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Exhibit 10.5
STUDENT ADVANTAGE, INC.
INVESTOR RIGHTS AGREEMENT
This Agreement dated as of October 20, 1998 is entered into by and
among Student Advantage, Inc., a Delaware corporation (the "Company"), the
individual and entity listed on Exhibit A attached hereto (the "Purchasers"),
Princeton Review Publishing, LLC ("PRP") and Xxxxxxx X. Xxxxx, Xx. (the
"Founder").
Recitals
WHEREAS, the Company and the Purchasers have entered into a Series A
Convertible Preferred Stock Purchase Agreement of even date herewith (the
"Purchase Agreement"); and
WHEREAS, the Company and the Purchasers desire to provide for certain
arrangements with respect to (i) the registration of shares of capital stock of
the Company under the Securities Act of 1933, as amended, (ii) the Purchasers'
right of first refusal with respect to certain issuances of securities of the
Company, and (iii) certain negative covenants of the Company; and
WHEREAS, PRP has acquired shares of Common Stock of the Company in
exchange for its membership interests in Student Advantage LLC, and the parties
desire that PRP shall participate in certain rights set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
1. Certain Definitions.
As used in this Agreement, the following terms shall have the following
respective meanings:
"Commission" means the Securities and Exchange Commission, or
any other federal agency at the time administering the Securities Act.
"Common Stock" means the common stock, $.01 par value per
share, of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission issued under such Act, as they each may, from time to time, be in
effect.
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"Founder Registrable Shares" means shares of Common Stock held
by the Founder on the date hereof.
"Initiating Holders" means the Stockholders initiating a
request for registration pursuant to Section 2.1(a) or 2.1(b), as the case may
be.
"Initial Public Offering" means the initial underwritten
public offering of shares of Common Stock pursuant to an effective registration
statement under the Securities Act.
"Other Holders" means holders of securities of the Company who
are entitled by contract to include such securities in a Registration Statement.
"Prospectus" means the prospectus included in any Registration
Statement, as amended or supplemented by an amendment or prospectus supplement,
including post-effective amendments, and all material incorporated by reference
or deemed to be incorporated by reference in such Prospectus.
"Registration Statement" means a registration statement filed
by the Company with the Commission for a public offering and sale of securities
of the Company (other than a registration statement on Form S-8 or Form S-4, or
their successors, or any other form for a similar limited purpose, or any
registration statement covering only securities proposed to be issued in
exchange for securities or assets of another corporation).
"Registration Expenses" means the expenses described in
Section 2.4.
"Registrable Shares" means (i) the shares of Common Stock
issued or issuable upon conversion of the Shares, (ii) the shares of Common
Stock held by PRP on the date hereof, (iii) Founder Registrable Shares, (iv) any
shares of Common Stock, and any shares of Common Stock issued or issuable upon
the conversion or exercise of any other securities, acquired by the Stockholders
pursuant to Section 3 of this Agreement and (v) any other shares of Common Stock
issued in respect of such shares (because of stock splits, stock dividends,
reclassifications, recapitalizations, or similar events); provided, however,
that shares of Common Stock which are Registrable Shares shall cease to be
Registrable Shares upon (i) any sale pursuant to a Registration Statement or
Rule 144 under the Securities Act or (ii) any sale in any manner to a person or
entity which, by virtue of Section 5 of this Agreement, is not entitled to the
rights provided by this Agreement. Wherever reference is made in this Agreement
to a request or consent of holders of a certain percentage of Registrable
Shares, the determination of such percentage shall include shares of Common
Stock issuable upon conversion of the Shares even if such conversion has not
been effected.
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"Securities Act" means the Securities Act of 1933, as amended,
or any successor federal statute, and the rules and regulations of the
Commission issued under such Act, as they each may, from time to time, be in
effect.
"Selling Stockholder" means any Stockholder owning Registrable
Shares included in a Registration Statement.
"Shares" shall mean the shares of Series A Convertible
Preferred Stock of the Corporation acquired by the Purchasers pursuant to the
Purchase Agreement or the Exchange Agreement of even date herewith by and among
the Company, Student Advantage LLC and others.
"Stockholders" means the Purchasers, PRP, and any persons or
entities to whom the rights granted under this Agreement are transferred by any
of the Purchasers, PRP, or their successors or assigns pursuant to Section 5
hereof. In addition, solely for purposes of Sections 2.2 through 2.8 hereof,
"Stockholders" shall include the Founder, and his successors or assigns pursuant
to Section 5 hereof.
2. Registration Rights
2.1 Required Registrations.
(a) At any time after the closing of the Initial
Public Offering, a Stockholder or Stockholders (other than PRP) holding in the
aggregate at least 40% of the Registrable Shares held by all Stockholders other
than PRP may request, in writing, that the Company effect the registration on
Form S-1 or Form S-2 (or any successor form) of Registrable Shares owned by such
Stockholder or Stockholders having an aggregate value of at least $5,000,000
(based on the public market price at the time of the request).
(b) At any time after the Company becomes eligible to
file a Registration Statement on Form S-3 (or any successor form relating to
secondary offerings), a Stockholder or Stockholders holding in the aggregate at
least 20% of the Registrable Shares may request, in writing, that the Company
effect the registration on Form S-3 (or such successor form), of Registrable
Shares having an aggregate value of at least $1,000,000 (based on the public
market price at the time of the request).
(c) Upon receipt of any request for registration
pursuant to this Section 2.1, the Company shall promptly give written notice of
such proposed registration to all other Stockholders. Such Stockholders shall
have the right, by giving written notice to the Company within 30 days after the
Company provides its notice, to elect to have included in such registration such
of their Registrable Shares as such Stockholders may request in such notice of
election, subject in the case of an
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underwritten offering to the approval of the managing underwriter as provided in
Section 2(d) below. Thereupon, the Company shall, as expeditiously as possible,
use its best efforts to effect the registration on an appropriate registration
form of all Registrable Shares which the Company has been requested to so
register (provided, however, that in the case of a registration requested under
Section 2.1(b), the Company will only be obligated to effect such registration
on Form S-3 (or any successor form)).
(d) If the Initiating Holders intend to distribute
the Registrable Shares covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
Section 2.1(a) or (b), as the case may be, and the Company shall include such
information in its written notice referred to in Section 2.1(c). The right of
any other Stockholder to include its Registrable Shares in such registration
pursuant to Section 2.1(a) or (b), as the case may be, shall be conditioned upon
such other Stockholder's participation in such underwriting on the terms set
forth herein.
(e) The Initiating Holders shall have the right to
select the managing underwriter(s) for any underwritten offering requested
pursuant to Section 2.1(a) or (b), subject to the approval of the Company, which
approval will not be unreasonably withheld.
(f) The Company shall not be required to effect more
than two registrations pursuant to Section 2.1(a). In addition, the Company
shall not be required to effect any registration (other than on Form S-3 or any
successor form relating to secondary offerings) within six months after the
effective date of any other Registration Statement of the Company. For purposes
of this Section 2.1(f), a Registration Statement shall not be counted until such
time as such Registration Statement has been declared effective by the
Commission (unless the Initiating Holders withdraw their request for such
registration (other than as a result of information concerning the business or
financial condition of the Company which is made known to the Stockholders after
the date on which such registration was requested) and elect not to pay the
Registration Expenses therefor pursuant to Section 2.4).
(g) If at the time of any request to register
Registrable Shares by Initiating Holders pursuant to this Section 2.1, the
Company is engaged or has plans to engage in a registered public offering or is
engaged in any other activity which, in the good faith determination of the
Company's Board of Directors, would be materially adversely affected by the
requested registration, then the Company may at its option direct that such
request be delayed for a period not in excess of 60 days from the date of such
request, such right to delay a request to be exercised by the Company not more
than once in any 24-month period.
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2.2 Incidental Registration.
(a) Whenever the Company proposes to file a
Registration Statement (other than a Registration Statement filed pursuant to
Section 2.1) at any time and from time to time, it will, prior to such filing,
give written notice to all Stockholders of its intention to do so. Upon the
written request of a Stockholder or Stockholders given within 20 days after the
Company provides such notice (which request shall state the intended method of
disposition of such Registrable Shares), the Company shall use its best efforts
to cause all Registrable Shares which the Company has been requested by such
Stockholder or Stockholders to register to be registered under the Securities
Act to the extent necessary to permit their sale or other disposition in
accordance with the intended methods of distribution specified in the request of
such Stockholder or Stockholders; provided that the Company shall have the right
to postpone or withdraw any registration effected pursuant to this Section 2.2
without obligation to any Stockholder.
(b) If the registration for which the Company gives
notice pursuant to Section 2.2(a) is a registered public offering involving an
underwriting, the Company shall so advise the Stockholders as a part of the
written notice given pursuant to Section 2.2(a). In such event, the right of any
Stockholder to include its Registrable Shares in such registration pursuant to
Section 2.2 shall be conditioned upon such Stockholder's participation in such
underwriting on the terms set forth herein. All Stockholders proposing to
distribute their securities through such underwriting shall (together with the
Company, Other Holders, and any officers or directors distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for the
underwriting by the Company, provided that such underwriting agreement shall not
provide for indemnification or contribution obligations on the part of the
Purchasers or PRP materially greater than the obligations of the Stockholders
pursuant to Section 2.5. Notwithstanding any other provision of this Section
2.2, if the managing underwriter determines that the inclusion of all shares
requested to be registered would adversely affect the offering, the Company may
limit the number of Registrable Shares to be included in the registration and
underwriting. The Company shall so advise all holders of Registrable Shares
requesting registration, and the number of shares that are entitled to be
included in the registration and underwriting shall be allocated in the
following manner. The securities of the Company held by officers and directors
of the Company (other than Registrable Shares) shall be excluded from such
registration and underwriting to the extent deemed advisable by the managing
underwriter, and, if a further limitation on the number of shares is required,
the number of shares that may be included in such registration and underwriting
shall be allocated among all Stockholders and Other Holders requesting
registration in proportion, as nearly as practicable, to the respective number
of shares of Common Stock (on an as-converted basis) which they held at the time
the Company gives the notice specified in Section
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2.2(a). If any Stockholder or Other Holder would thus be entitled to include
more securities than such holder requested to be registered, the excess shall be
allocated among other requesting Stockholders and Other Holders pro rata in the
manner described in the preceding sentence. If any holder of Registrable Shares
or any officer, director or Other Holder disapproves of the terms of any such
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, and any Registrable Shares or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
2.3 Registration Procedures.
(a) If and whenever the Company is required by the
provisions of this Agreement to use its best efforts to effect the registration
of any Registrable Shares under the Securities Act, the Company shall:
(i) file with the Commission a Registration
Statement with respect to such Registrable Shares and use its best efforts to
cause that Registration Statement to become and remain effective until all such
Registrable Shares are sold;
(ii) as expeditiously as possible prepare
and file with the Commission any amendments and supplements to the Registration
Statement and the prospectus included in the Registration Statement as may be
necessary to comply with the provisions of the Securities Act (including the
anti-fraud provisions thereof) and to keep the Registration Statement effective
until all such Registrable Shares are sold;
(iii) as expeditiously as possible furnish
to each Selling Stockholder such reasonable numbers of copies of the Prospectus,
including any preliminary Prospectus, in conformity with the requirements of the
Securities Act, and such other documents as such Selling Stockholder may
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Shares owned by such Selling Stockholder;
(iv) as expeditiously as possible use its
best efforts to register or qualify the Registrable Shares covered by the
Registration Statement under the securities or Blue Sky laws of such states as
the Selling Stockholders shall reasonably request, and do any and all other acts
and things that may be necessary or desirable to enable the Selling Stockholders
to consummate the public sale or other disposition in such states of the
Registrable Shares owned by the Selling Stockholder; provided, however, that the
Company shall not be required in connection with this paragraph (iv) to qualify
as a foreign corporation or execute a general consent to service of process in
any jurisdiction;
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(v) as expeditiously as possible, cause all
such Registrable Shares to be listed on each securities exchange or automated
quotation system on which similar securities issued by the Company are then
listed;
(vi) promptly provide a transfer agent and
registrar for all such Registrable Shares not later than the effective date of
such Registration Statement;
(vii) promptly make available for inspection
by the Selling Stockholders, any managing underwriter participating in any
disposition pursuant to such Registration Statement, and any attorney or
accountant or other agent retained by any such underwriter or selected by the
Selling Stockholders, all financial and other records, pertinent corporate
documents and properties of the Company and cause the Company's officers,
directors, employees and independent accountants to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such Registration Statement; provided, however, that
any such person inspecting such documents shall execute a confidentiality
agreement containing customary confidentiality provisions;
(viii) as expeditiously as possible, notify
each Selling Stockholder, promptly after it shall receive notice thereof, of the
time when such Registration Statement has become effective or a supplement to
any Prospectus forming a part of such Registration Statement has been filed; and
(ix) as expeditiously as possible following
the effectiveness of such Registration Statement, notify each seller of such
Registrable Shares of any request by the Commission for the amending or
supplementing of such Registration Statement or Prospectus.
(b) If the Company has delivered a Prospectus to the
Selling Stockholders and after having done so the Prospectus is amended to
comply with the requirements of the Securities Act, the Company shall promptly
notify the Selling Stockholders and, if requested, the Selling Stockholders
shall immediately cease making offers of Registrable Shares and return all
Prospectuses to the Company. The Company shall promptly provide the Selling
Stockholders with revised Prospectuses and, following receipt of the revised
Prospectuses, the Selling Stockholders shall be free to resume making offers of
the Registrable Shares.
(c) In the event that, in the judgment of the
Company, it is advisable to suspend use of a Prospectus included in a
Registration Statement due to pending material developments or other events that
have not yet been publicly disclosed and as to which the Company believes public
disclosure would be detrimental to the Company, the Company shall notify all
Selling Stockholders to such
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effect, and, upon receipt of such notice, each such Selling Stockholder shall
immediately discontinue any sales of Registrable Shares pursuant to such
Registration Statement until such Selling Stockholder has received copies of a
supplemented or amended Prospectus or until such Selling Stockholder is advised
in writing by the Company that the then current Prospectus may be used and has
received copies of any additional or supplemental filings that are incorporated
or deemed incorporated by reference in such Prospectus. Notwithstanding anything
to the contrary herein, the Company shall not exercise its rights under this
Section 2.3(c) to suspend sales of Registrable Shares for a period in excess of
30 days in any 365-day period.
2.4 Allocation of Expenses. The Company will pay all
Registration Expenses for all registrations under this Agreement; provided,
however, that if a registration under Section 2.1 is withdrawn at the request of
the Initiating Holders (other than as a result of information concerning the
business or financial condition of the Company which is made known to the
Stockholders after the date on which such registration was requested) and if the
Initiating Holders elect not to have such registration counted as a registration
requested under Section 2.1, the requesting Stockholders shall pay the
Registration Expenses of such registration pro rata in accordance with the
number of their Registrable Shares included in such registration. For purposes
of this Section, the term "Registration Expenses" shall mean all expenses
incurred by the Company in complying with this Agreement, including, without
limitation, all registration and filing fees, exchange listing fees, printing
expenses, fees and expenses of counsel for the Company and the fees and expenses
of one counsel selected by each Purchaser to represent it, state Blue Sky fees
and expenses, and the expense of any special audits incident to or required by
any such registration, but excluding underwriting discounts, selling commissions
and the fees and expenses of Selling Stockholders' own counsel (other than the
counsel referred to above).
2.5 Indemnification and Contribution.
(a) In the event of any registration of any of the
Registrable Shares under the Securities Act pursuant to this Agreement, the
Company will indemnify and hold harmless the seller of such Registrable Shares,
each underwriter of such Registrable Shares, and each other person, if any, who
controls such seller or underwriter within the meaning of the Securities Act or
the Exchange Act against any losses, claims, damages or liabilities, joint or
several, to which such seller, underwriter or controlling person may become
subject under the Securities Act, the Exchange Act, state securities or Blue Sky
laws or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any Registration
Statement under which such Registrable Shares were registered under the
Securities Act, any preliminary prospectus or final prospectus contained in the
Registration Statement, or any amendment or supplement to such Registration
Statement, or arise
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out of or are based upon the omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading; and the Company will reimburse such seller, underwriter and each
such controlling person for any legal or any other expenses reasonably incurred
by such seller, underwriter or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon any untrue statement or omission made in such Registration Statement,
preliminary prospectus or prospectus, or any such amendment or supplement, in
reliance upon and in conformity with information furnished to the Company, in
writing, by or on behalf of such seller, underwriter or controlling person
specifically for use in the preparation thereof.
(b) In the event of any registration of any of the
Registrable Shares under the Securities Act pursuant to this Agreement, each
seller of Registrable Shares, severally and not jointly, will indemnify and hold
harmless the Company, each of its directors and officers and each underwriter
(if any) and each person, if any, who controls the Company or any such
underwriter within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages or liabilities, joint or several, to which
the Company, such directors and officers, underwriter or controlling person may
become subject under the Securities Act, Exchange Act, state securities or Blue
Sky laws or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement under which such Registrable Shares were registered under
the Securities Act, any preliminary prospectus or final prospectus contained in
the Registration Statement, or any amendment or supplement to the Registration
Statement, or arise out of or are based upon any omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, if the statement or omission was made in
reliance upon and in conformity with information relating to such seller
furnished in writing to the Company by or on behalf of such seller specifically
for use in connection with the preparation of such Registration Statement,
prospectus, amendment or supplement; provided, however, that the obligations of
a Stockholder hereunder shall be limited to an amount equal to the net proceeds
to such Stockholder of Registrable Shares sold in connection with such
registration.
(c) Each party entitled to indemnification under this
Section (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom; provided, that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified
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Party (whose approval shall not be unreasonably withheld or delayed); and,
provided, further, that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section except to the extent that the Indemnifying Party is
materially adversely affected by such failure. The Indemnified Party may
participate in such defense at such party's expense; provided, however, that the
Indemnifying Party shall pay such expense if representation of such Indemnified
Party by the counsel retained by the Indemnifying Party would be inappropriate
due to actual or potential differing interests between the Indemnified Party and
any other party represented by such counsel in such proceeding; provided further
that in no event shall the Indemnifying Party be required to pay the expenses of
more than one law firm per jurisdiction as counsel for the Indemnified Party.
The Indemnifying Party also shall be responsible for the expenses of such
defense if the Indemnifying Party does not elect to assume such defense. No
Indemnifying Party, in the defense of any such claim or litigation shall, except
with the consent of each Indemnified Party, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect of such claim or litigation, and no
Indemnified Party shall consent to entry of any judgment or settle such claim or
litigation without the prior written consent of the Indemnifying Party, which
consents shall not be unreasonably withheld or delayed.
(d) In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in this
Section 2.5 is due in accordance with its terms but for any reason is held to be
unavailable to an Indemnified Party in respect to any losses, claims, damages
and liabilities referred to herein, then the Indemnifying Party shall, in lieu
of indemnifying such Indemnified Party, contribute to the amount paid or payable
by such Indemnified Party as a result of such losses, claims, damages or
liabilities to which such party may be subject in such proportion as is
appropriate to reflect the relative fault of the Company on the one hand and the
Stockholders on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of the Company and the
Stockholders shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of material fact related to information
supplied by the Company or the Stockholders and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Stockholders agree that it would not
be just and equitable if contribution pursuant to this Section 2.5 were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph of Section 2.5, in no case
shall any one Stockholder be liable or responsible for any amount in excess of
the net proceeds received by such Stockholder from the offering of Registrable
Shares; provided, however, that no person guilty of fraudulent misrepresentation
(within the
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meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action, suit or proceeding against such
party in respect of which a claim for contribution may be made against another
party or parties under this Section, notify such party or parties from whom
contribution may be sought, but the omission so to notify such party or parties
from whom contribution may be sought shall not relieve such party from any other
obligation it or they may have thereunder or otherwise under this Section,
except to the extent that the party from whom contribution is sought is
materially adversely affected by such failure. No party shall be liable for
contribution with respect to any action, suit, proceeding or claim settled
without its prior written consent, which consent shall not be unreasonably
withheld.
2.6 Other Matters with Respect to Underwritten Offerings. In
the event that Registrable Shares are sold pursuant to a Registration Statement
in an underwritten offering pursuant to Section 2.1, the Company agrees to (a)
enter into an underwriting agreement containing customary representations and
warranties with respect to the business and operations of the Company and
customary covenants and agreements to be performed by the Company, including
without limitation customary provisions with respect to indemnification by the
Company of the underwriters of such offering; (b) use its best efforts to cause
its legal counsel to render customary opinions to the underwriters and the
Selling Stockholders with respect to the Registration Statement; and (c) use its
best efforts to cause its independent public accounting firm to issue customary
"cold comfort letters" to the underwriters and the Selling Stockholders with
respect to the Registration Statement.
2.7 Information by Holder. Each holder of Registrable Shares
included in any registration shall furnish to the Company such information
regarding such holder and the distribution proposed by such holder as the
Company may reasonably request in writing and as shall be required in connection
with any registration, qualification or compliance referred to in this
Agreement.
2.8 "Stand-Off" Agreement; Confidentiality of Notices. Each
Stockholder, if requested by the Company and the managing underwriter of an
offering by the Company of Common Stock or other securities of the Company,
agrees not to sell or otherwise transfer or dispose of any Registrable Shares or
other securities of the Company held by such Stockholder for a period of 180
days following the effective date of a Registration Statement; provided, that:
(a) such agreement shall only apply to the initial
public offering of Common Stock of the Company sold in an underwritten offering;
and
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(b) all stockholders of the Company then holding at
least 5% of the outstanding Common Stock (on an as-converted basis) and all
officers and directors of the Company enter into similar agreements.
The Company may impose stop-transfer instructions with respect to the
Registrable Shares or other securities subject to the foregoing restriction
until the end of such 180-day period.
Any Stockholder receiving any written notice from the Company regarding
the Company's plans to file a Registration Statement shall treat such notice
confidentially and shall not disclose such information to any person other than
as necessary to exercise its rights under this Agreement.
2.9 Limitations on Subsequent Registration Rights. The Company
shall not, without the prior written consent of Stockholders holding at least 66
2/3% of the Registrable Shares then held by all Stockholders, enter into any
agreement (other than this Agreement) with any holder or prospective holder of
any securities of the Company which grant such holder or prospective holder
rights to include securities of the Company in any Registration Statement,
unless (a) such rights to include securities in a registration initiated by the
Company are not more favorable than the rights granted to Holders under this
Agreement, and (b) any such rights to initiate a registration provide that no
such initiation may be made prior to the Initial Public Offering and the
Stockholders shall be entitled to include therein Registrable Shares on a pro
rata basis with such holders based on the number of shares of Common Stock (on
an as-converted basis) owned by Stockholders and such holders.
2.10 Rule 144 Requirements. After the earliest of (i) the
closing of the sale of securities of the Company pursuant to a Registration
Statement or (ii) the registration by the Company of a class of securities under
Section 12 of the Exchange Act, the Company agrees to:
(a) make and keep current public information about
the Company available, as those terms are understood and defined in Rule 144;
(b) use its best efforts to file with the Commission
in a timely manner all reports and other documents required of the Company under
the Exchange Act (at any time after it has become subject to such reporting
requirements); and
(c) furnish to any holder of Registrable Shares upon
request (i) a written statement by the Company as to its compliance with the
reporting requirements of Rule 144(c) and of the Securities Act and the Exchange
Act (at any time after it has become subject to such reporting requirements),
(ii) a copy of the most recent annual or quarterly report of the Company, and
(iii) such other reports and
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documents of the Company as such holder may reasonably request to avail itself
of any similar rule or regulation of the Commission allowing it to sell any such
securities without registration.
3. Right Of First Refusal
3.1 Rights of Stockholders
(a) The Company shall not issue, sell or exchange,
agree to issue, sell or exchange, or reserve or set aside for issuance, sale or
exchange, (i) any shares of its Common Stock, (ii) any other equity securities
of the Company, including, without limitation, shares of preferred stock, (iii)
any option, warrant or other right to subscribe for, purchase or otherwise
acquire any equity securities of the Company, or (iv) any debt securities
convertible or exchangeable, directly or indirectly, into or for capital stock
of the Company (collectively, the "Offered Securities"), unless in each such
case the Company shall have first complied with this Section 3.1. The Company
shall deliver to each Stockholder a written notice of any proposed or intended
issuance, sale or exchange of Offered Securities (the "Offer"), which Offer
shall (i) identify and describe the Offered Securities, (ii) describe the price
and other terms upon which they are to be issued, sold or exchanged, and the
number or amount of the Offered Securities to be issued, sold or exchanged,
(iii) identify the persons or entities (if known) to which or with which the
Offered Securities are to be offered, issued, sold or exchanged and (iv) offer
to issue and sell to or exchange with such Stockholder (A) a pro rata portion of
the Offered Securities determined by dividing the aggregate number of shares of
Common Stock then held by such Stockholder (giving effect to the conversion of
all shares of convertible preferred stock then held) by the total number of
shares of Common Stock then outstanding (giving effect to the conversion of all
outstanding shares of convertible preferred stock) (the "Basic Amount"), and (B)
any additional portion of the Offered Securities attributable to the Basic
Amounts of other Stockholders as such Stockholder shall indicate it will
purchase or acquire should the other Stockholders subscribe for less than their
Basic Amounts (the "Undersubscription Amount").
(b) To accept an Offer, in whole or in part, a
Stockholder must deliver a written notice to the Company prior to the end of the
30-day period of the Offer, setting forth the portion of the Stockholder's Basic
Amount that such Stockholder elects to purchase and, if such Stockholder shall
elect to purchase all of its Basic Amount, the Undersubscription Amount (if any)
that such Stockholder elects to purchase (the "Notice of Acceptance"). If the
Basic Amounts subscribed for by all Stockholders are less than the total of all
of the Basic Amounts available for purchase, then each Stockholder who has set
forth an Undersubscription Amount in its Notice of Acceptance shall be entitled
to purchase, in addition to the Basic Amounts subscribed for, the
Undersubscription Amount it has subscribed for; provided, however, that if the
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Undersubscription Amounts subscribed for exceed the difference between the total
of all of the Basic Amounts available for purchase and the Basic Amounts
subscribed for (the "Available Undersubscription Amount"), each Stockholder who
has subscribed for any Undersubscription Amount shall be entitled to purchase
only that portion of the Available Undersubscription Amount as the
Undersubscription Amount subscribed for by such Stockholder bears to the total
Undersubscription Amounts subscribed for by all Stockholders, subject to
rounding by the Board of Directors to the extent it deems reasonably necessary.
(c) The Company shall have 90 days from the
expiration of the 30-day period of the Offer set forth in Section 3.1(b) above
to issue, sell or exchange all or any part of such Offered Securities as to
which a Notice of Acceptance has not been given by the Stockholders (the
"Refused Securities"), but only to the offerees or purchasers described in the
Offer (if so described therein) and only upon terms and conditions (including,
without limitation, unit prices and interest rates) which are not more
favorable, in the aggregate, to the acquiring person or persons or less
favorable to the Company than those set forth in the Offer.
(d) In the event the Company shall propose to sell
less than all the Refused Securities (any such sale to be in the manner and on
the terms specified in Section 3.1(c) above), then each Stockholder may, at its
sole option and in its sole discretion, reduce the number or amount of the
Offered Securities specified in its Notice of Acceptance to an amount that shall
be not less than the number or amount of the Offered Securities that the
Stockholder elected to purchase pursuant to Section 3.1(b) above multiplied by a
fraction, (i) the numerator of which shall be the number or amount of Offered
Securities the Company actually proposes to issue, sell or exchange (including
Offered Securities to be issued or sold to Stockholders pursuant to Section
3.1(b) above prior to such reduction) and (ii) the denominator of which shall be
the original amount of the Offered Securities. In the event that any Stockholder
so elects to reduce the number or amount of Offered Securities specified in its
Notice of Acceptance, the Company may not issue, sell or exchange more than the
reduced number or amount of the Offered Securities unless and until such
securities have again been offered to the Stockholders in accordance with
Section 3.1(a) above.
(e) Upon the closing of the issuance, sale or
exchange of all or less than all of the Refused Securities, the Stockholders
shall acquire from the Company, and the Company shall issue to the Stockholders,
the number or amount of Offered Securities specified in the Notices of
Acceptance, as reduced pursuant to Section 3.1(d) above if the Stockholders have
so elected, upon the terms and conditions specified in the Offer. The purchase
by the Stockholders of any Offered Securities is subject in all cases to the
preparation, execution and delivery by the Company and the Stockholders of a
purchase agreement relating to such Offered Securities reasonably satisfactory
in form and substance to the Stockholders and their respective counsel.
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(f) Any Offered Securities not acquired by the
Stockholders or other persons in accordance with Section 3.1(c) above may not be
issued, sold or exchanged until they are again offered to the Stockholders under
the procedures specified in this Agreement.
(g) The rights of the Stockholders under this Section
3 shall not apply to:
(1) Common Stock issued as a stock dividend
to holders of Common Stock or upon any subdivision or combination of shares of
Common Stock;
(2) the issuance of any shares of Common
Stock upon conversion of shares of convertible preferred stock;
(3) the issuance of up to 1,400,000 shares
of Common Stock, or the grant of options therefor, including shares issued upon
exercise of options outstanding on the date of this Agreement (such number to be
proportionately adjusted in the event of any stock splits, stock dividends,
recapitalizations or similar events occurring on or after the date of this
Agreement), to officers, directors, consultants and employees of the Company or
any subsidiary pursuant to any plan, agreement or arrangement approved by a vote
of not less than a majority of the Board of Directors of the Company (it being
understood that any shares subject to options that expire or terminate
unexercised shall not count towards the maximum number set forth in this
clause(3));
(4) shares of Common Stock sold by the
Company in an underwritten public offering pursuant to an effective registration
statement under the Securities Act;
(5) shares of Common Stock issued upon
exercise of warrants issued in connection with borrowings by the Company
(including lease finance arrangements), and shares of Common Stock (or warrants
therefor) issued in connection with acquisitions, joint ventures and corporate
partnering relationships, in each case after approval by a majority of the
non-employee members of the Board of Directors of the Company, provided that the
recipient of such shares of Common Stock pursuant to this clause (5) is not a
Purchaser, PRP or the Founder, or any affiliate thereof; or
(6) shares of Common Stock issued in any
acquisition of any third party (other than PRP, an entity of which the Founder
owns more than one percent (1%) of the outstanding capital stock, or an entity
of which a Purchaser owns more than fifty percent (50%) of the outstanding
capital stock) by the Company if (but
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only if) the exercise of the rights granted to Stockholders in this Section 3
would jeopardize, in the written opinion of the Company's independent
accountants, the desired accounting of such acquisition as a pooling of
interests.
3.2 Termination. This Section 3 shall terminate upon the
earlier of the following events:
(a) The sale of all or substantially all of the
assets or business of the Company, by merger, sale of assets or otherwise
(except a merger or consolidation in which the holders of capital stock of the
Company immediately prior to such merger or consolidation continue to hold
immediately following such merger or consolidation at least a 66 2/3% by voting
power of the capital stock of the surviving corporation); or
(b) The conversion of all Shares into Common Stock.
4. Negative Covenants. So long as any Shares are outstanding, the
Company shall not, without the prior written consent of the holders of not less
than 66 2/3% of the then outstanding Shares:
(a) authorize any additional shares of Common Stock
or Series A Preferred or authorize or designate any other class or series of
stock in addition to Common Stock and Series A Preferred or senior to, or on a
parity with, the Series A Preferred as to dividends, voting rights, rights upon
liquidation or redemption;
(b) declare or pay any dividends or distributions,
other than dividends payable solely in Common Stock;
(c) sell all or substantially all of its assets or
business, by merger, sale of assets or otherwise, in a transaction pursuant to
which holders of Shares receive cash, securities and/or other consideration
valued at less than $12.30 per share (as adjusted for stock splits, stock
dividends and similar events affecting the Shares or Common Stock);
(d) acquire all or substantially all of the
properties, assets or stock of any other corporation or entity, other than an
acquisition in which the aggregate consideration paid or issued by the Company
is less than the greater of: (i) $20,000,000, or (ii) ten (10) times the net
income of the Company for the four full fiscal quarters immediately preceding
such acquisition;
(e) incur indebtedness for borrowed money at any time
outstanding exceeding in the aggregate the greater of: (i) $12,000,000, or (ii)
five (5) times the net income of the Company for the four full fiscal quarters
immediately preceding such incurrence;
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(f) voluntarily liquidate or dissolve;
(g) amend any provision of, or add any provision to,
the Company's Certificate of Incorporation or By-Laws in a manner which
adversely affects the holders of the Shares; or
(h) apply any of its assets to the redemption,
retirement, purchase or acquisition, directly or indirectly, of any shares of
its Common Stock (other than purchases of Common Stock from employees, directors
or consultants, at cost, upon termination of their employment or services).
5. Transfers of Rights. This Agreement, and the rights and obligations
of each Purchaser hereunder, may be assigned by a Purchaser, PRP or the Founder
to (i) any person or entity to which at least 50% of the Shares then held by
such transferor are transferred by such transferor, (ii) any partner or
stockholder of such transferor, and (iii) any affiliates or members of the
immediate family of such transferor, or trusts for his or their benefit, and
such transferee shall be deemed a "Purchaser," "PRP" or "Founder," as the case
may be, for purposes of this Agreement; provided that the transferee provides
written notice of such assignment to the Company and agrees in writing to be
bound hereby.
6. General.
(a) Severability. The invalidity or unenforceability
of any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(b) Specific Performance. In addition to any and all
other remedies that may be available at law in the event of any breach of this
Agreement, each Stockholder shall be entitled to specific performance of the
agreements and obligations of the Company hereunder and to such other injunctive
or other equitable relief as may be granted by a court of competent
jurisdiction.
(c) Governing Law. This Agreement shall be governed
by and construed in accordance with the internal laws of the Commonwealth of
Massachusetts (without reference to the conflicts of law provisions thereof).
(d) Notices. All notices, requests, consents, and
other communications under this Agreement shall be in writing and shall be
deemed delivered (i) two business days after being sent by registered or
certified mail, return receipt requested, postage prepaid or (ii) one business
day after being sent via a
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reputable nationwide overnight courier service guaranteeing next business day
delivery, in each case to the intended recipient as set forth below:
If to the Company or the Founder, at 000 Xxxxxx Xxxxxx, Xxxxxx, XX
00000, Attention: President, or at such other address or addresses as may have
been furnished in writing by the Company to the Purchasers, with a copy to Xxxxx
& Xxxxxxx, 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000; attention: Xxxxxxx X.
Xxxxxx, Esq.; or
If to a Stockholder, at his or its address set forth on Exhibit A, or
at such other address or addresses as may have been furnished to the Company in
writing by such Stockholder, with a copy to Xxxx and Xxxx LLP, 00 Xxxxx Xxxxxx,
Xxxxxx, XX 00000, attention: Xxxx X. Xxxxxx, Esq.; and Stroock & Stroock & Xxxxx
LLP, 0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000, Xxx Xxxxxxx, XX 00000; attention:
Xxxxxxx X. Xxxxxx, Esq.
Any party may give any notice, request, consent or other communication
under this Agreement using any other means (including, without limitation,
personal delivery, messenger service, telecopy, first class mail or electronic
mail), but no such notice, request, consent or other communication shall be
deemed to have been duly given unless and until it is actually received by the
party for whom it is intended. Any party may change the address to which
notices, requests, consents or other communications hereunder are to be
delivered by giving the other parties notice in the manner set forth in this
Section.
(e) Complete Agreement. This Agreement constitutes
the entire agreement and understanding of the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter.
(f) Amendments and Waivers. Any term of this
Agreement may be amended or terminated and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), with the written consent of the Company and the
holders of at least 66 2/3% of the Registrable Shares held by all of the
Stockholders other than the Founder; provided, that this Agreement may be
amended with the consent of the holders of less than all Registrable Shares only
in a manner which affects all such holders in the same fashion, and, provided,
further, for so long as PRP owns at least 2% of the outstanding shares of Common
Stock of the Company (giving assumed effect to the conversion of all outstanding
shares of Preferred Stock of the Company and the exercise of all outstanding
options and warrants to purchase Common Stock), the consent of PRP shall be
required for any waiver of the rights in Section 3.1 hereof with respect to (i)
an issuance of shares to the Purchasers or the Founder, or any affiliate of the
Purchasers or the Founder, (ii) an issuance of shares that would cause PRP to
own less than 2% of the outstanding shares of Common Stock of the Company
(giving
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assumed effect to the conversion of all outstanding shares of Preferred Stock of
the Company and the exercise of all outstanding options and warrants to purchase
Common Stock) and (iii) an issuance of shares that would cause PRP to own less
than 5% of the outstanding shares of Common Stock of the Company (giving assumed
effect to the conversion of all outstanding shares of Preferred Stock of the
Company and the exercise of all outstanding options and warrants to purchase
Common Stock), if and only if PRP owns at least 5% of the outstanding shares of
Common Stock of the Company (giving assumed effect to the conversion of all
outstanding shares of Preferred Stock of the Company and the exercise of all
outstanding options and warrants to purchase Common Stock) immediately prior to
such issuance. Any such amendment, termination or waiver effected in accordance
with this Section 6(f) shall be binding on all parties hereto, even if they do
not execute such consent. No waivers of or exceptions to any term, condition or
provision of this Agreement, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such term, condition
or provision.
(g) Pronouns. Whenever the context may require, any
pronouns used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural, and vice versa.
(h) Counterparts; Facsimile Signatures. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original, and all of which together shall constitute one and the
same document. This Agreement may be executed by facsimile signatures.
(i) Section Headings. The section headings are for
the convenience of the parties and in no way alter, modify, amend, limit or
restrict the contractual obligations of the parties.
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Executed as of the date first written above.
COMPANY:
STUDENT ADVANTAGE, INC.
By: /s/ Xxxxxxx X. Xxxxx, Xx.
------------------------------
Name: Xxxxxxx X. Xxxxx, Xx.
Title: Chief Executive Officer
STOCKHOLDERS:
GREYLOCK IX LIMITED
PARTNERSHIP
By: Greylock IX GP Limited
Partnership, its General Partner
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: General Partner
/s/ Xxxx Xxxxxxxxxx
------------------------------
Xxxx Xxxxxxxxxx
PRINCETON REVIEW PUBLISHING, L.L.C.
By: /s/ Xxxx Xxxxxxx
------------------------------
Name: Xxxx Xxxxxxx
Title: President
FOUNDER:
/s/ Xxxxxxx X. Xxxxx, Xx.
------------------------------
Xxxxxxx X. Xxxxx, Xx.
Address: 00 Xxxxxxxxx Xxxxxx, #000
Xxxxxx, XX 00000
21
Exhibit A
Purchasers
Name and Address
Greylock IX GP Limited Partnership
Xxx Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Xxxx Xxxxxxxxxx
c/o The Money Store
000 0xx Xxxxxx
Xxxx Xxxxxxxxxx, XX 00000
