereto, including any amendment of or supplement to the prospectus, as
a Holder from time to time may reasonably request;
(e) Register or qualify the securities covered by such
registration statement under the Blue Sky laws of such jurisdictions as shall be
reasonably appropriate for the distribution of the securities covered thereby;
(f) Notify each seller of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing; and
(g) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first month after the effective date of the
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act.
7
8
2.7 AGREEMENTS OF HOLDERS. The Holder or Holders of
Registrable Securities included in any registration shall furnish to Parent such
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as Parent may request in writing and as shall be
reasonably required in connection with any Registration, qualification or
compliance referred to in this Article 2. Each Holder agrees to refrain from
sales pursuant to any Registration during the pendency of any notice from Parent
as contemplated by Sections 2.6(b) or 2.6(e).
2.8 INDEMNIFICATION.
(a) Parent will indemnify each Holder, each of its officers,
directors and partners, legal counsel, and accountants and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification, or compliance has been
effected pursuant to this Article 2; and each underwriter, if any, and each
person who controls within the meaning of Section 15 of the Securities Act any
underwriter, against all expenses, claims, losses, damages, and liabilities (or
actions, proceedings, or settlements in respect thereof) based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
prospectus (including any related registration statement, notification, or the
like) incident to any such registration, qualification, or compliance, or based
on any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or any violation by Parent of the Securities Act or any rule or regulation
thereunder applicable to Parent and relating to action or inaction required of
Parent in connection with any such registration, qualification, or compliance,
and will reimburse each such Holder, each of its officers, directors, partners,
legal counsel, and accountants and each person controlling such Holder, each
such underwriter, and each Person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating and defending or settling any such claim, loss, damage, liability,
or action, provided that Parent will not be liable in any such case to the
extent that any such claim, loss, damage, liability, or expense arises out of or
is based on any untrue statement or omission based upon written information
furnished to Parent by or on behalf of any Holder or underwriter specifically
for use in such registration, qualification or compliance. It is agreed that the
indemnity agreement contained in this Section 2.8(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of Parent (which consent has not been
unreasonably withheld).
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification, or compliance is being effected, indemnify Parent, each of its
directors, officers, partners, legal counsel, and accountants and each
underwriter, if any, of Parent's securities covered by such a registration
statement, each Person who controls Parent or such underwriter within the
meaning of Section 15 of the Securities Act, each other such Holder, and each of
their officers, directors, and partners, and each person controlling such Holder
against all claims, losses, damages and liabilities (or actions in respect
thereof) based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular, or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse Parent and such Holders,
directors, officers, partners, legal counsel, and accountants, persons,
underwriters, or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability, or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus, offering
circular, or other document in reliance upon and in conformity with written
information furnished to Parent by such Holder, provided, however, that the
obligations of such Holder hereunder shall not apply to amounts paid in
settlement of any such claims, losses, damages, or liabilities (or actions in
respect thereof) if such settlement is effected without the consent of such
Holder (which consent shall not be unreasonably withheld).
(c) Each party entitled to indemnification under this Section
2.8 (the "Article 2 Indemnified Party") shall give notice to the party required
to provide indemnity (the "Article 2 Indemnifying Party") promptly after such
Article 2 Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Article 2 Indemnifying Party to
assume the defense of such claim or any litigation resulting therefrom, provided
that counsel for the Article 2 Indemnifying Party, who shall be experienced in
the defense of securities actions of the type brought and conduct the defense of
such claim or any litigation resulting therefrom, shall be approved by the
Article 2 Indemnified Party (whose approval shall not unreasonably be withheld),
and the Article 2 Indemnified Party may participate in such defense
8
9
at such party's expense, and provided further that the failure of any Article 2
Indemnified Party to give notice as provided herein shall not relieve the
Article 2 Indemnifying Party of its obligations under this Article 2, to the
extent such failure is not prejudicial. No Article 2 Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Article 2 Indemnified Party, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Article 2 Indemnified Party of a release from
all liability in respect to such claim or litigation. Each Article 2 Indemnified
Party shall furnish such information regarding itself or the claim in question
as an Article 2 Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with defense of such claim and
litigation resulting therefrom.
(d) If the indemnification provided for in this Section 2.8 is
held by a court of competent jurisdiction to be unavailable to an Article 2
Indemnified Party with respect to any loss, liability, claim, damage, or expense
referred to therein, then the Article 2 Indemnifying Party, in lieu of
indemnifying such Article 2 Indemnified Party hereunder, shall contribute to the
amount paid or payable by such Article 2 Indemnified Party hereunder as a result
of such loss, liability, claim, damage, or expense in such proportion as is
appropriate to reflect the relative benefit received by the Article 2
Indemnifying Party on the one hand and of the Article 2 Indemnified Party on the
other in connection with any registration or qualification effected pursuant to
this Article 2 as well as any other relevant equitable considerations.
(e) The obligations of the parties under this Section 2.8
shall survive the completion of the offering of Registrable Securities under the
registration statement and otherwise.
2.9 DELAY OF REGISTRATION. No Holder shall have any right to
take any action to restrain, enjoin, or otherwise delay any registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Article 2.
2.10 SUSPENSION OF REGISTRATION RIGHTS. No Holder may request
registration pursuant to Section 2.3 at a time that all Registrable Securities
held by such Holder may immediately be sold under Rule 144 during any 90-day
period.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
3.1 REPRESENTATION AND WARRANTIES OF THE STOCKHOLDERS. In
connection with Parent's delivery of shares of Parent Common Stock pursuant to
the Merger Agreement, each Stockholder hereby represents and warrants as
follows:
(a) Such Stockholder has had the opportunity to read carefully
and review the Information Statement dated August 30, 1999 and the information
concerning Parent filed by Parent with the Commission.
(b) Such Stockholder confirms that no representations or
warranties have been made to Stockholder other than those contained in the
Merger Agreement and that Stockholder has not relied upon any representations or
warranties not contained therein (other than the information concerning Parent
filed with the Commission described in paragraph (a) above) in in voting on the
Merger or entering into this Agreement.
(c) Such Stockholder is acquiring the Parent Common Stock
solely for investment, for Stockholder's own account and not with a view to, or
for sale in connection with, the distribution thereof in violation of law.
(d) Such Stockholder has been advised and understands that an
investment in the Parent Common Stock involves a degree of risk.
9
10
(e) Such Stockholder confirms that all documents, records and
books pertaining to Parent and to the investment requested by such Stockholder
and/or such Stockholder's purchaser representative have been made available to
such Stockholder and/or such Stockholder's purchaser representative(s), if any,
and such Stockholder also confirms that such Stockholder and the purchaser
representative(s) have been given an opportunity to make any further inquiries
of Parent and its representatives that such Stockholder or the purchaser
representative(s) desires to make in order to make a fully informed investment
decision concerning investment in the Parent Common Stock.
(f) Such Stockholder, if an individual, is at least twenty-one
(21) years of age, or, if under twenty- one (21) years of age, this Agreement is
being signed on behalf of such Stockholder by such Stockholder's legal
representative, which representative is at least twenty-one (21) years of age.
(g) If such Stockholder is a partnership, corporation, trust
or other entity, the person executing this Agreement has the necessary power and
authority to do so.
(h) If such Stockholder has relied upon the advice of a
purchaser representative, such Stockholder has so indicated on the signature
page hereof and has provided the name and address of such purchaser
representative thereon; if so, such Stockholder hereby confirms to Parent that
Stockholder has heretofore received advice from each purchaser representative of
such Stockholder stating that such purchaser representative is not an affiliate,
director, officer or other employee of Parent, or beneficial owner of 10 percent
or more of any class of the equity securities or 10 percent or more of the
equity interest in Parent.
(i) Such Stockholder is aware of and understands the
following:
(1) That no federal or state agency has made a
finding or determination as to the fairness of an investment in the Parent
Common Stock or any recommendation or endorsement of the securities;
(2) The Parent Common Stock has not been registered
for sale under the Securities Act, or any state "Blue Sky" law; and
(3) There are substantial restrictions on the
transferability of the Parent Common Stock; the Parent Common Stock cannot be
transferred unless registered under the Securities Act, or an exemption from
such registration is available and established to the satisfaction of Parent;
the Stockholder will not be able to avail himself of the provisions of Rule 144
adopted by the Commission under the Securities Act, unless the conditions of
Rule 144 are met, and, accordingly, Stockholder may have to hold the Parent
Common Stock and bear the economic risk of this investment for an indefinite
period.
(4) The statements and information provided in the
Investor Questionnaire that accompanies this Agreement and all other information
provided by Stockholder are complete and accurate in all respects.
(5) Such Stockholder represents that the address of
such Stockholder set forth at the end of this Agreement is the true and correct
residence address of such Stockholder, and such Stockholder has no present
intention of becoming a resident or domiciliary of any other state or
jurisdiction.
Each Stockholder agrees that the representations and
warranties set forth in this Section 3.1 shall survive the Merger and the
delivery of shares as contemplated thereby.
3.2 LEGEND ON CERTIFICATE. Each Stockholder acknowledges and
agrees that each certificate representing Parent Common Stock will be endorsed
with a restrictive legend similar to the following:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR ANY STATE SECURITIES LAW. THE SECURITIES CANNOT
BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT IN
10
11
COMPLIANCE WITH THE RESTRICTIONS ON TRANSFERABILITY CONTAINED
IN THE STOCKHOLDERS AGREEMENT RELATING TO THE SECURITIES AND
APPLICABLE FEDERAL AND STATE SECURITIES LAWS AND NO TRANSFER
WILL BE RECOGNIZED UNLESS MADE IN COMPLIANCE WITH SUCH LAWS.
In addition, certificates representing such securities will
bear such other legends as may be required by the securities laws of the state
in which Stockholder resides.
3.3 INDEMNIFICATION. Each Stockholder acknowledges that he
understands the meaning and legal consequences of the representations,
warranties and agreements contained in Section 3.1 hereof, that Parent is
relying on the accuracy of the representations, warranties and agreements by
Stockholder as contained herein, and that he would not be permitted to acquire
any Parent Common Stock if any representation or warranty were known to be
materially false or inaccurate. Accordingly, each Stockholder hereby agrees to
indemnify and hold harmless Parent from and against any and all loss, damage,
liability, cost or expense (including attorneys' fees) relating to or arising
out of a breach of any representation, warranty or agreement of such Stockholder
contained in Section 3.1 of this Agreement.
3.4 NO ASSIGNMENT OR TRANSFER. Each Stockholder agrees not to
transfer or assign this Agreement, or any interest of Stockholder therein.
ARTICLE 4
GENERAL PROVISIONS
4.1 BOARD OBSERVATION RIGHTS. During the period beginning on
the Closing Date and ending on the date that is two years following the Closing
Date, for so long as Xxxxx X. Xxxxx or any other Stockholder is not otherwise
serving as a director of Parent, Parent shall (a) timely notify the
Representative of the time and place of all meetings of the Board of Directors
of Parent, (b) deliver to the Representative all materials provided by Parent to
members of Parent's Board of Directors, (c) shall afford the Representative the
opportunity to attend all meetings of Parent's Board of Directors (except for
such meetings or portions of meetings in which, in the opinion of counsel to
Parent, matters protected by attorney-client or other privilege are being
discussed and the Representative's presence would interfere with the
protections afforded by such privilige), and (d) shall pay the Representative's
reasonable direct expenses incurred in attending such board meetings using the
same guidelines governing the payment of expenses of other members of Parent's
Board of Directors.
4.2 "PRO RATA SHARE; OTHER CAPITALIZED TERMS." As used in this
Agreement, the term "Pro Rata Share" of any amount shall mean the fraction that
is determined by dividing the number of shares of Company Common Stock held by a
Stockholder immediately prior to the Effective Time of the Merger by the total
number of shares of Company Common Stock held immediately prior to the Effective
Time of the Merger by all Stockholders who are parties to this Agreement. Other
capitalized terms used, but not defined herein, shall have the meanings ascribed
to them in the Merger Agreement.
4.3 NOTICES. Any notice required to be given hereunder shall
be sufficient if in writing, and sent by facsimile transmission and by same day
or overnight courier service (with proof of service), hand delivery or certified
or registered mail (return receipt requested and first-class postage prepaid),
addressed as follows:
11
12
If to Parent or Merger Sub: If to the Stockholders:
eSoft, Inc. Xxxxx X. Xxxxx
Suite 500 Technologic, Inc.
000 Xxxxxxxxxxx Xxxxxxxxx Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000 0000 Xxxxxxx Xxxxx
Xxxx: Xxxxxxx Xxxx Xxxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
With copies to: With copies to:
Xxxxx, Xxxxxx & Xxxxxx LLP Xxxxx, Xxxxxxxx & Xxxxxxx, LLP
000 00xx Xxxxxx, Xxxxx 0000 0000 Xxxxxxxxx Xxxxxx, X.X., Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000 Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq. Attn: Xxxxx X. Xxxx, Esq.
Telephone: 000-000-0000 Telephone: (000) 000-0000
Facsimile: 000-000-0000 Facsimile: (000) 000-0000
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered, or delivered by courier or on the third
day after the mailing thereof.
4.4 ASSIGNMENT, BINDING EFFECT. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties.
4.5 ENTIRE AGREEMENT. This Agreement and any schedules or
agreements delivered in connection with this Agreement constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings among the parties with respect
thereto. No information previously provided, addition to or modification of any
provision of this Agreement shall be binding upon any party hereto unless made
in writing and signed by all parties hereto.
4.6 AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
4.7 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
its rules of conflict of laws.
4.8 COUNTERPARTS. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a number
of copies hereof each signed by less than all, but together signed by all of the
parties hereto. Executed counterparts transmitted by fax shall be effective as
originals.
4.9 HEADINGS. Headings of the Articles and Sections of this
Agreement are for the convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
12
13
4.10 INTERPRETATION. In this Agreement, unless the context
otherwise requires, words describing the singular number shall include the
plural and vice versa, and words denoting any gender shall include all genders
and words denoting natural persons shall include corporations and partnerships
and vice versa.
4.11 WAIVERS. Except as provided in this Agreement, no action
taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement. The waiver by
any party hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any other
provision hereunder.
4.12 SEVERABILITY. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction
unless the same is material to the terms of this Agreement, in the judgment of
either party to this Agreement, in which case the parties shall negotiate in
good faith to revise the same so as to be valid or enforceable. If any provision
of this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
4.13 ENFORCEMENT OF AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof, this being in addition to
any other remedy to which they are entitled at law or in equity.
4.14 CONSENT. Whenever the consent or approval of a party is
required by the terms of this Agreement, unless otherwise provided, the same
shall not be unreasonably withheld or delayed
* * * * * * *
13
14
IN WITNESS WHEREOF, the parties have executed this Agreement
and caused the same to be duly delivered on their behalf on the day and year
first written above.
"PARENT"
eSOFT, INC.
By: /s/ Xxxxxxx Xxxx
----------------------------
Name: Xxxxxxx Xxxx
Title: President
Croft & Xxxxxx LLC executes this Agreement and agrees to be bound solely by the
provisions of Article II of this Agreement.
"CROFT & XXXXXX"
CROFT & XXXXXX LLC
By: /s/ Xxxxxx X. Xxxxx, III
----------------------------
Name: Xxxxxx X. Xxxxx, III
Title: Managing Director
STOCKHOLDER SIGNATURE PAGES FOLLOW
14
15
NAME AND
NUMBER ADDRESS OF
STOCKHOLDER OF PURCHASER STOCKHOLDER
NAME ADDRESS SHARES REPRESENTATIVE SIGNATURE
(IF ANY)
Xxxxx X. Xxxxx 1,111,100 /s/ Xxxxx X. Xxxxx
---------------------------
Xxxxx X. Xxxxx 740,750 /s/ Xxxxx X. Xxxxx
---------------------------
Xxxx X. Xxxxx 666,700 /s/ Xxxx X. Xxxxx
---------------------------
Xxxxxxx X. XxXxxxxxx 537,750 /s/ Xxxxxxx X. XxXxxxxxx
---------------------------
Xxxxxx X. Xxxxxx 344,400 /s/ Xxxxxx X. Xxxxxx
---------------------------
Xxxxx X. Xxxxxxx 148,150 /s/ Xxxxx X. Xxxxxxx
---------------------------
Xxxxxxx X. Xxxx 133,300 /s/ Xxxxxxx X. Xxxx
---------------------------
Xxx "Dutch" Xxxxxxx 112,500 /s/ Xxx "Dutch" Xxxxxxx
---------------------------
Xxxx X. Xxxxx 88,850 /s/ Xxxx X. Xxxxx
---------------------------
Xxxxxxxx Xxxxxxx 88,850 /s/ Xxxxxxxx Xxxxxxx
---------------------------
Xxxxxxx Xxxxxxxx 44,400 /s/ Xxxxxxx Xxxxxxxx
---------------------------
Xxxx Xxxx 15,000 /s/ Xxxx Xxxx
---------------------------
15
16
EXHIBIT A
17
CONTROL STOCKHOLDERS
Xxxxx X. Xxxxx
Xxxxx Xxxxx
Xxxxxxx XxXxxxxxx
Xxxx Xxxxx
Xxxxxxx Xxxxxx
Any other person who has been an officer or a member of the Board of Directors
of the Company at any time during the thirty (30) days prior to the Closing.
