Exhibit 4.4
XXXXXXXXXXXXX.XXX, INC.
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (this "AGREEMENT") is made and entered
into as of December 31, 2001 by and among XxxxxxxXxxxxx.xxx, Inc., a Delaware
corporation (the "COMPANY"), the investors identified in the Investor Schedule
attached hereto as SCHEDULE 1 (the "INVESTOR SCHEDULE") (and each such person or
entity listed on the Investor Schedule being sometimes referred to herein
individually as an "INVESTOR" and collectively as the "INVESTORS"), and the
principal stockholders identified on SCHEDULE 2 attached hereto (the "PRINCIPAL
STOCKHOLDERS").
WITNESSETH:
WHEREAS, the parties hereto desire to set forth their mutual agreement
regarding various matters relating to the Company, including certain
restrictions with respect to the transfer and ownership of shares of the
Company's capital stock, corporate governance and certain other matters.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms used, but not defined, herein have the meanings
ascribed thereto in the Preferred Stock and Warrant Purchase Agreement, dated as
of December 31, 2001, between the Company and the Purchaser (as defined
therein), as amended, restated or otherwise modified from time to time (the
"Purchase Agreement"). As used in this Agreement, the following terms shall have
the following respective meanings:
"Affiliate" means with respect to any Person, any Person that, directly
or indirectly, controls, is controlled by or is under common control with such
first-named Person. A Person shall be deemed to "control" another Person if such
first Person directly or indirectly possesses the power to direct (or to cause
the direction of or to materially influence) the management and policies of the
second Person, whether through the ownership of voting securities, by contract
or otherwise. Without limiting the generality of the foregoing, each of the
following Persons will be deemed to be an Affiliate of a Person: (a) each
member, manager, partner, director and/or senior executive of such Person or any
Affiliate thereof; and (b) any immediate family member of such Person or any
Affiliate thereof; and (c) any trust of which any Person or Affiliate thereof is
either a trustee or beneficiary. Notwithstanding the foregoing, the Investors
shall not be deemed to be an Affiliate of the Company or any Affiliate thereof.
"Blue Sky Application" has the meaning set forth in Section 3.8(a) of
this Agreement.
"Board" means the Board of Directors of the Company, as constituted
from time to time.
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"Commission" means the United States Securities and Exchange
Commission, or any successor agency thereto.
"Common Stock" means the voting common stock of the Company, par value
$0.01 per share.
"Company Notice" has the meaning set forth in Section 2.3 of this
Agreement.
"Co-Sale Shares" means the shares of capital stock of the Company
proposed to be Transferred to a Third Party subject to Section 4.1(a) of this
Agreement.
"Co-Seller" has the meaning set forth in Section 4.1(c) of this
Agreement.
"Election Notice" has the meaning set forth in Section 4.1(c) of this
Agreement.
"Employee Options" means options granted to the officers, directors and
employees of the Company pursuant to any stock option plans that are approved by
the Board of Directors of the Company.
"Exchange Act" has the meaning set forth in Section 3.10(b) of this
Agreement.
"Executive Committee" has the meaning set forth in Section 6.5(b) of
this Agreement.
"Exercise Notice" has the meaning set forth in Section 2.3 of this
Agreement.
"Exempt ROFR Transfers" has the meaning set forth in Section 5.1(g) of
this Agreement.
"Fully-Diluted Basis" means, when referring to the computation of a
percentage of one or more classes of securities held by an Investor, a fraction
(x) the numerator of which is the number of shares of one or more classes of
securities that would be held by such Investor after giving effect to the full
exercise of any options or warrants and the full conversion or exchange of any
convertible or exchangeable securities held by such Investor, whether or not
such warrants, options or convertible or exchangeable securities are then
exercisable or convertible or exchangeable, as the case may be, and (y) the
denominator of which is the aggregate number of shares of the Company that would
be outstanding after giving full effect to the full exercise of all warrants or
options and the full conversion or exchange of any convertible or exchangeable
securities, whether or not such warrants, options or convertible or exchangeable
securities are then exercisable.
"Independent Appraiser" means a Person who (a) is a nationally
recognized investment banking or appraisal firm, (b) is qualified in the
valuation of businesses, transactions and securities of the general type being
analyzed, and (c) does not and whose Affiliates do not have a material direct or
material indirect financial interest in the Company or in the Investors or
Principal Stockholders.
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"Investor" has the meaning set forth in the preamble to this Agreement.
"Investor Remaining Shares" has the meaning set forth in Section 5.1(a)
of this Agreement.
"Investor Shortfall" has the meaning set forth in Section 5.1(a) of
this Agreement.
"MCG" means MCG Finance Corporation, a Delaware corporation, and its
successors, assigns, pledgees and transferees.
"New Securities" has the meaning set forth in Section 2.2 of this
Agreement.
"Notice of Transfer" has the meaning set forth in Section 4.1(b) of
this Agreement.
"Notice Period" has the meaning set forth in Section 5.1(c) of this
Agreement
"Offer Period" has the meaning set forth in Section 2.3 of this
Agreement.
"Offered Price" means the consideration offered by the Proposed
Transferee pursuant to Section 5.1(b) of this Agreement.
"Offered Securities" means the Common Stock, Restricted Stock or
Preferred Stock to be transferred pursuant to Section 5.1(b) of this Agreement.
"Permitted Transfer" means any Transfer of shares of capital stock held
by a Principal Stockholder transferred pursuant to the procedures set forth in
Sections 4 and 5 of this Agreement and pursuant to applicable law.
"Permitted Transferee" has the meaning set forth in Section 3.2 of this
Agreement.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, trust, estate, limited liability
partnership, joint stock company, unincorporated organization or any agency or
political subdivision thereof.
"Piggyback Holders" has the meaning set forth in Section 3.4 of this
Agreement.
"Preferred Designee" has the meaning set forth in Section 6.1(b) of
this Agreement.
"Preferred Stock" means the Senior Preferred Stock of the Company held
by the Investors.
"Principal Remaining Shares" has the meaning set forth in Section
5.1(a) of this Agreement.
"Principal Selling Party" has the meaning set forth in Section 5.1(a)
of this Agreement.
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"Principal Stockholder" has the meaning set forth in the preamble to
this Agreement.
"Proposed Transferee" has the meaning set forth in Section 5.1(b) of
this Agreement.
"Pro Rata Share" means the ratio of Common Stock of the Company held by
such Investor (including shares of Common Stock issuable upon exercise of
Warrants held by the Investor) on a Fully-Diluted Basis to the total number of
shares of Common Stock outstanding on a Fully-Diluted Basis, not including
Employee Options.
"Purchase Offeror" has the meaning set forth in Section 4.1(b) of this
Agreement.
"Purchase Option" has the meaning set forth in Section 5.1(c) of this
Agreement.
"Purchase Price" has the meaning set forth in Section 5.1(d) of this
Agreement.
"Purchasing Holders" means the Investors who elect to purchase the
Offered Securities pursuant to Section 5.1(e) of this Agreement.
"Registration Expenses" means all expenses incurred by the Company or
any holder in connection with complying with, or effecting a registration of
securities pursuant to, Sections 3.3, 3.4, 3.5 and 3.6 of this Agreement,
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, fees in
connection with the registration of Restricted Stock, fees of the National
Association of Securities Dealers, Inc., transfer taxes incurred by the Company,
fees and expenses of one special counsel for the selling holders of Restricted
Stock, fees of transfer agents and registrars, costs of any insurance which
might be obtained, but excluding any Selling Expenses.
"Registration Statements" has the meaning set forth in Section 3.5(b)
of this Agreement.
"Remaining Shares" has the meaning set forth in Section 5.1(f) of this
Agreement.
"Requesting Holders" means the holders of not less than twenty-five
percent (25%) of the shares of Common Stock issued or issuable upon exercise of
the Warrants or the holders of Restricted Stock, the offering price to the
public of which such holders reasonably conclude shall be at least $1,000,000.
"Restricted Stock" has the meaning set forth in Section 3.3(b) of this
Agreement.
"Right of First Refusal" has the meaning set forth in Section 5.1(a) of
this Agreement.
"Sale Agreement" has the meaning set forth in Section 4.1(d) of this
Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
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"Seller" has the meaning set forth in Section 4.1(b) of this Agreement.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the Restricted Stock registered by the holders.
"Selling Party " has the meaning set forth in Section 5.1(a) of this
Agreement.
"Stockholder Shortfall" has the meaning set forth in Section 5.1(a) of
this Agreement.
"Suspension Event" has the meaning set forth in Section 3.5(b) of this
Agreement.
"Tag-Along Shares" has the meaning set forth in Section 4.1(c) of this
Agreement.
"Third Party" has the meaning set forth in Section 4.1A of this
Agreement.
"Transfer" (including with correlative meaning the terms "Transferred",
"Transferee" and "Transferor") means any transfer, sale, assignment, pledge,
encumbrance or other disposal by any other means.
"Transfer Notice" has the meaning set forth in Section 5.1(b) of this
Agreement.
ARTICLE II
PREEMPTIVE RIGHTS
2.1 PREEMPTIVE RIGHTS. The Company hereby grants to each Investor the
preemptive right to purchase its Pro Rata Share of any New Securities which the
Company may, from time to time, propose to issue and sell, and to purchase its
Pro Rata Share of the New Securities allocable to any other person or entity
holding preemptive rights who does not exercise in full such preemptive rights.
For purposes of this Section 2.1, an Investor's Pro Rata Share shall be
calculated immediately prior to the issuance of the New Securities.
2.2 DEFINITION OF NEW SECURITIES. Except as set forth below, "NEW
SECURITIES" shall mean any shares of capital stock of the Company or any rights,
options, warrants or securities exercisable for or convertible into or
exchangeable for shares of capital stock of the Company, whether or not now
authorized or exercisable. Notwithstanding the foregoing, "NEW SECURITIES" does
not include: (i) capital stock, or rights, options or warrants to purchase
shares of capital stock, issued or issuable to employees, consultants, officers
or directors of the Company pursuant to Employee Options approved by the Board;
(ii) securities issued or issuable in connection with acquisition transactions
approved by the Board; or (iii) capital stock issued or issuable in connection
with any conversion of preferred stock, or any stock split, split-up, stock
dividend or other distribution on, or a combination or a recapitalization
affecting shares of Common Stock or preferred stock.
2.3 PROCEDURE. In the event the Company proposes to undertake an
issuance of New Securities, it shall give each Investor written notice of its
intention, describing the type of New
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Securities and the price and terms upon which the Company proposes to issue the
same (the "COMPANY NOTICE"). Each Investor shall have fifteen (15) business days
from the date of receipt of any such notice (the "OFFER PERIOD") to agree to
purchase up to its Pro Rata Share (including and, at such Investor's option, its
Pro Rata Share of any unpurchased New Securities allocable to any other person
or entity who holds preemptive rights) of such New Securities for the price and
upon the terms specified in the Company Notice by giving written notice to the
Company and stating therein the quantity of New Securities to be purchased (the
"EXERCISE NOTICE"). To the extent that any Investor subscribes for the
unpurchased New Securities allocable to any other person or entity who holds
preemptive rights, and the aggregate amount so subscribed for exceeds the total
amount of New Securities so offered, such over-subscription amounts shall be
allocated among such Investor and any other subscribing person or entity who
holds preemptive rights based upon their respective shares of the Company's
capital stock. The purchase by any Investor of any New Securities shall be
subject in all cases to the preparation, execution and delivery by the Company
and such Investor of a purchase agreement relating to the New Securities
reasonably satisfactory in form and substance to the Investor and the Company.
2.4 ISSUANCE OF NEW SECURITIES. In the event the Investors fail to
exercise their rights with respect to such New Securities within the fifteen
(15) business day period specified in Section 2.3, the Company shall have one
hundred thirty-five (135) days after the expiration of the Offer Period, to sell
or enter into an agreement to sell the New Securities not elected to be
purchased by the Investors at the price and upon terms no more favorable to the
purchasers of such securities than specified in the Company Notice. In the event
the Company has not sold the New Securities or entered into an agreement to sell
the New Securities as set forth above within said one hundred thirty-five (135)
day period (or sold and issued New Securities in accordance with the foregoing
agreement within thirty (30) days from the date of said agreement), the Company
shall not thereafter issue or sell any New Securities, without again first
offering such securities to each Investor in accordance with this Article 2.
ARTICLE III
TRANSFER OF SHARES AND REGISTRATION RIGHTS
3.1 RESTRICTIVE LEGEND. Each certificate representing shares of Common
Stock held by the Principal Stockholders shall, except as otherwise provided in
this Section 3.1 or in Section 3.2, be stamped or otherwise imprinted with a
legend substantially in the following form:
THESE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE UNLESS SUCH
TRANSFER COMPLIES WITH THAT CERTAIN INVESTOR RIGHTS AGREEMENT, DATED AS OF
DECEMBER 31, 2001, BY AND AMONG XXXXXXXXXXXXX.XXX, INC. AND CERTAIN OF ITS
STOCKHOLDERS, A COPY OF WHICH IS AVAILABLE FROM THE SECRETARY OF
XXXXXXXXXXXXX.XXX, INC. SUCH INVESTOR RIGHTS AGREEMENT COVERS MATTERS RELATING
TO THE VOTING AND TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE.
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A certificate shall not bear such legend if, in the opinion of counsel
reasonably satisfactory in substance to the Company, the securities being sold
thereby may be publicly sold without registration under the Securities Act and
applicable state securities laws.
3.2 NOTICE OF PROPOSED TRANSFER. Subject to the terms and conditions of
this Agreement, prior to any proposed Transfer of any Preferred Stock, Warrants
or Warrant Shares (other than under the circumstances described in Sections 3.3,
3.4 or 3.5), each Investor (and any subsequent holder of the Preferred Stock,
Warrants or Warrant Shares) shall give written notice to the Company of its
intention to effect such Transfer. Each such notice shall describe the manner of
the proposed Transfer and, if requested by the Company, shall be accompanied by
an opinion of counsel reasonably satisfactory in substance to the Company to the
effect that the proposed Transfer may be effected without registration under the
Securities Act and applicable state securities laws, whereupon the holder of
such Preferred Stock, Warrants or Warrant Shares shall be entitled to Transfer
such Preferred Stock, Warrants or Warrant Shares in accordance with the terms of
its notice; PROVIDED, HOWEVER, that no such opinion of counsel or notice to the
Company prior to Transferring shares of Preferred Stock, Warrants or Warrant
Shares shall be required for: (i) a Transfer to one or more members or limited
partners of the Transferor (in the case of a Transferor that is a limited
liability company or limited partnership, respectively); (ii) a Transfer to an
Affiliate of the Transferor (in the case of a Transferor that is a corporation),
or as a pledge by MCG to lenders from which MCG borrows funds in the ordinary
course of business; (iii) a Transfer to a Transferor's spouse, parent, child or
grandchild; or (iv) a Transfer to a trust (or business entity such as a family
limited partnership) under which a Transferor, or such Transferor's spouse,
parent, child or grandchild, is a beneficiary, and under which there are no
beneficiaries other than such Transferor or such family members (in all such
cases, a "PERMITTED TRANSFEREE"); PROVIDED, FURTHER, HOWEVER, that each Investor
shall promptly provide written notice to the Company after it has effected such
Transfer to a Permitted Transferee.
3.3 DEMAND REGISTRATION.
(a) At any time, and from time to time, beginning 90 days
after the date hereof, the Requesting Holders may require the Company to
register under the Securities Act all or any portion of the shares of Restricted
Stock held by such Requesting Holders for sale in the manner specified in such
notice. Following receipt of any notice under this Section 3.3(a), the Company
shall immediately notify all holders of Common Stock issued or issuable upon
exercise of the Warrants from whom notice has not been received and such holders
shall then be entitled within thirty (30) days thereafter to request the Company
to include in the requested registration all or any portion of their shares of
Restricted Stock. The Company shall use its best efforts to register under the
Securities Act, for public sale in accordance with the method of disposition
described in this Section 3.3(a), the number of shares of Restricted Stock
specified in such notice (and in all notices received by the Company from other
holders within thirty (30) days after the giving of notice by the Company). The
Company shall not be obligated to effect more than five (5) registrations
pursuant to this Section 3.3.
(b) The term "Restricted Stock" shall mean the shares of
Preferred Stock and the shares of Common Stock issued or issuable to holders of
Warrants upon exercise of Warrants; PROVIDED, HOWEVER, that, in any underwritten
public offering contemplated by this
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Section 3.3 or Sections 3.4 and 3.5, the holders of Warrants shall be entitled
to sell such Warrants to the underwriters for exercise and sale of the shares of
Common Stock issued upon exercise thereof. Notwithstanding anything to the
contrary contained herein, no request may be made under this Section 3.3 within
180 days after the effective date of a registration statement filed by the
Company covering a firm commitment underwritten public offering in which the
holders of Restricted Stock shall have been entitled to sell all Common Stock
they requested to sell pursuant to Sections 3.4 or 3.5.
(c) The Company shall be entitled to include in any
registration statement referred to in this Section 3.3, 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 or such other holders
for their own account, except as and to the extent that, in the opinion of the
managing underwriter (if such method of disposition shall be an underwritten
public offering), such inclusion would adversely affect the marketing of the
Restricted Stock to be sold by the Requesting Holders. Except for registration
statements on Form S-4 or Form S-8 (or any successor to either form) 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 stockholders,
from the date of receipt of a notice from Requesting Holders pursuant to this
Section 3.3 until a period of 90 days after the effectiveness of the
registration statement relating to the registration contemplated thereby (or, if
earlier, the completion of the period of distribution of the registration
contemplated thereby) or the earlier termination or withdrawal of such offering.
(d) If, in the opinion of the managing underwriter, if any,
for any offering of shares of Common Stock pursuant to this Section 3.3, the
inclusion of all of the Restricted Stock requested to be registered under
Section 3.3(a) would adversely affect the marketing of such shares, after any
shares to be sold by the Company or other holders of Common Stock or Restricted
Stock have been excluded, shares to be sold by the Requesting Holders of
Restricted Stock requested to be registered under Section 3.3(a) shall be
excluded in such manner that the shares to be sold shall be allocated among the
Requesting Holders pro rata based on their ownership of Restricted Stock.
3.4 PIGGYBACK REGISTRATION. If the Company at any time (other than
pursuant to Section 3.3 or Section 3.5) proposes 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 Forms X-0, X-0 or another form not
available for registering the Restricted Stock for sale to the public), each
such time the Company will give written notice to all holders of outstanding
Restricted Stock of its intention to do so. Upon the written request of any such
holder, received by the Company within 30 days after the giving of any such
notice by the Company, to register any of its Restricted Stock, the Company will
use its best efforts to cause the Restricted Stock 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 required to permit the sale or other disposition by the holder (in
accordance with its written request) of such Restricted Stock so registered
("PIGGYBACK HOLDERS"). In the event that any registration pursuant to this
Section 3.4 shall be, in whole or in part, an underwritten public offering of
Common Stock, the number of shares of Restricted Stock
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to be included in such an underwriting, if any, may be reduced (pro rata among
the Piggyback Holders based upon the number of shares of Restricted Stock held
by such Piggyback Holders) if and to the extent that the managing underwriter
shall be of the opinion that such inclusion would adversely affect the marketing
of the securities to be sold by the Company therein; PROVIDED, HOWEVER, that
such number of shares of Restricted Stock shall not be reduced if any shares are
to be included in such underwriting for the account of any person other than the
Company or Piggyback Holders of Restricted Stock; PROVIDED, HOWEVER, that the
number of shares of Restricted Stock shall not be reduced below 30% (determined
by the aggregate price to the public) of the securities to be covered by the
registration statement proposed to be filed by the Company. Notwithstanding the
foregoing provisions, the Company may withdraw any registration statement
referred to in this Section 3.4 without thereby incurring any liability to the
holders of Restricted Stock.
3.5 REGISTRATION ON FORM S-3.
(a) If at any time (i) any Requesting Holders 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 shares of Restricted Stock held by
such Requesting Holder or Holders, the reasonably anticipated aggregate price to
the public of which would exceed $[1,000,000], and (ii) the Company is a
registrant entitled to use Form S-3 or any successor thereto to register such
shares, then the Company shall use its best efforts to register under the
Securities Act on Form S-3 or any successor thereto, for sale in accordance with
the method of disposition specified in such notice, the number of shares of
Restricted Stock specified in such notice. Whenever the Company is required by
Section 3.3 and this Section 3.5 to use its best efforts to effect the
registration of Restricted Stock, each of the procedures and requirements of
Section 3.3 shall apply to such registration with respect to all of the holders
of Restricted Stock (including, but not limited to, the requirement that the
Company notify all holders of Restricted Stock from whom notice has not been
received and provide them with the opportunity to participate in the offering).
(b) Notwithstanding anything to the contrary set forth in this
Agreement, the Company's obligation under this Agreement to register Restricted
Stock under the Securities Act on registration statements ("REGISTRATION
STATEMENTS") may be suspended in the event and during such period as unforeseen
circumstances exist (such unforeseen circumstances being hereinafter referred to
as a "SUSPENSION EVENT") which, in the opinion of the Board of Directors of the
Company, would make it impractical or unadvisable for the Company to file the
Registration Statements or such other filings or to cause such to become
effective; PROVIDED, HOWEVER, the Company's obligation under this Agreement to
register Restricted Stock on Registration Statements may not be suspended
pursuant to this Section 3.5(b) more than once in a calendar year. Such
suspension shall continue only for so long as such event is continuing but in no
event for a period longer than ninety (90) days. The Company shall notify the
holders of Restricted Stock of the existence and nature of any Suspension Event.
3.6 REGISTRATION PROCEDURES. If and whenever the Company is required by
the provisions of Sections 3.3, 3.4 or 3.5 to use its best efforts to effect the
registration of any shares of Restricted Stock under the Securities Act, the
Company will, as expeditiously as possible:
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(a) prepare and file with the Commission a registration
statement (which, in the case of an underwritten public offering pursuant to
Section 3.3, 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 its best efforts to cause such registration
statement to become and remain effective for the period of the distribution
contemplated thereby (determined as hereinafter provided);
(b) prepare and file 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 paragraph (a) above and comply with the provisions of
the Securities Act with respect to the disposition of all Restricted Stock
covered by such registration statement in accordance with the seller's intended
method of disposition set forth in such registration statement for such period;
(c) furnish to each seller of Restricted Stock and to each
underwriter such number of copies of the registration statement and each such
amendment and supplement thereto (in each case including all exhibits) 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 Restricted Stock covered by such registration statement;
(d) use its best efforts to register or qualify the Restricted
Stock covered by such registration statement under the securities or "blue sky"
laws of such jurisdictions as the sellers of Restricted Stock 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 its best efforts to list the Restricted Stock covered
by such registration statement with any securities exchange on which the Common
Stock of the Company is then listed;
(f) immediately notify each seller of Restricted Stock 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, and promptly
prepare and furnish to such seller a reasonable number of copies of a prospectus
supplemented or amended so that, as thereafter delivered to the purchasers of
such Restricted Stock, 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 light of the
circumstances then existing;
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(g) if the offering is underwritten and at the request of any
seller of Restricted Stock, use its best efforts to furnish on the date that
Restricted Stock 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 underwriters and to such
seller, to such effect as reasonably may be requested by counsel for the
underwriters, and (ii) a letter dated such date from the independent public
accountants retained by the Company, addressed to the underwriters and to such
seller, stating that they are independent public accountants within the meaning
of the Securities Act and that, in the opinion of such accountants, the
financial statements of the Company included in the registration statement or
the prospectus, or any amendment or supplement thereof, comply as to form in all
material respects with the applicable accounting requirements of the Securities
Act, and such letter shall additionally cover such other financial matters
(including information as to the period ending no more than five (5) business
days prior to the date of such letter) with respect to such registration as such
underwriters reasonably may request;
(h) make available for inspection by each seller of Restricted
Stock, by any underwriter participating in any distribution pursuant to such
registration statement, and by any attorney, accountant or other agent retained
by such seller or underwriter, reasonable access to all financial and other
records, pertinent corporate documents and properties of the Company, as such
parties may reasonably request, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement;
(i) cooperate with the selling holders of Restricted Stock and
the managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Restricted Stock to be sold, such
certificates to be in such denominations and registered in such names as such
holders or the managing underwriters may request at least two (2) business days
prior to any sale of Restricted Stock; and
(j) permit any holder of Restricted Stock which holder, in the
sole and exclusive judgment, exercised in good faith, of such holder, might be
deemed to be a controlling person of the Company, to participate in good faith
in the preparation of such registration or comparable statement and to require
the insertion therein of material, furnished to the Company in writing, which in
the reasonable judgment of such holder and its counsel should be included.
For purposes of Sections 3.6(a) and 3.6(b) and of Section
3.3(a), the period of distribution of Restricted Stock 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 Restricted Stock in any other registration shall be deemed to
extend until the earlier of the sale of all Restricted Stock covered thereby and
180 days after the effective date of the registration statement therefor.
In connection with each registration hereunder, the sellers of
Restricted Stock will furnish to the Company in writing such information
requested by the Company with respect to themselves and the proposed
distribution by them as reasonably shall be necessary in order to assure
compliance with federal and applicable state securities laws and to make the
registration
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statement correct, accurate and complete in all respects with respect to such
sellers; PROVIDED, HOWEVER, that this requirement shall not be deemed to limit
any disclosure obligation arising out of any seller's relationship to the
Company if one of such seller's agents or affiliates is an officer, director or
control person of the Company. In addition, the sellers shall, if requested by
the Company, execute such other agreements, which are reasonably satisfactory to
them and which shall contain such provisions as may be customary and reasonable
in order to accomplish the registration of the Restricted Stock.
In connection with each registration pursuant to Sections 3.3, 3.4 or
3.5 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.
3.7 EXPENSES. The Company will pay all Registration Expenses in
connection with the preparation and filing of each registration statement under
Sections 3.3, 3.4 and 3.5. All Selling Expenses in connection with each
registration statement under Sections 3.3, 3.4 or 3.5 shall be borne by the
participating sellers in proportion to the number of 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.
3.8 INDEMNIFICATION.
(a) In the event of a registration of any of the Restricted
Stock under the Securities Act pursuant to Sections 3.3, 3.4 or 3.5, the Company
will indemnify and hold harmless each holder of Restricted Stock, its officers
and directors, each underwriter of such Restricted Stock thereunder and each
other person, if any, who controls such seller or underwriter within the meaning
of the Securities Act, against any losses, claims, damages or liabilities, joint
or several, to which such holder, 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 (i) any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
Restricted Stock was registered under the Securities Act pursuant to Sections
3.3, 3.4 or 3.5, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, (ii) any blue sky application
or other document executed by the Company specifically for that purpose or based
upon written information furnished by the Company filed in any state or other
jurisdiction in order to qualify any or all of the Restricted Stock under the
securities laws thereof (any such application, document or information herein
called a "Blue Sky Application"), (iii) the omission or alleged omission to
state therein a material fact required to be stated in any document referenced
in clause (i) or (ii) or necessary to make the statements therein not
misleading, (iv) any violation by the Company or its agents of any rule or
regulation promulgated under the Securities Act applicable to the Company or its
agents and relating to action or inaction required of the Company in connection
with such registration, or (v) any failure to register or qualify the Restricted
Stock in any state where the Company or its agents have affirmatively undertaken
or agreed in writing that the Company will undertake such
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registration or qualification on the seller's behalf; PROVIDED, THAT, in such
instance the Company shall not be so liable if it has undertaken its best
efforts to so register or qualify the Restricted Stock and it has advised each
seller of all jurisdictions in which the Restricted Stock has not been so
registered or qualified, and will reimburse each such holder, and such officer
and director, each such underwriter and each such controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action (as
such expense is incurred); PROVIDED, HOWEVER, that the Company will not be
liable 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 conformity with
information furnished by any such seller or any such controlling person in
writing specifically for use in such registration statement or prospectus.
(b) In the event of a registration of any of the Restricted
Stock under the Securities Act pursuant to Sections 3.3, 3.4 or 3.5, each seller
of such Restricted Stock thereunder, severally and not jointly, will indemnify
and hold harmless the Company, each 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 other holder of
Restricted Stock, 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,
other seller, 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 Restricted Stock was registered
under the Securities Act pursuant to Sections 3.3, 3.4 or 3.5, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or any Blue Sky Application or arise out of or are based upon the
omission or alleged omission to state in any such document a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and each such officer, director,
other seller, underwriter and controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action (as such expense is incurred);
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
pertaining to such seller, as such, 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
not in any event exceed the net proceeds received by such seller from the sale
of Restricted Stock covered by such registration statement.
(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 the indemnifying party from any
liability which it may have to such indemnified party other than under this
Section 3.8
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and shall only relieve the indemnifying party from any liability which it may
have to such indemnified party under this Section 3.8 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 3.8 for any legal expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so selected; 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 that 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.
(d) If the indemnification provided for in this paragraph 3.8
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified party in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative faults of such indemnifying
party and indemnified party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such indemnifying
party or indemnified party, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such action. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include, subject
to the limitations set forth in paragraph 3.8(a), (b), and (c), any legal or
other fees, charges or expenses reasonably incurred by such party in connection
with any investigation or proceeding; PROVIDED that the total amount to be
contributed by the seller of Restricted Stock shall be limited to the net
proceeds received by such seller of the Restricted Stock in the offering.
(e) The indemnities provided in this paragraph 3.8 shall
survive the transfer of any Restricted Stock by such holder.
3.9 CHANGES IN COMMON STOCK OR PREFERRED STOCK. If, and as often as,
there is any change in the Common Stock, Preferred Stock or Warrants 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
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hereof so that the rights and privileges granted hereby shall continue with
respect to the Common Stock, Preferred Stock or Warrants as so changed.
3.10 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the Commission which may at any time permit
the sale of the Restricted Stock to the public without registration, at all
times, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"); and
(c) furnish to each holder of Restricted Stock 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 Restricted Stock without
registration.
3.11 HOLDERS ENTITLED TO EQUIVALENT RIGHTS. Unless waived by fifty-five
percent (55%) of the Investors, if the Company has otherwise granted or
hereafter grants to any Person any other or additional registration rights with
respect to any securities of the Company (or similar registration rights with
any more favorable or less restrictive terms), then the Company shall promptly
notify the Investors, and such registration rights (or the more favorable or
less restrictive terms thereof) shall be deemed automatically to be incorporated
into this Agreement (without the necessity of any other action by the parties
hereto) as additional registration rights that the Investors are entitled to
exercise.
ARTICLE IV
TAG-ALONG RIGHTS
4.1A GENERAL. Each Principal Stockholder shall be permitted to Transfer
Common Stock (or any interest therein) to any other person (a "THIRD PARTY")
only if such Transfer is made in accordance with Section 4.1 and Section 5.1,
except for Transfers to Permitted Transferees or for Transfers from a Principal
Stockholder to another Principal Stockholder or such Principal Stockholder's
Permitted Transferees, which shall not be subject to Section 4.1 and Section
5.1.
4.1 TAG-ALONG RIGHTS
(a) Shares of capital stock sought to be Transferred pursuant
to this Section 4.1 are hereinafter referred to as "CO-SALE SHARES."
(b) The Principal Stockholder ("SELLER") seeking to effect a
Transfer of Co-Sale Shares to a Third Party shall deliver a written notice (the
"NOTICE OF TRANSFER") to the
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Company prior to making any such Transfer of Co-Sale Shares. The Notice of
Transfer will contain a copy of the definitive documentation pursuant to which
the Co-Sale Shares will be Transferred and will state the following: (i) the
Seller's bona fide intention to Transfer the Co-Sale Shares; (ii) the name and
address of the prospective Transferee (the "PURCHASE OFFEROR"); (iii) the number
of Co-Sale Shares to be Transferred and the consideration to be paid therefor;
(iv) the expected closing date of the transaction; and (v) confirmation that the
Purchase Offeror has been informed of the provisions of this Section 4.1 and has
agreed to purchase any and all shares of Restricted Stock proposed to be sold
pursuant to the terms of this Section 4.1, but no more than the number of shares
of Common Stock than the Purchase Offeror had originally offered to purchase.
The Company shall promptly, and in any event within five (5) days after receipt
of such Notice of Transfer and the related Sale Agreement (as defined below), if
any, deliver a copy of such Notice of Transfer and the related Sale Agreement to
each Investor.
(c) Any Investor may elect to participate in the Transfer
contemplated by paragraph (b) above by delivering a written notice (an "ELECTION
NOTICE") to the Seller and the Company within ten (10) days after receipt by
such Investor of such Notice of Transfer, and each such Investor (each a
"CO-SELLER") may elect to Transfer in such contemplated Transfer up to that
number of shares of Restricted Stock, as the case may be (referred to herein as
"TAG-ALONG SHARES"), that represents on a Fully-Diluted Basis the number of
shares of Common Stock equal to the product of (a) the number of shares of
Common Stock represented by the Co-Sale Shares proposed to be sold by the Seller
multiplied by (b) a fraction, the numerator of which is the total number of
shares of Common Stock issued and/or issuable to such Co-Seller on a
Fully-Diluted Basis and the denominator of which is the total number of shares
of Common Stock issued and/or issuable to the Seller and to all Co-Sellers on a
Fully-Diluted Basis. If any Investor fails to deliver an Election Notice by the
end of the tenth (10th) day after receipt of a Notice of Transfer, such Investor
shall be deemed to have elected not to participate in the Transfer covered by
such Election Notice.
(d) Each Co-Seller participating in a Transfer shall deliver
to the Purchase Offeror at a closing to be held at the offices of the Company
(or such other place as the parties agree), one or more certificates, properly
endorsed for Transfer, which represent the number of Tag-Along Shares which the
Co-Seller elects to Transfer pursuant to this Section 4.1. Such certificates
shall be transferred by the Seller to the Purchase Offeror simultaneously with
the consummation of the Transfer of the Co-Sale Shares pursuant to the terms and
conditions specified in the Notice of Transfer against receipt by the Co-Sellers
of the proceeds of the Transfer of their respective Tag-Along Shares. If there
is to be an agreement of sale or similar instrument with respect to the proposed
Transfer (a "SALE AGREEMENT"), the Seller will furnish a copy of the Sale
Agreement in its then current form to the Company with the Notice of Transfer.
As promptly as practicable after receipt of an Election Notice, if the Sale
Agreement has not previously been executed, the Seller shall furnish the
Co-Sellers with successive drafts of the Sale Agreement, if any, as available.
As a condition to making an Election Notice and being eligible to participate in
a Transfer, each Co-Seller shall be required solely to represent and warrant to
the Purchase Offeror with respect to the Tag-Along Shares being disposed of by
such Co-Seller that the Transferee of the Tag-Along Shares (or interests
therein) is receiving good and marketable title to such Tag-Along Shares (or
interests therein), free and clear of all pledges, security interests, liens,
charges or encumbrances created by such Co-Seller, and shall not be
- 17 -
liable for any other claims which may arise with respect to the Tag-Along
Shares. To the extent that any prospective Transferee or Transferees prohibit
assignment and delegation of such Sale Agreement or otherwise refuse to purchase
any Tag-Along Shares from a Co-Seller, the Seller shall not sell to such
prospective Transferee or Transferees any interest in the Company unless and
until, simultaneously with such sale, the Seller shall purchase from such
Co-Seller the Tag-Along Shares such Co-Seller would otherwise have been able to
sell hereunder for the same consideration and on the same terms and conditions
as the proposed transfer described in the Notice of Transfer. The purchase price
for each Investor for such Investor's Tag-Along Shares shall be such Investor's
pro rata percentage of the "aggregate consideration" to be received by all
Co-Sellers and the Seller in connection with the transaction (including any
related agreements that result in personal gain, payments or compensation to any
director, officer or equityholder of Company). To the extent that all or any
portion of the aggregate consideration so received is not cash, and the Company
and the Co-Sellers cannot agree on the value of the non-cash portion of the
aggregate consideration, then such determination shall be made by an Independent
Appraiser. Such Independent Appraiser shall be selected by the Investors and
approved by the Company (which approval may not be unreasonably withheld,
delayed or conditioned). Such Independent Appraiser shall use one or more
valuation methods that the Independent Appraiser (in its best professional
judgment) determines to be most appropriate under the circumstances; provided,
that, such valuation methods shall not give effect to (1) any discount for lack
of liquidity or non-controlling status of any such security or other property,
or (2) the fact that such equity securities may not be registered under the
Securities Act. The fees and expenses associated with the Independent Appraiser
shall be paid by the Company. To the extent that any consideration for such
transaction is payable by such Purchase Offeror in cash, in publicly traded and
readily marketable securities (with reasonable liquidity and no restrictions on
transfer) or evidence of indebtedness from an obligor who (in the commercially
reasonable opinion of the Co-Sellers) is highly creditworthy, then the purchase
price payable to the Co-Sellers in such transaction shall be made in the same
form of consideration; otherwise, the purchase price (or the remaining balance
thereof) payable to the Co-Sellers shall be made in cash, by wire transfer of
immediately available funds, unless such Co-Seller elects to receive to receive
the purchase price in the same form of consideration as is to be received by the
Seller.
(e) The exercise or non-exercise of the rights of the
Investors hereunder to participate in one or more Transfers of Co-Sale Shares
made by a Seller shall not adversely affect their rights to participate in
subsequent Transfers of Co-Sale Shares by Investors which meet the conditions
specified in this Section 4.1.
(f) Any Transfer made pursuant to this Section 4.1 shall be
consummated on the terms set forth in the Notice of Transfer. The Company shall
use reasonable efforts to aid such closing, including, but not limited to,
exchanging a Co-Seller's certificates for new certificates in requested
denominations.
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ARTICLE V
RIGHT OF FIRST REFUSAL
5.1 RIGHT OF REFUSAL.
(a) INVESTOR RIGHT OF FIRST REFUSAL. Except with respect to
Exempt ROFR Transfers (as defined in Section 5.1(g) below), before shares of
Common Stock held by a Principal Stockholder or Permitted Transferee of a
Principal Stockholder, who proposes to Transfer shares of Common Stock in any
manner to a Third Party (a "PRINCIPAL SELLING PARTY") may be Transferred, the
Principal Selling Party must afford the Investors the concurrent right to
purchase such shares of Common Stock on the terms and conditions set forth in
this Section 5.1 (the "RIGHT OF FIRST REFUSAL"). If more than one Investor
elects to exercise the Right of First Refusal, all Investors participating shall
purchase all or any portion of the shares of Common Stock on a pro rata basis
based upon the number of shares of Common Stock held and issuable upon
conversion of the Preferred Stock. In the event that the Investors do not elect
to purchase all of the shares of Common Stock of the Principal Selling Party
(such shortfall, a "STOCKHOLDER SHORTFALL"), the Principal Stockholders shall
have a Right of First Refusal to purchase all or any portion of the Stockholder
Shortfall on a pro rata basis among the Principal Stockholders electing to
purchase all or any portion of the Stockholder Shortfall. In the event that the
Principal Stockholders do not elect to purchase all of the Stockholder Shortfall
(such shortfall, an "INVESTOR SHORTFALL"), the Company shall have the right to
purchase all or any portion of the Investor Shortfall.
(b) TRANSFER NOTICE. In connection with the sale of Common
Stock in connection with which the Investors, the Principal Stockholders and the
Company are entitled to the Right of First Refusal, the Principal Selling Party
shall give the Company, each Investor and each Principal Stockholder prior
written notice of its intention to make the Transfer (the "TRANSFER NOTICE"),
which Transfer Notice shall include (i) a description of the Common Stock to be
transferred ("OFFERED SECURITIES"), (ii) the identity of the prospective
transferee(s) (the "PROPOSED TRANSFEREE"), (iii) the consideration (the "OFFERED
PRICE") and the material terms and conditions upon which the proposed Transfer
is to be made and (iv) an offer to either the Principal Stockholder, Investors
and the Company to purchase the shares of Common Stock as set forth in this
Section 5.1, at the Offered Price. The Transfer Notice shall certify that the
Principal Selling Party has received a bona fide offer from the prospective
Transferee(s) and in good faith believes a binding agreement for the Transfer is
obtainable on the terms set forth in the Transfer Notice. The Transfer Notice
shall also include a copy of any written proposal, term sheet or letter of
intent or other agreement relating to the proposed Transfer.
(c) EXERCISE OF RIGHT OF FIRST REFUSAL. Within thirty (30)
days after receipt of the Transfer Notice (the "NOTICE PERIOD"), the Investors,
the Principal Stockholders and the Company may, by giving written notice to the
Selling Party or Principal Selling Party, commit to purchase all or any portion
of the Offered Securities, at the same price and subject to the same material
terms and conditions as described in the Transfer Notice (the "PURCHASE
OPTION"), pursuant to the provisions of this Section 5.1 (which purchase must
then be consummated within 30 calendar days after such commitment).
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(d) PURCHASE PRICE. The purchase price ("PURCHASE PRICE") for
the Offered Securities purchased by the Investors, the Principal Stockholders
and the Company under Section 5.1 shall be the Offered Price and shall be
payable in cash. If the Offered Price includes consideration other than cash and
the parties cannot agree to its value, the cash equivalent value of the non-cash
consideration shall be determined in accordance with Section 5.1.
(e) VALUATION OF PROPERTY. Should the purchase price specified
in the Transfer Notice be payable in property other than cash, the Persons who
have elected to purchase the Offered Securities pursuant to this Section 5.1
(the "PURCHASING HOLDERS" for purposes of this Section 5.1) shall pay the
purchase price in the form of cash equal in amount to the fair market value of
the Offered Securities. To the extent the parties cannot agree on the valuation
of the property other than cash, then such determination shall be made by an
Independent Appraiser. Such Independent Appraiser shall be selected by the
Principal Selling Party and approved by the participating Investors, Company, or
Principal Stockholders (as applicable) (which approval may not be unreasonably
withheld, delayed or conditioned). Such Independent Appraiser shall use one or
more valuation methods that the Independent Appraiser (in its best professional
judgment) determines to be most appropriate under the circumstances; provided,
that, such valuation methods shall not give effect to (1) any discount for lack
of liquidity or non-controlling status of any such security or other property,
or (2) the fact that such equity securities may not be registered under the
Securities Act. The fees and expenses associated with the Independent Appraiser
shall be paid one-half by the participating Investors, the Company or the
Principal Stockholders (as applicable), and one-half by the Principal Selling
Party. If the time for the closing of the Purchasing Holders' purchase has
expired but for the determination of the value of the purchase price offered by
the prospective transferee(s), then such closing shall be held on or prior to
the fifth business day after such valuation shall have been made pursuant to
this subsection.
(f) PRINCIPAL SELLING PARTY'S RIGHT TO TRANSFER. If all or
some of the Offered Shares proposed in the Transfer Notice to be transferred to
a given Proposed Transferee are not purchased by the Investors, the Company or
the Principal Stockholders as provided in Section 5.1 (such shortfall, the
"REMAINING SHARES"), then the Principal Selling Party may sell or otherwise
Transfer the Remaining Shares to that Proposed Transferee at the Offered Price
or at a higher price; provided that, such Transfer is consummated within one
hundred eighty (180) days after the date of the Transfer Notice; and provided
further that any such Transfer is effected in accordance with any applicable
securities laws and Section 3.2 hereof, and the Proposed Transferee agrees in
writing that the provisions of this Section 5.1 shall continue to apply to the
Remaining Shares in the hands of such Proposed Transferee. If the Remaining
Shares are not Transferred to the Proposed Transferee within such period, a new
Transfer Notice shall be given to the Investors, the Company and the Principal
Stockholders, and the Investors, the Company and the Principal Stockholders
shall again be offered the Right of First Refusal before any shares held by the
Selling Party or Principal Selling Party may be sold or otherwise Transferred.
(g) EXEMPT ROFR TRANSFERS. For purposes of this Section 5.1,
the term "EXEMPT ROFR TRANSFERS" means any Transfer by a Person to a Permitted
Transferee of such Person.
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ARTICLE VI
BOARD OF DIRECTORS
6.1 COMPOSITION OF BOARD OF DIRECTORS. The Board of Directors of the
Company (the "Board") shall consist of up to six (6) members. All Investors and
Principal Stockholders shall comply with the provisions of this Article VI to
ensure that the designee of the holders of the Preferred Stock (the "Preferred
Designee"), is elected to (or removed from) the Board of Directors in accordance
with the directives of the holders of the Preferred Stock in accordance with the
Certificate of Designation; PROVIDED, HOWEVER, that the Investors will not
exercise their right to vote, to the extent, at any time, such vote will result
in a majority of the members of the Board of Directors having been elected by
the Investors. At all times the Company shall reserve a sufficient number of
seats on the Board of Directors to permit the election of the Preferred
Designee.
6.2 COMMITTEES. For so long as the Preferred Designee serves on the
Board of Directors of the Company, the Company, the Principal Stockholders and
each Investor agrees to vote all of its shares of Common Stock or Preferred
Stock, as applicable, and to take all lawful action as shall be reasonably
required in order to facilitate the election of such Preferred Designee to any
and all committees of the Board of Directors.
6.3 DIRECTOR INDEMNIFICATION. For so long as the Preferred Designee
serves on the Board of Directors of the Company, the Company, the Principal
Stockholders and the Investors hereby agree to:
(a) provide in the Articles of Incorporation of the Company,
as amended, and its Bylaws for indemnification and reimbursement of expenses of
directors and officers to the fullest extent permitted under the general
corporation law of the State of Delaware; and
(b) purchase and maintain director's and officer's insurance
in an amount of at least $10,000,000 on behalf of any person who is or was a
director, officer, employee or agent of the Company, or is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such.
ARTICLE VII
MISCELLANEOUS
7.1 NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on the part of
any party to this Agreement in exercising any right, power or remedy hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy hereunder.
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The remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
7.2 WAIVERS AND FURTHER AGREEMENTS. Except as otherwise expressly
provided herein, none of the provisions of this Agreement may be waived, except
by the written agreement of each of the parties hereto. Any waiver by any party
of a breach of any provision of this Agreement shall not operate or be construed
as a waiver of any subsequent breach of that provision or of any other provision
hereof. Each of the parties hereto agrees to execute all such further
instruments and documents and to take all such further action as any other party
may reasonably require in order to effectuate the terms and purposes of this
Agreement.
7.3 AMENDMENTS. Except as otherwise expressly provided herein, this
Agreement may not be amended except by an instrument in writing executed by each
of the parties hereto.
7.4 SEVERABILITY. The provisions of this Agreement are severable, so
that the invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other term or provision of this
Agreement, which shall remain in full force and effect.
7.5 GOVERNING LAW. THE LAWS OF THE COMMONWEALTH OF VIRGINIA SHALL
GOVERN THE INTERPRETATION, VALIDITY AND PERFORMANCE OF THE TERMS OF THIS
AGREEMENT REGARDLESS OF THE LAW THAT MIGHT BE APPLIED UNDER PRINCIPLES OF
CONFLICTS OF LAW. THE COMPANY AND THE INVESTORS HEREBY IRREVOCABLY (A) SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF VIRGINIA AND OF THE UNITED
STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA FOR THE PURPOSE OF
ANY LITIGATION RELATING TO THIS AGREEMENT AND (B) WAIVE ANY OBJECTION THAT IT AT
ANY TIME MAY HAVE TO THE LAYING OF VENUE IN ANY SUCH COURT AND/OR TO ANY CLAIM
THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
7.6 WAIVER OF JURY TRIAL. Each Investor, Principal Stockholder and the
Company each hereby knowingly, voluntarily and intentionally waives any rights
it may have to a trial by jury in respect of any litigation (whether as a claim,
counter-claim, affirmative defense or otherwise) in connection with or in any
way related to any of the Transaction Agreements, or any course of conduct,
course of dealing, statements (whether verbal or written), actions or inactions
of any Purchaser or the Company.
7.7 SPECIFIC PERFORMANCE. In addition to any and all other remedies
that may be available at law in the event of any breach of this Agreement, each
of the parties hereto shall be entitled to specific performance of the
agreements and obligations hereunder of the Company and the other parties hereto
and to such other injunctive or other equitable relief as may be granted by a
court of competent jurisdiction.
7.8 NOTICES. Any notice required or permitted by this Agreement shall
be in writing and shall be deemed given upon delivery, when delivered personally
or by overnight courier or
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sent by telegram or fax, or forty-eight (48) hours after being deposited in the
U.S. mail, as certified or registered mail, with postage prepaid, addressed to
the party to be notified at such party's address as set forth below or on
Schedule 1 hereto, or as subsequently modified by written notice, and:
(a) if to the Company:
XxxxxxxXxxxxx.xxx, Inc.
0000 Xxxxx 00
X.X. Xxx 0000
Xxxx, Xxx Xxxxxx 00000
Attention: Xxxx X. Xxxxx, President
Facsimile: (000) 000-0000
with a copy in all cases to:
Xxxxx & Xxxxxxx, Ltd.
Xxx Xxxxx Xxxx Xxxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
(b) if to MCG:
0000 Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: Investment Administration & Legal Affairs Division
Facsimile: (000) 000-0000
with a copy in all cases to:
Xxxxxxx X. Xxxxxxxxx, Xx.
Dow Xxxxxx & Xxxxxxxxx, PLLC
0000 Xxx Xxxxxxxxx Xxx, XX
Xxxxx 000
Xxxxxxxxxx, XX 00000
Facsimile (000) 000-0000
(c) To any other Investor or Principal Stockholder: The
address reflected on the signature page to this Agreement or, in any such case,
at such other address or addresses as shall have been furnished in writing by
such party to the other parties to this Agreement.
7.9 ASSIGNMENT; BINDING EFFECT. 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 Warrants, Warrant
Shares or shares of the Preferred Stock or Common Stock subject to this
Agreement), whether so expressed or not. Any transferee or assignee of the
rights of the
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holders of Warrants, Restricted Stock or Common Stock under this Agreement
shall, as a condition to such transfer or assignment, execute a writing agreeing
to be bound by the provisions of this Agreement.
7.10 COUNTERPARTS. This Agreement may be executed in more than one
counterpart, each of which shall be deemed to be an original and which,
together, shall constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
The foregoing Investor Rights Agreement is hereby executed as of the
date first above written.
XXXXXXXXXXXXX.XXX, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Vice President
MCG CAPITAL CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------
Name: Xxxxxx X. Xxxxxx
Title: President and Chief
Operating Officer
PRINCIPAL STOCKHOLDERS
By: /s/ Xxxx X. Xxxxx
-----------------------------
Xxxx X. Xxxxx
By: /s/ Xxxxx Xxxxx
-----------------------------
Xxxxx Xxxxx
SCHEDULE 1 - INVESTOR SCHEDULE
1. MCG Capital Corporation
SCHEDULE 2 - PRINCIPAL STOCKHOLDERS
1. Xxxx X. Xxxxx
2. Xxxxx Xxxxx
