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EXHIBIT 4.3.1
STOCKHOLDERS AGREEMENT
by and among
XXXXXXXXXXXX.XXX, INC.,
AND
THE STOCKHOLDERS OF XXXXXXXXXXXX.XXX, INC.,
Dated: July 2, 1999
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TABLE OF CONTENTS
Page
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ARTICLE I. DEFINITIONS........................................................1
1.1. Common Stock........................................................1
1.2. Exchange Act........................................................1
1.3. Investors...........................................................1
1.4. Qualified IPO.......................................................1
1.5. Registrable Securities..............................................1
1.6. Securities Act......................................................2
1.7. Shares..............................................................2
ARTICLE II. REGISTRATION RIGHTS...............................................2
2.1. Piggyback Registration Rights.......................................2
2.2. Demand Registration Rights..........................................3
2.3. Registration Procedures.............................................4
2.4. Restrictions on Public Sale.........................................8
2.5. Registration Expenses...............................................9
2.6. Indemnification....................................................10
2.7. Rule 144...........................................................12
2.8. Participation in Underwritten Registrations........................12
ARTICLE III. MISCELLANEOUS...................................................12
3.1. Legend.............................................................12
3.2. Transferees; Additional Restriction on Transfer....................12
3.3. Specific Performance, Etc..........................................13
3.4. Notices............................................................13
3.5. Entire Agreement; Amendments and Waivers...........................13
3.6. Termination........................................................14
3.7. Recapitalizations, Exchange, Etc. Affecting the Company's Stock....14
3.8. Jurisdiction; Mediation; Attorneys' Fees...........................14
3.9. Multiple Counterparts..............................................15
3.10. Headings..........................................................15
3.11. Governing.........................................................15
3.12. Construction......................................................15
3.13. Expenses..........................................................15
3.14. Invalidity........................................................15
3.15. Cumulative Remedies...............................................15
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STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT (this "Agreement") is entered into as
of July 2, 1999 by and among XXXXXXXXXXXX.XXX, INC., a Colorado corporation (the
"Company"), and the stockholders of the Company listed as signatories to this
Agreement (the "Stockholders").
RECITALS
The parties hereto desire to enter into this Agreement for the
purpose of regulating certain aspects of the Stockholders' relationships with
regard to each other and with the Company.
AGREEMENT
NOW THEREFORE, in consideration of the above recitals and the
mutual covenants herein contained and for other good and valuable consideration,
the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
As used herein, the following terms shall have the following
meanings:
1.1. Common Stock. The term "Common Stock" shall mean common
stock of the Company, par value $0.01 per share.
1.2. Exchange Act. The term "Exchange Act" shall mean the
Securities Exchange Act of 1934, as amended.
1.3. Investors. The term "Investors" shall mean the Stockholders
of the Company.
1.4. Qualified IPO. The term "Qualified IPO" shall mean the
Company's underwritten initial public offering of its Common Stock under the
Securities Act, provided that the gross proceeds to the Company in such offering
exceed $10 million and that the Company's Common Stock is listed for trading on
a national securities exchange or is authorized for trading on the NASDAQ
National Market System at such time.
1.5. Registrable Securities. The term "Registrable Securities"
shall mean shares of Common Stock held by the Investors, shares of Common Stock
issued upon any one or more exercises of Warrants issued to the Investors;
provided, however, that a Registrable Security shall cease to be a Registrable
Security at such time that (i) the Registrable Security has been effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering it, (ii) has been sold to the public pursuant to
Rule 144 (or any similar provision then in force) under the Securities Act and
the legend referred to in Section 3.1
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hereof has been removed from the certificate representing such Registrable
Security, (iii) may be sold to the public pursuant to Rule 144 (or any similar
provision then in force) under the Securities Act or (iii) one (1) year after a
Qualified IPO.
1.6. Securities Act. The term "Securities Act" shall mean the Securities
Act of 1933, as amended.
1.7. Shares. The term "Shares" shall mean shares of capital stock of the
Company, preferred or common, and securities convertible into, or exercisable or
exchangeable for, shares of capital stock of the Company.
ARTICLE II.
REGISTRATION RIGHTS
2.1. Piggyback Registration Rights.
(a) Right to Piggyback. Subject to the last sentence of
this Section 2.1(a), whenever the Company proposes to register any shares of
Common Stock (or securities convertible into of exchangeable for, or options to
purchase, Common Stock) with the Securities and Exchange Commission (the
"Commission") under the Securities Act and the registration form to be used may
be used for the registration of the Registrable Securities (a "Piggyback
Registration"), the Company (i) will give written notice to all Stockholders who
hold Registrable Securities (collectively, "Holders") at least 30 days prior to
the anticipated filing date, of its intention to effect such a registration,
which notice will specify the proposed offering price, the kind and number of
securities proposed to be registered, the distribution arrangements and such
other information that at the time would be appropriate to include in such
notice, and (ii) will, subject to Section 2.1 (b) below, include in such
Piggyback Registration all Registrable Securities with respect to which the
Company has received written requests for inclusion therein within 20 days after
the date of the Company's notice. Except as may otherwise be provided in this
Agreement, Registrable Securities with respect to which such request for
registration has been received will be registered by the Company and offered to
the public in a Piggyback Registration pursuant to this Article II on terms and
conditions at least as favorable as those applicable to the registration of
shares of Common Stock to be sold by the Company and by any other person selling
under such Piggyback Registration.
(b) Priority on Piggyback Registrations. If the managing
underwriter or underwriters, if any, advise the selling Holders in writing that
in its or their reasonable opinion or, in the case of a Piggyback Registration
not being underwritten, the Company shall reasonably determine (and notify the
selling Holders of such determination), after consultation with an investment
banker of nationally recognized standing, that the number or kind of securities
proposed to be sold in such registration (including Registrable Securities to be
included pursuant to subsection 2.1 (a) above) is inconsistent with that which
can be sold in such registration without having a material effect on the success
of the offering (including, without limitation, an impact on the selling price
or the number of securities that any participant may sell), the Company will
include in such registration only the number of securities, if any, which, in
the opinion of such underwriter or underwriters, or the Company, as the case may
be, can be sold as
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follows: (i) first, the shares the Company proposes to sell, and (ii) second,
the Registrable Securities requested to be included in such registration by the
Holders. To the extent that the privilege of including Registrable Securities in
any Piggyback Registration must be allocated among the selling Holders pursuant
to clause (ii) above, the allocation shall be made pro rata based on the number
of Registrable Securities that each such Holder shall have requested to include
therein.
(c) Selection of Underwriters. If any Piggyback
Registration is an underwritten offering, the Company will (i) select a managing
underwriter or underwriters to administer the offering, which managing
underwriter or underwriters will be of nationally recognized standing, and (ii)
determine the terms under which such underwriting shall take place.
2.2. Demand Registration Rights.
(a) Right to Demand. On one occasion after 90 days after a
Qualified IPO, the holders of 50% or more of the aggregate number of Registrable
Securities may collectively make a written request of the Company for
registration with the Commission, under and in accordance with the provisions of
the Securities Act, of all or part of their Registrable Securities (a "Demand
Registration"); provided, however, that (x) the Company need not effect a Demand
Registration unless such Demand Registration shall include at least 50% of the
Registrable Securities originally issued to each demanding Holder under the
Subscription Agreement and 5% of the issued and outstanding shares of Common
Stock of the Company as of the date the request is made, (y) the Company may, if
the Board of Directors determines in the exercise of its reasonable judgment
that effecting such Demand Registration at such time would have a material
adverse effect on the Company, defer such Demand Registration for a single
period not to exceed 90 days, and (z) if the Company elects to defer any Demand
Registration pursuant to (y) above, no Demand Registration shall be deemed to
have occurred for purposes of this Agreement. Within 10 days after receipt of
the request for a Demand Registration, the Company will send written notice (the
"Notice") of such registration request and its intention to comply therewith to
each of the other Holders and, subject to Section 2.2(c) below, the Company will
include in such registration all Registrable Securities of such Holders with
respect to which the Company has received written requests for inclusion therein
within 20 business days after the effectiveness of the Notice. All requests made
pursuant to this Section 2.2(a) will specify the aggregate number of Registrable
Securities requested to be registered and will also specify the intended methods
of disposition thereof.
(b) Expenses; Number of Demand Registrations; Withdrawal.
The expenses of each Demand Registration shall be borne by the Holders
requesting such Demand Registration. A Demand Registration shall not be counted
as a Demand Registration hereunder until such Demand Registration has been
declared effective by the Commission and maintained continuously effective for a
period of at least three months or such shorter period when all Registrable
Securities included therein have been sold in accordance with such Demand
Registration. A Demand Registration may be withdrawn by the Holders making the
demand without the demand counting as a Demand Registration hereunder provided
that the Holders making the demand reimburse the Company for all expenses
incurred by the Company in connection with the demand.
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(c) Priority on Demand Registrations. If in any Demand
Registration the managing underwriter or underwriters thereof (or in the case of
a Demand Registration not being underwritten, in the opinion of the holders of a
majority of the Registrable Securities included therein), advise the Company in
writing that in its or their reasonable opinion the number of securities
proposed to be sold in such Demand Registration is inconsistent with that which
can be sold in such offering without having a material effect on the success of
the offering (including, without limitation, an impact on the selling price or
the number of Registrable Securities that any participating Holder may sell),
the Company will include in such registration only the number of securities
that, in the reasonable opinion of such underwriter or underwriters (or holders
of Registrable Securities, as the case may be) can be sold without having a
material adverse effect on the success of the offering as follows: (i) first,
the Registrable Securities requested to be included in such Demand Registration
by Holders pro rata on the basis of the number of Registrable Securities
requested to be included, and (ii) second, any securities held by persons other
than the Holders and requested to be included in such Demand Registration.
(d) Selection of Underwriters. If any Demand Registration
is an underwritten offering, the Company will, subject to the reasonable
approval of the Holder requesting the Demand Registration, (i) select a managing
underwriter or underwriters to administer the offering, which managing,
underwriter or underwriters shall be of nationally recognized standing, and (ii)
determine the terms under which such underwriting shall take place.
2.3. Registration Procedures. With respect to any Piggyback
Registration or Demand Registration (generically, a "Registration"), the Company
will, subject to Sections 2.1 (b) and 2.2(c), as expeditiously as practicable:
(a) prepare and file with the Commission, within 90 days
after mailing the applicable Notice, a registration statement or registration
statements (the "Registration Statement") relating to the applicable
Registration on any appropriate form under the Securities Act, which form shall
be available for the sale of the Registrable Securities in accordance with the
intended method or methods of distribution thereof; provided, however, that the
Company will include in any Registration Statement on a form other than Form S-1
all information that the selling Holders shall reasonably request and shall
include all financial statements required by the Commission to be filed
therewith, cooperate and assist in any filings required to be made with the
National Association of Securities Dealers, Inc. ("NASD"), and use its best
efforts to cause such Registration Statement to become effective; provided
further, that before filing a Registration Statement or prospectus related
thereto (a "Prospectus") or any amendments or supplements thereto, the Company
will furnish to the Holders covered by such Registration Statement and the
underwriters, if any, copies of all such documents proposed to be filed, which
documents will be subject to the reasonable review of such Holders and
underwriters and their respective counsel, and the Company will not file any
Registration Statement or amendment thereto or any Prospectus or any supplement
thereto to which the holders of a majority of the Registrable Securities covered
by such Registration Statement or the underwriters, if any, shall reasonably
object;
(b) prepare and file with the Commission such amendments
and post-effective amendments to the Registration Statement as may be necessary
to keep each
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Registration Statement effective for the applicable period, or such shorter
period which will terminate when all Registrable Securities covered by such
Registration Statement have been sold; cause each Prospectus to be supplemented
by any required Prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 under the Securities Act; and comply with the provisions of
the Securities Act with respect to the disposition of all securities covered by
such Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the sellers thereof set forth in
such Registration Statement or supplement to the Prospectus; the Company shall
not be deemed to have used its best efforts to keep a Registration Statement
effective during the applicable period if it voluntarily takes any action that
would result in selling Holders covered thereby not being able to sell such
Registrable Securities during that period unless such action is required under
applicable law, provided that the foregoing shall not apply to actions taken by
the Company in good faith and for valid business reasons, including, without
limitation, the acquisition or divestiture of assets, so long as the Company
promptly thereafter complies with the requirements of Section 2.3(k) below, if
applicable;
(c) notify the selling Holders and the managing
underwriters, if any, promptly, and (if requested by any such person or entity)
confirm such advice in writing, (A) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to the
Registration Statement or any post-effective amendment, when the same has become
effective, (B) of any request by the Commission for amendments or supplements to
the Registration Statement or the Prospectus or for additional information, (C)
of the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or the initiation of any proceedings for that
purpose, (D) if at any time the representations and warranties of the Company
contemplated by Section 2.3(n) below cease to be true and correct, (E) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose and (F) of the
happening of any event which makes any statement made in the Registration
Statement, the Prospectus or any document incorporated therein by reference
untrue or which requires the making of any changes in the Registration
Statement, the Prospectus or any document incorporated therein by reference in
order to make the statements therein not misleading;
(d) make every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of the Registration Statement at the
earliest possible moment;
(e) if requested by the managing underwriter or
underwriters or a holder of Registrable Securities being sold in connection with
an underwritten offering, promptly incorporate in a Prospectus supplement or
post-effective amendment such information as the managing underwriters and the
holders of a majority of the Registrable Securities being sold agree should be
included therein relating to the plan of distribution with respect to such
Registrable Securities, including, without limitation, information with respect
to the number of Registrable Securities being sold to such underwriters, the
purchase price being paid therefor by such underwriters and with respect to any
other terms of the underwritten offering of the Registrable Securities to be
sold in such offering; and make all required filings of such
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Prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment;
(f) furnish to each managing underwriter and, if requested
by the holders of a majority of the Registrable Securities being sold, to each
selling Holder, without charge, at least one signed copy of the Registration
Statement and any amendment thereto, including financial statements and
schedules, all documents incorporated therein by reference and all exhibits
(including those incorporated by reference);
(g) deliver to each selling Holder and the underwriters,
if any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such Holder
and underwriters may reasonably request; the Company consents to the use of each
Prospectus or any amendment or supplement thereto by each of the selling Holders
and the underwriters, if any, in connection with the offering and sale of the
Registrable Securities covered by such Prospectus or any amendment or supplement
thereto;
(h) prior to any public offering of Registrable
Securities, register or qualify or cooperate with the selling Holders, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification of such Registrable Securities for offer and sale
under the securities or "Blue Sky" laws of such jurisdictions as any seller or
underwriter reasonably requests in writing, considering the amount of
Registrable Securities proposed to be sold in each such jurisdiction, and do any
and all other acts or things necessary or advisable to enable the disposition in
such jurisdictions of the Registrable Securities covered by the Registration
Statement; provided, however, that the Company will not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified
or to take any action that would subject it to general service of process in any
such jurisdiction where it is not then so subject;
(i) cooperate with the selling Holders and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not bearing any
restrictive legends and in such denominations and registered in such names as
the managing underwriters may request at least two business days prior to any
sale of Registrable Securities to the underwriters;
(j) use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the underwriters, if any,
to consummate the disposition of such Registrable Securities;
(k) upon the occurrence of any event contemplated by
Section 2.3(c)(F) above, prepare a supplement or post-effective amendment to the
Registration Statement or the related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities, the Prospectus will
not contain an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading;
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(l) cause all Registrable Securities covered by any
Registration Statement to be listed on each securities exchange on which similar
securities issued by the Company are then listed, or cause such Registrable
Securities to be authorized for trading on the NASDAQ National Market System if
any similar securities issued by the Company are then so authorized, if
requested by the holders of a majority of such Registrable Securities or the
managing underwriters, if any;
(m) provide a CUSIP number for all Registrable Securities,
not later than the effective date of the applicable Registration Statement;
(n) enter into such agreements (including an underwriting
agreement) and take all such other actions in connection therewith in order to
facilitate the disposition of such Registrable Securities as shall be reasonably
necessary, and in connection therewith, (A) make such representations and
warranties to the selling Holders and the underwriters, if any, in form,
substance and scope as are customarily made by issuers to underwriters in
primary underwritten offerings; (B) obtain opinions of counsel to the Company
and updates thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the managing underwriters, if any, and the
holders of a majority of the Registrable Securities being sold) addressed to
each selling Holder and the underwriters, if any, covering the matters
customarily covered in opinions requested in underwritten offerings and such
other matters as may be reasonably requested by such Holders and underwriters;
(C) obtain "cold comfort" letters and updates thereof from the Company's
independent certified public accountants addressed to the underwriters, if any,
such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters by underwriters in connection with
primary underwritten offerings; (D) if an underwriting agreement is entered
into, the same shall set forth in full the indemnification provisions and
procedures set forth in Section 2.6 below with respect to all parties to be
indemnified pursuant to said Section; and (E) the Company shall deliver such
documents and certificates as may be requested by the holders of a majority of
the Registrable Securities being sold and the managing underwriters, if any, to
evidence compliance with Section 2.3(c)(F) above and with any customary
conditions contained in the underwriting agreement or other agreement entered
into by the Company. The above shall be done at each closing under such
underwriting or similar agreement or as and to the extent required thereunder;
(o) make available for inspection during normal business
hours by a representative of the holders of a majority of the Registrable
Securities, any underwriter participating in any disposition pursuant to such
Registration, and any attorney or accountant retained by the representative or
underwriter, all financial and other records, and pertinent corporate documents
of the Company, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any such representative,
underwriter, attorney or accountant in connection with such Registration
Statement; provided, however, that any records, information or documents that
are designated by the Company in writing as confidential shall be kept
confidential by such persons unless disclosure of such records, information or
documents is required by court or administrative order or any regulatory body
having jurisdiction;
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(p) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make earnings statements
satisfying the provisions of Section 11(a) of the Securities Act generally
available to its security holders no later than 45 days after the end of any
12-month period (or 90 days, if such period is a fiscal year) (A) commencing at
the end of any fiscal quarter in which Registrable Securities are sold to
underwriters in a firm or best efforts underwritten offering, or (B) if not sold
to underwriters in such an offering, beginning with the first month of the
Company's first fiscal quarter commencing after the effective date of the
Registration Statement, which statements shall cover said 12-month periods; and
(q) promptly prior to the filing of any document that is
to be incorporated by reference into any Registration Statement or Prospectus
(after initial filing of the Registration Statement), provide copies of such
document to counsel to the selling Holders and to the managing underwriters, if
any, make the Company's representatives available for discussion of such
document and make such changes in such document prior to the filing thereof as
counsel for such selling Holders or underwriters may reasonably request.
The Company may require each seller of Registrable Securities as
to which any Registration is being effected to furnish to the Company such
information regarding the proposed distribution of such securities as the
Company may from time to time reasonably request in writing.
Each holder of Registrable Securities agrees by acquisition of
such Registrable Securities that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 23(c)(F), such
holder will forthwith discontinue disposition of Registrable Securities pursuant
to the Registration Statement until such holder's receipt of copies of the
supplemented or amended Prospectus as contemplated by Section 2.3(k), or until
it is advised in writing (the "Advice") by the Company that the use of the
Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus, and,
if so directed by the Company, such holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
holder's possession, of the Prospectus covering such Registrable Securities. In
the event the Company shall give any such notice, the three month time period
referred to in 2.2(a) shall be extended by the number of days during the period
from and including the date of the giving of such notice to and including the
date when each seller of Registrable Securities covered by such Registration
Statement shall have received the copies of the supplemental or amended
prospectus contemplated by Section 2.3(c)(F) or the Advice.
2.4. Restrictions on Public Sale.
(a) Public Sale by Stockholders and Holders. To the extent
not inconsistent with applicable law, (i) each Stockholder agrees not to effect
any public sale or distribution of Shares, including a sale pursuant to Rule 144
(or any similar provision then in force) under the Securities Act, during the
90-day period (or such shorter period as may be agreed to by the managing
underwriter or underwriters) following a Qualified IPO, and (ii) each Holder
whose Registrable Securities are included in a Registration Statement hereunder,
if requested by the managing underwriter or underwriters for such Registration,
agrees not to effect
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any public sale or distribution of Registrable Securities, including a sale
pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act, during the 15 business days prior to, and during the 90-day
period (or such shorter period as may be agreed to by such underwriter or
underwriters) beginning on, the effective date of a Registration Statement
pursuant to such Piggyback Registration or Demand Registration (except as part
of such Piggyback or Demand Registration).
(b) Public Sale by the Company. If requested by the
managing underwriter or underwriters for any underwritten Registration, or by
the holders of a majority of the Registrable Securities being registered in a
Demand Registration that is not being underwritten, (i) the Company will not
effect any public sale or distribution of Common Stock (or securities
convertible into or exchangeable or exercisable for Common Stock) for its own
account during the 15 business days prior to, and during the 90-day period
beginning on, the effective date of such Registration, and (ii) the Company will
use its reasonable efforts to cause each other holder of Common Stock (or
securities convertible into or exchangeable for, or options to purchase, Common
Stock) purchased from the Company at any time after the date of this Agreement
(other than in a registered public offering) to agree not to effect any public
sale or distribution of any such securities during the period described in (i)
above (except as part of such Registration, if otherwise permitted).
(c) Other Registrations. If the Company has previously
filed a Registration Statement with respect to Registrable Securities, and if
such previous Registration has not been withdrawn or abandoned, the Company will
not file or cause to be effected any other registration of any of its Common
Stock (or securities convertible into or exchangeable for, or options to
purchase, Common Stock) under the Securities Act (except on Form S-8 or any
similar successor form), whether on its own behalf or at the request of any
holder or holders of Common Stock (or securities convertible into or
exchangeable or exercisable for Common Stock), until a period of at least three
months has elapsed from the effective date of such previous Registration;
provided, however, that if the holders of 50% or more of the aggregate number of
Registrable Securities included in such previous Registration shall agree in
writing, such period may be shortened by the Company.
2.5. Registration Expenses. All expenses incident to the
Company's performance of or compliance with the provisions of this Article II
regarding Piggyback Registration will be borne by the Company, including,
without limitation, all registration and filing fees, the fees and expenses of
the counsel and accountants for the Company (including the expenses of any "cold
comfort" letters and special audits required by or incident to the performance
of such persons), all other costs and expenses of the Company incident to the
preparation, printing and filing under the Securities Act of the Registration
Statement (and all amendments and supplements thereto) and furnishing copies
thereof and of the Prospectus included therein, the costs and expenses incurred
by the Company in connection with the qualification of the Registrable
Securities under the state securities or "Blue Sky" laws of various
jurisdictions, the costs and expenses associated with filings required to be
made with the NASD (including, if applicable, the fees and expenses of any
"qualified independent underwriter" and its counsel as may be required by the
rules and regulations of the NASD), the costs and expenses of listing the
Registrable Securities for trading on a national securities exchange or
authorizing
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them for trading on the NASDAQ National Market System and all other costs and
expenses incurred by the Company in connection with any Piggyback Registration
hereunder; provided, however, that, except as otherwise provided in Section 2.6
below, the Company shall not bear the costs and expenses of any selling Holder
for underwriters' commissions, brokerage fees or transfer taxes, or the fees and
expenses of any counsel, accountants or other representative retained by any
selling Holder. The expenses of any Demand Registration, including, without
limitation, all filing and registration fees and other fees delineated above,
shall be borne by the Holders requesting such Demand Registration.
2.6. Indemnification.
(a) Indemnification by the Company. The Company agrees to
indemnify, to the full extent permitted by law, each Holder, its officers,
directors and agents and each person who controls such Holder within the meaning
of the Securities Act and the Exchange Act (each, an "Indemnified Holder"),
against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of a material fact contained in any
Registration Statement, Prospectus or preliminary Prospectus, or any omission or
alleged omission to state therein a material fact necessary to make the
statements therein (in the case of a Prospectus or any preliminary Prospectus,
in light of the circumstances under which they were made) not misleading, except
to the extent that such untrue statement or omission is caused by any
information with respect to such Indemnified Holder furnished in writing to the
Company by such Indemnified Holder or its representative expressly for use
therein. The Company will also indemnify underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution, their officers and directors and each person who controls such
persons (within the meaning of the Securities Act) to the same extent as
provided above with respect to Indemnified Holders; provided, however, that if
pursuant to an underwritten public offering of Registrable Securities, the
Company and any underwriters enter into an underwriting or purchase agreement
relating to such offering that contains provisions relating to indemnification
and contribution between the Company and such underwriters, such provisions
shall be deemed to govern indemnification and contribution as between the
Company and such underwriters.
(b) Indemnification by Holders of Registrable Securities.
In connection with any Registration, each Holder participating therein will
furnish to the Company in writing such information with respect to the Holder as
the Company reasonably requests for use in connection with any Registration
Statement, Prospectus or preliminary Prospectus, and agrees to indemnify, to the
full extent permitted by law, the Company, the directors and officers of the
Company signing the Registration Statement and each person who controls the
Company (within the meaning of the Securities Act and the Exchange Act) against
any losses, claims, damages, liabilities and expenses resulting from any untrue
statement of a material fact or any omission to state a material fact required
to be stated therein or necessary to make the statements in the Registration
Statement, Prospectus or preliminary Prospectus (in the case of the Prospectus
or any preliminary Prospectus, in light of the circumstances under which they
were made) not misleading, to the extent, and only to the extent, that such
untrue statement or omission is caused by any information with respect to the
Holder so furnished in writing by the Holder or its representative specifically
for inclusion therein. In no event shall the liability of any selling
10
13
Holder hereunder be greater in amount than the dollar amount of the proceeds
received by such Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation. The Company shall be entitled to receive
indemnities from underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, to the same
extent as provided above with respect to information with respect to such
persons or entities so furnished in writing by such persons or entities or their
representatives specifically for inclusion in any Registration Statement,
Prospectus or preliminary Prospectus.
(c) Conduct of Indemnification Proceedings. Any person or
entity entitled to indemnification hereunder will (i) give prompt written notice
to the indemnifying party after the receipt by the indemnified party of a
written notice of the commencement of any action, suit, proceeding or
investigation or threat thereof made in writing for which such indemnified party
will claim indemnification or contribution pursuant to this Agreement; provided,
however, that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding Section 2.6(a) or 2.6(b), as applicable, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice and
(ii) unless in such indemnified party's reasonable judgment a conflict of
interest may exist between such indemnified and indemnifying parties with
respect to such claim, permit such indemnifying party to assume the defense of
such claim with counsel reasonably satisfactory to the indemnified party.
Whether or not such defense is assumed by the indemnifying party, the
indemnifying party will not be subject to any liability for any settlement made
without its consent (but such consent will not be unreasonably withheld). No
indemnifying party will be required to consent to the entry of any judgment or
to enter into any settlement that does not include as an unconditional term
thereof the giving by the claimant or plaintiff of a release from all liability
in respect of such claim or litigation. An indemnifying party who is not
entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel in any one
jurisdiction for all parties indemnified by such indemnifying party with respect
to such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel or counsels.
(d) Contribution. If for any reason the indemnification
provided for in the preceding Section 2.6(a) or 2.6(b), as applicable, is
unavailable to an indemnified party as contemplated by such Section, then the
indemnifying party, in lieu of indemnification, shall contribute to the amount
paid or payable by the indemnified party as a result of such loss, claim,
damage, liability or expense in such proportion as is appropriate to reflect not
only the relative benefits received by the indemnified party and the
indemnifying party, but also the relative fault of the indemnified party and the
indemnifying party, as well as any other relevant equitable considerations;
provided, however, that no selling Holder shall be required to contribute in an
amount greater than the difference between the net proceeds received by the
Holder with respect to the sale of Registrable Securities and all amounts
already contributed by the Holder with respect to such claims, including amounts
paid for any legal or other fees or expenses incurred by the Holder.
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2.7. Rule 144. The Company agrees that at all times after it has
filed a registration statement pursuant to the requirements of the Securities
Act relating to any class of equity securities of the Company, it will file in a
timely manner all reports required to be filed by it pursuant to the Securities
Act and the Exchange Act and will take such further action as any Holder may
reasonably request in order that such Holder may effect sales of Registrable
Securities pursuant to Rule 144. At any reasonable time and upon request of a
Stockholder, the Company will furnish such Stockholder and others with such
information as may be necessary to enable the Stockholder to effect sales of
Common Stock pursuant to Rule 144 under the Securities Act and will deliver to
such Stockholder a written statement as to whether it has complied with such
requirements. Notwithstanding the foregoing, the Company may deregister any
class of its equity securities under Section 12 of the Exchange Act or suspend
its duty to file reports with respect to any class of its securities pursuant to
Section 15(d) of the Exchange Act if it is then permitted to do so pursuant to
the Exchange Act and the rules and regulations thereunder.
2.8. Participation in Underwritten Registrations. No Holder may
participate in any underwritten registration hereunder unless such Holder (i)
agrees to sell its Registrable Securities on the basis provided in any
underwriting arrangements approved by the Company, and (ii) accurately completes
timely. manner and executes all questionnaires, powers of attorney, underwriting
agreements and other documents customarily required under the terms of such
underwriting arrangements.
ARTICLE III.
MISCELLANEOUS
3.1. Legend. In addition to any legends required by federal or
state securities laws, the certificates representing the Shares shall bear the
following legend:
"The securities represented by this certificate are subject to certain
restrictions on transfer and voting set forth in a Stockholder Agreement dated
as of July 2, 1999. A copy of such Agreement may be obtained from the Company
upon request." Each of the parties hereto agrees that it will not transfer any
Shares without complying with each of the restrictions set forth herein and
agrees that in connection with any such transfer it will, if requested by the
Company, deliver at its expense to the Company an opinion of counsel (including
in-house or special counsel), in form and substance reasonably satisfactory to
the Company and counsel for the Company, that such transfer is not in violation
of the securities laws of the United States of America or any state thereof.
3.2. Transferees; Additional Restriction on Transfer. Each
transferee of Shares from an Investor or a subsequent transferee (including the
transferee in a transfer from one Investor to another Investor) shall take such
Shares subject to the same restrictions as existed in the hands of the
transferor. Each transferee of an Investor or a subsequent transferee shall be
entitled to the registration rights provided under Article II hereof. Shares
sold to the public pursuant to an effective Registration Statement shall no
longer be subject to any of the provisions of this Agreement.
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15
3.3. Specific Performance, Etc. The Company and each Stockholder,
in addition to being entitled to exercise all rights provided herein, in the
Company's Certificate of Incorporation or granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. Each party agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
3.4. Notices. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when received if
personally delivered; when transmitted if transmitted by telecopy, electronic or
digital transmission method; the day after it is sent, if sent for next day
delivery to a domestic address by recognized overnight delivery service (e.g.,
Federal Express); and upon receipt, if sent by certified or registered mail,
return receipt requested. In each case notice shall be sent to:
If to an Investor, to the address set forth in Schedule I hereto
If to the Company, addressed to:
Xxxxxxxxxxxx.xxx, Inc.
0000 Xxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxx X. Xxxx
Copy to:
Xxxxxx & Xxxxxxx
000 Xxxx Xxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxx X. Xxxxx, Esq.
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
3.5. Entire Agreement; Amendments and Waivers. This Agreement
constitutes the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the parties hereto. The provisions
of this Agreement, including the provisions of this sentence, may not be
amended, modified or supplemented, and waivers of or consents to departures from
the provisions hereof may not be given unless approved by the Company in writing
and the Company has obtained the written consent of Stockholders holding at
least 50% of the then outstanding Shares. This Agreement may be amended,
modified, waived or supplemented only
13
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by a written instrument executed by all the parties hereto that are required to
execute the same. No action taken pursuant to this Agreement, including, without
limitation, any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action. The waiver by any party
hereto of a breach of any provision of this Agreement shall not operate or be
construed as waiver of any preceding or succeeding breach and no failure by any
party to exercise any right or privilege hereunder shall be deemed a waiver of
such party's rights or privileges hereunder or shall be deemed a waiver of such
party's rights to exercise the same at any subsequent time or times hereunder.
3.6. Termination. If not terminated sooner pursuant to the terms
hereof, Article II of this Agreement (regarding registration rights) shall
terminate and cease to be of any further force or effect upon the Company's
merger with and into another corporation or other entity where, upon
consummation of the merger, the holders of the Company's voting stock
immediately prior to the merger will hold less than 50% of the voting stock of
the surviving corporation immediately after the merger. If not terminated sooner
pursuant to the terms hereof, Article II of this Agreement (regarding
registration rights) shall terminate and cease to be of any further force or
effect upon the Company's merger with and into another corporation where, in
connection with the merger, the Shares are exchanged exclusively for cash and/or
shares of capital stock or other securities that are publicly traded on a
national securities exchange or authorized for trading on the NASDAQ National
Market System.
3.7. Recapitalizations, Exchange, Etc. Affecting the Company's
Stock. The provisions of this Agreement shall apply, to the full extent set
forth herein with respect to the Shares, to any and all shares of capital stock
of the Company that may be issued in respect of, in exchange for, or in
substitution of the Shares and shall be appropriately adjusted for any stock
dividends, splits, reverse splits, combinations, recapitalizations and the like
occurring after the date hereof.
3.8. Jurisdiction; Mediation; Attorneys' Fees.
(a) Jurisdiction. Each party hereto agrees that any and
all claims, grievances, demands, controversies, causes of action, or disputes of
any nature whatsoever (including but not limited to tort and contract claims,
and claims upon any law, statute, order or regulation) (hereinafter "Claims")
arising out of, in connection with or in relation to (i) the interpretation,
performance or breach of this Agreement, or (ii) any relationship before, at the
time of entering into, during the term of, or upon or after expiration or
termination of this Agreement, between the parties hereto, shall be brought in
the United States District Court for the Central District of California or, if
such court does not have jurisdiction or will not accept jurisdiction, in any
court of general jurisdiction in the County of Orange, State of California. Each
party hereto unconditionally and irrevocably consents to the jurisdiction of any
such court over any Claims and waives any objection which such party may have to
the laying of venue of any Claims in any such court.
(b) Attorneys' Fees. If a party brings a Claim in an
action before a court described in Section 3.8(a), the prevailing party in such
action shall be entitled to recover its costs and expenses, including, without
limitation, reasonable attorneys' fees, incurred in connection with such action,
including any appeal of such action.
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17
3.9. Multiple Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
3.10. Headings. The headings of the Articles and Sections herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
3.11. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of California,
without regard to principles of conflict of laws.
3.12. Construction. Differences in language as between similar
provisions covering similar matters may reflect differences in style rather than
a different substantive intent and should be construed accordingly.
3.13. Expenses. Except as otherwise specified in this Agreement,
each party hereto shall pay its own legal, accounting, out-of-pocket and other
expenses incident to this Agreement and to any action taken by such party in
preparation for carrying this Agreement into effect.
3.14. Invalidity. In the event that any one or more of the
provisions contained in this Agreement or in any other document or instrument
referred to herein, shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, then to the maximum extent permitted by law, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement or any other such document or instrument.
3.15. Cumulative Remedies. All rights and remedies of either
party hereto are cumulative of each other and of every other right or remedy
such party may otherwise have at law or in equity, and the exercise of one or
more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of other rights or remedies.
IN WITNESS WHEREOF, the parties have executed this Stockholder
Agreement as of the day and year first written above.
XXXXXXXXXXXX.XXX, INC.,
a Colorado corporation
By: /s/ XXXX X. XXXX
-------------------------------------
Xxxx X. Xxxx,
President and Chief Executive Officer
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IN WITNESS WHEREOF, the parties have executed this Stockholder
Agreement as of the day and year first written above.
Accepted and agreed to:
-------------------------------
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
No. of Shares:
---------------------------------
Name and Address
of Stockholder
---------------------------------
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SCHEDULE 1
NAMES AND ADDRESSES OF STOCKHOLDERS
Xxxxxx X. XxxXxxxx Xxxxxx and Xxxx XxXxxx
0000 Xxxxxxx Xxxxx Xx. X. 00 Xxxxxxxx
Xxxxxxx Xxxxx, XX 00000 Xxxxx Xxxxx, XX 00000
Estate Planning L.P. Xxxx Xxxxxxxxxx
00 Xxxx Xxxxxx XXX 000
Xxxxxx Xxxxx, XX 00000 Hong Kong
Xxxxxxxxxx Family Trust Xxxxx Xxxxxxxx, XXX
1943 Port Cardigan 000 Xxxxxxxxxx Xxxxxx
Xxxxxxx Xxxxx, XX 00000 Xxx Xxxxxxxxx, XX 00000
Xxxxxx Xxxxxx Trust
0000 Xxxxxxxxxx
Xxx Xxxxx, XX 00000
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THIS SECURITY HAS BEEN ACQUIRED IN A TRANSACTION NOT INVOLVING ANY PUBLIC
OFFERING AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD OR TRANSFERRED EXCEPT IN
COMPLIANCE WITH THE ACT.
XXXXXXXXXXXX.XXX, INC.
-----------------------------
COMMON STOCK PURCHASE WARRANT
-----------------------------
Certificate No._________
Dated as of July 2, 1999
1. Grant. For consideration set forth under that certain Subscription
Agreement (as defined below) and other value received, XXXXXXXXXXXX.XXX, INC., a
Colorado corporation (the "Company"), hereby grants to XXXXXXXXXX FAMILY TRUST
or its assigns or transferees (the "Holder"), at the exercise price set forth in
Section 3 below, the right to purchase 75,000 shares (the "Warrant Shares") of
Common Stock (or other security issued in accordance with Section 8), subject to
adjustment from time to time as hereinafter set forth. This Warrant is issued at
Closing under that certain Subscription and Unit Purchase Agreement dated as of
the date hereof (the "Subscription Agreement") by and among the Company, the
Holder and certain other parties named therein. Capitalized terms used herein,
but not elsewhere defined herein or in the Subscription Agreement, have the
meanings set forth in Schedule 1.
2. Exercise Period. The right to exercise this Warrant, in whole or in
part, begins on the date hereof. The right to exercise this Warrant expires on
the second anniversary of the date hereof (the "Expiration Date").
3. Exercise Price. The exercise price of this Warrant is $4.75 per
Warrant Share (the "Exercise Price").
4. Anti-Dilution Adjustment.
(a) Dilutive Transactions. If the Company enters into a Dilutive
Transaction, other than a transaction described in Section 4(b) hereof, the
number of Warrant Shares issuable hereunder shall be increased to that number
determined by performing the following calculation and rounding the resulting
number to the nearest whole share: Divide:
21
(i) the Non-Dilutive Price then in effect of a Warrant Share
multiplied by the number of Warrant Shares then issuable
hereunder, by:
(ii) the Weighted Average Per Share Value.
(b) Additional Management Shares. If the Company, pursuant to a
Dilutive Transaction, issues Employee Options to acquire all Employee Option
Shares, then the number of Warrant Shares issuable hereunder shall be increased
to that number determined by performing the following calculation and rounding
the resulting number to the nearest whole share: Multiply:
(i) the number of Employee Option Shares into which the
Employee Options then issued by the Company are
exerciseable, times:
(ii) a fraction, the numerator of which is the number of
Warrant Shares issued or issuable hereunder immediately
prior to the issuance of the additional Employee
Options, and the denominator of which is the Common
Stock Deemed Outstanding.
(c) Readjustment.
(i) Expiration of Option or Right to Subscribe For or
Purchase. If any option or right issued in connection
with a Dilutive Transaction expires without having been
exercised prior to the exercise by Holder of its rights
hereunder, the number of Warrant Shares then issuable
hereunder shall forthwith be readjusted to such lesser
number as would have been issuable had the option or
right never been issued.
(ii) Expiration of Right to Convert or Exchange. If any right
to convert or exchange any Common Stock Equivalent
issued in connection with a Dilutive Transaction expires
without having been exercised prior to the exercise by
Holder of its rights hereunder, the number of Warrant
Shares then issuable hereunder shall forthwith be
readjusted to such lesser number as would have been
issuable had the Common Stock Equivalent never been
issued.
5. Other Adjustments.
(a) Adjustment for Change in Common Stock.
(i) If the Company (A) pays a dividend or makes a
distribution on its Common Stock in shares of its Common
Stock, (B) subdivides or reclassifies its outstanding
shares of Common Stock into a greater
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number of shares, or (C) combines or reclassifies its
outstanding shares of Common Stock into a smaller number
of shares (each, an "Adjustment Event"), the number of
Warrant Shares issuable hereunder immediately prior to
such action shall be proportionately adjusted so that
the Holder will receive, upon exercise, the aggregate
number and kind of shares of capital stock of the
Company which it would have owned immediately following
such action if the Holder had exercised this Warrant
immediately prior to such Adjustment Event.
(ii) The adjustment shall become effective immediately after
the record date in the case of a dividend or
distribution and immediately after the effective date in
the case of a subdivision, combination or
reclassification.
(iii) The adjustment shall be made successively whenever any
Adjustment Event occurs.
(b) Adjustment for Reorganization. If the Company consolidates or
merges with or into another Person or enters into any other similar transaction,
recapitalization or reorganization (any such action, a "Reorganization"), there
shall thereafter be deliverable, upon exercise of this Warrant (in lieu of the
number of Warrant Shares theretofore deliverable) the number of shares of stock
or other securities or property to which a holder of the number of shares of
Common Stock that would otherwise have been deliverable upon exercise of this
Warrant would have been entitled upon such Reorganization if such Warrant has
been exercised in full immediately prior to such Reorganization.
6. Participation in Dividends, Distributions, Repurchases or
Redemptions. If the Company declares any dividend or makes any distribution, in
each case, that is not in shares of Common Stock or Common Stock Equivalents, or
repurchases or redeems any of its securities, the Company will pay the Holder
the declared dividend, or offer to include the Holder in such distribution,
repurchase or redemption, as if the Holder had exercised this Warrant
immediately prior to the event (or any record date with respect thereto);
provided, however, that the Company shall not be required to include the Holder
in any open market stock buyback program approved by the Board of Directors. If
the Holder elects to participate in a repurchase or redemption, this Warrant
shall be modified (as of the date of such event) so that the Holder shall be
entitled to receive, upon exercise, the number of Warrant Shares issuable
hereunder less the number of Warrant Shares redeemed or repurchased.
7. Prior Notice as to Certain Events.
(a) Dividends, Distributions, Subscription Rights. If the Company
(i) pays any dividend, or makes any distribution, or repurchases or redeems any
of its securities, or (ii) offers any subscription rights pro rata to the
holders of its Common Stock, then at least 15 days prior to the record date for
such action, the Company will send written notice (by first class mail,
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postage prepaid, addressed to the Holder at its address shown on the books of
the Company) of the dates on which (A) the Company will close its books or take
a record for such action and (B) the holders of Common Stock of record will
participate in such action.
(b) Reorganizations. If the Company (i) enters into any
Reorganization or reclassification of its capital stock, or (ii) is the subject
of a voluntary or involuntary dissolution, liquidation or winding up of the
Company, then at least 15 days prior to such action, the Company will send
written notice (by first class mail, postage prepaid, addressed to the Holder at
its address shown on the books of the Company) of the dates on which (A) such
action will occur and (B) the holders of Common Stock of record may exchange
their Common Stock for securities or other property deliverable upon such
action.
8. Alternate Class. In the event the Company consummates the
registration of any of its securities other than Common Stock (the "Alternate
Class") in accordance with the Securities Act of 1933, as amended:
(a) the Company will issue to Holder, upon exercise of this
Warrant, the equivalent number of shares of such Alternate Class, so long as the
holders of the shares of the Alternate Class have all of the same rights as the
holders of shares of Common Stock, except for voting rights; and
(b) all references herein to Common Stock shall be deemed to refer
to the Alternate Class.
9. Reservation of Common Stock. The Company will reserve and keep
available for issuance and delivery upon the exercise of this Warrant such
number of its authorized but unissued shares of Common Stock or other securities
of the Company as will be sufficient to permit the exercise in full of this
Warrant. Upon issuance, each of the Warrant Shares will be validly issued, fully
paid and nonassessable, free and clear of all liens, security interests, charges
and other encumbrances or restrictions on sale and free and clear of all
preemptive rights.
10. No Voting Rights; Limitations of Liability. Prior to exercise, this
Warrant will not entitle the Holder to (a) any voting rights, or (b) other
rights as a stockholder of the Company not granted herein. No provision of this
Warrant, in the absence of affirmative action by the Holder to exercise this
Warrant, and no enumeration in this Warrant of the rights or privileges of the
Holder, will give rise to any liability of such Holder for the Exercise Price.
11. Company's Right to Call for the Purchase of Warrant. The Company may
call for the purchase of this Warrant, at its option, at a purchase price of
$0.50 per Warrant Share, if both of the following conditions are met: (a) the
Company's stock is quoted on the NASDAQ, and (b) for a period of thirty (30)
consecutive Trading Days, the trading price of the Company's Common Stock is
greater than one hundred and twenty-five percent (125%) of the Exercise Price;
provided, however, that in no event may the Company call for the purchase of
this Warrant
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prior to the first anniversary of the date hereof, unless the Company enters
into an Underwriting Agreement for a public offering of its common stock.
12. Exercise Procedure. To exercise this Warrant, the Holder must
deliver to the principal office of the Company (prior to the Expiration Date)
this Warrant, the subscription substantially in the form of Exhibit "A" attached
hereto, and the Exercise Price. The Holder may deliver the Exercise Price by any
of the following methods, at its option: (i) in legal tender, (ii) by bank
cashier's or certified check, or (iii) by wire transfer to an account designated
by the Company. Upon exercise, the Company, at its sole expense (including the
payment of any documentary, stamp, issue or transfer taxes), will issue and
deliver to Holder, within 10 days after the date on which the Holder exercises
this Warrant, certificates for the Warrant Shares purchased hereunder. The
Warrant Shares shall be deemed issued, and the Holder deemed the holder of
record of such Warrant Shares, as of the opening of business on the date on
which the Holder exercises this Warrant.
13. Sale of Warrant or Warrant Shares. Neither this Warrant nor any of
the Warrant Shares have been registered under the Act or under the securities
laws of any state. Neither this Warrant nor any of the Warrant Shares (when
issued) may be sold, assigned, transferred, pledged or hypothecated or otherwise
disposed of except as permitted: (i) by any shareholders agreement then in
effect, (ii) by any effective registration statement under the Act and by the
securities laws of any state in question, or (iii) by an opinion of counsel
reasonably satisfactory to the Company stating that such registration under the
Act and registration or qualification under the securities laws of any state is
not required. Until the Warrant Shares have been registered under the Act and
registered and qualified under the securities laws of any state in question, the
Company shall cause each certificate evidencing any Warrant Shares to bear the
following legends:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF
ANY STATE. THE SHARES MAY NOT BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED
OR HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND SUCH
REGISTRATION OR QUALIFICATION AS MAY BE NECESSARY UNDER THE SECURITIES LAWS OF
ANY STATE, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION OR QUALIFICATION IS NOT REQUIRED.
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF
(1) A SHAREHOLDERS AGREEMENT BETWEEN THE HOLDER, XXXXXXXXXXXX.XXX, INC, AND THE
OTHER PARTIES NAMED THEREIN DATED AS OF JULY 2, 1999 AND (2) A SUBSCRIPTION AND
UNIT PURCHASE AGREEMENT BETWEEN THE HOLDER, XXXXXXXXXXXX.XXX, INC. AND THE OTHER
PARTIES NAMED THEREIN DATED AS OF JULY 2, 1999.
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14. Transfer. The Company will register this Warrant on its books and
keep such books at its offices. To effect a transfer permitted by Section 13
hereof, the Holder must present (either in person, or by duly authorized
attorney) written notice substantially in the form of Exhibit "B" attached
hereto. To prevent a transfer in violation of Section 13, the Company may issue
appropriate stop orders to its transfer agent.
15. Replacement of Warrant. If the Holder provides evidence that this
Warrant or any certificate or certificates representing the Warrant Shares have
been lost, stolen, destroyed or mutilated, the Company (at the request and
expense of the Holder) will issue a replacement warrant upon reasonably
satisfactory indemnification by the Holder (if required by the Company).
16. Governing Law. This Warrant will be governed by and construed in
accordance with the laws of the State of California without regard to its
conflicts of law principles.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed on
its behalf, in its corporate name, by its President, and its corporate seal to
be hereunto affixed, as of the 2nd day of July, 1999.
XXXXXXXXXXXX.XXX, INC.,
a Colorado corporation
By: /s/ XXXX X. XXXX [Seal]
------------------------
Xxxx X. Xxxx
President and Chief Executive Officer
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EXHIBIT A
IRREVOCABLE SUBSCRIPTION
To: Xxxxxxxxxxxx.xxx, Inc.
The undersigned hereby elects to exercise its right under the attached
Warrant by purchasing _______ shares of the Common Stock, and hereby irrevocably
subscribes to such issue. The certificates for such shares shall be issued in
the name of:
--------------------------------------
(Name)
--------------------------------------
(Address)
--------------------------------------
(Taxpayer Number)
and delivered to:
--------------------------------------
(Name)
--------------------------------------
(Address)
The Exercise Price of $________ is enclosed.
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EXHIBIT B
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
--------------------------------------
(Name)
--------------------------------------
(Address)
the attached Warrant, together with all right, title and interest therein
to purchase ________shares of the Common Stock, and does hereby irrevocably
appoint ______________________ as attorney-in-fact to transfer said Warrant on
the books of Xxxxxxxxxxxx.xxx, Inc., with full power of substitution in the
premises.
Done this _____ day of _______________ 1999.
--------------------------------------
(Signature)
--------------------------------------
(Name and title)
--------------------------------------
--------------------------------------
(Address)
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SCHEDULE 1
"COMMON STOCK EQUIVALENT" means any equity interest of the Company that is
convertible or exchangeable into Common Stock at any time.
"COMMON STOCK DEEMED OUTSTANDING" means, at any given time, the sum of:
(i) the number of shares of Common Stock and Common Stock
Equivalents (excluding the Contingent Warrants) outstanding at such time,
plus
(ii) the number of shares of Common Stock and Common Stock
Equivalents subject to any options, warrants, convertible securities or
other commitments outstanding at such time.
"CONSIDERATION" means:
(i) if the Company issues Common Stock, -- the gross proceeds
received by the Company;
(ii) if the Company issues Common Stock Equivalents, -- the gross
proceeds received by the Company, plus the minimum aggregate amount of
gross proceeds, if any, payable to the Company upon exchange or
conversion;
(iii) if the Company issues options or rights to subscribe for or to
purchase Common Stock or any Common Stock Equivalents, -- the gross
proceeds, if any, received by the Company, plus the minimum aggregate
amount of gross proceeds, if any, payable to the Company upon exercise;
(iv) if the Company issues a combination of securities consisting of
Common Stock or Common Stock Equivalents and other securities of the
Company, and if the amount of gross proceeds allocable to the Common Stock
or Common Stock Equivalents is not determinable on its face at the time of
such issuance, -- the portion of gross proceeds received by the Company,
as determined in good faith by the Company's Board of Directors; and
(v) if the Company receives any non-cash consideration, -- the fair
value of the non-cash consideration, as determined in good faith by the
Company's Board of Directors.
"DILUTIVE TRANSACTION" means any transaction (other than Exempt Transactions)
where the Company does any of the following, based on a Per Share Price
which is less than the Non-Dilutive Price:
(i) issues or sells any Common Stock or any Common Stock
Equivalents;
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(ii) issues or sells any options, warrants or other rights to
purchase or otherwise acquire any Common Stock or any Common Stock
Equivalent; or
(iii) decreases the subscription, exercise, conversion or exchange
price of the securities described in (i) or (ii).
"EMPLOYEE OPTIONS" means options to purchase shares of Common Stock issued to
employees of, consultants to, contractors with, or members of the Board of
Directors of the Company (collectively, the "Employees"), in connection
with or as compensation for the performance of services to the Company.
"EMPLOYEE OPTION SHARES" means shares of Common Stock into which Employee
Options are exerciseable.
"EXEMPT TRANSACTION" means any transaction where the Company:
(i) issues any Common Stock upon conversion or exercise of
securities outstanding or issued as of the date hereof,
(ii) issues any Common Stock upon exercise of Employee Options to be
issued pursuant to existing agreements and understandings between the
Company and certain Employees,
(iii) issues Employee Options to acquire all Employee Option Shares;
provided, however, that the exercise price for such Employee Options shall
be the lesser of (A) 85% of the Fair Market Value of the shares of Common
Stock at the time of the issuance of such options and (B) the Non-Dilutive
Price, or
(iv) issues any Common Stock upon exercise of this Warrant and the
Other Warrant.
"FAIR MARKET VALUE" of a share of Common Stock means:
(i) if the Common Stock is listed on a national securities exchange
or admitted to unlisted trading privileges on such exchange or listed for
trading on the Nasdaq National Market System maintained by the National
Association of Securities Dealers, Inc., -- the last reported sale price
of the Common Stock on the last trading day prior to the Dilutive
Transaction (or the average closing bid and asked prices for such day if
no such sale is made on such day);
(ii) if clause (i) does not apply, and if the prices are reported by
the National Quotation Bureau, Inc. and/or the OTC Bulletin Board, -- the
mean of the last reported bid and asked prices reported on the last
trading day prior to the Dilutive Transaction;
(iii) if clauses (i) and (ii) do not apply, and if the transaction
involves the sale by the Company of securities to unaffiliated third
parties (utilizing the services of an investment banker acceptable to
Holder), -- the Per Share Price; and
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(iv) in all other cases -- as determined based on earnings and book
value and other appropriate items in accordance with the following
procedures:
(a) the Holder will recommend three qualified, independent
appraisers to the Company;
(b) the Company will select and compensate one of the three
appraisers to determine a value;
(c) if either the Holder or the Company is dissatisfied with
the value determined by the first appraiser, that
Person may designate and compensate an appraiser of
its choice to determine a second value;
(d) if the second value is within 10% of the first value or
if the Holder and the Company agree, the average of
the two values will be the "Fair Market Value";
(e) if the second value is not within 10% of the first
value, and if either the Holder or the Company is
dissatisfied with the second value, that Person may
designate and compensate an appraiser of its choice
to determine a third value; and
(f) the average of the two values that are nearest will be
the "Fair Market Value".
"NON-DILUTIVE PRICE" means the lesser of (i) $4.00 (as adjusted for stock
splits, combinations and similar events) and (ii) the Fair Market Value of
a share of Common Stock.
"PER SHARE PRICE" means the total Consideration for each share of Common Stock
or Common Stock Equivalent issued or issuable by the Company in connection
with a Dilutive Transaction.
"TRADING DAY" with respect to the Common Stock means if the Common Stock is
quoted on NASDAQ, a day on which trades may be made on such system.
"WEIGHTED AVERAGE PER SHARE VALUE" means the amount determined by performing the
following calculation and rounding the resulting number to the nearest
whole cent: Divide:
(i) the sum of:
(a) the Fair Market Value of a Warrant Share
multiplied by the number of shares of Common
Stock Deemed Outstanding immediately prior to
the Dilutive Transaction, plus
(b) the aggregate Consideration, if any, received or
to be received by the
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Company in connection with the Dilutive
Transaction, by
(ii) the number of shares of Common Stock Deemed Outstanding
immediately after the Dilutive Transaction.
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