Exhibit 10.3
EXECUTION COPY (A&R INVESTORS' RIGHTS AGREEMENT)
GENERAL INTERNET INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (this
"Agreement") dated as of November 13, 1998, by and among GENERAL INTERNET INC.,
a New York corporation having a principal place of business at 000 Xxxx 00xx
Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "Company"), and each of the
investors named on the attached Exhibit A and having a principal place of
business as set forth thereon (each an "Investor" and collectively the
"Investors"), as such Exhibit A may be amended from time to time to add such
other person(s) who may hereafter become a party to this Agreement as a result
of purchasing shares of the Company's Series C Convertible Preferred Stock,
$.001 par value per share, at the Closings (as hereinafter defined).
RECITALS
WHEREAS, on April 20, 1998 the Company and certain of the Investors
(collectively, the "Series A Investors") entered into that certain Series A
Convertible Preferred Stock Purchase Agreement (the "Series A Purchase
Agreement"), pursuant to which the Company issued and sold to the Series A
Investors an aggregate of 3,346,715 shares of the Company's Series A Convertible
Preferred Stock, $.001 par value per share (the "Series A Stock");
WHEREAS, on April 20, 1998 the Company and certain of the Investors
(collectively, the "Series B Investors" and, together with the Series A
Investors, the "Existing Investors") entered into that certain Series B
Convertible Preferred Stock Purchase Agreement (the "Series B Purchase
Agreement" and, together with the Series A Purchase Agreement, the "Prior
Purchase Agreements"), pursuant to which the Company issued and sold to the
Series B Investors an aggregate of 6,597,596 shares of the Company's Series B
Convertible Preferred Stock, $.001 par value per share (the "Series B Stock");
WHEREAS, concurrently with the execution and delivery of the Prior
Purchase Agreements, the Company and the Existing Investors entered into that
certain Investors' Rights Agreement dated as of April 20, 1998 (the "Investors'
Rights Agreement");
WHEREAS, on the date hereof the Company and certain of the Investors
(collectively, the "Series C Investors") are entering into that certain Series C
Convertible Preferred Stock Purchase Agreement (the "Series C Purchase
Agreement"), pursuant to which the Company is authorized to issue and sell to
the Series C Investors an aggregate of up to 8,717,949 shares of the Company's
Series C Convertible Preferred Stock, $.001 par value per share (the "Series C
Stock" and, together with the Series A Stock and the Series B Stock, the
"Preferred Stock"), at one or more closings to be held on or prior to thirty
(30) days from the date hereof (the "Closings");
WHEREAS, it is a condition to the closing of the transactions
contemplated by the Series C Purchase Agreement that the Company and the
Investors enter into this Agreement
to, among other things, amend and restate the rights granted to the Existing
Investors pursuant to the Investors' Rights Agreement in order to provide the
Series C Investors with certain registration rights, information rights and
other rights in connection with the Investors' ownership of shares of the
Company's Preferred Stock (and the Conversion Shares (as hereinafter defined)
into which such shares of Preferred Stock are convertible);
WHEREAS, pursuant to Section 4.3 of the Investors' Rights Agreement,
the Investors' Rights Agreement may be amended, waived, discharged or terminated
by the written consent of the Company, holders of at least a majority of the
Series A Stock and the holders of at least a majority of the Series B Stock,
each voting as a separate series, and any such amendments, waivers, discharges
or terminations effected in accordance with Section 4.3 of the Investors' Rights
Agreement shall be binding upon all parties thereto, including those not signing
such amendment, waiver, discharge or termination; and
WHEREAS, by entering into this Agreement, the Company, and the Series
A Investors and Series B Investors whose signatures are set forth on the
signature pages hereto, which Series A Investors and Series B Investors
constitute the holders of at least a majority of the Series A Stock and the
holders of at least a majority of the Series B Stock, each voting as a separate
series, hereby consent to amending the Investors' Rights Agreement in the manner
set forth herein.
NOW, THEREFORE, in consideration of the promises and mutual agreements
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION I
DEFINITIONS; REGISTRATION RIGHTS
1.1 Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"C-Max" shall mean C-Max Capital Limited Partnership - I, a Florida
limited partnership and an Investor hereunder.
"Commission" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock, $.001 par value, of the
Company.
"Conversion Shares" shall mean shares of Common Stock issued or
issuable upon conversion of the Preferred Stock.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
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"Excluded Stock" shall mean (i) the Reserved Employee Shares, (ii)
securities issuable as a stock dividend or upon any subdivision of shares of
Common Stock, provided that the securities issued pursuant to such stock
dividend or subdivision are limited to additional shares of Common Stock, (iii)
securities issuable pursuant to a Qualified Public Offering, (iv) debt
securities without equity features or conversion privileges (provided, however,
that any debt security convertible into the Company's capital stock shall be
Excluded Stock if a majority of the Board of Directors approves its issuance),
(v) securities issued in connection with equipment or debt financing or leases
(including securities issued in consideration of guarantees of such financing or
leases) which are approved by the Series A Investor Director, the Series B
Investor Director and the Series C Investor Director, (vi) up to an aggregate of
200,000 shares of Common Stock (or options or warrants to purchase such shares
of Common Stock) issuable to consultants or vendors to the Company at prices or
exercise prices determined by the Board of Directors to be not less than fair
market value, (vii) the shares of Common Stock issued or issuable upon
conversion of the Preferred Stock, (viii) the shares of Common Stock issued or
issuable upon exercise of the options and warrants contemplated by the
capitalization table of the Company provided as a schedule to the Series C
Purchase Agreement (ix) the shares of stock issuable upon exercise of a warrant
issued, or to be issued, to Citicorp, N.A. to purchase 100,000 shares of Common
Stock, as described in a certain Letter Agreement by and between the Company and
Citicorp, N.A., dated June 20, 1997, and (x) if expressly approved by the
Company's Board of Directors, including a majority of the Series A Investor
Director, the Series B Investor Director and the Series C Investor Director,
securities issued (a) to vendors, customers or co-venturers or other persons in
similar commercial or corporate partnering situations, or (b) in connection with
an acquisition by the Company or an affiliate of the Company.
"Qualified Public Offering" shall mean a firm commitment underwritten
public offering of the Company's Common Stock underwritten by a nationally
recognized full-service investment bank pursuant to which (i) the aggregate
gross proceeds received by the Company are at least $15,000,000, and (ii) the
price per share is not less than $10.00 (following appropriate adjustment in the
event of any stock dividends, stock split, combination or other similar
recapitalization affecting such shares).
"Register," "registered" and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act (as hereinafter defined) and the declaration or ordering of the
effectiveness of such registration statement.
"Registrable Shares" shall mean the Series A Registrable Shares, the
Series B Registrable Shares and the Series C Registrable Shares.
"Reserved Employee Shares" shall mean shares of Common Stock (or
options to purchase such shares of Common Stock) issued or issuable at not less
than fair market value to officers, employees or directors of, or consultants
to, the Company pursuant to any stock purchase or option plan or other employee
stock bonus arrangement as provided by the Company's Board of Directors. The
number of Reserved Employee Shares shall not exceed 5,300,000 shares of Common
Stock (inclusive of shares subject to currently outstanding employee options)
prior to the one (1) year anniversary of the execution of this Agreement;
provided, however, that after the one (1) year anniversary, the number of shares
set aside for
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Reserved Employee Shares may be increased (or decreased) by the
vote of the Board of Directors.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Series A Investor Director" shall have the meaning given to that term
in the Amended and Restated Shareholders Agreement entered into
contemporaneously herewith.
"Series B Investor Director" shall have the meaning given to that term
in the Amended and Restated Shareholders Agreement entered into
contemporaneously herewith.
"Series C Investor Director" shall have the meaning given to that term
in the Amended and Restated Shareholders Agreement entered into
contemporaneously herewith.
"Series A Registrable Shares" shall mean (i) the shares of Common
Stock issued or issuable upon conversion of the Series A Stock; (ii) an
aggregate of 864,557 shares of Common Stock issued or issuable by the Company to
certain Investors upon the exercise of certain warrants issued on March 27,
1997, April 14, 1997, July 10, 1997, July 24, 1997, August 7, 1997, August 27,
1997, September 22, 1997 and January 15, 1998 in connection with that certain
Note and Warrant Purchase Agreement dated March 27, 1997, as such warrants and
such Note and Warrant Purchase Agreement have been amended from time to time
(such warrants collectively referred to herein as the "Series A Outstanding
Warrants"); and (iii) shares issued or issuable upon an adjustment for (a) stock
splits, stock dividends and the like (including, without limitation, any such
adjustments with respect to the securities referred to in (i) and (ii) above),
and (b) in the Series A Outstanding Warrants as in effect on the date hereof.
Notwithstanding the foregoing, Series A Registrable Shares shall not include
shares of Common Stock issued or issuable pursuant to the foregoing which (i)
have been registered under the Securities Act pursuant to an effective
registration statement filed thereunder and disposed of in accordance with the
registration statement covering them, (ii) are publicly sold pursuant to Rule
144 under the Securities Act or, as to any one holder, all of his or its shares
may be sold in a single transaction, or (iii) are eligible for sale under Rule
144(k) under the Securities Act.
"Series B Registrable Shares" shall mean (i) the shares of Common
Stock issued or issuable upon conversion of the Series B Stock; (ii) an
aggregate of 702,777 shares of Common Stock issued or issuable by the Company to
certain Investors upon the exercise of certain warrants issued on November 26,
1997, February 2, 1998, February 12, 1998 and February 26, 1998 in connection
with those certain Note and Warrant Purchase Agreements dated November 26, 1997,
February 2, 1998 and February 12, 1998, respectively, as such warrants and such
Note and Warrant Purchase Agreement have been amended from time to time (such
warrants collectively referred to herein as the "Series B Outstanding Warrants"
and, together with the Series A Outstanding Warrants, the "Outstanding
Warrants"); (iii) the shares of Common Stock issued or issuable by the Company
to certain of the Investors upon the exercise of certain warrants issued in
connection with the sale of the Series B Stock; (iv) the 60,000 shares of Common
Stock issued or issuable by the Company to Mr. Xxxxx Xxxxxx upon the exercise of
a warrant issued in connection with the execution of an advisory agreement with
the
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Company; and (v) shares issued or issuable upon an adjustment for stock splits,
stock dividends and the like (including, without limitation, any such
adjustments with respect to the securities referred to in (i) above).
Notwithstanding the foregoing, Series B Registrable Shares shall not include
shares of Common Stock issued or issuable pursuant to the foregoing which (i)
have been registered under the Securities Act pursuant to an effective
registration statement filed thereunder and disposed of in accordance with the
registration statement covering them, (ii) are publicly sold pursuant to Rule
144 under the Securities Act or, as to any one holder, all of his or its shares
may be sold in a single transaction, or (iii) are eligible for sale under Rule
144(k) under the Securities Act.
"Series C Registrable Shares" shall mean the shares of Common Stock
issued or issuable upon conversion of the Series C Stock and shares issued or
issuable upon an adjustment for stock splits, stock dividends and the like
(including, without limitation, any such adjustments with respect to the
securities referred above). Notwithstanding the foregoing, Series C Registrable
Shares shall not include shares of Common Stock issued or issuable pursuant to
the foregoing which (i) have been registered under the Securities Act pursuant
to an effective registration statement filed thereunder and disposed of in
accordance with the registration statement covering them, (ii) are publicly sold
pursuant to Rule 144 under the Securities Act or, as to any one holder, all of
his or its shares may be sold in a single transaction, or (iii) are eligible for
sale under Rule 144(k) under the Securities Act.
1.2. Restrictive Legend. Each certificate representing Preferred Stock
or Conversion Shares shall, except as otherwise provided in Section 1.3, be
stamped or otherwise imprinted with a legend substantially in the following
form:
"TRANSFER RESTRICTED
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO RESTRICTIONS (I) UPON TRANSFER PURSUANT TO AN AMENDED AND
RESTATED SHAREHOLDERS AGREEMENT BY AND AMONG THE COMPANY AND
ITS SHAREHOLDERS, AND (II) PURSUANT TO AN AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT BY AND AMONG THE
COMPANY AND CERTAIN SHAREHOLDERS. A COPY OF THE AMENDED AND
RESTATED SHAREHOLDERS AGREEMENT AND A COPY OF THE AMENDED
AND RESTATED INVESTORS' RIGHTS AGREEMENT MAY BE OBTAINED
FROM THE COMPANY WITHOUT CHARGE UPON THE WRITTEN REQUEST OF
THE HOLDER HEREOF.
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS
AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT COVERING SUCH
SHARES UNDER THAT ACT AND ANY APPLICABLE STATE SECURITIES
LAWS, UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY, AN EXEMPTION FROM REGISTRATION THEREUNDER IS
AVAILABLE."
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1.3. Required Registration.
(a) Following the earlier to occur of (a) the third anniversary of the
date of execution and delivery of this Agreement, and (b) the date which is six
(6) months following the date of a Qualified Public Offering, either (i) the
holders of Series A Registrable Shares constituting at least fifty percent (50%)
of the Series A Registrable Shares then owned beneficially or of record by
Investors and Investor Transferees (as hereinafter defined), (ii) (A) the
holders of Series B Registrable Shares constituting at least fifty percent (50%)
of the Series B Registrable Shares then owned beneficially or of record by
Investors and Investor Transferees or (B) C-Max, or (iii) the holders of Series
C Registrable Shares constituting at least fifty percent (50%) of the Series C
Registrable Shares then owned beneficially or of record by Investors and
Investor Transferees, may request that the Company use commercially reasonable
efforts to register under the Securities Act all or any portion of the
Registrable Shares held by such requesting holder or holders for sale in the
manner specified in such notice; provided, however, that the Company may, by
notice to the requesting holders, delay such requested registration if the
Company's Board of Directors determines that such registration at the time
requested would have a material adverse effect upon the Company; provided,
further, however, that the Company's ability to delay such registration shall be
limited to durations of no longer than ninety (90) days and the Company shall
not delay more than once during any twelve (12) month period.
(b) The Company shall not be obligated pursuant to this Section 1.3 to
effectuate more than: (i) one (1) registration before a Qualified Public
Offering for the benefit of the holders set forth in Section 1.3(a)(i) above;
(ii) one (1) registration before a Qualified Public Offering for the benefit of
the holders set forth in Section 1.3(a)(ii) above; (iii) one (1) registration
before a Qualified Public Offering for the benefit of the holders set forth in
Section 1.3(a)(iii) above; (iv) one (1) registration after a Qualified Public
Offering for the benefit of the holders set forth in Section 1.3(a)(i) above;
(v) one (1) registration after a Qualified Public Offering for the benefit of
the holders set forth in Section 1.3(a)(ii) above; or (vi) one (1) registration
after a Qualified Public Offering for the benefit of the holders set forth in
Section 1.3(a)(iii). In addition, the aggregate offering price of the
Registrable Shares to be sold pursuant to each such registration shall be at
least $5,000,000. Notwithstanding anything to the contrary contained herein, no
request may be made under this Section 1.3:
(i) within one hundred eighty (180) days after the effective date of a
registration statement filed by the Company covering a firm commitment
underwritten public offering of securities of the Company under the
Securities Act; or
(ii) during the period starting with the date sixty (60) days prior to
the Company's estimated date of filing of, and ending on the date six (6)
months immediately following the effective date of any registration
statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in
good faith all reasonable efforts to cause such registration statement to
become effective and that the Company's estimate of the date of filing such
registration statement is made in good faith.
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(c) Following receipt of any notice under Section 1.3(a), the Company
shall promptly notify all Investors and Investor Transferees from whom notice
has not been received and, as soon thereafter as practicable, shall use its
reasonable efforts to register under the Securities Act, for public sale in
accordance with the method of disposition specified in such notice from
requesting holders, the number of shares of Registrable Shares specified in such
notice (and in all notices received by the Company from other holders within
twenty (20) days after the giving of such notice by the Company). If such method
of disposition shall be an underwritten public offering, the Company shall
designate the managing underwriter of such offering, following consultation and
subject to the approval of the Investors and Investor Transferees from whom
notice has been received, which approval shall not be unreasonably withheld or
delayed. All sellers must participate in the underwriting. The Company's
registration obligation hereunder shall be deemed satisfied only when a
registration statement or statements covering shares of Registrable Shares
specified in notices received as aforesaid, for sale in accordance with the
method of disposition specified by the requesting holders, shall have become
effective and, if such method of disposition is a firm commitment underwritten
public offering, all such shares shall have been sold pursuant thereto.
(d) The Company shall be entitled to include in any registration
statement referred to in this Section 1.3, for sale in accordance with the
method of disposition specified by the requesting holders, shares of Common
Stock to be sold by the Company for its own account and for the account of other
selling shareholders, except as and to the extent that, in the reasonable
opinion of the managing underwriter (if such method of disposition shall be an
underwritten public offering), such inclusion would materially adversely affect
the marketing of the shares of Common Stock to be sold. Except for registration
statements on Form X-0, X-0 or any successor thereto, and subject to Section
1.3(b), the Company will not file with the Commission any other registration
statement with respect to its Common Stock, whether for its own account or that
of other shareholders, from the date of receipt of a notice from requesting
holders pursuant to this Section 1.3 until the completion of the lesser of the
period of distribution of the shares of Registrable Shares registered thereby
and 90 days from the effective date of the registration statement, unless the
Registrable Shares shall be entitled to be included therein in accordance with
Section 1.4 below.
(e) The Company will use commercially reasonable efforts to maintain
the effectiveness of any Form S-1 used to register the shares pursuant to this
Section 1.03 for up to ninety (90) days or such earlier time as all of the
Registrable Shares have been sold.
1.4. Incidental Registration.
(a) If, at any time, the Company determines to register any of its
securities under the Securities Act for sale to the public, whether for its own
account or for the account of other security holders or both (except with
respect to registration statements on Form S-8 or its then equivalent, or in
connection with a Rule 145 transaction or Form S-4 or its equivalent, or another
form not available for registering the Registrable Shares for sale to the
public), each such time it will give prompt written notice to all holders of
outstanding Registrable Shares, including each holder who has the right to
acquire Registrable Shares, of its intention so to do and of the proposed method
of distribution of such securities. Upon the written request of any such holder,
received by the Company within twenty (20) days after the giving of any such
notice by the
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Company, to include in the registration all or any part of the Registrable
Shares, the Company will use commercially reasonable efforts to cause the
Registrable Shares as to which registration shall have been so requested to be
included in the securities to be covered by the registration statement proposed
to be filed by the Company, all to the extent and under the conditions such
registration is permitted under the Securities Act and this Section 1.4. In the
event that any registration pursuant to this Section 1.4 shall be, in whole or
in part, an underwritten public offering of Common Stock, the number of shares
of Registrable Shares to be included in such an underwriting may be reduced (pro
rata among the requesting holders based upon the number of shares of Registrable
Shares owned by such holders) if and to the extent that the managing underwriter
shall be of the opinion that the inclusion of some or all of the Registrable
Shares would adversely affect the marketing of the securities to be sold by the
Company therein. Any such limitation shall be imposed in such manner so as to
avoid any diminution in the number of shares the Company may register for sale
by giving first priority for the shares to be registered for issuance and sale
by the Company, by giving second priority for any Registrable Shares to be
registered pursuant to Section 1.3 hereof, and by giving third priority for the
Registrable Shares to be registered for sale by any other Investor pursuant to
the terms of this Section 1.4. Notwithstanding the foregoing provisions, the
Company may, in its sole discretion, terminate or withdraw any registration
statement referred to in this Section 1.4 without thereby incurring any
liability to the holders of Registrable Shares.
(b) The Company will use commercially reasonable efforts to maintain
the effectiveness of any form used to register the shares pursuant to this
Section 1.04 for up to ninety (90) days or such earlier time as all of the
Registrable Shares have been sold .
1.5. Registration on Form S-3. If at any time the holders of at least
twenty percent (20%) of the Registrable Shares then owned beneficially or of
record by Investors and Investor Transferees request that the Company file a
registration statement on Form S-3 or any successor thereto for a public
offering of all or any portion of the Registrable Shares held by such requesting
holder or holders, the reasonably anticipated aggregate price to the public (net
of underwriting discounts and commissions) of which would exceed $2,000,000, and
the Company is a registrant entitled to use Form S-3 or any successor thereto to
register such shares, then the Company shall use all commercially reasonable
efforts to register under the Securities Act on Form S-3 or any successor
thereto, for public sale in accordance with the method of disposition specified
in such notice, the number of Registrable Shares specified in such notice.
Whenever the Company is required by this Section 1.5 to use all reasonable
efforts to effect the registration of Registrable Shares, each of the procedures
and requirements of Section 1.3 (including but not limited to the requirement
that the Company notify all holders of Registrable Shares from whom notice has
not been received and provide them with the opportunity to participate in the
offering) shall apply to such registration. The Company shall be obligated to
register Registrable Shares pursuant to this Section 1.5 on two occasions;
provided, however, that such obligation shall be deemed satisfied only when a
registration statement or statements covering all shares of Registrable Shares
specified in notices received as aforesaid, for sale in accordance with the
method of disposition specified by the requesting holders, shall have become
effective. The Company will use its commercially reasonable efforts to maintain
the effectiveness of any Form S-3 for a period of up to one hundred eighty (180)
days or such earlier time as all of the Registrable Shares have been sold.
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1.6. Limitation on Registration Request. Notwithstanding any other
provision of this Agreement, the right of a holder of Registrable Shares to
request registration of the same by the Company pursuant to Sections 1.3, 1.4
and 1.5 hereof shall not apply with respect to such holder upon the earliest to
occur of (a) all of such holder's Conversion Shares can be sold in compliance
with the volume and other restrictions set forth in Rule 144 of the Securities
Act, (b) all of such holder's Conversion Shares may be sold in compliance with
Rule 144(k) of the Securities Act, or (c) five (5) years from the date of the
consummation of the Qualified Public Offering.
1.7. Registration Procedures. If and whenever the Company is required
by the provisions of Sections 1.3, 1.4 or 1.5 to use its commercially reasonable
efforts to effect the registration of any Registrable Shares under the
Securities Act, the Company will, at its cost and expense (including without
limitation, payment of the costs and expenses described in Section 1.8), as
expeditiously as reasonably practicable:
(a) prepare and file with the Commission a registration statement
(which, in the case of an underwritten public offering pursuant to Section
1.3, shall be on Form S-1 or other form of general applicability
satisfactory to the managing underwriter selected as therein provided) with
respect to such securities and use all reasonable efforts to cause such
registration statement to become and remain effective for the period set
forth in Section 1.3, 1.4, or 1.5, as applicable;
(b) prepare and file as expeditiously as reasonably practicable and in
any event within ninety (90) days with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for the period specified in Section 1.7(a) above and
comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Shares covered by such registration
statement in accordance with the sellers' intended method of disposition
set forth in such registration statement for such period;
(c) furnish to each seller of Registrable Shares and to each
underwriter such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the public sale or
other disposition of the Registrable Shares covered by such registration
statement;
(d) use all reasonable efforts to register or qualify the Registrable
Shares covered by such registration statement under the securities or "blue
sky" laws of such jurisdictions as the sellers of Registrable Shares or, in
the case of an underwritten public offering, the managing underwriter
reasonably shall request, provided, however, that the Company shall not for
any such purpose be required to qualify generally to transact business as a
foreign corporation in any jurisdiction where it is not so qualified or to
consent to general service of process in any such jurisdiction;
(e) use all reasonable efforts to list the Registrable Shares covered
by such registration statement with NASDAQ or any securities exchange on
which the Common Stock of the Company is then listed, or NASDAQ or such
securities exchange as shall be selected by the Company, or, if the Company
fails to make an application to so list within thirty (30) days of a
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request for the same by the Investors in connection with a Qualified Public
Offering, the Investors may determine the place of listing, subject to
qualification by the Company to list its shares thereon;
(f) immediately notify each seller of Registrable Shares and each
underwriter under 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 of which the Company has
knowledge as a result of which the prospectus contained 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 light
of the circumstances then existing. The sellers of Registrable Shares agree
upon receipt of such notice forthwith to cease making offers and sales of
Registrable Shares pursuant to such registration statement or deliveries of
the prospectus contained therein for any purpose until the Company has
prepared and furnished such amendment or supplement to the prospectus as
may be necessary so that, as thereafter delivered to purchasers of such
Registrable Shares, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing;
(g) notify each seller of Registrable Shares under such registration
statement of (i) the effectiveness of such registration statement, (ii) the
filing of any post-effective amendments to such registration statement, or
(iii) the filing of a supplement to such registration statement;
(h) at the request of any seller of Registrable Shares, use all
reasonable efforts to furnish on the date that Registrable Shares is
delivered to the underwriters for sale pursuant to such registration: (i)
an opinion dated such date of counsel representing the Company for the
purposes of such registration, addressed to the sellers (with a copy
provided to the underwriters), and in customary form; and (ii) a letter
dated such date from the independent public accountants retained by the
Company, addressed to the sellers (with a copy provided to the
underwriters) and covering such matters with respect to such registration
as such underwriters reasonably may request; and
(i) make available for inspection upon reasonable notice during the
Company's regular business hours by each seller of Registrable Shares, any
underwriter participating in any distribution pursuant to such registration
statement, and any attorney, accountant or other agent retained by such
seller or underwriter, all material financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers and directors to supply all information reasonably requested by
any such seller, underwriter, attorney, accountant or agent in connection
with such registration statement.
For purposes of Section 1.7(a) and 1.7(b) and of Section 1.3(d), the
period of distribution of Registrable Shares in a firm commitment underwritten
public offering shall be deemed to extend until each underwriter has completed
the distribution of all securities purchased by it, and the period of
distribution of Registrable Shares in any other registration shall be deemed to
extend until the earlier of the sale of all Registrable Shares covered thereby
10
and 90 days after the effective date of such registration statement, with
reasonable extensions to be granted for suspensions thereof.
In connection with and as a condition to each registration hereunder,
the sellers of Registrable Shares shall (a) provide such information and execute
such documents as may reasonably be required in connection with such
registration, (b) agree to sell Registrable Shares on the basis provided in any
underwriting arrangements, and (c) complete and execute all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required or requested under the terms of such underwriting
arrangements.
In connection with each registration pursuant to Sections 1.3, 1.4 or
1.5 covering an underwritten public offering, the Company and each seller agree
to enter into a written agreement with the managing underwriter selected in the
manner herein provided in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature.
1.8. Expenses. All expenses incurred by the Company in complying with
Sections 1.3, 1.4 and 1.5, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees and expenses (including
counsel fees) incurred in connection with complying with state securities or
"blue sky" laws, transfer taxes, fees of transfer agents and registrars, and the
reasonable fees and disbursements of one counsel for the sellers of Registrable
Shares (which fees and expenses do not exceed $15,000 in the aggregate), but
excluding any Selling Expenses, are called "Registration Expenses." All
underwriting discounts and selling commissions applicable to the sale of
Registrable Shares and the fees of more than one counsel are called "Selling
Expenses."
The Company will pay all Registration Expenses in connection with each
registration statement under Sections 1.3, 1.4 or 1.5. The Company shall not,
however, be required to pay for the Registration Expenses of any registration
proceeding begun pursuant to Section 1.3 or 1.5, the request for which is
subsequently withdrawn by the requesting holders of Registrable Shares, in which
event the Registration Expenses shall be borne by the requesting holders of the
Registrable Shares in proportion to the number of shares for which registration
was requested. All Selling Expenses in connection with each registration
statement under Sections 1.3, 1.4 or 1.5 shall be borne by the participating
sellers in proportion to the number of Registrable Shares sold by each, or by
such participating sellers other than the Company (except to the extent the
Company shall be a seller) as they may agree.
1.9. Information by Holder. The holder or holders of Registrable
Shares included in any registration shall furnish to the Company such
information regarding such holder or holders of Registrable Shares, the
Registrable Shares held by them and the distribution proposed by such holder or
holders of Registrable Shares as the Company may reasonably request in writing
and as shall be required in connection with any registration (including any
amendment to a registration statement or prospectus), qualification or
compliance referred to in this Section 1.9.
11
1.10. Lock-Up Agreements. Each holder of Registrable Shares shall
agree to be bound by such lock-up agreements (not to exceed a period of 180 days
following the date of the prospectus relating to any such underwriting) as the
managing underwriter of any such registration shall specify as a requirement to
any such underwriting, provided that the entry of such holder of Registrable
Shares into such agreements shall be conditioned upon at least ninety percent
(90%) of the then current shareholders (including all shareholders, who,
together with their affiliates, hold at least one percent (1%) of the then
outstanding shares of the Company's capital stock) and all executive key
officers (including, at a minimum, Xxxxx Xxxxxx) and directors of the Company
also agreeing to execute such lock-up agreement regardless of the number of
shares of the capital stock of the Company then owned by them.
1.11. Indemnification and Contribution.
(a) In the event of a registration of any of the Registrable Shares
under the Securities Act pursuant to Sections 1.3, 1.4 or 1.5, the Company will
indemnify and hold harmless each seller of such Registrable Shares thereunder,
each underwriter of such Registrable Shares thereunder and each other person, if
any, who controls such seller or underwriter within the meaning of Section 15 of
the Securities Act, from and 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 or under any other statute or at common
law 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 pursuant to Sections 1.3, 1.4 or 1.5, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereof,
or arise out of or are based upon 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 any violations of applicable law relating
to such registration, and will pay the reasonable legal fees and other expenses
of each such seller, each such underwriter and each such controlling person
incurred by them in connection with investigating or defending any action
whether or not resulting in any liability insofar as such loss, claim, damage,
liability or action results from the foregoing, provided, however, that the
Company will not be liable to a seller in any such case if and to the extent
that any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in reliance upon and in conformity with information furnished in writing by
any such seller, any such underwriter or any such controlling person
specifically for use in such registration statement or prospectus; and,
provided, further, however, that the Company will not be liable to a holder in
any such case to the extent that any such loss, claim, damage, liability or
action arises out of or is based upon an untrue or alleged untrue statement or
omission or an alleged omission made in any preliminary prospectus or final
prospectus if (1) such holder failed to send or deliver a copy of the final
prospectus or prospectus supplement with or prior to the delivery of written
confirmation of the sale of the Registrable Shares, and (2) the final prospectus
or prospectus supplement would have corrected such untrue statement or omission.
(b) In the event of a registration of any of the Registrable Shares
under the Securities Act pursuant to Sections 1.3, 1.4 or 1.5, each seller of
such Registrable Shares thereunder, severally and not jointly, will indemnify
and hold harmless the Company, each
12
person, if any, who controls the Company within the meaning of the Securities
Act, each officer of the Company who signs the registration statement, each
director of the Company, each underwriter and each person who controls any
underwriter within the meaning of the Securities Act, against all losses,
claims, damages or liabilities, joint or several, to which the Company or such
officer, director, underwriter or controlling person may become subject under
the Securities Act 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
the registration statement under which such Registrable Shares was registered
under the Securities Act pursuant to Sections 1.3, 1.4 or 1.5, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon 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, and will pay the reasonable legal fees
and other expenses of the Company and each such officer, director, underwriter
and controlling person incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that such seller will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information furnished in
writing to the Company by such seller specifically for use in such registration
statement or prospectus; and provided, further, however, that the liability of
each seller hereunder shall be limited to the amount of gross proceeds received
by such seller in connection with such registration.
(c) Promptly after receipt by an indemnified party hereunder of notice
of the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability that it may have to
such indemnified party other than under this Section 1.11 and shall only relieve
it from any liability that it may have to such indemnified party under this
Section 1.11 if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 1.11 for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof; provided,
however, that, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded (based on the advice of counsel) that there may be reasonable defenses
available to it which are different from or additional to those available to the
indemnifying party or if the interests of the indemnified party reasonably may
be deemed to conflict with the interests of the indemnifying party, the
indemnified party shall have the right to select a separate counsel and to
assume such legal defenses and otherwise to participate in the defense of such
action, with the expenses and fees of such separate counsel and other expenses
related to such participation to be reimbursed by the indemnifying party as
incurred, it being understood, however, that the indemnifying party shall not,
in connection with any one such action or separate but substantially similar or
related actions
13
in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (together with appropriate local counsel as required by the
local rules of such jurisdiction) at any time for all such indemnified parties.
(d) 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 of
Registrable Shares exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 1.11 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 1.11
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 1.11; then, and in each such case, the Company and each 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
as may be reasonable taking into account such matters as (i) their relative
fault as to the matters giving rise to such losses, claims, damages or
liabilities, (ii) their relative ability or opportunity to have avoided such
losses, claims, damages or liabilities, provided, however, that, in any such
case, no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 12(f) of the Securities Act) will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.
(e) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.
1.12. Changes in Common Stock or Preferred Stock. If, and as often as,
there is any change in the Common Stock or the Preferred Stock by way of a stock
split, stock dividend, combination or reclassification, or through a merger,
consolidation, reorganization or recapitalization, or by any other means,
appropriate adjustment shall be made in the provisions hereof so that the rights
and privileges granted hereby shall continue with respect to the Common Stock or
the Preferred Stock as so changed.
1.13. Rule 144 Reporting and Rule 144A Information. With a view to
making available the benefits of certain rules and regulations of the Commission
that may at any time permit the resale of the Registrable Shares without
registration, the Company will:
(a) at all times after 90 days after the first registration statement
covering a public offering of securities of the Company under the
Securities Act shall have become effective or following registration under
Section 12 of the Exchange Act, use its commercially reasonable efforts to:
14
(i) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
(ii) file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and
the Exchange Act; and
(iii) furnish to each holder of Registrable Shares forthwith upon
request a written statement by the Company as to its compliance with
the reporting requirements of such Rule 144 and of the Securities Act
and the Exchange Act, a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents so filed
by the Company as such holder may reasonably request in availing
itself of any rule or regulation of the Commission allowing such
holder to sell any Registrable Shares without registration; and
(b) at any time, at the request of any holder of Preferred Stock or
Registrable Shares, make available to such holder and to any prospective
transferee of such Preferred Stock or Registrable Shares the information
concerning the Company described in Rule 144A(d)(4) under the Securities
Act.
1.14. Damages. The Company recognizes and agrees that the holders of
Registrable Shares will suffer irreparable harm and will not have an adequate
remedy at law if the Company fails to comply with any provision of Section 1,
and the Company expressly agrees that, in the event of such failure, the holders
of Registrable Shares or any other person entitled to the benefits of Section 1
shall be entitled to seek specific performance of any and all provisions of
Section 1 and may seek to enjoin the Company from continuing to commit any
further breach of this Section 1.
15
SECTION 2
INFORMATION RIGHTS; INSPECTION RIGHTS; SMALL BUSINESS
ADMINISTRATION EXAMINER AUDITS
2.1 Information Rights. As long as any Investor or any Investor
Transferee owns any Preferred Stock (and, with respect to clauses (d) - (h)
below, as long as any Investor or any Investor Transferee owns at least three
percent (3%) of the Company's Common Stock on an as converted basis) each such
Investor, or any Investor Transferee, shall be entitled to receive, and the
Company shall mail to any such Investor or Investor Transferee, at the times
specified, the following reports:
(a) as soon as available, and in any event within thirty (30) days
after the end of each month, a balance sheet for the Company as of the end
of such month and the related statements of income, shareholder's equity
and cashflows for the year to date, prepared in accordance with generally
accepted accounting principles and certified by the Chief Financial Officer
of the Company as true, correct and complete;
(b) as soon as available and in any event within ninety (90) days
after the end of each fiscal year of the Company, a balance sheet of the
Company as of the end of such fiscal year and the related statements of
income, shareholders' equity and cash flows for the fiscal year then ended,
prepared in accordance with generally accepted accounting principles and
audited by a firm of independent public accountants of national recognition
selected by the Board of Directors of the Company and reasonably acceptable
to the Investors;
(c) no later than thirty (30) days prior to the start of each fiscal
year, the Company's annual operating plan, including, without limitation,
consolidated capital and operating expense budgets, cash flow projections
and income and loss projections for the Company and its subsidiaries in
respect of such fiscal year, all itemized in reasonable detail and prepared
on a monthly basis, and, promptly after preparation, any revisions to any
of the foregoing;
(d) promptly following receipt by the Company, each audit response
letter, accountant's management letter and other written report submitted
to the Company by its independent public accountants in connection with an
annual or interim audit of the books of the Company or any of its
subsidiaries;
(e) promptly after the commencement thereof, notice of all actions,
suits, claims, proceedings, investigations and inquiries that are likely to
materially adversely affect the Company or any of its subsidiaries;
(f) promptly upon sending, making available or mailing the same, all
press releases, reports and financial statements that the Company sends or
makes available to its shareholders;
(g) promptly, from time to time, such other material information
regarding the business, prospects, financial condition, operations,
property or affairs of the Company and its Subsidiaries as such Investor
reasonably may request; and
16
(h) as soon as practicable, but in any event within forty-five (45)
days after the end of each of the first three (3) quarters of each fiscal
year of the Company, an unaudited profit or loss statement, schedule as to
the sources and application of funds for such fiscal quarter and an
unaudited balance sheet and a statement of stockholder's equity, as of the
end of such fiscal quarter and a statement showing the number of shares of
each class and series of capital stock and securities convertible into or
exercisable for shares of capital stock outstanding at the end of the
period, the number of common shares issuable upon conversion of exercise of
any outstanding securities convertible or exercisable for common shares and
the exchange ratio or exercise price applicable thereto, all in sufficient
detail as to permit the Investor to calculate its percentage equity
ownership in the Company.
The obligations of the Company to furnish financial information to the
Investors and the Investor Transferees pursuant to this Section 2.1 shall
terminate upon the earlier to occur of (i) the completion of a Qualified Public
Offering, or (ii) such time as the Company otherwise becomes subject to the
reporting requirements of the Exchange Act.
2.2 Inspection Rights. As long as any Investor or any Investor
Transferee owns any Preferred Stock, the Company shall permit each Investor and
such persons as it may designate, subject to the Company's reasonable approval
and the execution of a confidentiality agreement acceptable to the Company, at
such Investor's expense, upon not less than three (3) business days prior notice
to the Company to visit and inspect, during normal business hours and without
disruption to the Company's business, any of the properties of the Company and
its subsidiaries, examine their books (and take copies and extracts therefrom),
discuss the affairs, finances and accounts of the Company and its subsidiaries
with their officers and employees, and consult with and advise the management of
the Company and its subsidiaries as to their affairs, finances and accounts, all
at reasonable times and upon reasonable notice. The Investors and their approved
designees agree that he or it will keep confidential and will not disclose,
divulge or use (other than for purposes of monitoring its investment in the
Company) any confidential, proprietary or secret information which such Investor
may obtain from the Company pursuant to financial statements, reports and other
materials submitted by the Company to such Investor pursuant to this Agreement,
or pursuant to inspection rights granted hereunder, unless such information is
known to the public through no fault of any Investor or its designees or
representatives; provided, however, an Investor may disclose such information
(i) to its attorneys, accountants and other professionals to the extent
necessary to obtain their services in connection with its investment in the
Company, (ii) to any prospective permitted transferee of the Preferred Stock, so
long as the prospective transferee agrees to be bound by the provisions of this
Section 2.2, (iii) to any general partner or affiliate of such Investor, and
(iv) to any other Investor.
2.3 Small Business Administration Examiner Audits. So long as any of
the Investors which holds shares of the capital stock of the Company is a Small
Business Investment Company, and at any reasonable time and from time to time
during normal business hours and upon prior notice, the Company will provide
Small Business Administration examiners access to its books and records for
Small Business Administration audit purposes. In addition, upon request by the
Investors, the Company shall deliver or cause to be delivered copies of any and
all documents, costs, or other instruments which the Investors may request from
time to time (a) in
17
response to a request for production of the same for the Small Business
Administration, or (b) in compliance with any instrument under the Small
Business Investment Act.
SECTION 3
RIGHT TO PURCHASE NEW SECURITIES
3.1 Participation Rights. The Company shall, at least ten (10) days
prior to any issuance by the Company of any of its securities other than
Excluded Stock to any party, give written notice of such issuance to each holder
of Registrable Shares (the "Offerees"). The Company's written notice to the
Offerees shall describe the securities proposed to be issued by the Company and
specify the number, price and payment terms. Each holder of the Registrable
Shares shall have the right, for a period of twenty (20) days from such notice,
to purchase, at the same price and on the same terms and conditions, that number
of additional securities of the Company as would be necessary to preserve such
holder's percentage interest in the equity of the Company on a fully diluted, as
converted basis, as of the time immediately prior to such issuance. Each Offeree
may accept the Company's offer as to the full number of securities offered to it
or any lesser number, by written notice thereof given by it to the Company prior
to the expiration of the aforesaid twenty (20) day period, in which event the
Company shall promptly sell and such Offeree shall buy, upon the terms
specified, the number of securities agreed to be purchased by such Offeree.
The Company shall be free at any time after the end of the aforesaid
twenty (20) day period and prior to ninety (90) days after the date of its
notice of offer to the Offerees, to offer and sell to any third party or parties
the number of such securities not agreed by the Offerees to be purchased by
them, at a price and on payment terms no less favorable to the Company than
those specified in such notice of offer to the Offerees. However, if such third
party sale or sales are not consummated within such ninety (90) day period, the
Company shall not sell such securities as shall not have been purchased within
such period without again complying with this Section 3.1. The obligations of
the Company under this Section 3.1 shall terminate upon the completion of a
Qualified Public Offering. Notwithstanding anything contained in this Agreement
to the contrary, the written notice of an offer to purchase newly issued shares
to which a participation right applies (as provided in the preceding paragraph)
need not be given prior to the purchase by the party intending to purchase the
newly issued shares, provided such offer is sent within five (5) days thereafter
and remains open for a twenty (20) day period from the receipt thereof, and
further provided that the Company has set aside a number of shares sufficient to
satisfy the obligations of the Company pursuant to this section.
SECTION 4
MISCELLANEOUS
4.1 Successors and Assigns. All covenants and agreements contained in
this Agreement by or on behalf of any of the parties hereto shall bind and inure
to the benefit of the respective successors and assigns of the parties hereto
(including without limitation transferees of any Preferred Stock or Registrable
Shares), whether so expressed or not; provided, however,
18
that the rights conferred in this Agreement on the Investors shall only inure to
the benefit of a transferee of Preferred Stock or Registrable Shares if: (a) (1)
there is transferred to such transferee at least 100,000 Registrable Shares (the
transferee in any such case being referred to as a "Investor Transferee"), or
(2) such transferee is an affiliate of the transferor; and (b) such transfer may
otherwise be effected in accordance with applicable securities laws; and (c)
notice of such transfer or assignment is given to the Company and such
Transferee has agreed in writing to be bound by the terms of this Agreement and
the Amended and Restated Shareholders Agreement.
4.2 Governing Law. This Agreement is executed and delivered in the
State of New York, and this Agreement shall be governed by and construed in
accordance with the laws of the State of New York for all purposes and in all
respects, without giving effect to the conflict of law provisions thereof.
4.3 Integration; Amendment. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement among the parties with regard to the subjects hereof and thereof, and
supersede any previous agreement or understanding between or among the parties
with respect to such subjects, including, without limitation, the Investors'
Rights Agreement. No party shall be liable or bound to any other party in any
manner by any warranties, representations or covenants except as specifically
set forth herein or therein. Except as expressly provided herein, neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the party against whom enforcement
of any such amendment, waiver, discharge or termination is sought; provided,
however, that with the written consent of the Company and the holders of at
least two-thirds of the Registrable Shares may waive, modify or amend, on behalf
of all parties hereto, any provisions of this Agreement and such waiver,
modification or amendment may be given or withheld for any reason or no reason
in the sole discretion of any party. Any amendments, waivers, discharges or
terminations of this Agreement effected in accordance herewith shall be binding
upon all parties hereto, including those not signing such amendment, waiver,
discharge or termination.
4.4 Notices. All notices, requests, demands, and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom notice is
to be given, on the date of transmittal of services via telecopy to the party to
whom notice is to be given (with a confirming copy being delivered within 24
hours thereafter), or on the third day after mailing if mailed to the party to
whom notice is to be given, by first class mail, registered or certified,
postage prepaid, or on the date of receipt if served via overnight courier
providing a receipt and properly addressed as set forth on Schedule I hereto.
Any party may change its address for purposes of this paragraph by giving notice
of the new address to each of the other parties in the manner set forth above.
4.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
4.6 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement
19
shall continue in full force and effect without said provision; provided that no
such severability shall be effective if it materially changes the economic
benefit of this Agreement to any party.
4.7 Dispute Resolution. If the parties should have a material dispute
arising out of or relating to this Agreement or the parties' respective rights
and duties hereunder, then the parties will resolve such dispute in the
following manner: (i) any party may at any time deliver to the others a written
dispute notice setting forth a brief description of the issue for which such
notice initiates the dispute resolution mechanism contemplated by this Section
4.7; (ii) during the forty-five (45) day period following the delivery of the
notice described in Section 4.7 (i) above, appropriate representatives of the
various parties will meet and seek to resolve the disputed issue through
negotiation, (iii) if representatives of the parties are unable to resolve the
disputed issue through negotiation, then within thirty (30) days after the
period described in Section 4.7(ii) above, the parties will refer the issue (to
the exclusion of a court of law) to final and binding arbitration in New York,
New York in accordance with the then existing rules (the "Rules") of the
American Arbitration Association ("AAA"), and judgment upon the award rendered
by the arbitrators may be entered in any court having jurisdiction thereof;
provided, however, that the law applicable to any controversy shall be the law
of the State of New York, regardless of principles of conflicts of laws. In any
arbitration pursuant to this Agreement, (i) discovery shall be allowed and
governed by the New York Code of Civil Procedure and (ii) the award or decision
shall be rendered by a majority of the members of a Board of Arbitration
consisting of three (3) members, one of whom shall be appointed by each of the
respective parties and the third of whom shall be the chairman of the panel and
be appointed by mutual agreement of said two party-appointed arbitrators. In the
event of failure of said two arbitrators to agree within sixty (60) days after
the commencement of the arbitration proceeding upon the appointment of the third
arbitrator, the third arbitrator shall be appointed by the AAA in accordance
with the Rules. In the event that either party shall fail to appoint an
arbitrator within thirty (30) days after the commencement of the arbitration
proceedings, such arbitrator and the third arbitrator shall be appointed by the
AAA in accordance with the Rules. Nothing set forth above shall be interpreted
to prevent the parties from agreeing in writing to submit any dispute to a
single arbitrator in lieu of a three (3) member Board of Arbitration. Upon the
completion of the selection of the Board of Arbitration (or if the parties agree
otherwise in writing, a single arbitrator), an award or decision shall be
rendered within no more than forty-five (45) days. Notwithstanding the
foregoing, the request by either party for preliminary or permanent injunctive
relief, whether prohibitive or mandatory, shall not be subject to arbitration
and may be adjudicated only by the courts of the State of New York or the U.S.
District Court in New York.
4.8 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
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20
IN WITNESS WHEREOF, the Company and the Investors have executed this
Agreement under seal as of the day and year first above written.
THE COMPANY:
GENERAL INTERNET INC.
By: /s/ Xxxxx Xxxxxx
------------------------------------------
Xxxxx Xxxxxx, President and CEO
THE INVESTORS:
BIG FLOWER CAPITAL CORPORATION
By: /s/ Xxxx X. Xxxxxxxx
------------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Deputy Chairman/General Counsel
BIG FLOWER DIGITAL SERVICES, INC.
By: /s/ Xxxx X. Xxxxxxxx
------------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Executive Vice President and Secretary
ZERO STAGE CAPITAL V LIMITED PARTNERSHIP
By: Zero Stage Capital Associates Limited
Partnership, General Partner
By: /s/ Xxxxxxx X. Xxxx
-------------------------------------
Xxxxxxx X. Xxxx, General Partner
21
ZERO STAGE CAPITAL VI LIMITED PARTNERSHIP
By: Zero Stage Capital Associates VI, LLC,
General Partner
By: /s/ Xxxxxxx X. Xxxx
-------------------------------------
Xxxxxxx X. Xxxx, Managing Member
XX. XXXXXXX X. XXXX
/s/ Xxxxxxx X. Xxxx
---------------------------------------------
Xx. Xxxxxxx X. Xxxx
DOLL TECHNOLOGY INVESTMENT FUND,
a California limited partnership
By: Doll Technology Investment Management,
L.L.C., its General Partner
By: /s/ Xxxxx R. Doll
-------------------------------------
Xxxxx X. Xxxx, Managing Member
DOLL TECHNOLOGY AFFILIATES FUND, L.P.
By: Doll Technology Investment Management,
L.L.C., its General Partner
By: /s/ Xxxxx R. Doll
-------------------------------------
Xxxxx X. Xxxx, Managing Member
22
DOLL TECHNOLOGY SIDE FUND, L.P.
By: Doll Technology Investment Management,
L.L.C., its General Partner
By: /s/ Xxxxx R. Doll
-------------------------------------
Xxxxx X. Xxxx, Managing Member
CRYSTAL INTERNET VENTURE FUND, L.P.
By: Crystal Venture Ltd.,
its General Partner
By: /s/ Xxxxxx Xxxxxxx
-------------------------------------
Xxxxxx Xxxxxxx, Vice President
C-MAX CAPITAL LIMITED PARTNERSHIP - I
By: C-Max Capital Corporation,
its General Partner
By: /s/ Xxxxx Xxxxxx
------------------------------------------
Name: Xxxxx Xxxxxx
Title: Director
PROSPECT STREET NYC DISCOVERY
FUND, L.P.
By: /s/ Xxxxxx Ryeon
------------------------------------------
Name: Xxxxxx Ryeon
Title: Vice President
23
MR. XXXXX XXXXXX
/s/ Xxxxx Xxxxxx
---------------------------------------------
Mr. Xxxxx Xxxxxx
24
OPEN TEXT CORPORATION
By: /s/ Xxxxxx Xxxxxx
------------------------------------------
Xxxxxx Xxxxxx - Chief Financial Officer
INFOTECH VENTURES LTD.
By:
------------------------------------------
Lip-Bu Tan
XX. XXXX XXXXXX
/s/ Xxxx Xxxxxx
---------------------------------------------
Xx. Xxxx Xxxxxx
XX. XXXXX XXXXXXXXX
---------------------------------------------
Xx. Xxxxx Xxxxxxxxx
MR. XXXXXXX XXX
---------------------------------------------
Mr. Xxxxxxx Xxx
XX. XXXXXX X. XXXXXX
/s/ Xxxxxx X. Xxxxxx
---------------------------------------------
Xx. Xxxxxx X. Xxxxxx
25
XX. XXXXX XXXXXX
---------------------------------------------
Xx. Xxxxx Xxxxxx
XX. XXXXXXX KURNIT
---------------------------------------------
Xx. Xxxxxxx Xxxxxx
XX. XXXX XXXXXX
---------------------------------------------
Xx. Xxxx Xxxxxx
XX. XXXXXX XXXX
/s/ Xxxxxx Xxxx
---------------------------------------------
Xx. Xxxxxx Xxxx
26
XX. XXXX XXXXXX
/s/ Xxxx Xxxxx
---------------------------------------------
Xx. Xxxx Xxxxxx
MR. XXXXX XXXXXXX
/s/ Xxxxx Xxxxxxx
---------------------------------------------
Mr. Xxxxx Xxxxxxx
CAMELOT CAPITAL L.P.
By: Camelot Capital, its General Partner
---------------------------------------------
By: Xxxxx Xxxxx
Title:
CAMELOT OFFSHORE FUND LTD.
By: Camelot Capital, its General Partner
---------------------------------------------
By: Xxxxx Xxxxx
Title:
THE MARKS FAMILY LIMITED PARTNERSHIP
---------------------------------------------
By:
27
XXXX & ASSOCIATES LIMITED PARTNERSHIP
---------------------------------------------
By: Xx. Xxxxxxxx T. Veru, General Partner
XX. XXXXXXXX T. VERU
---------------------------------------------
XX. XXXXXXX X. XXXXXX
---------------------------------------------
XX. XXXXXXX XXXXXXXX
---------------------------------------------
DAHLM PARTNERS
---------------------------------------------
By:
28
EXHIBIT A
Investors
Name and Address
----------------
C-Max Capital Limited Partnership - I
000 Xxxx 00xx Xxxxxx, Xxx. 00X
Xxx Xxxx, Xxx Xxxx 00000
Attn: Mr. Xxxxx Xxxxxx
Facsimile: (000) 000-0000
with a copy to: Xxxxxxxxx Xxxxxxx
0000 Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attn: Xxxxx XxxXxxxxxx, Esq.
Facsimile: (000) 000-0000
Zero Stage Capital V Limited Partnership
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxx, General Partner
Facsimile: (000) 000-0000
Zero Stage Capital VI Limited Partnership
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxx, General Partner
Facsimile: (000) 000-0000
Doll Technology Investment Fund
c/o Doll Capital Management
0000 Xxxx Xxxx Xxxx, Xxxx. 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxx, Managing General Partner
Facsimile: (000) 000-0000
Doll Technology Affiliates Fund, L.P.
c/o Doll Capital Management
0000 Xxxx Xxxx Xxxx, Xxxx. 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Attn: Xxxxx Xxxx, Managing General Partner
Facsimile: (000) 000-0000
Doll Technology Side Fund, L.P.
c/o Doll Capital Management
0000 Xxxx Xxxx Xxxx, Xxxx. 0, Xxxxx 000
29
Menlo Park, CA 94025
Attn: Xxxxx Xxxx, Managing General Partner
Facsimile: (000) 000-0000
with a copy to
(for Zero/Doll): Xxxxxxx X. Xxxxx, Esquire
Peabody & Xxxxxx
00 Xxxxx Xxxxx
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Crystal Internet Venture Fund, L.P.
CIVF Management, Ltd.
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxx, Managing Director
Facsimile: (000) 000-0000
with a copy to:
Xxxxx X. Xxxxxxxx, Esquire
Xxxxx & Xxxxxxxxx
0000 Xxxx 0xx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
Open Text Corporation
000 Xxxxxxxx Xxxxxx Xxxx
Xxxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0
Attn: Xxxxxxx X. Xxxxxxx, Executive Vice President
Facsimile: (000) 000-0000
with a copy to:
Xxxx Xxxxxx, Esquire
Xxxxxxxx, Xxxxxxx
Scotia Plaza, Suite 3100
00 Xxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Facsimile: (000) 000-0000
Xx. Xxxx Xxxxxx
Lauder Partners
00 Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
30
with a copy to: Gunderson, Dettmer, Xxxxxx,
Xxxxxxxx & Xxxxxxxxx
000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, XX 00000
Attn: Xxxxxx X'Xxxxxx, Esq.
Facsimile: (000) 000-0000
Xx. Xxxxx Xxxxxxxxx
00 Xxxxxxxxxxx Xxxxxxxx
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Mr. Xxxxxxx Xxx
000 Xxxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Xx. Xxxxxx X. Xxxxxx
0 Xxxxx Xxxx Xxxxx
Xxx Xxxx, XX 00000
Infotech Ventures Ltd.
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Mr. Lip-Bu Tan
Xx. Xxxxxxx Xxxx
c/o Zero Stage Capital
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxx, XX 00000
Big Flower Digital Services, Inc.
c/o Big Flower Press Holdings, Inc.
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Secretary
Facsimile: (000) 000-0000
Prospect Street NYC Discovery Fund, L.P.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxx
Facsimile: (000) 000-0000
31
Xx. Xxxxx Xxxxxx
000 Xxxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Xx. Xxxxxxx Xxxxxx
#8010
000 XX Xxxxx Xxxxxx
Xxxx Xxxxx, XX 00000
Facsimile: (000) 000-0000
Xx. Xxxx Xxxxxx
00 Xxxxxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Xx. Xxxxxx Xxxx
c/o Zero Stage Capital
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxx, XX 00000
Xx. Xxxx Xxxxxx
c/o Zero Stage Capital
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxx, XX 00000
Mr. Xxxxx Xxxxxxx
c/o Zero Stage Capital
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxx, XX 00000
Camelot Capital L.P.
Camelot Capital
00 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxx
Facsimile: (000)000-0000
Camelot Offshore Fund Ltd.
Camelot Capital
00 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxx
Facsimile: (000)000-0000
32
The Marks Family Limited Partnership
c/o Xxxxxxxx Xxxxx
00 Xxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Xxxx & Associates Limited Partnership
000 Xxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Dennison T. Veru
Facsimile: (212)
Xx. Xxxxxxxx T. Veru
0 Xxxx Xxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile: (212)
Xx. Xxxxxxx X. Xxxxxx
0000 Xxxxxx Xxxxxxx
Xxxxxxxx, XX 00000
Xx. Xxxxxxx Xxxxxxxx
000 Xxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
DAHLM Partners
KR Capital Advisors
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxx
Facsimile: (000) 000-0000
[other new investors]
33
