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EXHIBIT 10.27
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INVESTOR RIGHTS AGREEMENT
among
SCREAMING ▇▇▇▇▇.▇▇▇, INC.
and
THE STOCKHOLDERS NAMED HEREIN
dated as of October 6, 1999
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TABLE OF CONTENTS
Page
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1. BACKGROUND ............................................. 1
2. DEFINITIONS ............................................ 1
3. BOARD REPRESENTATION ................................... 5
3.1. Representation on the Board of Directors ........ 5
3.2. Expenses ........................................ 5
4. ADDITIONAL UNDERTAKINGS AND COVENANTS .................. 5
4.1. Maintenance of Corporate Status ............. 5
4.2. Accounts and Records ........................ 5
4.3. Litigation .................................. 6
4.4. Compliance with Law: No Infringement ........ 6
4.5. Disclosure of Information by the Investors. . 6
4.6. Maintenance of Properties ................... 6
4.7. Insurance ................................... 7
4.8. Change in Operations ........................ 7
4.9. Guarantees and Loans ........................ 7
5. REGISTRATION UNDER SECURITIES ACT, ETC ................. 7
5.1. Registration on Request ..................... 7
5.2. Piggyback Registrations ..................... 11
5.3. Registration Procedures ..................... 12
5.4. Selection of Underwriters ................... 16
5.5. Preparation: Reasonable Investigation ....... 18
5.6. Indemnification ............................. 18
5.7. Registration Expenses ....................... 21
5.8. Adjustments Effecting Registrable Securities 22
5.9. Participation in Underwritten Registrations . 22
5.10. Rule 144 .................................... 22
6. BASIC FINANCIAL INFORMATION OF THE COMPANY ............. 23
6.1. Inspection .................................. 23
6.2. Annual Report ............................... 23
6.3. Quarterly Report ............................ 23
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6.4. Monthly Report ................................ 24
6.5. Business Plan and Operating Budget ............ 24
7. TRANSFERABILITY OF SECURITIES; COMPLIANCE WITH SECURITIES
ACT ...................................................... 24
7.1. Transferability ............................... 24
7.2. Restrictive Legend ............................ 24
7.3. Notice of Proposed Transfers .................. 26
8. PREEMPTIVE RIGHTS ........................................ 26
8.1. Pro Rata Right ................................ 26
8.2. Definition of "New Securities" ................ 27
8.3. Required Notice ............................... 27
8.4. Company's Right to Sell ....................... 28
8.5. Expiration of Right ........................... 28
9. RIGHT OF CO-SALE ......................................... 28
10. MISCELLANEOUS ........................................... 30
10.1. Entire Agreement; Amendments and Waivers ...... 30
10.2. Nominees for Beneficial Owners ................ 30
10.3. Notices ....................................... 30
10.4. Assignment .................................... 31
10.5. Binding Effect ................................ 32
10.6. Descriptive Headings .......................... 32
10.7. Governing Law ................................. 32
10.8. Termination: Rule 144(k) ...................... 32
10.9. Severability .................................. 32
10.10. Counterparts .................................. 32
10.11. Costs of Enforcement: Specific Enforcement .... 32
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INVESTOR RIGHTS AGREEMENT dated as of October 6,1999 among SCREAMING
▇▇▇▇▇.▇▇▇, INC., a Delaware corporation (the "Company"), the Investors listed on
Schedule I hereto, and the Existing Stockholders named in the signature pages
hereof.
1. BACKGROUND
The Company and the Investors are parties to a Stock Purchase Agreement
of even date herewith (the "Series B Preferred Stock Purchase Agreement") for
the purchase and sale of shares of Series B Preferred Stock of the Company. The
parties have entered into this Agreement in order to induce the Investors to
enter into the Series B Preferred Stock Purchase Agreement.
2. DEFINITIONS
As used herein, unless the context otherwise requires, the following
terms have the following respective meanings:
Affiliate: As defined in Rule 405 under the Securities Act.
Authorized Transfer: (a) If a stockholder of the Company is an
individual, a pledge of securities, a gift of securities or a transfer of
securities without consideration by such stockholder, to or for the benefit of
any members of the immediate family of such stockholder or to any personal trust
in which such stockholder or any of such member retains the entire beneficial
interest, (b) if a stockholder is a partnership, corporation, limited liability
company or trust, a pledge of securities or a distribution or transfer of
securities by such stockholder to its affiliates, successor trustee,
stockholders, partners or members or managing directors of its members, as
applicable, without consideration or at cost, and if a stockholder is an
employee or former employee of the Company, a transfer or sale of securities to
current employees of the Company (individually, each transferee described in
(a), (b) and (c) above, an "Authorized Transferee"), in each case provided that,
prior to such pledge, gift, distribution or transfer, such Authorized Transferee
agrees in writing to be bound by this Agreement.
Business: The provision of content to commercial Web sites, and the
provision of related services.
Claims: All demands, claims, actions or causes of action, assessments,
losses, damages (including, without limitation, diminution in value),
liabilities, costs and expenses, including, without limitation, interest,
penalties and reasonable attorneys, fees and disbursements.
Commission: The Securities and Exchange Commission or any other Federal
agency at the time administering the Securities Act.
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Common Stock: The authorized Common Stock, $.0l par value, of the
Company.
Competitor: Any Person, firm or entity regularly engaged in any
material Business of the Company or any Affiliate of such Person, firm or
entity, as determined in good faith by the Board of Directors.
Confidential Information: Any non-public confidential, proprietary or
secret information that an Investor may obtain from the Company, including, but
not limited to, financial statements, reports and other materials submitted by
the Company prior to the date hereof or as required hereunder, or pursuant to
visitation or inspection rights granted hereunder.
Environmental Laws: Any Laws (including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act),
including any plans, other criteria, or guidelines promulgated pursuant to such
Laws, now or hereafter in effect relating to Hazardous Materials generation,
production, use, storage, treatment, transportation or disposal, or noise
control, or the protection of human health or the environment.
Exchange Act: The Securities Exchange Act of 1934, as amended, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
Existing Stockholders: The holders of Common Stock and Series A
Preferred Stock, in each case who are signatories hereto.
Fair Market Value: With respect to the Company, the price which a
willing buyer would pay to a willing seller for (a) all of the assets and
liabilities of the Company, or (b) all of the outstanding stock of the Company,
with both the buyer and seller being fully informed and neither being under a
compulsion to buy or sell, as the case may be,
Hazardous Materials: Any wastes, substances or materials (whether
solids, liquids or gases) that are deemed hazardous, toxic, pollutants or
contaminants, including, without limitation, substances defined as "hazardous
wastes," "hazardous substances," "toxic substances," "radioactive
materials," or other similar designations in, or otherwise subject to regulation
under, any Environmental Laws, "Hazardous Materials" includes polychlorinated
biphenyls (PCBs), asbestos, lead-based paints, and petroleum and petroleum
products (including, without limitation, crude oil or any fraction thereof).
Intellectual Property: All franchises, patents, patent applications,
trademarks, service marks, trade names, trade styles, brands, private labels,
copyrights, know-how, computer software, industrial designs and drawings and
general intangibles of a like nature, trade secrets, licenses, and rights and
filings with respect to the foregoing, and all reissues, extensions and renewals
thereof.
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Investors: The holders of Series B Preferred Stock who are signatories
hereto and their respective Authorized Transferees.
Laws: All foreign, federal, state and local statutes, laws, ordinances,
regulations, rules, resolutions, orders, determinations, writs, injunctions,
awards (including, without limitation, awards of any arbitrator), judgments and
decrees applicable to the specified persons or entities and to the businesses
and assets thereof (including, without limitation, laws relating to securities
registration and regulation; the sale, leasing, ownership or management of real
property; employment practices, terms and conditions, and wages and hours;
building Standards, land use and zoning; safety, health and fire prevention, and
environmental protection, including Environmental Laws).
Limited Securities: The securities of the Company required to bear the
legend set forth in Section 7.2.
Material Adverse Effect: A material adverse effect on the business,
operations, assets, liabilities, condition (financial or otherwise) or
prospects of the Company and the Subsidiaries, taken as a whole.
NASD: The National Association of Securities Dealers, Inc. or any
similar successor organization.
Nasdaq: The Nasdaq Stock Market or the Nasdaq National Market System.
Other Shares: At any time those shares of Common Stock that do not
constitute Primary Shares or Registrable Securities.
Person: A corporation, limited liability company, association,
partnership, organization, business, natural person, estate, governmental or
political subdivision or governmental agency,
Primary Shares: Authorized but unissued shares of Common Stock.
Proposed Transferee: Any Person, firm or entity to which a holder of
shares of Series B Preferred Stock intends to transfer some or all of such
shares, except as part of an Underwritten Offering or an Authorized Transfer.
Register, Registered, and Registration: The terms "register,"
"registered" and "registration" refer to a registration statement in compliance
with the Securities Act, and the declaration or ordering of the effectiveness of
such registration statement.
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Registrable Securities: At any time, with respect to any Investor, the
shares of Common Stock held (or to be held upon conversion of any Series B
Preferred Stock) by such Investor, its or his heirs, legatees, successors or
assigns, that constitute Restricted Securities.
Restricted Securities: At any time, with respect to any Investor, the
shares of Series B Preferred Stock held by such Investor from time to time, any
shares of Common Stock issued or issuable upon conversion thereof, any shares or
other securities received in respect thereof, and any other shares of Common
Stock held by such Investor, which are held by such Investor, its or his
successors or assigns, and which have not previously been sold to the public
pursuant to a registration statement under the Securities Act or pursuant to
Rule 144.
Rule 144: Rule 144 under the Securities Act, as such rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the Commission.
Securities Act: The Securities Act of 1933, as amended, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
Series A Preferred Stock: The authorized Series A Convertible Preferred
Stock, $.01 par value, of the Company.
Series B Certificate of Designations: The certificate setting forth the
rights, privileges and limitations of the Series B Preferred Stock.
Series B Preferred Stock: The authorized Series B Convertible Preferred
Stock, $.01 par value, of the Company.
Subscription Price: The amount payable to the Company in consideration
of the initial issuance of the Registrable Securities or the securities from
which the Registrable Securities were issued, whether by way of conversion,
exercise, stock dividend, stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization or
otherwise.
Subsidiaries: The subsidiaries of the Company, all of which are listed
in Schedule 5.28 to the Series B Preferred Stock Purchase Agreement.
Substantial Hold: Any holder of any Series B Preferred Stock which,
when added to Common Stock held by such holder and such holder's Authorized
Transferees and Affiliates, is convertible into at least 3% of the outstanding
Common Stock on a fully converted and fully-diluted basis.
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Voting Agreement: That certain Voting Agreement dated as of January 27,
1999 among the Company and the other signatories thereto.
3. BOARD REPRESENTATION
3.1 Representation on the Board of Directors. Following the Closing (as
defined in the Series B Preferred Stock Purchase Agreement) and in accordance
with Section 3(e) of the Series B Certificate of Designations, the Company shall
cause the Board of Directors of the Company to consist of not more than seven
members, as follows: (a) for so long as 20% or more of the authorized shares of
Series B Preferred Stock are outstanding, one director nominated by the holders
of Series B Preferred Stock (and who shall initially be ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇)
shall be elected by a majority vote of the holders of Series B Preferred Stock,
voting separately as a single class (the "Series B Director"); and (b) the
remaining members of the Board of Directors shall be nominated and elected in
accordance with the provisions of the Voting Agreement. The Series B Director
may be removed at any time only by the holders of Series B Preferred Stock
entitled to elect him or her, and any successor to any vacancy occurring in the
Board of Directors as a result of the death, resignation, or removal of any
Series B Director shall be nominated and elected by the holders of Series B
Preferred Stock in the manner set forth in clause (a) of the immediately
preceding sentence. The Company agrees to use its best efforts to cause the
nomination and election of the directors as provided above and will not, by any
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be performed hereunder by the Company.
3.2 Expenses. The Company shall reimburse the Series B Director for all
reasonable expenses incurred in connection with his or her attendance at
meetings of the Board of Directors, including without limitation reasonable and
necessary food, lodging and travel expenses. The Series B Director shall also be
entitled to receive such compensation as shall be paid to the directors of the
Company other than the Series B Director for their attendance at meetings of the
Board of Directors.
4. ADDITIONAL UNDERTAKINGS AND COVENANTS
The Company hereby covenants and agrees with the Investors as follows:
4.1 Maintenance of Corporate Status. The Company shall maintain, and
shall cause its Subsidiaries to maintain, their corporate existence in good
standing in the jurisdictions where they are respectively incorporated and shall
remain, and cause its Subsidiaries to remain, qualified as foreign corporations
in good standing in all other jurisdic-
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tions where they are respectively required to be qualified, except where any
failure so to maintain or remain will not have a Material Adverse Effect.
4.2 Accounts and Records. The Company shall establish and maintain, and
shall cause its Subsidiaries to establish and maintain, true, correct and
complete financial accounts and records in conformity with generally accepted
accounting principles to be furnished pursuant to Section 6 of this Agreement.
4.3 Litigation. The Company shall promptly notify the Investors in
writing of all litigation and all proceedings before any governmental or
regulatory body to which it or any of its Subsidiaries is a party as a result of
which (i) damages are sought against the Company or any of its Subsidiaries at
law of $250,000 or more, or (ii) an equitable remedy is sought against the
Company or any of its Subsidiaries, the impact of which would have a Material
Adverse Effect.
4.4 Compliance with Law; No Infringement. The Company shall comply, and
shall cause its Subsidiaries to comply, with the provisions of all applicable
Laws, except where the failure to comply will not have a Material Adverse
Effect, and shall not engage in any activities that to the Company's knowledge,
after the exercise of reasonable diligence, infringe upon the Intellectual
Property rights of any other person, corporation, partnership or other entity.
4.5 Disclosure of Information by the Investors. The Company consents to
disclosure by the Investors of any information with respect to the Company and
any of its Subsidiaries which is not Confidential Information or a trade secret
of the Company or any of its Subsidiaries, including financial information, to
the members, partners, advisory board members, stockholders or advisers of the
Investors, and to any permitted transferee of the Restricted Securities;
provided that the Investors use reasonable efforts to avoid disclosure of
financial or other information (other than in a summary format) to anyone other
than such persons, including but not limited to Competitors or customers of the
Company; provided, further, that, notwithstanding anything in this Section 4.5
to the contrary, the Investors may disclose such information as is required by
law.
4.6 Maintenance of Properties. (a) The Company shall maintain, and
shall cause its Subsidiaries to maintain, all real and tangible personal
property owned and used in the Business of the Company in good condition
excepting ordinary wear and tear, and shall make all such repairs, renewals,
replacements, additions, and improvements to such properties as are necessary or
appropriate and in the case of leased property, shall maintain such property in
substantial compliance with the terms of the lease.
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(b) The Company shall use its reasonable best efforts to maintain, and
shall cause its Subsidiaries to use their reasonable best efforts to maintain,
all Intellectual Property owned or held by the Company or its Subsidiaries or
thereafter owned or held by the Company or its Subsidiaries in full force and
effect in the United States and in such other countries in which the Company or
its Subsidiaries shall engage in business, the maintenance of which is necessary
for the Company to conduct its Business or the failure to maintain which would
have a Material Adverse Effect, including, but not limited to: (i) the execution
by future employees, officers, and independent contractors engaged in providing
services related to the Business of the Company or its Subsidiaries of
confidentiality and nondisclosure agreements or acknowledgments, and
Intellectual Property assignment agreements; (ii) the prosecution of
applications to register or perfect rights or claims in and to any such
Intellectual Property; (iii) the registration of license agreements; (iv) the
timely filing of affidavits of use, renewals or other maintenance filings; and
(v) the timely payment of filing and maintenance fees. The Company shall use its
reasonable best efforts not, and shall use its reasonable best efforts to cause
its Subsidiaries not, to: (i) abandon or let lapse or pass to the public domain
any of the Intellectual Property owned or held by the Company or any Subsidiary
or hereafter owned or held by the Company or its Subsidiaries except where such
abandonment or lapsing or passing to public domain would not have a Material
Adverse Effect; (ii) encumber or license others to use the Intellectual Property
rights owned by it except in the ordinary course of business or except where
such encumbrance or license would not have a Material Adverse Effect; and (iii)
fail to maintain the confidentiality and trade secret status of all Intellectual
Property except to the extent that such disclosure is necessary to obtain
copyright or trademark or patents or except under the protection of a
confidentiality and nondisclosure agreement in the exercise of prudent business
judgment.
4.7 Insurance. The Company shall maintain, and shall cause its
Subsidiaries to maintain, with financially sound and reputable insurers having a
Best rating of "B" or better, insurance with respect to its assets, properties
and business against such casualties and contingencies and in such types and
amounts as would be deemed necessary or advisable by prudent persons engaged in
similar businesses.
4.8 Change in Operations. Except as authorized by the Board of
Directors, the Company shall not, and shall not permit the Subsidiaries to,
substantially change the type of operations currently contemplated by the
Company and its Subsidiaries or enter into, by internal expansion or by any form
of acquisition, any line of business not directly related to the type of
operations currently contemplated by the Company and its Subsidiaries.
4.9 Guarantees and Loans. Except as approved by the Board of Directors,
the Company shall not, and shall cause its Subsidiaries not to, guarantee or
endorse an obligation of, or make an advance or loan to, any individual,
corporation, or other business entity, or assume any contingent liability,
except for (a) the endorsement of negotiable
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instruments for deposit or collection in the ordinary course of business, (b)
the advancement of travel expenses and relocation costs, (c) intercompany
transactions (e.g., loans to Subsidiaries) or (d) payments or other obligations
in the ordinary course of business and consistent with prudent business
practices, which shall include, but is not limited to obligations of joint
ventures in which the Company has an interest.
5. REGISTRATION UNDER SECURITIES ACT, ETC.
5.1 Registration on Request. (a) Request. Subject to the restrictions
set forth in paragraphs (f) and (g) of this Section 5.1, upon the written
request of the holders of at least 33-1/3% of the aggregate amount of
Registrable Securities that the Company effect the registration under the
Securities Act of the public offering and sale thereof, on Form S-1 or any
similar long-form registration (a "Long-form Registration"), or upon the written
request of holders of such number of Registrable Securities so as to meet the
threshold set forth in Section 5.1(g) that the Company effect the registration
under the Securities Act on Form S-3 or any successor form thereto (a
"Short-form Registration"), if available, the Company shall promptly give
written notice of such requested registration to all holders of record of
Registrable Securities and shall promptly use its best efforts to effect, as
promptly as practicable, such registration under the Securities Act of:
(i) the Registrable Securities that the Company has been so requested
to register, and
(ii) all other Registrable Securities that the Company has been
requested to register by the holders thereof by written request given to the
Company within 30 days after the giving of such written notice by the
Company, all to the extent required to permit the disposition of the
Registrable Securities so to be registered.
All registrations requested pursuant to this Section 5.1(a) are referred to
herein as "Demand Registrations."
(b) Long-form Registrations. The holders of Registrable Securities are
entitled to request two Long-form Registrations. A requested Short-form
Registration on Form S-3 or any successor form in compliance with Section 5.1(c)
shall not be deemed to be a registration statement requested pursuant to
this Section 5.1(b), but shall otherwise be treated as a registration
initiated pursuant to and shall, except as otherwise expressly provided in
Section 5.1(c), be subject to this Section 5.1.
(c) Short-form Registrations. In addition to the Long-form
Registrations provided for in Section 5.1(b), the holders of Registrable
Securities are entitled to request up to three Short-form Registrations per
year, if and at such times as the Company qualifies for the use of such form.
Demand Registrations shall be Short-form Registrations whenever the Company is
eligible to use
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any applicable short form for registrations. The Company shall use its
reasonable best efforts to be and remain eligible to use Short-form
Registrations for registered sales of Registrable Securities.
(d) Registration of Other Securities. Subject to the provisions of
Section 5.2, whenever the Company shall effect a registration pursuant to this
Section 5.1 in connection with an offering by one or more holders of Registrable
Securities, no securities other than Registrable Securities shall be included
among the securities covered by such registration, unless (i) in the case of an
underwritten offering, the managing underwriter of such offering shall have
advised such holders of such Registrable Securities in writing that the
inclusion of such other securities would not adversely affect such offering, or
(ii) such holders of such Registrable Securities shall have consented in writing
to the inclusion of such other securities. Any persons other than holders of
Registrable Securities who participate in Demand Registrations that are not at
the Company's expense shall pay their proportionate shares of the Registration
Expenses, as provided in Section 5.7.
(e) Restrictions on Demand Registrations. The Company shall not be
obligated to effect any Demand Registration (i) within 180 days after the
effective date of a previous registration, if the gross proceeds from all such
previous registrations within such period of 180 days were at least $20,000,000,
(ii) within 90 days after the effective date of any prior Demand Registration or
Piggyback Registration (as hereinafter defined), or (iii) prior to the earlier
of (x) the second anniversary of the date of this Agreement, and (y) 180 days
after the effective date of the Company's initial public offering of Common
Stock pursuant to an effective registration statement under the Securities Act.
The Company may delay the filing or effectiveness of any Demand Registration
statement for a period not to exceed 90 days after the date of a request for
registration pursuant to this Section 5.1 if (i) at the time of such request the
Company is engaged, or has fixed plans to engage within 60 days after the time
of such request, in a firm commitment underwritten public offering in which the
holders of Registrable Securities may include Registrable Securities pursuant to
Section 5.2 below, or (ii) the Company shall furnish to the holders requesting
registration pursuant to this Section 5.1 a certificate signed by the President
of the Company stating that, in the good faith judgment of the Board of
Directors of the Company, and with the concurrence of the investment banking
firm acting as financial advisor to the Company, if any, that is currently being
retained by the Company, it would be materially detrimental to the Company and
its stockholders for such registration statement to be filed and it is therefore
essential to defer the filing of such registration statement (provided that the
Company may not utilize the rights set forth in this Section 5.1(e) more than
once in any twelve-month period and in the event the Company does utilize such
right, the holders of Registrable Securities requesting such registration shall
be entitled to withdraw such request and, if such request is withdrawn, such
registration shall not count as a registration pursuant to this Section 5.1 and
the holders of Registrable Securities requesting such registration shall have no
obligation to reimburse the Company for the Company's expenses in connection
with such rescinded registration). The Demand Registration rights of any holder
of Registrable Securities shall terminate at such time as such holder is able to
sell all of such Registrable Securities under Rule 144 within a period of 90
days.
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(f) Restrictions on Long-form Registrations. The Company shall not be
obligated to effect any Long-form Registration under the Securities Act except
in accordance with the following provisions:
(i) the Company shall not be obligated to file more than two Long-form
Registrations initiated pursuant to Section 5.1(b) that become effective
(subject to Section 5.1(k)); and
(ii) the Company shall not be obligated to effect any Long-form
Registration if the anticipated gross proceeds are expected to be less than
$10,000,000.
(g) Restrictions on Short-form Registrations. The Company shall not be
obligated to effect any Short-form Registration under the Securities Act if the
anticipated gross proceeds with respect to the Registrable Securities included
in such registration statement are expected to be less than $3,000,000.
(h) Other Registration Rights. Except as provided in this Agreement,
the Company shall not grant to any Person the right to request the Company to
register any equity securities of the Company, or any securities convertible or
exchangeable into or exercisable for such securities, without the written
consent of the holders of a majority of the Registrable Securities; provided
that the Company may grant rights to other Persons so long as such rights are
junior to the rights of the holders of Registrable Securities.
(i) Effective Registration Statement; Rescission. A Demand
Registration pursuant to this Section 5.1 shall not be deemed to have been
effected (i) unless a registration statement with respect thereto has become
effective, (ii) if after it has become effective, such registration is precluded
form effectiveness by any stop order, injunction or other order or requirement
of the Commission or other governmental agency or court for any reason, or (iii)
if the conditions to closing specified in the purchase agreement or underwriting
agreement entered into in connection with such registration are not satisfied,
other than by reason of some act or omission by the holders requesting such
registration. A requested Demand Registration under this Section 5.1 may be
rescinded by written notice to the Company by the holders requesting such
registration, and such rescinded registration shall not count as a registration
statement initiated pursuant to this Section 5.1, but if no event has occurred
following the exercise of such Demand Registration right (and prior to such
written notice of rescission) that may cause a material reduction in the Fair
Market Value of the Company and the demanded registration was a Long-form
Registration, then in order for such rescinded registration not to count as a
registration statement initiated pursuant to this Section 5.1 the holders who
requested such rescission must reimburse the Company for 50% of all Registration
Expenses incurred by the company in connection with such withdrawn Demand
Registration.
(j) Priority in Demand Registrations. With respect to any registration
pursuant to this Section 5.1, the Company may include in such registration any
Primary Shares and/or Other
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Shares; provided that, in the event the registration is for an underwritten
public offering, if the underwriter (or the managing underwriter on behalf of
the underwriters, if there are more than a single underwriter) advises the
Company that the inclusion of all Registrable Securities, Primary Shares and/or
Other Shares proposed to be included in such registration would interfere with
the successful marketing (including pricing) of all such securities, then the
numbers of Registrable Securities, Primary Shares and/or Other Shares proposed
to be included in such registration shall be included in the following order:
(i) first, Registrable Securities, and any securities having
registration rights on a par with Registrable Securities, which rights have
been approved pursuant to Section 5.1(h);
(ii) second, securities with registration rights junior to Registrable
Securities but senior to Primary Shares and Other Shares; and
(iii) third, Primary Shares and Other Shares.
(k) Additional Demand Registration. Notwithstanding any other provision
of this Section 5.1, at any time or from time to time, if the Company effects
the registration of less than all of the Registrable Securities requested to be
registered pursuant to Section 5.1(a), the parties entitled to request a
registration under Section 5.1(a) shall be entitled to request an additional
registration pursuant to Section 5.1(a). Any such registration that shall be
requested shall be effected in all other respects in accordance with the terms
of Section 5.1, and the Company shall pay all customary Registration Expenses
in connection with any such registration, subject to the limitations set forth
in Section 5.7. This provision shall apply successively in the event that any
holder of Registrable Securities shall continue to hold Registrable Securities
solely as a result of Section 5.1(j).
5.2 Piggyback Registrations.
(a) Right to Piggyback. If the Company at any time proposes to register
any of its securities under the Securities Act (other than registrations solely
in connection with an employee benefit plan or a merger or share exchange or
consolidation and other than pursuant to Section 5.1), whether or not for sale
for its own account, and the registration form to be used may be used for the
registration of Registrable Securities (a "Piggyback Registration"), the Company
will at each such time give prompt written notice to all holders of Registrable
Securities and all other holders of Common Stock not constituting Registrable
Securities of its intention to do so and of such holders' rights under this
Section 5.2. Upon the written request of any such holder made within 20 days
after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such holder), the Company
shall use its best efforts to effect the registration under the Securities Act
of all Registrable Securities and/or other Common Stock that the Company has
been so requested to register by the holders thereof on the same terms and
conditions as the securities otherwise being sold in such registration, to the
extent required to permit the disposition of the Registrable Securities and/or
other Common Stock so to
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be registered. No registration effected under this Section 5.2 shall relieve the
Company of its obligation to effect any registration upon request under Section
5.1 above.
(b) Priority in Piggyback Registrations. If (i) a registration pursuant
to this Section 5.2 involves an underwritten offering of the securities so being
registered, whether or not for sale for the account of the Company, to be
distributed (on a firm commitment basis) by or through one or more underwriters
of recognized standing under underwriting terms appropriate for such a
transaction, (ii) the Registrable Securities and/or other Common Stock so
requested to be registered for sale for the account of holders of Registrable
Securities and/or other Common Stock are not also to be included in such
underwritten offering (because the Company has not been requested so to include
such Registrable Securities and/or other Common Stock pursuant to Section
5.4(b)) and (iii) the managing underwriter of such underwritten offering shall
inform the Company in writing of its belief that the number of securities
requested to be included in such registration exceeds the number which can be
sold in (or during the time of) such offering without adversely affecting the
price to be received thereon, then the Company will include in such
registration, to the extent of the number which the Company is so advised can be
sold in (or during the time of) such offering, first, all securities proposed by
the Company to be sold for its own account; second, such Registrable Securities
and any securities having registration rights on a par with the Registrable
Securities requested to be included in such registration pro rata on the basis
of the number of shares of such Registrable Securities and other securities on a
par with the Registrable Securities so proposed to be sold and so requested to
be included; third, other Common Stock requested to be included in such
registration; and, fourth, Primary Shares, if the Company has not undertaken
such registration to sell securities for its own account in the first instance.
(c) Other Registrations. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
Section 5.1 or with respect to Registrable Securities and/or other Common Stock
pursuant to this Section 5.2 and, if such previous registration has not been
withdrawn or abandoned, the Company will not file or cause to be effected any
other registration of any of its equity securities or securities convertible
into or exercisable for its equity securities under the Securities Act (except
on Form S-8 or any successor form), whether on its own behalf or at the request
of any holder or holders of such securities, until a period of at least three
months has elapsed from the effective date of such previous registration.
5.3 Registration Procedures. If and whenever the Company is required to
use its best efforts to effect the registration of any Registrable Securities
and/or other Common Stock under the Securities Act as provided in Sections 5.1
or Section 5.2, the Company shall as expeditiously as possible:
(a) prepare and file with the Commission the requisite registration
statement to effect such registration and thereafter use its best efforts to
cause such registration statement to become and remain effective for a period of
180 days or until all of such Registrable Securities and/or other Common Stock
have been disposed of (if earlier), provided that the Company may discon-
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tinue any registration of its securities which are not Registrable Securities at
any time prior to the effective date of the registration statement relating
thereto;
(b) furnish, at least five business days before filing a registration
statement that registers such Registrable Securities and/or other Common Stock,
a prospectus relating thereto or any amendments or supplements relating to such
a registration statement or prospectus, to one counsel selected by a majority of
the Substantial Holders who hold Registrable Securities to be included in such
registration (the "Investors' Counsel"), copies of all such documents proposed
to be filed;
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(c) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
a period of not less than 180 days and to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement until such time as all of such securities have been
disposed of in accordance with the intended methods of disposition by the seller
or sellers thereof set forth in such registration statement;
(d) notify in writing the Investors' Counsel promptly of the receipt by
the Company of any notification with respect to (i) any comments by the
Commission with respect to such registration statement or prospectus or any
amendment or supplement thereto or any request by the Commission for the
amending or supplementing thereof or for additional information with respect
thereto, (ii) the issuance by the Commission of any stop order suspending the
effectiveness of such registration statement or prospectus or any amendment or
supplement thereto or the initiation or threatening of any proceeding for that
purpose, mid (iii) the suspension of the qualification of such Registrable
Securities and/or other Common Stock for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purposes;
(e) furnish to each seller of Registrable Securities and/or other
Common Stock covered by such registration statement 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 contained in such registration statement (including each preliminary
prospectus and any summary prospectus) and any other prospectus filed under Rule
424 under the Securities Act, in conformity with the requirements of the
Securities Act, and such other documents as such seller may reasonably request;
(f) use its best efforts to register or qualify all Registrable
Securities and/or other Common Stock covered by such registration statement
under such other securities or blue sky laws of such United States jurisdictions
as each seller thereof shall reasonably request, to keep such registration or
qualification in effect for so long as such registration statement remains in
effect, and to take any other action which may be reasonably necessary or
advisable to enable such seller to consummate the disposition in such
jurisdictions of the securities owned by such seller, 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 would not but for the
requirements of this Section 5.3(f) be obligated to be so qualified, to subject
itself to taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;
(g) use its best efforts to cause all Registrable Securities and/or
other Common Stock covered by such registration statement to be registered with
or approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of the Company to enable the
seller or sellers thereof to consummate the disposition of such Registrable
Securities and/or other Common Stock;
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(h) furnish to each seller of Registrable Securities and/or other
Common Stock a signed counterpart, addressed to such seller (and the
underwriters, if any) of:
(i) in the case of an under-written public offering, an
opinion of counsel for the Company dated the effective date of such
registration statement (and, if such registration includes an
underwritten public offering, dated the date of the closing under the
underwriting agreement), reasonably satisfactory in form and substance
to such seller, and
(ii) a "comfort" letter, dated the effective date of such
registration statement (and, if such registration 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, covering substantially the
same matters with respect to such registration statement (and the
prospectus included therein) and, in the case of the accountants'
letter, with respect to events subsequent to the date of such financial
statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letter delivered to the underwriters in
underwritten public offerings of securities and, in the case of the
accountants' letter, such other financial matters, and, in the case of
the legal opinion, such other legal matters, as such seller or such
holder (or the underwriters, if any) may reasonably request;
(i) notify each seller of Registrable Securities and/or other Common
Stock covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, upon
discovery that, or upon the happening of any event as a result of which, the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made, and at
the request of any such seller promptly prepare and furnish to such seller a
reasonable number of copies of a supplement to or an amendment of such
Prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made.
(j) make available for inspection by any seller of such Registrable
Securities and/or other Common Stock, any underwriter participating in any
disposition pursuant to such registration statement and any attorney, accountant
or other agent retained by any such seller or underwriter (collectively, the
"Inspectors"), all pertinent financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "Records"), as shall
be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information (together with the Records, the "Information")
reasonably requested by any such Inspector in connection with such registration
statement. Any of the Information which the Company determines in good faith to
be confidential, and of which determination the Inspectors are so notified,
shall not be disclosed by the Inspectors
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unless (i) the disclosure of such Information is necessary to avoid or correct a
misstatement or omission in the registration statement, (ii) the release of such
Information is ordered pursuant to a subpoena or other form from a court of
competent jurisdiction or (iii) such Information has been made generally
available to the public. The seller of Registrable Securities and/or other
Common Stock agrees that he, she or it will, upon learning that disclosure of
such Information is sought in a court of competent jurisdiction, give notice to
the Company and allow the Company, at the Company's expense, to undertake
appropriate action to prevent disclosure of the Information deemed confidential;
(k) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its security holders,
as soon as reasonably practicable, an earnings statement covering the period of
at least twelve months, but not more than 18 months, beginning with the first
full calendar month after the effective date of such registration statement,
which earnings statement shall satisfy the provisions of the Securities Act;
(l) provide and cause to be maintained a transfer agent and registrar
for all Registrable Securities and/or other Common Stock covered by such
registration statement from and after a date not later than the effective date
of such registration statement;
(m) list such Registrable Securities and/or other Common Stock on any
national securities exchange or Nasdaq on which any shares of Common Stock are
listed or quoted or, if shares of Common Stock are not listed on a national
securities exchange or quoted on Nasdaq, use its reasonable best efforts to
qualify such Registrable Securities and/or other Common Stock for inclusion on
such national securities exchange as the holders of a majority of such
Registrable Securities shall request;
(n) issue to any underwriter to which any seller of Registrable
Securities and/or other Common Stock may sell shares in such offering
certificates evidencing such Registrable Securities and/or other Common Stock;
and
(o) use its best efforts to take all other steps necessary to effect
the registration of such Registrable Securities and/or other Common Stock
contemplated hereby. The Company may require each seller of Registrable
Securities and/or other Common Stock as to which any Registration is being
effected to furnish to the Company such information regarding such seller and
the distribution of such securities as the Company may from time to time
reasonably request in writing. In connection with the preparation and filing of
each registration statement under the Securities Act pursuant to this Agreement,
the Company shall give the holder of Registrable Securities and/or other Common
Stock covered by such registration statement a reasonable opportunity to review
and comment upon such registration statement, each prospectus included therein
or filed with the Commission, and each amendment thereof or supplement thereto,
all prior to finalization.
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Each holder of Registrable Securities and/or other Common Stock covered
by any such registration statement agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section
5.3(i), such holder will forthwith discontinue such holder's disposition of
Registrable Securities and/or other Common Stock pursuant to such registration
statement until such holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 53(i) and, if so directed by the
Company, will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies, then in such holder's possession of the
prospectus included in such registration statement which is current at the time
of receipt of such notice.
5.4 Selection of Underwriters.
(a) Demand Registrations. In connection with any Demand Registration by
the holders of Registrable Securities pursuant to Section 5.l(a) in which such
securities are to be distributed by Or through one or more underwriters, the
Company shall select the investment banker(s) and manager(s) that will
administer the offering (the "Underwriters". The Company shall enter into an
underwriting agreement with the Underwriters, such agreement to be reasonably
satisfactory in substance and form to the holders of Registrable Securities
being underwritten who are Substantial Holders and the Underwriters and to
contain such representations and warranties by the Company and such other terms
as are generally prevailing in agreements of such type, including, without
limitation, indemnities to the effect and to the extent provided in Section 5.6,
The holders of Registrable Securities and/or other Common Stock being
underwritten shall be parties to such underwriting agreement and may, at their
Option, require that any or all of 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 such holders and that
any or all of the conditions precedent to the obligations of such Underwriters
under such underwriting agreement be conditions precedent to the obligations of
such holders. Any such holder shall not be required to make any representations
or warranties to or agreements with the Company or the Underwriters other than
representations, warranties or agreements regarding such holder, such holder's
Registrable Securities and/or other Common Stock and such holder's intended
method of distribution and any other representation required by law.
(b) Piggyback Registrations. If the Company at any time proposes to
register any of its securities under the Securities Art as contemplated by
Section 5.2 and such securities are to be distributed by or through one or more
underwriters, the Company shall, if requested by any holder of Registrable
Securities as provided in Section 5.2 and subject to the provisions of Section
5.2(b), use its best efforts to arrange for such underwriters to include all the
Registrable Securities and/or other Common Stock requested to be offered and
sold by such holder among the securities to be distributed by such underwriters.
The holders of Registrable Securities and/or other common Stock to be
distributed by such underwriters shall he parties to the underwriting agreement
between the Company and such underwriters and may, at their option, require that
any or all of 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 such
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holders and that any or all of the conditions precedent to the obligations of
such underwriters under such underwriting agreement be conditions precedent to
the obligations of such holders to the extent that such representations,
warranties, other agreements, and conditions precedent bear on such holders'
liability or otherwise impose obligations on such holders. Any such holder of
Registrable Securities shall not be required to make any representations or
warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such holder, such holder's
Registrable Securities and/or other Common Stock and such holder's intended
method of distribution and any other representation required by law.
(c) Holdback Agreement. (i) If, in connection with the initial
public offering of shares of Common Stock of the Company registered pursuant to
the Securities Act, the managing underwriter for such registration shall so
request, the holders of Registrable Securities shall not sell, make any short
sale of, grant any option for the purchase of, or otherwise dispose of any
Restricted Securities (other than those shares of Common Stock included in such
registration) without the prior written consent of the Company for a period
designated by the Company in writing to the holders of Registrable Securities,
which period shall begin not more than 14 days prior to the effectiveness of the
registration statement pursuant to which such public offering shall be made and
shall not last more than 180 days (or such other period as the officers and
directors of the Company and all holders of greater than 3% of all Registrable
Securities mutually agree, but in no event more than 210 days) after the
effective date of such registration statement.
(ii) The Company agrees (x) not to effect any public sale or
distribution of its equity securities or securities convertible into or
exchangeable or exercisable for any of such securities during the 14
days prior to and the 120 days after any underwritten Demand
Registration or any underwritten Piggyback Registration pursuant to
Section 5.1 or 5.2 has become effective, except as part of such
underwritten registration and except pursuant to registrations on Form
▇-▇, ▇-▇ or any successor or similar forms thereto, and (y) to use its
best efforts to cause each holder of at least 5% (on a fully-diluted
basis) of its equity securities or any securities convertible into or
exchangeable or exercisable for any such securities, in each case
purchased from the Company at any time after the date of this Agreement
(other than in a public offering), to agree not to effect any such
public sale or distribution of such securities, during such period,
unless the managing underwriter otherwise agrees to such sale or
distribution.
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(d) Other Agreements. The Company agrees that, notwithstanding any
provision in this Section 5.4 to the contrary, for so long as General Electric
Pension Trust shall be a holder of equity securities of the Company, in the case
of any public offering of equity securities of the Company in which existing
stockholders of the Company are permitted to sell such equity securities,
General Electric Pension Trust shall have the right, in its sole discretion, to
approve or disapprove of any underwriter in which General Electric Company owns
a direct or indirect interest of 5% or more.
5.5 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company shall give the Substantial Holders who
hold Registrable Securities registered under such registration statement, their
underwriters, if any, and the Investor Counsel and accountants, the opportunity
to participate in the preparation of such registration statement, each
prospectus included therein or filed with the Commission, and each amendment
thereof or supplement thereto, and shall give each of them such access to its
books and records and such opportunities to discuss the business of the Company
with its officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of such holder's and
such underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
5.6 Indemnification.
(a) Indemnification by the Company. In the event of any registration of
any securities of the Company under the Securities Act, the Company shall
indemnify and hold harmless each holder of Registrable Securities and/or other
Common Stock selling such Registrable Securities and/or other common Stock, its
officers and directors, each underwriter, broker or any other person acting on
behalf of such seller and each other person, if any, who controls any of the
foregoing persons within the meaning of the Securities Act against any losses,
claims, damages or liabilities, joint or several, to which such seller or any
such director or officer or underwriter or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto or any document incident to
registration or qualification of any Registrable Securities and/or other Common
Stock or arise out of or are based upon 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, with respect to any prospectus,
necessary to make the statements therein in light of the circumstances under
which they were made not misleading, or any violation by the Company of the
Securities Act or state securities or blue sky laws applicable to the Company
and relating to action or inac-
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tion required of the Company in connection with such registration or
qualification under such state securities or blue sky laws; and the Company
will reimburse such seller and each such director, officer, underwriter and
controlling person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in reliance upon
and in conformity with written information furnished to the Company through an
instrument duly executed by such seller, specifically stating that it is for use
in the preparation thereof and, provided further, that the Company shall not be
liable to any Person who participates as an underwriter in the offering or sale
of Registrable Securities and/or other Common Stock or any other Person, if any,
who controls such underwriter within the meaning of the Securities Act, in any
such case to the extent that any such loss, claim, damage, liability (or action
or proceeding in respect thereof) or expense arises out of such Person's failure
to send or give a copy of the final prospectus, as the same may be then
supplemented or amended, to the Person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities and/or the Common Stock to
such Person if such statement or omission was corrected in such final
prospectus. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such seller or any such director,
officer, underwriter or controlling person and shall survive the transfer of
such securities by such seller.
(b) Indemnification by the Sellers. The Company may require, as a
condition to including any Registrable Securities and/or other common Stock in
any registration statement filed pursuant to Sections 5.1 or 5.2, that the
Company shall have received an undertaking satisfactory to it from the
prospective sellers of such securities, to indemnify and hold harmless (in the
same manner and to the same extent as set forth in Section 5.6(a) the Company,
each director of the Company, each officer of the Company and each other Person,
if any, who controls the Company within the meaning of the Securities Act, with
respect to any statement or alleged statement in or omission or alleged omission
from such registration statement, any preliminary prospectus, final prospectus
or summary prospectus contained therein, or any amendment or supplement thereto,
if such statement or alleged statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by such sellers specifically
stating that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement, provided that the obligation to indemnify shall be several, and not
joint and several, among such sellers of and the liability of each such seller
shall be in proportion to and limited to the net amount received by such seller
from the sale of Registrable Securities and/or other Common Stock pursuant to
such registration statement. Such indemnity shall remain in full force and
effect, regardless of any investigation made by or on behalf of the Company or
any such director, officer or controlling person and shall survive the transfer
of such securities by such seller.
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(c) Notices of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 5.6, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action, provided that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding subdivisions of this Section 5.6, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice.
In case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified
to the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and alter notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable for any settlement made by the
indemnified party without its consent (which consent will not be unreasonably
withheld) or for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation.
(d) Other Indemnification. Indemnification similar to that specified
in the preceding subdivisions of this Section 5.6 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities and/or other Common Stock with respect to any required registration
or other qualification of securities under any federal or state law or
regulation of any governmental authority other than the Securities Act.
(e) Indemnification Payments. The indemnification required by this
Section 5.6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in this Agreement
shall for any reason be unavailable or insufficient to an indemnified party
under Sections 5.6(a), 5.6(b) or 5.6(d) hereof in respect of any loss, claim,
damage or liability, or any action in respect thereof, or referred to therein,
then each indemnifying party shall, in lieu of indemnifying such party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, in such
proportion as shall be appropriate to reflect (i) the relative benefits received
by the Company, on the one hand, and the holders of the Registrable Securities
and/or other Common Stock included in the offering, on the other hand, from the
offering of the Registrable Securities and/or other Common Stock and (ii) the
relative fault of the Company, on the one hand, and the holders of the
Registrable Securities and/or other
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Common Stock included in the offering, on the other hand, with respect to the
statements or omissions which resulted in such loss, claim, damage or liability,
or action in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company, on the one hand
and the holders of the Registrable Securities and/or other Common Stock, on the
other hand, with respect to such offering shall be deemed to be in the same
proportion as the sum of the total Subscription Price paid to the Company in
respect of the Registrable Securities and/or other Common Stock plus the total
net proceeds from the offering of the securities (before deducting expenses)
received by the Company bears to the amount by which the total net proceeds from
the offering of the securities (before deducting expenses) received by the
holders of the Registrable Securities and/or other common Stock with respect to
such offering exceeds the Subscription Price paid to the Company in respect of
the Registrable Securities and/or other common Stock and in each case the net
proceeds received from such offering shall be determined as set forth on the
table of the cover page of the prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or the holders of
the Registrable Securities and/or other Common Stock, the intent of the parties
and their relative knowledge, access to information and opportunity to correct
or prevent such statement or omission. The Company and the holders of the
Registrable Securities and/or other Common Stock agree that it would not be just
and equitable if contribution pursuant to this Section 5.6 were to be determined
by pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to in this Section 5.6 shall
be deemed to include, for purposes of this Section 5.6, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 1l(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
5.7 Registration Expenses. (a) Subject to the limitations in Section
5.1 and this Section 5.7, all customary expenses incident to the Company's
performance of or compliance with the registration provisions of this Agreement,
including without limitation all registration, filing and NASD fees, all fees
and expenses of compliance with securities or blue sky laws, all word
processing, duplicating and printing expenses, messenger and delivery expenses,
and fees and disbursements of counsel for the Company and its independent
certified public accountants, including the expenses of any special audits or
"cold comfort" letters required by or incident to such performance and
compliance, the reasonable fees and disbursements, including without limitation,
out-of-pocket expenses of any single counsel and accountants retained by the
holder or holders of a majority of the Registrable Securities being registered
and any fees and disbursements of underwriters customarily paid by issuers or
sellers of securities (including fees paid to a "qualified independent
underwriter" required by the rules of the NASD in connection with a distri-
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bution, but excluding discounts and commissions and transfer taxes, if any) and
other Persons retained by the Company (all such expenses being herein called
"Registration Expenses"), shall be borne by the Company and, in addition, the
Company shall pay its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit or quarterly review, the
expense of any liability insurance, and the expenses and fees for listing the
securities to be registered on each securities exchange on which similar
securities issued by the Company are then listed or other expenses for the
preparation of financial statements or other data normally prepared by the
Company in the ordinary course of its business or which the Company would have
incurred in any event.
(b) In connection with each Demand Registration, the Company shall
reimburse the holders of Registrable Securities covered by such registration for
the reasonable fees and disbursements of one counsel chosen by the holders of a
majority of such Registrable Securities; provided that, in connection with a
Short-form Registration, the Company shall not be obligated to pay expenses for
such Demand Registration in excess of thirty thousand dollars ($30,000).
(c) To the extent Registration Expenses are not required to be paid by
the Company, each holder of securities other than the Company included in any
registration hereunder shall pay those Registration Expenses allocable to the
registration of such holder's securities so included, and any Registration
Expenses not so allocable shall be borne by all sellers of securities included
in such registration in proportion to the aggregate selling price of the
securities to be so registered.
5.8 Adjustments Effecting Registrable Securities. The Company shall not
effect or permit to occur any combination or subdivision of shares which would
adversely affect the ability of the holders of Registrable Securities and/or
other Common Stock to include such Registrable Securities and/or other Common
Stock in any registration of securities contemplated by this Section 5 or the
marketability of such Registrable Securities and/or other Common Stock under any
such registration.
5.9 Participation in Underwritten Registrations. No Person may
participate in any registration hereunder which is underwritten unless such
Person (a) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (b) completes and executes all questionnaires,
power of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements.
5.10 Rule 144. If the Company shall have filed a registration
statement pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act, the
Company shall file the reports required to be
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filed by it under the Securities Act and the Exchange Act (or, if the Company is
not required to file such reports, shall, upon the request of any holder of
Registrable Securities and/or other Common Stock, make publicly available other
information) and shall take such further action as any holder of Registrable
Securities and/or other Common Stock may reasonably request, all to the extent
required from time to time to enable such holder to sell such bolder's
securities without registration under the Securities Act but within the
limitations of the exemptions provided by (a) Rule 144, or (b) any similar rule
or regulation hereafter adopted by the Commission. Upon the request of any
holder of Registrable Securities, the Company shall deliver to such holder a
written statement as to whether it has complied with such requirements.
6. BASIC FINANCIAL INFORMATION OF THE COMPANY
6.1 Inspection. Notwithstanding any provision of the Bylaws of the
Company regarding delivery or non-delivery of financial information to
stockholders of the Company, until the Company becomes a reporting company under
the Exchange Act, the Company shall (x) allow Substantial Holders to visit the
Company and inspect any of the property of the Company, to examine the books and
records of the Company, and to make copies, notes and abstracts therefrom;
provided that such visits are at reasonable times, are by appointment with
management (which shall not be unreasonably withheld, conditioned or delayed),
and the Substantial Holders agree to enter into a confidentiality agreement in
form and substance satisfactory to the Company with respect to information that
is identified to them as confidential during such visits; provided, however,
that each Substantial Holder may disclose such confidential information to its
senior officers and managers, provided that such senior officers and managers
agree to be bound by the same confidentiality restrictions as apply hereunder,
(y) from time to time upon request of any authorized officer or representative
of the Substantial Holders, furnish to any such authorized officer or
representative such information regarding the business, operations, assets,
liabilities, condition (financial or otherwise) or prospects (including
materials furnished to the directors of the Company at or in connection with
board meetings) as such officer or representative may reasonably request.
6.2 Annual Report. The Company will use its reasonable best efforts to
deliver within 90 days after the end of each fiscal year a consolidated balance
sheet of the Company and its Subsidiaries, if any, as of the end of such fiscal
year, and a consolidated statement of income and a consolidated statement of
cash flows of the Company and its Subsidiaries, if any, for such year, prepared
in accordance with generally accepted accounting principles and setting forth in
each case in comparative form the figures for the previous fiscal year, all in
reasonable detail and audited by independent certified public accountants of
recognized national standing selected by the Company.
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6.3 Quarterly Report. The Company will use its reasonable best efforts
to deliver within 45 days after the end of the first, second and third quarterly
accounting periods in each fiscal year of the Company a consolidated balance
sheet of the Company and its Subsidiaries, if any, as of the end of each such
quarterly period, and a consolidated statement of income and a consolidated
statement of cash flows for such period and for the current fiscal year to date,
prepared in accordance with generally accepted accounting principles, with the
exception that no notes need be attached to such statements and interim and
year-end adjustments may not have been made. Said financial statements shall be
signed by an officer of the Company who shall state that such financial
statements are in accordance with generally accepted accounting principles, with
the exception that no notes need be attached to such statements and interim and
year-end adjustments may not have been made.
6.4 Monthly Report. The Company will use its reasonable best efforts to
deliver, within 30 days after the end of each month, a consolidated balance
sheet of the Company and its Subsidiaries, if any, as of the end of each such
month, and a consolidated statement of income and a consolidated statement of
cash flows for such month and for the current fiscal year to date, prepared in
accordance with generally accepted accounting principles, with the exception
that no notes need be attached to such statements and interim and year-end
adjustments may not have been made.
6.5 Business Plan and Operating Budget. The Company will use its
reasonable best efforts to deliver, at least 30 days prior to the commencement
of each fiscal year, a business plan and annual operating budget in detail for
such fiscal year, monthly operating expenses and profit and loss projections,
quarterly cash flow projections and a capital expenditure budget for the fiscal
year.
7. TRANSFERABILITY OF SECURITIES; COMPLIANCE WITH SECURITIES ACT
7.1 Transferability. As set forth below in this Section 7.1 and subject
to the restrictions set forth in the last sentence of this Section 7.1 and in
Section 7.3, any stockholder may transfer his, her or its Limited Securities;
provided, however, that the Company is given written notice at the time of such
transfer, stating the names and addresses of the transferee and identifying the
Limited Securities to be transferred, and such transferee expressly agrees in
writing with the Company to be bound by and to comply with all applicable
provisions of this Agreement, whereupon such person or entity shall have the
benefit of, and shall be subject to the restrictions contained in, this
Agreement with respect to such Limited Securities. Notwithstanding the
provisions of this Section 7.1 and Section 7.3, a stockholder may transfer on
any public securities market or in any public
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offering pursuant to Article 5, without being required to comply with the
provisions of this Section 7.1, any of its Common Stock and following such
transfer the Common Stock so transferred shall be free of the requirements of
this Article 7; provided that nothing in this sentence shall be deemed to
increase the number of Demand Registrations to which the holders of Registrable
Securities are entitled pursuant to Section 5.1.
7.2 Restrictive Legend. (a) Each certificate representing the shares of
Series B Preferred Stock or any securities (other than Common Stock) issued in
respect of the shares of Series B Preferred Stock or the Common Stock issuable
upon conversion thereof, shall (unless otherwise permitted by the provisions of
Section 7.1 or Section 7.3) be stamped or otherwise imprinted with a legend
substantially in the following form (in addition to any legend required under
applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. SUCH SHARES
MAY NOT BE OFFERED, PLEDGED, SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM AS DETERMINED IN ACCORDANCE WITH
THE INVESTOR RIGHTS AGREEMENT DATED AS OF OCTOBER 9, 1999 RESTRICTING
THEIR TRANSFER. COPIES OF THE INVESTOR RIGHTS AGREEMENT MAY BE OBTAINED
AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS
CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE CORPORATION'S
PRINCIPAL PLACE OF BUSINESS. FURTHER, THE DESIGNATIONS, RELATIVE
RIGHTS, PREFERENCES AND LIMITATIONS OF EACH CLASS OF STOCK OF THE
CORPORATION AND THE VARIATIONS IN THE RIGHTS, PREFERENCES AND
LIMITATIONS DETERMINED FOR EACH SERIES OF STOCK (AND THE AUTHORITY OF
THE BOARD OF DIRECTORS OF THE CORPORATION TO DETERMINE VARIATIONS FOR
FUTURE SERIES), ARE SET FORTH IN THE CORPORATION'S CERTIFICATE OF
INCORPORATION, AS AMENDED, A COPY OF WHICH WILL BE FURNISHED BY THE
CORPORATION TO THE HOLDER OF THIS CERTIFICATE, WITHOUT CHARGE, UPON THE
WRITTEN REQUEST OF SUCH HOLDER.
(b) Each certificate representing shares of Common Stock issued upon
conversion of the shares of Series B Preferred Stock or in respect of the shares
of Series B Preferred Stock or the Common Stock issuable upon conversion thereof
shall (unless otherwise permitted by the provisions of Section 7.1 or Section
7.3) be stamped or otherwise im-
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printed with a legend substantially in the following form (in addition to any
legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. SUCH SHARES
MAY NOT BE OFFERED, PLEDGED, SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM AS DETERMINED IN ACCORDANCE WITH
THE INVESTOR RIGHTS AGREEMENT DATED AS OF OCTOBER 6, 1999, RESTRICTING
THEIR TRANSFER. COPIES OF THE INVESTOR RIGHTS AGREEMENT MAY BE OBTAINED
AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS
CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE CORPORATION'S
PRINCIPAL PLACE OF BUSINESS. FURTHER, THE DESIGNATIONS, RELATIVE
RIGHTS, PREFERENCES AND LIMITATIONS OF EACH CLASS OF STOCK OF THE
CORPORATION AND THE VARIATIONS IN THE RIGHTS, PREFERENCES AND
LIMITATIONS DETERMINED FOR EACH SERIES OF STOCK (AND THE AUTHORITY OF
THE BOARD OF DIRECTORS OF THE CORPORATION TO DETERMINE VARIATIONS FOR
FUTURE SERIES), ARE SET FORTH IN THE CORPORATION'S CERTIFICATE OF
INCORPORATION, AS AMENDED, A COPY OF WHICH WILL BE FURNISHED BY THE
CORPORATION TO THE HOLDER OF THIS CERTIFICATE, WITHOUT CHARGE, UPON THE
WRITTEN REQUEST OF SUCH HOLDER.
7.3 Notice of Proposed Transfers. The holder of each certificate
representing Limited Securities by acceptance thereof agrees in writing to
comply with the provisions of this Section 7.3. Prior to any proposed transfer
of any Limited Securities, unless there is in effect a registration statement
under the Securities Act covering the proposed transfer, the holder thereof
shall give written notice to the Company of such holder's intention to effect
such transfer. Each such notice shall describe the manner and circumstances of
the proposed transfer (including the names of the transferees, if known) in
sufficient detail, and shall be accompanied (except in the following cases, with
respect to which the requirements set forth in the balance of this sentence need
not be complied with if the transferee agrees in writing to be bound by the then
applicable provisions of this Section 7: transactions in compliance with rule
144 so long as the Company is furnished with satisfactory evidence of compliance
with such Rule; transactions involving the distribution of Limited Securities in
accordance with the beneficial ownership thereof by any Investor to any
Authorized Transferee, so long as such transaction does not involve the
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disposition of such Limited Securities for value; and transactions involving the
transfer of Limited Securities by any holder who is an individual to any
Authorized Transferee) by either (i) an unqualified written opinion of legal
counsel who shall be reasonably satisfactory to the Company addressed to the
Company and reasonably satisfactory in form and substance to the Company's
counsel, to the effect that the proposed transfer of the Limited Securities may
be effected without registration under the Securities Act, or (ii) a "no action"
letter from the Commission to the effect that the distribution of such
securities without registration will not result in a recommendation by the staff
of the Commission that action be taken with respect thereto, whereupon the
holder of such Limited Securities shall be entitled to transfer such Limited
Securities in accordance with the terms of the notice delivered by the holder to
the Company. Each certificate evidencing the Limited Securities transferred as
above provided shall bear the appropriate restrictive legend set forth in
Section 7.2, except that such certificate shall not bear such restrictive legend
if in the reasonable opinion of counsel for the Company such legend is not
required in order to establish compliance with any provisions of the Securities
Act.
8. PREEMPTIVE RIGHTS
8.1 Pro Rata Right. The Company hereby grants to each holder of Series
B Preferred Stock the right of first refusal to purchase, pro rata all New
Securities (as defined in Section 8.2) which the Company may, from time to time,
propose to sell and/or issue. An Investor's pro rata share, for purposes of this
right of first refusal, is a ratio of (A) the numerator of which is the
aggregate of the number of shares of Common Stock (i) issued or issuable upon
conversion of Series B Preferred Stock held by such Investor on the date of the
Company's written notice pursuant to Section 8.3; or (ii) otherwise held by such
Investor on the date of the Company's written notice pursuant to Section 8.3,
and (B) the denominator of which is the total number of shares of Common Stock
outstanding immediately prior to the issuance of the New Securities, assuming
the conversion or exercise of all then outstanding convertible securities,
options, warrants or similar rights to acquire Common Stock (including without
limitation the Series A Preferred Stock and Series B Preferred Stock) and
assuming the issuance of all then unissued permitted employee shares ("Pro Rata
Share"). For purposes of this Section 8.1, the number of shares of Series B
Preferred Stock and Common Stock held by such Investor shall be determined as of
the date of the Company's written notice pursuant to Section 8.3. Each Investor
shall have a right of over-allotment such that if any other Investor fails to
exercise its or his right hereunder to purchase its or his Pro Rata Share of New
Securities, the other such holders may purchase each non-purchasing holder's
portion on a pro rata basis within 15 days from the date such non-purchasing
holder fails to exercise its right. This pre-emptive right shall be subject to
all of the provisions of this Section 8.
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8.2 Definition of "New Securities". "New Securities" shall mean any
capital stock (including without limitation Common Stock, Series A Preferred
Stock and Series B Preferred Stock) of the Company, whether or not now
authorized, and rights, options or warrants to purchase capital stock, and
securities of any type whatsoever that are, or may become, convertible into
capital stock; provided that the term "New Securities" does not include (i)
Common Stock or other securities issuable upon conversion of or with respect to
any Series B Preferred Stock, (ii) Common Stock or other securities issuable
upon conversion of or with respect to any Series A Preferred Stock; (iii)
Common Stock or other securities issued, or issuable, pursuant to the Company's
1999 Stock Option Plan, if any; (iv) warrants issued by the Company in
connection with the offering of Series B Preferred Stock, (v) securities covered
by a registration statement filed under the Securities Act and offered to the
public pursuant to a firm underwriting; (vi) securities issued pursuant to the
acquisition of another corporation by the Company by merger or purchase of all
or substantially all the assets of such corporation; (viii) any borrowings,
direct or indirect, from financial institutions or other persons by the Company,
whether or not presently authorized, including any type of loan or payment
evidenced by any type of debt instrument, provided such borrowings do not have
any equity features, including warrants, options or other rights to purchase
capital stock, and are not convertible into capital stock of the Company;
(viii) securities issued pursuant to any stock dividend, stock split,
combination or other reclassification by the Company of any of its capital stock
or (ix) securities issued to a provider of services at fair market value.
8.3 Required Notice. In the event that the Company proposes to
undertake an issuance or sale of New Securities, it shall give each Investor
written notice of its intention, describing the type of New Securities, the
price and the general terms upon which the Company proposes to issue or sell the
same. Each Investor shall have 30 days from the date of receipt of any such
notice to agree to purchase such Investor's Pro Rata Share of such New
Securities for the price and upon the general terms specified in the notice by
giving written notice to the Company and stating therein the quantity of New
Securities to be purchased.
8.4 Company's Right to Sell. In the event an Investor within the 30 day
period set forth above to agree to purchase its or his full Pro Rata Share to
which such Investor is pursuant to this Section 8 entitled to purchase, and
after the expiration of the 15 day period for the exercise of the over-allotment
rights under Section 8. 1, if applicable, the Company shall have 90 days
thereafter to sell or enter into an agreement (pursuant to which the sale of New
Securities covered thereby shall be closed, if at all, within 90 days after the
date of said agreement) to sell all such New Securities respecting which such
Investor's pre-emptive right to purchase was not exercised, at a price and upon
general terms no more favorable to the purchasers thereof than specified in the
Company's notice
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delivered to each Investor pursuant to Section 8.3. In the event the Company has
not sold, or entered into an agreement to sell, all such New Securities within
such 90 day period (or sold and/or issued all such New Securities in accordance
with the foregoing within 90 days after the date of such agreement), the Company
shall not thereafter issue or sell any New Securities without first offering
such New Securities to each Investor in the manner provided above.
8.5 Expiration of Right. The pre-emptive right granted under Section
8.1 shall expire upon the closing of an underwritten public offering of the
Company's Common Stock pursuant to an effective registration statement under the
Securities Act, or under other applicable securities regulations covering the
offer and sale of capital stock of the Company, in which (a) the offering price
per share of Common Stock is greater than or equal to 150% of the
then-applicable conversion price of the Series B Preferred Stock, (b) the gross
proceeds received by the Company exceed $30,000,000, and (c) the offering is
underwritten on a firm-commitment basis (a "Qualified Public Offering").
9. RIGHT OF CO-SALE
Except for an Underwritten Offering or Authorized Transfers of any
securities of the Company ("Securities"), if any of ▇▇▇▇▇▇, Chiat or an
individual then holding the office of Chief Executive Officer or Chief Financial
Officer of the Company or the equivalent (each a "Covered Seller") intends to
sell any Securities, such Coveted Seller shall deliver a written notice (the
"Co-sale Notice") to each Investor, at least 30 days prior to the proposed sale,
which notice shall specify the terms and conditions upon which the proposed sale
is intended to be consummated. Each Investor shall have the right to participate
in such sale of Securities in the manner hereinafter set forth.
To exercise such right, an Investor shall give written notice (the
"Participation Notice") of such election to such Covered Seller within 20 days
after receipt of the Co-sale Notice. Thereupon, such Investor shall have the
right to sell Securities to the proposed purchaser upon the same terms and
conditions as specified in the Co-sale Notice (which terms and conditions shall
include the types and class of Securities then held by such Covered Seller and
proposed to be sold), pro rata with its then current holding of Common Stock, on
a fully-converted basis, vis-a-vis the holding of Common Stock, on a
fully-converted basis, inclusive of Securities purchasable upon the exercise of
then-exercisable options, of the covered seller immediately prior to such sale.
The amount of Securities to be sold by such Covered Seller shall be reduced by
the number of Securities such Investor elects to sell. If such Investor
exercises such right, it shall bear its pro rata portion of expenses incident to
such sale. Failure by such Investor to exercise such right within such 20 day
period shall be deemed a declination of any right to participate in such
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sale, provided that such sale is completed within 90 days after expiration of
such 20 day period at a price and on terms and conditions substantially similar
to those set forth in the Co-sale Notice. Failure to meet the conditions in the
proviso in the immediately preceding sentence shall require a new Co-sale Notice
and a new opportunity to exercise the rights of co-sale with respect to such
sale. The co-sale rights granted under this Section 9 shall expire upon
consummation of a Qualified Public Offering.
In the event a Covered Seller should sell any Securities in
contravention of the co-sale rights of the Investors under this Section 9 (a
"Prohibited Transfer"), the Investors, in addition to such other remedies as may
be available at law, in equity or hereunder, shall have the put option provided
herein, and the Covered Seller shall be bound by the applicable provisions of
such option. In the event of a Prohibited Transfer, each Investor shall have the
right to sell to the Covered Seller the type and number of shares of stock equal
to the number of shares each Investor would have been entitled to transfer to
the purchaser had the Prohibited Transfer been effected pursuant to and in
compliance with the terms of this Section 9. Such sale shall be made on the
following terms and conditions:
(i) The price per share at which the shares are to be sold to
the Covered Seller shall be equal to the price per share paid by the
purchaser to the Covered Seller in the Prohibited Transfer. The Covered
Seller shall also reimburse each Investor for any and all fees and
expenses including, without limitation, legal fees and expenses
incurred pursuant to the exercise or attempted exercise of the
Investors's rights hereunder.
(ii) Within 90 days after the later of the dates on which an
Investor (A) receives notice of the Prohibited Transfer or (B)
otherwise becomes aware of the Prohibited Transfer, each Investor
shall, if exercising the option created hereby, deliver to the Covered
Seller the certificate or certificates representing the shares to be
sold, each certificate properly endorsed for transfer.
(iii) The Covered Seller shall, upon receipt of the
certificate or certificates for the shares to be sold by the Investor
pursuant to clause (ii) above, pay the aggregate purchase price
therefor and the amount of reimbursable fees and expenses, as specified
in clause (i) above, in cash or by other means acceptable to the
Investor.
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(iv) Notwithstanding the foregoing, any attempt by a Covered
Seller to transfer Securities in violation of this Section 9 shall be
void and the Company agrees it will not effect such a transfer nor will
it treat any alleged transferee as the holder of such Securities
without the written consent of a majority in interest of the Investors.
10. MISCELLANEOUS
10.1 Entire Agreement; Amendments and Waivers. This Agreement, the
Stock Purchase Agreements and the Stockholders Agreement contain the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior arrangements or understandings with respect hereto. The
terms and provisions of this Agreement may not be modified or amended, except
pursuant to a writing signed by the parties.
10.2 Nominees for Beneficial Owners. In the event that any Registrable
Securities and/or other Common Stock are held by a nominee for the beneficial
owner thereof, the beneficial owner thereof may, at its election, be treated as
the holder of such Registrable Securities and/or other Common Stock for purposes
of any request or other action by any holder or holders of Registrable
Securities and/or other Common Stock pursuant to this Agreement. If the
beneficial owner of any Registrable Securities and/or other Common Stock so
elects, the Company may require assurances reasonably satisfactory to it of such
owner's beneficial ownership of such Registrable Securities and/or other Common
Stock,
10.3 Notices. All notices, demands, requests, or other communications
that may be or are required to be given, served, or sent by any party to any
other party pursuant to this Agreement shall be in writing and shall be hand
delivered, sent by nationally recognized overnight courier, sent by facsimile
transmission, or mailed by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
(i) If to any holder of Registrable Securities and/or other
Common Stock, at the address that such holder shall have furnished to
the Company in writing,
(ii) If to the Company:
Screaming ▇▇▇▇▇.▇▇▇, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
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Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request, or communication which shall be hand delivered,
sent or mailed, in the manner described above, shall be deemed given for all
purposes at such time as it is hand delivered to the addressee (with the return
receipt or the delivery receipt being deemed conclusive, but not exclusive,
evidence of such delivery); if sent by the courier, on next business day; if
made by facsimile transmission, at the time that receipt thereof has been
acknowledged by electronic confirmation or otherwise or; if so mailed, on the
fifth day after deposited in the U.S. mail.
10.4 Assignment.
(a) Assignment of Registration Rights. Except as set forth in paragraph
(b), the rights of each Investor under this Agreement shall be assignable;
provided, however, that the Company is given written notice at the time of such
assignment stating the name and address of the assignee and identifying the
securities with respect to which the rights and benefits hereunder are being
assigned and such assignee expressly agrees in writing with the Company and the
other holders of Registrable Securities to be bound by and to comply with all
applicable provisions of this Agreement, whereupon such person or entity shall
have the benefits of, and shall be subject to the restrictions contained in,
this Agreement with respect to such securities. Any assignment pursuant to this
Section 10.4(a) shall not relieve, release or otherwise discharge the holder
effecting such assignment from its obligations under this Agreement,
(b) Assignment of Preemptive Rights, Rights of Subsequent Refusal and
Co-Sale. Notwithstanding paragraph (a) or any other provision hereof,
(i) The preemptive rights and right of co-sale of the
Investors set forth in Sections 8 and 9 are nonassignable, except that
(A) such rights are assignable by each Investor to any wholly-owned
subsidiary or parent of the assigning Investor, or to any Affiliate in
the case of the assigning Investor, (B) such rights are assignable
between and among any of the Investors, (C) such rights are assignable
by any Investor to its partners, shareholders or members, or the
managing directors thereof, in connection with distributions of shares
of Series B Preferred Stock or Common Stock to such partners,
shareholders or members, or the managing directors thereof and (iv)
such rights are assignable by any Investor to its Authorized
Transferees other than those set forth above in any of clauses (A), (B)
or (C); provided that the Company is given written notice at the time
of such assignment, stating the name and address of the assignee and
identifying the securities with respect to which the rights and
benefits hereunder are being assigned and such assignee expressly
agrees in writing with the Company
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and the other holders of Registrable Securities to be bound by and to
comply with all applicable provisions of Sections 8 and 9, whereupon
such person or entity shall have the benefits of, and shall be subject
to the restrictions contained in Sections 8 and 9 with respect to such
securities; any assignment pursuant to this Section 10.4(b) shall not
relieve, release or otherwise discharge the holder effecting such
assignment from its obligations under this Agreement; and
(ii) The Board of Directors nomination, separate class voting
and service rights set forth in Section 3 and the informational and the
other rights set forth in Section 6 are nonassignable to a Competitor.
(c) Assignment of Rights by Company. The Company may not assign this
Agreement in whole or in part to any other person without the prior written
consent of the other parties hereto.
10.5 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and their respective
permitted successors and assigns, heirs and legal representatives. In addition,
and whether or not any express assignment shall have been made, the provisions
of this Agreement which are for the benefit of the parties hereto other than the
Company shall also be for the benefit of and enforceable by any subsequent
holder of any Registrable Securities and/or other Common Stock.
10.6 Descriptive Headings. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
10.7 Governing Law. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of New York (but not including the choice of law rules thereof).
10.8 Termination: Rule 144(k). This Agreement shall terminate and be of
no further force or effect when there shall not be any Registrable Securities
outstanding; provided that the rights of the holders of Registrable Securities
and obligations of the Company under Section 5 hereof shall terminate and be of
no further force and effect at such earlier time as to any holder of Registrable
Securities as the provision of Rule 144(k) are applicable to the Restricted
Securities then held by such holder.
10.9 Severability. If any part of any provision of this Agreement or
any other agreement or document given pursuant to or in connection with this
Agreement shall be
34
38
invalid or unenforceable in any respect, such part shall be ineffective to the
extent of such invalidity or unenforceability only, without in any way affecting
the remaining parts of such provision or the remaining provisions of this
Agreement.
10.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument. It is
understood and agreed that each Investor may execute and deliver this Agreement
by executing and delivering the Omnibus Signature Page attached hereto, which
explicitly refers to this Agreement.
10.11 Costs of Enforcement: Specific Enforcement. If any action or
proceeding is instituted by any party to enforce or construe any provision of
this Agreement, the prevailing party in such action or proceeding shall be
entitled to recover from such other party (or parties) all of its costs and
reasonable attorneys' fees and disbursements. It is agreed and understood that
monetary damages would not adequately compensate an injured party for the breach
of this Agreement by any other party hereto, that this Agreement shall be
specifically enforceable and that any breach or threatened breach of this
Agreement shall be the proper subject of a temporary or permanent injunction or
restraining order. Further, each party hereto hereby waives any claim or defense
that there is an adequate remedy at law for such breach or threatened breach.
35
39
IN WITNESS WHEREOF, each of the undersigned has executed and delivered
this Agreement, or caused this Agreement to be duly executed and delivered on
its behalf, as of the date first above written.
SCREAMING ▇▇▇▇▇.▇▇▇, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, solely with
respect to the matters set forth
in Section 9
/s/ ▇▇▇ ▇▇▇▇▇
-------------------------------------
▇▇▇ ▇▇▇▇▇, solely with respect to
the matters set forth in Section 9
36
40
SCHEDULE I
INVESTORS
Name and Address Number of Shares Aggregate Purchase Price
------------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇▇▇ Enterprise Fund 191,800 $ 2,148,160.00
▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
attn: ▇▇▇ ▇▇▇▇▇▇
▇▇-▇▇, LLC 31,800 356,160.00
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Riverside Holdings II LP 67,400 754,880.00
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
attn: ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Capital Corp. 42,000 470,400.00
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇
S-Media, LLC 289,733 3,245,009.60
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇
INEMA S.A. 22,700 254,240.00
▇ ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ - ▇▇▇▇▇▇▇▇▇▇▇
attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
41
Name and Address Number of Shares Aggregate Purchase Price
------------------------------------------------------------------------------------------------------------------------------------
General Electric Pension Trust 446,528 5,001,113.60
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ Equities 51,875 581,000.00
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ #▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
MW Partnership 6,692 74,950.40
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ 4,467 50,030.40
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 4,466 50,019.20
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
GGEP Coinvestment Partners, L.L.C. 22,300 249,760.00
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
2
42
Name and Address Number of Shares Aggregate Purchase Price
------------------------------------------------------------------------------------------------------------------------------------
JSA Investment Co LLC 18,000 201,600.00
▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tennyson Fund II, LLLP 58,000 649,600.00
c/o Tennyson Equity Advisors
▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ 7,500 84,000.00
▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 900 10,080.00
Deutsche Banc Alex. ▇▇▇▇▇
▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇* 5,000 56,000.00
Deutsche Banc Alex. ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ 3,000 33,600.00
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
#▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 18,000 201,600.00
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
3
43
Name and Address Number of Shares Aggregate Purchase Price
------------------------------------------------------------------------------------------------------------------------------------
US Development Capital Investment Company 89,300 1,000,160.00
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
AMCITO PARTNERS, L.P. 22,322 250,006.40
c/o Wm. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ 2,232 24,99840
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ 8,928 99,993.60
c/o ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 2,678 29,993.60
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ 8,928 99,993.60
▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇/▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇,▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ 8,930 100,016.00
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
4
44
Name and Address Number of Shares Aggregate Purchase Price
------------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ Ventures, L.P. 20,000 224,000.00
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
attn: Rugis ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 2,372 26,566.40
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ (▇▇▇▇▇) ▇▇▇▇▇▇ 11,160 124,992.00
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ 2,238 25,065.60
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ----------------------------------------------------------
TOTAL 2,678,572 $ 30,000,006.40
==========================================================
* Not an "accredited investor" as defined in Rule 501(a) under the Securities
Act.
5
45
Name and Address Number of Shares Aggregate Purchase Price
------------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇ Global Technology Fund 155,300 1,739,360.00
▇▇▇▇ ▇▇▇▇▇▇▇ Adviser, lnc.
c/c, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Odyssey Capital, L.P. 22,400 250,880.00
Three ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ Capital Management 424,300 4,752,160.00
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
attn: ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ Communications and Information Fund 89,285 999,992.00
▇▇▇▇▇▇▇▇ New Technologies Fund, Inc. 291,440 3,264,128.00
▇▇▇▇▇▇▇▇ Investment Opportunities (Master) Fund-NTV
Portfolio 63,975 716,520.00
c/o J.& ▇. ▇▇▇▇▇▇▇▇ & Co, Incorporated, its Investment
Adviser
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Essex Private Placement Fund II Limited Partnership 87,300 977,760.00
c/o Essex Investment
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
6
46
Name and Address Number of Shares Aggregate Purchase Price
------------------------------------------------------------------------------------------------------------------------------------
RIC-TECH Ltd. 21,800 $ 244,160.00
c/o Rana Investment Company
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
attn: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
ABS Employee Venture Fund 5,523 $ 577,057.60
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇#▇-▇▇-▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
attn: ▇▇▇ ▇▇▇▇▇▇
7