EXHIBIT 10.4
iOWN HOLDINGS, INC.
FIFTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
This Fifth Amended and Restated Investor Rights Agreement (this
"Agreement") is made effective as of November 30, 1999 (the "Effective Date"),
by and among iOwn Holdings, Inc., a Delaware corporation (the "Company"), and
the persons listed on the Schedule of Investors attached hereto as Exhibit A
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(collectively the "Investors" and individually an "Investor").
RECITALS
A. Certain of the Investors (the "Existing Investors") hold shares
of the Company's Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and/or Series D Preferred Stock and possess registration rights,
information rights and other rights pursuant to a Fourth Amended and Restated
Investor Rights Agreement dated as of April 28, 1999, by the Company and such
Existing Investors (the "Prior Agreement"). The Prior Agreement was entered into
between the Existing Investors and iOwn, Inc., a California corporation which
subsequently became a wholly-owned subsidiary of the Company pursuant to a
reorganization and merger dated as of September 10, 1999. In connection with
that reorganization and merger, all agreements of iOwn, Inc. were assumed by the
Company.
B. The Existing Investors are holders of more than 50% of the
"Registrable Securities" of the Company (as defined in the Prior Agreement) and
desire to terminate the Prior Agreement and to accept the rights created
pursuant hereto in lieu of the rights granted to them under the Prior Agreement.
C. Certain of the Investors are parties to the Series E Preferred
Stock Purchase Agreement of even date herewith by and between the Company and
such Investors (the "Purchase Agreement"), pursuant to which certain of the
Company's and such Investors' obligations are conditioned upon the execution and
delivery of this Agreement.
In consideration of the mutual promises and covenants set forth
herein, the Existing Investors hereby agree that the Prior Agreement shall be
terminated and superseded and replaced in its entirety by this Agreement, and
the parties hereto further agree as follows:
SECTION 1
Definitions
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As used in this Agreement, the following terms shall have the following
respective meanings:
1.1 "Affiliate" shall mean, with respect to any specified Person (as
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defined below), any other Person which, directly or indirectly, controls, is
under common control with, or is owned or controlled by, such specified Person.
For purposes of this Agreement, (i) "control" shall mean, with respect to any
specified Person, either (x) the beneficial ownership of 10% or
more of any class of equity securities or (y) the power to direct the management
or policies of the specified Person through the ownership of voting securities,
by contract, voting agreement or otherwise, (ii) the terms "controlling",
"control with" and "controlled by", etc. shall have meanings correlative to the
foregoing and (iii) the officers, directors and 10% shareholders of the Company
shall be deemed to be Affiliates of the Company.
1.2 "Ancillary Agreements" shall mean this Agreement, the Fifth Amended
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and Restated Voting Agreement of even date herewith by and among the Company,
Xxxxxx X. Xxxx and the holders of the Preferred, and the Fifth Amended and
Restated Right of First Refusal and Co-Sale Agreement of even date herewith, by
and among the Company, Xxxxxx X. Xxxx, and the holders of the Preferred.
1.3 "Certificate Of Incorporation" shall mean the Company's Second Amended
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and Restated Certificate of Incorporation.
1.4 "Commission" shall mean the Securities and Exchange Commission of the
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United States or any other U.S. federal agency at the time administering the
Securities Act.
1.5 "Common Stock" shall mean shares of the Company's Common Stock.
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1.6 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
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amended.
1.7 "Holder" shall mean each of the Investors (and their transferees as
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permitted by Section 4.10) holding Registrable Securities or securities
convertible into Registrable Securities.
1.8 "Initial Public Offering" shall mean the initial offering to the
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public of the Company's securities pursuant to a firm underwriting commitment
pursuant to the Securities Act.
1.9 "Initiating Holders" shall mean Holders who in the aggregate hold
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greater than fifty percent (50%) of the Preferred.
1.10 "Other Holders" shall mean holders of Company securities, other than
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the Holders, proposing to distribute their securities pursuant to a registration
under Section 4 of this Agreement.
1.11 "Person" shall mean any individual, corporation, general or limited
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partnership, joint venture, association, limited liability company, joint stock
company, trust, business trust, bank, trust company, estate (including any
beneficiaries thereof), unincorporated organization, cooperative, association or
government or branch, agency or political subdivision thereof.
1.12 "Qualified IPO" shall mean the Initial Public Offering of the
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Company's stock which results in aggregate proceeds to the Company of not less
than $30,000,000.
1.13 "Preferred" shall mean shares of the Company's Series A, Series A-1,
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Series B, Series B-1, Series C, Series C-1, Series D, Series D-1, Series DD,
Series DD-1, Series E, Series E-1, Series EE and Series EE-1 Preferred Stock
respectfully.
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1.14 "Registrable Securities" shall mean Common Stock issued or issuable
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on conversion of the Preferred and any shares of Common Stock issued or issuable
in respect of such Common Stock upon any stock split, stock dividend,
recapitalization or similar event. Shares of Common Stock or other securities
shall only be treated as Registrable Securities if they have not been sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction.
1.15 The terms "register," "registered" and "registration" refer to a
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registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
1.16 "Registration Expenses" shall mean all expenses, except as otherwise
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stated below, incurred by the Company in complying with Sections 4.1, 4.2, and
4.3 hereof, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and disbursements of counsel
for the Company, reasonable fees and disbursements not to exceed twenty thousand
dollars ($20,000) of a single special counsel for the Holders, blue sky fees and
expenses and the expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular employees of the
Company which shall be paid in any event by the Company), but will not include
Selling Expenses.
1.17 "SBIC" shall mean a Small Business Investment Company regulated
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pursuant to Section 121.301(c)(1) of Title 13 of the Code of Federal
Regulations.
1.18 "SBIC Holder" shall mean any Investor who is an SBIC.
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1.19 "Securities" shall mean Common Stock or Preferred.
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1.20 "Securities Act" shall mean the Securities Act of 1933, as amended,
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or any similar United States federal statute and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
1.21 "Selling Expenses" shall mean all underwriting discounts, selling
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commissions and stock transfer taxes applicable to the securities registered by
the Holders.
SECTION 2
Information Rights
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2.1 Financial Information.
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(a) The Company will provide each Investor the following reports for
so long as such Investor is a holder of a minimum of One Million Five Hundred
Thousand (1,500,000) shares of Registrable Securities, or a minimum of Five
Hundred Thousand (500,000) shares in the case of holders of Series E Preferred
Stock, including for purposes of this Section 2 any such shares which have been
transferred to a constituent partner or Affiliate of an Investor:
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(i) As soon as practicable after the end of each fiscal year,
and in any event within ninety (90) days thereafter, consolidated balance sheets
of the Company and its subsidiaries, if any, as of the end of such fiscal year,
and consolidated statements of income, shareholders' equity and cash flows of
the Company and its subsidiaries, if any, for such year, prepared in accordance
with generally accepted accounting principles and setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail and audited (without qualification as to scope) by independent auditors
selected by the Company.
(ii) As soon as practicable after the end of each fiscal
quarter, and in any event within forty-five (45) days thereafter, a consolidated
balance sheet of the Company and its subsidiaries, if any, as of the end of each
such period, consolidated statements of income, consolidated statements of
changes in financial condition, a consolidated statement of cash flow of the
Company and its subsidiaries and a statement of shareholders' equity for such
period and for the current fiscal year to date, and setting forth in each case
in comparative form the figures for corresponding periods in the previous fiscal
year, and setting forth in comparative form the budgeted figures, prepared in
accordance with generally accepted accounting principles (other than for
accompanying notes), subject to changes resulting from year-end audit
adjustments, all in reasonable detail and signed by the principal financial or
accounting officer of the Company.
(iii) As soon as practicable after the end of each month and in
any event within thirty (30) days thereafter, a consolidated balance sheet of
the Company and its subsidiaries, if any as of the end of each such period,
consolidated statements of income, consolidated statements of changes in
financial condition, a consolidated statement of cash flow of the Company and
its subsidiaries and a statement of shareholders' equity for such period and for
the current fiscal year to date, and setting forth in each case in comparative
form the figures for corresponding periods in the previous fiscal year, and
setting forth in comparative form the budgeted figures, prepared in accordance
with generally accepted accounting principles (other than for accompanying
notes), subject to changes resulting from year-end audit adjustments, all in
reasonable detail and signed by the principal financial or accounting officer of
the Company.
(iv) As soon as practicable after its adoption by the Board of
Directors and in any event within thirty (30) days prior to the commencement of
a new fiscal year, a copy of the annual operating plan and budget of the Company
for the next fiscal year.
2.2 Inspection. The Company shall permit each Investor, at its expense,
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to visit and inspect the Company's properties, to examine its books of account
and records and to discuss the Company's affairs, finances and accounts with its
officers, all at such reasonable times as may be requested by the Investor upon
reasonable notice; provided, however, that the Company shall not be obligated
pursuant to this Section 2.2 to provide access to any information which it
reasonably considers to be a trade secret or similar confidential information.
2.3 Assignment of Rights. The rights granted pursuant to Section 2.1 may
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be assigned or otherwise conveyed by an Investor to a constituent partner or
Affiliate of an Investor or to a transferee who acquires (i) at least One
Million Five Hundred Thousand (1,500,000) shares of Preferred, or (ii) all
shares of Preferred held by such transferor. Notwithstanding the foregoing, the
rights granted pursuant to Section 2.1 may not be assigned or otherwise conveyed
to a competitor of the Company, as reasonably determined by the Board of
Directors of the Company excluding any director with an interest in such
transferee. The Investor shall provide the Company with written notice of any
assignment or conveyance of the rights granted pursuant to Section 2.1.
2.4 Termination. The provisions of Sections 2, 3 and 5, including
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information rights, rights of first refusal and miscellaneous covenants, shall
terminate upon the closing of a Qualified IPO of the Company in which, prior to
or in connection therewith, all shares of outstanding Preferred are converted
into Common Stock and the provisions of Section 3 shall not be applicable to
such transaction.
SECTION 3
Rights of First Refusal
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3.1 Rights of First Refusal on New Securities. The Company hereby grants
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to each Investor, for so long as the Investor is a holder of a minimum of One
Hundred Thousand (100,000) shares of Registrable Securities, the right of first
refusal to purchase such Investor's pro rata portion of New Securities (as
defined in Section 3.1(a)) that the Company may, from time to time, propose to
sell and issue. Such Investor's pro rata portion, for purposes of this right of
first refusal, is the ratio of the number of shares of Common Stock of such
Investor issued or issuable upon conversion of Preferred held by such Investor
over the total number of shares of Common Stock outstanding at the time of
issuance of such New Securities (including Common Stock issuable upon conversion
of all outstanding securities convertible into Common Stock, including the
Preferred); provided, however, that with respect to any Investor that is an SBIC
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Holder or a Regulated Entity (as defined below), the pro rata portion of New
Securities shall be the smaller of (i) the pro rata portion set forth above in
this Section 3.1 and (ii) the number of shares of New Securities such SBIC
Holder or Regulated Entity determines in its sole discretion that it may
purchase without triggering a Regulatory Violation (as defined in the Purchase
Agreement) or a violation of the Bank Holding Company Act of 1956, as amended
(the "BHC Act"). "Regulated Entity" shall mean (i) any entity that is a "bank
holding company" as defined in Section 2(a) of the BHC Act or any non-bank
subsidiary of such an entity and (ii) any entity, that pursuant to Section 8(a)
of the International Banking Act of 1978, as amended, is subject to the
provisions of the BHC Act or any non-bank subsidiary of such an entity. This
right of first refusal on New Securities shall be subject to the following
provisions:
(a) "New Securities" shall mean any Common Stock of the Company,
whether now authorized or not, and any rights, options, or warrants to purchase
said Common Stock, and securities of any type whatsoever that are, or may
become, convertible into Common Stock; provided, however, that New Securities
does not include (i) shares of Common Stock or Preferred Stock issued upon
conversion of the Preferred Stock; (ii) securities issued pursuant to the
acquisition of another corporation by the Company by merger, purchase of
substantially all of the assets, or other reorganization; (iii) shares of the
Company's Common Stock (or related options) issued to employees, officers,
directors, consultants, or other persons performing services for the Company
(including, but not by way of limitation, distributors and sales
representatives) pursuant to any stock offering, plan, or arrangement approved
by the Board of
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Directors; (iv) securities issued to financial institutions in connection with
the extension of credit to the Company or in connection with the lease of
equipment and in both cases for other than equity financing purposes; (v)
securities issued in connection with participation in a strategic alliance or
other corporate partner transaction with the Company for purposes which are not
primarily equity financing, as determined in good faith by the Company's Board
of Directors; (vi) shares of the Company's Common Stock issued in connection
with any stock split, stock dividend, or recapitalization by the Company; or
(vii) up to Eleven Million Six Hundred and Sixty Six Thousand Six Hundred and
Sixty Seven (11,666,667) shares of Series E Preferred Stock issued after the
Effective Date as contemplated by Section 2.3 of the Purchase Agreement.
(b) In the event that the Company proposes to issue New Securities,
it shall give each Investor at least thirty (30) days prior written notice of
its intention, describing the type of New Securities, the price, and the general
terms upon which the Company proposes to issue the same. Each Investor shall
have twenty (20) days from the date of mailing of any such notice to agree to
purchase its pro rata share of such New Securities for the price and upon the
general terms specified in the notice by giving written notice to the Company
and stating therein the quantity of New Securities to be purchased.
(c) In the event that an Investor fails to exercise in full the right
of first refusal within said twenty (20) day period, the Company shall have
seventy-five (75) days thereafter to sell (or enter into an agreement pursuant
to which the sale of New Securities covered thereby shall be closed, if at all,
within thirty (30) days from the date of said agreement) the New Securities
respecting which the Investor's rights were not exercised, at a price and upon
general terms no more favorable to the purchasers thereof than specified in the
Company's notice. In the event the Company has not sold the New Securities
within said seventy-five (75) day period (or sold and issued New Securities in
accordance with the foregoing within thirty (30) days from the date of said
agreement), the Company shall not thereafter issue or sell any New Securities,
without first offering such securities to the Investors in the manner provided
above.
(d) Any Investor's failure to exercise this right of first refusal on
any issuance of New Securities shall not adversely affect such Investor's right,
or any other Investor's right, of first refusal to purchase subsequent issuances
of New Securities, but may trigger the special mandatory conversion as described
in Article IV, Section 7 of the Company's Certificate of Incorporation.
(e) The right of first refusal set forth in this Section 3.1 is
nonassignable except to a constituent partner or Affiliate of an Investor or to
a transferee who acquires at least One Million Five Hundred Thousand (1,500,000)
shares of Preferred. Notwithstanding the foregoing, the rights granted pursuant
to this Section 3.1 may not be assigned or otherwise conveyed to a competitor of
the Company, as reasonably determined by the Board of Directors of the Company
excluding any director with an interest in such transferee. The Investor shall
provide the Company with written notice of any assignment or conveyance of the
rights granted pursuant to Section 3.1.
3.2 Waiver. Pursuant to Section 7.2 below, the Existing Investors,
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constituting greater than 50% of the "Investors" as defined in the Prior
Agreement, hereby waive the right of
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first refusal for all Existing Investors with respect to the Series E Preferred
Stock issued or to be issued pursuant to the Purchase Agreement (or a similar
stock purchase agreement entered into as contemplated by Section 2.3 of the
Purchase Agreement), including the right to receive at least thirty (30) days'
prior written notice thereof, as set forth in Section 3.1 of the Prior
Agreement.
3.3 Rights of First Refusal on Series E Preferred Stock. The holders of
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Series E Preferred Stock (each a "Series E Holder") hereby grants to each other
holder of Series E Preferred Stock, for so long as such Series E Holder is a
holder of a minimum of One Hundred Thousand (100,000) shares of Series E
Preferred Stock, the right of first refusal to purchase such Series E Holder's
pro rata portion of Series E Preferred Stock that any Series E Holder (the
"Selling Series E Holder") may, from time to time, propose to sell. Such Series
E Holder's pro rata portion, for purposes of this right of first refusal, is the
ratio of (a) the number of shares of Series E Preferred Stock held by such
Investor over (b) the total number of shares of Series E Preferred Stock
outstanding at the time of issuance of such proposed sale of Series E Preferred
Stock less the number of Series E Preferred Stock such Selling Series E Holder
proposes to sell. This right of first refusal on Series E Preferred Stock shall
be subject to the following provisions:
(a) In the event that a Series E Holder proposes to sell Series E
Preferred Stock, it shall give each other Series E Holder at least thirty (30)
days prior written notice of its intention, describing the price, and the
general terms upon which the Series E Holder proposes to sell the same. Each
other Series E Holder shall have twenty (20) days from the date of mailing of
any such notice to agree to purchase its pro rata share of such Series E
Preferred Stock for the price and upon the general terms specified in the notice
by giving written notice to the Selling Series E Holder and stating therein the
quantity of Series E Preferred Stock to be purchased.
(c) In the event that a Series E Holder fails to exercise in full the
right of first refusal within said twenty (20) day period, the Selling Series E
Holder shall have seventy-five (75) days thereafter to sell (or enter into an
agreement pursuant to which the sale of Series E Preferred Stock covered thereby
shall be closed, if at all, within thirty (30) days from the date of said
agreement) the Series E Preferred Stock respecting which the Series E Holders'
rights were not exercised, at a price and upon general terms no more favorable
to the purchasers thereof than specified in the notice. In the event the Selling
Series E Holder has not sold the Series E Preferred Stock within said seventy-
five (75) day period (or sold the Series E Preferred Stock in accordance with
the foregoing within thirty (30) days from the date of said agreement), the
Company shall not thereafter sell any Series E Preferred Stock, without first
offering such securities to the Series E Holders in the manner provided above.
(d) Any Series E Holder's failure to exercise this right of first
refusal on any sale of Series E Preferred Stock shall not adversely affect such
Series E Holder's right, or any other Series E Holder's right, of first refusal
to purchase in connection with subsequent sales of Series E Preferred Stock.
(e) The right of first refusal set forth in this Section 3.3 is
nonassignable except to a constituent partner or Affiliate of a Series E Holder
or to a transferee who acquires all such holder's Series E Preferred Stock.
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3.4 Termination. The provisions of this Section 3 shall terminate in
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accordance with the provisions of Section 2.4.
SECTION 4
Registration Rights
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4.1 Requested Registration.
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(a) Request for Registration. In case the Company shall receive from
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Initiating Holders a written request that the Company effect any registration,
qualification, or compliance with respect to not less than fifty percent (50%)
of the Registrable Securities (or such lesser percentage of the Registrable
Securities if the reasonably anticipated aggregate price to the public thereof
would constitute a Qualified IPO) the Company will:
(i) promptly give written notice of the proposed registration,
qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts to effect such
registration, qualification or compliance (including, without limitation,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act and any other governmental requirements or regulations) as may be
so requested and as would permit or facilitate the sale and distribution of all
or such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request received
by the Company within twenty (20) days after receipt of such written notice from
the Company;
provided, however, that the Company shall not be obligated to
take any action to effect any such registration, qualification or compliance
pursuant to this Section 4.1:
(A) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(B) Prior to one hundred eighty (180) days after the
effective date of the Company's Initial Public Offering of its stock or, if
within thirty (30) days of receipt of a request for registration, the Company
delivers written notice to the holders of Registrable Securities of its
intention to file a registration statement for an Initial Public Offering within
ninety (90) days;
(C) During the period starting with the date sixty (60)
days prior to the Company's estimated date of filing of, and ending on the date
six (6) months immediately following the effective date of, any registration
statement pertaining to securities of the Company sold by the Company (other
than a registration of securities in a Rule 145 transaction or with respect to
an employee benefit plan), provided that the Company is actively
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employing in good faith all reasonable efforts to cause such registration
statement to become effective;
(D) After the Company has effected two (2) registrations
pursuant to this Section 4.1 and such registrations have been declared or
ordered effective, provided that all Registrable Securities requested to be
included in such registrations were in fact included in the registration;
(E) If the Company shall furnish to such Holders a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its shareholders for a registration statement to be filed in the
near future, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 4 shall be deferred for a period not to
exceed ninety (90) days from the date of receipt of written request from the
Initiating Holders, provided, however, that the Company shall not utilize this
right more than once in any twelve (12) month period; or
Subject to the foregoing clauses (A) through (E), the
Company shall file a registration statement covering the Registrable Securities
so requested by the Initiating Holders to be registered as soon as practicable,
after receipt of the request or requests of the Initiating Holders.
(b) Underwriting. In the event that a registration pursuant to
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Section 4.1 is for a registered public offering involving an underwriting, the
Initiating Holders will so advise the Company as part of the written request
given by such Initiating Holders pursuant to Section 4.1(a), and the Company
shall in turn advise the Holders as part of the notice given pursuant to Section
4.l(a)(i). In such event, the right of any Holder to registration pursuant to
Section 4.1 shall be conditioned upon such Holder's participation in the
underwriting arrangements required by this Section 4.1, and the inclusion of
such Holder's Registrable Securities in the underwriting to the extent requested
shall be limited to the extent provided herein.
The Company shall (together with all Holders proposing to distribute
their securities through such underwriting and the Other Holders) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by the Company, but subject to the reasonable approval of
a majority in interest of the Initiating Holders. Notwithstanding any other
provision of this Section 4.1, if the managing underwriter advises the
Initiating Holders in writing that marketing factors require a limitation of the
number of shares to be underwritten, then the Company shall so advise all
Holders and Other Holders, and the number of shares that may be included in the
registration and underwriting shall be allocated first among all Holders in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by such Holders at the time of filing the registration statement
and, following such allocation, second, among the Other Holders in proportion to
the number of shares proposed to be included in such registration by such Other
Holders. No Registrable Securities or other securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration. To facilitate the allocation of shares
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in accordance with the above provisions, the Company or the underwriters may
round the number of shares allocated to any holder to the nearest one hundred
(100) shares.
If any Holder of Registrable Securities or Other Holder disapproves of
the terms of the underwriting, such person may elect to withdraw therefrom by
written notice to the Company, the managing underwriter and the Initiating
Holders. The Registrable Securities and/or other securities so withdrawn shall
also be withdrawn from registration.
4.2 Company Registration.
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(a) Notice of Registration. If at any time or from time to time the
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Company shall determine to register any of its securities, either for its own
account or the account of a security holder or holders, other than (i) a
registration relating solely to employee benefit plans or (ii) a registration
relating solely to a Commission Rule 145 transaction, the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance) and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests made, within twenty (20) days after receipt of such written notice
from the Company, by any Holder. A Holder may register Registrable Securities
under this Section 4.2 each and every time the Company shall determine to
register any of its securities.
(b) Underwriting. If the registration of which the Company gives
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notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 4.2(a)(i). In such event the right of any Holder to
registration pursuant to Section 4.2 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall, together with the
Company and the Other Holders, enter into an underwriting agreement in customary
form with the managing underwriter selected for such underwriting by the
Company. Notwithstanding any other provision of this Section 4.2, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the managing underwriter may limit the
number of shares of Registrable Securities to be included in such registration
without requiring any limitation in the number of shares to be registered on
behalf of the Company. The Company shall so advise all Holders and Other Holders
and the number of shares that may be included in the registration and
underwriting by all Holders and Other Holders shall be allocated among them, as
nearly as practicable, first, to the Company (or, if applicable, to the holders
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for whose account the Company is registering the securities), second, among the
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Holders of Registrable Securities in proportion to the respective amounts of
Registrable Securities held by such Holders at the time of filing of the
registration statement and, third, among the Other Holders in proportion to the
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number of shares proposed to be included in such registration by such
OtherHolders. No such reduction shall reduce the amount of securities of the
Holders included in the registration below twenty-five percent (25%) of the
total amount of securities included in such registration, unless such offering
is the
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Company's initial public offering and such registration does not include shares
of any other selling shareholders, in which event any or all of the Registrable
Securities of the Holders may be excluded in accordance with the immediately
preceding sentence. To facilitate the allocation of shares in accordance with
the above provisions, the Company may round the number of shares allocated to
any Holder or Other Holder to the nearest one hundred (100) shares. If any
Holder or Other Holder disapproves of the terms of any such underwriting, such
holder may elect to withdraw therefrom by written notice to the Company and the
managing underwriter. Any securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
(c) Right to Terminate Registration. The Company shall have the
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right to terminate or withdraw any registration initiated by it under this
Section 4.2 prior to the effectiveness of such registration whether or not any
Holder has elected to include Registrable Securities in such registration.
4.3 Registration on Form S-3.
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(a) Request for Registration. After consummation of its Initial
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Public Offering, the Company shall use its best efforts to qualify for
registration on Form S-3 if any Holder or Holders request that the Company file
a registration statement on Form S-3 (or any successor form to Form S-3) for a
public offering of shares of the Registrable Securities the reasonably
anticipated aggregate price to the public of which would exceed $750,000, and
the Company is a registrant entitled to use Form S-3 to register the Registrable
Securities for such an offering. The Company shall use its best efforts to cause
such Registrable Securities to be registered for the offering on such form and
to cause such Registrable Securities to be qualified in such jurisdictions as
the Holder or Holders may reasonably request. The substantive provisions of
Section 4.1(b) shall be applicable to each registration initiated under this
Section 4.3.
(b) Limitations. Notwithstanding the foregoing, the Company shall
-----------
not be obligated to take any action pursuant to this Section 4.3: (i) in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities Act; (ii) for
a period of one-hundred-twenty (120) days after receipt of the request of the
initiating Holders, if the Company, within ten (10) days after such receipt
gives notice of its bona fide intention to effect the filing of a registration
statement with the Commission within ninety (90) days of receipt of such request
(other than with respect to a registration statement relating to a Rule 145
transaction, an offering solely to employees or any other registration which is
not appropriate for the registration of Registrable Securities) and the Company
shall promptly notify the initiating Holders in the event it abandons its
intention to effect such registration statement; (iii) during the period
starting with the date sixty (60) days prior to the Company's estimated date of
filing of; and ending on the date six (6) months immediately following, the
effective date of any registration statement pertaining to securities of the
Company (other than a registration of securities in a Rule 145 transaction or
with respect to an employee benefit plan), provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
-11-
statement to become effective; (iv) after the Company has effected three (3)
registrations pursuant to this paragraph 4.3, and such registrations have been
declared or ordered effective, provided that all Registrable Securities
requested to be included in each such registration were in fact included in the
registration; or (v) if the Company shall furnish to such Holder a certificate
signed by the President of the Company stating that in the good faith judgment
of the Board of Directors it would be seriously detrimental to the Company or
the Investors as a whole for registration statements to be filed in the near
future, then the Company's obligation to use its best efforts to file a
registration statement shall be deferred for a period not to exceed ninety (90)
days from the receipt of the request to file such registration by such Holder,
provided, however, that the Company shall not utilize this right more than once
in any twelve (12) month period.
4.4 Limitations on Subsequent Registration Rights. From and after the
---------------------------------------------
date hereof, the Company will not, without the prior written consent of holders
of a majority of the voting power of the then outstanding Registrable
Securities, enter into any agreement with any holder or prospective holder of
any securities of the Company which allows such holder or prospective holder of
any securities of the Company to include such securities in any registration
filed under Sections 4.1, 4.2 or 4.3 hereof, unless, under the terms of such
agreement, such holder or prospective holder may include such securities in any
such registration only to the extent that the inclusion of his securities will
not diminish the amount of Registrable Securities which are included.
4.5 Expenses of Registration.
------------------------
(a) Registration Expenses. The Company shall bear all Registration
---------------------
Expenses incurred in connection with all registrations pursuant to Section 4.1,
Section 4.2 and Section 4.3.
(b) Selling Expenses. Unless otherwise stated in Section 4.5(a), all
----------------
Selling Expenses and Registration Expenses relating to securities registered on
behalf of the Holders shall be borne by the Holders pro rata on the basis of the
number of shares so registered.
4.6 Registration Procedures. In the case of each registration,
-----------------------
qualification or compliance effected by the Company pursuant to this Agreement,
the Company will:
(a) keep each Holder advised in writing as to the initiation of each
registration, qualification and compliance and as to the completion thereof;
(b) as soon as practicable, prepare and file with the Commission a
registration statement with respect to such securities and use its best efforts
to cause such registration statement to become and remain effective until the
earlier of (i) one hundred twenty (120) days or (ii) the distribution described
in the Registration Statement has been completed; provided, however, that (i)
such 120-day period shall be extended for a period of time equal to the period
the Holder refrains from selling any securities included in such registration at
the request of an underwriter of Common Stock (or other securities) of the
Company; and (ii) in the case of any registration of Registrable Securities on
Form S-3 which are intended to be offered on a continuous or delayed basis, such
120-day period shall be extended, if necessary, to keep the registration
statement effective until all such Registrable Securities are sold, provided
that
-12-
Rule 415, or any successor rule under the Securities Act, permits an offering on
a continuous or delayed basis, and, provided further, that applicable rules
under the Securities Act governing the obligation to file a post-effective
amendment permit, in lieu of filing a post-effective amendment which (I)
includes any prospectus required by Section l0(a)(3) of the Securities Act or
(II) reflects facts or events representing a material or fundamental change in
the information set forth in the registration statement, the incorporation by
reference of information required to be included in (I) and (II) above to be
contained in periodic reports filed pursuant to Section 13 or 15(d) of the
Exchange Act in the registration statement;
(c) furnish to the Holders participating in such registration and to
the underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities;
(d) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(e) in the event of an underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement;
(f) notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of material fact or omits to state
a material fact required to be stated therein or necessary to make the
statements made therein not misleading in the light of the circumstances then
existing; and
(g) provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
4.7 Indemnification.
---------------
(a) By Company. The Company will indemnify each Holder, each of its
----------
officers and directors, partners and affiliates, and each person controlling
such Holder within the meaning of Section 15 of the Securities Act, with respect
to which registration, qualification or compliance has been effected pursuant to
this Agreement, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act and each
Investor and its officers, directors, partners and affiliates and each person
controlling such Investor within the meaning of Section 15 of the Securities
Act, against all expenses, claims, losses, damages or liabilities, joint or
several, (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or
-13-
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by the Company of the
Securities Act, the Exchange Act or any state or federal securities law, or any
rule or regulation promulgated under such Acts or law applicable to the Company
in connection with any such registration, qualification or compliance, and the
Company will reimburse each such Holder, each of its officers, directors,
partners and affiliates, and each person controlling such Holder, each such
underwriter and each person who controls any such underwriter, each Investor,
each of its officers, directors, partners and affiliates and each person
controlling such Investor, for any legal and any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder, controlling person, underwriter or Investor and
stated to be specifically for use therein. If the Holders and Investors are
represented by counsel other than counsel for the Company, the Company will not
be obligated under this Section 4.7(a) to reimburse legal fees and expenses of
more than one separate counsel for all Holders and Investors.
(b) By Holders. Each Holder will, if Registrable Securities held by
----------
such Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors, each of its officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers and directors
and each person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company, such Holders, such directors, officers, persons, underwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder and
stated to be specifically for use therein. Notwithstanding the foregoing, the
liability of each Holder under this subsection (b) shall be limited in an amount
equal to the public offering price of the shares sold by such Holder, unless
such liability arises out of or is based on willful misconduct by such Holder.
-14-
(c) Procedures. Each party entitled to indemnification under this
----------
Section 4.7 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement unless the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action and provided further, that the Indemnifying Party shall not
assume the defense for matters as to which there is a conflict of interest or
separate and different defenses. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation.
(d) Contribution. If the indemnification provided for in this
------------
Section 4.7 is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage, or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Controlling Agreement. Notwithstanding the foregoing, to the
---------------------
extent that the provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with the underwritten public
offering are in conflict with the foregoing provisions of this Section 4.7, the
provisions in the underwriting agreement shall control.
4.8 Information by Holder. The Holder or Holders of Registrable
---------------------
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by them as the Company may request in writing
and only as shall be necessary to enable the Company to comply with the
provisions hereof in connection with any registration, qualification or
compliance referred to in this Agreement.
-15-
4.9 Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission which may at any time permit the
sale of the Registrable Securities to the public without registration, after
such time as a public market exists for the Common Stock of the Company, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Exchange 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 Exchange Act (at any time after it has become subject to
such reporting requirements);
(c) Furnish to any Holder forthwith upon request a written statement
by the Company as to its compliance with the reporting requirements of Rule 144
(at any time after 90 days after the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
of the Company and other information in the possession of or reasonably
obtainable 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 such securities without registration.
4.10 Transfer of Registration Rights.
-------------------------------
(i) The rights to cause the Company to register securities granted Holders
under Sections 4.1, 4.2 and 4.3 may be assigned in connection with any transfer
or assignment by a Holder of Registrable Securities to (a) any partner or
retired partner of any Holder which is a partnership, (b) any Affiliate of any
Holder, (c) any family member or trust for the benefit of any individual Holder,
or (d) any transferee who acquired more than One Million Five Hundred Thousand
(1,500,000) shares of Registrable Securities, provided that: (i) such transfer
may otherwise be effected in accordance with applicable securities laws, (ii)
such transfer is effected in compliance with the restrictions on transfer
contained in this Agreement and in any other agreement between the Company and
the Holder and (iii) the Company receives written notice of such transfer or
assignment. No transfer or assignment will divest a Holder or any subsequent
owner of such rights and powers unless all Registrable Shares are transferred or
assigned.
(ii) Notwithstanding anything to the contrary in this Agreement, The Times
Mirror Company ("Times Mirror"), any affiliates of Times Mirror, any operating
unit of Times Mirror, Eagle New Media Investments, LLC, Liberty Xxxx I and TMCT
Ventures, L.P. (each, a "Times Mirror Entity") may transfer or otherwise convey
to any other Times Mirror Entity any capital stock or securities of the Company
held by such Times Mirror Entity and any such party's rights under this
Agreement and the related agreements without obtaining the signature, consent or
permission of the Company or any Investor, so long as such Time Mirror Entity
receiving such capital stock or securities of the Company is or becomes a
signatory to the this Agreement and
-16-
the Ancillary Agreements. Upon a transfer or assignment meeting the above
conditions, the Company and the Investors will be automatically deemed to have
approved such transfers and waive all rights of first refusal, co-sale or
participation, if any, and all rights to notice, if any, in connection with such
assignment or transfer.
4.11 Termination. The rights granted pursuant to this Section 4 shall
-----------
terminate as to any Holder at the later of (i) five (5) years after a Qualified
IPO or (ii) after the effective date of the Company's first registered public
offering of its stock, at such time as such Holder may sell under Rule 144, or a
successor rule, in a three (3) month period all Registrable Securities then held
by such Holder.
4.12 Lockup Agreement. Each Holder agrees that, if, in connection with
----------------
the Initial Public Offering of the Company's securities, the Company or the
underwriters managing the offering so request, the Holder shall not sell, make
any short sale of, loan, grant any option for the purchase of or otherwise
dispose of any Registrable Securities (other than those included in the
registration) without the prior written consent of the Company or such
underwriters as the case may be, for such period of time (not to exceed one
hundred eighty (180) days) from the effective date of such registration as may
be requested by the Company or the underwriters; provided that each officer and
director of the Company who owns stock of the Company and other holders of at
least 5% of the Company's voting securities also agrees to such restrictions.
This Section 4.12 shall be binding on all transferees or assignees of
Registrable Securities, whether or not such persons are entitled to registration
rights pursuant to Section 4.10.
SECTION 5
Miscellaneous Covenants
-----------------------
5.1 Proprietary Information Agreement. Unless otherwise determined by
---------------------------------
Board of Directors, the Company shall require all future officers, directors and
employees of, and consultants to, the Company and its subsidiaries, if any, to
execute a proprietary information agreement providing for the protection of the
Company's proprietary or confidential information and the assignment of
intellectual property rights to the Company.
5.2 Stock Vesting. The Company shall cause all future recipients of the
-------------
Company's Common Stock or options to purchase the Company's Common Stock
receiving such securities in connection with the performance of services for the
Company to execute and deliver agreements providing that such Common Stock shall
be subject to a right of the Company to repurchase such Common Stock at the
original purchase price in the event that the relationship of such person with
the Company is terminated, which right shall lapse over a four-year period, or
providing that such options shall become exercisable over a four-year period
based upon continuing employment, or providing such other vesting arrangements
as determined appropriate by the Company's Board of Directors.
5.3 Arbitration Agreements. The Company shall use commercially reasonable
----------------------
efforts to cause each present and future Company shareholder to execute, within
thirty (30) days
-17-
following the later of (a) the Effective Date and (b) the date upon which such
shareholder first acquires shares of the Company's capital stock, a "shareholder
dispute agreement" for the purpose of prohibiting such shareholder from filing a
claim with a federal or state court for any dispute it may have against the
Company that arises in such shareholder's capacity as a Company shareholder,
providing, instead, that the shareholder shall submit such claim to legally
binding arbitration.
5.4 Key Person Life Insurance. The Company shall maintain Key Person Life
-------------------------
Insurance for Xxxxxx X. Xxxx in such amounts and on such terms and conditions as
the Company's Board of Directors may agree. The Company agrees that it shall not
assign any such insurance benefit to any third party.
5.5 Use of Proceeds. The Company shall use the proceeds of the sale of
---------------
its Series E Preferred Stock in the ordinary course of business as determined by
the Company's officers or the Board of Directors and within one year from the
initial close of the sale of its Series D Preferred Stock shall not become a
"relender" or "reinvestor" as defined in Section 107.720 of Title 13 of the Code
of Federal Regulations without giving notice to each SBIC Holder as soon as
practicable after the Company contemplates taking any action which would cause
it to be a "relender" or "reinvestor".
5.6 SBIC Regulatory Provisions.
---------------------------
(a) At any time the Company has fifty (50) or more record holders of
the Company's voting stock, the Company shall notify each SBIC Holder as soon as
practicable (and, in any event, not later than fifteen (15) days) prior to
taking any action, which action would have the effect of rendering any SBIC
Holder (collectively with its Affiliates) the record holder of twenty percent
(20%) of more of the Company's voting stock. Further, the Company shall notify
each SBIC Holder of any other action or occurrence after which any SBIC Holder
(collectively with its Affiliates) would own of record twenty percent (20%) or
more of the Company's voting stock), as soon as practicable after the Company
becomes aware that such other action or occurrence has occurred or is proposed
to occur. Upon the occurrence of any such event or transaction wherein any SBIC
Holder (collectively with its Affiliates) would own of record twenty percent
(20%) or more of the Company's voting stock, the Company shall as soon as is
practicable facilitate a plan of divestiture with each SBIC Holder set forth in
subsection (c) below.
(b) Within seventy-five (75) days after the Closing Date, the Company
shall deliver to each SBIC Holder a written statement certified by the Company's
president or chief financial officer describing in reasonable detail the use of
the proceeds of the sale of Shares hereunder by the Company. In addition to any
other rights granted hereunder, the Company shall grant each SBIC Holder and the
United States Small Business Administration (the "SBA") reasonable access to the
Company's records for the purpose of verifying the use of such proceeds, so long
as any SBIC Holder and the SBA give the Company at least thirty (30) days prior
written notice of seeking such access to the Company's records.
-18-
(c) Upon the occurrence of a Regulatory Violation (as defined below)
or in the event that any SBIC Holder determines in its reasonable good faith
judgment that a Regulatory Violation has occurred, in addition to any other
rights and remedies to which it may be entitled as a holder of Preferred Stock
(whether under this Agreement, the Certificate of Incorporation or otherwise),
such SBIC Holder shall have, at its option, the following rights: (i) if such
Regulatory Violation occurs prior to the Initial Public Offering held by the
Company, then that number of shares of Series D Preferred Stock held by the SBIC
Holder which such SBIC Holder must divest itself of in order to cure a
Regulatory Violation (as reasonably determined by such SBIC Holder) shall be
converted to non-voting stock pursuant to the Company's Certificate of
Incorporation then in effect; and (ii) if such Regulatory Violation occurs after
the Initial Public Offering by the Company, the Company will use best efforts to
assist the SBIC Holder in divesting itself of sufficient stock as to bring such
SBIC Holder into compliance with the SBIC Regulations.
(d) Promptly after the end of each fiscal year (but in any event
prior to February 28 of each year), the Company shall deliver to each SBIC
Holder a written assessment of the economic impact of each SBIC Holder's
investment in the Company, specifying the full-time equivalent jobs created or
retained in connection with the investment, the impact of the investment on the
businesses of the Company in terms of expanded revenue and taxes and other
economic benefits resulting from the investment (including, but not limited to,
technology development or commercialization, minority business development,
urban or rural business development and expansion of exports).
(e) For purposes of this paragraph, "Regulatory Violation" shall
mean, with respect to any SBIC Holder providing Financing under this Agreement,
(i) a diversion of the proceeds of such financing from the permitted use thereof
set forth in Section 5.5 above, if such diversion was effected without obtaining
the prior written consent of the SBIC Holders or (ii) a change in the primary
business activity of the Company and its subsidiaries, if any, to an ineligible
business activity (within the meaning of the SBIC Regulations) if such change
occurs within one year after the initial sale of the Company's Series D
Preferred Stock. "SBIC Regulations" shall mean the Small Business Investment Act
of 1958 and the regulations issued thereunder as set forth in 13 CFR 107 and
121, as amended. "Financing" shall have the meaning set forth in the SBIC
Regulations, as set forth in 13 CFR 107 and 121.
5.7 Regulatory Compliance Cooperation.
---------------------------------
(a) In the event that any SBIC Holder determines that it has a
Regulatory Problem (as defined below), such SBIC Holder shall have the right to
transfer its Series D Preferred Stock (and any Common Stock issued upon
conversion thereof) to any other Person other than a competitor of the Company ,
provided that such Person agrees in writing to become a party to the Ancillary
Agreements, without regard to any restrictions on transfer set forth in the
Purchase Agreement and the Ancillary Agreements other than federal and state
securities law restrictions, and the Company shall take all such actions as are
reasonably requested by such SBIC Holder in order to effectuate and facilitate
any transfer by such SBIC Holder of any securities of the Company then held by
such SBIC Holder to any Person so designated by such SBIC Holder.
-19-
(b) For purposes of this Agreement, a "Regulatory Problem" shall mean
any set of facts or circumstances wherein it has been asserted by any
governmental regulatory agency (or any SBIC Holder reasonably believes that
there is a substantial risk of such assertion) that such SBIC Holder and its
Affiliates are not entitled to hold, or exercise any significant right with
respect to, the Preferred Stock and includes a Regulatory Violation.
5.8 Termination. The provisions of Sections 5.1, 5.2, 5.3 and 5.4 shall
-----------
terminate in accordance with the provisions of Section 2.4. The provisions of
Sections 5.5, 5.6 and 5.7 shall terminate at such time as the Company has no
SBIC Holders.
5.9 Limitation on Subsequent Registration Rights. From and after the date
--------------------------------------------
of this Agreement, the Company shall not, without the prior written consent of
the Holders of a majority of the outstanding Registrable Securities, enter into
any agreement with any holder or prospective holder of any securities of the
Company which would allow such holder or prospective holder to include such
securities in any registration filed pursuant to Section 4 of this Agreement,
unless under the terms of such agreement, such holder or prospective holder may
include such securities in any such registration only to the extent that the
inclusion of its securities will not reduce the amount of the Registrable
Securities of the Holders which is included.
SECTION 6
Legends
-------
6.1 Legends. Each Investor understands that the share certificates
-------
evidencing any Registrable Securities shall be endorsed with the following
legends (in addition to any legends required under applicable state securities
laws):
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR, IF REASONABLY REQUESTED BY
THE CORPORATION, AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933."
(b) "THE SALE, TRANSFER OR ASSIGNMENT OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY
AND THE REGISTERED HOLDER OR HIS PREDECESSOR IN INTEREST. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY."
(c) Any legend required to be placed thereon by the California
Commissioner of Corporations or any other applicable state securities laws.
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SECTION 7
Miscellaneous
-------------
7.1 Governing Law. This Agreement shall be governed in all respects by
-------------
the laws of the State of Delaware as applied to contracts made and to be fully
performed entirely within that state between residents of that state.
7.2 Entire Agreement; Amendment. This Agreement constitutes the full and
---------------------------
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof. This Agreement or any term hereof may be amended,
waived, discharged or terminated by a written instrument signed by the Company
and the Investors and transferees of such Investors holding more than fifty
percent (50%) of the Registrable Securities. Notwithstanding this Section 7.2,
the Company may, without the written consent of the Investors, add the
Additional Investors (as defined in the Purchase Agreement) as parties to this
Agreement, which Additional Investors shall become bound by and entitled to the
terms and conditions herein by the execution of a signature page hereto.
7.3 Aggregation. For the purposes of determining the number of shares of
-----------
Registrable Securities held by an Investor, transferee or assignee, the holdings
of transferees and assignees of a partnership who are partners or retired
partners of such partnership (including spouses and ancestors, lineal
descendants and siblings of such partners or members, or spouses who acquire
Registrable Securities by gift, will or intestate succession), the holdings of
all affiliates of an Investor, and the holdings of all Investors who are members
of the same immediate family (including spouses, ancestors, lineal descendants
and siblings of such Investors), shall be aggregated together and with the
partnership or Investor, as appropriate; provided, that all assignees and
transferees who would not qualify individually for assignment of registration
rights shall have a single attorney-in-fact for the purpose of exercising any
rights, receiving notices or taking any action under Sections 2 and 4.
7.4 Adjustments for Stock Splits, Etc. Whenever in this Agreement there
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is a reference to a specific number of shares of Common Stock or Preferred, then
upon the occurrence of any subdivision, combination or stock dividend, the
specific number of shares so referenced shall automatically be proportionately
adjusted to reflect the effect on the outstanding shares of stock.
7.5 Notices, etc. All notices and other communications required or
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permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to an Investor, at the address set forth on Exhibit A, hereto,
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or at such other address as shall have been furnished to the Company upon not
less than 10 days notice in writing, (b) if to any other holder of the Shares,
at such address as such holder will have furnished to the Company upon not less
than 10 days notice in writing, or (c) if to the Company, at the address set
forth below and addressed to the attention of the President and with a copy to
Xxxxxxx Coie LLP, 000 Xxxxxxxxxxxx Xxxxx, Xxxxx 000, Xxxxx Xxxx, Xxxxxxxxxx
00000-0000, Attention: Xxxxx X. Xxxxxxx, III, Esq. or at such other address as
the Company shall have furnished to the Investors upon not less than 10 days
notice in writing.
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7.6 Severability. In the event that any provision of this Agreement
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becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
7.7 Counterparts. This Agreement may be executed in any number of
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counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the undersigned have executed this Fifth Amended and
Restated Investor Rights Agreement as of the date set forth above.
"COMPANY"
iOWN HOLDINGS, INC., a Delaware corporation
By:__________________________________________
Xxxxxx X. Xxxx, Chief Executive Officer
