Exhibit 10.7
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STOCKHOLDERS AGREEMENT
OF
▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ inc.
As of _____________, 1999
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STOCKHOLDERS AGREEMENT
OF
▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ inc.
THIS STOCKHOLDERS AGREEMENT, dated as of _________, 1999, by and among
▇▇▇▇▇▇ & ▇▇▇▇▇, Inc., a corporation organized and existing under the laws of
Delaware, with its principal place of business at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ("BN"), B&▇.▇▇▇ Holding Corp., a corporation organized and
existing under the laws of Delaware, with its principal place of business at ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ("BN Holding"), ▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ inc.,
a corporation organized and existing under the laws of Delaware, with its
principal place of business at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the
"Company"), Bertelsmann AG, an Aktiengesellschaft organized and existing under
the laws of Germany, with its principal place of business at
▇▇▇▇-▇▇▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ("BAG") and ▇▇▇.▇▇
Online, Inc., a corporation organized and existing under the laws of Delaware,
with its principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
("USO"). BN Holding and USO are sometimes hereafter referred to, collectively,
as the "Stockholders" and, individually, as a "Stockholder."
WHEREAS, the Company has an authorized capital of 750,000,000 shares of
common stock, consisting of 500,000,000 shares of Class A Common Stock, $.001
par value per share (the "Class A Common Stock"), 100,000,000 shares of Class B
Common Stock, $.001 par value per share (the "Class B Common Stock"),
100,000,000 shares of Class C Common Stock, $.001 par value per share (the
"Class C Common Stock", and together with the Class A Common Stock and the Class
B Common Stock, the "Common Stock"), and 50,000,000 shares of Preferred Stock,
$.001 par value per share.
WHEREAS, as of the date hereof BN Holding owns all of the issued and
outstanding shares of Class B Common Stock and USO owns all of the issued and
outstanding shares of Class C Common Stock;
WHEREAS, as of the date hereof BN Holding, USO and the Company are the
sole members of ▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ llc, a Delaware limited liability company
(the "Operating Company"), with each owning an interest in the Operating Company
through the ownership of Membership Units of the Operating Company ("Membership
Units"), which Membership Units (other than Membership Units owned by the
Company) are, in accordance with the terms of the Company's Certificate of
Incorporation, exchangeable at the holder's option at any time into shares of
Class A Common Stock;
WHEREAS, BN Holding is a wholly owned subsidiary of BN and USO
(indirectly) is a wholly owned subsidiary of BAG;
WHEREAS, the Stockholders desire to promote their mutual interests by
imposing certain restrictions and obligations on each other and on the shares of
Common Stock, and, further, to provide for matters pertaining to the management
and governance of the Company.
NOW, THEREFORE, in consideration of the conditions and provisions
contained herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. The following terms shall, for the purposes of
this Agreement and the Schedules and Exhibits hereto, have the following
meanings (terms defined in the singular or the plural include the plural or the
singular, as the case may be):
"Affiliate" of any Person shall mean any other Person that, directly or
indirectly, controls, is under common control with or is controlled by that
Person. For purposes of this definition, "control" (including, with its
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting securities
or by contract or otherwise. In the case of BOL, the term "Affiliates" shall
include all Persons in which BOL directly or indirectly owns an equity interest
to the extent such Person operates under the name BOL (or a derivative thereof)
provided that no Restricted Transferee owns any equity interest therein.
"BN Directors" shall mean, collectively, the Class B Directors as
defined in the Certificate of Incorporation.
"Board" shall mean the Board of Directors of the Company.
"BOL" shall mean ▇▇▇.▇▇▇▇▇▇, Inc., a corporation organized under the
laws of Delaware.
"Business Day" shall mean any day, other than a Saturday or Sunday, on
which federally chartered banks in the United States are open for business.
"By-laws" shall mean the By-laws of the Company as in effect as of the
date of this Agreement, as the same may be amended from time to time in
accordance with the terms thereof.
"Certificate of Incorporation" shall mean the Certificate of
Incorporation of the Company as in effect as of the date of this Agreement, as
the same may be amended from time to time in accordance with the terms thereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
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"Commission" shall mean the Securities and Exchange Commission, or any
successor agency performing the functions currently performed by the Securities
and Exchange Commission.
"Encumbrance" shall mean any mortgage, pledge, security interest, lien,
restriction on use or transfer, other than those imposed by law, voting
agreement, adverse claim or encumbrance or charge of any kind (including any
agreement to give any of the foregoing), any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of, or any
agreement to give, any financing statement under the Uniform Commercial Code or
similar law of any jurisdiction.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder,
as amended.
"Governmental Body" shall mean any domestic or foreign national, state
or municipal or other local government or multi-national body (including, but
not limited to, the European Union), any subdivision, agency, commission or
authority thereof, or any quasi-governmental or private body exercising any
regulatory authority thereunder and any corporation, partnership or other entity
directly or indirectly owned by or subject to the control of any of the
foregoing.
"Operating Agreement" shall mean the Second Amended and Restated
Limited Liability Company Agreement of the Operating Company, as the same may be
amended from time to timer in accordance with the terms thereof.
"Person" shall mean an individual, sole proprietorship, corporation,
partnership, limited liability company, joint venture, trust, unincorporated
organization, mutual company, joint stock company, estate, union, employee
organization, bank, trust company, land trust, business trust or other
organization, whether or not a legal entity, or a Governmental Body.
"Public Sale" shall mean a sale pursuant to an offering registered
under the Securities Act or in a transaction pursuant to Rule 144 of the
Securities Act.
"Restricted Transferee" shall mean ▇▇▇▇▇▇.▇▇▇ inc., Borders Group,
Inc., America Online, Inc., Microsoft, Inc. or Yahoo, Inc. or any of their
respective Affiliates.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder, as amended.
"Transfer" shall mean, whether directly or indirectly by merger,
operation of law or otherwise, any sale, assignment, conveyance, transfer,
donation or any other means to dispose of, or pledge, hypothecate or otherwise
encumber in any manner whatsoever, or permit or suffer any Encumbrance.
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"USO Directors" shall mean, collectively, the Class C Directors as
defined in the Certificate of Incorporation.
Section 1.2 Usage Generally; Interpretation. Whenever the context may
require, any pronoun includes the corresponding masculine, feminine and neuter
forms. All references herein to Articles and Sections shall be deemed to be
references to Articles and Sections of this Agreement unless the context
otherwise requires. The words "include", "includes" and "including" shall be
deemed to be followed by the phrase "without limitation". The words "hereof",
"herein" and "hereunder" and words of similar import when used in this Agreement
refer to this Agreement as a whole and not to any particular provision of this
Agreement. Unless otherwise expressly provided herein, any agreement, instrument
or statute defined or referred to herein or in any agreement or instrument that
is referred to herein means such agreement, instrument or statute as from time
to time amended, modified or supplemented, including (in the case of agreements
or instruments) by waiver or consent and (in the case of statutes) by succession
of comparable successor statutes and references to all attachments thereto and
instruments incorporated therein.
ARTICLE II
VOTING PROVISIONS
Section 2.1 Voting Agreements. The Stockholders agree to vote all
shares of Common Stock held by them or their respective Affiliates so as to
cause the following:
(a) The election of each Class A Director (as defined in the
Certificate of Incorporation) proposed for election by the Nominating
Committee of the Board of Directors of the Company;
(b) The election of such Chairman of the Board as shall be
selected by the BN Directors, unless (if such nominee is not ▇▇▇▇▇▇▇
▇▇▇▇▇▇ or ▇▇▇▇▇▇▇ ▇▇▇▇▇▇) the USO Directors reject such nominee for
good reason; and
(c) The election of such Chief Executive Officer as shall be
selected by the Special Committee (as defined in the By-laws) pursuant
to a search by a nationally recognized search service selected by the
Special Committee. In connection with such process: (i) applicants
shall be interviewed by the Chairman of the Board and by the members of
the Special Committee; and (ii) any member of the Special Committee may
make recommendations.
Section 2.2 Limitations. The provisions of Sections 2.1(b) and 2.1(c)
hereof shall cease to apply upon the occurrence of a Class B Triggering Event or
Class C Triggering Event (as each such term is defined in the Certificate of
Incorporation).
ARTICLE III
TRANSFERS.
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s
Section 3.1 Prohibited Transfers. Except as expressly permitted in this
Agreement, no Stockholder or any of their respective Affiliates, including any
direct or indirect beneficial owner or ultimate parent of any such entity
(including BN and BAG), shall, directly or indirectly, Transfer any of the
right, title or interest in (i) any shares of Common Stock or (ii) any of their
Affiliates which beneficially own, either directly or indirectly, any shares of
Common Stock. Except for Transfers duly made in accordance with this Article
III, no Transfer of Common Stock by a Stockholder shall be valid as against the
Company and its stockholders.
Section 3.2 Permitted Transfers.
(a) Notwithstanding anything in this Agreement to the contrary,
each Stockholder may Transfer all (but not less than all) of the shares of
Common Stock owned by it and its rights under this Agreement under any of the
following circumstances:
(i) Each Stockholder may Transfer all (but not less than all)
of the shares of Common Stock owned by it together with its rights under this
Agreement to any transferee which is an Affiliate of the transferring
Stockholder provided that (x) no Restricted Transferee owns an interest in such
transferee, and (y) all Membership Units owned by such transferor are also
transferred concurrently to such transferee; and
(ii) Each Stockholder (or any permitted transferee under
clause (i) above) may Transfer all (but not less than all) of the shares of
Common Stock owned by it together with its rights under this Agreement if such
Transfer is part of the Transfer (x) by BAG and its Affiliates of all (or
substantially all) of the publishing business in the United States, operated by
BAG and its Affiliates, or (y) by BN and its Affiliates, of all (or
substantially all) of its retail book store business, provided in each case that
all Membership Units owned by such transferor are also transferred concurrently
to such transferee.
(iii) In the event of any Transfer pursuant to Sections
3.2(a)(i) or (ii), a transferee (or subsequent transferee) shall be entitled to
the rights and privileges set forth in this Agreement and shall be bound and
obligated by the provisions of this Agreement. As a condition to such Transfer
permitted pursuant to this Section 3.2(a), each transferee that will own shares
of Common Stock shall, prior to such transfer, agree in writing to be bound by
all of the provisions of this Agreement and no such transferee shall be
permitted to make any Transfer which the original transferor was not permitted
to make. In connection with any Transfer pursuant to this Section 3.2(a), the
transferee shall execute and deliver to the non-transferring Stockholder and the
Company such documents as may reasonably be requested by the non-transferring
Stockholder or the Company to evidence the same.
(b) Each Stockholder may Transfer some or all of the shares of
Common Stock owned by it to the other Stockholder.
(c) Each Stockholder may Transfer some or all of the Class A
Common Stock owned by it in a Public Sale.
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Section 3.3 Rights of First Refusal.
(a) Except with respect to Transfers permitted pursuant to Section
3.2, if, on or after October 31, 1999, a Stockholder desires to Transfer any
shares of Common Stock to any other Person (other than a Restricted Transferee)
in a bona fide transaction solely for cash consideration, such Stockholder (the
"Offeror") shall be entitled to do so provided that such Offeror first offers to
sell such shares of Common Stock to the other Stockholder (the "Offeree") at the
same price and the same terms and conditions as the Offeror would receive from
such other Person. If the Offeror Transfers an amount of shares of Common Stock
which (together with any Membership Units also being transferred by the Offeror)
are equal to or more than ten percent (10%) of the then aggregate outstanding
Membership Units, the member of the Special Committee elected by the BN
Directors (if BN Holding or its Affiliate is the Offeror) or by the USO
Directors (if USO or its Affiliate is the Offeror) shall be deemed to have
resigned effective immediately upon such Transfer. The Offeror shall submit to
the Company and the Offeree a written notice (the "Offer Notice") stating in
reasonable detail such price and such terms and conditions and identifying the
Person and all Persons who beneficially own more than five percent (5%) of such
Person, proposing to purchase the shares of Common Stock, and the amount of
Membership Units, if any, also being sold. The Offeree shall have a period of
thirty (30) days after the receipt of the Offer Notice in which to accept or
reject such offer. If the Offeree elects to accept such offer, which acceptance
must be for all and not part of the Common Stock and Membership Units offered
for sale, it shall so indicate within such thirty (30) day period by notice to
the Offeror. The notice required to be given by the Offeree shall specify a date
for the closing of the purchase which, subject to the expiration or early
termination of any waiting period required by any Governmental Body and the
receipt of any required approvals of any Governmental Body, shall not be more
than thirty (30) days after the date of the giving of such notice.
(b) If the Offeree does not exercise its right to purchase all of
the shares of Common Stock offered for sale pursuant to the provisions of this
Section 3.3, the Offeror of such shares of Common Stock shall have the right to
sell to the Person identified in the Offer Notice, subject to the provisions of
this Agreement, all of such shares of Common Stock and Membership Units on the
same terms and conditions including the price as specified in the Offer Notice,
free from the restrictions of Section 3.1 of this Agreement (for purposes of
such specific transaction, but not for purposes of any subsequent transaction)
in a bona fide transaction, for a period of ninety (90) days from the date that
the Offer expires hereunder, provided that any such purchaser shall prior to
such transfer, if such purchaser shall be receiving shares of Common Stock,
agree in writing to be bound by all of the provisions of this Agreement. At the
end of such ninety (90) day period, the Offeror shall notify the Company and the
Offeree in writing whether its shares of Common Stock have been sold in a bona
fide transaction during such period. To the extent not sold during such ninety
(90) day period, all of such shares of Common Stock shall again become subject
to all of the restrictions and provisions hereof.
(c) The purchase price per share of the shares of Common Stock
shall be the price per share offered to be paid by the prospective transferee
described in the Offer Notice, which price shall be paid in cash.
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(d) The closing of the purchase shall take place at the office of
the Company or such other location as shall be mutually agreeable and the
purchase price shall be paid at the closing by wire transfer of immediately
available funds. At the closing, the Offeror shall deliver to the Offeree the
certificates evidencing the shares of Common Stock to be conveyed, duly endorsed
and in negotiable form as well as the items listed in Section 3.4.
Section 3.4 Closing Deliveries. The Offeror at a closing under this
Article III shall deliver to the Offeree the following:
(a) A duly executed "Deed of Transfer" conveying to the Offeree
the shares of Common Stock being purchased by the Offeree, free and clear of any
Encumbrances, except those in this Agreement which are expressly assumed.
(b) A statement from the Offeror that: (i) except as set forth
therein, the Offeror has no claim as against the Company for unpaid dividends,
compensation, bonuses, profit-sharing or rights or other claims of whatsoever
kind, nature or description and that all amounts due and payable by the Company
to the Offeror have been paid; and (ii) it shall guarantee the performance of
the Purchaser's obligations under this Agreement.
Section 3.5 Continuity of Agreements.
(a) In the event of a permitted Transfer under Section 3.2 or 3.3
(other than a permitted transfer to an Affiliate), the Company's rights under
the Fulfillment Agreements and the Supply Agreement (as such terms are defined
in the Operating Agreement) shall terminate on the date which is six (6) months
after the date of Transfer unless otherwise provided therein.
(b) Notwithstanding the foregoing Section 3.5(a), in the event
that (i) USO is the transferring party in a transfer subject to Section 3.3, and
has complied with Section 3.3, and (ii) the Transfer is to any entity which is a
competitor of the Company and derives more than fifty percent (50%) of its
revenues from the sale of books, BN College shall have the right, by notice
given no later than ninety (90) days after the consummation of the Transfer by
USO under Section 3.3(a), to terminate the Amended and Restated Trademark
License Agreement dated as of October 31, 1998, as amended, insofar as relates
to the right granted to the Company and the Operating Company to use the name
"▇▇▇▇▇▇ and Noble" or any substantially similar name or derivation, including
"B&N" or "BN".
ARTICLE IV
REGISTRATION RIGHTS IN CLASS A COMMON STOCK.
The shares of Class A Common Stock that are issued by the Company
(i) upon conversion of Class B Common Stock or Class C Common Stock, or (ii) in
exchange for Membership Units pursuant to the Certificate of Incorporation shall
have the registration rights set forth on Annex A attached hereto, which is
incorporated herein by reference and made a part hereof as if included in full
herein. The parties agree that, subject to the advance notice requirements set
forth in the Certificate of Incorporation, any such conversion or exchange shall
occur, at the option of the
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exchanging or converting Stockholder, contemporaneously with the registration of
the Class A Common Stock to be received, or the consummation of the sale of such
Class A Common Stock pursuant to such registration, or at such other time as
such Stockholder shall request in writing.
ARTICLE V
CERTIFICATES
As long as this Agreement shall remain in full force and effect, there
shall be inscribed upon each certificate of Common Stock held by a Stockholder
the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, ASSIGNED, HYPOTHECATED OR IN ANY WAY DISPOSED OF
OR ENCUMBERED EXCEPT PURSUANT TO THE TERMS AND CONDITIONS OF A CERTAIN
STOCKHOLDERS AGREEMENT DATED AS OF _____________, 1999, AND ANY
AMENDMENTS THERETO, AMONG ▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ INC., B&▇.▇▇▇ HOLDING
CORP., ▇▇▇.▇▇ ONLINE, INC., ▇▇▇▇▇▇ & ▇▇▇▇▇, INC. AND BERTELSMANN AG, A
COPY OF WHICH IS ON FILE AT THE OFFICE OF THE COMPANY. THE HOLDER AND
THE OWNER HEREOF IS SUBJECT TO THE OBLIGATIONS THEREIN SET FORTH AND
CONTAINED AND ANY SUCH DISPOSITION OR ENCUMBRANCE IN VIOLATION OF SAID
STOCKHOLDERS AGREEMENT SHALL BE NULL AND VOID.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE, AND MAY NOT BE SOLD,
ASSIGNED, PLEDGED, ENCUMBERED, TRANSFERRED, GRANTED AN OPTION WITH
RESPECT TO OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
OR DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO THE COMPANY THAT SUCH SALE OR TRANSFER IS EXEMPT FROM
REGISTRATION UNDER THE ACT.
ARTICLE VI
TERMINATION
This Agreement, other than Article IV which shall terminate in
accordance with the provisions set forth in Section 9 of Annex A of this
Agreement, shall terminate upon the occurrence of any of the following events:
(a) The written agreement of the parties hereto;
(b) The date on which there are no more shares of Common Stock
owned by any Stockholder; and
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(c) The dissolution of the Company.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Severability. The terms, conditions, and provisions of this
Agreement are fully severable, and the decision or judgment of any court of
competent jurisdiction rendering void or unenforceable any one or more of such
terms, conditions or provisions shall not render void or unenforceable any of
the other terms, conditions or provisions hereof and such void or unenforceable
term shall be replaced with a valid and enforceable term which would to the
greatest degree possible reflect the original intentions of the parties
hereunder.
Section 7.2 Notices. All notices and other communications hereunder
shall be in writing and shall be given and delivered by messenger, transmitted
by telecopy or telegram (in either case followed by reputable overnight courier
sent the same day), by reputable overnight courier or mailed by certified mail,
postage prepaid, return receipt requested, to the parties at the following
addresses (or such other address as shall be specified by such party by like
notice), and shall be deemed given on the date on which so delivered by
messenger or reputable overnight courier, on the next business day following the
date on which so transmitted by telecopy, telegram or on the third business day
following the date on which mailed by certified mail:
If to the Company, to:
▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to BN or BN Holding, to:
▇▇▇▇▇▇ & Noble, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Mr. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Aronsohn & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
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Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to USO, to:
Bertelsmann AG
▇▇▇▇-▇▇▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇
with a copy for each of USO to:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & Green, P.C.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Section 7.3 Captions. The captions at the heading of each article or
section of this Agreement are for convenience of reference only, and are not to
be deemed a part of the Agreement itself.
Section 7.4 Entire Agreement. This Agreement, including the annexes
hereto and the other agreements and documents referenced herein or contemplated
hereby, constitutes the entire agreement and understanding of the parties hereto
with respect to the matters herein set forth, and all prior negotiations and
understandings relating to the subject matter of this Agreement are merged
herein and are superseded and canceled by this Agreement.
Section 7.5 Counterparts. This Agreement may be executed and delivered
in one or more counterparts, each of which shall be deemed an original, and all
of which shall be deemed to constitute one and the same agreement.
Section 7.6 Amendments; Waiver. Amendments to this Agreement may be
made from time to time, provided, however, that no amendment, modification or
waiver of this Agreement or any provision hereof shall be valid or effective
unless in writing and signed by each and every Stockholder. No consent to, or
waiver, discharge or release (each, a "Waiver") of, any provision of or breach
under this Agreement shall be valid or effective unless in writing and signed by
the party giving such Waiver, and no specific Waiver shall constitute a Waiver
with respect to any other provision or breach, whether or not of similar nature.
Failure on the part of any party hereto to insist in any instance upon strict,
complete and timely performance by another party hereto of any provision of or
obligation under this Agreement shall not constitute a Waiver by such party of
any of its rights under this Agreement or otherwise.
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Section 7.7 Further Assurances. Each party shall perform all other acts
and execute and deliver all other documents as may be necessary or appropriate
to carry out the purposes and intent of this Agreement.
Section 7.8 Governing Law. This Agreement shall in all respects be
governed by and construed in accordance with the laws of the State of Delaware
without giving effect to its rules on conflicts of laws.
Section 7.9 Third Party Beneficiary. Nothing set forth in the Agreement
shall be construed to confer any benefit to any third party who is not a party
to this Agreement.
Section 7.10 Assignment. This Agreement is personal to the parties
hereto and neither party may (except as set forth in Article III) assign or
Transfer the rights accruing hereunder nor may performance of any duties by
either party hereunder be delegated or assumed by any other Person or legal
entity without the prior written consent of the other parties hereto.
Section 7.11 Successors And Assigns. This Agreement shall be binding
upon and inure to the benefit of the respective successors and permitted assigns
of each party hereto; provided, that no party hereto may Transfer (or cause or
permit to be created or existing any lien on) or assign such party's Common
Stock (or any portion thereof or any beneficial interest therein) or this
Agreement or such party's rights, interests or obligations hereunder, except in
accordance with the terms of this Agreement.
Section 7.12 Relationship. This Agreement does not constitute any
Stockholder, director, or any employee or agent of the Company or the Operating
Company as the agent or legal manager of any Stockholder for any purpose
whatsoever and no Stockholder, Director, or any employee or agent of the Company
or the Operating Company is granted hereby any right or authority to assume or
to create any obligation or responsibility, express or implied, on behalf of or
in the name of any Stockholder or to bind any Stockholder in any manner or thing
whatsoever.
Section 7.13 Consent to Jurisdiction. The exclusive jurisdiction and
venue for any disputes arising out of or in connection with this Agreement will
be any state or federal court located in New York County, New York, and each
party hereby consents to personal jurisdiction in such court and consents to
service of process by means of certified or registered mail, return receipt
requested.
Section 7.14 Equitable Remedies. Each party acknowledges that no
adequate remedy of law would be available for a breach of Articles II, III and
IV of this Agreement, and that a breach of any of such Articles of this
Agreement by one party would irreparably injure the other parties and
accordingly agrees that in the event of a breach of any of such Articles of this
Agreement, the respective rights and obligations of the parties hereunder shall
be enforceable by specific performance, injunction or other equitable remedy
(without bond or security being required), and each party waives the defense in
any action and/or proceeding brought to enforce this Agreement that there exists
an adequate remedy or that the other party is not irreparably
-11-
injured. Nothing in this Section 7.14 is intended to exclude the possibility of
equitable remedies with respect to breaches of other sections of this Agreement.
Section 7.15 Fees and Expenses. Except as specifically set forth
herein, each party shall be responsible for any legal and other fees and
expenses incurred by such party in connection with the negotiation and
preparation of this Agreement and the transactions contemplated hereby.
Section 7.16 Obligations of ▇▇▇▇▇▇ & ▇▇▇▇▇ and Bertelsmann. By their
signatures below, BN agrees to be liable for any failure by BN Holding to
perform any of its obligations under this Agreement, and any other agreements
executed in connection herewith to which it is a party, and BAG agrees to be
liable for any failure by USO to perform any of its obligations under this
Agreement, and any other agreements executed in connection herewith to which it
is a party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ inc.
By: _________________________________
Name:
Title:
-12-
B&▇.▇▇▇ HOLDING CORP.
By: _________________________________
Name:
Title:
▇▇▇.▇▇ ONLINE, INC.
By: _________________________________
Name:
Title:
▇▇▇▇▇▇ & NOBLE, INC..
By: _________________________________
Name:
Title:
BERTELSMANN AG
By: _________________________________
Name:
Title:
-13-
Annex A
-------
Registration Rights
Section 1. Definitions
Section 1.1 Capitalized terms used herein without definition have the
meanings assigned to such terms in the Shareholders Agreement to which this
Annex A is a part of. As used in this Annex A, the following terms shall have
the following meanings:
"Holder" means any Person who owns Registrable Securities.
"IPO" means the initial public offering of the Class A Common
Stock pursuant to an offering registered under the Securities Act.
"Lock-Up Agreement" means the agreement between each
Stockholder and an underwriter for the IPO, pursuant to which such Stockholder
agrees that it will not offer to sell, contract to sell, or otherwise sell,
dispose of, loan, pledge or grant any rights with respect to any shares of
Common Stock, any options or warrants to purchase any shares of common stock, or
any securities convertible into or exchangeable for any shares of Common Stock
now owned or hereafter acquired directly by the Stockholder or with respect to
which the Stockholder has or hereafter acquires the power of disposition.
"Lock-Up Period" means the respective period agreed to by each
Stockholder and an underwriter for the IPO during which time such Stockholder
agrees that it will not offer to sell, contract to sell, or otherwise sell,
dispose of, loan, pledge or grant any rights with respect to any shares of
Common Stock, any options or warrants to purchase any shares of common stock, or
any securities convertible into or exchangeable for any shares of Common Stock
now owned or hereafter acquired directly by the Stockholder or with respect to
which the Stockholder has or hereafter acquires the power of disposition.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means any prospectus included in a Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
Registration Statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by any Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
"Registrable Securities" means shares of Class A Common Stock
issued upon conversion of shares of Class B Common Stock or Class C Common Stock
or in exchange for
Membership Units; provided, however, that the shares of Class A Common Stock
that are Registrable Securities shall cease to be Registrable Securities (x)
upon the consummation of any sale of such shares pursuant to an effective
Registration Statements under the Securities Act or Rule 144 promulgated
thereunder or (y) at such time as such shares of Class A Common Stock (which are
issued or which may become issued upon conversion or exchange of any other
security) become eligible for sale under Rule 144(k) under the Securities Act.
"Registration Statement" means any Registration Statement and
any additional Registration Statement, including (in each case) the Prospectus,
amendments and supplements to such Registration Statement or Prospectus,
including pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference in such Registration Statement to be filed
pursuant to the terms of this Annex A.
"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Underwritten Registration or Underwritten Offering" means a
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective Registration
Statement.
Section 2. "Piggy-Back" Registrations
Section 2.1 If at any time after the IPO the Company shall determine to
register for its own account or the account of others under the Securities Act
(including (i) in connection with a public offering by the Company other than
the IPO or (ii) a demand for registration made by any stockholder of the Company
including any of the parties hereto) any of its equity securities (other than on
Form S-4 or Form S-8 or their then equivalents relating to shares of Common
Stock to be issued solely in connection with any acquisition of an entity or
business or shares of Common Stock issuable in connection with stock option or
other employee benefit plans) it shall send to each Holder written notice of
such determination and if, within 30 days after receipt of such notice, such
Holder shall so request in writing, the Company shall use its best efforts to
include in such Registration Statement all or any part of the Registrable
Securities such Holder requests to be registered.
Section 2.2 If, in connection with any offering described in Section
2.1 of this Annex A involving an underwriting of common stock to be issued by
the Company, the managing underwriter shall impose a limitation on the number of
shares of such common stock which may
-2-
be included in the Registration Statement because in its judgment, such
limitation is necessary to affect an orderly public distribution, then, in the
discretion of such managing underwriter, the Company shall include in such
Registration Statements only such portion of the Registrable Securities with
respect to which such Holders have requested inclusion pursuant hereto as such
limitation permits after the inclusion of all shares of common stock to be
registered by the Company for its own account. Any exclusion of Registrable
Securities shall be made pro rata among such Holders seeking to include such
shares, in proportion to the number of such shares sought to be included by such
Holders.
Section 3. "Demand" Registrations
Section 3.1 At any time commencing at least 180 days after the
effective date of any registration statement covering the IPO, each Holder (a
"Demand Holder") may make a written request (each a "Demand Request") for
registration under the Securities Act (a "Demand Registration") of all or part
of the Registrable Securities held by such Holder; provided, however, that the
Registrable Securities requested to be registered shall, on the date that the
Demand Request is delivered, (i) constitute at least five percent (5%) of the
shares of Common Stock outstanding, or (ii) have an aggregate minimum market
value of at least $25,000,000 before calculation of underwriting discounts and
commissions. Each Demand Request shall specify the number of Registrable Shares
proposed to be sold by such Demand Stockholder.
Section 3.2 Within 15 days after receipt of each Demand Request, the
Company shall give written notice of such Demand Request to all non-requesting
Holders and shall use its best efforts to cause such of the Registrable
Securities as may be requested by any Holders thereof (including the Holder or
Holders giving the initial notice of intent to offer) to be filed with the
Commission not later than 120 days after receipt of a Demand Request (the
"Demand Filing Date") and shall use all commercially reasonable efforts to cause
the same to be declared effective by the Commission as promptly as practicable
after such filing. Both the Demand Request and any request to join in such
Demand Request shall be considered a single Demand Request. Any inclusion of
Registrable Shares owned by a Demand Holder pursuant to a Demand Request
(including a notice to join in a prior Demand Request) shall be deemed to have
been effected pursuant to a single Demand Request.
Section 3.3 Notwithstanding any other provision set forth in this
Section 3, no Holder shall be entitled to deliver a Demand Request within 90
days after the effectiveness of any Registration Statement filed (i) by the
Company pursuant to an Underwritten Offering by the Company other than the IPO
or (ii) on behalf of any Demand Holder or any other holder of demand
registration rights.
Section 3.4 A registration will not count as a Demand Registration
until it has become effective (unless the Demand Holder withdraws all of its
Registrable Securities and the Company has performed its obligations hereunder
in all material respects, in which case such demand will count as a Demand
Registration); provided, that if, after it has become effective, an offering of
Registrable Securities pursuant to a registration is interfered with by any stop
order, injunction, or other order or requirement of the Commission or other
governmental agency or court, such
-3-
registration will be deemed not to have been effected and will not count as a
Demand Registration.
Section 3.5 The Company may defer the filing (but not the preparation)
of a registration statement required by this Section 3 until a date not later
than 120 days after the Demand Filing Date if:
(a) at the time the Company receives the Demand Request, there
is (i) material non-public information regarding the Company which the Board
reasonably determines not to be in the Company's best interest to disclose and
which the Company is not otherwise required to disclose, or (ii) there is a
significant business opportunity (including but not limited to the acquisition
or disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar transaction) available to
the Company which the Board reasonably determines not to be in the Company's
best interest to disclose; or
(b) prior to receiving the Demand Request, the Board had
determined to effect an Underwritten Offering and the Company had taken
substantial steps and is proceeding with reasonable diligence to effect such
offering.
A deferral of the filing of a registration statement pursuant to this
Section 3.5 shall be lifted, and the requested registration statement shall be
filed forthwith, if, (x) in the case of a deferral pursuant to clause (a)(i),
the material non-public information is made public by the Company, (y) in the
case of a deferral pursuant to clause (a)(ii), the significant business
opportunity is disclosed by the Company or is terminated, or (z) in the case of
a deferral pursuant to clause (b), the proposed registration for the Company's
account is abandoned. In order to defer the filing of a registration statement
pursuant to this Section 3.5, the Company shall promptly (but in any event
within 10 days), upon determining to seek such deferral, deliver to each Demand
Holder a certificate signed by an executive officer of the Company stating that
the Company is deferring such filing pursuant to this Section 3.5 and an
approximation of the anticipated delay. Within 20 days after receiving such
certificate, the holders of a majority of the Registrable Securities held by the
Demand Holder and for which registration was previously requested may withdraw
such Demand Request by giving written notice to the Company; if withdrawn, the
Demand Request shall be deemed not to have been made for all purposes of this
Annex A.
Section 4. Registration Procedures
Whenever any Holder has requested that any Registrable Securities be
registered pursuant to this Annex A, the Company will use its reasonable best
efforts to effect the registration of such Registrable Securities and in
furtherance thereof the Company shall:
(a) prepare and file with the Commission on any appropriate
form under the Securities Act with respect to such Registrable Securities and
use its commercially reasonable efforts to cause such Registration Statement to
become effective;
-4-
(b) prepare and file with the Commission such amendments,
including post-effective amendments and supplements to the Registration
Statement as may be necessary to keep the Registration Statement continuously
effective as to the applicable Registrable Securities for a period of not less
than 180 days (or such lesser period as is necessary for the underwriters in an
underwritten offering to sell unsold allotments) and prepare and file with the
Commission such additional Registration Statements in order to register for
resale under the Securities Act all of the Registrable Securities; (ii) cause
the related Prospectus to be amended or supplemented by any required Prospectus
supplement, and as so supplemented or amended to be filed pursuant to Rule 424
(or any similar provisions then in force) promulgated under the Securities Act;
(iii) respond as promptly as possible to any comments received from the
Commission with respect to the Registration Statements or any amendment thereto
and as promptly as possible provide the Holders true and complete copies of all
correspondence from and to the Commission relating to the Registration
Statements; and (iv) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statements during the
applicable period in accordance with the intended methods of disposition by the
Stockholders thereof set forth in the Registration Statements as so amended or
in such Prospectus as so supplemented;
(c) (i) furnish to the Holders of Registrable Securities to be
sold, their counsel and any managing underwriters, copies of all such documents
proposed to be filed, which documents (other than those incorporated by
reference) will be subject to the review of such Stockholders, their counsel and
such managing underwriters, and (ii) cause its officers and directors, counsel
and independent certified public accountants to respond to such inquiries as
shall be necessary, in the reasonable opinion of respective counsel to such
Holders and such underwriters, to conduct a reasonable investigation within the
meaning of the Securities Act. The Company shall not file a Registration
Statement to which the holder of a majority of the Registrable Securities or its
counsel or any managing underwriters shall reasonably object in writing within
three (3) Business Days of their receipt thereof;
(d) notify the Holders of Registrable Securities to be sold,
their counsel and any managing underwriters as promptly as possible (and in the
case of (i), below, not less than five (5) days prior to such filing) and
confirm such notice in writing no later than one (1) Business Day following the
day:
(i) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statements is proposed to be filed;
(ii) when the Commission notifies the Company whether
there will be a "review" of such Registration Statements and whenever the
Commission comments in writing on such Registration Statements;
(iii) with respect to the Registration Statements or
any post-effective amendment, when the same has become effective;
-5-
(iv) of any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to the
Registration Statements or Pro spectus or for additional information;
(v) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statements covering any
or all of the Registrable Securities or the initiation of any Proceedings for
that purpose;
(vi) if at any time any of the representations and
warranties of the Company contained in any agreement (including any underwriting
agreement) contemplated hereby ceases to be true and correct in all material
respects;
(vii) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and
(viii) of the occurrence of any event that makes any
statement made in the Registration Statements or Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires any revisions to the Registration Statements,
Prospectus or other documents so that, in the case of the Registration
Statements or the Prospectus, as the case may be, it will not contain any untrue
statement of a material fact or omit to state any 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;
(e) use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
the Registration Statements or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment;
(f) if requested by any managing underwriter to be sold in
connection with an Underwritten Offering, (i) promptly incorporate in a
Prospectus supplement or post-effective amendment to the Registration Statement
such information as the Company reasonably agrees should be included therein and
(ii) make all required filings of such Prospectus supplement or such
post-effective amendment as soon as practicable after the Company has received
notification of the matters to be incorporated in such Prospectus supplement or
post-effective amendment; provided, however, that the Company shall not be
required to take any action pursuant to this clause (f) that would, in the
opinion of counsel for the Company, violate applicable law or be materially
detrimental to the business prospects of the Company;
(g) furnish to each Holder of Registrable Securities to be
sold, their counsel and any managing underwriters, without charge, at least one
conformed copy of each Registration Statements and each amendment thereto,
including financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference, and all exhibits to the extent
requested by such Person (including those previously furnished or incorporated
by reference) promptly after the filing of such documents with the Commission;
-6-
(h) promptly deliver to each Holder of Registrable Securities
to be sold, their counsel, and any underwriters, without charge, as many copies
of the Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request; and the
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Stockholders and any underwriters in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement thereto;
(i) prior to any public offering of Registrable Securities,
use its best efforts to register or qualify or cooperate with the selling
Holders, any underwriters and their counsel in connection with the registration
or qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any selling Holder or
underwriter requests in writing, to keep each such registration or qualification
(or exemption therefrom) effective for at least 180 days and to do any and all
other acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement;
provided, however, that the Company shall not be required to qualify generally
to do business in any jurisdiction where it is not then so qualified or to take
any action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject;
(j) cooperate with the selling Holders and any managing
underwriters to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold pursuant to a Registration
Statements, which certificates shall be free, to the extent permitted by
applicable law, of all restrictive legends, and to enable such Registrable
Securities to be in such denominations and registered in such names as any such
managing underwriters or Stockholders may request at least two Business Days
prior to any sale of Registrable Securities;
(k) upon the occurrence of any event contemplated by Section
4(d)(viii) of this Annex A, as promptly as possible, prepare a supplement or
amendment, including a post-effective amendment, to the Registration Statement
or a supplement to the related Prospectus or any document incorporated or
deemed to be incorporated therein by reference, and file any other required
document so that, as thereafter delivered, neither the Registration Statements
nor such Prospectus will contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading;
(l) use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on the securities exchange,
quotation system, market or over-the-counter bulletin board on which similar
securities issued by the Company are then listed;
(m) enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in Underwritten
Offerings) and take all such other actions in connection therewith (including
those reasonably requested by any managing underwriters in order to expedite or
facilitate the disposition of such Registrable Securities, and whether or not an
underwriting agreement is entered into):
-7-
(i) make such representations and warranties to such
selling Holders and such underwriters as are customarily made by issuers to
underwriters in underwritten public offerings, and confirm the same if and when
requested;
(ii) in the case of an Underwritten Offering, obtain
and deliver copies thereof to the managing underwriters, if any, of opinions of
counsel to the Company and updates thereof addressed to each such underwriter,
in form, scope and substance reasonably satisfactory to any such managing
underwriters and counsel to the selling Stockholders covering the matters
customarily covered in opinions requested in Underwritten Offerings and such
other matters as may be reasonably requested by such counsel and underwriters;
(iii) immediately prior to the effectiveness of the
Registration Statement, and, in the case of an Underwritten Offering, at the
time of delivery of any Registrable Securities sold pursuant thereto, obtain and
deliver copies to the selling Holders and the managing underwriters, if any, of
"cold comfort" letters and updates thereof from the independent certified public
accountants of the Company (and, if necessary, any other independent certified
public accountants of any subsidiary of the Company or of any business acquired
by the Company for which financial statements and financial data is, or is
required to be, included in the Registration Statements), addressed to each
selling Holder and each of the underwriters, if any, in form and substance as
are customary in connection with Underwritten Offerings;
(iv) if an underwriting agreement is entered into,
the same shall contain indemnification provisions and procedures no less
favorable to the selling Holders and the underwriters, if any, other than those
set forth in Section 8 of this Annex A (or such other provisions and procedures
acceptable to the managing underwriters, if any; and
(v) deliver such documents and certificates as may be
reasonably requested by the selling Holders, their counsel and any managing
underwriters to evidence the continued validity of the representations and
warranties made pursuant to clause (i) above and to evidence compliance with any
customary conditions contained in the underwriting agreement or other agreement
entered into by the Company;
(n) make available for inspection by the selling Holders, any
representative of such Holders, any underwriter participating in any disposition
of Registrable Securities, and any attorney or accountant retained by such
selling Holder or underwriters, at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries, and cause the
officers, directors, agents and employees of the Company and its subsidiaries to
supply all information in each case reasonably requested by any such Holder,
representative, underwriter, attorney or accountant in connection with the
Registration Statements; provided, however, that any information that is
determined in good faith by the Company in writing to be of a confidential
nature at the time of delivery of such information shall be kept confidential by
such Persons, unless (i) disclosure of such information is required by court or
administrative order or is necessary to respond to inquiries of regulatory
authorities; (ii) disclosure of such information, in the opinion of counsel to
such Person, is required by law; (iii) such information becomes generally
available to the public other than as a result of a disclosure or failure to
safeguard by
-8-
such Person; or (iv) such information becomes available to such Person from a
source other than the Company and such source is not known by such Person to be
bound by a confidentiality agreement with the Company;
(o) comply in all material respects with all applicable rules
and regulations of the Commission and make generally available to its security
holders earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) (i) commencing at the end of any fiscal quarter in which
Registrable Securities are sold to underwriters in a firm commitment or best
efforts Underwritten Offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the Company
after the effective date of the Registration Statements, which statement shall
conform to the requirements of Rule 158;
(p) the Company may require each selling Holder to furnish to
the Company information regarding such Holder and the distribution of such
Registrable Securities as is required by law to be disclosed in the Registration
Statements, and the Company may exclude from such registration the Registrable
Securities of any such Stockholder who unreasonably fails to furnish such
information within a reasonable time after receiving such request. If the
Registration Statements refers to any Stockholder by name or otherwise as the
holder of any securities of the Company, then such Stockholder shall have the
right to require (if such reference to such Stockholder by name or otherwise is
not required by the Securities Act or any similar Federal statute then in force)
the deletion of the reference to such Stockholder in any amendment or supplement
to the Registration Statements filed or prepared subsequent to the time that
such reference ceases to be required.
Section 5. Lock-Up Agreement
Each Holder agrees, if such Holder is so requested by the managing
underwriter in the Initial Public Offering, to enter into a Lock-Up Agreement,
provided that the lock-up period shall not exceed 180 days.
Section 6. Stockholder Covenants
Each Holder hereby covenants and agrees that:
(a) it will not sell any Registrable Securities under the
Registration Statement until it has received notice from the Company that such
Registration Statement and any post-effective amendments thereto have become
effective;
(b) it and its officers, directors or Affiliates, if any, will
comply with the prospectus delivery requirements of the Securities Act as
applicable to them in connection with sales of Registrable Securities pursuant
to a Registration Statement;
(c) by its acquisition of such Registrable Securities that,
upon receipt of a notice from the Company of the occurrence of any event of the
kind described in Section 4(d)(iv),
-9-
(v), (vi), (vii) and (viii) of this Annex A, such Holder will forthwith
discontinue disposition of such Registrable Securities under the Registration
Statements until such Holder's receipt of the copies of the supplemented
Prospectus and/or amended Registration Statements or until it is advised in
writing (the "Advice") by the Company that the use of the applicable Pro spectus
may be resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Pro spectus or Registration Statement.
Section 7. Registration Expenses
Except to the extent limited by the applicable state law, all fees and
expenses incident to the performance of or compliance with this Annex A by the
Company shall be borne by the Company whether or not pursuant to an Underwritten
Offering and whether or not any Registration Statements is filed or becomes
effective and whether or not any Registrable Securities are sold pursuant to any
Registration Statements. The fees and expenses referred to in the foregoing
sentence shall include, without limitation (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with any securities exchange or market on which Registrable
Securities are required hereunder to be listed and (B) in compliance with state
securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel for the Stockholders in connection with Blue Sky
qualifications of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws of such
jurisdictions as the managing underwriters, if any)); (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is requested by the managing underwriters, if any; (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for the
Company; (v) Securities Act liability insurance, if the Company so desires such
insurance; (vi) fees and expenses of all other Persons retained by the Company
in connection with the consummation of the transactions contemplated by this
Annex A; and (vii) all of its internal expenses of the Company incurred in
connection with the consummation of the transactions contemplated by this Annex
A (including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties, the expense of any annual
audit, the fees and expenses incurred in connection with the listing of the
Registrable Securities on any securities exchange as required hereunder (all
such expenses being referred to herein as "Registration Expenses"); provided,
however, that except as expressly set forth herein, in no event shall
Registration Expenses include any underwriting discounts, commissions, or fees
attributable to the sale of the Registrable Securities or any counsel,
accountants or other persons retained by the Holders incurred in connection with
the consummation of the transactions contemplated by this Annex A.
Section 8. Indemnification and Contribution
Section 8.1 Indemnification by the Company. The Company shall,
notwithstanding any termination of this Annex A, indemnify and hold harmless
each Holder and their agents, brokers, investment advisors and employees of each
of them and each underwriter of the Registrable Securities and their officers,
directors, affiliates, partners and any broker or dealer through whom such
shares may be sold and each Person, if any, who controls (within the
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meaning of Section 15 of the Securities Act) such Holder or any such underwriter
to the fullest extent permitted by applicable law, from and against any and all
losses, claims, damages, liabilities, costs (including, without limitation,
costs of preparation and attorneys' fees) and expenses (collectively, "Losses"),
as incurred, arising out of or relating to any untrue or alleged untrue
statement of a material fact contained in any Registration Statement, any
Prospectus or any form of prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading (in the case of any Prospectus or form of
Prospectus or supplement thereto, in light of the circumstances under which they
were made), except to the extent, but only to the extent, that such untrue
statements or omissions are based solely upon information regarding such Holder
furnished in writing to the Company by such Holder expressly for use therein,
which information was reasonably relied on by the Company for use therein or to
the extent that such information relates to such Holder or such Holder's
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in any
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto. The Company shall notify the Holders promptly
of the institution, threat or assertion of any Proceeding of which the Company
is aware in connection with the transactions contemplated by this Annex A.
Section 8.2 Indemnification by Holders. Each Holder shall, severally
and not jointly, indemnify and hold harmless the Company, the directors,
officers, agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of or based solely upon any untrue
statement of a material fact contained in the Registration Statements, any
Prospectus, or any form of prospectus, or arising solely out of or based solely
upon any omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading to the extent, but only to the
extent, that such untrue statement or omission is contained in any information
so furnished in writing by such Holder to the Company specifically for inclusion
in the Registration Statement or such Prospectus and that such information was
reasonably relied upon by the Company for use in the Registration Statement,
such Prospectus or such form of prospectus or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus. In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
Section 8.3 Conduct of Indemnification Proceedings.
(a) If any Proceeding shall be brought or asserted against any
Person entitled to indemnity hereunder (an "Indemnified Party"), such
Indemnified Party promptly shall notify
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the Person from whom indemnity is sought (the "Indemnifying Party") in writing,
and the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Annex A, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
(b) An Indemnified Party shall have the right to employ
separate counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed
in writing to pay such fees and expenses; or (2) the Indemnifying Party shall
have failed promptly to assume the defense of such Proceeding and to employ
counsel reasonably satisfactory to such Indemnified Party in any such
Proceeding; or (3) the named parties to any such Proceeding (including any
impeded parties) include both such Indemnified Party and the Indemnifying Party,
and such Indemnified Party shall have been advised by counsel that a conflict of
interest is likely to exist if the same counsel were to represent such
Indemnified Party and the Indemnifying Party (in which case, if such Indemnified
Party notifies the Indemnifying Party in writing that it elects to employ
separate counsel at the expense of the Indemnifying Party, the Indemnifying
Party shall not have the right to assume the defense thereof and such counsel
shall be at the expense of the Indemnifying Party). The Indemnifying Party shall
not be liable for any settlement of any such Proceeding effected without its
written consent, which consent shall not be unreasonably withheld. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.
(c) All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within 10 Business Days of written notice thereof to the Indemnifying
Party (regard less of whether it is ultimately determined that an Indemnified
Party is not entitled to indemnification hereunder; provided, that the
Indemnifying Party may require such Indemnified Party to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined
that such Indemnified Party is not entitled to indemnification hereunder).
Section 8.4 Contribution.
(a) If a claim for indemnification under Section 8.1 or 8.2 is
unavailable to an Indemnified Party because of a failure or refusal of a
governmental authority to enforce such indemnification in accordance with its
terms (by reason of public policy or otherwise), then each Indemnifying Party,
in lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any
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other relevant equitable considerations. The relative fault of such Indemnifying
Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material fact,
has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set forth
herein, any reasonable attorneys' or other reasonable fees or expenses incurred
by such party in connection with any Proceeding to the extent such party would
have been indemnified for such fees or expenses if the indemnification provided
for in this Section was available to such party in accordance with its terms. In
no event shall the liability of any selling Holder hereunder be greater in
amount than the dollar amount of the net proceeds received by such Holder upon
the sale of the Registrable Securities giving rise to such indemnification
obligation.
(b) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 8 were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 8, no Stockholder shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by such Stockholder from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Stockholder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(c) The indemnity and contribution agreements contained in
this Section 8 are in addition to any liability that the Indemnifying Parties
may have to the Indemnified Parties.
Section 8.5 Rule 144. Following the IPO, the Company covenants that:
(a) it will file the reports required to be filed by the
Company under the Securities Act and the Exchange Act, so to enable the Holders
to sell Registrable Securities pursuant to Rule 144 under the Securities Act;
(b) it shall cooperate with any Holder in connection with any
sale, transfer or other disposition by such Holder of any Registrable Securities
pursuant to Rule 144 under the Securities Act;
(c) it will take such action as any Holder may reasonably
request, all to the extent required from time to time to enable such Holder to
sell its Common Stock without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 promulgated under the
Securities Act, including providing any legal opinions; and
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(d) upon the request of any Holder, it shall deliver to such
Holder a written certification of a duly authorized officer as to whether it has
complied with such requirements.
Section 9. Term of Registration Rights.
The rights of Holders with respect to the registration rights
granted pursuant to this Annex A shall remain in effect, subject to the terms
hereof, so long as there are Registrable Securities or securities which are
convertible or exchangable for Registrable Securities issued and outstanding.
Section 10. Miscellaneous.
Section 10.1 Entire Agreement; Amendments. This Annex A contains the
entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with
respect to such matters.
Section 10.2 Notices. Any and all notices or other communications or
deliveries required or permitted to be provided pursuant to this Annex A shall
be in writing and shall be deemed to have been received (a) upon hand delivery
(receipt acknowledged) or delivery by telex (with correct answer back received),
telecopy or facsimile (with transmission confirmation report) at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered on a business day after normal business hours where
such notice is to be received) or (b) on the second business day following the
date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The address for the Company shall be: ▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ inc., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇; Attention: Chief Executive Officer; fax:
(▇▇▇) ▇▇▇-▇▇▇▇. The addresses for each Holder shall be maintained by the
Company. Copies of all notices shall be sent to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.; fax: (▇▇▇) ▇▇▇-▇▇▇▇, or such other address as may be
designated in writing hereafter, in the same manner, by such person.
Section 10.3 Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Annex A, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Annex A, including recovery of damages,
will be entitled to specific performance of its rights under this Annex A. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Annex A and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
Section 10.4 No Inconsistent Agreements. Neither the Company nor any of
its subsidiaries has, as of the date hereof, nor shall the Company or any of its
subsidiaries, on or after the date of this Annex A, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Annex A or otherwise conflicts with the
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provisions hereof. Neither the Company nor any of its subsidiaries has
previously entered into any agreement granting any registration rights with
respect to any of its securities to any Person. Without limiting the generality
of the foregoing, the Company shall not grant to any Person the right to request
the Company to register any securities of the Company under the Securities Act
unless the rights so granted are subject in all respects to the prior rights in
full of the Holders, and are not otherwise in conflict or inconsistent with the
provisions of this Annex A.
Section 10.5 Amendments and Waivers. No provision of this Annex A may
be waived or amended except in a written instrument signed, in the case of an
amendment, by both the Company and the Holders; or, in the case of a waiver, by
the party against whom enforcement of any such waiver is sought. No waiver of
any default with respect to any provision, condition or requirement of this
Annex A shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter. Notwithstanding the
foregoing, no such amendment shall be effective to the extent that it applies to
less than all of the Holders. The Company shall not offer or pay any
consideration to a Holder for consenting to such an amendment or waiver unless
the same consideration is offered to each Holder and the same consideration is
paid to each Holder which consents to such amendment or waiver.
Section 10.6 Successors and Assigns. This Annex A shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties. The rights of each Holder hereunder, including the right to have
the Company register for resale Registrable Securities in accordance with the
terms of this Annex A, shall be automatically assignable by each Holder together
with the Registrable Security, or the securities into which such Registrable
Securities are convertible or exchangeable into, to which such rights relate if:
(i) the Holder agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) following such transfer or assignment the further disposition of such
securities by the transferee or assignees is restricted under the Securities Act
and applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this Section, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions of this Annex A, and (v) such transfer shall have been made in
accordance with the applicable requirements of any agreement applicable to the
transfer of such shares, including, without limitation, the Stockholders
Agreement.. The rights to assignment shall apply to the Holders (and to
subsequent) successors and assigns.
Section 10.7 No Third-Party Beneficiaries. This Annex A is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
Section 10.8 Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
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Section 10.9 Severability. If any term, provision, covenant or
restriction of this Annex A is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
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