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Exhibit 10.5
THE EDISON PROJECT INC.
THIRD AMENDED AND RESTATED
SHAREHOLDERS' AGREEMENT
SHAREHOLDERS' AGREEMENT dated as of July 2, 1999 (the
"Agreement") by and among The Edison Project Inc. (the "Company"), WSI Inc.
("WSI"), WPA Investment L.P. ("WPA"), WEG L.P. ("WEG I"), WEG II L.P. ("WEG
II"), WEG III L.P. ("WEG III"), WEG IV L.P., ("WEG IV"), WEG V L.P. ("WEG V") ,
WEG VI L.P. ("WEG VI"), WEG VII L.P. ("WEG VII," and together with WSI, WPA and
WEG I, WEG II, WEG III, WEG IV, WEG V, and WEG VI, the "WSI Stockholders"),
Sprout Capital VI, L.P., Sprout CEO Fund, L.P., Sprout Capital VII, L.P., DLJ
Capital Corporation (Delaware) (together, the "Sprout Stockholders"), Blue Rock
Capital, L.P. ("Blue Rock"), Xxxxx X. Xxxxxxx, Xx. ("BCS"), Xxxx X. Xxxxxxx
("JRS"), Xxxxxx X. Xxxx, trustee fbo Xxxxxxxxx X. Xxxxxxx, Xxxxxx X. Xxxx,
trustee fbo Xxxxx X. Xxxxxxx, III, Xxxxxx X. Xxxx, trustee fbo Xxxxxxxxx X.
Xxxxxxx (together, "Xxxx"), Xxxxxxxxx X. Xxxxxxx, Custodian for Xxxxx X. Xxxxxx
("Xxxxxxx"), Xxxx X. XxXxxxxx and Xxxx X. XxXxxxxx CFBO Xxxxxxxxx X. XxXxxxxx
("XxXxxxxx"), Xxxx Xxxxxx ("Xxxxxx"), Xxxxxx X.X. Xxxxx ("Xxxxx"), Xxxx X.
Xxxxxx ("Xxxxxx"), Xxxx X. Childs ("Childs"), X.X. Childs Investments, L.L.C.
("JWC"), Richmont Leeds Education Company L.L.C. ("RLEC"), Leeds II L.P. ("Leeds
II"), Xxxx X. Xxxx ("Xxxx"), Xxxxxxxxx X. Xxxxxxxxx ("AOB"), each of the certain
investors set forth on Schedule I hereto (collectively, the "Xxxxxxx Group"),
X.X. Xxxxxx Investment Corporation ("JPMIC"), Sixty Wall Street SBIC Fund, L.P.
("Sixty Wall" and together with JPMIC, the "JPM Investors"), Investor
Investments AB ("Investor AB"), ABS Employees' Venture Fund L.P. ("ABS
Ventures"), Greenwood Partners ("Greenwood"), Forum Partners ("Forum" and
together with Greenwood, the "Xxxxxx Partners"), Progressive Investment Company,
Inc. ("Progressive"), Xxxxx X. Xxxxxx, III ("JAH"), Yale University ("Yale"),
UBS Capital XV LLC ("UBS") and Vulcan Ventures Incorporated ("Vulcan"). The WSI
Stockholders, the Sprout Stockholders, Blue Rock, BSC, JRS, Ryan, Schmidt,
McMillen, Lusher, Edgar, Smilow, Childs, JWC, RLEC, Leeds II, Xxxx, AOB, the
Xxxxxxx Group, the JPM Investors, Investor AB, ABS Ventures, the Xxxxxx
Partners, Progressive, JAH, Yale, UBS and Vulcan are sometimes hereinafter
referred to individually as a "Stockholder" and collectively as "Stockholders,"
which term shall include any permitted transferee of any Shares (as defined
below) of a Stockholder who agrees in writing to become bound by the terms of
this Agreement).
WHEREAS, certain of the Stockholders wish to amend and restate
the Second Amended and Restated Stockholders' Agreement, dated June 4, 1999, as
amended;
WHEREAS, simultaneously with the execution and delivery of
this Agreement, the Company and certain other parties named herein will execute
and deliver a Series F Subscription Agreement dated as of the date hereof (the
"Subscription
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Agreement") which provides for the purchase and sale of certain stock of the
Company subject to the terms and conditions contained therein;
WHEREAS, simultaneously with the execution and delivery of
this Agreement and in accordance with the Subscription Agreement, each of Vulcan
and the other Purchasers named therein (together, the "Investors") will purchase
the number of shares of Series F Convertible Preferred Stock, $.01 par value per
share, and/or NonVoting Series G Convertible Preferred Stock of the Company
shown next to its, his or her name on Exhibit A thereto (the occurrence of the
foregoing events, the "Closing");
WHEREAS, immediately following the Closing, the parties
hereto, other than the Company, will be the holders of all of the issued and
outstanding capital stock of the Company; and
WHEREAS, the Company and the Stockholders desire to provide
for certain matters concerning the management of the Company and the ownership
and transfer of the Shares;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Stock Ownership. Upon consummation of the Closing, (a) each
of the Stockholders will own the Series A Common Stock ("Common Shares") and/or
convertible and/or exchangeable preferred stock (each series thereof,
collectively, the "Preferred Shares") shown next to its name on Exhibit A
hereto, (b) WSI will own one share of Series B Common Stock, (c) the Sprout
Stockholders (collectively) will own one share of Series C Common Stock, (d) JWC
will own one share of Series D Common Stock, (e) Blue Rock will own one share of
Series E Common Stock, (f) RLEC will own one share of Series F Common Stock, (g)
JPMIC will own one share of Series G Common Stock, (h) Investor AB will own one
share of Series H Common Stock and (i) Vulcan will own one share of Series I
Common Stock (each such Series described in clauses (b)-(i), collectively, the
"Special Common Stock"). Each such Common Share and Preferred Share and the
Special Common Stock shall have the rights and attributes ascribed to it in the
Company's Amended and Restated Certificate of Incorporation (the "Certificate")
set forth as Exhibit B to the Subscription Agreement and the Amended and
Restated ByLaws set forth as Exhibit B hereto (collectively, the "Constitutional
Documents") and as provided herein.
2. Certain Definitions.
2.1. "Affiliate" of any individual, partnership, joint
venture, corporation, limited liability company, trust or unincorporated
association (a "Person") means (i) any other Person which directly or indirectly
through one or more intermediaries controls, is controlled by, or is under
common control with, such Person, and (ii) in the case of any Person who is an
individual, any parent, child, sibling or spouse (or parent, child
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or sibling of such spouse) of such Person, or any trust for the benefit of any
of the Persons described in this clause (ii). For purposes of this definition
the term "control" (including the correlative meanings of the terms "controlled
by" and "under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of management or investment policies of such Person, whether through
the ownership of voting securities or by contract or otherwise.
2.2. "Qualified Public Offering" has the same meaning as in
the Certificate.
2.3 "Shares" means (i) any and all Common Shares, Special
Common Stock and Preferred Shares of the Company, (ii) any and all Common Shares
of the Company or other securities directly or indirectly issuable or issued
upon conversion or exchange of any of the Preferred Shares (without regard to
any restriction on conversion or exercise that may be applicable to any
particular holder) and (iii) any securities issuable or issued or distributed in
respect of any of the securities identified in any of the foregoing clauses (i),
(ii) or (iii) by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, reorganization, merger, consolidation
or otherwise.
3. Management.
3.1. Except as provided below, the Board of Directors of the
Company (the "Board") shall consist of sixteen individuals: (a) two directors to
be elected by the holders of Series C Common Stock, (b) two directors to be
elected by the holder of Series D Common Stock, (c) five directors to be elected
by the holder of Series B Common Stock (one of which such directors (the
"Special Class B Director") shall be the president of WSI (currently H.
Xxxxxxxxxxx Xxxxxxx ("Xxxxxxx"))), (d) one director to be elected by the holder
of Series E Common Stock, (e) one director to be elected by the holder of Series
F Common Stock, (f) two directors to be elected by the holder of Series G Common
Stock, (g) one director to be elected by the holder of Series H Common Stock,
(h) one director to be elected by the holder of Series I Common Stock, and (i)
one director to be elected by a majority of the directors elected pursuant to
clauses (a) through (h) above with BCS to be such director for so long as BCS
remains the chairman of the Company (the "Chairman") and thereafter such
directors shall have no right or obligation to elect a director under this
clause (i). No holder of Special Common Stock shall be obligated to elect a
director (notwithstanding that such holder is entitled to do so), provided, that
in accordance with the provisions of the Certificate, if any of the holders of
Series B Common Stock, Series C Common Stock, Series D Common Stock or Series G
Common Stock determine to elect fewer directors than the number specified in the
previous sentence (but at least one such director), such lesser number of
directors so elected shall be entitled as set forth in the Certificate to cast
the same number of votes with respect to Board decisions as if such holder had
appointed the number of directors
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specified in the previous sentence (subject, in the case of the holder of Series
B Common Stock, to the proviso in Section 3.5(iii) below).
3.2. Any member of the Board may resign at any time by giving
written notice to the Company pursuant to Section 9.1. Such resignation shall
take effect upon receipt thereof by the Company, unless otherwise specified
therein. Any member may be removed for cause by action of a majority of the
votes held by the members of the Board; provided if the member so removed was
elected or appointed by the holders of Series B Common Stock, Series C Common
Stock, Series D Common Stock, Series E Common Stock, Series F Common Stock,
Series G Common Stock, Series H Common Stock or Series I Common Stock, then no
action taken by the Board of Directors after such removal and prior to the
election or appointment of a replacement director for such removed director
shall take effect unless both (i) the stockholder entitled to elect or appoint
such removed director has been given notice in writing of the action and (ii)
within ten (10) days after receipt of such notice any one of the following three
events or actions shall not have occurred or been taken: (A) such stockholder
shall have elected or appointed a replacement director for such removed
director; (B) such replacement director shall have indicated in writing to the
Company that he or she would have voted against such action; and (C) treating
such written indication as a vote against such action by such replacement
director as if he or she had been duly elected to the Board prior to such
action, such action would not have been approved by the Board. Cause for removal
shall exist only if the member whose removal is proposed shall have been
convicted of a felony by a court of competent jurisdiction or shall have been
adjudged by a court of competent jurisdiction to be liable for gross negligence
or willful misconduct in the performance of his or her duties to the Company in
a matter of substantial importance to the Company. A member of the Board may be
removed at any time without cause by the stockholder entitled to elect such
director.
3.3. Any vacancy created by the death, resignation, retirement
or removal of a member of the Board other than BCS shall be filled by the
designee of the stockholder of the Company entitled to elect the member whose
absence created such vacancy. Except as provided in this Section 3.3 or in the
event a Stockholder entitled to elect a member of the Board notifies the Company
in writing that it will not be electing such member at such time, a vacancy
occurring for any reason and newly created directorships resulting from an
increase in the authorized number of directors may be filled by the vote of a
majority of the directors then in office, although less than a quorum or by the
sole remaining director, and any directors so chosen shall hold office until the
next election of the series or class for which such directors shall have been
chosen and until their successors shall be elected and qualified.
3.4. A majority of the entire number of votes which the
members of the entire Board are entitled to cast shall constitute a quorum at
any meeting of the Board. If at any meeting of the Board there shall not be a
quorum present, the members present thereat shall adjourn the meeting until a
quorum shall have been obtained. Unless
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otherwise provided herein or in the Constitutional Documents, the vote of a
majority of the entire number of votes which the members of the entire Board are
entitled to cast shall be the vote of the Board. Members of the Board shall
receive reasonable notice of meetings of the Board.
3.5. The affirmative votes of each of (a) the Special Series B
Director, (b) the director or directors appointed by the holders of Series C
Common Stock, (c) the director or directors appointed by the holder of Series D
Common Stock, and (d) the director or directors appointed by the holder of the
Series G Common Stock, shall be required to authorize: (i) any indebtedness
(including funded debt, capitalized leases and material operating leases) of the
Company or any subsidiaries of the Company, other than (x) trade debt and
accounts payable containing customary payment terms and incurred in the ordinary
course of business and (y) working capital credit facilities not exceeding
$1,000,000 in the aggregate, (ii) the authorization or issuance of any shares of
capital stock of any class or series or other equity securities of the Company
(or any change or amendment to the attributes or preferences of any such
securities, whether or not issued), granting of registration rights (other than
as permitted by this Agreement), redemption of Shares, granting or redemption of
stock options or approval of performance standards for vesting of options
granted to executives of the Company, options issued to employees of the
Company, or the sale or issuance of any securities by the Company (provided,
however, that after January 1, 1999, such votes shall not be required to
authorize the issuance of securities of the Company in an initial public
offering, and at any time after January 1, 2000, any one of (I) the Special
Class B Director, (II) the director(s), acting together, appointed by the
holders of Series C Common Stock, (III) the directors, acting together,
appointed by the holder of Series D Common Stock, or (IV) the director(s),
acting together, appointed by the holder of the Series G Common Stock may
require that the Company undertake an initial public offering), (iii) the
appointment, removal, replacement or reduction in compensation or
responsibilities of any of the Chairman, the Chairman of the Board, the
President, the Chief Executive Officer, the Chief Operating Officer, or the
Chief Financial Officer or any other officer (or other similar position) of the
Company or any subsidiary of either thereof with authority, responsibilities and
duties equivalent to such officers (each, a "Senior Officer"), provided that if
the Special Series B Director is at such time a Senior Officer, the affirmative
vote of the Special Series B Director shall not be required to authorize his
removal as a Senior Officer (or a reduction in his responsibilities or
compensation as such) and the directors appointed by the Series B Common Stock
shall be limited to two votes on such removal or reduction and (iv) the approval
or disapproval of any merger, consolidation, recapitalization, reorganization,
sale of all or substantially all of the assets, dissolution or winding up of the
Company or any subsidiary thereof. No matter requiring the vote of any Board
member as stated above shall be determined at a meeting from which such Board
member is absent unless the holder of the relevant series of Special Common
Stock shall have notified the Company in writing that it is not, at such time,
electing a member to the Board. In addition, the Company shall not amend the
Certificate to increase the number of authorized shares
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of Special Common Stock without the unanimous consent of the then current
holders of such Stock. Notwithstanding anything herein to the contrary, the
issuance of any stock, options or other securities under the terms of the
Subscription Agreement shall not require a vote of the Board of Directors.
3.6. The Company may enter into transactions otherwise
requiring the approval of the Board in which any of the WSI Stockholders, the
Sprout Stockholders, JWC, Blue Rock, RLEC, BCS, the JPM Investors, Investor AB,
UBS or Vulcan have an interest only if a majority of the votes of directors
elected by Stockholders not party to or otherwise having an interest in such
transaction are cast in favor thereof. Unless a holder of Common Shares or
Preferred Shares otherwise agrees, such holder shall not be required to receive
in any merger, consolidation, recapitalization, reorganization or liquidation
of, or declaration or payment of dividends or stock buy-back by, the Company,
consideration other than the consideration each other holder of such holder's
particular series of Common Shares or Preferred Shares, as the case may be,
receives in such transaction and the Company will not engage in any such
dividend or buy-back without the consent of the holders of a majority of the
shares held by non-participating Stockholders (measured, with respect to the
outstanding Preferred Stock, on an as-converted to Common Shares basis), voting
as a class.
3.7. The Company shall furnish to each holder of Special
Common Stock and to UBS (unless any such stockholder requests that such
information not be furnished to it): (a) within thirty (30) days after the end
of each month (i) the unaudited balance sheet of the Company at the end of such
month, (ii) the unaudited statement of income of the Company for the year
through the end of such month, (iii) a comparison of actual results with the
budget for such period and (iv) an unaudited cash flow statement with a
comparison to budget for such period and (b) any other information which any
such Stockholder may reasonably request.
3.8. Each Stockholder shall vote its Shares and take all other
actions as may be necessary or desirable to cause the Board and its members to
be constituted and to have the rights and powers as set forth in this Article 3,
including promptly executing and delivering any consent or other document
reasonably required to do so.
3.9. "Option Plan" means the employee stock option plans
implemented by the Company and shall include any options issued to employees of
the Company.
3.10. The Stockholders agree not to vote to amend Sections
3.3, 3.4, 3.5 and 4.5 of the Company's Amended and Restated By-Laws without the
unanimous consent of the holders of the Company's Special Common Stock. In
addition, the Stockholders agree, if required by the managing underwriters in
connection with a Qualified Public Offering or other public offering or any
stock exchange or quotation system on which the Company desires its Shares to be
listed or quoted, to vote their shares to amend the Constitutional Documents to
increase the number of members of
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the Board of Directors of the Company to provide for the addition of two outside
directors.
3.11 The Board shall establish an Audit and Finance Committee
to be co-chaired by one director elected by the holder of the Series G Common
Stock (if at such time such holder has elected at least one director that has
agreed to be on such Committee) and one director appointed by a majority of the
directors elected by the other holders of the Special Common Stock.
4. Transfer of Shares.
4.1. General. (a) No Stockholder or transferee thereof shall
directly or indirectly sell, assign, transfer, pledge or otherwise encumber or
dispose of ("Transfer") all or any part of its Shares in the Company or any
rights appurtenant thereto except as permitted by this Agreement.
Notwithstanding anything to the contrary herein, none of (i) the pledge by WSI
of its Shares to Xxxxxx Guaranty Trust Company (or in connection with any
replacement financing related thereto), (ii) the agreement by WSI and Xxxxxxx to
elect a designee of UBS as director elected by the holder of Series B Common
Stock pursuant to an Agreement dated as of June 4, 1999 by and among WSI,
Xxxxxxx and UBS (the "UBS Agreement"), (iii) the transfers by WSI to Progressive
Investment Company, Inc. ("Progressive") and to Xxxxx Xxxxxx as described in the
Notice to the Company dated as of January 14, 1998 (the "Notice"), nor (iv) the
transfer by BCS to Progressive as described in the Notice, shall be a "Transfer"
hereunder or a transaction requiring compliance with Sections 4.2, 4.4 or 4.5.
Notwithstanding anything to the contrary herein, none of the transfers by WSI
and RLEC of the Company's capital stock to WEG VI, Leeds II and UBS under those
certain Purchase Agreements dated June 4, 1999 (the "Purchase Agreements"),
shall be a transaction requiring compliance with Sections 4.2, 4.4 or 4.5.
(b) If any Shares cease to be "restricted securities", as that
term is defined in the Securities Act of 1933, as amended (the "Securities
Act"), or cease to be subject to any and all of the restrictions on transfer set
forth in this Agreement, the Company shall, upon written request of the holder
thereof, issue to such holder a new certificate evidencing such Shares without a
legend evidencing such restrictions.
4.2. Prior to any proposed Transfer of Shares in accordance
with this Agreement, the Stockholder(s) proposing such Transfer shall give at
least fifteen (15) business days' prior written notice to the Company. The
notice shall specify the number of Shares proposed to be Transferred and
describe briefly the manner of the proposed Transfer. Upon the request of the
Company following receipt of such notice, the Stockholder(s) proposing such
Transfer shall provide an opinion of counsel satisfactory to the Company that
the proposed Transfer may be effected without registration under the Securities
Act and applicable state securities or blue sky laws. If, in the opinion of such
counsel, no registration under the Securities Act or any applicable state
securities
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or blue sky laws is or will be necessary in connection therewith, the
Stockholder(s) shall be entitled to Transfer such Shares in the manner described
in the notice given to the Company if such Transfer is otherwise in accordance
with this Agreement (including, to the extent applicable, Sections 4.3, 4.4 and
4.5).
4.3. Permitted Transfers. Each Stockholder may Transfer its
Shares as follows:
(a) to one or more Affiliates of such Stockholder, so long as
such transferee shall have agreed in a writing to be bound by the terms of this
Agreement, without the consent of any other Stockholder, the Company or the
Board of Directors and without compliance with Sections 4.4 or 4.5 or the
opinion requirement of Section 4.2;
(b) if such Stockholder is a partnership or limited liability
company, to its partners or members, respectively, in a distribution without
consideration in accordance with the terms of its partnership agreement or
operating agreement (as applicable), so long as such partners or members (as
applicable) shall have agreed in writing to be bound by the terms of this
Agreement, without the consent of any other Stockholder, the Company, or the
Board of Directors and without compliance with Section 4.4 or 4.5;
(c) in the case of the Xxxxxxx Group, to any Person who at the
time of Transfer is a pre-existing client of Xxxxxxx Capital Group LLC, so long
as such transferee shall have agreed in writing to be bound by the terms of this
Agreement, without the consent of any other Stockholder, the Company, or the
Board of Directors and without compliance with Section 4.4 or 4.5;
(d) in an aggregate cumulative amount of up to 15% of the sum
of (i) its Shares held on December 31, 1997 and (ii) its Shares purchased since
December 31, 1997 (including Shares to be purchased under the Subscription
Agreement and Purchase Agreements), so long as such transferee shall have agreed
in writing to be bound by the terms of this Agreement, without the consent of
any other Stockholder, the Company or the Board of Directors and without
compliance with Sections 4.4 or 4.5;
(e) in a Transfer made in compliance with Section 4.4 and, if
applicable, 4.5;
(f) in a public offering in connection with the exercise of
its rights under Article 5 hereof, without compliance with Section 4.2, 4.4 or
4.5; or
(g) following a public offering, in open market sales under
Rule 144 under the Securities Act, without giving effect to paragraph (k) of
such rules without the
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consent of any other Stockholder, the Company or the Board of Directors and
without compliance with Sections 4.4 or 4.5.
(h) Notwithstanding anything to the contrary contained herein,
in no event shall any Transfer pursuant to Section 4.3(a) - (e) be made to a
Person that the Company reasonably determines is a competitor of the Company
without the Company's prior written consent. This Section 4.3(h) shall not
restrict a Transfer otherwise permitted under Sections 4.3(a) - (e) to a Person
that is a financial or institutional investor or a diversified holding company,
or an Affiliate of any of the foregoing, that owns securities of a competitor
for investment purposes.
4.4. Right of First Offer. (a) If a Stockholder (the
"Prospective Seller") desires to sell all or part of its Shares, other than its
Special Common Stock (the "Offered Shares") in a Transfer not otherwise
permitted by this Article 4, the Prospective Seller shall first provide written
notice to the Company and each other Stockholder (the "Offer Notice") of its
desire to sell the Offered Shares, which notice shall describe (i) the series,
class and number of Shares proposed to be sold, (ii) the cash price per share
(the "Offer Price") for each class and series of Shares proposed to be sold and
(iii) all other material terms and conditions of the proposed sale.
(b) The Offer Notice shall constitute an offer by the
Prospective Seller to sell, to the Stockholders (other than the Prospective
Seller), the Offered Shares on the terms and conditions set forth in the Offer
Notice and on the terms and provisions contained in this Agreement.
(c) Each Stockholder shall have twenty (20) business days from
the date such notice is deemed given as herein provided to elect to purchase its
pro rata portion (based on the number of Shares held by Stockholders other than
the Prospective Seller, measured on an as-converted to Common Shares basis) of
the Offered Shares on the same terms and conditions as set forth in the Offer
Notice by giving written notice as herein provided (the "Response Notice")
within such 20-business day period to the Prospective Seller and the Company of
its desire to do so, which notice shall constitute the irrevocable agreement of
such Stockholder to so purchase such pro rata portion.
(d) If any Stockholder fails to deliver a timely Response
Notice (or otherwise notifies the Prospective Seller and the Company that it
does not elect to participate in the purchase of Offered Shares), the
Prospective Seller shall, within one (1) business day after the expiration of
the 20-business day period, give to each other Stockholder which shall have
timely delivered a Response Notice, a written notice that additional Offered
Shares are available, and each such other Stockholder timely delivering a
Response Notice may increase the number of Offered Shares to be purchased by it,
pro rata (based on the number of Shares held by Stockholders delivering a
Response Notice, measured on an as-converted to Common Shares basis), by
delivering a second Response Notice in the manner set forth above, provided that
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each Response Notice delivered after the initial Response Notice shall be
delivered within five (5) business days after a Stockholder receives notice from
the Prospective Seller that additional Offered Shares are available and shall
constitute the irrevocable agreement of such Stockholder to purchase its pro
rata portion of such additional Offered Shares. Any Offered Shares not subject
to a Response Notice shall be offered successively, on a pro rata basis (based
on the number of Shares held by Stockholders delivering a Response Notice,
measured on an as-converted to Common Shares basis), in accordance with the
procedures set forth in this Section 4.4(d), to all Stockholders which shall
have timely delivered a Response Notice until (i) a timely Response Notice has
been delivered in respect of all Offered Shares or (ii) no timely Response
Notice has been delivered in respect of any remaining Offered Shares.
(e) If a Prospective Seller proposes to sell Shares of
different classes or series, each Stockholder that elects to purchase a portion
of such Shares shall purchase its proportionate share of each class and/or
series of such Shares based upon the aggregate number of Shares of each such
class and/or series proposed to be sold by the Prospective Seller.
(f) If Stockholders (other than the Prospective Seller) do not
elect to purchase all of the Offered Shares available for purchase under the
Offer Notice, the Prospective Seller (i) shall be under no obligation to sell
any of the Offered Shares to any Stockholder under this Section 4.4, unless the
Prospective Seller so elects, and (ii) subject to Section 4.5 below (if
applicable), may, within a period of four (4) months from the date of the Offer
Notice, sell the Offered Shares to one or more third parties for cash per share
of not less than 95% of the Offer Price and on such other terms and conditions
as are not materially more favorable to such transferee than those specified in
the Offer Notice. Upon a sale of Offered Shares, the purchaser of such Offered
Shares shall execute an agreement pursuant to which such purchaser agrees that
the Shares it acquired from the Prospective Seller are subject to the provisions
of this Agreement. Any purchaser to whom Shares are sold pursuant to and in
compliance with this Section 4.4 shall, upon the consummation of such purchase
and sale, be deemed a "Stockholder" under this Agreement. If a Prospective
Seller does not complete the sale of the Offered Shares within such four (4)
month period, the provisions of this Section 4.4 shall again apply, and no sale
of Shares shall be made other than in accordance with this Agreement.
(g) The closing of purchases of Offered Shares by the
Stockholders (other than the Prospective Seller) pursuant to this Section 4.4
shall take place within 20 business days after the delivery of the last received
Response Notice (provided that if such day is not a business day in New York,
New York, then the closing shall occur prior to the next succeeding such
business day) such date to be specified by the Prospective Seller, at 11:00 A.M.
local time at the principal offices of the Company, or at such other date, time
or place as the parties to the sale may agree, provided, however, that if the
purchase and sale of the Shares is subject to any regulatory approval, the time
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period during which such purchase and sale may be consummated shall be extended
until the expiration of five (5) business days after all such regulatory
approvals shall have been obtained. At least five (5) business days prior to
such closing, the Prospective Seller shall notify each purchaser in writing of
the name and number of purchasers and the portion of the Offered Shares to be
purchased by each, and the date of the closing. At such closing, the Prospective
Seller shall sell, transfer and deliver to each purchaser full right, title and
interest in and to the Offered Shares so purchased by such purchaser, free and
clear of all liens, security interests or adverse claims of any kind and nature
(except as otherwise set forth in this Agreement), and shall deliver to each
purchaser a certificate or certificates representing the Offered Shares sold to
such purchaser, in each case duly endorsed for transfer or accompanied by
appropriate stock transfer powers duly endorsed with signatures guaranteed by a
commercial bank, trust company or registered broker dealer. Upon surrender of
the certificate(s) representing the Offered Shares purchased, or to be
purchased, by purchasers pursuant to this Section 4.4, the Company shall
promptly issue new certificates representing such Offered Shares in the name(s)
of such purchaser(s) and representing the appropriate number, class and series
of Stock. Simultaneously with delivery of appropriate certificates, each
purchaser of the Offered Shares shall deliver to the Prospective Seller, by wire
transfer of immediately available funds to such bank and account as the
Prospective Seller shall designate, a cash amount equal to the product of the
purchase price (for each applicable class and/or series) and the number of
Offered Shares (of each applicable class and/or series) being acquired by such
purchaser, in full payment of the purchase price of the Offered Shares
purchased.
(h) The provisions of this Section 4.4 shall not apply to any
Transfer by a Stockholder pursuant to the exercise of such Stockholder's rights
under Section 4.5.
(i) For the purposes of this Section 4.4, a Transfer of a
Stockholder's Shares shall be deemed to include the sale, assignment, transfer
or other disposition (other than pledges or other encumbrances) of any equity
interest in the Stockholder owning such Shares ("Stockholder Equity"), if (i)
the percentage of Stockholder Equity transferred exceeds 15% of the Total
Stockholder Equity (as defined below) of such Stockholder and (ii) a principal
purpose of the Transfer is to avoid or circumvent the provisions of this Article
4.
(j) "Total Stockholder Equity" of a Stockholder for purposes
of this Section 4.4 means the total Stockholder Equity of such Shareholder
immediately following the Closing as adjusted to reflect the effect of any stock
dividend, stock split, or other binding transaction or recapitalization,
reorganization, merger, consolidation or other similar transaction affecting the
Company.
4.5. Right to Participate in Transfers. (a) In the event any
Prospective Seller or group of Prospective Sellers acting together, after
complying with the provisions of Section 4.4 hereof (if applicable), shall be
entitled to sell Offered Shares in
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an aggregate amount greater than five percent (5%) of the then outstanding
Shares (measured, with respect to all outstanding Preferred Shares, on an
as-converted to Common Shares basis) to any Person or Persons in any transaction
or series of related transactions (each a "Third Party"), such Prospective
Seller(s) shall give notice thereof (the "Third Party Notice") to each other
Stockholder, describing the kind and number of Shares to be sold, the price per
share and all other material terms and conditions of the proposed sale. Each
other Stockholder shall have the right and option, for a period of twenty (20)
business days after the Third Party Notice is deemed given as herein provided,
by giving the Prospective Seller(s) written notice (the "Notice of Election"),
to sell to the Third Party(ies) a pro rata portion of its Shares (based on the
number of Shares then outstanding measured, with respect to all outstanding
Preferred Shares, on an as-converted to Common Shares basis) for the same
consideration and otherwise on the same terms and conditions as contained in the
Third Party Notice. If a Stockholder shall not have given as provided herein a
Notice of Election pursuant to this Section 4.5 with respect to any Third Party
Notice, such Stockholder will be deemed to have waived all its rights under this
Section 4.5 with respect to the transaction specified in such Third Party
Notice. If the Third Party is unwilling to purchase all Shares proposed to be
sold hereunder, the amount of Shares to be sold by any Prospective Seller(s) and
each other Stockholder that has delivered a Notice of Election shall be reduced
to the extent necessary to provide for the sale of Shares by the Prospective
Seller(s) and each of the other Stockholders that has delivered a Notice of
Election, pro rata based upon the number of Shares held by each such Person
(measured, with respect to all outstanding Preferred Shares, on an as-converted
to Common Shares basis) participating in the proposed sale.
(b) At the closing of any proposed Transfer subject to this
Section 4.5, the Prospective Seller(s), together with all other Stockholders
that have elected to exercise their rights hereunder in connection with such
Transfer, shall deliver to the Third Party(ies) certificates and/or other
instruments representing the subject Shares to be sold, free and clear of all
liens and encumbrances (except as provided in this Agreement), together with
stock or other appropriate powers duly endorsed therefor, and shall receive in
exchange therefor the consideration to be paid or delivered by the Third Party
in respect of such Shares as described in the Third Party Notice.
(c) Notwithstanding anything herein to the contrary, in the
event a Prospective Seller(s), under this Section 4.5 is selling Series D
Preferred Shares (or NonVoting Series E Preferred Shares) for consideration per
share of less than $6.00 (adjusted for any stock splits, stock dividends (other
than P.I.K. Dividends), stock combinations or similar events), only Stockholders
holding and desiring to sell Series D Preferred Shares (or Non-Voting Series E
Preferred Shares) shall be entitled to exercise the tagalong rights provided
herein and each such Stockholder's pro rata rights shall be measured by
reference to only the Series D Preferred Shares and Non-Voting Series E
Preferred Shares held by such Stockholder. Any capitalized term used in this
Section
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4.5(c) and not otherwise defined in this Agreement shall have the same meaning
as in the Certificate.
(d) The Prospective Seller(s) and each other Stockholder
participating in the Third Party Offer each shall bear their respective expenses
(including, without limitation, legal expenses) incurred in connection with such
sale.
(e) Except as expressly provided in this Section 4.5, the
Prospective Seller(s) shall not have any obligation to any Stockholder with
respect to the sale of any Shares owned by such Stockholder in connection with
this Section 4.5. Anything herein to the contrary notwithstanding and
irrespective of whether any Notice of Election shall have been given as herein
provided, the Prospective Seller(s) shall not have any obligation to any
Stockholder to sell any Shares to the proposed Third Party(ies) pursuant to this
Section 4.5 if such Prospective Seller(s) decides not to accept or consummate
any proposed Transfer of its Shares (it being understood that any and all such
decisions shall be made by such Prospective Seller(s) in its sole discretion).
4.6. Purchase of Pledged Shares. In the event WSI (the
"Pledgor") has pledged its Shares (the "Pledged Shares") to a third party (the
"Secured Party") as permitted pursuant to Section 4.1 hereof, and the Secured
Party at any time exercises any voting rights with respect to the Pledged
Shares, the Company, in its sole discretion (but subject to the provisions of
the Certificate and of Section 3.5 above), shall have the right to purchase the
Pledged Shares from the Secured Party for an amount equal to the fair market
value of such Pledged Shares as determined by a nationally recognized investment
bank. If the Company chooses to exercise such right, the Company shall give
notice thereof to the Secured Party (in accordance with Section 9.2 as if the
Secured Party were a party hereto). Within 10 business days after such notice
shall be deemed given as herein provided, the Secured Party shall give notice to
the Company and the Pledgor of the Secured Party's selection of an investment
bank, which selection shall be reasonably acceptable to Pledgor. The investment
bank so selected shall deliver to the Secured Party and the Company such
investment bank's fair market value determination within thirty (30) business
days. If the Company does not exercise its right to purchase the Pledged Shares
within twenty (20) business days after the Company's receipt of such investment
bank's determination, the Secured Party shall succeed, on the twenty-first
business day after such determination, to all rights of the Pledgor hereunder
notwithstanding any other provisions herein to the contrary and shall cause to
be delivered to the Company an instrument signed by the Secured Party evidencing
such Secured Party's acknowledgment of and agreement to be bound by the terms of
this Agreement. At the time of the execution of this Agreement, in the case of
any existing Pledged Shares, or at the time WSI pledges its Shares pursuant to
Section 4.1 and this Section 4.6, the Pledgor shall cause to be delivered to the
Company an instrument signed by the Secured Party evidencing such Secured
Party's acknowledgment of and agreement to the terms of the preceding sentence.
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4.7. Preemptive Rights. If the Company desires to issue and
sell any additional shares of common stock or preferred stock, or any rights,
options or warrants to purchase said common or preferred stock, or securities
that are, or may become, convertible into said common or preferred stock, in
exchange for cash (other than (i) in or following a Qualified Public Offering,
(ii) shares of common stock or preferred stock to be issued upon conversion or
exchange of Preferred Shares or Common Shares or any other convertible or
exercisable security (which issuance was subject to the provisions of this
Section 4.7), or (iii) shares of common stock to be issued or other securities
issuable or issued upon the exercise of any of the options or warrants described
in Section 2.2 of the Subscription Agreement dated December 30, 1997, as
amended, or similar options or warrants for the purchase of up to a maximum of
four million (4,000,000) shares of Series A Common Stock, the Company shall give
written notice thereof (the "Transaction Notice") to each Stockholder,
describing the kind and number of securities to be issued, the price and all
other material terms and conditions of the issuance and sale not later than
twenty (20) business days prior to the consummation of such proposed issuance
and sale. Each Stockholder shall have fifteen (15) business days from the date
the Transaction Notice is deemed given as herein provided to agree to purchase
or obtain on the same terms and conditions as the issuance and sale described in
the Transaction Notice such amount of common stock or preferred stock, as the
case may be, as will permit such Stockholder to maintain its respective
percentage ownership of Shares (measured on an as-converted to Common Shares
basis) prior to such issuance and sale by giving as herein provided written
notice within such 15-business day period to the Company of its desire to do so,
which notice shall constitute the irrevocable agreement of such Stockholder to
so purchase or obtain, subject to the consummation of the transaction described
in the Transaction Notice. Any purchase pursuant to such notice shall be
consummated simultaneously with and subject to the consummation of the
transaction described in the Transaction Notice, provided, however, that in the
event the purchase of such securities is subject to any regulatory approval, the
purchase and sale shall not be consummated until five business days following
the date on which such approval shall have been obtained. Any Stockholder that
shall fail to deliver a timely notice indicating its desire to purchase Shares
pursuant to this Section 4.7 or shall fail to consummate the purchase in
accordance with the preceding sentence, shall be deemed to have waived all
pre-emptive rights under this Section 4.7 with respect to the issuance and sale
described in the Transaction Notice. Notwithstanding anything to the contrary
herein, each Stockholder hereby waives any and all pre-emptive or similar rights
it, he or she may have pursuant to the Constitutional Documents or this
Agreement or otherwise with respect to the issuance of up to 7,000,000 Shares
pursuant to the Subscription Agreement or pursuant to the Company's Series F
Subscription Agreement dated June 4, 1999. The Company shall cause any
purchasers of any equity securities (or securities convertible into or
exchangeable for equity securities) of the Company which may be issued prior to
or after the Closing to waive such purchaser's pre-emptive rights with respect
to the transactions contemplated by the Subscription Agreement (including with
respect to any Common Shares or Preferred Shares issuable upon the
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conversion or exchange of any Shares issued thereunder or upon the exercise of
any options issued thereunder).
4.8 Restriction on Transfer of Special Common Stock.
Notwithstanding anything to the contrary herein, until December 30, 2000, no
holder may Transfer shares of Special Common Stock except (i) to the Company (in
which event such Transferred shares shall be canceled by the Company), (ii)
pursuant to a pledge described in Sections 4.1 or 4.6, provided, that in
connection with any transfer pursuant to Section 4.6, the special voting rights
as described in Section 3.5 shall not be transferable (and shall terminate with
respect to such Stockholder upon such Transfer pursuant to Section 4.6), (iii)
to an Affiliate on the terms and conditions set forth in Section 4.3(a) hereof,
provided, that in the event an Affiliate transferee under this clause (iii) does
not at the time of such Transfer own Shares of the Company (other than the share
of Special Common Stock to be transferred), such Transfer shall require the
consent of the Company, which consent shall not be unreasonably withheld.
Following December 31, 2000, a holder may transfer its Special Common Stock as
permitted by the immediately preceding sentence and to any one transferee of at
least 75% of the Shares of the Company held by such holder (measured immediately
following the Closing) (a "75% Transferee"), provided, that a 75% Transferee
(other than an Affiliate) shall not be entitled to the special voting rights
described in Section 3.5 and such holder's special voting rights shall terminate
upon the consummation of any Transfer (other than to an Affiliate) described in
this sentence. The right of first offer and tagalong rights provided herein
shall not apply to any transfer of Special Common Stock permitted under this
Section 4.8.
4.9. Aggregation. For purposes of this Section 4, and Sections
5.1 and 5.2, (i) the WSI Shareholders, (ii) the Sprout Shareholders, (iii) the
Xxxxxxx Group, (iv) the JPM Investors, and (v) any Stockholder and any
Affiliate(s) of such Stockholder, shall in each case be deemed to be one
Stockholder.
4.10. Transfer of Right to Receive Dividends. Nothing herein
contained shall prohibit any of the Stockholders from Transferring its right to
receive any or all dividends to which it may be entitled with respect to the
Shares.
4.11. Additional Purchases by WSI Stockholders.
Notwithstanding any other provision of this Article 4, except for purchases
under the Subscription Agreement and the Purchase Agreements, prior to a
Qualified Public Offering none of (i) the WSI Shareholders, (ii) Xxxxxxx, (iii)
any Person which has a written or verbal agreement with any of the WSI
Shareholders or Xxxxxxx (other than this Agreement) relating to the control of
the Company or (iv) any Affiliate of any of the foregoing shall purchase
additional Shares without the prior written consent of JPMIC except that such
restriction shall not apply in any transaction where (a) one or more of the WSI
Shareholders, Xxxxxxx or their Affiliates is exercising a pre-emptive right or
right of first offer of the WSI Shareholders under this Agreement or the
Constitutional Documents or (b) any
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Person or Persons other than a WSI Shareholder or their Affiliates is at the
same time offering to purchase from or purchasing from more than one Stockholder
in a single transaction or series of related transactions such that following
the consummation of such transaction or transactions such Person will hold an
aggregate of 35% or more of the Company's shares. Each Stockholder (other than
the WSI Stockholders) represents and warrants, as of the date hereof, to each
other Stockholder hereunder that it does not have an agreement under clause
(iii) of this Section 4.11, except, in the case of UBS, WSI and Xxxxxxx, the UBS
Agreement.
5. Registration Rights.
5.1. Demand Registration. (a) Following the consummation of a
public offering of the Company's equity securities, if any one of the WSI
Stockholders, the Sprout Stockholders, JWC, the JPM Investors, Investor AB, UBS
and/or Vulcan (each, a "Demand Stockholder") desires to Transfer a number of
Shares (x) equal to or greater than 5% of the outstanding Shares or (y) with an
aggregate proposed offering price of $10,000,000 or more, each such
Stockholder(s) (the "Demanding Stockholder(s)") shall have the right (subject to
its obligations under any underwriters' lock-up agreements entered into in
connection with any public offering) on an unlimited number of occasions to
require the Company to, upon written notice describing the proposed Transfer,
effect as soon as practicable the registration under the Securities Act,
including filing an appropriate Registration Statement (including any Prospectus
therein, a "Registration Statement") under the Securities Act with the
Securities and Exchange Commission (the "Commission" or the "SEC") with respect
to such proposed Transfer of the Company's Shares; provided, however, in no
event shall the Company be obligated to effect more than one registration
pursuant to this Section 5.1(a) within any ninety day period. The notice by such
Demanding Stockholder(s) for the first such Registration Statement may be
delivered to the Company at any time after such Demanding Stockholders'
obligations under any lock-up agreements entered into in connection with the
initial public offering of the Company's equity securities (an "IPO") shall have
expired. If Shares to be included in a Registration Statement pursuant to this
Section 5.1 are to be Transferred by Demanding Stockholder(s) in an underwritten
public offering, then the Demanding Stockholder(s) holding a majority of the
Shares proposed to be Transferred shall in their written demand for registration
name the managing underwriter or underwriters, subject to the reasonable
approval of the Company.
(b) After receipt of each such notice from Demanding
Stockholder(s), the Company shall, within ten (10) days of the receipt thereof,
give written notice of such request to all Demand Stockholders and shall as soon
as practicable but not later than sixty (60) days after receipt of any such
notice, file a Registration Statement with the Commission to register the Shares
which the Demanding Stockholder(s) and the other Demand Stockholders request to
be registered within twenty (20) days of the mailing of such notice by the
Company (the Demand Stockholder(s) so requesting to be
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registered, together with the Demanding Stockholder(s), the "Participating
Stockholders").
(c) After filing any Registration Statement pursuant to this
Section 5.1, the Company shall use its reasonable best efforts to cause such
Registration Statement to become effective as soon as practicable, which efforts
shall include entering into customary agreements with underwriters. After such
Registration Statement becomes effective, the Company shall use reasonable
efforts to maintain the effectiveness of such Registration Statement for such
reasonable period as each of the Participating Stockholders may require to
complete its contemplated sales in compliance with the Securities Act. So long
as such Registration Statement or a Registration Statement under Section 5.2
remains in effect, the Company shall furnish to the Participating Stockholders
and their underwriters and to the other holders of Shares covered by such
Registration Statement such quantities of each prospectus included in the
Registration Statement, any revised or supplemental prospectus filed, and other
documents as they may reasonably request. Upon the request of any Participating
Stockholder, the Company shall file post-effective amendments or supplements to
such Registration Statement for a reasonable period of time in order that the
Registration Statement may be effective at all times during such period and
shall at all times comply with applicable federal, state securities or blue sky
laws and deliver copies of the prospectus contained therein as provided above.
(d) A registration requested pursuant to this Section 5.1
shall not be deemed to be "effected" for purposes of this Section 5.1 (i) if it
has not been declared effective by the SEC and become effective in accordance
with the Securities Act, (ii) if it shall not have remained effective for a
period of at least 180 days (or such shorter period in which all Shares of the
Stockholders included in such registration have actually been sold thereunder),
(iii) if after it has become effective, such registration is materially
interfered with by any stop order, injunction or similar order or requirement of
the SEC or other governmental agency or court for any reason other than any
action or omission of a Participating Stockholder, or (iv) if the conditions to
closing specified in the underwriting agreement, if any, entered into in
connection with such registration are not satisfied or waived other than by
reason of a breach of such agreement by a Participating Stockholder.
(e) Should a Registration Statement filed pursuant to this
Section 5.1 not become effective due to the failure of a Participating
Stockholder to perform its obligations under this Agreement or the inability of
a Participating Stockholder to reach agreement with the underwriters on price or
other customary terms for such transaction, or in the event a Participating
Stockholder determines to withdraw or not to pursue a request for registration
pursuant to this Article 5 (in each of the foregoing cases, provided that at
such time the Company is in compliance in all material respects with its
obligations under this Agreement), then (subject to the last sentence of this
paragraph) such registration shall be deemed to have been "effected" for
purposes of
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this Section 5.1. In such event, the Participating Stockholders may reimburse
the Company for all of the Company's reasonable out-of-pocket expenses incurred
in the preparation, filing and processing of the Registration Statement. If such
reimbursement is made within thirty (30) business days following a request
therefor, such registration shall not be deemed to have been effected for
purposes of this Section 5.1.
(f) If the lead managing underwriter of an underwritten
offering made pursuant to this Section 5.1 shall advise the Company in writing
(with a copy to the Participating Stockholders) that, in such underwriter's
opinion, the number of Shares requested to be included in such registration
exceeds the number which can be sold in such offering within a price range
acceptable to the Participating Stockholders, the Company will reduce the number
of Shares requested to be included in such offering, pro rata based upon the
number of Shares held by each Participating Stockholder (measured on an
as-converted to Common Shares basis), to the number which the Company is so
advised can be sold in such offering within such price range, provided, that all
Shares proposed to be included in such offering other than Shares held by
Participating Stockholders shall be reduced pro rata as provided above (to zero
if required) before any reduction in the number of Shares to be sold by the
Participating Stockholders. If, as a result of any such reduction, the number of
Shares requested to be included in such registration by the Participating
Stockholders is reduced by fifty percent (50%) or more, then notwithstanding
anything herein to the contrary, a registration will not be deemed to have been
effected for purposes of this Section 5.1, provided, however, that the
provisions of this sentence shall apply only to the first request made by each
of JWC, the WSI Stockholders, the Sprout Stockholders, the JPM Stockholders,
Investor AB, UBS and/or Vulcan, as the case may be, for a registration pursuant
to this Section 5.1. In the case of such a registration which would have been
deemed to be a registration for purposes of this Section 5.1 but for the
application of the immediately preceding sentence, the Company nonetheless shall
pay the Registration Expenses in connection with such registration.
5.2. Piggy-Back Registration. (a) If at any time the Company
determines that the Company will file a Registration Statement with respect to
any securities of the Company of any class, whether such securities are to be
offered for the Company's own account or the account of any holder, other than a
registration statement on Form S-4 or Form S-8 or a registration statement filed
in connection with an exchange offer or an offering of equity securities solely
to the Company's existing Stockholders, then the Company shall, in each case,
give at least fifteen (15) business days' prior written notice to each
Stockholder (other than, in the case of a filing under Section 5.1 above, the
Demanding Stockholder) of such proposed filing and such notice shall offer each
Stockholder the opportunity to register such number of Shares as such
Stockholder may specify.
(b) In the event that any offering of securities with respect
to which a Registration Statement is filed as described in Section 5.2(a) is to
be an underwritten
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public offering, the Company shall, if a Stockholder so requests, use reasonable
efforts to cause the managing underwriter or underwriters of such underwritten
public offering to permit such number of Shares as the Stockholder may specify
to be included in such underwritten public offering on no less favorable terms
and conditions to the Stockholder than the terms and conditions applicable to
any similar securities included therein for the account of the Company (or other
Stockholders). Notwithstanding the foregoing, if the lead managing
underwriter(s) of such offering deliver(s) a written opinion to the Company that
marketing factors require a limitation on the number of Shares or other
securities of the Company to be offered and sold in such offering, then there
shall be included in the offering, first, all securities proposed by the Company
to be sold for its account and second, only that number of Shares, if any,
requested to be included in such Registration Statement by Stockholders
requesting registration pursuant to this Section 5.2 that such lead managing
underwriter reasonably and in good faith believes will not substantially
interfere with (including, without limitation, adversely affecting the pricing
of) the offering of securities proposed to be sold by the Company for its own
account. In such event and provided the managing underwriter has so notified the
Company in writing, the number of Shares to be offered and sold by Stockholders
desiring to participate in such offering shall be allocated among such
Stockholders in accordance with the terms of the immediately preceding sentence
and otherwise on a pro rata basis based upon the number of shares of Common
Stock (assuming conversion of the Preferred Stock and other securities
convertible into or exchangeable for Common Stock held by such Stockholders)
each such Stockholder beneficially owns, provided, that all Shares proposed to
be included in such offering other than Shares held by Participating
Stockholders shall be reduced pro rata as provided above (to zero if required)
before any reduction in the number of Shares to be sold by the Participating
Stockholders.
(c) To the extent that the registration of any Shares pursuant
to Section 5.1 or 5.2 is not to be included in an underwritten public offering,
each Registration Statement which includes such Shares shall permit any
Stockholder to sell the Shares in such lawful manner as a Stockholder may
request in accordance with this Section 5, provided, however, that the Company
may elect to file an additional Registration Statement to cover Shares on any
occasion when the Stockholder requests inclusion of Shares in a Registration
Statement to be filed by the Company. Each Stockholder acknowledges that its
right to cause Shares to be included in any underwritten public offering will be
subject to its entering into (i) an underwriting agreement, on terms and
conditions no less favorable to the Stockholder than are offered to the Company
in such underwritten public offering and (ii) other customary arrangements with
the underwriters of such offering; provided, however, that no Stockholder shall
be required to make any representations, warranties or indemnities except as
they relate to such Stockholder's ownership of shares and authority to enter
into the underwriting agreement and to such Stockholder's intended method of
distribution, and the liability of each such Stockholder shall be limited to an
amount equal to the net proceeds from the offering received by such Stockholder.
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(d) To the extent not inconsistent with applicable law, in the
event that the Company effects an underwritten public offering of the Shares
pursuant to Section 5.1 or 5.2, each Stockholder agrees not to effect any public
sale or distribution of any Shares during a reasonable period not to exceed (i)
180 days following the effective date of the initial public offering and (ii) 90
days following the effective date of any other public offering, in each case,
if, and to the extent, such "lock-up" is requested by the underwriter(s) of the
offering.
5.3. Listing. If, in the case of any Transfer of Shares by or
for the account of a Stockholder pursuant to Section 5.1 or 5.2 hereof, such
Shares meet the criteria for listing on any exchange on which the Shares are
then listed, then the Company shall apply for and use its reasonable commercial
efforts to obtain a listing of all such Shares on such exchange.
5.4. State Securities or Blue Sky Laws. In connection with the
registration under the Securities Act of any Transfer of Shares by or for the
account of a Stockholder pursuant to Section 5.1 or 5.2 hereof, the Company
shall file on a timely basis all requisite applications or other instruments to
register, qualify or obtain exemptions for the Transfer under such state
securities or blue sky laws as the managing underwriter shall reasonably
specify, in the case of an underwritten offering, or as each Stockholder may
reasonably specify. The Company shall use reasonable efforts in good faith to
obtain and maintain for a reasonable period, up to the period during which the
Company maintains the effectiveness of the related Registration Statement under
Section 5.1 or 5.2 hereof, an effective registration, qualification or exemption
under the applications or other instruments filed by the Company.
5.5. Certain Other Registration Matters. The Company shall:
(a) notify each holder of any Shares covered by such
Registration Statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act within the appropriate time
period of the Company's becoming aware that the prospectus included in such
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, and at the request of any such holder, prepare and
furnish to such holder a reasonable number of copies of an amendment or
supplement to such Registration Statement or related prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such Shares,
such prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing;
(b) notify each holder of Shares covered by such Registration
Statement at any time:
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(i) when the prospectus or any prospectus supplement
or post-effective amendment has been filed, and, with respect to the
registration statement or any post-effective amendment, when the same
has become effective;
(ii) of any request by the SEC for amendments or
supplements to the registration statement or the prospectus or for
additional information;
(iii) of the issuance by the SEC of or any threat to
institute any stop order suspending the effectiveness of the
Registration Statement or any order preventing the use of a related
prospectus, or the initiation (or any overt threats) of any proceedings
for such purposes; and
(iv) of the receipt by the Company of any written
notification of the suspension of the qualification of any of the
Shares for sale in any jurisdiction or the initiation (or overt
threats) of any proceeding for that purpose;
(c) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and as soon as practicable after
the effective date of the Registration Statement, but in any event within
sixteen (16) months thereafter make available to its security holders an earning
statement that shall satisfy the provisions of Section 11(a) of the Securities
Act, provided that the Company shall be deemed to have complied with this
paragraph if it has complied with Rule 158 of the Securities Act;
(d) use its best efforts to provide a transfer agent and
registrar for the Shares covered by such Registration Statement no later than
the effective date of such Registration Statement;
(e) enter into agreements (including an underwriting agreement
in the form customarily entered into by the Company in a comparable underwritten
offering) and take all other appropriate and all commercially reasonable actions
in order to expedite or facilitate the disposition of such Shares and in such
connection, whether or not an underwriting agreement is entered into and whether
or not the registration is an underwritten registration:
(i) provide the indemnification in accordance with
the provisions and procedures of Section 5.8 hereof to all parties to
be indemnified pursuant to such Section; and
(ii) deliver such documents and certificates as may
be reasonably requested by the Demanding Stockholder, if any, and, if
there is no Demanding Stockholder, the holders of a majority in number
of the Shares being sold and the managing underwriters, if any, to
evidence compliance with Section 5.5(b) above
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and with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company;
(f) cooperate with the holders of Shares covered by such
Registration Statement and the managing underwriter or underwriters to
facilitate, to the extent reasonable under the circumstances, the timely
preparation and delivery of certificate (not bearing any restrictive legends)
representing the securities to be sold under such Registration Statement, and
enable such securities to be in such denominations and registered in such names
as the managing underwriter or underwriters, if any, or such holders may request
and/or in a form eligible for deposit with the Depository Trust Company;
(g) make available for inspection by any holder included in
such Registration Statement, any underwriter participating in any disposition
pursuant to such Registration Statement, and any attorney, accountant or other
agent retained by any such holder or underwriter (collectively, the
"Inspectors"), reasonable access to appropriate officers of the Company and the
Company's subsidiaries to ask questions and to obtain information reasonably
requested by such Inspector and all financial and other records and other
information, pertinent corporate documents and properties of any of the Company
and its subsidiaries and affiliates (collectively, the "Records"), as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility; provided, however, that the Records that the Company determined,
in good faith, to be confidential and which it notifies the Inspectors in
writing are confidential shall not be disclosed to any Inspector unless such
Inspector signs a confidentiality agreement reasonably satisfactory to the
Company or either (i) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission of a material fact in such Registration
Statement or (ii) the release of such Records is ordered pursuant to a subpoena
or other order from a court of competent jurisdiction; provided, further, that
any decision regarding the disclosure of information pursuant to subclause (i)
shall be made only after consultation with counsel for the applicable
Inspectors; and provided, further, that each holder agrees that it will,
promptly after learning that disclosure of such Records is sought in a court
having jurisdiction, give notice to the Company and allow the Company, at the
Company's expense, to undertake appropriate action to prevent disclosure of such
Records;
(h) in the event of the issuance of any stop order suspending
the effectiveness of the Registration Statement or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any Shares included in the Registration Statement for sale in any jurisdiction,
the Company will use all commercially reasonable efforts promptly to obtain its
withdrawal;
(i) prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in connection
with such Registration Statement as may be necessary to comply with the
provisions of the
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Securities Act with respect to the disposition of all securities covered by such
Registration Statement;
(j) furnish to the Participating Stockholders such number of
copies of such Registration Statement and of each amendment and supplement
thereto (in each case including all exhibits), such number of copies of the
prospectus contained in such Registration Statement (including each preliminary
prospectus and any summary prospectus) and any other prospectus filed under Rule
424 under the Securities Act, in conformity with the requirements of the
Securities Act, and such other documents as the Participating Stockholders may
reasonably request in order to facilitate the disposition of the Shares covered
by such registration;
(k) use its best efforts to cause all Shares covered by such
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
Company's business or operations to enable the seller or sellers thereof to
consummate the disposition of such Shares;
(l) furnish, at the request of any Participating Stockholder,
(i) on the date that the Shares to be registered are delivered to the
underwriters for sale in connection with a registration pursuant to this
Agreement, if such securities are being sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that the
Registration Statement with respect to such securities becomes effective, an
opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, in form and in substance as is customarily given
to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Participating Stockholders and (ii) on the date
that the Registration Statement with respect to such securities becomes
effective, a "comfort" letter dated such date, from the independent certified
public accountants of the Company, in form and substance as is customarily given
by independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and to the Participating
Stockholders, and, if such securities are being sold through underwriters, a
reaffirmation of such letter on the date that the Shares are delivered to the
underwriters for sale; and
(m) provide each Participating Stockholder with drafts of any
Registration Statement or amendment or supplement thereto prior to their filing.
Each holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 5.5(a),
such holder shall forthwith discontinue disposition of Shares pursuant to the
prospectus or Registration Statement covering such Shares until such holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 5.5(a) and, if so directed by the Company, such holder will deliver to
the Company (at the Company's expense)
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all copies, other than permanent file copies then in such holder's possession,
of the prospectus covering such Shares current at the time of receipt of such
notice.
The Company agrees that it shall use all reasonable efforts to
timely file the reports required to be filed by it under the Securities Act and
the Securities and Exchange Act of 1934, as amended from time to time (the
"Exchange Act") (including, without limitation, the reports under Sections 13
and 15(d) of the Exchange Act referred to in paragraph (c)(1) of Rule 144 under
the Securities Act), and shall take such further actions as any Stockholder may
reasonably request, all to the extent required to enable Stockholders to sell
Shares, from time to time, pursuant to the resale limitations of (a) Rule 144
under the Securities Act, as such rule may be hereafter amended, or (b) any
similar rules or regulations hereafter adopted by the SEC. Upon the written
request of any Stockholder, the Company shall deliver to such Stockholder a
written statement verifying that it has complied with such requirements.
Notwithstanding anything herein to the contrary, if the
provisions of this Article 5 conflict with the provisions of any underwriting
agreement or similar agreement entered into by the Company in connection with an
IPO, the provisions of such underwriting or similar agreement shall govern the
IPO, provided, that the Company shall not enter into any such agreement which
adversely affects the rights of any Demand Stockholder without the consent of
such Demand Stockholder.
5.6. Customary Agreements. The Company and any Stockholders
selling Shares under this Section 5 shall enter into customary underwriting and
other related agreements (which agreements will include provisions for
indemnification and the delivery of certain closing documents) and will deliver
such other documents in connection with the consummation of an IPO as are
customary for such transactions; provided, however, that no Stockholder shall be
required to make any representations, warranties or indemnities except as they
relate to such Stockholder's ownership of shares and authority to enter into the
underwriting agreement and to such Stockholder's intended method of
distribution, and the liability of each such Stockholder shall be limited to an
amount equal to the net proceeds from the offering received by such Stockholder.
5.7. Registration Expenses. Except as may be otherwise
required by law, regulation or administrative interpretations of applicable laws
and regulations, all of the costs, fees, disbursements and expenses incurred in
connection with the Registration Statements filed or prepared for filing
pursuant to Sections 5.1 and 5.2 hereof and in connection with compliance with
all related listing requirements and federal, state securities or blue sky laws
and regulations and all applications or other instruments, including without
limitation all registration, filing and qualification fees, printing expenses,
fees and disbursements of counsel for the Company (and, if the Company also
sells securities under any such Registration Statements, reasonable fees of one
counsel for any Participating Stockholders) and fees and expenses of accountants
incidental to
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such Registration Statements, shall be borne by the Company, provided, however,
that each Stockholder shall pay all fees of its separate counsel retained in
connection with any Transfer in connection with a registration of any of its
Shares pursuant to Section 5.2. Notwithstanding any other provision of this
Section 5.7, each Stockholder shall bear the entire amount of any discount or
commission allowed or paid to any underwriter in connection with any Transfer of
Shares by or for its own account.
5.8. Indemnifications. (a) (i) In connection with any
Registration Statement filed pursuant to Section 5.1 or 5.2 hereof, the Company
shall indemnify and hold harmless each Stockholder (and its respective
employees, affiliates, trustees, partners, officers and directors) whose shares
are being registered and any agent or investment advisor thereof, each
underwriter who may purchase from or sell any Shares for such Stockholders and
their agents and each person who controls the Stockholders or underwriter,
within the meaning of the Securities Act (and its respective employees,
affiliates, trustees, partners, offices and directors), from and against any and
all losses, claims, damages, expenses and liabilities caused by or arising out
of any untrue statement or alleged untrue statement of a material fact contained
in such Registration Statement, prospectus, preliminary prospectus, or any
amendment or supplement to any of the foregoing, or in any related state
securities or blue sky applications or other instruments or caused by or arising
out of any omission or alleged omission to state in such Registration Statement,
prospectus, preliminary prospectus, or any amendment or supplement to any of the
foregoing, or any related state securities or blue sky applications or other
instruments any material fact required to be stated therein or necessary to make
the statements which are made not misleading, except insofar as such losses,
claims, damages, expenses or liabilities are caused by or arise out of any such
untrue statement or by any such omission that was made in reliance upon and in
strict conformity with information that was furnished in writing to the Company
by such Stockholder (or its officers or directors), underwriter or controlling
person expressly for use in such Registration Statement or any related state
securities or blue sky applications or other instruments and was used in
accordance with such writing, and the Company will pay to each such indemnified
party, as incurred, any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage, expense
or liability; provided, however, that the indemnity agreement contained in this
Section 5.8(a)(i) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld).
(ii) If Shares are included by a Stockholder in any
Registration Statement filed pursuant to Section 5.1 or 5.2 hereof, then such
Stockholder shall indemnify the Company, its directors, each officer signing
such Registration Statement, each other person whose securities are included in
such Registration Statement, each underwriter who may purchase from or sell any
securities for the Company or any other person pursuant to such Registration
Statement and each person, if any, who controls the
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Company, any such other person or any such underwriter, within the meaning of
the Securities Act, from and against any and all losses, claims, damages,
expenses and liabilities caused by any untrue statement of a material fact
furnished in writing to the Company by such Stockholder expressly for use in
such Registration Statement or any related state securities or blue sky
applications or other instruments and used in accordance with such writing and
from any omission therefrom of a material fact needed to be furnished or
necessary to make the information not misleading and each such Stockholder will
pay, as incurred, any legal or other expenses reasonably incurred by the Company
pursuant to this Section 5.8(a)(ii), in connection with investigating or
defending any such loss, claim, damage, expense or liability; provided, however,
that the indemnity agreement contained in this Section 5.8(a)(ii) shall not
apply to amounts paid in settlement of any such loss, claim, damage, expense or
liability if such settlement is effected without the consent of the Stockholder,
which consent shall not be unreasonably withheld; and provided further, that, in
no event shall the liability of any Stockholder under this Section 5.8(a)(ii)
exceed the net proceeds from the offering received by such Stockholder.
(b) Promptly after receipt by an indemnified party under this
Section 5.8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 5.8, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the indemnified party under this Section 5.8 except if, and only to
the extent that, the indemnifying party is actually prejudiced thereby; and such
failure to deliver written notice to the indemnifying party will not relieve it
of any liability that it may have to any indemnified party otherwise than under
this Section 5.8.
(c) Contribution. If the indemnification from the indemnifying
party provided for in this Section 5.8 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 and
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified party in connection with the
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actions which resulted in such losses, claims, damages, liabilities and
expenses, and the relative benefits received by the indemnified party and
indemnifying party (taking into consideration the fact that the provision of the
registration rights and indemnification hereunder is a material inducement to
the Stockholders to purchase Shares pursuant to the Subscription Agreement) as
well as any other relevant equitable considerations. The relative fault 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
any legal and other fees and expenses reasonably incurred by such indemnified
party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5.8(c) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. No Stockholder shall be required to contribute any amount in excess
of the amount by which the total price at which the Shares of such holder were
offered to the public exceeds the amount of any damages which such holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
If indemnification is available under this Section 5.8, the
indemnifying parties shall indemnify each indemnified party to the fullest
extent provided in Section 5.8(a), as the case may be, without regard to the
relative fault of such indemnifying parties or indemnified party or any other
equitable consideration provided for in this Section 5.8(c).
(d) The provisions of this Section 5.8 shall be in addition to
any liability which any party may have to any other party and shall survive any
termination of this Agreement. The indemnification provided by this Section 5.8
shall remain in full force and effect irrespective of any investigation made by
or on behalf of an indemnified party, so long as the actions of such indemnified
party resulting in indemnification hereunder were not fraudulent, reckless or
grossly negligent.
5.9. Other Provisions Relating to Registration Rights. If
Shares are included by a Stockholder in any Registration Statement filed
pursuant to Section 5.1 or 5.2, then such Stockholder shall furnish to the
Company at the Company's request such
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information regarding the Stockholder and the Transfer proposed by the
Stockholder as may be required for inclusion in such Registration Statement or
any related state securities or blue sky applications or other instruments, as
may be necessary to provide supplemental information to the Commission, the
National Association of Securities Dealers, Inc., any national securities
exchange or any administrator of any state securities or blue sky law, or as the
Company or any underwriter may reasonably request. If any registration statement
or comparable statement under the Securities Act refers to a Demanding
Stockholder or any of its Affiliates, by name or otherwise, as the holder of any
securities of the Company then, unless counsel to the Company advises the
Company that the Securities Act requires that such reference be included in any
such statement, each such Stockholder shall have the right to require the
deletion of such reference to itself and its Affiliates.
5.10. Transferability. The rights and obligations of a
Stockholder under this Article 5 shall be transferable in connection with any
Transfer of such Stockholder's Shares (including Shares to be purchased under
the Subscription Agreement and the Purchase Agreements) permitted under this
Agreement, provided, that notwithstanding the foregoing, (i) the rights of a
Stockholder to request a registration under Section 5.1(a) shall be transferable
only to any Affiliate or 75% Transferee of such Stockholder (which Affiliate or
75% Transferee shall assume any concomitant obligations of such rights) and (ii)
none of the such rights and obligations under this Article 5 shall be
transferable in a Transfer of Shares in a public offering or following a public
offering in an open market sale under Rule 144K.
5.11. Changes in Registrable Securities. If, and as often as,
there are any changes in the registrable securities by way of stock split, stock
dividend, combination or reclassification, or through merger, consolidation,
reorganization or recapitalization, or by any other means, appropriate
adjustment shall be made in the provisions of this Agreement, as may be
required, so that the rights and privileges granted hereby shall continue with
respect to the registrable securities as so changed. Without limiting the
generality of the foregoing, the Company will require any successor by merger or
consolidation to assume and agree to be bound by the terms of this Agreement, as
a condition to any such merger or consolidation.
6. Legend. The parties agree that the certificates
representing the Shares shall be legended as follows:
"This certificate and the shares represented hereby are
subject to The Edison Project Inc. Third Amended and Restated
Shareholders' Agreement dated as of July 2, 1999 as amended
from time to time, by and among the parties named therein, a
copy of which is available for inspection at the office of the
Secretary of The Edison Project Inc."
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7. Termination. Except as provided below, the provisions of
Article 4 and Article 3 shall terminate upon the consummation of a Qualified
Public Offering, provided, that notwithstanding the foregoing, (x) in connection
with any public offering, Section 3.5 shall terminate in any event if both (i)
requested in writing by the managing underwriter of such offering and (ii)
consented to by each of the holders of the Series B Common Stock, Series C
Common Stock, Series D Common Stock and Series G Common Stock and (y) the
provisions of Section 4.5 (and all related provisions of this Agreement
necessary to give effect to Section 4.5 which modify or limit such Section 4.5)
shall not terminate until two years after the consummation of a Qualified Public
Offering. The Company shall further amend or amend and restate the Amended and
Restated Certificate of Incorporation, this Agreement and the Amended and
Restated ByLaws to the extent necessary to reflect such terminations, and each
Stockholder agrees to vote its Shares to consent and approve any such amendments
or amendments and restatements.
8. Further Assurances. Each party to this Agreement shall
execute, acknowledge, deliver, file and record such further certificates,
amendments, instruments and documents, and do all such other acts and things as
may be required by law, or as may in the opinion of the Board or counsel to the
Company, be necessary or advisable to carry out the intents and purposes of this
Agreement.
9. Notices.
9.1. Unless otherwise specified in this Agreement, all
notices, demands, elections, requests or other communications which any party to
this Agreement may desire or be required to give hereunder shall be in writing
and shall be given by personal delivery, recognized overnight delivery service,
telecopy, receipt confirmed, or by mailing (by registered or certified first
class mail, postage prepaid, return receipt requested) addressed as provided on
Schedule II hereto. Neither the Company nor any Stockholder will be under any
obligation to communicate with or otherwise deal with in any manner any present
or future member of the Xxxxxxx Group or any Affiliate thereof other than
Xxxxxxx Capital Group LLC.
9.2. A notice shall be deemed to have been given (i) if
delivered personally, on the date so delivered (or, if not a business day, on
the next following business day), (ii) if sent by recognized overnight delivery
service or by registered or certified first class mail, postage prepaid, return
receipt requested, on the day after the day sent, or (iii) if sent by telecopy,
upon electronic confirmation of receipt.
9.3. Whenever notice is required to be given by statute, the
Constitutional Documents or this Agreement, a waiver thereof in writing, signed
by the person or persons entitled to such notice whether before or after the
time stated therein, shall be deemed equivalent to the giving of such notice.
Attendance of a person at a meeting of the Board shall constitute a waiver of
notice of such meeting, except where
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the person is attending for the express purposes of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened.
10. Captions; Contents. All section and article titles or
captions contained in this Agreement, and the table of contents, are for
convenience only and shall not be deemed part of this Agreement.
11. Variation of Pronouns. All pronouns and all variations
thereof shall be deemed to refer to the masculine, feminine or neuter, and all
words in the singular or plural number shall be deemed to refer to both, as the
context shall require.
12. Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original and all of which, taken
together, shall constitute one agreement, and any party hereto may execute this
Agreement by signing one or more counterparts thereof.
13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to conflicts of laws provisions thereof.
14. Successors and Assigns. This Agreement shall be binding
upon the parties hereto and upon their respective successors, executors,
administrators, legal representatives, heirs and any person who receives shares
in a Transfer permitted by Section 4.3(a) - (e) of this Agreement and shall
inure to the benefit of the parties hereto and, except as otherwise provided
herein, their respective successors, executors, administrators, legal
representatives, heirs and any person who receives shares in a Transfer
permitted by Section 4.3(a) - (e) this Agreement. Except as otherwise provided
herein, a Stockholder may not assign any of its rights or obligations under this
Agreement without the prior written consent of the Company, which shall not be
unreasonably withheld. Any and all transferees of Shares in a Transfer permitted
by Section 4.3(a) - (e) this Agreement shall execute this Stockholders'
Agreement or otherwise agree to be bound by its terms.
15. Entire Agreement, Amendments. This Agreement contains the
entire agreement among the parties hereto relative to the subject matter hereof
and may not be amended except in writing signed by each holder of the Company's
Special Common Stock and any Regulation Y Stockholder as defined in the
Certificate (and, in the event all of the Special Common Stock has been
converted to Series A Common Stock, each of the Demand Stockholders) and notice
to each other party hereto.
16. No Third Party Beneficiaries. No provisions in this
Agreement shall be for the benefit of (except as otherwise specifically provided
herein) or enforceable by any third party.
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17. Arbitration. Except as may be otherwise provided herein,
disputes arising under this Agreement shall be arbitrated in New York City in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association by three arbitrators, one selected by the party raising such
dispute, one selected by a majority (based upon the number of shares held at the
time of such dispute) of the other parties hereto (other than the party raising
such dispute and the Company), and the third selected by the others so selected.
Any judgment on the award rendered by the arbitrators may be entered in any
court of competent jurisdiction. The arbitrators shall have no authority to
amend this Agreement. The costs of such arbitration, including expenses of the
other parties thereto, shall be borne by the party against whom the arbitrators'
resolution is rendered. The parties hereto agree that any proceedings pursuant
to this Section 17 shall be kept strictly confidential and shall not be
disclosed to any third party except pursuant to court order.
18. Specific Performance. Each party hereto recognizes and
agrees that (i) its breach of the provisions of this Agreement would cause
irreparable harm to the other parties hereto and (ii) each such other party's
remedy at law for any breach of the provisions of this Agreement would be
inadequate, and (iii) for breach of such provisions, such party shall, in
addition to such other remedies as may be available to it at law or in equity or
as provided in this Agreement, be entitled to injunctive relief and to enforce
its rights by an action for specific performance to the extent permitted by
applicable law. Each party hereto hereby waives any requirement for security or
the posting of any bond or other surety in connection with any temporary or
permanent award of injunctive, mandatory or other equitable relief. Nothing
herein contained shall be construed as prohibiting a party from pursuing any
other remedies available to such party for any breach of threatened breach
hereof or failure to take or refrain from any action as required hereunder.
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IN WITNESS WHEREOF, the parties hereto have entered into this
agreement as of the day and year first above written.
THE EDISON PROJECT INC.
By: /s/ H. Xxxxxxxxxxx Xxxxxxx
-------------------------------
Name: H. Xxxxxxxxxxx Xxxxxxx
Title: President
WSI INC.
By: /s/ H. Xxxxxxxxxxx Xxxxxxx
-------------------------------
Name: H. Xxxxxxxxxxx Xxxxxxx
Title: President
WPA INVESTMENT L.P.
By WSI Inc., its General Partner
By: /s/ H. Xxxxxxxxxxx Xxxxxxx
-------------------------------
Name: H. Xxxxxxxxxxx Xxxxxxx
Title: President
WEG L.P.
By WSI Inc., its General Partner
By: /s/ H. Xxxxxxxxxxx Xxxxxxx
-------------------------------
Name: H. Xxxxxxxxxxx Xxxxxxx
Title: President
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WEG II L.P.
By WSI Inc., its General Partner
By: /s/ H. Xxxxxxxxxxx Xxxxxxx
-------------------------------
Name: H. Xxxxxxxxxxx Xxxxxxx
Title: President
WEG III L.P.
By WSI Inc., its General Partner
By: /s/ H. Xxxxxxxxxxx Xxxxxxx
-------------------------------
Name: H. Xxxxxxxxxxx Xxxxxxx
Title: President
WEG IV L.P.
By WSI Inc., its General Partner
By: /s/ H. Xxxxxxxxxxx Xxxxxxx
-------------------------------
Name: H. Xxxxxxxxxxx Xxxxxxx
Title: President
WEG V L.P.
By WSI Inc., its General Partner
By: /s/ H. Xxxxxxxxxxx Xxxxxxx
-------------------------------
Name: H. Xxxxxxxxxxx Xxxxxxx
Title: President
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WEG VI L.P.
By WSI Inc., its General Partner
By: /s/ H. Xxxxxxxxxxx Xxxxxxx
-------------------------------
Name: H. Xxxxxxxxxxx Xxxxxxx
Title: President
WEG VII L.P.
By WSI Inc., its General Partner
By: /s/ H. Xxxxxxxxxxx Xxxxxxx
-------------------------------
Name: H. Xxxxxxxxxxx Xxxxxxx
Title: President
SPROUT CAPITAL VI, L.P.
By: DLJ Capital Corporation
Its: Managing General Partner
By: /s/ Xxxxx X. Xxxxxx
-------------------------------
Name: Xxxxx X. Xxxxxx
Its: Attorney-in-Fact
SPROUT CAPITAL VII, L.P.
By: DLJ Capital Corporation
Its: Managing General Partner
By: /s/ Xxxxx X. Xxxxxx
-------------------------------
Name: Xxxxx X. Xxxxxx
Its: Attorney-in-Fact
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SPROUT CEO FUND, L.P.
By: DLJ Capital Corporation
Its: General Partner
By: /s/ Xxxxx X. Xxxxxx
-------------------------------
Name: Xxxxx X. Xxxxxx
Its: Attorney-in-Fact
DLJ CAPITAL CORPORATION (Delaware)
By: /s/ Xxxxx X. Xxxxxx
-------------------------------
Name: Xxxxx X. Xxxxxx
Its: Attorney-in-Fact
BLUE ROCK CAPITAL, L.P.
By Blue Rock Partners, L.P., its General
Partner
By Blue Rock, Inc., its General Partner
By: /s/ Xxxxxxxx X. Xxxxxx
-------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: President
/s/ Xxxxx X. Xxxxxxx, Xx.
---------------------------------------
XXXXX X. XXXXXXX, XX.
/s/ Xxxx X. Xxxxxxx
---------------------------------------
XXXX X. XXXXXXX
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/s/ Xxxxxx X. Xxxx
--------------------------------------
XXXXXX X. XXXX
Trustee fbo Xxxxxxxxx X. Xxxxxxx
/s/ Xxxxxx X. Xxxx
--------------------------------------
XXXXXX X. XXXX
Trustee fbo Xxxxx X. Xxxxxxx, III
/s/ Xxxxxx X. Xxxx
--------------------------------------
XXXXXX X. XXXX
Trustee fbo Xxxxxxxxx X. Xxxxxxx
/s/ Xxxxxxxxx X. Xxxxxxx
--------------------------------------
XXXXXXXXX X. XXXXXXX
Custodian for Xxxxx X. Xxxxxx
/s/ Xxxx X. Xxxxxx
--------------------------------------
XXXX X. XXXXXX
/s/ Xxxx X. Childs
--------------------------------------
XXXX X. CHILDS
X.X. CHILDS INVESTMENTS, L.L.C.
By X.X. Childs Associates, Inc.
its Manager
By: /s/ Xxxx Xxxxxx
-------------------------------
Name: Xxxx Xxxxxx
Title: Vice President
-36-
37
RICHMONT LEEDS EDUCATION
COMPANY L.L.C.
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Member
By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Member
LEEDS II L.P.
By Leeds Associates L.L.C., its General
Partner
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Member
/s/ Xxxx X. Xxxx
---------------------------------------
XXXX X. XXXX
/s/ Xxxxxxxxx X. Xxxxxxxxx
---------------------------------------
XXXXXXXXX X. XXXXXXXXX
-37-
38
EACH OF THE INVESTORS SET FORTH ON
SCHEDULE I HERETO
By Xxxxxxx Capital Group
LLC, as Agent and
Attorney-in-Fact for each
of the Investors set forth
on Schedule I hereto
By /s/ Xxxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Managing Director
X.X. XXXXXX INVESTMENT
CORPORATION
By /s/ Xxxx X. Xxxxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Managing Director
SIXTY WALL STREET SBIC FUND, L.P.
By: Sixty Wall Street SBIC Corporation
By /s/ Xxxx X. Xxxxxxxxx
-------------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Managing Director
INVESTOR INVESTMENTS AB
By /s/ Claes Dahlback /s/ Xxxxxxxxx Xxxxxxx
-----------------------------------------
Name: Claes Dahlback & Xxxxxxxx Xxxxxxx
Title:
-38-
39
ABS EMPLOYEES' VENTURE FUND L.P.,
a Maryland limited partnership
By Alex. Xxxxx Investments Inc.,
By: /s/
-------------------------------------
Name:
Title:
GREENWOOD PARTNERS
By: /s/ Xxxxxx Xxxxxx
-----------------------------------------
Xxxxxx Xxxxxx, its General Partner
FORUM PARTNERS
By: /s/ Xxxxxx Xxxxxx
-----------------------------------------
Xxxxxx Xxxxxx, its General Partner
PROGRESSIVE INVESTMENT
COMPANY, INC.
By: /s/
-----------------------------------------
Name:
Title:
/s/ Xxxxx X. Xxxxxx
--------------------------------------------
XXXXX X. XXXXXX, III
-39-
40
YALE UNIVERSITY
By:
-------------------------------------
Name:
Title:
UBS CAPITAL XV LLC
By:
-------------------------------------
Name:
Title:
VULCAN VENTURES INCORPORATED
By: /s/ Xx Xxxxxx
-------------------------------------
Name:
Title:
XXXX X. XXXXXXXX
/s/ Xxxx X. XxXxxxxx
---------------------------------------
XXXX X. XXXXXXXX
Custodian fbo Xxxxxxxxx X. XxXxxxxx
/s/ Xxxx Xxxxxx
----------------------------------------
XXXX XXXXXX
/s/ Xxxxxx X.X. Xxxxx
---------------------------------------
XXXXXX X.X. XXXXX
-40-
41
SCHEDULE I
XXXXXXX INVESTORS
THE XXXXXXX CAPITAL GROUP LLC
Xxxx Xxxxxxx, TTEE 1982 X.X. Xxxxxxx Trust
Xxxxxx X. Xxxxxxx
Alza Corporation Retirement Plan
Xxxxxx X. Xxxxxx Emp. Private Placements
Xxxxxx Xxxxxx Xxxxxxx
Xxxxxxxx School Endowment Fund
City of Milford Employee Pension Fund
City of Stamford Firemen's Pension Fund
Xxxxxxx X. Xxxxx
Estate of Xxxxxx X. Xxxxxx
Xxxxxx & Xxxxx Xxxxxxx JTWROS
HBL Charitable Unitrust
Xxxxx Xxxx
Xxxxxx X. Xxxxxxx
Xxxxxxx Xxxxxxxx
Xxxx Xxx X. Xxxxxxxx Trust for Self
Xxxxxx Investment Partnership I, X.X.
Xxxxxx Trust Co. of the Bahamas Ltd.
Xxxxxx Capital LLC
NFIB Employee Pension Trust
Norwalk Employee's Pension Plan
Public Employee Ret. System of Idaho
Psychology Associates
Roanoke College
State of Oregon/ZCG
Tab Products Co. Pension Fund
The Xxxx Xxxxxx Foundation
The Xxxxxx X. Xxxxxxxx Family Trust
The Xxxxxxx Xxxxxx Foundation
The Xxxxx Foundation
Trustees of Amherst College
Van Loben Sels Charitable Foundation
Xxxxxx Investment Group Ltd. LLC
Xxxxxx Otologic Profit Sharing Trust
Xxxxxxx X. Xxxxx
Xxxxxxx Investment Partners LP
42
SCHEDULE II
STOCKHOLDERS
Name Address
---- -------
The Edison Project Inc. 000 Xxxxx Xxxxxx
Sprout Edison Project Inc. 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxxxxx Xxxx, Esq.
Telecopy: (000) 000-0000
with a copy to: The Edison Project Inc.
First Tennessee Plaza
000 Xxxxx Xxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx
Telecopy: (000) 000-0000
Xxxx and Xxxx LLP
The Xxxxxxx Office Building
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxx Xxxxxxxxx, Esq.
Telecopy: (000) 000-0000
WSI Inc. First Tennessee Plaza
WPA Investment L.P. 000 Xxxxx Xxx Xxxxxx
WEG L.P. Suite 1230
WEG II L.P. Xxxxxxxxx, XX 00000
WEG III L.P. Attention: Xxxxx Xxxxxxxx
WEG IV L.P. Telecopy: (000) 000-0000
WEG V L.P.
WEG VI L.P.
WEG VII L.P.
with a copy to: Xxxx and Xxxx LLP
The Xxxxxxx Office Building
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxx Xxxxxxxxx, Esq.
Telecopy: (000) 000-0000
43
The Sprout Stockholders The Sprout Group
x/x XXX Xxxxxxx Xxxxxxxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxx
Xxxxx X. Xxxxxxx, Xx. c/o The Edison Project Inc.
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Telecopy: (000) 000-0000
with a copy to: c/o Xxxxxx X. Xxxx
X.X. Xxxxxxx & Company
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX
Xxxx X. Xxxxxxx 0000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
with a copy to: c/o Xxxxxx X. Xxxx
X.X. Xxxxxxx & Company
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Xxxxxx X. Xxxx c/o Xxxxxx X. Xxxx
Trustee fbo Xxxxxxxxx X. Xxxxxxx X.X. Xxxxxxx & Co.
Trustee fbo Xxxxx X. Xxxxxxx, III 000 Xxxxx Xxxxxx, 00xx Xxxxx
Trustee fbo Xxxxxxxxx X. Xxxxxxx Xxx Xxxx, XX 00000
Xxxxxxxxx X. Xxxxxxx c/o Xxxxxx X. Xxxx
Custodian for Xxxxx X. Xxxxxx X.X. Xxxxxxx & Co.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Xxxx X. XxXxxxxx 000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Xxxx Xxxxxx c/o Xxxx X. XxXxxxxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Xxxxxx X.X. Xxxxx 0000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
2
44
Xxxx X. Childs c/o X.X. Childs Associates, L.P.
0 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxx X. Childs
Xxxx X. Xxxxxx 000 Xxxx Xxxx Xxxx
Xxxxxxxx, XX 00000
Blue Rock Capital, L.P. c/o Xxxxxxxx X. Xxxxxx
000 Xxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, XX 00000
X.X. Childs Investments, L.L.C. c/o X.X. Childs Associates, L.P.
0 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxx Xxxxxx
Richmont Leeds Education Leeds Group, Inc.
Company L.L.C. 000 Xxxxxxx Xxxxxx
Xxxxx II L.P. 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxx
Xxxx X. Xxxx 000 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Xxxxxxxxx X. Xxxxxxxxx c/o X. Xxxxxx Xxxxxxx
Xxxxxxx Capital
00 Xxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000-0000
The Investors Set Forth Xxxxxxx Capital Group LLC
on Schedule I Hereof 000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
X.X. Xxxxxx Investment Corporation 00 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xx. Xxxx X. Xxxxxxxxx and
J. Xxxxxx Xxxxxxxx, Esq.
with a copy to: Proskauer Rose LLP
0000 Xxxxxxxx
0
00
Xxx Xxxx, XX 00000-0000
Attention: Xxxxx X. Xxxx, Esq.
Telecopy: (000) 000-0000
Sixty Wall Street SBIC Fund, L.P. 00 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xx. Xxxx X. Xxxxxxxxx and
J. Xxxxxx Xxxxxxxx, Esq.
with a copy to: Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxx, Esq.
Telecopy: (000) 000-0000
Investor Investments AB Attn: Klas Hillston
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
with a copy to: Xxxxx, Polk & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention:
Greenwood Partners c/o Xxxxxx Xxxxxx
PFP Associates
0000 Xxxxx Xxxxx, Xxxxx 000
X. Xxxx Xxxxx, XX 00000-0000
Telecopy: (000) 000-0000
Forum Partners c/o Xxxxxx Xxxxxx
PFP Associates
0000 Xxxxx Xxxxx, Xxxxx 000
X. Xxxx Xxxxx, XX 00000-0000
Telecopy: (000) 000-0000
ABS Employees' Venture Fund L.P. c/o Xxxx X'Xxxxxxx, Administrator
000 Xxxx Xxxxxxx Xxxx
X.X. 00
Xxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Progressive Investment c/o Xxxxxxx Xxxxxxxxx
Company, Inc. 0 Xxxxxxxxx Xx.
Xxxxxx, XX 00000
4
46
Xxxxx X. Xxxxxx, III c/o Pilot Corporation
0000 Xxxxx Xxxxx
Xxxxxxxxx, XX 00000
Yale University x/x Xxxxxxx Xxxxxx
000 Xxxxxx Xxxxxx
Xxx Xxxxxxx Xxxxx
00xx Xxxxx
Xxx Xxxxx, XX 00000
UBS Capital XV LLC c/o UBS Capital LLC
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx
Telecopy: (000) 000-0000
with a copy to: Xxxx, Scholer, Fierman, Xxxx &
Handler, LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxx, Esq.
Telecopy: (000) 000-0000
Vulcan Ventures Incorporated 000 000xx Xxxxxx X.X.
Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xx Xxxxxx
Telecopy: (000) 000-0000
with a copy to: Irell & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxx
Xxxxx 000
Xxx Xxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxx, Esq.
Telecopy: (000) 000-0000
5
47
THE EDISON PROJECT INC.
FIRST AMENDMENT TO THIRD AMENDED AND RESTATED
SHAREHOLDERS' AGREEMENT
This First Amendment (the "Amendment") to Third Amended and Restated
Shareholders' Agreement is made as of July 28, 1999 by and among The Edison
Project Inc., a Delaware corporation (the "Company"), the Stockholders whose
names are signed below and the New Investors listed on Exhibit A hereto (the
"New Investors").
WITNESSETH
WHEREAS, the Company and certain of its Stockholders (the "Stockholders")
are parties to that certain Third Amended and Restated Shareholders' Agreement
dated as of July 2, 1999 (the "Shareholders' Agreement");
WHEREAS, the Company and the Stockholders desire that the New Investors be
made parties to the Shareholders' Agreement;
WHEREAS, pursuant to Section 15 thereof, the Shareholders' Agreement may
be amended with the consent of each holder of the Company's Special Common
Stock and each Regulation Y Stockholder of the Company;
WHEREAS, the Company and Stockholders required to amend the Shareholders'
Agreement hereby consent in writing to this Amendment.
NOW, THEREFORE, for good and better consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. For all purposes of the Shareholders' Agreement (as amended by this
Amendment), the term "Stockholders" shall include the New Investors.
2. Except as amended hereby, the Shareholders' Agreement shall remain in
full force and effect.
3. Capitalized terms used but not defined herein shall have the
respective meanings given to such terms in the Shareholders' Agreement.
4. This Amendment may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
date set forth above.
1
48
THE COMPANY:
THE EDISON PROJECT INC.
By: /s/ H. Xxxxxxxxxxx Xxxxxxx
-----------------------------
Name: H. Xxxxxxxxxxx Xxxxxxx
Title: President
2
