INVESTOR RIGHTS AGREEMENT
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THIS INVESTOR RIGHTS AGREEMENT (this "Agreement") is made and entered
into as of this 9th day of May, 2000, by and between WEBMODAL, INC., a Delaware
corporation (the "Company") and NET VALUE HOLDINGS, INC., a Delaware corporation
(the "Investor").
RECITALS
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A. The Investor has agreed to purchase from the Company, and the
Company has agreed to sell to the Investor, Five Hundred Sixty-Three Thousand
(563,000) shares of the Company's Series A Convertible Preferred Stock, par
value $1.00 per share (the "Series A Stock"), and a Warrant to purchase 170,000
shares of Common Stock, on the terms and conditions set forth in that certain
Series A Convertible Preferred Stock Purchase Agreement, of even date herewith,
by and between the Company and the Investor (the "Series A Agreement").
Capitalized terms used herein but not otherwise defined shall have the meaning
given such terms in the Series A Agreement.
B. The Series A Agreement provides that the Investor shall be granted
certain information, registration rights and rights of first refusal, all as
more fully set forth herein.
AGREEMENT
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NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
1. INFORMATION RIGHTS.
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1.1. Financial Information. The Company covenants and agrees
that, commencing on the date of this Agreement, for so long as the Investor
holds any shares of Series A Stock and/or shares of Common Stock of the Company
issued upon the conversion of such shares of Series A Stock, the Company will:
(a) Annual Reports. Furnish to the Investor, as soon as
practicable and in any event within sixty (60) days after the end of each fiscal
year of the Company, a balance sheet as of the end of such fiscal year, a
statement of income and a statement of cash flows of the Company for such year,
setting forth in each case in comparative form the figures from the Company's
previous fiscal year (if any), all prepared in accordance with generally
accepted accounting principles and practices and audited by nationally
recognized independent certified public accountants.
(b) Quarterly Reports. Furnish to the Investor as soon as
practicable, and in any case within thirty (30) days of the end of each fiscal
quarter of the Company (except the last quarter of the Company's fiscal year),
quarterly and year-to-date unaudited financial statements, including an
unaudited balance sheet, an unaudited statement of income and an unaudited
statement of cash flows.
(c) Monthly Reports. Furnish to the Investor within
twenty (20) days of the end of each calendar month, monthly and year-to-date
unaudited financial statements, including an unaudited balance sheet, an
unaudited statement of income and an unaudited statement of cash flows, together
with an unaudited management report thereon (including a budget variance
analysis and management's discussion and analysis), if and to the extent any of
the information described in this Subsection (c) has been otherwise prepared by
the Company.
(d) Annual Budget. Furnish to the Investor, as soon
as practicable and in any event no later than forty-five (45) days before the
close of each fiscal year of the Company, an annual operating plan and budget,
prepared on a quarterly basis, for the next immediate fiscal year, and on a
basis consistent with prior periods (including, among other items, appropriate
reserves, accruals and provisions for income taxes). The Company shall also
furnish to the Investor, within a reasonable time of its preparation, amendments
to the annual budget, if any. Such budget shall include underlying assumptions
and a qualitative description of the Company's plan by the Chief Executive
Officer, Chief Financial Officer, Chief Accounting Officer or Controller in
support of that budget.
(e) Material Events. The Company will notify the
Investor, as soon as possible and in any event within ten (10) days, of (i) the
existence and status of any litigation, pending or threatened, which could, in
the event of an unfavorable outcome, have a material adverse effect upon the
financial condition or results of operations of the Company considered in the
aggregate and (ii) a default or any event or occurrence which with lapse of time
or notice or both could become a default under the Series A Agreement. Such
notice shall contain a reasonably detailed statement outlining such default or
event, and the Company's proposed response.
(f) Confidentiality. The Investor agrees to hold all
information received pursuant to this Agreement in confidence, and not to use or
disclose any of such information to any third party, except to the extent such
information may be made publicly available by the Company; provided, however,
that the Investor may, in the ordinary course of business, provide the financial
results of the Company to third parties in the same manner such information is
provided by the Investor with respect to its portfolio companies.
(g) Substitute Financials. In the event the Company
fails to provide the reports required by Section 1.1(a), (b) or (c), the
Investor may give the Company notice requesting immediate delivery of such
reports. If the Company fails to deliver such reports within a two-week period
after receipt of such notice from the Investor, then the Investor, shall have
the right and authority, at the Company's sole expense, to request an audit by a
nationally recognized accounting firm of its choice (the expense of which shall
not exceed the usual and customary expenses associated with such an audit), such
that the reports are produced to the satisfaction of the Investor.
(h) Variance Reports; Certifications. Each of the
financial statements and other reports described in this Section 1.1 shall be
accompanied by a report of the Chief Financial Officer, Chief Accounting Officer
or Controller of the Company explaining any material variances in such financial
statement or report from the Company's operating plan and budget for the quarter
covered and stating that such financial statement or report fairly presents in
all material respects the financial position and financial results of the
Company for the period covered.
1.2. Inspection Rights. The Company shall permit a designated
representative of the Investor, at the Investor's expense, to visit and inspect
the Company's properties, to examine its books of account, operational records,
and reports, and to discuss the business, operations, and financial affairs of
the Company with its respective officers, all at such reasonable times as may be
requested by the Investor.
1.3. Termination of Certain Rights. The Company's obligations
under Sections 1.1 and 1.2 above will terminate upon (i) the consummation of a
Qualifying IPO (as defined in Section 5(b) of the Company's Series A
Certificate) or (ii) a consolidation or merger of the Company with or into any
other corporation in which the holders of record of the Company's outstanding
shares of stock immediately before such consolidation or merger hold (by virtue
of securities issued as consideration in such transaction or otherwise) less
than a majority of the voting power of the surviving corporation of such
consolidation or merger, or the sale of all or substantially all of the assets
of the Company (a "Change of Control Event"). After a Qualifying IPO, the
Company shall provide the Investor with reports and information generally
provided to shareholders.
1.4. Rule 144A Information. At all times during which the
Company is neither subject to the reporting requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), nor
exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act, the
Company shall provide in written form, upon the written request of the Investor,
or a prospective purchaser of securities of the Company from the Investor, all
information required by Rule 144A(d)(4)(i) of the Rules and Regulations
promulgated under the Securities Act (the "144A Information"). The Company's
obligations under this Section 1.4 shall at all times be contingent upon the
Investor's obtaining from a prospective purchaser an agreement to use its
commercially reasonable efforts to safeguard the 144A Information from
disclosure to anyone other than employees of the prospective purchaser who
require access to the 144A Information for the sole purpose of evaluating its
purchase of the Company's securities.
2. REGISTRATION RIGHTS.
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2.1. Definitions. For purposes of this Section 2.1:
(a) Registration. The terms "register," "registered,"
and "registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such registration statement.
(b) Registrable Securities. The term "Registrable
Securities" means: (1) all the shares of Common Stock of the Company issued or
issuable upon the conversion of any shares of Series A Stock originally issued
to the Investor under the Series A Agreement or upon exercise of the Warrant
that are now owned or may hereafter be acquired by the Investor or the
Investor's permitted successors and assigns; and (2) any shares of Common Stock
of the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, all such
shares of Common Stock described in clause (1) of this Section 2.1(b), excluding
in all cases, however, any Registrable Securities sold by a person in a
transaction in which rights under this Section 2.1 are not assigned in
accordance with this Agreement or any Registrable Securities sold to the public
or sold pursuant to Rule 144 promulgated under the Securities Act.
(c) Holder. The term "Holder" means any person owning
of record Registrable Securities that have not been sold to the public or
pursuant to Rule 144 promulgated under the Securities Act or any assignee of
record of such Registrable Securities to whom rights under this Section 2 have
been duly assigned in accordance with this Agreement; provided, however, that
for purposes of this Agreement, a record holder of shares of Series A Stock
convertible into such Registrable Securities shall be deemed to be the Holder of
such Registrable Securities; provided, further, that the Company shall in no
event be obligated to register shares of Series A Stock, and that Holders of
Registrable Securities will not be required to convert their shares of Series A
Stock into Common Stock in order to exercise the registration rights granted
hereunder, until immediately before the closing of the offering to which the
registration relates.
(d) Form S-3. The term "Form S-3" means such form
under the Securities Act as is in effect on the date hereof or any successor
registration form under the Securities Act subsequently adopted by the SEC which
permits inclusion or incorporation of substantial information by reference to
other documents filed by the Company with the SEC.
(e) Securities Act. The term "Securities Act" means
the Securities Act of 1933, as amended.
(f) SEC. The term "SEC" or "Commission" means the
U.S. Securities and Exchange Commission.
2.2. Demand Registration.
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(a) Request by Holders. If the Company shall receive
at any time after ninety (90) days after the effective date of the Company's
initial public offering of its securities pursuant to a registration filed under
the Securities Act, a written request from the Holders of at least twenty-five
percent (25%) of the Registrable Securities that the Company file a registration
statement under the Securities Act covering the registration of Registrable
Securities pursuant to this Section 2.2 then the Company shall, within ten (10)
business days of the receipt of such written request, give written notice of
such request ("Request Notice") to all Holders, and effect, as soon as
practicable, the registration under the Securities Act of all Registrable
Securities which Holders request to be registered and included in such
registration by written notice given such Holders to the Company within twenty
(20) days after receipt of the Request Notice, subject only to the limitations
of this Section 2.2; provided that the Registrable Securities requested by all
Holders to be registered pursuant to such request must have an anticipated
aggregate public offering price (before any underwriting discounts and
commissions) of not less than Ten Million Dollars ($10,000,000).
(b) Underwriting. If the Holders initiating the
registration request under this Section 2.2 ("Initiating Holders") intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, then they shall so advise the Company as a part of their request
made pursuant to this Section 2.2 and the Company shall include such information
in the written notice referred to in Section 2.2(a). In such event, the right of
any Holder to include its Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall enter into an
underwriting agreement in customary form with the managing underwriter or
underwriters selected for such underwriting by the Company and a majority in
interest of the Initiating Holders. Notwithstanding any other provision of this
Section 2.2 to the contrary, if the underwriter(s) advise(s) the Company in
writing that marketing factors require a limitation of the number of securities
to be underwritten then the Company shall so advise all Holders of Registrable
Securities which would otherwise be registered and underwritten pursuant hereto,
and the number of Registrable Securities that may be included in the
underwriting shall be reduced as required by the underwriter(s) and allocated
among the Holders of Registrable Securities on a pro rata basis according to the
number of Registrable Securities held by each Holder requesting registration
(including the Initiating Holders); provided, however, that the number of shares
of Registrable Securities to be included in such underwriting and registration
shall not be reduced unless all other securities of the Company are first
entirely excluded from the underwriting and registration. Any Registrable
Securities excluded and withdrawn from such underwriting shall be withdrawn from
the registration.
(c) Maximum Number of Demand Registrations. The
Company is obligated to effect only one (1) Demand Registration pursuant to this
Section 2.2.
(d) Deferral. Notwithstanding anything to the
contrary contained in this Section 2.2, if the Company shall furnish to Holders
requesting the filing of a registration statement pursuant to this Section 2.2,
a certificate signed by the President or Chief Executive Officer of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its stockholders
for such registration statement to be filed and it is, therefore, essential to
defer the filing of such registration statement, then the Company shall have the
right to defer such filing for a period of not more than 120 days after receipt
of the request of the Initiating Holders; provided, however, that the Company
may not utilize this right more than once in any twelve (12) month period.
(e) Expenses. All expenses incurred in connection
with a registration pursuant to this Section 2.2, including without limitation
all registration and qualification fees, printers' and accounting fees, fees and
disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel for the selling Holders not exceeding $20,000
(excluding underwriters' discounts and commissions), shall be borne by the
Company. Each Holder participating in a registration pursuant to this Section
2.2 shall bear such Holder's proportionate share (based on the total number of
shares sold in such registration other than for the account of the Company) of
all discounts, commissions or other amounts payable to underwriters or brokers
in connection with such offering. Notwithstanding the foregoing, the Company
shall not be required to pay for any expenses of any registration proceeding
begun pursuant to this Section 2.2 if the registration request is subsequently
withdrawn at the request of the Holders of a majority of the Registrable
Securities requested to be registered; provided however, that if at the time of
such withdrawal, the Holders have learned of a material adverse change in the
condition, business, or prospects of the Company not known to the Holders at the
time of their request for such registration and have withdrawn their request for
registration with reasonable promptness after learning of such material adverse
change, then the Holders shall not be required to pay any of such expenses and
shall retain their rights pursuant to this Section 2.2.
2.3. Piggyback Registrations.
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(a) Registration Rights. The Company shall notify all
Holders of Registrable Securities in writing at least thirty (30) days prior to
filing any registration statement under the Securities Act for purposes of
effecting a public offering of securities of the Company, including, but not
limited to, registration statements relating to secondary offerings of
securities of the Company, but specifically excluding registration statements
relating to: (i) any registration under Section 2.2 or Section 2.4 of this
Agreement; or (ii) on Form S-8 related to any employee benefit plan or on Form
S-4 related to any corporate reorganization, business combination or acquisition
and will afford each such Holder an opportunity to include in such registration
statement all or any part of the Registrable Securities then held by such
Holder. Each Holder desiring to include in any such registration statement all
or any part of the Registrable Securities held by such Holder shall, within
twenty (20) days after receipt of the above-described notice from the Company,
so notify the Company in writing, and in such notice shall inform the Company of
the number of Registrable Securities such Holder wishes to include in such
registration statement. If a Holder decides not to include all of its
Registrable Securities in any registration statement thereafter filed by the
Company, such Holder shall nevertheless continue to have the right to include
any Registrable Securities in any subsequent registration statement or
registration statements as may be filed by the Company with respect to offerings
of its securities, all upon the terms and conditions set forth herein.
(b) Underwriting. If a registration statement under
which the Company gives notice under this Section 2.3 is for an underwritten
offering, then the Company shall so advise the Holders of Registrable
Securities. In such event, the right of any such Holder's Registrable Securities
to be included in a registration pursuant to this Section 2.3 shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their Registrable
Securities through such underwriting shall enter into an underwriting agreement
in customary form with the managing underwriter or underwriter(s) selected for
such underwriting by the Company. Notwithstanding any other provision of this
Agreement, if the managing underwriter determines in good faith that marketing
factors require a limitation of the number of shares to be underwritten, then
the managing underwriter may exclude shares (including Registrable Securities)
from the registration and the underwriting, and the number of shares that may be
included in the registration and the underwriting shall be allocated, first, to
the Company, and second, to each of the Holders requesting inclusion of their
Registrable Securities in such registration statement on a pro rata basis based
on the total number of Registrable Securities then held by each such Holder;
provided, however, that the right of the underwriters to exclude shares
(including Registrable Securities) from the registration and underwriting as
described above shall be restricted so that (i) the number of Registrable
Securities included in any such registration is not reduced below twenty percent
(20%) of the shares included in the registration, except for a registration
relating to the Company's initial public offering from which all Registrable
Securities shall be excluded; and (ii) all shares that are not Registrable
Securities and are held by persons who are employees or directors of the Company
(or any subsidiary of the Company) shall first be excluded from such
registration and underwriting before any Registrable Securities are so excluded.
If any Holder disapproves of the terms of any such underwriting, such Holder may
elect to withdraw therefrom by written notice to the Company and the
underwriter, delivered at least ten (10) business days prior to the effective
date of the registration statement. Any Registrable Securities excluded or
withdrawn from such underwriting shall be excluded and withdrawn from the
registration. For any Holder which is a partnership or corporation, the
partners, retired partners and stockholders of such Holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single "Holder,"
and any pro rata reduction with respect to such "Holder" shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such "Holder," as defined in this sentence.
(c) Expenses. All expenses incurred in connection with a
registration pursuant to this Section 2.3 (excluding underwriters' and brokers'
discounts and commissions), including, without limitation all federal and "blue
sky" registration and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company and reasonable fees and
disbursements of one counsel for the selling Holders not exceeding $20,000 shall
be borne by the Company.
2.4. Form S-3 Registration. In case the Company shall receive
from any Holder or Holders of at least a majority of all Registrable Securities
a written request or requests that the Company effect a registration on Form S-3
and any related qualification or compliance with respect to all or a part of the
Registrable Securities owned by such Holder or Holders, then the Company will:
(a) Notice. Promptly give written notice of the proposed
registration and the Holder's or Holders' request therefor, and any related
qualification or compliance, to all other Holders of Registrable Securities; and
(b) Registration. As soon as practicable, effect such
registration and all such qualifications and compliance as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of such Holder's or Holders' Registrable Securities as are specified in
such request, together with all or such portion of the Registrable Securities of
any other Holder or Holders joining in such request as are specified in a
written request given within twenty (20) days after receipt of such written
notice from the Company; provided, however, that the Company shall not be
obligated to effect any such registration, qualification or compliance pursuant
to this Section 2.4:
(i) if Form S-3 is not available for such
offering by the Holders;
(ii) if the Holders, together with the
holders of any other securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities and such other securities
(if any) at an aggregate price to the public of less than $2,000,000;
(iii) if the Company shall furnish to the
Holders a certificate signed by the President or Chief Executive Officer of the
Company stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its stockholders
for such Form S-3 registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement no more than once during any twelve month period for a period of not
more than 120 days after receipt of the request of the Holder or Holders under
this Section 2.4;
(iv) if the Company has, within the twelve
(12) month period preceding the date of such request, already effected one (1)
registration on Form S-3 for the Holders pursuant to this Section 2.4; or
(v) in any particular jurisdiction in
which the Company would be required to qualify to do business or to execute a
general consent to service of process or to subject itself to taxation in
effecting such registration, qualification or compliance.
(c) Underwriting. If the Holders initiating the
registration request under this Section 2.4 (the "Initiating Holders") intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, then they shall so advise the Company as part of their request
made pursuant to this Section 2.4 and the Company shall include such information
in the written notice referred to in Section 2.4(a). In such event, the right of
any Holder to include its Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall enter into am
underwriting agreement in customary form with the managing underwriter or
underwriters selected for such underwriting by the Company and a majority of the
Initiating Holders. Notwithstanding any other provision of this Section 2.4 to
the contrary, if the underwriter(s) advise(s) the Company in writing that
marketing factors require a limitation of the number of securities to be
underwritten then the Company shall so advise all Holders of Registrable
Securities which would otherwise be registered and underwritten pursuant
thereto, and the number of Registrable Securities that may be included in the
underwriting shall be reduced as required by the underwriter(s) and allocated
among the Holders of Registrable Securities on a pro rata basis according to the
number of Registrable Securities held by each Holder requesting registration
(including the Initiating Holders); provided, however, that the number of shares
of Registrable Securities to be included in such underwriting and registration
shall not be reduced unless all other securities of the Company are first
entirely excluded from the underwriting and registration. Any Registrable
Securities excluded and withdrawn from such underwriting shall be withdrawn from
the registration.
(d) Expenses. Subject to the foregoing, the Company shall
file a Form S-3 registration statement covering the Registrable Securities and
other securities so requested to be registered pursuant to this Section 2.4 as
soon as practicable after receipt of the request or requests of the Holders for
such registration. The Company shall pay all expenses incurred in connection
with each registration requested pursuant to this Section 2.4, (excluding
underwriters' or brokers' discounts and commissions), including without
limitation all filing, registration and qualification, printers' and accounting
fees and the reasonable fees and disbursements of one counsel for the selling
Holder or Holders not exceeding $20,000 and counsel for the Company.
(e) Not Demand Registration. Form S-3 registrations shall
not be deemed to be a demand registration as described in Section 2.2 above.
(f) Number of Form S-3 Registrations. Upon request in
accordance with this Section 2.4, the Company is obligated to effect four (4)
such registrations pursuant to this Section 2.4.
2.5. Obligations of the Company. Whenever required, upon
request in accordance with this Section 2.5, to effect the registration of any
Registrable Securities under this Agreement, the Company shall, as expeditiously
and as reasonably as possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to ninety (90)
days.
(b) Prepare and file with the SEC 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) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by them that are included in such registration.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
"blue sky" laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process or to subject itself to taxation in any such states or
jurisdictions.
(e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, a
custody agreement and a power of attorney in usual and customary form, with the
managing underwriter(s) of such offering and furnish customary opinions and
certificates in connection therewith. Each Holder participating in such
underwriting shall also enter into and perform its obligations under each such
agreement and provide such documents.
(f) Notify each Holder 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 in the light of the circumstances then
existing.
(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities, on the date that such Registrable
Securities are delivered to the underwriters for sale, if such securities are
being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated as of such date, of
the counsel representing the Company for the purposes of such registration, in
form and substance as is customarily given to underwriters in an underwritten
public offering and reasonably satisfactory to a majority in interest of the
Holders requesting registration, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a
"comfort" letter dated as of such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering and reasonably satisfactory to a majority in interest of the
Holders requesting registration, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities.
2.6. Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to Sections 2.2, 2.3
or 2.4 that the selling Holders shall furnish to the Company such information
regarding themselves, the Registrable Securities held by them, and the intended
method of disposition of such securities as shall be required to timely effect
the registration of their Registrable Securities.
2.7. Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 2.
2.8. Indemnification. In the event any Registrable Securities
are included in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) By the Company. To the extent permitted by law, the
Company will indemnify and hold harmless each Holder selling securities, the
partners, officers and directors of each such Holder, any underwriter (as
defined in the Securities Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the Securities Act or
the Securities Exchange Act of 1934, as amended, (the "1934 Act"), against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, the 1934 Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"):
(i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto;
(ii) the 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
(iii) any violation or alleged violation by
the Company of the Securities Act, the 1934 Act, any federal or state securities
law or any rule or regulation promulgated under the Securities Act, the 1934 Act
or any federal or state securities law in connection with the offering covered
by such registration statement; and the Company will reimburse each such Holder,
partner, officer or director, underwriter or controlling person for any legal or
other expenses reasonably incurred by them, as incurred, in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this Section 2.8
shall not apply to (A) any such loss, claim, damage or liability (or actions in
respect thereto) that results from a Violation contained in a preliminary
prospectus or a final prospectus which was corrected in the final prospectus or
in the final prospectus as then amended or supplemented and any Holder (if the
Holder is selling securities and no underwriter is involved) or the underwriter
sold securities to a person to whom there was not sent or given, at or prior to
the written confirmation of such sale, a copy of the final prospectus or of the
final prospectus as then amended or supplemented in any case where such delivery
is required by the Act if the Company has previously furnished copies thereof in
sufficient quantity to such Holder or underwriter or (B) amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person of such Holder, including without limitation, any
information furnished by any Holder of the Company pursuant to Section 2.6
hereof.
(b) By Selling Holders. To the extent permitted by
law, each selling Holder will indemnify and hold harmless the Company, each of
its directors, each of its officers who have signed the registration statement,
each person, if any, who controls the Company within the meaning of the
Securities Act, any underwriter and any other Holder selling securities under
such registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder within the meaning of the
Securities Act or the 1934 Act (collectively "Company Indemnities"), against any
losses, claims, damages or liabilities (joint or several) to which the Company
or any such Company Indemnities may become subject under the Securities Act, the
1934 Act or other federal or state law, insofar as such losses, claims, damages
or liabilities (or actions in respect thereto) arise out of or are based upon
any Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration;
and each such Holder will reimburse any legal or other expenses reasonably
incurred by the Company or any such Company Indemnities in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this Section 2.8
shall not apply to (i) any loss, claim, damage or liability (or actions in
respect thereto) that results from a Violation contained in a preliminary
prospectus or a final prospectus which was corrected in the final prospectus or
in the final prospectus as then amended or supplemented and the Company (if the
Company is selling securities and no underwriter is involved) or the underwriter
sold securities to a person to whom there was not sent or given, at or prior to
the written confirmation of such sale, a copy of the final prospectus or of the
final prospectus as then amended or supplemented in any case where such delivery
is required by the Act if the Company has previously furnished copies thereof in
sufficient quantity to such underwriter or (ii) amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; and provided, further, that the total amounts payable in indemnity by
a Holder under this Section 2.8 in respect of any Violation shall not exceed the
gross proceeds received by such Holder in the registered offering out of which
such Violation arises.
(c) Notice. Promptly after receipt by an indemnified
party under this Section 2.8 of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under this Section
2.8, deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an indemnified
party shall have the right to retain its own counsel, with the reasonable fees
and expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential conflict of interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if prejudicial
to its ability to defend such action, shall relieve such indemnifying party of
any liability to the indemnified party under this Section 2.8, but the omission
so to deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this Section 2.8.
(d) Contribution. In order to provide for just and
equitable contribution to joint liability under the Securities Act in any case
in which either (i) any Holder exercising rights under this Agreement, or any
controlling person of any such Holder, makes a claim for indemnification
pursuant to this Section 2.8, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 2.8 provides for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of any such selling Holder
or any such controlling person in circumstances for which indemnification is
provided under this Section 2.8; then, and in each such case, the Company and
such Holder will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that such Holder is responsible for the portion represented
by the percentage that the public offering price of its Registrable Securities
offered by and sold under the registration statement bears to the public
offering price of all securities offered by and sold under such registration
statement, and the Company and other selling Holders are responsible for the
remaining portion; provided, however, that, in any such case, (a) no such Holder
will be required to contribute any amount in excess of the public offering price
of all such Registrable Securities offered and sold by such Holder pursuant to
such registration statement; and (b) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.
(e) Survival. The obligations of the Company and
Holders under this Section 2.8 shall survive the completion of any offering of
Registrable Securities in a registration statement, and otherwise.
2.9. "Lock-up" Agreement. Each Holder hereby agrees that it
shall not, to the extent requested by the Company or an underwriter of
securities of the Company, sell or otherwise transfer or dispose of any
Registrable Securities or other shares of stock of the Company then owned by
such Holder (other than to donees or partners of the Holder who agree to be
similarly bound) for up to one hundred eighty (180) days following the effective
date of a registration statement of the Company filed under the Securities Act;
provided, however, that:
(a) such agreement shall be applicable only to the first
such registration statement of the Company which covers securities to be sold on
its behalf to the public in an underwritten offering but not to Registrable
Securities sold pursuant to such registration statement; and
(b) all officers, directors then holding Common Stock and
all holders of more than 10% of the outstanding capital stock of the Company
enter into similar agreements.
In order to enforce the foregoing covenant, the Company shall have the right to
place restrictive legends on the certificates representing the shares subject to
this Section and to impose stop transfer instructions with respect to the
Registrable Securities and such other shares of stock of each Holder (and the
shares or securities of every other person subject to the foregoing restriction)
until the end of such period.
2.10. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Registrable Securities to the public without
registration, after such time as a public market exists for the Common Stock of
the Company, the Company agrees to:
(a) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times after the effective date of the first registration under the Securities
Act filed by the Company for an offering of its securities to the general
public;
(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 Securities Act and the 1934 Act (at any time after it has become subject to
such reporting requirements); and
(c) So long as a Holder owns any Registrable Securities,
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144 (at any
time after 90 days after the effective date of the first registration statement
filed by the Company for an offering of its securities to the general public),
and of the Securities Act and the 1934 Act (at any time after it has become
subject to the reporting requirements of the 1934 Act), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents of the Company as a Holder may reasonably request in availing itself
of any rule or regulation of the Commission allowing a Holder to sell any such
securities without registration (at any time after the Company has become
subject to the reporting requirements of the 1934 Act).
2.11. Termination of the Company's Obligations. The Company
shall have no obligations pursuant to Sections 2.2 through 2.4 with respect to:
(a) any request or requests for registration made by any Holder on a date more
than five (5) years after the closing date of a Qualifying IPO; or (b) any
Registrable Securities proposed to be sold by a Holder in a registration
pursuant to Section 2.2, 2.3 or 2.4 if, in the opinion of counsel to the
Company, all such Registrable Securities proposed to be sold by a Holder may be
sold in a three-month period without registration under the Securities Act
pursuant to Rule 144 under the Securities Act.
2.12. Limitations on Subsequent Registration Rights. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders of a majority of the Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder (a) to
include such securities in any registration filed under Section 2.2 hereof,
unless under the terms of such agreement, such holder or prospective holder may
include such securities in any such registration only to the extent that the
inclusion of his securities will not reduce the amount of the Registrable
Securities of the Holders which is included, or (b) to make a demand
registration which could result in such registration statement being declared
within one hundred twenty (120) days of the effective date of any registration
effected pursuant to Section 2.2.
3. PREEMPTIVE RIGHT.
----------------
3.1. General. Each Holder and any party to whom such Holder's
rights under this Section 3.1 have been duly assigned in accordance with Section
4.1(b) (each such Holder or assignee being hereinafter referred to as a "Rights
Holder") shall have the right of first refusal to purchase such Rights Holder's
Pro Rata Share (as defined below), of all (or any part) of any "New Securities"
(as defined in Section 3.2) that the Company may from time to time issue after
the date of this Agreement. A Rights Holder's "Pro Rata Share" for purposes of
this right of first refusal shall mean a fraction, the numerator of which is (a)
the number of Registrable Securities held by such Rights Holder (or deemed held
by the Holder under Section 2.1(c)), and the denominator of which is (b) the
number of shares of common stock of the Company equal to the sum of (i) the
total number of shares of common stock of the Company then outstanding plus (ii)
the total number of shares of common stock of the Company into which all then
outstanding shares of Series A Stock of the Company are then convertible.
3.2. New Securities. "New Securities" shall mean any common
stock or preferred stock of the Company, whether now authorized or not, and
rights, options or warrants to purchase such common stock or preferred stock,
and securities of any type whatsoever that are, or may become, convertible or
exchangeable into such common stock or preferred Stock; provided, however, that
the term "New Securities" does not include:
(i) up to 458,200 shares of the Company's Common
Stock (or options, warrants or other rights therefor) issued to employees,
officers, directors, contractors, advisors, consultants or transportation
carrier partners of the Company pursuant to the Company's Long Term Incentive
Plan or other incentive agreements, plans or arrangements approved by the Board
of Directors of the Company, and including in such number all such shares,
options, warrants or other such rights outstanding on the date hereof (such
number to be calculated net of any repurchases of such shares and net of any
such expired or terminated options, warrants or rights);
(ii) any shares of Series A Stock issued under the
Series A Agreement, as such agreement may be amended;
(iii) any securities issuable upon conversion of or
with respect to any then outstanding shares of Series A Stock of the Company or
Common Stock or other securities issuable upon conversion thereof;
(iv) any shares of Series A Stock issued under the
Warrants;
(v) shares of the Company's Common Stock or Series
A Stock issued in connection with any stock split or stock dividend or similar
event;
(vi) securities offered by the Company to the
public pursuant to a registration statement filed under the Securities Act; or
(vii) securities issued pursuant to strategic
alliances or the acquisition of another corporation or entity by the Company by
consolidation, merger, purchase of all or substantially all of the assets, or
other reorganization in which the Company acquires, in a single transaction or
series of related transactions, all or substantially all of the assets of such
other corporation or entity or fifty-one percent (51%) or more of the voting
power of such other corporation or entity or fifty-one percent (51%) or more of
the equity ownership of such other entity, provided that, such strategic
alliance or acquisition was approved by (A) the Investor Director (as defined
below) or (B) by holders of a majority of the outstanding shares of Series A
Stock.
3.3. Procedures. In the event that the Company proposes to
undertake an issuance of New Securities, it shall give to each Rights Holder
written notice of its intention to issue New Securities (the "Notice"),
describing the type of New Securities and the price and the general terms upon
which the Company proposes to issue such New Securities. Each Rights Holder
shall have ten (10) days from the date of mailing of any such Notice to agree in
writing to purchase such Rights Holder's Pro Rata Share of such New Securities
for the price and upon the general terms specified in the Notice by giving
written notice to the Company and stating therein the quantity of New Securities
to be purchased (not to exceed such Rights Holder's Pro Rata Share). If any
Rights Holder fails to so agree in writing within such ten (10) day period to
purchase such Rights Holder's full Pro Rata Share of an offering of New
Securities (a "Nonpurchasing Holder"), then such Nonpurchasing Holder shall
forfeit the right hereunder to purchase that part of his Pro Rata Share of such
New Securities that he did not so agree to purchase and the Company shall
promptly give each Rights Holder who has timely agreed to purchase his full Pro
Rata Share of such offering of New Securities (a "Purchasing Holder") written
notice of the failure of any Nonpurchasing Holder to purchase such Nonpurchasing
Rights Holder's full Pro Rata Share of such offering of New Securities (the
"Overallotment Notice"). Each Purchasing Holder shall have the right to purchase
such Rights Holder's Pro Rata Share (according to the relative Pro Rata Shares
of all Purchasing Holders) of the Nonpurchasing Holders' unpurchased Pro Rata
Shares of such offering at any time within five (5) days after receiving the
Overallotment Notice.
3.4. Failure to Exercise. In the event that the Rights Holders
fail to exercise in full the right of first refusal within such ten (10) plus
five (5) day period, then the Company shall have 120 days thereafter to sell the
New Securities with respect to which the Rights Holders' rights of first refusal
hereunder were not exercised, at a price and upon general terms not materially
more favorable to the purchasers thereof than specified in the Company's Notice
to the Rights Holders. In the event that the Company has not issued and sold the
New Securities within such 120 day period, then the Company shall not thereafter
issue or sell any New Securities without again first offering such New
Securities to the Rights Holders pursuant to this Section 3.4.
3.5. Termination. This right of first refusal shall terminate
(a) upon consummation of a Qualifying IPO or (b) upon a Change of Control Event.
4. ASSIGNMENT AND AMENDMENT.
------------------------
4.1. Assignment. Notwithstanding anything herein to the
contrary:
(a) Information Rights. The rights of the Investor
under Section 1 hereof may be assigned only to (i) a Related Party (as defined
below) or (ii) a party who acquires from the Investor (or the Investor's
permitted assigns) at least ten percent (10%) of the Series A Stock or the
equivalent number (on an as-converted basis) of shares of Common Stock of the
Company issued upon the conversion of such shares of Series A Stock.
(b) Registration Rights; Preemptive Rights. The
registration rights of a Holder under Section 2 hereof and the preemptive rights
of a Rights Holder under Section 3 hereof may be assigned only to a party who
acquires at least ten percent (10%) of the Series A Stock or an equivalent
number (on an as-converted basis) of Registrable Securities issued upon
conversion thereof; provided, however, that no party may be assigned any of the
foregoing rights unless the Company is given written notice by the assigning
party at the time of such assignment stating the name and address of the
assignee and identifying the securities of the Company as to which the rights in
question are being assigned; and provided, further that any such assignee shall
receive such assigned rights subject to all the terms and conditions of this
Agreement, including without limitation the provisions of this Section 4.1.
4.2. Amendment of Rights. Any provision of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of a majority of the outstanding
shares of Series A Stock issued under the Series A Agreement plus all then
outstanding shares of Common Stock issued upon the conversion of any shares of
Series A Stock issued under the Series A Agreement. Any amendment or waiver
effected in accordance with this Section 4.2 shall be binding upon the Investor,
each Holder, each permitted successor or assignee of the Investor or Holder and
the Company.
4.3. Related Party. As used herein, the term "Related Party"
with respect to any Holder means (i) any person or entity that, directly or
indirectly, through one or more intermediaries, has voting control of, or is
under common voting control with, such Holder; or (ii) a trust, corporation,
partnership or other entity, the beneficiaries, stockholders, partners or owners
or persons or entities holding controlling interest of which consist of any
Holder and/or such other persons or entities referred to in the immediately
preceding clause (i); and (iii) any Holders' current partners, stockholders or
members as the case may be, pro rata in accordance with the current distribution
provision of such entities charter documents.
5. COVENANTS OF THE COMPANY.
------------------------
5.1. Minutes. The Company will deliver to the Investor copies
of the complete minutes of all meetings of the Company's Board of Directors
(including all committees thereof) and stockholders no later than the earlier
of: (i) thirty (30) days after any such meeting; or (ii) the next successive
board or stockholder meeting, as applicable.
5.2. Special Voting Rights. The Company shall not, without the
approval, by vote or written consent, of the member of the Company's Board of
Directors designated by the Investor pursuant to the Stockholders' Agreement of
even date herewith among the Investor, the Company and certain of the Company's
shareholders (the "Investor Director"):
(i) amend its Certificate of Incorporation in any
manner that would alter or change any of the rights, preferences, privileges or
restrictions of the Series A Preferred Stock;
(ii) reclassify any outstanding shares of
securities of the Company into shares having rights, preferences or privileges
senior to or pari passu to the Series A Preferred Stock;
(iii) authorize or issue any additional Series A
Preferred Stock or any other stock having rights or preferences senior to or
pari passu to the Series A Preferred Stock;
(iv) merge or consolidate with or into any
corporation unless the holders of the Company's outstanding shares immediately
after such consolidation or merger retain stock representing a majority of the
voting power of the surviving corporation of such merger or consolidation;
(v) sell all or substantially all the Company's
assets in a single transaction or series of related transactions;
(vi) liquidate or dissolve;
(vii) increase the size of the Board to more than
five (5) directors;
(viii) declare or pay any dividends (other than
dividends payable solely in shares of Common Stock) on or declare or make any
other distribution, directly or indirectly, on account of any shares of Common
Stock now or hereafter outstanding;
(ix) any redemption or repurchase any outstanding
shares of the Company's capital stock, except for shares of Common Stock held by
employees, officers, directors, contractors, advisors, consultants or
transportation carrier partners of the Company pursuant to the Company's Long
Term Incentive Plan or other incentive agreements, plans or arrangements
approved by the Board of Directors of the Company;
(x) pay any bonuses to officers, directors or
employees of the Company not included in the annual budget;
(xi) award stock options, stock warrants, stock
appreciation rights or similar employee benefits or determine vesting schedules,
exercise prices or similar features, except for any such options, warrants,
rights or benefits described in Section 3.2(i) above;
(xii) pledge its assets or guarantee the
obligations of any other individual or entity;
(xiii) incur indebtedness (other than trade
payables) in excess of Five Million Dollars ($5,000,000) in the aggregate,
including (A) the execution of any promissory note, loan agreement or other
agreement evidencing indebtedness, (B) drawing upon a line of credit or similar
credit facility, or (C) causing a letter of credit to be issued in the Company's
name;
(xiv) enter into a new line of business that is
unrelated to its contemplated line of business as of May 9, 2000; or
(xv) modify in any material way the Company's
annual operating and capital budgets.
5.3. Additional Board Members. Any appointment or nomination
of additional directors, whether outside industry representatives or as a
condition of securing additional financing, must be acceptable to the Investor,
such approval not to be unreasonably withheld.
5.4. Board Committees. The Investor shall have one
representative appointed to the audit and executive committees of the Board of
Directors, each committee to consist of three members. The Investor's
representative to the Audit Committee, if and when established, shall be the
chairman of such committee.
5.5. Bylaws. The Company shall at all times cause its By-laws
to provide that, the number of directors fixed in accordance therewith shall in
no event conflict with any of the terms or provisions of the Series A Stock as
set forth in the Series A Certificate. The Company shall at all times maintain
provisions in its Bylaws or Certificate of Incorporation indemnifying all
directors against liability and absolving all directors from liability to the
Company and its stockholders to the maximum extent permitted under the laws of
the State of Delaware.
5.6. Investor's Expenses. Following the Closing, any
reasonable expenses incurred by the Investor or its representatives on behalf of
the Company, including reasonable expenses associated with attendance at
meetings of the Board of Directors (other than observer expenses if the Investor
no longer has a representative elected to the Board), trade shows or similar
meetings or events, shall be borne by the Company.
5.7. Key Person Life Insurance. The Company shall obtain and
maintain life insurance on Xxxxxxxxxxx Xxxxxx in an amount not less than $2.0
million, with proceeds payable for the benefit of the Company, upon the death of
Xxxxxxxxxxx Xxxxxx.
5.8. Conduct of Business. The Company will duly observe and
conform to or cause to be observed or conformed to all valid requirements of all
governmental authorities relative to the conduct of the business of the Company
or to its properties or assets, the failure to observe or conform to which would
have a materially adverse effect on the business of the Company, and will
maintain and keep in full force and effect all licenses and permits necessary to
the proper conduct of the business of the Company.
5.9. Preservation of Corporate Existence. The Company shall
preserve and maintain its respective corporate existence, rights, franchises and
privileges in its jurisdiction of incorporation, and will qualify and remain
qualified as a foreign corporation in every jurisdiction in which such
qualification is necessary in view of the business and operations of the Company
or the ownership of their respective properties.
5.10. Performance Under Other Documents. The Company will
promptly pay or perform or cause to be performed all payments and obligations
required of it under the terms, agreements and covenants of the Series A
Agreement, the Related Agreements and the Series A Certificate.
5.11. Performance of Obligations. The Company will promptly
perform or cause to be performed every commitment, undertaking, agreement or
covenant of the Company with any third person whether or not specifically
referred to in this Agreement, the non-performance of which could cause the
acceleration of indebtedness of the Company; provided, however, that (unless and
until foreclosure, sale or similar proceedings have been commenced) the Company
shall have the right in good faith to contest the obligation to perform any such
commitment, undertaking, agreement or covenant.
5.12. Payment of Taxes and Accounts. The Company will pay or
cause to be paid all taxes, assessments, and governmental charges or levies
imposed upon the Company or upon its respective income, profits, or properties
before the same shall become delinquent; provided, however, that (unless and
until foreclosure, sale or similar proceedings have been commended) nothing
herein shall require the Company to pay or cause to be paid any such tax,
assessment, charge, levy or account so long as the validity thereof shall be
contested in good faith by appropriate proceedings and the Company has set aside
on its books and maintained adequate reserves with respect thereto.
5.13. Maintenance of Property. The Company will maintain or
cause to be maintained the real and personal property which is required for the
business of the Company in good repair, working order and condition, and from
time to time will make or cause to be made all repairs, renewals, and
replacements that are necessary and proper.
5.14. Insurance on Properties. The Company has and will
maintain or cause to be maintained insurance with reputable insurance companies
on such of the properties of the Company in such amounts and against such risks
as is deemed sufficient by the Company's management. The Company will furnish to
the Investor, upon request, certificates signed by the President or the Chief
Financial Officer of the Company setting forth a list of all insurance in force
on the properties of the Company and containing a general schedule of property
insured, risks insured against and amount of insurance then in force.
5.15. Authorized Capital Stock. The Company covenants that it
shall at all times reserve and keep available out of its authorized but unissued
Common Stock, solely for the purpose of effecting the exercise of the Series A
Stock, such number of shares of Common Stock as shall from time to time be
issuable upon the exercise of all of the Series A Stock, as the case may be.
5.16. Taxes and Costs. The Company shall pay all taxes which
may be imposed with respect to the issuance and delivery of shares of Common
Stock upon conversion of the Series A Stock; provided, however, that the Company
shall not be required, in any event, to pay any transfer or other taxes by
reason of issuance of such shares of Common Stock in a name or names other than
the name of the holder of the Series A Stock surrendered for exchange.
5.17. Proprietary Assets. The Company shall take all steps
reasonably necessary to preserve and protect all of its intellectual property,
including without limitation all patents, copyrights, trade secrets, trademarks,
trade names, and service marks used in its business.
5.18. Professional Advisors. The Company shall consult and
receive the approval from the Investor, which shall not be unreasonably
withheld, as to the Company's hiring of professional advisors, which include,
but are not limited to, the Company's accountants, attorneys, investment bankers
and public relations consultants. The Investor approves of the Company's current
professional advisors.
5.19. Termination. The covenants in this Section 5 shall
terminate (a) upon consummation of a Qualifying IPO, or (b) Change of Control
Event.
6. GENERAL PROVISIONS.
------------------
6.1. Notices. Any notice, request or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or if deposited in the U.S. mail by
registered or certified mail, return receipt requested, postage prepaid, as
follows:
(a) if to the Investor, at:
Net Value Holdings, Inc.
Xxx Xxxx Xxxxxx Xxxxx,
Xxxxx 000
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx
with a copy to: Klehr, Harrison, Xxxxxx,
(which shall not constitute Branzburg & Xxxxxx, LLP
notice hereunder) 000 X. Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxxx X.
Xxxxx, Esquire
(b) if to the Company, at:
Webmodal, Inc.
000 Xxxx Xxxxxxx Xxxxxx,
Xxxx X
Xxxxxxxxx, XX 00000
Attention: Xxxxxxxxxxx X.
Xxxxxx
with a copy to: Xxxxx Xxxxx & Xxxxx
(which shall not constitute 000 X. XxXxxxx Xxxxxx
notice hereunder) Xxxxxxx, XX 00000-0000
Attention: Xxxxx X.
Xxxxxx, Esquire
Any party hereto (and such party's permitted assigns) may by notice so given
change its address for future notices hereunder. Notice shall conclusively be
deemed to have been given when personally delivered or when deposited in the
mail in the manner set forth above.
6.2. Entire Agreement. This Agreement, together with all the
Exhibits hereto, constitutes and contains the entire agreement and understanding
of the parties with respect to the subject matter hereof and supersedes any and
all prior negotiations, correspondence, agreements, understandings, duties or
obligations between the parties respecting the subject matter hereof.
6.3. Governing Law. This Agreement shall be governed by a
construed exclusively in accordance with the internal laws of the State of
Delaware, excluding that body of law relating to conflict of laws and choice of
law.
6.4. Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, then 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 terms.
6.5. Third Parties. Nothing in this Agreement, express or
implied, is intended to confer upon any person, other than the parties hereto
and their successors and assigns, any rights or remedies under or by reason of
this Agreement.
6.6. Successors and Assigns. Subject to the provisions of
Section 4.1, the provisions of this Agreement shall inure to the benefit of, and
shall be binding upon, the successors and permitted assigns of the parties
hereto.
6.7. Captions. The captions to sections of this Agreement have
been inserted for identification and reference purposes only and shall not be
used to construe or interpret this Agreement.
6.8. Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed an original, but both of which
together shall constitute one and the same instrument.
6.9. Costs and Attorneys' Fees. In the event that any action,
suit or other proceeding is instituted concerning or arising out of this
Agreement or any transaction contemplated hereunder, the prevailing party shall
recover all of such party's costs and attorneys' fees reasonably incurred in
each such action, suit or other proceeding, including any and all appeals or
petitions therefrom.
6.10. Adjustments for Stock Splits, Etc. Wherever in this
Agreement there is a reference to a specific number of shares of Common Stock or
Series A Stock of the Company of any class or series, then, upon the occurrence
of any subdivision, combination or stock dividend of such class or series of
stock, the specific number of shares so referenced in this Agreement shall
automatically be proportionally adjusted to reflect the affect on the
outstanding shares of such class or series of stock by such subdivision,
combination or stock dividend.
6.11. Aggregation of Stock. All shares held or acquired by
affiliated entities or persons shall be aggregated together for the purpose of
determining the availability of any rights under this Agreement.
[SIGNATURES ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties hereto have executed this
Investor Rights Agreement as of the date and year first above written.
THE COMPANY:
------------
WEBMODAL, INC.
a Delaware corporation
By: ________________________________
Xxxxxxxxxxx X. Xxxxxx, President
THE INVESTOR:
NET VALUE HOLDINGS, INC.,
a Delaware corporation
By: ________________________________
Xxxxxx X. Xxxxx, President
