Pre-Effective Amendment to Registration of Securities by a Small-Business Issuer — Form SB-2
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SB-2/A Pre-Effective Amendment to Registration of 92 446K
Securities by a Small-Business Issuer
2: EX-1.1 Underwriting Agreement 37 177K
3: EX-1.2 Underwriting Agreement 33 85K
4: EX-4.1 Instrument Defining the Rights of Security Holders 2 21K
5: EX-4.2 Instrument Defining the Rights of Security Holders 34 89K
6: EX-4.3 Instrument Defining the Rights of Security Holders 5± 24K
7: EX-5 Opinion re: Legality 2 12K
8: EX-10.1 Material Contract 4 22K
15: EX-10.10 Material Contract 16 60K
16: EX-10.11 Material Contract 12 40K
17: EX-10.12 Material Contract 7 34K
18: EX-10.15 Material Contract 9 43K
19: EX-10.17 Material Contract 3 17K
20: EX-10.18 Material Contract 6 31K
21: EX-10.19 Material Contract 11 56K
9: EX-10.2 Material Contract 6 36K
10: EX-10.4 Material Contract 4 19K
11: EX-10.5 Material Contract 2 16K
12: EX-10.6 Material Contract 3 15K
13: EX-10.7 Material Contract 26 106K
14: EX-10.9 Material Contract 4± 19K
22: EX-23.1 Consent of Experts or Counsel 1 8K
23: EX-27 Financial Data Schedule (Pre-XBRL) 2 12K
24: EX-27.1 Financial Data Schedule (Pre-XBRL) 2 13K
INVESTORS' RIGHTS AGREEMENT
THIS INVESTORS' RIGHTS AGREEMENT (the "AGREEMENT") is made as of
January 9th, 2000, by and among Liquor.com, Inc., a Delaware corporation, (the
"COMPANY"), the holders of shares of the Company's Series A Preferred Stock (the
"PREFERRED HOLDERS" and each individually a "PREFERRED HOLDER"), and those other
stockholders of the Company listed on the signature pages hereto under the
caption "Stockholders" (the "STOCKHOLDERS" and each individually a
"STOCKHOLDER").
RECITALS
A. The Preferred Holders have entered into a Series A Preferred Stock
Purchase Agreement dated of even date herewith (the "Purchase Agreement"),
pursuant to which the Company shall sell and the Preferred Holders shall
purchase shares of the Company's Series A Preferred Stock (the "Preferred
Stock").
B. The execution of this Agreement is a condition to the closing of the
transactions contemplated by the Purchase Agreement.
C. In order to induce the Preferred Holders to enter into this
Agreement and the Purchase Agreement, the Stockholders and the Company desire to
grant to the Preferred Holders certain rights of first refusal and certain
rights of co-sale with respect to equity securities owned by each Stockholder
and any other equity securities of the Company hereafter owned or acquired by
each Stockholder and certain Registration Rights and Preemptive Rights.
NOW, THEREFORE, in consideration of the mutual promises herein
contained, and other consideration, the receipt and adequacy of which hereby is
acknowledged, the parties hereto agree as follows:
1 . CERTAIN DEFINITIONS. For purposes of this Agreement, the following terms
have the following meanings:
1.1 "AFFILIATE" OR "AFFILIATED ENTITY OR PERSON" means, as to any
specified Person any other Person that, directly or indirectly through one or
more intermediaries or otherwise, controls, is controlled by or is under common
control with the specified Person. As used in this definition, "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person (whether through ownership
of capital stock of that Person, by contract or otherwise).
1.2 "COMMON STOCK" means the Company's common stock, par value $.00001
per share.
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1.3 "DEMAND REGISTRABLE SECURITIES" shall mean (i) the shares of Common
Stock of the Company issuable or issued upon conversion of the Preferred Stock
of the Company, and (ii) any other shares of the Company's Common Stock issued
as (or issuable upon conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with respect to or
exchange for or replacement of the Preferred Stock.
1.4 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder, all as
the same shall be in effect at that time.
1.5 "QUALIFIED INITIAL PUBLIC OFFERING" means the Company's sale of its
Common Stock in a bona fide, firm commitment underwriting pursuant to a
registration statement under the Securities Act, the price to the public of
which is not less than $5.90 per share (appropriately adjusted for any
recapitalizations, stock combinations, stock dividends, stock splits and the
like) and for an aggregate gross offering price of at least $20,000,000.
1.6 "INITIATING HOLDERS" means the Preferred Holders who are the
holders of at least 51% of the then outstanding Registrable Securities.
1.7 "MAJOR SHAREHOLDER" means the individuals named from time to time
by the Board of Directors of the Company and listed in EXHIBIT A hereto.
1.8 "OFFERED STOCK" means all Stock proposed to be transferred by the
Seller.
1.9 "OFFERED PREFERRED STOCK" means all Preferred Stock proposed to be
offered by the Preferred Seller.
1.10 "PREFERRED DIRECTOR" shall mean the director elected by the
holders of Preferred Stock pursuant to Section 4(b) of the Company's Certificate
of Incorporation.
1.11 "PREFERRED HOLDER'S SHARE" means, as to the Right of Co-Sale, the
percentage determined by dividing (A) the number of shares of Stock held by the
Preferred Holder by (B) the number of shares of Stock held by the Seller and all
Preferred Holders participating in the Right of Co-Sale.
1.12 "PREFERRED SELLER" means any Preferred Holder proposing to
transfer or sell Preferred Stock.
1.13 The terms "REGISTER", "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act (as defined below), and the declaration or
ordering of the effectiveness of such registration statement.
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1.14 "REGISTRABLE SECURITIES" means Demand Registrable Securities,
excluding in all cases, however, any securities sold by a person in a
transaction in which a holder's registration rights under this Agreement are not
assigned; provided, however, that securities shall only be treated as
Registrable Securities if and for so long as, they have not been (A) sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction or (B) sold in a transaction exempt from the registration
and prospectus delivery requirements of the Securities Act under Section 4(l)
thereof so that all transfer restrictions and restrictive legends with respect
thereto are removed upon the consummation of such sale.
1.15 "REGISTRATION EXPENSES" shall mean all expenses (excluding
underwriting discounts and selling commissions) incurred in connection with a
registration under Section 3 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses.
1.16 "RIGHT OF CO-SALE" means the right of co-sale provided to the
Preferred Holders in Article 5 of this Agreement.
1.17 "RIGHT OF FIRST REFUSAL" means the right of first refusal provided
to the Company and the Preferred Holders in Article 4 of this Agreement.
1.18 "SEC" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
1.19 "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the SEC promulgated thereunder, all as
the same shall be in effect at the time.
1.20 "SELLER" means any Stockholder proposing to transfer or sell
Stock, and expressly does not include a Preferred Seller.
1.21 "STOCK" means and includes all securities and options issued by
the Company.
1.22 "TRANSFER" means and includes any sale, assignment, encumbrance,
hypothecation, pledge, conveyance in trust, gift, transfer by bequest, devise or
descent, distribution by a corporation to its shareholders or other transfer or
disposition of any kind, including but not limited to transfers to receivers,
levying creditors, trustees or receivers in bankruptcy proceedings or general
assignees for the benefit of creditors, whether voluntary or by operation of
law, directly or indirectly, except:
1.22.1 any bona fide pledge if the pledgee executes a
counterpart copy of this Agreement and becomes bound thereby as a Stockholder;
or
1.22.2 any transfers of Stock by a Seller to the Seller's
spouse, lineal descendant or antecedent, father, mother, brother or sister of
the Seller, the adopted child or adopted
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grandchild of the Seller, or the spouse of any child, adopted child, grandchild
or adopted grandchild of the Seller, or to a trust or trusts for the exclusive
benefit of the Seller or the Seller's family members as described in this
Section, or transfers of Stock by the Seller by devise or descent, or transfers
of Stock to a general or limited partner or other Affiliate of the Seller-,
provided, that, in all cases, the transferee or other recipient executes a
counterpart copy of this Agreement and becomes bound thereby as was the Seller.,
2. RESTRICTIVE LEGEND. Each certificate representing Stock shall (unless
otherwise permitted or unless the securities evidenced by such certificate
shall have been registered under the Securities Act) 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 (THE "ACT"), OR ANY STATE SECURITIES LAWS. SUCH
SHARES MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF SUCH
REGISTRATION OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE ACT. THE SHARES REPRESENTED BY THIS CERTIFICATE AND THE SALE,
ASSIGNMENT, TRANSFER, PLEDGE OR OTHER DISPOSITION THEREOF ARE SUBJECT
TO CERTAIN RESTRICTIONS AS SET FORTH IN AN INVESTORS' RIGHTS AGREEMENT
DATED JANUARY _, 2000, ENTERED INTO BY THE HOLDER OF THESE SHARES, THE
COMPANY AND THE STOCKHOLDERS OF THE COMPANY. A COPY OF SUCH AGREEMENT
IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED
BY THE COMPANY TO THE HOLDER HEREOF WITHOUT CHARGE UPON THE WRITTEN
REQUEST TO THE COMPANY.
Upon request of a holder of such a certificate, the Company
shall remove the foregoing legend from the certificate or issue to such holder a
new certificate therefor free of any transfer legend, if, with such request, the
Company shall have received either: (i) a written opinion of legal counsel to
the holder, which legal counsel shall be reasonably satisfactory to the Company,
addressed to the Company and reasonably satisfactory in form and substance to
the
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Company's counsel, to the effect that the proposed transfer of the Restricted
Securities may be effected without registration under the Securities Act; or
(ii) a "no-action" letter from the SEC to the effect that the distribution of
such securities without registration will not result in a recommendation by the
staff of the SEC that action be taken with respect thereto, unless any such
transfer legend may be removed pursuant to Rule 144(k), in which case no such
legal opinion or "no-action" letter shall be required; and PROVIDED THAT the
Company shall not be obligated to remove any such legends prior to the date of
the initial public offering of the Company's Common Stock under the Securities
Act.
3. REGISTRATION RIGHTS
3.1 COMPANY REGISTRATION.
3.1.1 If the Company shall determine to register any of its
securities either for its own account or for the account of a security holder or
holders exercising their respective demand registration fights, other than a
registration relating solely to employee benefit plans or a registration
relating solely to a transaction of the type specified in Rule 145 under the
Securities Act or a registration on any registration form which does not permit
secondary sales or does not include substantially the same information as would
be required to be included in a registration statement covering the sale of
Registrable Securities, the Company will:
3.1.1.1 promptly give to each holder of Registrable
Securities written notice thereof, and
3.1.1.2 include in such registration, and in any
underwriting involved therein, all of the Registrable Securities specified in a
written request or requests made by any holder of Registrable Securities within
ten days after receipt of the written notice from the Company described in
Section 3.1.1.1 above, except as set forth in Section 3.1.2 below. Such written
request may specify all or a part of a holder's Registrable Securities.
3.1.2 UNDERWRITING. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the holders of Registrable Securities AS A PART OF THE
WRITTEN NOTICE given pursuant to Section 3.1.1. In such event the right of any
holder of Registrable Securities subject to registration pursuant to this
Section 3.1 shall be conditioned upon such holder's participation in such
underwriting and the inclusion of such holder's Registrable Securities in the
underwriting to the extent provided herein. All holders of Registrable
Securities proposing to distribute their securities through such underwriting
shall (together with the Company and the other stockholders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with a nationally recognized underwriter selected for
underwriting by the Company (the "Underwriter"). Notwithstanding any other
provision of this Section 3.1, if the Underwriter determines that marketing
factors require a limitation on the number of shares to be underwritten, the
Underwriter may (subject to the allocation priority set forth below) exclude
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from such registration and underwriting any or all of the Registrable Securities
which would otherwise be underwritten pursuant hereto. The Company shall so
advise all holders of securities requesting registration, and the number of
shares of securities that are entitled to be included in the registration and
underwriting by persons other than the Company shall be allocated in the
following priority: first, among all holders of Registrable Securities in
proportion, as nearly as practicable, to the respective amounts of securities
which they had requested to be included in such registration at the time of
filing the registration statement, and second, among persons not contractually
entitled to registration rights under this Agreement. If any Preferred Holder or
other stockholder disapproves of the terms of any such underwriting, such holder
may elect to withdraw therefrom by written notice to the Company and the
Underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
3.2 DEMAND REGISTRATION
3.2.1 REQUEST FOR REGISTRATION. If the Company shall receive
from Initiating Holders, at any time following the date which is two years after
the effective date of this Agreement, a written request that the Company effect
any registration with respect to at least 5 1 % of the then outstanding
Registrable Securities the Company will
3.2.1.1 promptly give written notice of the proposed
registration to all other holders of Registrable Securities; and
3.2.1.2 as soon as practicable, use its best efforts
to effect such registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and appropriate compliance
with applicable regulations issued under the Securities Act) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Preferred
Holders joining in such request as are specified in a written request delivered
to the Company within 15 days after receipt of such written notice from the
Company; PROVIDED THAT the Company shall not be obligated to effect, or to take
any action to effect, any such registration pursuant to this Section 3.2:
3.2.1.2.1 in any particular jurisdiction in
which the Company would be required to execute a general consent to service of
process in effecting such registration, qualification or compliance, unless the
Company is already subject to service in such jurisdiction and except as may be
required by the Securities Act; or
3.2.1.2.2 after the Company has effected one
such registration pursuant to this Section 3.2 and such registration has been
declared or ordered effective and the sales of such Registrable Securities have
closed.
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Subject to the foregoing clauses 3.2.1.2.1 and 3.2.1.2., the Company
shall file a registration statement covering the Registrable Securities so
requested to be registered as soon as practicable, after receipt of the request
or requests of the Initiating Holders; provided, however, that if the Company
shall furnish to such Initiating Holders a certificate signed by the President
of the Company stating that in the good faith judgment of the Board of Directors
of the Company, it would be significantly detrimental to the Company and its
stockholders for such registration statement to be filed on or before the time
filing would be required and it is therefore essential to defer the filing of
such registration statement, the Company shall have the right to defer such
filing (but not more than once during any twelve month period) for a period of
not more than 180 days after receipt of the request of the Initiating Holders.
The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of Section 3.2.2 below,
include other securities of the Company which are held by Major Shareholders and
other officers or directors of the Company or which are held by persons who, by
virtue of agreements with the Company, are entitled to include their securities
in any such registration.
3.2.2 UNDERWRITING. If the Initiating Holders intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request made
pursuant to Section 3.2, and the Company shall include such information in the
written notice referred to in Section 3.2.1 above. The right of any Preferred
Holder to registration pursuant to this Section 3.2 shall be conditioned upon
such Preferred Holder's participation in such underwriting and the inclusion of
such Preferred Holder's Registrable Securities in the underwriting to the extent
provided herein. A Preferred Holder may elect to include in such underwriting
all or a part of the Registrable Securities he holds.
The Company shall (together with all Preferred Holders
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement in customary form with the representative of the
underwriter or underwriters selected for such underwriting by the Initiating
Holders and reasonably acceptable to the Company. Notwithstanding any other
provision of this Section 3.2, if the Underwriter determines that marketing
factors require a limitation on the number of shares to be underwritten, the
Underwriter may (subject to the allocation priority set forth below) limit the
number of Registrable Securities to be included in the registration and
underwriting to not less than twenty percent (20%) of the securities which
Preferred Holders have requested be included therein. The Company shall so
advise all holders of securities requesting registration, and the number of
shares of securities that are entitled to be included in the registration and
underwriting shall be allocated in the following priority: first, among all
Preferred Holders; second, among Major Shareholders in proportion, as nearly as
practicable, to the respective amounts of securities which they had requested to
be included in such registration at the time of filing the registration
statement; and third, among all other stockholders in proportion, as nearly as
practicable, to the respective amounts of securities which they had requested to
be included in such registration at the time of filing the registration
statement. If any holder requesting participation in the registration
disapproves of the terms of
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any such underwriting, such holder may elect to withdraw therefrom by written
notice to the Company and the Underwriter. Any Registrable Securities excluded
or withdrawn from such underwriting shall be withdrawn from such registration.
If the Underwriter has not limited the number of Registrable Securities or other
securities to be underwritten, the Company may include its securities for its
own account in such registration if the underwriter so agrees and if the number
of Registrable Securities and other securities which would otherwise have been
included in such registration and underwriting will not thereby be limited.
3.2.3 UNDERWRITTEN PUBLIC OFFERING. If requested, and provided
that the underwriter or underwriters are reasonably satisfactory to the Company,
the Company shall enter into an underwriting agreement with an investment
banking firm or firms containing representations, warranties, indemnities and
agreements then customarily included by an issuer in underwriting agreements
with respect to secondary distributions. The Company shall not cause the
registration under the Securities Act of any other shares of its Common Stock to
become effective (other than registration of an employee stock plan, or
registration in connection with any Rule 145 or similar transaction) during the
effectiveness of a registration requested hereunder for an underwritten public
offering if, in the judgment of the underwriter or underwriters, marketing
factors would adversely affect the price of the Registrable Securities subject
to such underwritten registration.
3.3 REGISTRATION ON FORM S-3. The Company shall use its best efforts to
qualify for registration on Form S-3, and to that end, the Company shall comply
with the reporting requirements of the Exchange Act following the effective date
of the first registration of any securities of the Company for a registered
public offering. After the Company has qualified for the use of Form S-3, each
holder of Registrable Securities shall have the right to request two
registrations on Form S-3 (such requests shall be in writing and shall state the
number of shares of Registrable Securities to be disposed of, which shall be at
least 50,000 shares of Common Stock, as appropriately adjusted for any
recapitalizations, stock combinations, stock dividends, stock splits and the
like, and the intended method of disposition of such shares by each such
holder), subject only to the following limitations:
3.3.1 The Company shall not be obligated to cause a
registration on Form S-3 to become effecitve prior to one hundred eighty (180)
days following the effective date of a Company-initiated registration (other
than a registration effected solely to qualify an employee benefit plan or to
effect a business combination pursuant to Rule 145), provided that the Company
shall use its best efforts to achieve such effectiveness promptly following such
one hundred eighty (180) day period;
3.3.2 The Company shall not be required to effect more than
one registration pursuant to this Section 3.3 within any 12-month period;
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3.3.3 The Company may postpone any demand registration on Form
S-3 by up to 180 days if it believes in its good faith judgment, and after
consultation with its investment bankers, that such demand registration will be
detrimental to the Company; and
3.3.4 The Company shall not be required to maintain and keep
any such registration on Form S-3 effective for a period exceeding 90 days from
the effective date thereof. The Company shall give notice to all Preferred
Holders and all holders of registration rights under any other agreement of the
Company granting Form S-3 or similar demand registration rights of the receipt
of a request for registration pursuant to this Section 3.3 and shall provide a
reasonable opportunity for all such other holders to participate in the
registration. Subject to the foregoing, the Company will use its best efforts
to effect promptly the registration of all shares of Registrable Securities on
Form S-3 to the extent requested by the Preferred Holder or Preferred Holders
thereof for purposes of disposition. In the event the Underwriter determines
that market factors require a limitation on the number of shares to be
underwritten, then shares shall be excluded from such registration and
underwriting pursuant to the method described in Section 3.1.2.
3.4 EXPENSES OF REGISTRATION. The Company shall pay the Registration
Expenses incurred in connection with the demand registration pursuant to Section
3.2, up to two registrations on Form S-3 pursuant to Section 3.3, and all
Piggyback Registrations, provided, however, that the Company shall not be
required to pay any Registration Expenses if, as a result of the withdrawal of
a request for registration by Initiating Holders, the registration statement
does not become effective, unless such withdrawal is caused by a material
adverse change in the business or operations of the Company after such request
for registration, or unless the Initiating Holders agree to have such
registration considered a registration pursuant to Section 3.2.1.2.2. If the
Company is not required to pay any Registration Expenses, then the holders of
Registrable Securities seeking to participate in such registration shall bear
such Registration Expenses pro rata on the basis of the number of their shares
so included in the registration request, and such registration shall not be
considered a registration for purposes of Section 3.2.1.2.2.
3.5 INDEMNIFICATION.
3.5.1 The Company will indemnify each Preferred Holder, each
of its officers, directors and partners, and each person controlling such
Preferred Holder within the meaning of Section 15 of the Securities Act, if
Registrable Securities held by such Preferred Holder are included in the
securities with respect to which registration, qualification or compliance has
been effected pursuant to this Agreement, and each underwriter, if any, and each
person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other document (including any related registration statement)
incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein,
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in light of the circumstances in which they were made, not misleading, or any
violation by the Company of the Securities Act, including any rule or regulation
thereunder applicable to the Company relating to action or inaction required of
the Company in connection with any such registration, qualification or
compliance, and will reimburse each such Preferred Holder, each of its officers,
directors and partners, and each person controlling such Preferred Holder, each
such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based on
any untrue statement (or alleged untrue statement) or omission (or alleged
omission) based upon written information furnished to the Company by such Holder
or underwriter and stated to be specifically for use therein.
3.5.2 Each Preferred Holder will, if Registrable Securities or
other securities held by such Preferred Holder are included in the securities as
to which such registration, qualification or compliance is being effected,
indemnify the Company, each of its directors, officers and agents and each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act, each other such Preferred Holder
and each of their officers, directors and partners, and each person controlling
such Preferred Holder within the meaning of Section 15 of the Securities Act,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, and will reimburse the Company and such
Preferred Holders, directors, officers, agents, partners, persons, underwriters
or control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by such Preferred Holder and stated to be specifically
for use therein. In no event shall the aggregate liability of a Preferred Holder
for indemnification under this Section 3.5.2 exceed the net proceeds received by
such Preferred Holder from the sale of shares in such offering.
3.5.3 Each party entitled to indemnification under this
Section 3.5 (the "INDEMNIFIED PARTY") shall give notice to the party required to
provide indemnification (the "INDEMNIFYING PARTY") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought and shall permit the Indemnifying Party to assume the defense of any such
claim or any litigation resulting therefrom, PROVIDED THAT counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably
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be withheld), and the Indemnified Party may participate in such defense at such
party's expense, and PROVIDED FURTHER THAT the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Agreement, except to the extent that the Indemnifying
Party is prejudiced thereby. Each Indemnified Party shall furnish such
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request and as shall be reasonably required in connection with
the defense of such claim and litigation resulting therefrom. An Indemnified
Party shall have the right to retain its own counsel, with the fees and expenses
to be paid by the Indemnifying Party, if representation of such Indemnified
Party by the counsel retained by the Indemnifying Party would be inappropriate
due to actual or potential conflicts of interest between such Indemnified Party
and any other party represented by such counsel in such proceeding, PROVIDED
THAT in no event shall the Indemnifying Party be required to pay the fees and
expenses of more than one such separate counsel for all Indemnified Parties.
3.5.4 If the indemnification provided for in this Section 3.5
is held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any losses, claims, damages or liabilities referred to
herein, the Indemnifying Party, in lieu of indemnifying such Indemnified Party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such Indemnified Party as the result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party on the one hand and of the Indemnified
Party on the other in connection with the allegation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relevant intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; PROVIDED THAT in no event shall any contribution by a
Preferred Holder hereunder exceed the proceeds from the sale of shares in the
offering received by such Preferred Holder.
3.5.5 The obligations of the Company and Preferred Holders
under this Section 3.5 shall survive the completion of any offering of
Registrable Securities in a registration statement and the termination of this
Agreement. No Indemnifying Party, in the defense of any such claim or
litigation, shall consent to the entry of any judgment or enter into any
settlement thereof which does not involve solely the payment of money damages
except with the prior written consent of each Indemnified Party (which consent
shall not be unreasonably withheld). Unless waived by the Indemnified Party, all
judgments and settlements must 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.
11
3.6 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the SEC which may permit the sale of the
Registrable Securities to the public without registration, the Company agrees
to:
3.6.1. Make and keep public information available as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times from and after ninety (90) days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the general public;
3.6.2. Use its best efforts to file with the Commission in a
timely mariner all reports and other documents required of the Company under the
Securities Act and the Exchange Act at any time after it has become subject to
such reporting requirements;
3.6.3. So long as a Preferred Holder owns any Restricted
Securities, furnish to the Preferred Holder forthwith upon request a written
statement by the Company as to its compliance with the reporting requirements of
Rule 144 (at any time from and after ninety (90) days following the effective
date of the first registration statement filed by the Company for an offering of
its securities to the general public), and of the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements).
3.7 STANDOFF AGREEMENT. In connection with any underwritten public
offering by the Company, if requested by the managing underwriter, each
Preferred Holder and Major Shareholder agrees not to sell, agree or contract to
sell, make any short sale of, loan, grant any option or warrant for the purchase
of, or otherwise dispose of any Stock (other than those included in the public
offering, if any) without the prior written consent of the Company or the
underwriters for such period of time (not to exceed one hundred eighty (180)
days in the event of a Qualified Initial Public Offering and 90 days in the
event of any other public offering) as may be requested by the Board of
Directors of the Company and the managing underwriter; PROVIDED, HOWEVER, , that
all officers and directors of the Company and all holders of at least five
percent of the voting power of the Company enter into similar agreements.
3.8 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after the
date of this Agreement, the Company shall not, without the prior written consent
of the holders of at least 51% of the then outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company giving such holder or prospective holder any registration rights
the terms of which are senior to or PARI PASSU with the registration rights
granted to Preferred Holders hereunder or require the Company to effect a
registration earlier than the date on which Preferred Holders can first require
a registration under Section 3.2.
3.9 TERMINATION OF RIGHTS. Unless otherwise provided herein, the rights
and provisions of this Article 3 shall terminate at the time an active public
trading market exists for the Common Stock of the Company and as to any
Preferred Holder, at such time as such
12
Preferred Holder is able to sell all of his Registrable Securities in any 90-day
period pursuant to Rule 144 promulgated under the Securities Act.
3.10 MISCELLANEOUS.
3.10.1. TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS. The
rights to cause the Company to register the Preferred Holder's securities
granted by the Company under Sections 3.1, 3.2 and 3.3 hereof may be transferred
or assigned by the Preferred Holder to a transferee or assignee of any of the
Registrable Securities, PROVIDED THAT the Company is given written notice by
such Preferred Holder at the time of said transfer or assignment, stating the
name and address of said transferee or assignee and identifying the securities
with respect to which such registration rights are being transferred or
assigned; and PROVIDED FURTHER THAT such transferee is a constituent partner of,
or subsidiary controlled by, the transferor, and after giving effect to such
transfer, the transferee holds at least 50,000 shares of Registrable Securities
(appropriately adjusted for recapitalizations, stock combinations, stock splits,
dividends and the like); and PROVIDED FURTHER THAT the transferee or assignee of
such rights is not deemed by the Board of Directors of the Company, in its
reasonable judgment, to be a competitor of the Company; and PROVIDED FURTHER
THAT the transferee or assignee of such rights assumes the obligations of a
Preferred Holder under this Agreement and the Purchase Agreement.
3.10.2. AGGREGATION OF STOCK. ALL Registrable Securities held
or acquired by Affiliated entities or persons shall be aggregated for the
purposes of determining the availability of any right under this Article 3.
4. RESTRICTIONS ON TRANSFERABILITY OF STOCK.
4.1 SELLER
4.1.1 NOTICE OF PROPOSED TRANSFER. Before any Seller may
effect any Transfer of Stock, the Seller shall deliver to the Company and to the
Preferred Holders a written notice signed by the Seller (the "SELLER'S NOTICE")
stating (a) the Seller's bona fide intention to Transfer such Offered Stock; (b)
the name and address of each proposed purchaser or other transferee (the
"TRANSFEREE"); (c) the number of shares of the Offered Stock to be Transferred
to each Transferee; and (d) the bona fide cash price or other consideration for
which the Seller proposes to Transfer such Offered Stock (the "OFFERED PRICE");
and the Seller shall offer the Offered Stock at the Offered Price to the Company
and non-selling Preferred Holders.
4.1.2 COMPANY'S INITIAL RIGHT. The Company shall have the
right of first refusal to purchase all or any part of the Offered Stock, if the
Company gives written notice of the exercise of such right to the Seller within
ten days (the "COMPANY'S REFUSAL PERIOD") after the date on which the Seller's
Notice is received by the Company, PROVIDED THAT if the Company is not ready and
willing to consummate the purchase within 20 days after the date on which the
Seller's Notice is received by the Company, the Company's refusal right shall be
deemed to be
13
waived for such sale by Seller. If the Company desires to purchase less than all
of the Offered Stock, within ten days after expiration of the Company's Refusal
Period, the Company will give written notice to each Preferred Holder specifying
the number of shares of Offered Stock that were not subscribed by the Company
exercising its Right of First Refusal (the "COMPANY'S NOTICE").
4.1.3 PREFERRED HOLDERS' RIGHT. If the Company desires to
purchase less than all of the Offered Stock, the Preferred Holders and their
assignees have the right of first refusal to purchase all or any part of the
remaining Offered Stock; PROVIDED THAT each Preferred Holder gives written
notice of the exercise of such right to the Seller within ten days (the
"PREFERRED HOLDERS' REFUSAL PERIOD") after the date of the Company's Notice to
the Preferred Holders. To the extent the aggregate number of shares the
Preferred Holders desire to purchase exceeds the Offered Stock available, each
Preferred Holder will be entitled to purchase a fraction of the Offered Stock,
the numerator of which shall be the number of shares of Stock held by such
Preferred Holder and the denominator of which shall be the number of shares of
Stock held by all Preferred Holders exercising their Right of First Refusal.
Within five days after expiration of the Preferred Holders' Refusal Period, the
Seller will give written notice to the Company and each Preferred Holder
specifying the number of shares of Offered Stock that was subscribed by the
Preferred Holders exercising their Right of First Refusal (the "CONFIRMATION
NOTICE").
4.1.4 PURCHASE PRICE. The purchase price (the "PURCHASE
PRICE") for the Offered Stock to be purchased by the Company or a Preferred
Holder shall be the Offered Price, and shall be payable as set forth in Section
4.1.5 hereof. If the Offered Price includes consideration other than cash, the
cash equivalent value of the non-cash consideration shall be determined by the
Board of Directors of the Company in good faith, which determination shall be
binding upon the Company, each Preferred Holder and the Seller, absent fraud or
material error.
4.1.5 PAYMENT. Payment of the Purchase Price will be made
within 5 days after the later of (i) the end of the Company's Refusal Period, or
(ii) should there be delivery of the Company's Notice, the end of the Preferred
Holders' Refusal Period. Payment of the Purchase Price shall be made, at the
option of the Company or the exercising Preferred Holder, as the case may be,
(i) in cash (by check or wire transfer); (ii) by cancellation of all or a
portion of any outstanding indebtedness of the Seller to the Company or the
Preferred Holder, as the case may be; or (iii) by any combination of the
foregoing.
4.1.6 RIGHTS AS A STOCKHOLDER. If the Company or any Preferred
Holder exercises its Right of First Refusal to purchase the Offered Stock, then,
upon the date the notice of such exercise is given by the Company or any
Preferred Holder, the Seller will have no further rights as a holder of the
Offered Stock except the right to receive payment for the Offered Stock from the
Company or the Preferred Holder, as the case may be, in accordance with the
terms of this Agreement, and the Seller will forthwith cause all certificate(s)
evidencing such Offered Stock to be surrendered for transfer to the Company or
the Preferred Holder, as the case may be.
14
4.1.7 SELLER'S RIGHT TO TRANSFER. If the Company and each
Preferred Holder have not elected to purchase all of the Offered Stock, then,
subject to the Preferred Holders' Right of Co-Sale as defined in Article 5
hereof, the Seller may transfer that portion of the Offered Stock permitted to
be sold, to any person named as a Transferee in the Seller's Notice, at the
Offered Price or at a higher price, provided that such Transfer (i) is
consummated within 30 days after the end of the Preferred Holders' Refusal
Period, (ii) is on terms no more favorable to the Transferee than the terms
proposed in the Seller's Notice and (iii) is in accordance with all the terms of
this Agreement. If the Offered Stock is not so Transferred during such 30-day
period, then the Seller may not Transfer any of such Offered Stock without
complying again in full with the provisions of this Agreement.
4.2 SALES BY PREFERRED SELLERS
4.2.1 NOTICE . Before any Preferred Seller may effect any
Transfer of Preferred Stock, other than transfers to any general or limited
partner or other Affiliate of a Preferred Holder, the Preferred Seller shall
deliver to the other Preferred Holders and to the Company a written notice
signed by the Preferred Seller (the "PREFERRED SELLER'S NOTICE") stating (a) the
Preferred Seller's bona fide intention to Transfer such Offered Preferred Stock;
(b) the name and address of each proposed purchaser or other transferee (the
"TRANSFEREE"); (c) the number of shares of the Offered Preferred Stock to be
Transferred to each Transferee; and (d) the bona fide cash price or other
consideration for which the Preferred Seller proposes to Transfer such Offered
Preferred Stock (the "PREFERRED OFFERED PRICE"), and the Preferred Seller shall
offer the Offered Preferred Stock at the Preferred Offered Price to the
remaining Preferred Holders and the Company.
4.2.2 PREFERRED HOLDERS' INITIAL RIGHT. The Preferred Holders
shall have the right of first refusal to purchase all or any part of the Offered
Preferred Stock, if the Preferred Holders give written notice of the exercise of
such right to the Preferred Seller within ten (10) days (the "PREFERRED HOLDERS'
PREFERRED REFUSAL PERIOD") after the date on which the Preferred Seller's Notice
is received by the Preferred Holders, PROVIDED THAT if any Preferred Holder is
not ready and willing to consummate the purchase within twenty (20) days after
the date on which the Preferred Seller's notice is received by the Preferred
Holders, such Preferred Holder's refusal right shall be deemed to be waived. To
the extent the aggregate number of shares the Preferred Holders desire to
purchase exceeds the Offered Preferred Stock available, each Preferred Holder
will be entitled to purchase a fraction of the Offered Preferred Stock, the
numerator of which is the number of shares of Preferred Stock held by such
Preferred Holder and the denominator of which is the number of Shares of
Preferred Stock held by all Preferred Holders exercising their Right of First
Refusal. If the Preferred Holders desire to purchase less than all of the
Offered Preferred Stock, within ten (10) days after expiration of the Preferred
Holders' Preferred Refusal Period, the Preferred Seller will give written notice
to the Company specifying the number of shares of Offered Preferred Stock that
were not subscribed by the Preferred Holders exercising their Right of First
Refusal (the "PREFERRED SELLER'S NOTICE").
15
4.2.3 If the Preferred Holders desire to purchase less than
all of the Offered Preferred Stock, the Company shall have the right of first
refusal to purchase all or any part of the remaining Offered Preferred Stock;
PROVIDED THAT the Company gives written notice of the exercise of such right
to the Preferred Seller within ten days (the "COMPANY'S PREFERRED REFUSAL
PERIOD") after the date of the Preferred Holders' Notice to the Company.
Within five days after expiration of the Company's Preferred Refusal Period,
the Preferred Seller will give written notice to the Company and each
Preferred Holder specifying the number of shares of Offered Preferred Stock
that was subscribed by the Company exercising its Right of First Refusal (the
"PREFERRED CONFIRMATION NOTICE").
4.2.4 PURCHASE PRICE. The purchase price (the "PREFERRED
PURCHASE PRICE") for the Offered Preferred Stock to be purchased by a
Preferred Holder or the Company shall be the Preferred Offered Price, and
shall be payable as set forth in Section 4.2.5 hereof. If the Preferred
Offered Price includes consideration other than cash, the cash equivalent
value of the non-cash consideration shall be determined by the Board of
Directors of the Company in good faith, which determination shall be binding
upon the Company, each Preferred Holder and the Preferred Seller, absent
fraud or material error.
4.2.5 PAYMENT. Payment of the Preferred Purchase Price will
be made within 5 days after the later of (i) the end of the Preferred
Holders' Preferred Refusal Period, or (ii) should there be delivery of the
Preferred Holders' Notice, the end of the Company's Preferred Refusal Period.
Payment of the Preferred Purchase Price shall be made, at the option of the
exercising Preferred Holder or the Company, as the case may be, (i) in cash
(by check or wire transfer), (ii) by cancellation of all or a portion of any
outstanding indebtedness of the Preferred Seller to the Preferred Holder or
the Company, as the case may be; or (iii) by any combination of the foregoing.
4.2.6 RIGHTS AS A STOCKHOLDER. If any Preferred Holder or
the Company exercises its Right of First Refusal to purchase the Offered
Preferred Stock, then, upon the date the notice of such exercise is given by
any Preferred Holder or the Company, the Preferred Seller will have no
further rights as a holder of the Offered Preferred Stock except the right to
receive payment for the Offered Preferred Stock from the Preferred Holder or
the Company, as the case may be, in accordance with the terms of this
Agreement, and the Preferred Seller will forthwith cause all certificate(s)
evidencing such Offered Preferred Stock to be surrendered for transfer to the
Preferred Holder or the Company, as the case may be.
4.2.7 SELLER'S RIGHT TO TRANSFER. If each Preferred Holder
and the Company have not elected to purchase all of the Offered Preferred
Stock, then the Preferred Seller may transfer that portion of the Offered
Preferred Stock permitted to be sold to any person named as a Transferee in
the Preferred Seller's Notice, at the Preferred Offered Price or at a higher
price, provided that such Transfer (i) is consummated within 30 days after
the end of the Preferred Holders' Preferred Refusal Period, (ii) is on terms
no more favorable to the Transferee than the terms proposed in the Preferred
Seller's Notice and (iii) is in accordance with all the terms of this
16
Agreement. If the Offered Preferred Stock is not so Transferred during such
30-day period, then the Preferred Seller may not Transfer any of such Offered
Preferred Stock without complying again in full with the provisions of this
Agreement.
5. RIGHT OF CO-SALE.
5.1 RIGHT OF CO-SALE. If the Company and the Preferred Holders have
waived or failed to timely exercise their Rights of First Refusal under Section
4.1 with respect to any portion of the Offered Stock, then if the Seller is a
Major Shareholder, the Seller may Transfer to the transferee such Offered Stock:
(i) if Seller gives further written notice to each Preferred Holder within 10
days after the date of the expiration of the Preferred Holders' Refusal Period
(the "RIGHT OF CO-SALE NOTICE"), specifying the date of the Transfer of the
Offered Stock to such transferee which shall not occur within ten days of the
Right of Co-Sale Notice (the "CLOSING"), and the number of shares and type of
Stock that the Seller desires to Transfer to the Transferee, and (ii) subject to
the Preferred Holders' Right of Co-Sale. If the Seller desires to Transfer to
the Transferee such Offered Stock, the Preferred Holders shall have the right to
require, at any time within fifteen (15) days of receipt of the Right of Co-Sale
Notice as a condition to such Transfer, that the Seller arrange for the purchase
by the Transferee, at the same price per share and on the same terms and
conditions as involved in such sale or disposition by the Seller, a number of
shares of the Preferred Holder's shares equal to a percentage of the Offered
Stock (regardless of whether the Offered Stock consists of preferred or common
issued upon conversion of the preferred) equivalent to the Preferred Holder's
Share. This Right of Co-Sale shall not apply with respect to Offered Stock sold
or to be sold by Seller to Preferred Holders under the Right of First Refusal.
5.2 CONSUMMATION OF CO-SALE. A Preferred Holder may exercise the
Right of Co-Sale by delivering to the Seller, at any time within fifteen (15)
days of receipt of the Right of Co-Sale Notice, one or more certificates,
properly endorsed for Transfer, representing a number of shares not to exceed
such Preferred Holder's Share, representing such Stock to be Transferred by
the Seller on behalf of the Preferred Holder. If the Preferred Holder does
not hold a certificate in that series, class or type of stock representing
the number of securities to be sold by such Preferred Holder pursuant to this
Article 5, then the Company shall promptly issue a certificate representing
the proper number of shares to be sold pursuant to this Right of Co-Sale.
Following the Closing, the Company shall deliver a certificate for the
remaining balance of the securities held by the Preferred Holder, if any, to
such Preferred Holder. At the Closing, such certificates or other instruments
will be Transferred and delivered to the Transferee as set forth in the Right
of Co-Sale Notice in consummation of the transfer of the Offered Stock
pursuant to the terms and conditions specified in the Right of Co-Sale
Notice, and the Seller will remit, or will cause to be remitted, to each
participating Preferred Holder, within ten days after such Closing, that
portion of the proceeds of the Transfer to which each participating Preferred
Holder is entitled by reason of each Preferred Holder's participation in such
Transfer pursuant to the Right of Co-Sale.
17
6. MULTIPLE SERIES, CLASS OR TYPE OF STOCK. If the Offered Stock consists of
more than one series, class or type of Stock, the Seller has the right to
Transfer hereunder each such series, class or type; PROVIDED, HOWEVER, THAT if,
as to the Right of Co-Sale, a Preferred Holder does not hold any of such series,
class or type, and the proposed Transferee is not willing, at the Closing, to
purchase some other series, class or type of Stock from such Preferred Holder,
or is unwilling to purchase any Stock from such Preferred Holder at the Closing,
then such Preferred Holder will have the put right (the "PUT RIGHT") set forth
in Section 7.2 hereof.
7. REFUSAL TO TRANSFER: PUT RIGHT.
7.1 REFUSAL TO TRANSFER. Any attempt by any Preferred Holder or
Stockholder to transfer any Stock in violation of any provision of this
Agreement will be void. The Company will not be required (i) to transfer on its
books any Stock that has been sold, gifted or otherwise transferred in violation
of this Agreement, or (ii) to treat as owner of such Stock, or to accord the
right to vote or pay dividends to any purchaser, donee or other transferee to
whom such Stock may have been so transferred.
7.2 PUT RIGHT. If a Stockholder transfers any Stock in contravention of
the Preferred Holders' Right of Co-Sale under this Agreement (a "PROHIBITED
TRANSFER"), or if the proposed transferee of Offered Stock desires to purchase a
class, series or type of stock offered by the Stockholder not held by a
Preferred Holder or is unwilling to purchase any Stock from a Preferred Holder,
such Preferred Holder may, by delivery of written notice to such Stockholder (a
"PUT NOTICE") within ten days after (i) the Closing as defined in Section 5.1
above, or (ii) the date on which such Preferred Holder becomes aware of the
Prohibited Transfer or the terms thereof, require such Stockholder to purchase
from such Preferred Holder, for cash or such other consideration as the
Stockholder received in the Prohibited Transfer or at the Closing, a number of
shares of Stock (of the same class or type as transferred in the Prohibited
Transfer or at the Closing if such Preferred Holder then owns Stock of such
class or type; otherwise of Preferred Stock or Common Stock) having a purchase
price equal to the aggregate purchase price the Preferred Holder would have
received in the closing of such Prohibited Transfer if such Preferred Holder had
elected to exercise its right of Co-Sale with respect thereto or in the Closing
if the proposed transferee had been willing to purchase the Stock of the
Preferred Holder. The closing of such sale to the Stockholder will occur within
30 days after the date of such Preferred Holder's Put Notice to such
Stockholder.
8. STOP-TRANSFER ORDERS.
8.1 STOP TRANSFER INSTRUCTIONS. Each Preferred Holder and Stockholder
agrees, to ensure compliance with the restrictions referred to herein, that the
Company may issue appropriate "stop transfer" certificates or instructions and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its records.
18
8.2 TRANSFERS. No securities shall be transferred by a Preferred Holder or
Stockholder unless (i) such transfer is made in compliance with all of the terms
of this Agreement and in compliance with the terms of applicable federal and
state securities laws and (ii) prior to such transfer, the transferee or
transferees sign a counterpart to this Agreement pursuant to which it or they
agree to be bound by the terms of this Agreement. The Company shall not be
required (a) to transfer on its books any shares that shall have been sold or
transferred in violation of any of the provisions of this Agreement or (b) to
treat as the owner of such shares or to accord the right to vote as such owner
or to pay dividends to any transferee to whom such shares shall have been so
transferred.
9. TERMINATION, WAIVER, MISCELLANEOUS.
9.1 TERMINATION. The Preferred Holders' rights under Sections 4, 5, 6,
7 and 8 hereof will terminate upon the earlier of (i) the closing of a Qualified
Initial Public Offering, or (ii) the date on which this agreement is terminated
by the written consent of the Company and holders of 66 2/3% of the shares then
held by the Preferred Holders. The Company's Right of First Refusal under
Section 4.2 will terminate upon the earliest of: (i) a written election of the
Company pursuant to an action by the Board of Directors, (ii) immediately prior
to the closing of an initial public offering, or (iii) two (2) years from the
date of this Agreement.
9.2 WAIVERS. Any waiver by a party of its rights hereunder will be
effective only if evidenced by a written instrument executed by such party or
its authorized representative and shall not constitute a waiver of any rights
provided in this Agreement with respect to any subsequent transactions covered
by this Agreement.
9.3 OBLIGATION OF COMPANY. The Company agrees to use its best efforts
to enforce the terms of this Agreement, to inform the Preferred Holders of any
breach hereof (to the extent the Company has knowledge thereof) and to assist
the Preferred Holders in the exercise of their rights and the performance of
their obligations hereunder.
9.4 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
9.5 GOVERNING LAW. This Agreement shall be construed in accordance
with, and governed in all respects by, the laws of the State of New York, as
applied to agreements entered into, and to be performed entirely in such state,
between residents of such state. The parties hereto agree to submit to the
jurisdiction of the federal and state courts of the State of New York with
respect to the breach or interpretation of this Agreement or the enforcement of
any and all rights, duties, liabilities, obligations, powers, and other
relations between the parties arising under this Agreement.
19
9.6 EXPENSES. If any action at law or in equity (including arbitration)
is necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, expenses and necessary
disbursements in addition to any other relief to which such party may be
entitled.
9.7 NOTICES. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by first-class mail,
postage prepaid, or otherwise delivered by hand or by messenger, addressed (a)
if to a Preferred Holder, at the address set forth on EXHIBIT B attached hereto,
or at such other address as the Preferred Holder shall have furnished to the
other parties hereto in writing, or (b) if to any other holder of any
securities, at such address as such holder shall have furnished the other
parties hereto in writing, or, until any such holder so furnishes an address to
the Company, then to and at the address of the last holder of such Stock who has
so furnished an address to the Company, or (c) if to the Company, at the address
of its principal offices set forth on the signature page of this Agreement, or
at such other address as the Company shall have furnished to the other parties
hereto in writing.
9.8 SEVERABILITY. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, portions of such provisions, or such
provisions in their entirety, to the extent necessary, shall be severed from
this Agreement, and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
9.9 FURTHER ASSURANCES. Each party hereby agrees to execute and deliver
all such further instruments and documents and take all such other actions as
the other party may reasonably request in order to carry out the intent and
purposes of this Agreement.
9.10 CONFLICT. In the event of any conflict between the terms of this
Agreement and the Company's Certificate of Incorporation or its Bylaws, the
terms of the Company's Certificate of Incorporation, or its Bylaws, as the case
may be, will control. In the event of any conflict between the terms of this
Agreement and any other agreement to which a Stockholder is a party or by which
such Stockholder is bound, the terms of this Agreement will control. In the
event of any conflict between the Company's books and records and this Agreement
or any notice delivered hereunder, the Company's books and records will control
absent fraud or material error.
9.11 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience in construing or interpreting this Agreement.
9.12 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any party to this Agreement, upon any breach or
default of the other party, shall impair any such right, power or remedy of such
non-breaching party nor shall it be construed to be a waiver of any such breach
or default, or an acquiescence therein, or of any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or
20
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be made writing and shall be effective only
to the extent specifically set forth in such writing. All remedies, either under
this Agreement, or by law or otherwise afforded to any Preferred Holder, shall
be cumulative and not alternative.
9.13 ENTIRE AGREEMENT. This Agreement and the documents referred to
herein constitute the entire agreement between the parties hereto pertaining to
the subject matter hereof and any other written or oral agreements between the
parties hereto are expressly canceled.
9.14 AMENDMENTS. This Agreement may be amended by the written agreement
of the holders of 66 2/3% or more of the shares of Preferred Stock, 51% of the
holders of Common Stock, and the Company.
9.15 WAIVER OF PREEMPTIVE RIGHTS. BY ITS SIGNATURE BELOW, EACH OF THE
UNDERSIGNED PARTIES TO THIS AGREEMENT WAIVES ANY AND ALL PREEMPTIVE RIGHTS OR
OTHER SIMILAR RIGHTS IT MAY HAVE WITH RESPECT TO THE SALE OF SERIES A PREFERRED
STOCK BY THE COMPANY PURSUANT TO THE TERMS OF THE PURCHASE AGREEMENT.
[The Remainder of Page Intentionally Left Blank)
21
LIQUOR.COM, INC.
By: /s/ Steve Olsher
---------------------------------------
Name: Steve Olsher
-------------------------------------
Title: President
------------------------------------
STOCKHOLDERS:
------------------------------
George Wight, Jr.
------------------------------------------
Brian Wink
------------------------------------------
John Hurley
------------------------------------------
Michael Rosedale
CORPORATE CAPITAL STRATEGIES,
INC.
By:
---------------------------------------
Name: George Wight, JR.
-------------------------------------
Title: Managing Director
------------------------------------
22
LIQUOR.COM, INC.
By: /s/ Steve Olsher
---------------------------------------
Name: Steve Olsher
-------------------------------------
Title: President
------------------------------------
STOCKHOLDERS:
/s/ Steve Olsher
------------------------------------------
Steve Olsher
/s/ Gail Zelitsky
------------------------------------------
Gail Zelitsky
/s/ Erin Revesz
------------------------------------------
Erin Revesz
/s/ George Wight, Jr.
------------------------------------------
George Wight, Jr.
/s/ Brian Wink
------------------------------------------
Brian Wink
/s/ John Hurley
------------------------------------------
John Hurley
/s/ Michael Rosedale
------------------------------------------
Michael Rosedale
23
[signature page continues]
CORPORATE CAPITAL STRATEGIES,
INC.
By: /s/ George Wight, Jr.
---------------------------------------
Name: George Wight, Jr.
-------------------------------------
Title: Managing Director
------------------------------------
24
[signature page continues]
PREFERRED HOLDERS:
GEM GLOBAL YIELD FUND LIMITED
By: /s/ Pierce Loughran for
Iona Limited
---------------------------------------
Name: Pierce Loughran
-------------------------------------
Title: Director
------------------------------------
GLOBAL STRATEGIC HOLDINGS LIMITED
By: /s/ S. Etienne /s/ N. B. Petty
---------------------------------------
Name: Susan Etienne Nathan Petty
-------------------------------------
Title: Alternate Director for the Secretary
------------------------------------
OCEAN STRATEGIC HOLDINGS LIMITED
By: /s/ Rosemary E. Marr /s/ S. Etienne
---------------------------------------
Name: Rosemary E. Marr Susan Etienne
-------------------------------------
Title: Director for the Secretary
------------------------------------
TAZMANIC CORPORATION
By: /s/ Bryan D. Legate
---------------------------------------
Name: Bryan D. Legate
-------------------------------------
Title: Authorized Signatory
------------------------------------
W.R. TIMKEN TRUST FBO ALEXANDER C. TIMKEN
By: /s/ David H. Dix
---------------------------------------
Name: David H. Dix
-------------------------------------
Title: Vice President
------------------------------------
25
EXHIBIT A
MAJOR SHAREHOLDERS
Steve Olsher
Gail Zelitsky
Erin Revesz
Corporate Capital Strategies, Inc.
26
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