STOCKHOLDER AGREEMENT
by and among
XXXXXXXXXXXXXX.XXX INC.,
XXXXXX HOLDING CORP.,
and
INDIVIDUAL INVESTOR GROUP, INC.
Dated as of
June 2, 1999
TABLE OF CONTENTS
Page
1. Effective Date; Management; Board of Directors..................................................2
2. Restrictions on Transfers of INDI Shares. ......................................................2
3. Pre-emptive Rights. ............................................................................5
4. Control Transfer................................................................................6
5. Representation and Warranty of Stockholders.....................................................8
6. Noncompetition..................................................................................8
7. Definition of Affiliates........................................................................8
8. Definition of "Shares". .......................................................................9
9. Specific Performance. .........................................................................9
10. Successors and Assigns..........................................................................9
11. Governing Law; Venue. ........................................................................9
12. Counterparts and Facsimile Signatures...........................................................9
13. Titles and Subtitles. ........................................................................10
14. Notices........................................................................................10
15. Entire Agreement; Amendments and Waivers.......................................................10
16. Severability. ................................................................................11
17. Termination....................................................................................11
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STOCKHOLDER AGREEMENT
This STOCKHOLDER AGREEMENT is made as of the 2nd day of June, 1999 by
and among XXXXXXXXXXXXXX.XXX INC., a New York corporation (the "Company"),
XXXXXX HOLDING CORP., a Delaware corporation ("Xxxxxx"), and INDIVIDUAL INVESTOR
GROUP, INC., a Delaware corporation ("INDI").
WHEREAS, the Company was formed on March 1, 1999 and thereafter issued
10,000 shares of its common stock, no par value ("Common Stock") to Xxxxxx;
WHEREAS, the Company, Xxxxxx and INDI are simultaneously herewith
entering into an agreement (the "VentureHighway Agreement") relating to their
respective investments in and operation of "XxxxxxxXxxxxxx.xxx," a branded
website (the "Site"), the primary focus, principal theme and format of which
shall be to serve as an interactive portal for one or more of the following
activities: (a) the matching of companies seeking funding with qualified
investors seeking to fund such companies ("Online Matching Services"), (b) the
facilitation of private placements of securities of companies to qualified
investors ("Online Private Placement Services"), and (c) the facilitation of
public offerings of securities of companies (the operation of such a website (or
site available on a proprietary online service) being referred to herein as the
"Business");
WHEREAS, pursuant to the VentureHighway Agreement, the Company will
issue 2,484 shares of Common Stock to INDI, representing 19.9% of the
outstanding shares of Common Stock on an after-issued basis (with Xxxxxx'x
shares of Common Stock representing 80.1% of the outstanding shares of Common
Stock);
WHEREAS, the Common Stock owned by INDI and Xxxxxx (together, the
"Stockholders") will constitute 100% of the issued and outstanding capital stock
of the Company; and
WHEREAS, the Stockholders and the Company desire to set forth certain
agreements among them with respect to (a) the transfer and control of the Common
Stock owned by them or their respective Affiliates (as defined in Section 7
hereof) and (b) the management of the Company.
NOW THEREFORE, in consideration of the premises and mutual agreements
herein and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
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1. Effective Date; Management; Board of Directors.
(a) Immediately after the execution of this Agreement, the
Board of Directors and Officers of the Company shall be comprised of the persons
set forth on Schedule 1 hereto. One of the directors has been designated by
INDI, with the balance being designated by Xxxxxx.
(b) Until the later of such time as (i) INDI, together with
any of its Affiliates, owns Shares (as defined in Section 9) constituting less
than 10% of the outstanding Common Stock and (ii) the Promotion Period expires,
INDI shall continue to have the right to designate one director to serve on the
Board of Directors ("INDI Director"). Each INDI designee must be reasonably
acceptable to Xxxxxx. Notwithstanding anything to the contrary in this
Agreement, while there is an INDI Director serving on the Board of Directors,
the Company shall not, without approval of the INDI Director, (a) engage in any
transaction with Xxxxxx or its Affiliates, except those contemplated by Section
7.3 of the VentureHighway Agreement or (b) declare or pay any cash dividend to
the holders of the Common Stock if Xxxxxx or its Affiliates would be entitled to
receive or participate therein.
(c) Until such time as Xxxxxx owns Shares constituting less
than 50% of the outstanding Common Stock, Xxxxxx shall continue to have the
right to designate the majority of the directors constituting the Board.
(d) Each Stockholder and its Affiliates shall vote all of
their Shares for the election of the other Stockholder's designees.
2. Restrictions on Transfers of INDI Shares.
(a) Transfer of Shares. INDI and its Affiliates shall not
sell, transfer, assign, pledge, donate, or otherwise encumber or dispose of any
interest in its Shares (a "Transfer") except as provided herein.
(b) Exempt Transfers. INDI may make an Exempt Transfer at any
time. An "Exempt Transfer" shall be deemed to be any Transfer made by INDI (i)
to the Company; (ii) to Xxxxxx or any of its Affiliates; (iii) to any of INDI's
Affiliates; or (iv) to a third party in a Control Transfer (as defined in
Section 4(d)).
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(c) Non-Exempt Transfers. Any Transfer other than those set
forth in Section 2(b) shall be deemed a Non-Exempt Transfer. INDI shall not be
permitted to make a Non-Exempt Transfer unless (i) it has first complied with
Xxxxxx'x First Offer Right (set forth in Section 2(d)) and (ii) all Shares owned
by INDI and any of its Affiliates are the subject of such Transfer.
Notwithstanding anything to the contrary, INDI shall not make any Non-Exempt
Transfer prior to the expiration of the Promotion Period (as defined in the
VentureHighway Agreement).
(d) First Offer Right.
(i) If INDI wishes to make a Non-Exempt Transfer of
its Shares ("Offered Shares"), then, at least 30 days before making any
such Non-Exempt Transfer (the "Rights Exercise Election Period"), INDI
shall deliver to the Company and Xxxxxx a written notice (the "INDI
Sale Notice") notifying them of the proposed Non-Exempt Transfer. The
INDI Sale Notice shall disclose in reasonable detail the proposed terms
and conditions of the Non-Exempt Transfer, including, without
limitation, the price per share to be paid by the transferee, the
identity of the transferee, evidence of its financial ability to
effectuate the purchase, and confirmation of the transferee's agreement
to be bound by the terms of this Agreement. Unless otherwise agreed by
Xxxxxx, the purchase price for any Non-Exempt Transfer must be payable
in cash and/or marketable securities at the closing of the transaction.
In any case where INDI is offered marketable securities from the
transferee in payment for the Offered Shares, if Xxxxxx exercises its
First Offer Right, it shall pay for the Offered Shares in cash in an
amount equal to the market value of such marketable securities. Such
market value shall be the number of securities offered as consideration
for the Offered Shares ("Consideration Securities") multiplied by the
closing price of the Consideration Securities on the last trading day
prior to the date the third-party offer was made. Notwithstanding the
foregoing, if the number of Consideration Securities being offered is
greater than the then average daily trading volume (based on the then
last 30 trading days) of the Consideration Securities multiplied by
four, Xxxxxx shall have the right to use a third-party investment bank
to determine the fair, discounted value of such shares (e.g.,
discounted to give effect to block purchases, etc.). In such situation,
the parties agree to use and be bound by the value determined by such
third-party investment bank.
(ii) Xxxxxx (or any Affiliate designated by it) shall
have the right to purchase all (but not less than all) of the Offered
Shares, at the price and on the terms specified in the INDI Sale Notice
(the "Offer Right"). Xxxxxx shall deliver written notice of its
election to exercise the Offer Right (the "Purchase Election Notice")
to INDI within 15 days after the INDI Sale Notice is given.
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Failure by Xxxxxx to give a timely Purchase Election Notice to INDI
shall be deemed an election by it not to exercise the Offer Right.
(iii) If Xxxxxx elects to purchase all of the Offered
Shares pursuant to the Offer Right, then such purchase shall, unless
the parties thereto otherwise agree, be completed at a closing to be
held at the principal office of the Company at 10:00 a.m. local time on
the 10th day following the exercise of the Offer Right.
(iv) The purchase price for the Shares sold pursuant
to the Offer Right shall be the purchase price contained in the INDI
Sale Notice, and shall be on the applicable terms and conditions
contained in the INDI Sale Notice and this Agreement.
(v) In the event that Xxxxxx fails to exercise the
Offer Rights, then INDI shall be permitted to transfer the Offered
Shares solely to the proposed transferee and solely on the terms and
conditions set forth in the INDI Sale Notice, subject to paragraph (e),
below.
(e) Limitations on Future Rights. Xxxxxx and the Company agree
that any restrictions imposed upon any other investors in the Company which are
similar to the First Offer Right shall have terms no more favorable to such
investor than those provided to INDI hereunder.
(f) Rights and Obligations Attached to Common Stock;
Securities Laws. Upon a Transfer by INDI, the recipient of the Shares shall be
entitled to all of the rights and benefits, and subject to all the obligations,
of INDI arising under this Agreement. Prior to any Transfer, INDI shall cause
(i) the prospective transferee to execute and deliver documents evidencing same
to the Company and Xxxxxx, in type and form reasonably satisfactory to the
Company and (ii) its counsel to deliver an opinion to the Company, in form
reasonably satisfactory to the Company, to the effect that such Transfer may be
made without registration under federal securities laws.
(g) Prohibited Transfers. Notwithstanding anything to the
contrary, INDI (and its Affiliates) shall be prohibited, without Xxxxxx'x
consent, from selling its Shares in a Non-Exempt Transfer to any entity that is
a member of any national securities exchange or the National Association of
Securities Dealers, Inc. or any Affiliate of such entity.
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(h) Improper Transfer. Any attempt to transfer any Shares
which is not in accordance with this Agreement or is in violation of law shall
be null and void, and the Company shall not give any effect to such attempted
transfer in the share records of the Company.
3. Pre-emptive Rights.
(a) Except with respect to (i) the grant of options (and the
issuance of shares of Common Stock upon exercise thereof) to employees,
consultants, directors and officers of the Company where the pre- money
valuation of the Company (i.e., the number of shares outstanding (on a fully
diluted basis) multiplied by the option exercise price) is more than $16
million, (ii) the issuance of securities by the Company in a private offering
where the pre-money valuation of the Company (i.e., the number of shares
outstanding (on a fully diluted basis) multiplied by the offering price) is more
than $16 million, and (iii) the issuance of securities by the Company in an
underwritten public offering, if the Company proposes to offer or sell, in
consideration for cash, cash equivalents, Barter Consideration (as defined) or
promissory notes, shares of Common Stock or any other class of capital stock or
securities convertible or exercisable into or exchangeable for shares of Common
Stock or any other class of the Company's capital stock ("New Offer"), the
Company shall offer to each Stockholder the right ("Pre-emptive Right"), on the
same terms specified below (the "Preemptive Right Terms"), to purchase up to
that number of securities sufficient to permit the Stockholder to maintain its
proportionate equity interest in the Company (as determined by dividing all of
the Shares then owned by such Stockholder (and its Affiliates) by the shares of
Common Stock then outstanding. Notwithstanding the foregoing, no Pre-emptive
Rights shall be triggered by the grant of options by the Company (and the
issuance of shares of Common Stock upon exercise thereof) to employees,
consultants, directors and officers of the Company where the pre-money valuation
of the Company is less than $16 million (such options, the "Subject Options")
until such time as Subject Options to purchase an aggregate of 20% of the
Company's then outstanding Common Stock on an after-issued basis (currently
3,121 shares) have been granted ("Subject Option Limit Date"). Pre-emptive
Rights shall be triggered by any grant of Subject Options after the Subject
Option Limit Date, and the number of shares of Common Stock purchasable upon
exercise of such Pre-emptive Rights shall be calculated based solely upon the
number of shares purchasable upon exercise of Subject Options granted after the
Subject Option Limit Date. With respect to cash consideration specified in the
New Offer, the Pre-emptive Right Terms shall be the same as those specified in
the New Offer. With respect to non-cash consideration specified in the New
Offer, the Pre-emptive Right Terms shall permit the Stockholder (and its
Affiliates) to provide such consideration in the form of cash, cash equivalents
and/or a form of non-cash consideration substantially similar to the non-cash
consideration specified in the
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New Offer, in each case having a value equal to the fair value of the non-cash
consideration specified in the New Offer.
(b) "Barter Consideration" shall mean nonmonetary
consideration which can be utilized in the business of the Company, is not
unique in character and is readily available from multiple providers for
purchase for cash in the market.
(c) The Company shall send a written notice of the New Offer
to each Stockholder at least 20 days prior to the consummation of any New Offer
specifying in reasonable detail the material terms of the New Offer including,
without limitation, the material terms of the proposed security, the material
terms of any proposed agreement to be executed by the purchaser, the
consideration per share to be paid by the purchaser, and the identity (if known)
of each proposed purchaser. Each Stockholder shall notify the Company within ten
days of the receipt of such notice whether it intends to exercise its rights
under this Section. The closing of any purchase of securities by a Stockholder
under this Section shall take place on the same day as the closing of the New
Offer at the Company's discretion, within 10 days thereafter.
(d) The Pre-emptive Rights afforded under this Section 3 shall
terminate with respect to a Stockholder at such time as it owns less than 5% of
the outstanding Common Stock.
4. Control Transfer.
(a) If Xxxxxx and/or any of its Affiliates which owns Shares
proposes to make a Control Transfer (as hereinafter defined) of any of their
Shares, then INDI shall have the right to participate ("INDI Participation
Right") and Xxxxxx shall have the right to require INDI to participate ("Xxxxxx
Bring Along Right") in any such sale on the same terms as Xxxxxx and/or its
Affiliates by requiring the purchaser to purchase the "INDI Proportionate Share"
(as hereinafter defined) of the Shares to be sold, on the same terms and
conditions as pertain to the Shares to be sold by Xxxxxx and/or its Affiliates
in the Control Transfer. Notwithstanding the foregoing, if the pre-money
valuation of the Company (i.e., the price per share being offered by the
purchaser multiplied by the number of shares of Common Stock outstanding on a
fully diluted basis) is less than $32 million, INDI shall have the right to
require the purchaser to purchase (and Xxxxxx shall have the right to require
INDI to sell to the purchaser) all of the INDI Shares on the same terms and
conditions as pertain to the Shares to be sold by Xxxxxx and/or its Affiliates
in the Control Transfer.
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(b) "INDI Proportionate Share" means the percentage determined
by dividing (x) the number of Shares then owned by INDI and its Affiliates, by
(y) the sum of (i) the number of Shares then owned by Xxxxxx and its Affiliates
plus (ii) the number of Shares then owned by INDI and its Affiliates.
(c) Procedure.
(i) If Xxxxxx desires to make a Control Transfer,
then at least 30 days before making any such Control Transfer (the
"INDI Rights Exercise Period"), Xxxxxx shall deliver to INDI a written
notice (the "Change of Control Notice") notifying it of the proposed
Control Transfer. The Change of Control Notice shall specify the
proposed number of Shares to be the subject of the Control Transfer
(the "Subject Shares") and disclose in detail the proposed terms and
conditions of the Control Transfer, including, without limitation, the
price per share to be paid by the transferee, the identity of the
transferee, evidence of its financial ability to effectuate the
purchase and, if applicable, notice that INDI is obligated to include
and sell all of its Shares or the INDI Proportionate Share, as the case
may be, as part of such Control Transfer pursuant to the Xxxxxx Bring
Along Right. In the event the consideration to be given by the
transferee in the Control Transfer consists in part or in whole of
consideration other than cash, a description of the non-cash component
of the consideration, together with Xxxxxx'x reasonable estimate of the
fair market value of such non-cash component shall also be provided in
the Change of Control Notice. INDI shall have 15 days from the receipt
of the Change of Control Notice to exercise the INDI Participation
Rights by providing written notice of such exercise to Xxxxxx. Failure
by INDI to give timely notice to Xxxxxx shall be deemed an election by
it not to exercise the INDI Participation Right.
(ii) If INDI exercises the INDI Participation Right,
or Xxxxxx exercises the Xxxxxx Bring Along Right, it shall cooperate in
consummating the Control Transfer, including, without limitation, by
becoming a party to the sale agreement and all other appropriate
related agreements, delivery of certificates and other instruments for
its Shares duly endorsed for transfer, free and clear of all liens and
encumbrances, and voting or consenting in favor of such transaction (to
the extent a vote or consent is required) and taking any other
necessary or appropriate action in furtherance thereof, including the
execution and delivery of any other appropriate agreements,
certificates, instruments and other documents, including becoming a
party to standard representations, warranties and indemnities in such
agreements.
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(iii) In the event that INDI fails to exercise the
INDI Participation Right, then Xxxxxx shall be permitted to transfer
the Subject Shares solely to the proposed transferee and solely on the
terms and conditions set forth in the Change of Control Notice.
(d) "Control Transfer" means the first transaction or series
of related transactions as a result of which any third party, or group of third
parties acting in concert, acquires, directly or indirectly, from Xxxxxx and/or
any of its Affiliates, a majority of the Common Stock owned by Xxxxxx and its
Affiliates prior to such transaction or series of related transactions or the
power or ability to exercise voting rights in respect of a majority of such
shares of Common Stock.
5. Representation and Warranty of Stockholders. Each of the
Stockholders hereby represents and warrants that, except for this Agreement and
the VentureHighway Agreement, it is not a party to any contract or agreement
respecting the Shares, including any voting trust or other voting arrangement,
option or transfer agreement.
6. Noncompetition. If INDI or any Affiliate shall breach Section 9.3(a)
of the VentureHighway Agreement after the Promotion Period, then from and after
such date, the rights provided to INDI in Sections 1(b), 3 and 4 of this
Agreement shall terminate. If Xxxxxx or any Affiliate shall breach Section
9.3(a) of the VentureHighway Agreement, then from and after such date, the
rights provided to Xxxxxx in Sections 2, 3 and 4 of this Agreement shall
terminate.
7. Definition of Affiliates. "Affiliate" of a party shall mean any
person or entity owned or controlled by or under common control with such party
and any of their respective directors, officers or employees; provided, however,
that the parties' nonemployee directors and Xxxx Xxxxxxxxx and any entity
controlled by such persons shall not be deemed Affiliates. For purposes of this
Agreement, the Company shall not be deemed to be an Affiliate of either INDI or
Xxxxxx or any of their respective Affiliates. In the event INDI makes a Transfer
to any Affiliate or Affiliates, INDI shall designate a single entity (either
itself or an Affiliate) to serve as the sole party to which Xxxxxx or the
Company shall provide any notice required to be delivered to INDI or its
Affiliates under this Agreement and the VentureHighway Agreement and such
designated entity shall also become the sole party which may serve notice upon
the Company or Xxxxxx and which may elect any rights afforded to INDI and/or its
Affiliates hereunder or thereunder. Any obligation on the part of INDI to give
notice to Xxxxxx under this Agreement or the VentureHighway Agreement shall be
satisfied by INDI giving notice to Xxxxxx, regardless of whether Xxxxxx has
transferred all or any portion of its Shares to an Affiliate or any other party.
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8. Definition of "Shares". The term "Shares" shall mean any and all
shares of Common Stock outstanding as of the Closing Date and any additional
shares of Common Stock hereafter acquired by the owner thereof.
9. Specific Performance. If any Stockholder commits a breach, or
threatens to commit a breach, of any of the provisions of this Agreement, the
other parties shall have the right and remedy to have the provisions of this
Agreement specifically enforced by any court having equity jurisdiction, it
being acknowledged and agreed by the parties that the transactions contemplated
hereunder are of a special, unique and extraordinary character and that any such
breach or threatened breach by a party will cause irreparable injury to the
other parties and that money damages will not provide an adequate remedy to such
other parties.
10. Successors and Assigns. None of the rights or obligations of the
parties hereto may be assigned without the written consent of each of the
parties, and any attempt to do so shall be null and void. Subject to the
preceding sentence, the rights and obligations of each party hereto shall be
binding on and inure to the benefit of its successors and permitted assigns.
11. Governing Law; Venue. This Agreement shall be governed by and
construed under the law of the State of New York, disregarding any principles of
conflicts of law that would otherwise provide for the application of the
substantive law of another jurisdiction. The Company and each Stockholder (i)
agrees that any legal suit, action or proceeding arising out of or relating to
this Agreement shall be instituted exclusively in New York State Supreme Court,
County of New York, or in the United States District Court for the Southern
District of New York, (ii) waives any objection to the venue of any such suit,
action or proceeding and the right to assert that such forum is not a convenient
forum, and (iii) irrevocably consents to the jurisdiction of the New York State
Supreme Court, County of New York, and the United States District Court for the
Southern District of New York in any such suit, action or proceeding. The
Company, Xxxxxx and each Stockholder further agrees to accept and acknowledge
service of any and all process which may be served in any such suit, action or
proceeding in the New York State Supreme Court, County of New York, or in the
United States District Court for the Southern District of New York and agrees
that service of process upon it mailed by certified mail to its address set
forth herein shall be deemed in every respect effective service of process upon
it in any such suit, action or proceeding.
12. Counterparts and Facsimile Signatures. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument. A
signature received via facsimile shall be deemed an original for all purposes.
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13. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
14. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered if delivered personally or by nationally
recognized overnight courier, or four business days after deposit with the
United States Post Office by certified mail, postage prepaid, to the parties at
the following addresses and numbers (or at such other address or number for a
party as shall be specified by like notice, except that notices of changes of
address or number shall be effective upon receipt):
If to INDI:
Individual Investor Group, Inc.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel
(Facsimile No.: 212/742-0742)
with a copy to:
Xxxxxxx X. Xxxxx, Esq.
Xxxxx Xxxxxxxxxx Xxxxxxxx & Xxxxxxxx, P.C.
Xxx Xxxxx Xxxxxxxxx Xxxxxx
Xxxxx Xxxxxx, Xxx Xxxx 00000
(Facsimile No.: 914/997-0035)
If to Xxxxxx or the Company:
0000 Xxxxxxx Xxxxxxxx
Xxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxxx
Facsimile No: 516/364-5199
in either case, with a copy to
Xxxxxxxx Mollen & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxx Xxxxxx, Esq.
(Facsimile No: 212/818-8881)
15. Entire Agreement; Amendments and Waivers. This Agreement
constitutes the full and entire understanding and agreement between the parties
with regard to the subjects hereof. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either
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generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company, Xxxxxx and INDI.
16. Severability. If one or more provisions of this Agreement is or are
held to be unenforceable under applicable law, such provision(s) shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its remaining terms.
17. Termination. The provisions of this Agreement will terminate
automatically and be of no further force and effect upon the earliest of (i) the
date neither INDI or Xxxxxx or any of their respective Affiliates holds any
Shares, (ii) consummation of a Control Transfer, and (iii) consummation of the
initial public offering of the Company's equity securities.
18. Rights of Third Parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective permitted successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Stockholder Agreement on the day and year first above written.
XXXXXXXXXXXXXX.XXX INC.
By:____________________________________
Name:
Title:
XXXXXX HOLDING CORP.
By:_____________________________________
Name:
Title:
INDIVIDUAL INVESTOR GROUP, INC.
By:_____________________________________
Name:
Title:
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