EXHIBIT 4.6
EXECUTION COPY
XINHUA FINANCE MEDIA LIMITED
INVESTOR RIGHTS AGREEMENT
March 16, 2006
TABLE OF CONTENTS
ARTICLE I Definitions...................................................... 1
Section 1.01. Definitions............................................. 1
ARTICLE II Covenants of the Company........................................ 11
Section 2.01. Certain Affirmative Covenants of the Company............ 11
Section 2.02. Termination of Covenants................................ 15
ARTICLE III Pre-Emptive Rights............................................. 15
Section 3.01. Pre-Emptive Rights...................................... 15
Section 3.02. Termination of Pre-Emptive Rights....................... 16
ARTICLE IV Transfers....................................................... 16
Section 4.01. Transfers............................................... 16
Section 4.02. Legends................................................. 17
Section 4.03. Co-Sale Rights.......................................... 17
Section 4.04. Right to sell in IPO or QIPO............................ 19
ARTICLE V Registration Rights.............................................. 19
Section 5.01. Demand Registration..................................... 19
Section 5.02. Piggyback Registration.................................. 22
Section 5.03. F-3 or S-3 Registration................................. 23
Section 5.04. Expenses of Registration................................ 24
Section 5.05. Further Obligations of the Company...................... 25
Section 5.06. Preparation; Reasonable Investigation;
Review by Counsel....................................... 27
Section 5.07. Indemnification......................................... 28
Section 5.08. Rule 144 Reporting...................................... 30
Section 5.09. Transfer of Registration Rights......................... 31
Section 5.10. Subsequent Registration Rights.......................... 31
Section 5.11. Registration in Non-U.S. Jurisdictions.................. 31
ARTICLE VI Miscellaneous................................................... 31
Section 6.01. Notices................................................. 32
Section 6.02. Counterparts............................................ 33
Section 6.03. Modification or Amendment of Agreement.................. 33
Section 6.04. Successors and Assigns.................................. 33
Section 6.05. Governing Law........................................... 33
Section 6.06. Waiver of Jury.......................................... 33
Section 6.07. Integration............................................. 34
Section 6.08. Severability............................................ 34
Section 6.09. Interpretation.......................................... 34
Section 6.10. Ambiguities............................................. 34
Section 6.11. Further Assurances...................................... 34
Section 6.12. No Third-Party Rights................................... 35
Section 6.13. No Waiver; Remedies..................................... 35
Section 6.14. Submission to Jurisdiction.............................. 35
Schedule A - Investors
Annex A - Exempt Issuances
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INVESTOR RIGHTS AGREEMENT (the "Agreement"), dated as of March 16, 2006,
between among (a) XINHUA FINANCE MEDIA LIMITED, a Cayman Islands Limited Company
(the "Company"), (b) the holders of the Company's Preferred Shares (as defined
below) listed on Schedule A hereto (each, an "Investor" and collectively, the
"Investors"), and (c) XINHUA FINANCE LIMITED (the "Parent").
RECITALS
A. The Company and the Investors have entered into that certain Share
Purchase Agreement, dated as of the date hereof (the "Share Purchase
Agreement"), pursuant to which the Company agreed to issue to the Investors, and
the Investors agreed to purchase from the Company, Preferred Shares.
B. In order to induce the Investors to invest funds in the Company pursuant
to the Share Purchase Agreement and as a condition to the Investors' obligations
under the Share Purchase Agreement, the Company and the Parent desire to grant
the Investors certain rights as set forth herein.
AGREEMENT
In consideration of the premises and the mutual covenants and the
agreements herein set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions.
(a) As used in this Agreement, the following terms shall have the
following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined).
(i) "Accelerated Redemption Event" means the "Accelerated
Redemption Event" as defined in the Articles of Association of the
Company.
(ii) "Action" against a Person means an action, suit, litigation,
arbitration, investigation, complaint, contest, hearing, inquiry,
inquest, audit, examination or other proceeding threatened or pending
against or affecting the Person or its property, whether civil,
criminal, administrative, investigative or appellate, in law or equity
before any arbitrator or Governmental Body.
(iii) "Affiliate" of a Person means any other Person (a) that
directly or indirectly controls, is controlled by or is under common
control with, the Person or any of its Subsidiaries, (b) that directly
or indirectly beneficially owns or holds 5% or more of any class of
equity Security or other similar interests of the Person or any of
its Subsidiaries or (c) 5% or more of the equity Securities of which
is directly or indirectly beneficially owned or held by the Person or
any of its Subsidiaries. For purposes of this definition, the term
"control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by
contract, agreement or otherwise. Notwithstanding the foregoing, no
Investor or any Affiliate of any Investor shall be an Affiliate of the
Parent, the Company or any of its Subsidiaries.
(iv) "Articles of Association" means the Amended and Restated
Articles of Association of the Company.
(v) "Authorized Officer" means, as applied to any Person, any
individual holding the position of chairman of the board (if an
office), chief executive officer, president or one of its vice
presidents (or the equivalent thereof), and such Person's chief
financial officer or treasurer.
(vi) "Board of Directors" means the board of directors of the
Company as constituted from time to time.
(vii) "Bridge Loan" means the loan dated March 2, 2006 in the
principal amount of $2,000,000 from Xinhua Financial Network Limited
to Company.
(viii) "Business Day" means a day other than Saturday or Sunday
or other day on which commercial banks in New York City, New York,
Charlotte, North Carolina, Hong Kong or Tokyo, Japan, are authorized
or required by law or other governmental action to close and a day on
which dealings are carried on for deposits in Dollars by and among
banks in the London interbank market.
(ix) "Capital Lease" means, as applied to any Person, any lease
of any property (whether real, personal or mixed) by that Person as
lessee that, in conformity with GAAP, is or should be accounted for as
a capital lease on the balance sheet of that Person.
(x) "Capital Stock" means any and all shares, interests,
participations or other equivalents (however designated) of capital
stock of a corporation, any and all equivalent ownership interests in
a Person (other than a corporation), including, without limitation,
partnership interests and membership interests, and any and all
warrants, rights or options to purchase or other arrangements or
rights to acquire any of the foregoing.
(xi) "Collateral" has the meaning stated in the Security
Agreement.
(xii) "Collateral Documents" means the Security Agreement, the
Pledge Agreement, and all other instruments, documents and agreements
delivered by the Company or any Covered Subsidiary pursuant to the
Share Purchase Agreement or any of the other Equity Documents
(including, without limitation, all UCC financing
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statements) in order to grant to the Investor a Lien on any property
of the Company or any Covered Subsidiary as security for the
Obligations.
(xiii) "Common Shares" means (a) the Company's common shares, par
value $0.001 per share, (b) any securities of the Company which the
holders of the Company's common shares, par value $0.001 per share,
shall be entitled to receive, or shall have received, in connection
with any stock splits, stock dividends or similar events with respect
to the Company's common shares, par value $0.001 per share and (c) any
other securities into which or for which any of the Company's common
shares, par value $0.001 per share, may be converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger, sale
of assets or otherwise.
(xiv) "Covered Subsidiary" means (i) ▇▇▇▇ ▇▇▇▇▇ International
Limited, a British Virgin Islands company, (ii) Upper Will Enterprises
Limited, a British Virgin Islands company and (iii) Active Advertising
Agency Limited, a Hong Kong company.
(xv) "Credit Agreement" means the Credit Agreement, dated as of
March 16, 2006, among the Company, the Investors, the Guarantors named
therein and the Agent named therein.
(xvi) "Credit Document" means "Credit Document" as defined under
the Credit Agreement.
(xvii) "Default" means a condition or event that, after notice or
lapse of time or both, would constitute an Event of Default.
(xviii) "Designated Offshore Securities Market" means the
Designated Offshore Securities Market as defined in Section 230.902(b)
of Regulation S of the Securities Act.
(xix) "Domestic Subsidiary" means any Subsidiary organized under
the laws of the PRC.
(xx) "Environmental Laws" means all national, state, regional,
provincial, and local laws (including without limitation common law),
statutes, regulations and rules whether now or hereinafter in effect
relating in any way to the environment, the preservation or
reclamation of natural resources, the management, release or
threatened release of any Hazardous Material or health and safety
matters.
(xxi) "Environmental Permits" means all permits, licenses,
authorizations, registrations and other governmental consents required
by applicable Environmental Laws for the use, storage, treatment,
transportation, release, emission and disposal of raw materials,
by-products, wastes and other substances used or produced by or
otherwise relating to the operations of the Company and any of its
Subsidiaries.
(xxii) "Equity Documents" means the Share Purchase Agreement, the
Collateral Documents, the Investor Rights Agreement, the Articles of
Association of
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the Company and all other documents or instruments or agreements
executed or delivered by the Company or a Covered Subsidiary for the
benefit of any Investor.
(xxiii) "Equity Securities" means the Common Shares, Preferred
Shares and any other capital stock, equity interest or other ownership
interest or profit participation or similar right with respect to the
Company, including, without limitation, limited liability company
membership interests, partnership interests, voting trust
certificates, certificates of interest or participation in any
profit-sharing agreement or arrangement, options, warrants, bonds,
debentures, notes, or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities" or any certificates of
interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to
subscribe to, purchase or acquire, any of the foregoing.
(xxiv) "Event of Default" means an Event of Default as defined in
the Credit Agreement.
(xxv) "Exchange Act" means the United States Securities Exchange
Act of 1934, as amended from time to time, and any successor statute.
(xxvi) "Financial Officer Certification" means, with respect to
the financial statements for which such certification is required, the
certification of the chief financial officer of the Company that such
financial statements fairly present, in all material respects, the
financial condition of the Company and its Subsidiaries on a
consolidated basis as at the dates indicated and the results of their
operations and their cash flows for the periods indicated, subject to
the absence of footnotes and changes resulting from audit and normal
year-end adjustments.
(xxvii) "Financials" means, with respect to any Person for any
period, the balance sheet of such Person as at the end of such period,
and the related statement of income and expense and statement of cash
flow of such Person for such period, each setting forth in comparative
form the figures for the previous comparable fiscal period, all in
reasonable detail and prepared in accordance with GAAP.
(xxviii) "First Lien Collateral Agent" means "Agent" as defined
under the Credit Documents.
(xxix) "Fiscal Year" means the fiscal year of the Company and its
Subsidiaries ending on December 31 of each calendar year.
(xxx) "Foreign Subsidiary" means any Subsidiary that is not a
Domestic Subsidiary.
(xxxi) "Fully-Diluted Common Shares" means, as of the time of
determination, all issued and outstanding common shares of the Company
and all common shares of the Company issuable upon conversion or
exercise of any rights,
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options, warrants or other securities convertible into or exercisable
for common shares, including, without limitation, the Preferred
Shares.
(xxxii) "GAAP" means International Financial Reporting Standards
as in effect from time to time, consistently applied throughout the
periods to which reference is made.
(xxxiii) "Governmental Body" means any agency, bureau,
commission, court, department, official, political subdivision,
tribunal or other instrumentality of any administrative, judicial,
legislative, executive, regulatory, police or taxing authority of any
government, whether supranational, national, federal, state, regional,
provincial, local, domestic or foreign.
(xxxiv) "Hazardous Material" means any hazardous or toxic
substance, waste, contaminant, pollutant, gas or material, including,
without limitation, radioactive materials, oil, petroleum and
petroleum products and constituents thereof, which are regulated under
any Environmental Law, including, without limitation, any substance,
waste or material which is (a) designated a "pollutant", "hazardous
substance", "extremely hazardous substance" or "toxic chemical" under
any Environmental Law, or (b) regulated in any way under the
Regulations of any state where the Company or any of its Subsidiaries
conducts its business or owns any real property or has any leasehold
or in which any Relevant Property is located.
(xxxv) "Holder" means any Person (including the Investors) who
holds any Equity Securities.
(xxxvi) "Hong Kong" means the Hong Kong Special Administrative
Region of the People's Republic of China.
(xxxvii) "IPO" means an initial public offering of Common Shares
of the Company which has been admitted for listing and trade on a
Qualified Exchange.
(xxxviii) "Indebtedness" means, with respect to any Person,
without duplication, the following: (i) all indebtedness of such
Person for borrowed money, (ii) all obligations of such Person for the
deferred purchase price of property or services other than accounts
payable and accrued liabilities that would be classified as current
liabilities under GAAP which payables and expenses are incurred in
respect of property or services purchased in the ordinary course of
business, (iii) all obligations of such Person evidenced by notes,
bonds, debentures or similar borrowing or securities instruments, (iv)
all obligations of such Person created or arising under any
conditional sale or other title retention agreement with respect to
property acquired by such Person, (v) all obligations of such Person
as lessee under Capital Leases, (vi) all obligations of such Person in
respect of banker's acceptances and letters of credit, (vii) all
obligations of such Person secured by Liens on the assets and property
of such Person, (viii) all obligations of such Person to purchase,
redeem, retire, defease or otherwise make any payment in respect of
any capital stock or other ownership or profit interest in such Person
or any other Person or any warrants, rights or options to acquire such
capital stock, (ix) all obligations of such Person in respect of any
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guaranty by such Person of any obligation of another Person of the
type described in clauses (i) through (viii) of this definition and
(x) all obligations of another Person of the type described in clauses
(i) through (ix) secured by a Lien on the property or assets of such
Person (whether or not such Person is otherwise liable for such
obligations of such other Person).
(xxxix) "Internal Control Agreement" means (i) any appointment or
indemnification arrangement or agreement with a natural Person, who is
a citizen of the PRC, designated by the Parent or the Company or any
Affiliate or Subsidiary of the Parent or the Company to act as nominee
shareholder and legal representative of any Domestic Subsidiary, and
any action, arrangement, declaration, or agreement undertaken by such
Person, or caused to be undertaken by such Person, in connection with
the fulfillment of such role, including, without limitation, the
acquisition of any beneficial interest or the holding of record in the
Securities (including Capital Stock) of such Domestic Subsidiary and
the execution, either with the Parent, the Company, Affiliate or
Subsidiary of the Parent or the Company or any other third party
whether or not affiliated with the Parent or the Company, of any
secured promissory note, equity pledge agreement, equity purchase
option agreement, subrogation agreement, declaration of waiver of
pre-emption rights, and declaration of waiver of spousal communal
rights or (ii) any arrangement or agreement (including, without
limitation, any consulting or service arrangements or agreements)
pursuant to which the Company or any Subsidiary of the Company
indirectly receives the economic benefit of revenue generated by any
Media Asset.
(xl) "Liens" means any encumbrance, mortgage, pledge,
hypothecation, charge, assignment, lien, restriction or other security
interest of any kind securing any obligation of any Person.
(xli) "Material Adverse Effect" means any (i) material adverse
effect on the business, operations, properties, assets or condition
(financial or otherwise) of the Company and its Subsidiaries taken as
a whole that may affect the ability of the Company or any Covered
Subsidiary to perform its material obligations under any of the Equity
Documents, (ii) material impairment of the ability of the Company or
the Covered Subsidiaries to perform their obligations under any of the
Equity Documents, (iii) material adverse effect on the legality,
validity, binding effect or enforceability of the Equity Documents
against the Company or any Covered Subsidiary or (iv) material adverse
effect on the rights or remedies available to the Investors under any
Equity Document, excluding any written waivers or releases by the
Investors.
(xlii) "Media Asset" means the assets set forth in Annex A of the
Share Purchase Agreement.
(xliii) "Newspaper Assets" means the assets set forth in Annex B
of the Share Purchase Agreement.
(xliv) "Obligations" means all amounts owed, obligations and
liabilities of the Company or any of its Covered Subsidiaries from
time to time owed to any
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Investor or its Affiliates direct or indirect, joint or several,
absolute or contingent, matured or unmatured, liquidated or
unliquidated, secured or unsecured, arising by contract, operation of
law or otherwise, arising or incurred under the Equity Documents.
(xlv) "Original Issuance Date" has the meaning defined in the
Articles of Association.
(xlvi) "Parent" means Xinhua Finance Limited.
(xlvii) "Permitted Liens" means (i) Liens securing the
Obligations, (ii) Liens securing taxes or other governmental charges
not yet due or due but contested in good faith by appropriate
proceedings and for which the Company or any of its Covered Subsidiary
has made appropriate reserves (so long as the holder of any such Lien
is not taking any active steps to enforce or foreclose on such Lien),
(iii) Liens of landlords, carriers, warehousemen, mechanics and
materialmen and other similar statutory Liens arising in the ordinary
course of the Company and such Covered Subsidiary's business, less
than 120 days old as to obligations not yet due or due but contested
in good faith by appropriate proceedings and for which the Company and
such Covered Subsidiary has made appropriate reserves (so long as the
holder of any such Lien is not taking any active steps to enforce or
foreclose on such Lien), (iv) easements, rights of way, zoning
restrictions and similar minor Liens which individually and in the
aggregate do not have a Material Adverse Effect on the Company and/or
any Covered Subsidiary, and (v) Liens securing obligations arising
under the Credit Documents.
(xlviii) "Person" means and includes natural persons,
corporations, limited partnerships, general partnerships, limited
liability companies, limited liability partnerships, joint stock
companies, Joint Ventures, associations, companies, trusts, banks,
trust companies, land trusts, business trusts or other organizations,
whether or not legal entities, other legal entities and Governmental
Bodies.
(xlix) "Pledge Agreement" means the Pledge Agreement, dated as of
March 16, 2006, by the Pledgors signatory thereto in favor of
Investors.
(l) "Potential Material Event" means either (a) the possession by
the Company of material information not ripe for disclosure in a
registration statement, or (b) any material engagement or activity by
the Company which would be adversely affected by disclosure in a
registration statement at such time, in each case, which shall be
evidenced by a written good faith determination by the Board that both
(x) disclosure of such information, engagement or activity in a
registration statement would be detrimental to the business and
affairs of the Company, and (y) a registration statement would be
materially misleading absent the inclusion of such information,
engagement or activity.
(li) "Preference Amount" means the "Preference Amount" defined in
the Articles of Association of the Company.
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(lii) "Preferred Holder" means (both before and after the
conversion of the Preferred Shares into Common Shares) the Investors
and any Person to whom the Investors shall Transfer any of the
Investors' Preferred Shares, and/or Common Shares pursuant to the
terms of this Agreement.
(liii) "Preferred Shares" means (a) the shares of the Company's
Convertible Preferred Shares, face value $3.657438 per share, (b) any
securities of the Company which the holders of the Company's
Convertible Preferred Shares, face value $3.657438 per share, shall be
entitled to receive, or shall have received, in connection with any
stock splits, stock dividends or similar events with respect to the
Company's Convertible Preferred Shares, face value $3.657438 per
share, and (c) any other securities into which or for which any of the
Company's Convertible Preferred Shares, face value $3.657438 per
share, may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.
(liv) "PRC" means the People's Republic of China excluding Hong
Kong, Macau Special Administrative Region and Taiwan.
(lv) "QIPO" means an IPO of the Company in which the QIPO
Valuation is no less than $400 million or, if 100% of the ownership of
both Newspaper Assets has been acquired directly or indirectly by the
Company, an IPO of the Company in which the QIPO Valuation is no less
than $500 million.
(lvi) "QIPO Valuation" means an amount equal to (i) the initial
price per share of Company's Common Shares issued in the IPO (and, if
such price is not expressed in Dollars, then its equivalent in
Dollars) multiplied by (ii) the number of outstanding Company's Common
Shares immediately following the closing of the IPO.
(lvii) "Register", "registered" and "registration" means a
registration effected through the preparation and filing of a
registration statement or similar document in compliance with the
Securities Act and the declaration or ordering of effectiveness of
such registration statement or document.
(lviii) "Registrable Securities" means and includes all Common
Shares held by the Preferred Holders (including, without limitation,
all Common Shares issuable upon conversion of the Preferred Shares);
provided, however, that Registrable Securities shall cease to be
Registrable Securities upon the consummation of any sale of such
securities pursuant to a registration statement or Rule 144.
(lix) "Registrable Security Holder" means any Person (including
each Investor) who holds Registrable Securities or the rights to hold
Registrable Securities, or any Person to whom any Registrable Security
Holder shall Transfer its Registrable Securities pursuant to Section
5.09 of this Agreement.
(lx) "Registration Expenses" means all expenses incurred by the
Company in effecting any registration pursuant to this Agreement,
including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and
8
disbursements of counsel for the Company, blue sky fees and expenses,
the expense of any special audits incident to or required by any such
registration and the reasonable fees and disbursements of one special
legal counsel to represent all of the Registering Holders, Piggyback
Holders or F-3 or S-3 Holders, as the case may be. Registration
Expenses do not include compensation of regular employees of the
Company which shall be paid in any event by the Company, underwriting
discounts and commissions and stock transfer taxes.
(lxi) "Registration Statement" means a registration statement on
Form F-1 or S-1, Form F-3 or S-3 or Form SB-2 (or such similar or
successor forms as may be appropriate) prepared and filed with the SEC
by the Company pursuant to Article V of this Agreement.
(lxii) "Regulation" means each applicable law, rule, regulation,
order, guidance or recommendation (or any change in its interpretation
or administration) by any Governmental Body, central bank or
comparable agency and any request or directive (whether or not having
the force of law) of any of those Persons and each judgment,
injunction, order, writ, decree or award of any Governmental Body,
arbitrator or other Person.
(lxiii) "Relevant Property" means, for the Company and/or any of
its Subsidiaries, all sites, facilities, locations, real property and
leaseholds (a) presently or formerly owned, leased, used or operated
by the Company or any of its Subsidiaries (whether or not such
properties are currently owned, leased, used or operated by the
Company or any of its Subsidiaries), (b) at which any Hazardous
Material has been transported, disposed, treated, stored or released
by the Company or any of its Subsidiaries, or (c) that are directly
adjacent to any sites, facilities, locations, real property or
leaseholds presently or formerly owned, leased, used or operated by
the Company or any of its Subsidiaries.
(lxiv) "Rule 144" means Rule 144 promulgated under the Securities
Act, as such rule shall be in effect from time to time.
(lxv) "Schedule of Exceptions" means the Schedule of Exceptions
attached as Exhibit C to the Share Purchase Agreement and delivered to
the Investors prior to the execution of the Share Purchase Agreement.
(lxvi) "SEC" means the United States Securities and Exchange
Commission and includes any Governmental Body succeeding to the
functions thereof.
(lxvii) "Security Agreement" means the Security Agreement, dated
as of March 16, 2006, among the Company, the Covered Subsidiaries and
the Investors.
(lxviii) "Securities" means any stock, shares, limited liability
company membership interests, partnership interests, voting trust
certificates, certificates of interest or participation in any
profit-sharing agreement or arrangement, options, warrants, bonds,
debentures, notes, or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general any
instruments
9
commonly known as "securities" or any certificates of interest, shares
or participations in temporary or interim certificates for the
purchase or acquisition of, or any right to subscribe to, purchase or
acquire, any of the foregoing.
(lxix) "Securities Act" means the United States Securities Act of
1933, as amended from time to time, and any successor statute.
(lxx) "Selling Expenses" means all underwriting discounts,
selling commissions and stock transfer taxes applicable to the
Registrable Securities registered by the Registering Holders,
Piggyback Holders or F-3 or S-3 Holders, as the case may be.
(lxxi) "Subsidiary" means, (i) with respect to any Person, any
corporation, partnership, limited liability company, association,
joint venture or other business entity of which more than 50% of the
total voting power of shares of stock or other ownership interests
entitled (without regard to the occurrence of any contingency) to vote
in the election of the Person or Persons (whether directors, managers,
trustees or other Persons performing similar functions) having the
power to direct or cause the direction of the management and policies
thereof is at the time owned or controlled, directly or indirectly, by
that Person or one or more of the other Subsidiaries of that Person or
a combination thereof and (ii) the entities listed on Annex C of the
Share Purchase Agreement and their Subsidiaries as defined in clause
(i) of this definition.
(lxxii) "Tax" means any present or future tax, levy, impost,
duty, assessment, charge, fee, deduction or withholding of any nature
and whatever called, by whomsoever, on whomsoever and wherever
imposed, levied, collected, withheld or assessed, provided, "Tax on
the overall net income" of a Person shall be construed as a reference
to a tax imposed by the jurisdiction in which that Person is organized
or in which that Person's applicable principal office is located or in
which that Person is deemed to be doing business on all or part of the
net income, profits or gains (whether worldwide, or only insofar as
such income, profits or gains are considered to arise in or to relate
to a particular jurisdiction, or otherwise) of that Person.
(lxxiii) "Transfer" means any sale, assignment, transfer,
exchange, pledge, grant of security interest in, hypothecation,
encumbrance or other disposition or conveyance of any interest in.
(lxxiv) "UCC" means the Uniform Commercial Code (or any similar
or equivalent legislation) as in effect in any applicable
jurisdiction.
(lxxv) "WFOE" means a direct or indirect wholly owned Domestic
Subsidiary of the Company.
(b) Any reference in this Agreement to a "first-priority lien" or
words of similar effect in describing the security interests created under
the Share Purchase Agreement shall be understood to refer to such priority
subject to the claims of the First Lien Collateral Agent under the Credit
Agreement and related agreements.
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ARTICLE II
Covenants of the Company
Section 2.01. Certain Affirmative Covenants of the Company. The Company
covenants and agrees that, from and after the date of this Agreement, the
Company shall perform and observe the following covenants and provisions:
(a) Basic Reporting Requirements. The Company shall furnish to the
Investor:
(i) as soon as available but in any event within ninety (90) days
after the close of each Fiscal Year, the audited consolidated
Financials of the Company and its Subsidiaries for such Fiscal Year,
certified by the Company's accountants;
(ii) as soon as available but in any event within sixty (60) days
after the end of each Fiscal Quarter, the unaudited consolidated
Financials of the Company and its Subsidiaries for such quarter;
(iii) as soon as available but in any event within thirty (30)
Business Days after the end of each fiscal month the unaudited
consolidated Financials of the Company and its Subsidiaries for such
month, certified by its chief financial officer pursuant to a
Financial Officer Certification;
(iv) together with the quarterly and annual audited consolidated
Financials, a certificate of the Company certifying that (i) no
Default or Event of Default has occurred and (ii) no Accelerated
Redemption Event has occurred, or if any such event in subsection (i)
or (ii) has occurred, the actions taken by the Company with respect
thereto;
(v) promptly upon Company obtaining knowledge of (i) the
institution of, or non-frivolous written threat of, any Action not
previously disclosed in writing by Company to Investors, or (ii) any
material development in any action that, in the case of either clause
(i) or (ii), if adversely determined could be reasonably expected to
have a Material Adverse Effect, or seeks to enjoin or otherwise
prevent the consummation of, or to recover any material damages or
obtain relief as a result of, the transactions contemplated hereby,
written notice thereof together with such other information as may be
reasonably available to Company to enable Investors and their counsel
to evaluate such matters;
(vi) as soon as available but in any event no later than the end
of each Fiscal Year an updated financial projection for the succeeding
Fiscal Year;
(vii) promptly upon their becoming available, all minutes and
written resolutions of the Board of Directors of the Company;
(viii) promptly upon their becoming available, copies of all
statements, reports, releases, notices and any other information or
data sent or made available generally by the Company to its
shareholders; and
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(ix) with reasonable promptness, such other information and
financial data concerning the Company and its Subsidiaries as any
Person entitled to receive information under this Section 2.01(a)
shall request.
(b) Visitation; Verification. The Company shall keep, and shall cause
each Covered Subsidiary to keep, true and accurate books of account in
accordance with GAAP and shall permit, and cause such Covered Subsidiary to
permit, the Investor and or any of their designated representatives, upon
reasonable notice and at the expense of the Company, to visit and inspect
the premises of the Company and/or other Covered Subsidiary, to examine the
books of account of any such Persons and their Affiliates (and to make
copies and/or extracts therefrom) and to discuss the affairs, finances and
accounts of such Persons and their Affiliates with, and to be advised as to
the same by, the officers of such Persons and to be advised as to such or
other business records upon the request of the Investor.
(c) Maintenance of Properties. The Company shall maintain, and shall
cause each Covered Subsidiary to maintain, its corporate/legal existence
and business, shall maintain, and shall cause such Covered Subsidiary to
maintain, its assets in good operating conditions and repair (subject to
ordinary wear and tear and casualty damage), and shall keep, and shall
cause such Covered Subsidiary to keep, its business and assets adequately
insured.
(d) Notice of Material Events. The Company shall notify, and shall
cause each Covered Subsidiary to notify, the Investor promptly in writing
upon an Authorized Officer becoming aware of any of the following: (i) the
occurrence of any Default or Event of Default, or any Accelerated
Redemption Event, (ii) any noncompliance with any Environmental Law or
proceeding in respect thereof which could have a Material Adverse Effect,
(iii) any change of address of the Company or any other Covered Subsidiary,
(iv) any threatened or pending litigation or similar proceeding affecting
the Company or any Covered Subsidiary involving claims in excess of
$500,000 in the aggregate or any material change in any such litigation or
proceeding previously reported, (v) claims in excess of $500,000 in the
aggregate against any assets or properties of the Company or any Covered
Subsidiary encumbered in favor of the Investor and (vi) any other
development that results in, or could reasonably be expected to result in,
a Material Adverse Effect.
(e) Use of Proceeds. The Company shall use, and shall cause each
Covered Subsidiary to use, the proceeds of the sale of the Preferred Shares
to the Investors pursuant to the Share Purchase Agreement only as permitted
by Section 2(d) of the Share Purchase Agreement (for the avoidance of
doubt, the proceeds of such sale shall not be used for the purpose of
purchasing or carrying of "margin security" or "margin stock" within the
meaning of Regulations U and X of the Board of Governors of the Federal
Reserve System, 12 C.F.R. Parts 221 and 224). The Company shall not
transfer, and shall not cause or permit each Covered Subsidiary to
transfer, any of the proceeds of the sale of Preferred Shares to the
Investors to, nor use any such proceeds for the benefit of, any of its
Subsidiaries that is not a Covered Subsidiary.
(f) Further Assurances.
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(i) The Company shall cooperate with, and shall cause each
Covered Subsidiary to cooperate with, the Investor, take such action,
execute such documents, and provide such information as the Investor
may from time to time reasonably request.
(ii) The Company shall promptly correct, and shall cause each
Covered Subsidiary to promptly correct, upon request by any Investor,
any defect or error that may be discovered in any Equity Document or
in the execution, acknowledgment or recordation of the Equity
Document. Promptly upon request by the Investor, the Company shall
execute, authorize, acknowledge, deliver, record, file and register,
and shall cause each Covered Subsidiary to execute, authorize,
acknowledge, deliver, record, file and register, any and all such
further acts, deeds, conveyances, documents, security agreements,
pledge agreements, mortgages, deeds of trust, trust deeds,
assignments, financing statements and continuations, notices of
assignment, transfers, certificates, assurances and other instruments
as the Investor may require from time to time in order to carry out
more effectively the purposes of each Equity Document. Without
limiting the foregoing, the Company shall, and shall cause each
Covered Subsidiary to (A) authorize the filing of UCC-1 financing
statements for all applicable jurisdictions, and (B) take such action
from time to time (including, without limitation, authorizing, filing,
executing and/or delivering such assignments, security agreement and
other instruments) as shall be reasonably requested by the Investors
to create, in favor of such Investors, to the extent required under
the respective Equity Documents and to the maximum extent permitted
under applicable law, a first-priority perfected Lien in all of the
Collateral, subject only to Permitted Liens.
(g) Bridge Loan. Company shall repay the Bridge Loan in full within
five (5) Business Days from the date hereof.
(h) Insurance. The Company shall maintain, and shall cause each
Covered Subsidiary to maintain, at its respective expense, and keep in
effect with responsible insurance companies, such liability insurance for
bodily injury and third-party property damage as is customary in the case
of companies engaged in the same or similar business or having similar
properties, similarly situated. The Company shall keep and maintain, and
shall cause each Covered Subsidiary to keep and maintain, at its expense,
its material real and personal property insured against loss or damage by
fire, theft, explosion, spoilage and all other risks ordinarily insured
against by other owners or users of such properties in similar businesses
in an amount equal to the full replacement or cash value thereof, subject
to deductible amounts which the Company, in its reasonable judgment, deems
prudent.
(i) Information Regarding Collateral. The Company shall furnish, and
shall cause each Covered Subsidiary to furnish, to the Investor prompt
written notice of any change in (i) the Company or any Covered Subsidiary's
corporate name or any trade name used to identify it in the conduct of its
business or the Company's or any Covered Subsidiary's chief executive
office, its principal place of business or its jurisdiction of
organization, (ii) the Company or any Covered Subsidiary's identity or
corporate structure or (iii) the Company or any Covered Subsidiary's
federal Taxpayer Identification Number (if any). The Company shall not
effect or permit, and shall not cause or permit each Covered
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Subsidiary to effect or permit, any change referred to in the preceding
sentence unless all filings have been made under the UCC and all other
actions have been taken that are required so that such change shall not at
any time adversely affect the validity, perfection or priority of any Lien
established under any Equity Document on the Collateral.
(j) Existence; Conduct of Business. The Company shall do or cause to
be done, and shall cause each Covered Subsidiary to do or cause to be done,
all things necessary to preserve, renew and keep in full force and effect
its legal existence and the rights, licenses, permits (including, without
limitation, Environmental Permits) privileges, franchises, patent,
copyrights, trademarks and trade names material to the conduct of its
business.
(k) Payment of Obligations. The Company shall pay, and shall cause
each Covered Subsidiary to pay, its Indebtedness and other obligations,
including Tax liability, before the same shall become delinquent or in
default, except where (a) the validity or amount thereof is being contested
in good faith by appropriate proceedings, (b) the Company or such Covered
Subsidiary has set aside on its books adequate reserves with respect
thereto in accordance with GAAP, (c) such contest effectively suspends
collection of the contested obligation and the enforcement of any Lien
securing such obligation and (d) the failure to make payment pending such
contest would not result in a Material Adverse Effect.
(l) Compliance with Laws. The Company shall comply, and shall cause
each Covered Subsidiary to comply, with all laws (including, without
limitation, all Environmental Laws), rules, licenses, permits, Regulations
and orders of any Governmental Body applicable to it or its property,
except where failures to do so, in the aggregate, would not result in a
Material Adverse Effect.
(m) Subsidiaries. If any Foreign Subsidiary is formed or acquired
after the date hereof, the Company shall notify, and shall cause each
Covered Subsidiary to notify, within three (3) Business Days after such
Foreign Subsidiary is formed or acquired, the Investors thereof and, if
such Foreign Subsidiary directly or indirectly holds any Media Assets or
any outstanding shares of Capital Stock of a WFOE which is party to an
Internal Control Agreement with respect to such Media Assers, cause any
equity interest in or Indebtedness owned by or on behalf of any Covered
Subsidiary to be added to the Collateral.
(n) Additional Covered Subsidiary. The Company shall cause, and shall
cause each Covered Subsidiary to cause, any wholly-owned Foreign
Subsidiaries formed after the date hereof which directly or indirectly
holds any Media Asset or any outstanding shares of Capital Stock of a WFOE
which is party to an Internal Control Agreement with respect to such Media
Assets (each, an "Additional Covered Subsidiary") to become a Covered
Subsidiary subject to all the Obligations arising under this Agreement and
any other Equity Document.
(o) Reserved Shares. The Company shall reserve a sufficient number of
shares of authorized Common Shares of the Company for issuance such that at
all times there are enough such Common Shares to fully convert the shares
upon election by the Investor to
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convert into the Company's Common Shares in accordance with the terms of
the Articles of Association of the Company.
(p) Additional Media Assets. Any Media Asset acquired after the date
hereof shall be (i) held by the Company or Subsidiary of the Company or
(ii) subject to an Internal Control Agreement with any Covered Subsidiary
or wholly-owned Subsidiary of any Covered Subsidiary.
Section 2.02. Termination of Covenants. Section 2.01 shall terminate and be
of no further force or effect upon redemption in full of the Preferred Shares;
provided, however, that such Section shall not terminate if the Investors elect
to convert the Preferred Shares held by such Investors into the Company's Common
Shares.
ARTICLE III
Pre-Emptive Rights
Section 3.01. Pre-Emptive Rights.
(a) Delivery of Notice. Except with respect to an Exempt Issuance (as
defined below), in the event that the Company proposes to issue or sell any
of its Equity Securities to any Person, the Company shall first deliver to
each of the Preferred Holders a written notice (the "Issuance Notice")
stating (i) the Company's bona fide intention to issue or sell such Equity
Securities, (ii) the number of Equity Securities to be issued or sold, and
(iii) the price and terms upon which the Company proposes to issue or sell
such Equity Securities.
(b) Right to Elect. Each of the Preferred Holders shall have a period
of 20 calendar days following the date on which such Preferred Holder
actually receives the Issuance Notice from the Company in which to elect to
purchase from the Company, at a price per share and on the terms specified
in the Issuance Notice, a number of Equity Securities being issued or sold
by the Company equal to the product of (A) a fraction, (I) the numerator of
which is the number of Fully-Diluted Common Shares owned by such Preferred
Holder, and (II) the denominator of which is the total number of
Fully-Diluted Common Shares owned by all Holders, multiplied by (B) the
number of Equity Securities to be issued or sold by the Company as set
forth in the Issuance Notice.
(c) Company's Right to Sell. Any Equity Securities referred to in the
Issuance Notice that are not purchased under Section 3.01(b) by Preferred
Holders may be issued and sold by the Company in accordance with the terms
and conditions of, and at the price per share set forth in, the Issuance
Notice. If such proposed issuance and sale of Securities is not consummated
within 90 calendar days following the termination of the Preferred Holders'
rights to acquire such shares in Section 3.01(b), the Company may not issue
or sell any Equity Securities without complying again with all the
provisions of this Section 3.01.
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(d) Exempt Issuance. Notwithstanding the foregoing, the Company shall
be free to issue and sell Equity Securities without complying with the
provisions of this Section 3.01 with respect to the issuance of any of the
Company's Common Shares: (a) under any employee benefit plan, employee
share option plan, share incentive plan or other similar plan adopted by
the Company's Board of Directors (an "Exempt Plan") only to the extent that
the total number of Company's Common Shares issued to such Exempt Plan on a
fully-diluted as converted basis does not exceed the lesser of (i) 20% of
the Fully-Diluted Common Shares determined as of the date immediately prior
to such issuance and (ii) the maximum number of shares set forth next to
Exempt Plans on Annex A, as adjusted in accordance with the provisions of
the Articles of Association; (b) to any Person listed on Annex A (each, an
"Exempt Issuee") in consideration for the contribution of assets as
indicated on Annex A (the "Specified Contributed Assets"), (i) at an
effective per share price equal to or greater than $3.00 per Company's
Common Share and (ii) only to the extent that (A) the total number of
Company's Common Shares issued to such Exempt Issuee on a fully-diluted as
converted basis does not exceed the maximum number of shares set forth next
to such Exempt Issuee's name on Annex A and (B) the Exempt Issuee
contributes the Specified Contributed Assets in consideration for the
issuance of such Company's Common Shares; or (c) not exceeding 0.5% of the
lesser of (i) the Fully-Diluted Common Shares determined as of the date
immediately prior to such issuance and (ii) the number equal to the sum of
(A) the number of outstanding Fully-Diluted Common Shares determined as of
the Original Issuance Date plus (B) the number of Fully-Diluted Common
Shares issued pursuant to any Exempt Issuance under clauses (a) and (b) of
this definition, each of (A) and (B) as adjusted in accordance with the
provisions of the Articles of Association. For the avoidance of doubt, any
issuance of Company's Common Shares pursuant to clause (a) of this
definition for numbers of Company's Common Shares in excess of the maximum
numbers listed on Annex A shall be subject to adjustments as set forth in
the Articles of Association and any issuance of Company's Common Shares
pursuant to clause (b) of this definition (w) for an effective per share
price less than $3.00, (x) in consideration for assets other than the
Specified Contributed Assets, (y) to any Person not listed on Annex A, or
(z) for numbers of Company's Common Shares in excess of the maximum numbers
listed on Annex A shall be subject to adjustments as set forth in the
Articles of Association.
Section 3.02. Termination of Pre-Emptive Rights. Section 3.01 shall
terminate and be of no further force or effect upon the earlier of consummation
of a QIPO or the redemption in full of the Preferred Shares; provided, however,
that such Section shall not terminate, in the case of redemption, if the
Investors elect to convert the Preferred Shares held by such Investors into the
Company's Common Shares.
ARTICLE IV
Transfers
Section 4.01. Transfers. The Holders may freely Transfer any Equity
Securities provided that such Transfer is in compliance with all of the
requirements of the Securities Act and all other applicable securities laws.
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Section 4.02. Legends.
(a) Legends. Each certificate representing Equity Securities now owned
or hereafter acquired by the Holders shall bear the following legends:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT").
THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE
DISTRIBUTED EXCEPT (i) IN CONJUNCTION WITH AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE ACT OR (ii) IN COMPLIANCE WITH
RULE 144, OR (iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE ACT."
(b) Removal of Legend and Transfer Restrictions. The legend set forth
in Section 4.03(a) and any stop transfer instructions with respect to such
legend shall be removed, and the Company shall issue a certificate without
such legend to the Holder of such Equity Securities if (A) such Equity
Securities are registered and sold under the Securities Act and a
prospectus meeting the requirements of Section 10 of the Securities Act is
available, (B) such Equity Securities are sold to the public in a
transaction satisfying the requirements of Rule 144, or (C) if such Holder
satisfies the requirements of Rule 144(k), or (D) the legend is no longer
required by law.
Section 4.03. Co-Sale Rights.
(a) Delivery of Notice. In the event that the Parent (a "Transferring
Holder") at any time proposes to Transfer any of the Equity Securities now
owned or hereafter acquired by such Transferring Holder to any Person who
shall make a good faith, bona fide written offer therefor, the Transferring
Holder shall first deliver to each Preferred Holder a written notice (such
written notice being a "Co-Sale Notice") stating (i) that the Transferring
Holder intends to make such Transfer, (ii) the number and type of Equity
Securities proposed to be Transferred (the "Offered Securities"), (iii) the
identity (including the name and address) of the prospective transferee or
transferees (the "Proposed Transferee"), (iv) the type and amount of
consideration for the Offered Securities and (v) the material terms and
conditions upon which the proposed Transfer is to be made (the date on
which each Preferred Holder receives the Co-Sale Notice being the "Co-Sale
Notice Date").
(b) Right to Elect. Each Preferred Holder shall have a period of 15
calendar days following the Co-Sale Notice Date in which to elect to sell
to the Proposed Transferee (i) such Preferred Holder's Equity Securities of
the same class as the Offered Securities on the terms and conditions and at
the price per Equity Security stated in the Co-Sale Notice, and (ii) such
Preferred Holder's Preferred Shares, on an as-converted basis, on the same
terms and conditions and at the price per Equity Security stated in the
Co-Sale Notice. Each Preferred Holder so electing to sell (each, a "Co-Sale
Holder") shall within such 15 calendar day period deliver to the
Transferring Holder and the Company a written notice (a "Co-Sale Election
Notice") stating that the Co-Sale Holder wishes to participate in such
Transfer. All Common Shares shall be deemed one class for purposes of this
Section 4.03.
17
(c) Number of Securities to Be Sold. The Co-Sale Election Notice shall
set forth the number of Equity Securities that the Co-Sale Holder wishes to
sell (such Equity Securities being the "Co-Sale Securities"), which number
of Equity Securities shall be calculated in accordance with this subsection
(c).
(i) If the Transferring Holder is proposing to Transfer Preferred
Shares, each Co-Sale Holder may sell up to a number of Preferred
Shares (or Preferred Shares that on an as-converted basis equals such
number of Common Shares) equal to the product of (A) a fraction, (I)
the numerator of which is the number of Preferred Shares owned by the
Co-Sale Holder on the date of the Co-Sale Notice and (II) the
denominator of which is the total number of Preferred Shares owned by
the Transferring Holder and all of the Co-Sale Holders on the date of
the Co-Sale Notice, multiplied by (B) the aggregate number of
Preferred Shares to be sold by the Transferring Holder to the Proposed
Transferee as set forth in the Co-Sale Notice.
(ii) If the Transferring Holder is proposing to Transfer Common
Shares, each Co-Sale Holder may sell up to a number of Common Shares
equal to the product of (A) a fraction, (I) the numerator of which is
the number of Fully-Diluted Common Shares owned by the Co-Sale Holder
on the date of the Co-Sale Notice and (II) the denominator of which is
the total number of Fully-Diluted Common Shares owned by the
Transferring Holder and all of the Co-Sale Holders on the date of the
Co-Sale Notice, multiplied by (B) the aggregate number of Common
Shares to be sold by the Transferring Holder to the Proposed
Transferee as set forth in the Co-Sale Notice.
(d) Mechanics of Co-Sale.
(i) Each Co-Sale Holder shall Transfer its Co-Sale Securities to
the Proposed Transferee at the time and place at which the
Transferring Holder shall Transfer its Offered Securities to the
Proposed Transferee. No Co-Sale Holder shall be obligated to Transfer
any Co-Sale Securities to the Proposed Transferee if the Transferring
Holder defaults in its obligation to Transfer its Offered Securities
to the Proposed Transferee.
(ii) In connection with any such co-sale of Co-Sale Securities
under this Section 4.03, each Co-Sale Holder agrees to enter into and
deliver a purchase and sale agreement for the benefit of the Proposed
Transferee in connection with the Transfer of their Co-Sale Securities
under this Section 4.03, which purchase and sale agreement shall
contain standard and customary representations, warranties, covenants
and indemnities by the Co-Sale Holders for the benefit of the Proposed
Transferee; provided, however, that such representations, warranties,
covenants and indemnities shall be substantially similar to those made
by the Transferring Holder for the benefit of the Proposed Transferee.
(iii) In the event that a Co-Sale Holder shall be required to
convert Preferred Shares into Common Shares in connection with such
sale, the Company agrees to convert any such Preferred Shares
concurrent with the actual sale of such shares to the Proposed
Transferee and contingent on such sale to the Proposed Transferee.
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(iv) If any Co-Sale Holder defaults in its obligation to Transfer
Co-Sale Securities, the Transferring Holder and the other Co-Sale
Holders may (but shall not be obligated to) Transfer to the Proposed
Transferee (on a pro-rata basis) an additional number of Preferred
Shares or Common Shares, as the case may be, not greater than the
number of shares with respect to which default was made and thereafter
the defaulting Co-Sale Holder shall not be entitled or obligated to
Transfer to the Proposed Transferee such shares.
(e) Transferring Holder's Right to Sell. If the Transferring Holder
has received one or more Co-Sale Election Notices, the Transferring Holder
may not Transfer any Offered Securities to the Proposed Transferee unless
the Proposed Transferee shall simultaneously purchase all of the Co-Sale
Securities for the same consideration (if applicable, on an as-converted
basis) and on the same terms and conditions as the proposed sale described
in the Co-Sale Notice. In the event that the material terms or conditions
of the Transfer to the Proposed Transferee set forth in the Co-Sale Notice
shall be modified, or the Proposed Transferee shall refuse to purchase
Co-Sale Securities from a Co-Sale Holder exercising its rights of co-sale
hereunder, the Transferring Holder shall not Transfer to the Proposed
Transferee any Offered Securities without again complying with all of the
terms and provisions of this Section 4.03 hereof. In addition, any Offered
Securities referred to in the Co-Sale Notice that are not Transferred by
the Transferring Holder to the Proposed Transferee in compliance with this
Section 4.03 prior to the date which is 90 calendar days following the
termination of the rights of the Preferred Holders to elect to participate
in such Transfer pursuant to Section 4.03(b), may not be Transferred by the
Transferring Holder without complying again with all the provisions of this
Section 4.03.
(f) Termination of Co-Sale Right. The rights described under Section
4.03 shall terminate and be of no further force or effect upon redemption
in full of the Preferred Shares; provided, however, that such rights shall
not terminate if the Investors elect to convert the Preferred Shares held
by such Investors into the Company's Common Shares.
Section 4.04. Right to sell in IPO or QIPO. In the event there is an IPO or
QIPO by the Company, then upon request for participation in the IPO or QIPO by
the Investors, the Company shall use its best efforts to cause to be sold in the
IPO or QIPO, as applicable, the maximum number of Common Shares designated by
the Investors.
ARTICLE V
Registration Rights
Section 5.01. Demand Registration.
(a) Request for Registration. If at any time after the date that is
180 days following the date of the consummation of an IPO in the United
States, the Company shall receive a written request (a "Demand Notice")
from Preferred Holders holding shares that represent at least 2% of the
outstanding Common Shares of the Company (as such number may be adjusted
for stock splits, stock dividends, recapitalizations, reorganizations and
other
19
similar transactions) of the outstanding Registrable Securities requesting
that the Company file a Registration Statement under the Securities Act
registering for resale Registrable Securities (such Holders being referred
to herein as the "Initiating Holders") (the date on which the Company
receives the Demand Notice being the "Demand Notice Date"), the Company
shall promptly (but in any event within 5 calendar days) after the Demand
Notice Date, forward a copy of the Demand Notice to all of the Registrable
Security Holders. Each of the Registrable Security Holders shall have a
period of 20 calendar days after receiving the Demand Notice from the
Company in which to elect to include some or all of such Registrable
Security Holder's Registrable Securities in such Registration Statement.
The Registrable Security Holders shall exercise their right to include
Registrable Securities in such Registration Statement by delivering a
written notice to the Company within such 20 calendar day period specifying
the number of Registrable Securities such Registrable Security Holder
wishes to include in such Registration Statement (such electing Registrable
Security Holders, together with the Initiating Holders being the
"Registering Holders").
(b) Filing and Effectiveness of Registration Statement. The Company
shall prepare and file with the SEC, no later than 90 calendar days after
the Demand Notice Date, a Registration Statement registering for resale by
the Registering Holders a sufficient number of Common Shares for the
Registering Holders to sell the Registrable Securities requested to be
registered. The Company shall use its reasonable best efforts to cause such
Registration Statement to be declared effective no later than the earlier
of (i) five (5) calendar days after the date on which the Company receives
notice from the SEC that such Registration Statement may be declared
effective and (ii) the date which is 120 calendar days after the Demand
Notice Date (such date being the "Required Effectiveness Date"). The
Company shall use its reasonable best efforts to cause the Registration
Statement filed pursuant to this Section 5.01 to remain effective until the
earlier of (A) the date on which all Registrable Securities registered
pursuant to such Registration Statement shall have been sold to the public
and (B) the date which is 180 calendar days after the date on which such
Registration Statement is declared effective by the SEC.
(c) Underwritten Offering.
(i) If the Initiating Holders intend to distribute the
Registrable Securities covered by their Demand Notice by means of an
underwriting, they shall so advise the Company as a part of their
Demand Notice. In such event, the right of any Registrable Security
Holder to include its Registrable Securities in such registration
shall be conditioned upon such Registrable Security Holder's
participation in such underwriting and the inclusion of such
Registrable Security Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by Initiating Holders
holding a majority of the Registrable Securities held by the
Initiating Holders to be registered hereunder and such Registrable
Security Holder) to the extent provided herein. In connection with
such an underwritten offering, the Company shall have the right to
select the managing underwriter or underwriters, subject to the
reasonable approval of Initiating Holders holding a majority of the
Registrable Securities. All Registering Holders proposing to
distribute their Registrable Securities through such underwriting
shall enter into an underwriting agreement in customary form with the
underwriter or underwriters, subject to the limitations set forth in
Section 5.07 hereof,
20
and the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters,
shall also be made to and for the benefit of the Registering Holders.
(ii) Notwithstanding any other provision of this Section 5.01, if
the underwriter advises the Company that in the opinion of such
underwriter, the distribution of all of the Registrable Securities
requested to be registered would materially and adversely affect the
distribution of all of the securities to be underwritten, then (x) the
Company shall deliver to the Registering Holders a copy of such
underwriter's opinion, which opinion shall be in writing and shall
state the reasons for such opinion and (y) the number of Equity
Securities (including the Registrable Securities) that may be included
in such registration shall be allocated in the order listed below. Any
Registrable Securities excluded or withdrawn from such underwriting
shall be withdrawn from the registration.
(A) first, to the Initiating Holders;
(B) second, to the other Preferred Holders electing to
register their Registrable Securities, on a pro rata basis based on
the number of Registrable Securities held by such other Preferred
Holders;
(C) third, to the other Registering Holders of such
Registrable Securities on a pro rata basis based on the number of
Registrable Securities held by such other Registering Holders; and
(D) finally, to the other Persons proposing to register
securities in such registration, if any.
(d) Limitations on Registration. The Company shall not be required to
effect a registration pursuant to this Section 5.01:
(i) after the Company has effected 2 registrations pursuant to
this Section 5.01, and such registrations have been declared or
ordered effective; provided, however, that in the event that the
number of Registrable Securities included in any registration pursuant
to this Section 5.01 is reduced by more than 50% of the number of
Registrable Securities proposed to be registered pursuant to Section
5.01(a) in any registration, then such registration shall not count as
a registration for purposes of this Section 5.01;
(ii) during the period starting with the date which is 60
calendar days prior to the Company's good faith estimate of the date
of the filing of, and ending on a date 180 calendar days following the
effective date of, a Company-initiated registration subject to Section
5.02 below, provided that the Company is actively employing in good
faith all reasonable efforts to cause such registration statement to
become effective;
(iii) if the Company shall furnish to the Initiating Holders
requesting a registration pursuant to this Section 5.01 a certificate
signed by the Company's
21
Authorized Officer stating that a Potential Material Event exists, in
which event the Company shall have the right to defer such filing for
a period of not more than 90 calendar days after the Demand Notice
Date, provided that such right to delay a request may not be exercised
by the Company more than twice in any 12-month period with at least a
60 calendar day interval between such "black-out" periods; or
(iv) if the Initiating Holders, together with the holders of any
other Securities of the Company entitled to inclusion in such
registration statement, propose to sell Registrable Securities and
such other Securities (if any) whereby the aggregate proceeds of which
(after deduction for underwriter's discounts and expenses related to
the issuance) are less than $5,000,000.
Section 5.02. Piggyback Registration.
(a) Company Registration. If the Company proposes to register
(including for this purpose a registration effected by the Company for
shareholders other than the Registrable Security Holders) any of its Equity
Securities under the Securities Act in connection with the public offering
(including the IPO) of such securities, the Company shall promptly give
each Registrable Security Holder written notice of such registration at
least 30 calendar days prior to the filing of such Registration Statement
with the SEC. Each of the Registrable Security Holders shall have a period
of 20calendar days after receiving such written notice from the Company in
which to elect to include some or all of such Registrable Security Holder's
Registrable Securities in such Registration Statement. The Registrable
Security Holders shall exercise their right to include Registrable
Securities in such Registration Statement by delivering a written notice to
the Company within such 20 calendar day period specifying the number of
Registrable Securities such Registrable Security Holder wishes to include
in such Registration Statement (such electing Registrable Security Holders
being referred to as the "Piggyback Holders"). Subject to the provisions of
Sections 5.01(c) and 5.02(c) hereof, the Company shall use its reasonable
best efforts to include the Registrable Securities requested to be included
by the Piggyback Holders in the Company Registration Statement.
(b) Underwritten Offerings.
(i) If the registration for which the Company gives notice to the
Registrable Security Holders under Section 5.02(a) is an underwritten
offering, the Company shall not be required under this Section 5.02 to
include any of the Piggyback Holders' Registrable Securities in such
underwriting unless the Piggyback Holders accept the terms of the
underwriting as agreed upon between the Company and the underwriters.
In connection with such an underwritten offering, the Company (or
other Persons who may be entitled to select the underwriters) shall
have the right to select the managing underwriter or underwriters. All
Piggyback Holders proposing to distribute their Registrable Securities
through such underwriting shall enter into an underwriting agreement
in customary form with the underwriter or underwriters, subject to the
limitations set forth in Section 5.07 hereof. If any Piggyback Holder
does not approve of the terms of such underwriting, the Piggyback
Holder may elect to withdraw from such offering by providing written
notice to the Company and the underwriter.
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(ii) Notwithstanding any other provision of this Section 5.02, if
the underwriter advises the Company that in the opinion of such
underwriter, the distribution of all of the Registrable Securities
requested to be registered would materially and adversely affect the
distribution of all of the securities to be underwritten, then (x) the
Company shall deliver to the Piggyback Holders a copy of such
underwriter's opinion, which opinion shall be in writing and shall
state the reasons for such opinion and (y) the number of Equity
Securities (including the Registrable Securities) that may be included
in such registration shall be allocated in the order listed below. If
so determined by the underwriter, all Registrable Securities shall be
excluded from such registration and underwritten offering. Any
Registrable Securities excluded or withdrawn from such underwriting
shall be withdrawn from the registration.
(A) first, to the Company;
(B) second, to the Preferred Holders electing to register
their Registrable Securities, on a pro rata basis based on the number
of Registrable Securities held by such Preferred Holders; and
(C) third, to the other Piggyback Holders on a pro rata
basis based on the number of Registrable Securities held by such other
Piggyback Holders; and
(D) finally, to the other Persons proposing to register
securities in such registration, if any.
Section 5.03. F-3 or S-3 Registration.
(a) F-3 or S-3 Registration. If, at any time after the first date on
which the Company is eligible to file a registration statement under the
Securities Act on Form F-3 or S-3 (or, if applicable, Form SB-2), or such
similar or successor form as may be appropriate, the Company shall receive
from any Registrable Security Holder holding at least shares representing
2% of the outstanding Common Shares of the Company (as such number may be
adjusted for stock splits, stock dividends, recapitalizations,
reorganizations and other similar transactions) of the outstanding
Registrable Securities a written request (an "F-3 or S-3 Notice") that the
Company effect a registration on Form F-3 or S-3 (or, if applicable, Form
SB-2), or such similar or successor form as may be appropriate, and any
related qualification or compliance with respect to the Registrable
Securities (the date on which the Company receives the F-3 or S-3 Notice
being the "F-3 or S-3 Notice Date"), the Company shall promptly (but in any
event within 5 calendar days) after the F-3 or S-3 Notice Date, forward a
copy of the F-3 or S-3 Notice to all of the Registrable Security Holders.
Each of the Registrable Security Holders shall have a period of 20 calendar
days after receiving the F-3 or S-3 Notice from the Company in which to
elect to include some or all of such Registrable Security Holder's
Registrable Securities in such Registration Statement. The Registrable
Security Holders shall exercise their right to include Registrable
Securities in such Registration Statement by delivering a written notice to
the Company within such 20 calendar day period specifying the number of
Registrable Securities such Registrable Security Holder wishes to include
in such Registration Statement (such electing Registrable Security Holders,
together with the Registrable
23
Security Holders delivering the F-3 or S-3 Notice to the Company being the
"F-3 or S-3 Holders").
(b) Filing and Effectiveness of Registration Statement. The Company
shall prepare and file with the SEC, no later than 30 calendar days after
the F-3 or S-3 Notice Date, a Registration Statement on Form F-3 or S-3
(or, if applicable, Form SB-2), or such similar or successor form as may be
appropriate, covering, and shall obtain all such qualifications and
compliances as may be required and as would permit the sale and
distribution of, all Registrable Securities. The Company shall use its
reasonable best efforts to cause such Registration Statement to be declared
effective no later than the earlier of (i) five (5) calendar days after the
date on which the Company receives notice from the SEC that such
Registration Statement may be declared effective and (ii) 60 calendar days
after the F-3 or S-3 Notice Date (such date being the "Required F-3 or S-3
Effectiveness Date"). The Company shall its reasonable best efforts to
cause the Registration Statement filed pursuant to this Section 5.03 to
remain effective until the earlier of (A) the date on which all Registrable
Securities registered pursuant to such Registration Statement shall have
been sold to the public and (B) the date on which all of the Registrable
Securities requested to be registered by the F-3 or S-3 Holders can be
freely sold to the public pursuant to Rule 144 without any volume
limitations.
(c) Limitations on Registration. The Company shall not be required to
effect a registration pursuant to this Section 5.03:
(i) if at the time of the request, Form F-3 or S-3 or Form SB-2
(or such similar or successor form as may be applicable) is not
available to the Company for such offering;
(ii) if the Company shall furnish to the F-3 or S-3 Holders
requesting a registration pursuant to this Section 5.03 a certificate
signed by the Company's Authorized Officer stating that a Potential
Material Event exists, in which event the Company shall have the right
to defer such filing for a period of not more than 90 calendar days
after the F-3 or S-3 Notice Date, provided that such right to delay a
request may not be exercised by the Company more than twice in any
12-month period with at least a 60 calendar day interval between such
"black-out" periods; or
(iii) if the Initiating Holders, together with the holders of any
other securities of the Company entitled to inclusion in such
registration statement, propose to sell Registrable Securities and
other such Securities (if any) whereby the aggregate proceeds of which
(after deduction for underwriter's discounts and expenses related to
the issuance) are less than $1,000,000..
Section 5.04. Expenses of Registration. All Registration Expenses incurred
in connection with any registration, filing, qualification or compliance
pursuant to Sections 5.01, 5.02 or 5.03 shall be borne by the Company. Unless
otherwise stated, all Selling Expenses relating to Registrable Securities
registered by the Registrable Security Holders shall be borne by the Registrable
Security Holders holding such Registrable Securities pro rata on the basis of
the number of Registrable Securities so registered.
24
Section 5.05. Further Obligations of the Company. Whenever the Company is
required to effect the registration of any Registrable Securities pursuant to
this Article V, the Company shall:
(a) Filing and Effectiveness of Registration Statement. With respect
to a Registration Statement required by Section 5.01 or 5.03, the Company
shall (i) prepare and file with the SEC a Registration Statement, (ii)
cause such Registration Statement to become effective, and (iii) maintain
the effectiveness of such Registration Statement, in each case, as of the
dates and for the periods required by Section 5.01 or 5.03, as the case may
be, which Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein) shall not contain any 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, in light of
the circumstances in which they were made, not misleading.
(b) Filing of Amendments and Supplements. Prepare and file with the
SEC such amendments (including post-effective amendments) and supplements
to the Registration Statement and the prospectus used in connection with
the Registration Statement as may be necessary to keep the Registration
Statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all Registrable Securities and other
securities of the Company covered by the Registration Statement at all
times during the period for which the Company is required to maintain the
effectiveness of such Registration Statement pursuant to the terms of this
Agreement.
(c) Copies of Documents. Furnish to each Registrable Security Holder
selling such Registrable Securities by means of such Registration
Statement, without charge, such number of conformed copies of such
Registration Statement and of each such amendment and supplement thereto
(in each case including all exhibits), such number of copies of the
prospectus included in such Registration Statement (including each
preliminary prospectus and any summary prospectus), in conformity with the
requirements of the Securities Act, such documents incorporated by
reference in such Registration Statement or prospectus, and such other
documents, as such Registrable Security Holder may reasonably request.
(d) Opinion and Comfort Letter. Furnish to each Registrable Security
Holder selling such Registrable Securities by means of such Registration
Statement (i) an opinion of the counsel representing the Company for
purposes of such registration, dated the effective date of such
Registration Statement (or, if such registration includes an underwritten
public offering, dated the date of the closing under the underwriting
agreement with respect to both the effective date of the Registration
Statement and the date of the closing under the underwriting agreement), in
form and substance as is customarily given by counsel for the issuer to
underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to such Registrable Security Holders, and (ii) a
"cold comfort" letter, dated the effective date of such Registration
Statement (and, if such Registration Statement includes an underwritten
public offering, dated the date of the closing under the underwriting
agreement) signed by the independent certified public accountants who have
certified the Company's financial statements included in such Registration
Statement, 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 such Registrable
Security Holders.
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(e) "Blue Sky" Qualification. Register or qualify all Registrable
Securities and other securities covered by such Registration Statement
under the securities or blue sky laws of such jurisdictions as the
Registrable Security Holders (or in an underwritten offering, the managing
underwriter) shall reasonably request, and do any and all other acts and
things which may be necessary or advisable to enable the Registrable
Security Holders to consummate the disposition in such jurisdictions of its
Registrable Securities covered by such Registration Statement, except that
the Company shall not for any such purpose be required to qualify generally
to do business as a foreign corporation in any jurisdiction wherein it is
not so qualified, or to subject itself to taxation in any such
jurisdiction, or to consent to general service of process in any such
jurisdiction.
(f) Notification of Certain Events. As promptly as practicable after
becoming aware thereof, notify each Registrable Security Holder of the
happening of any event of which the Company has knowledge, as a result of
which the prospectus included in the 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, in light of the circumstances under which they were
made, not misleading, and promptly prepare and file with the SEC a
supplement or amendment to the Registration Statement or other appropriate
filing with the SEC to correct such untrue statement or omission, and
deliver a number of copies of such supplement or amendment to each
Registrable Security Holder selling Registrable Securities pursuant to such
Registration Statement as such Holder may reasonably request.
(g) SEC Stop Orders. As promptly as practicable after becoming aware
thereof, notify each Registrable Security Holder who holds Registrable
Securities being sold (and, in the event of an underwritten offering, the
managing underwriters) of the issuance by the SEC of any notice of
effectiveness or any stop order or other suspension of the effectiveness of
the Registration Statement at the earliest possible time.
(h) Potential Material Event. As promptly as practicable after
becoming aware thereof, notify each Registrable Security Holder who holds
Registrable Securities being sold (and, in the event of an underwritten
offering, the managing underwriters) of the existence of a Potential
Material Event, in which case, the Registrable Security Holders shall not
offer or sell any Registrable Securities, or engage in any other
transaction involving or relating to the Registrable Securities, from the
time of the giving of notice with respect to a Potential Material Event
until such Registrable Security Holder receives written notice from the
Company that such Potential Material Event either has been disclosed to the
public or no longer constitutes a Potential Material Event; provided,
however, that the Registrable Security Holders may only be required to
cease offering and selling Registrable Securities pursuant to this clause
(h) for a period of not more than 90 calendar days after receiving notice
from the Company that a Potential Material Event exists; provided, further,
however, that the Company may only exercise its rights under this clause
(h) twice in any 12-month period with at least a 60 calendar day interval
between such "black-out" periods.
(i) Listing Requirements. Use its reasonable best efforts to list such
Registrable Securities on each securities exchange on which the Equity
Securities of the Company are then listed.
26
(j) Certificate Preparation. Cooperate with the Registrable Security
Holders who hold Registrable Securities being offered to facilitate the
timely preparation and delivery of certificates for the Registrable
Securities to be offered pursuant to the Registration Statement and enable
such certificates for the Registrable Securities to be in such
denominations or amounts as the case may be, as the Registrable Security
Holders may reasonably request, and, within 2 Business Days after a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, or shall cause legal
counsel selected by the Company to deliver, to the transfer agent for the
Registrable Securities (with copies to the Registrable Security Holders
whose Registrable Securities are included in such Registration Statement)
an appropriate instruction and opinion of such counsel.
(k) Underwriting Agreement. In the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form and complying with the provisions of
Section 5.07, with the managing underwriter of such offering. Each
Registrable Security Holder participating in such underwriting shall also
enter into and perform his or its obligations under such agreement.
(l) Section 11 Information. Make available to the Holders, as soon as
reasonably practicable, an earnings statement covering the period of at
least 12 months, but not more than 18 months, beginning with the first
month of the first fiscal quarter after the effective date of such
Registration Statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act, including, without
limitation, Rule 158 promulgated thereunder.
(m) Other Actions. Take all other reasonable actions necessary to
expedite and facilitate disposition by the Registrable Security Holders of
the Registrable Securities pursuant to the Registration Statement.
Section 5.06. Preparation; Reasonable Investigation; Review by Counsel. In
connection with the preparation and filing of each Registration Statement
registering Registrable Securities under the Securities Act, the Registrable
Security Holders on whose behalf such Registrable Securities are to be so
registered, their underwriters, if any, and one counsel for all of the
Registrable Security Holders holding such Registrable Securities (and one
counsel in each applicable jurisdiction) shall:
(a) be permitted to review such Registration Statement, each
prospectus included therein or filed with the SEC, and each amendment
thereof or supplement thereto a reasonable period of time (but not less
than 3 Business Days) prior to their filing with the SEC; and
(b) be given reasonable access to the Company's books and records and
such opportunities to discuss the business of the Company with its
officers, counsel and the independent public accountants who have certified
its financial statements as shall be necessary, in the opinion of such
Registrable Security Holders, such underwriters, if any, or their
respective counsel, to conduct a reasonable investigation within the
meaning of the Securities Act.
27
Section 5.07. Indemnification. In the event any Registrable Securities are
included in a Registration Statement under this Article V, the following
indemnification provisions shall apply.
(a) Indemnification by the Company.
(i) Indemnification. To the extent permitted by law, the Company
shall indemnify and hold harmless each Registrable Security Holder,
each of the employees, officers, directors, partners, members,
managers, legal counsel and agents of each Registrable Security
Holder, any underwriter (as defined in the Securities Act) for such
Registrable Security Holder and each Person, if any, who controls such
Registrable Security Holder or underwriter within the meaning of the
Securities Act or Exchange Act (collectively, the "Holder Indemnified
Persons") against and hold each Holder Indemnified Person harmless
from any and all liabilities, obligations, losses, damages, lawsuits,
investigations, arbitrations, actions, judgments, costs, expenses or
claims, including, without limitation, reasonable attorneys' fees and
expenses incurred in investigation or defending any of the foregoing
(collectively, "Losses"), that the Holder Indemnified Persons may
suffer or sustain arising out of or due to any of the following (any
of the following being a "Violation"):
(A) any untrue statement or alleged untrue statement of a
material fact contained in such Registration Statement, including any
preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto;
(B) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the
statements therein not misleading; or
(C) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law or any rule
or regulation promulgated under the Securities Act, the Exchange Act
or any state securities law, or any applicable securities laws or
Regulations of a jurisdiction outside the United States.
(ii) Limitations on Indemnification. Notwithstanding the
foregoing, the Company shall not be liable for:
(A) any amounts paid in settlement of any such Losses if
such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld or delayed); or
(B) any Losses to the extent that such Losses arise out of
or are based upon a Violation which occurs in reliance upon and in
strict conformity with written information furnished by the
Registrable Security Holder expressly for use in connection with such
registration.
(b) Indemnification by the Registrable Security Holders.
28
(i) Indemnification. To the extent permitted by law, each
Registrable Security Holder, severally and not jointly and severally,
shall indemnify and hold harmless the Company, each of the Company's
employees, officers, directors, legal counsel and other agents, any
underwriter (as defined in the Securities Act) for the Company and
each Person, if any, who controls the Company or underwriter within
the meaning of the Securities Act or Exchange Act (collectively, the
"Company Indemnified Persons"), against and hold each Company
Indemnified Person harmless from any and all Losses that the Company
Indemnified Persons may suffer or sustain arising out of or due to any
Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in strict conformity with
written information furnished by such Registrable Security Holder
expressly for use in connection with such registration.
(ii) Limitations on Indemnification. Notwithstanding the
foregoing, no Registrable Security Holder shall be liable for:
(A) indemnification pursuant to this Agreement in excess of
the aggregate net cash proceeds received by such Registrable Security
Holder from the offering of Registrable Securities in such
registration;
(B) any amounts paid in settlement of any such Losses if
such settlement is effected without the consent of such Registrable
Security Holder; or
(C) any Losses to the extent that such Losses do not arise
out of or are not based upon a Violation which occurs in reliance upon
and in strict conformity with written information furnished by such
Registrable Security Holder expressly for use in connection with such
registration.
(c) Indemnification Mechanics. If there occurs an event which a
Company Indemnified Person or a Holder Indemnified Person (any such Person
being the "Indemnitee") hereto asserts is an indemnifiable event pursuant
to this Section, the Indemnitee shall promptly notify the party obligated
to provide indemnification hereunder (the "Indemnitor") in writing of such
event. Delay or failure to so notify the Indemnitor shall only relieve the
Indemnitor of its obligations to the extent, if at all, that it is actually
prejudiced by reason of such delay or failure. The Indemnitor shall have a
period of 20 calendar days in which to respond thereto. If the Indemnitor
accepts responsibility within such 20 calendar day period, then the
Indemnitor shall be obligated to compromise or defend, at its own expense,
such matter, and the Indemnitor shall provide the Indemnitee with such
assurances as may be reasonably required by the Indemnitee to assure that
the Indemnitor shall assume and be responsible for the Losses at issue
(subject to the limitations set forth in this Agreement). If the Indemnitor
fails to assume the defense of such matter within such 20 calendar day
period or does not respond within such 20 calendar day period, the
Indemnitee against which such matter has been asserted shall (upon
delivering notice to such effect to the Indemnitor) have the right to
undertake, at the Indemnitor's cost and expense, the defense, compromise or
settlement of such matter on behalf of the Indemnitee. In any event, the
Indemnitee shall have the right to participate at its own expense in the
defense of such asserted liability; provided, however, that the Indemnitor
shall pay the expenses of such defense if the Indemnitee is advised by
counsel
29
in writing that there are one or more legal defenses available to the
Indemnitee that are different from or additional to those available to the
Indemnitor (in which case, if the Indemnitee notifies the Indemnitor in
writing, the Indemnitor shall not have the right to assume the defense of
such asserted liability on behalf of the Indemnitee).
(d) Contribution. If the indemnification provided for in this Section
is held by a court of competent jurisdiction to be unavailable to an
Indemnitee with respect to any Losses, then the Indemnitor, in lieu of
indemnifying such Indemnitee hereunder, shall contribute to the amount paid
or payable by such Indemnitee as a result of such Losses in such proportion
as is appropriate to reflect the relative fault of the Indemnitor on the
one hand and of the Indemnitee on the other in connection with the
Violation that resulted in such Losses, as well as any other relevant
equitable considerations; provided, however, that in no event shall any
contribution under this Section 5.07(d) from a Registrable Security Holder,
together with the amount of any indemnification payments made by such
Holder pursuant to Section 5.07(b) above, exceed the net proceeds from the
offering received by such Registrable Security Holder. The relative fault
of the Indemnitor and of the Indemnitee shall be determined by reference
to, among other things, whether the Violation relates to information
supplied by the Indemnitor or the Indemnitee and the parties relative
intent, knowledge, access to information, and opportunity to correct or
prevent such Violation.
(e) No Inconsistent Underwriting Agreements. Notwithstanding any
provision of this Agreement to the contrary, the Registrable Security
Holders shall not be required to enter into an underwriting agreement that
contains indemnification and contribution provisions which, in the sole
discretion of the Registrable Security Holders, materially differ from
those contained in this Section 5.07.
Section 5.08. Rule 144 Reporting. With a view to making available to the
Registrable Security Holders the benefits of Rule 144 and any other rule or
regulation of the SEC that may at any time permit a Registrable Security Holder
to sell securities of the Company to the public without registration or pursuant
to a registration on Form F-3 or S-3, the Company agrees, at any time after it
has become subject to the reporting requirements of the Securities Act and the
Exchange Act, to:
(a) make and keep public information available as those terms are
understood and defined in Rule 144 at all times after ninety (90) calendar
days after the effective date of the first registration statement filed by
the Company;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act;
(c) furnish to any Registrable Security Holder, so long as the
Registrable Security Holder owns any Registrable Securities, upon request,
(i) a written statement by the Company that it has complied with the
reporting requirements of Rule 144 (at any time after ninety (90) calendar
days after the effective date of the first registration statement filed by
the Company), the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), or that it qualifies as
a registrant whose securities may be resold pursuant to Form F-3 or S-3 (at
any time after it so qualifies), (ii) a
30
copy of the most recent annual or quarterly report of the Company and such
other reports and documents so filed by the Company and (iii) such other
information as may be reasonably requested in availing any Registrable
Security Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such
form; and
(d) to take such action, including the voluntary registration of its
Common Shares under Section 12 of the Exchange Act, as is necessary to
enable the Registrable Security Holders to utilize Form F-3 or S-3 for the
sale of their Registrable Securities, such action to be taken as soon as
practicable after the end of the fiscal year in which the first
registration statement filed by the Company for the offering of its
securities to the public is declared effective.
Section 5.09. Transfer of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Article V may be
assigned by a Registrable Security Holder to a transferee or assignee of such
Registrable Security Holder's Registrable Securities, provided, that (x) the
Company is furnished a written notice of the name and address of such transferee
or assignee and the Registrable Securities with respect to which such
registration rights are being assigned, and (y) such transferee or assignee
agrees in writing to be bound by and subject to the terms and conditions of this
Agreement.
Section 5.10. Subsequent Registration Rights. From and after the date of
this Agreement, the Company shall not, without the prior written consent of
Registrable Security Holders holding a majority of the outstanding Registrable
Securities, enter into any agreement with any holder or prospective holder of
any securities of the Company which provides such holder or prospective holder
of securities of the Company the right (a) to include such securities in any
registration filed under Sections 5.01, 5.02 or 5.03 hereof, unless under the
terms of such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of
such securities shall not reduce the amount of the Registrable Securities of the
Registrable Security Holders that are included or (b) to demand registration of
their securities.
Section 5.11. Registration in Non-U.S. Jurisdictions. In the event that the
Company effects an IPO or QIPO which does not result in the listing of its
Common Shares on a nationally recognized securities exchange in the United
States or quotation in the National Association of Securities Dealers Inc.
automated quotation system, but rather a listing on any Designated Offshore
Securities Market or other internationally recognized securities exchange, then
it shall use its reasonable best efforts, to the extent permitted by applicable
law, to provide the Registrable Security Holders with substantially the same
rights and benefits in such jurisdiction as are provided for in this Agreement,
and to take such steps, if any, consistent with customary market practice at the
time so that the Registrable Securities are freely transferable in such listed
market without transfer restrictions imposed by the securities or similar laws
of such jurisdiction.
ARTICLE VI
Miscellaneous
31
Section 6.01. Notices. All notices, requests, demands and other
communications to any party or given under this Agreement shall be in writing
and delivered personally, by overnight delivery or courier, by registered mail
or by telecopier (with confirmation received) to the parties at the address or
telecopy number specified for such parties below (or at such other address or
telecopy number as may be specified by a party in writing given at least five
business days prior thereto). All notices, requests, demands and other
communications shall be deemed delivered when actually received:
(a) If to the Company, at:
Xinhua Finance Media Limited
▇▇▇▇▇ ▇▇▇▇-▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇: ▇▇▇▇ ▇▇▇▇▇▇
Telephone: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
Facsimile: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP
35th Floor
Two International Finance ▇▇▇▇▇▇
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇: ▇▇▇▇▇▇▇▇ ▇▇
Telephone: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
Facsimile: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
(b) If to the Investors, at:
Patriarch Partners Media Holdings, LLC
c/o Patriarch Partners, LLC
▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇; ▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇ ▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇ ▇▇▇▇
(c) If to the Parent, at:
32
Xinhua Finance Limited
▇▇▇▇▇ ▇▇▇▇-▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇: ▇▇▇▇ ▇▇▇▇▇▇
Telephone: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
Facsimile: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP
35th Floor
Two International Finance ▇▇▇▇▇▇
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇: ▇▇▇▇▇▇▇▇ ▇▇
Telephone: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
Facsimile: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
Section 6.02. Counterparts. This Agreement may be executed simultaneously
in one or more counterparts, and by different parties hereto in separate
counterparts, each of which when executed shall be deemed an original, but all
of which taken together shall constitute one and the same instrument.
Section 6.03. Modification or Amendment of Agreement. This Agreement may
not be modified or amended except by an instrument in writing signed by the
Company and Preferred Holders holding at least a majority of the Preferred
Shares; provided, however, that any modification or amendment of this Agreement
which materially and adversely affects an Investor in a manner which is
materially worse than the affect on any other Investor shall not be effective
without the consent of such Investor and; provided, further, however, that a
Holder may waive any or all of such Holder's rights hereunder without obtaining
the consent of the Company or any other Holder.
Section 6.04. Successors and Assigns. This Agreement shall be binding upon
and inures to the benefit of and is enforceable by the respective successors and
permitted assigns of the parties hereto.
Section 6.05. Governing Law. This Agreement, and all claims, disputes and
matters arising hereunder or thereunder or related hereto or thereto, shall be
governed by, and construed in accordance with, the laws of the state of New York
applicable to contracts executed in and to be performed entirely within that
state, without reference to conflicts of laws provisions.
Section 6.06. Waiver of Jury. THE PARTIES HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT THAT THEY MAY HAVE TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION, OR IN
ANY LEGAL PROCEEDING, DIRECTLY OR INDIRECTLY BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR THE
33
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT (WHETHER BASED ON CONTRACT, TORT, OR
ANY OTHER THEORY). EACH PARTY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT, OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTIES WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION.
Section 6.07. Integration. This Agreement, the Share Purchase Agreement and
other Equity Documents contains and constitutes the entire agreement of the
parties with respect to the subject matter hereof and supersedes all prior
negotiations, agreements and understandings, whether written or oral, of the
parties hereto.
Section 6.08. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
Section 6.09. Interpretation. As used in this Agreement, references to the
singular shall include the plural and vice versa and references to the masculine
gender shall include the feminine and neuter genders and vice versa, as
appropriate. Unless otherwise expressly provided in this Agreement (a) the words
"hereof", "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement and (b) article, section, subsection, schedule and
exhibit references are references with respect to this Agreement unless
otherwise specified. Unless the context otherwise requires, the term "including"
shall mean "including, without limitation." The headings in this Agreement are
included for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 6.10. Ambiguities. This Agreement was negotiated between legal
counsel for the parties and any ambiguity in this Agreement shall not be
construed against the party who drafted this Agreement.
Section 6.11. Further Assurances. In order to (a) carry out more
effectively the purposes of this Agreement, (b) enable the parties to exercise
and enforce their rights and remedies hereunder, promptly upon the reasonable
request by any party hereto, the Company and the Holders shall (with the
expenses paid by the party responsible as provided in this Agreement) shall (i)
correct any defect or error that may be discovered in this Agreement or in the
execution, delivery, acknowledgment or recordation of this Agreement and (ii)
execute, acknowledge, deliver, record, file and register, any and all such
further acts, conveyances, assignments, notices of assignment, transfers,
certificates, assurances and other instruments, in each case, as such requesting
party may require from time to time.
34
Section 6.12. No Third-Party Rights. This Agreement is not intended, and
shall not be construed, to create any rights in any parties other than the
Company and the Holders, and no Person may assert any rights as third-party
beneficiary hereunder, except as provided in Section 5.07.
Section 6.13. No Waiver; Remedies. No failure or delay by any party in
exercising any right, power or privilege under this Agreement shall operate as a
waiver of the right, power or privilege. A single or partial exercise of any
right, power or privilege shall not preclude any other or further exercise of
the right, power or privilege or the exercise of any other right, power or
privilege.
Section 6.14. Submission to Jurisdiction. Each of the Company and the
Holders hereby (a) agrees that any Action with respect to any Equity Document
may be brought only in the New York State courts sitting in New York County or
the federal courts of the United States of America for the Southern District of
New York and sitting in New York County, (b) accepts for itself and in respect
of its property, generally and unconditionally, the exclusive jurisdiction of
such courts, (c) irrevocably waives any objection, including, without
limitation, any objection to the laying of venue or based on the grounds of
forum non conveniens, which it may now or hereafter have to the bringing of any
Action in those jurisdictions, and (d) irrevocably consents to the service of
process of any of the courts referred to above in any Action by the mailing of
copies of the process to the parties hereto as provided in Section 6.01. Service
effected as provided in this manner shall become effective ten (10) calendar
days after the mailing of the process.
[Remainder of page intentionally left blank; signatures on following pages.]
35
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
COMPANY: XINHUA FINANCE MEDIA LIMITED
By: /s/
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
S-1
INVESTOR: PATRIARCH PARTNERS MEDIA HOLDINGS LLC
By: /s/
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
S-2
PARENT: XINHUA FINANCE LIMITED
By: /s/
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
S-3
SCHEDULE A
INVESTORS
Patriarch Partners Media Holdings, LLC
Schedule A
ANNEX A
EXEMPT ISSUANCES
All defined terms used herein and not defined shall have the meanings set forth
in Annex A to the Credit Agreement.
MAXIMUM NUMBER OF
XFM SHARES
SHAREHOLDER SPECIFIED CONTRIBUTED ASSETS TO BE ISSUED
----------- ---------------------------- -----------------
1. Best Gain Group Ltd 40% of the fully-diluted equity of EconWorld Media 955,556
2. Cheers Perfect Ltd. Limited so long as EconWorld Media Limited holds
3. ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ the Financial Magazine Assets.
4. EconWorld Holdings Ltd.
5. Gainful Concept Ltd.
6. Justly Investment
International Ltd.
7. Lo ▇▇ ▇▇▇▇
8. Lo ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
9. ▇▇▇▇▇ ▇▇▇▇ Vi
Sanlian Group and its Affiliates 42% of the fully-diluted equity of Beijing Jingguan 4,781,893
Xingcheng Advertising Co., Ltd. (Economic Observer)
so long as Beijing Jingguan Xingcheng Advertising
Co., Ltd.(Economic Observer) holds the Financial
Newspaper Assets.
Economic Observer Shareholders 8% of the fully-diluted equity of Beijing Jingguan 979,424
Xingcheng Advertising Co., Ltd. (Economic Observer)
so long as Beijing Jingguan Xingcheng Advertising
Co., Ltd. (Economic Observer) holds the Financial
Newspaper Assets.
Hyperlink Shareholder 49% of the fully-diluted equity of Shanghai 1,613,169
Hyperlink Market Research Co., Ltd. (Hyperlink) so
long as Shanghai Hyperlink Market Research Co.,
Ltd. (Hyperlink) holds the Media Market Research
Assets.
Yu Gang 16% of the fully-diluted equity of Accord Group 125,053
Investments Limited so long as Accord Group
Investments holds the Radio Assets.
Sino Investments Holdings Limited 37% of the fully-diluted equity of Upper Step 6,478,437
Holdings Limited so long as Upper Step Holdings
Limited holds the Television Assets.
Sino Investments Holdings Limited 49% of the fully-diluted equity of Accord Group 451,107
Investments Limited so long as Accord Group
Investments holds the Radio Assets.
Sungolden Limited 44% of the fully-diluted equity of Upper Step 6,407,018
Holdings Limited so long as Upper Step Holdings
Annex A
Limited holds the Television Assets.
Sungolden Limited 16% of the fully-diluted equity of Accord Group 125,053
Investments Limited so long as Accord Group
Investments holds the Radio Assets.
Xinhua Finance Limited 50% of the fully-diluted equity of Beijing Jingguan 5,761,317
Xingcheng Advertising Co., Ltd. (Economic Observer)
so long as Beijing Jingguan Xingcheng Advertising
Co., Ltd.(Economic Observer) holds the Financial
Newspaper Assets.
Xinhua Finance Limited 51% of the fully-diluted equity of Shanghai 1,679,012
Hyperlink Market Research Co., Ltd. (Hyperlink) so
long as Shanghai Hyperlink Market Research Co.,
Ltd. (Hyperlink) holds the Media Market Research
Assets.
Exempt Plan if both Newspaper N/A 22,777,602
Assets are not acquired
Exempt Plan if both Newspaper N/A 22,340,962
Assets are acquired
Fully-diluted capitalization of Xinhua Finance Media Limited assuming completion
of all Exempt Issuances above if both Newspaper Assets are not acquired:
SHAREHOLDER OWNERSHIP PERCENTAGE XFM SHARES
----------- -------------------- -----------
Xinhua Finance Limited 44.0% 50,054,619
Patriarch Partners Media Holdings, LLC 16.8% 19,139,080
EconWorld Shareholders 0.8% 955,556
Sino Investments Holdings Limited 6.1% 6,929,544
Sungolden Limited 5.7% 6,532,070
Yu Gang 0.1% 125,053
Sanlian Group and its Affiliates 4.2% 4,781,893
Economic Observer Shareholders 0.9% 979,424
Hyperlink Shareholders 1.4% 1,613,169
Exempt Plan 20.0% 22,777,602
----- -----------
Total 100.0% 113,888,009
===== ===========
Fully-diluted capitalization of Xinhua Finance Media Limited assuming completion
of all Exempt Issuances above if both Newspaper Assets are acquired:
SHAREHOLDER OWNERSHIP PERCENTAGE XFM SHARES
----------- -------------------- -----------
Xinhua Finance Limited 44.8% 50,054,619
Patriarch Partners Media Holdings, LLC 15.6% 17,392,522
S-2
EconWorld Shareholders 0.9% 955,556
Sino Investments Holdings Limited 6.2% 6,929,544
Sungolden Limited 5.8% 6,532,070
Yu Gang 0.1% 125,053
Sanlian Group and its Affiliates 4.3% 4,781,893
Economic Observer Shareholders 0.9% 979,424
Hyperlink Shareholders 1.4% 1,613,169
Exempt Plan 20.0% 22,340,962
----- -----------
Total 100.0% 111,704,811
===== ===========
S-3