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EXHIBIT 10.25
CONFIDENTIAL
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED. THESE
SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID
ACT OR LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED.
NEWSREAL, INC.
STOCK SUBSCRIPTION WARRANT
April 4, 2000
1. GENERAL.
(a) THIS CERTIFIES that, for value received, AMERICA ONLINE, INC., a
Delaware corporation ("AOL"), or its assigns, is entitled to subscribe for and
purchase from NEWSREAL, INC., a Delaware corporation (the "Corporation"), at any
time or from time to time during the period (the "Exercise Period") commencing
with the date hereof and ending on the earlier of (i) the fourth anniversary of
the date hereof and (ii) the third anniversary of the Corporation's initial
public offering of Common Stock (as defined below) pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Termination Date"), on the terms and subject to the provisions hereinafter set
forth, up to 832,691 (subject to adjustment as provided herein)(the "Warrant
Shares") fully paid and non-assessable shares of common stock, $.001 par value
(the "Common Stock"), of the Corporation, at a price per share (the "Warrant
Price") of $3.72 at such times as shall be determined in accordance with Section
1(b) hereof.
This Warrant is being issued pursuant to an Interactive Services Agreement dated
as of the date hereof (the "Agreement"), between the Corporation and AOL. All
terms used but not defined herein shall have the meanings set forth in the
Agreement.
(b) This Warrant shall become exercisable as to that number of Warrant
Shares, and at such times, as are determined in accordance with Exhibit A
attached hereto; provided, however, that (i) this Warrant shall become
exercisable as to all of the Warrant Shares immediately upon the occurrence of a
Stipulated Event and (ii) no more Warrant Shares shall vest pursuant to this
Section 1(b) upon the occurrence of a termination of the Agreement that results
from a breach by AOL of the Agreement; provided, further however, all Warrant
Shares vested as of the time of such termination shall remain vested Warrant
Shares for purposes of this Warrant. As used herein, the term "Stipulated Event"
shall mean (a) a Corporate Transaction (as hereinafter defined) or (b) a
termination of the Agreement that results from a material breach by the
Corporation of the Agreement. "Corporate Transaction" means (A) any
consolidation or merger of the Corporation with or into any other corporation or
other entity, other than any
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merger or consolidation resulting in the holders of the capital stock of the
Corporation entitled to vote for the election of directors holding a majority
of the capital stock of the surviving or resulting corporation or other entity
entitled to vote for the election of directors, (B) any person or entity
(including any affiliates thereof) becoming the holder of a majority of the
capital stock of the Corporation entitled to vote for the election of
directors, or (C) any sale or other disposition by the Corporation of all or
substantially all of its assets or capital stock.
2. EXERCISE OF WARRANT. The rights represented by this Warrant may be
exercised by the holder hereof, as to those Warrant Shares for which this
Warrant is then exercisable as determined in accordance with Section 1, in whole
or in part, at any time or from time to time during the Exercise Period, by the
surrender of this Warrant (properly endorsed) at the office of the Corporation
at 66 Canal Center Plaza, Suite 700, Alexandria, Virginia 22314, or at such
other agency or office of the Corporation in the United States of America as it
may designate by notice in writing to the holder hereof at the address of such
holder appearing on the books of the Corporation, and by payment (either in
cash, by check, by cancellation of indebtedness with the prior approval of the
Corporation (which approval shall not be unreasonably withheld) and/or in shares
of capital stock of the Corporation valued at Fair Market Value (as hereinafter
defined) on the date of such exercise) to the Corporation of the Warrant Price
for each Warrant Share being purchased. In the event of the exercise of the
rights represented by this Warrant, a certificate or certificates for the
Warrant Shares so purchased, registered in the name of the holder, and if this
Warrant shall not have been exercised for all of the Warrant Shares, a new
Warrant, registered in the name of the holder hereof, of like tenor to this
Warrant, shall be delivered to the holder hereof within a reasonable time, not
exceeding ten days, after the rights represented by this Warrant shall have been
so exercised. The person in whose name any certificate for Warrant Shares is
issued upon exercise of this Warrant shall for all purposes be deemed to have
become the holder of record of such shares on the date on which the Warrant was
surrendered and payment of the Warrant Price and any applicable taxes was made,
irrespective of the date of delivery of such certificate, except that, if the
date of such surrender and payment is a date when the stock transfer books of
the Corporation are closed, such person shall be deemed to have become the
holder of such shares at the close of business on the next succeeding date on
which the stock transfer books are open.
3. EXCHANGE OF WARRANT.
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(a) In addition to, and independent of, the rights of the holder of
this Warrant set forth in Section 2 hereof and solely to the extent this
Warrant has become exercisable pursuant to Section 1(b) hereof, the holder
hereof may at any time or from time to time elect to receive, without the
payment by the holder of any additional consideration, that number of Warrant
Shares determined as hereinafter provided in this Section 3 by surrender of
this Warrant or any portion hereof to the Corporation, accompanied by an
executed Notice of Exchange in substantially the form thereof attached hereto
(the "Net Issue Election"). Thereupon, the Corporation shall issue to the
holder hereof such number of fully paid and nonassessable Warrant Shares as is
computed using the following formula:
X=Y (A-B)
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A
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where X = the number of Warrant Shares to be issued to the holder pursuant to
this Section 3.
Y = the number of Warrant Shares covered by this Warrant, and solely to
the extent this Warrant has become exercisable pursuant to Section
1(b) hereof, in respect of which the Net Issue Election is made
pursuant to this Section 3.
A = the Fair Market Value (as hereinafter defined) of one Warrant Share
determined at the time the Net Issue Election is made pursuant to
this Section 3 (the "Determination Date").
B = the Warrant Price in effect under this Warrant at the time the Net
Issue Election is made pursuant to this Section 3.
For purpose of the above calculation, "Fair Market Value" of one Warrant Share
as of the Determination Date shall mean:
(i) (A) if the Common Stock of the Corporation is not then traded on
a national securities exchange, the average of the closing prices quoted on
the National Association of Securities Dealers, Inc. Automated Quotation
National Market System, if applicable, or the average of the closing bid
and closing asked prices of the Common Stock quoted in the
over-the-counter-market or (B) if the Common Stock is then traded on a
national securities exchange, the average of the high and low prices of the
Common Stock listed on the principal national securities exchange on which
the Common Stock is so traded, in each case for the twenty (20) trading
days immediately preceding the Determination Date or, if such date is not a
business day on which shares are traded, the next immediately preceding
trading day;
(ii) in the event of a Warrant Exchange in connection with a
Corporate Transaction, the value per share of Common Stock received or
receivable by each holder thereof (assuming for purposes of this
determination, in the case of a sale of assets, the Corporation is
liquidated immediately following such sale and the consideration paid to
the Corporation is immediately distributed to its stockholders); and
(iii) in all other circumstances, the fair market value per share of
Common Stock as determined by the Corporation's Board of Directors in good
faith after taking into consideration all factors it deems appropriate,
including, without limitation, recent sale and offer prices of the capital
stock of the Corporation in private transactions negotiated at arm's
length.
The closing of any Warrant Exchange shall take place at the offices of the
Corporation on the date specified in the Notice of Exchange (the "Exchange
Date"), which shall be not less than five and not more than 30 days after the
delivery of such Notice. At such closing, the Corporation shall issue and
deliver to the holder or its designee a certificate or certificates for the
Warrant Shares to be issued upon such Warrant Exchange, registered in the name
of the holder or such designee, and if such Warrant Exchange shall not have
been for all Warrant Shares, a new Warrant, registered in the name of the
holder, of like tenor to this Warrant for the number of shares still subject to
this Warrant following such Warrant Exchange.
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(b) If as of the Termination Date the Warrants are in the money
based on the cash or other property to be received, such exercise shall take
place automatically with respect to all then outstanding and exercisable (but
not yet exercised) Warrants (the "Termination Date Exercise"), on a net
issuance basis, immediately prior to the Termination Date; provided, however,
that the Corporation may condition such exercise on the delivery by the
Warrantholder of a duly completed Net Issue Election and the reasonable
satisfaction of the Corporation that all applicable securities laws have been
complied with, which the Corporation shall give notice to the Warrantholder of
within ten (10) days prior to the Termination Date.
4. COVENANTS AS TO COMMON STOCK. The Corporation covenants and agrees
that all shares of Common Stock that may be issued upon the exercise of the
rights represented by this Warrant, will, upon issuance, be validly issued,
fully paid and non-assessable and free from all taxes, liens and charges with
respect to the issuance thereof. The Corporation further covenants and agrees
that the Corporation will from time to time take all such action as may be
requisite to assure that the stated or par value per share of Common Stock is
at all times equal to or less than the then effective Warrant Price per share
of Common Stock issuable upon exercise of this Warrant. The Corporation further
covenants and agrees that the Corporation will at all times have authorized and
reserved, free from preemptive rights (without regard to any subscription
rights provided under any shareholders, rights or shareholders rights agreement
to which the Company is a party), a sufficient number of shares of Common Stock
to provide for the exercise of the rights represented by this Warrant;
provided, however, that in the event the Corporation does not have sufficient
number of shares of Common Stock to provide for exercise of the rights
represented by this Warrant, the Corporation shall have thirty (30) days to
cure such deficiency prior to being in breach of this Warrant. The Corporation
further covenants and agrees that if any shares of capital stock to be reserved
for the purpose of the issuance of shares of Common Stock upon the exercise of
this Warrant require registration with or approval of any governmental
authority under any Federal or state law before such shares may be validly
issued or delivered upon exercise, then the Corporation will in good faith and
expeditiously as possible endeavor to secure such registration or approval, as
the case may be. If and so long as the Common Stock issuable upon the exercise
of the rights represented by this Warrant is listed on any national securities
exchange, the Corporation will, if permitted by the rules of such exchange,
list and keep listed on such exchange, upon official notice of issuance, all
shares of such capital stock.
5. NO SHAREHOLDER RIGHTS. This Warrant shall not entitle the holder
hereof to any voting rights or other rights as a shareholder of the Corporation.
6. RESTRICTIONS ON TRANSFER. The holder of this Warrant acknowledges
that neither this Warrant nor the Warrant Shares have been registered under the
Securities Act of 1933, as amended (the "Securities Act") and the holder of
this Warrant agrees that no sale, transfer, assignment, hypothecation or other
disposition of this Warrant or the Warrant Shares shall be made in the absence
of (a) current registration statement under the Securities Act as to this
Warrant or the Warrant Shares and the registration or qualification of this
Warrant or the Warrant Shares under any applicable state securities laws is
then in effect or (ii) an opinion of counsel reasonably satisfactory to the
Corporation to the effect that such registration or qualification is not
required. Each certificate or other instrument for Warrant Shares issued upon
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exercise of this Warrant shall, if required under the Securities Act or the
rules promulgated thereunder, be imprinted with a legend substantially to the
foregoing effect.
7. RIGHTS OF THE HOLDER.
The Corporation hereby grants to the holder of this Warrant those
rights set forth on EXHIBIT B attached hereto, the provisions of which are
incorporated herein by reference and made a part hereof as if set forth herein
in their entirety.
8. TRANSFER OF WARRANT; AMENDMENT. Subject to the restriction set forth
in Section 6, this Warrant and all rights hereunder are transferable, in whole,
or in part, at the agency or office of the Corporation referred to in Section 2,
AOL or any other entity to an entity controlled by AOL, under common control
with or that controls AOL or to any other entity with the reasonable approval of
the Corporation in person or by duly authorized attorney, upon surrender of this
Warrant properly endorsed. Each taker and holder of this Warrant, by taking or
holding the same, consents and agrees that this Warrant, when endorsed, in
blank, shall be deemed negotiable, and, when so endorsed the holder hereof may
be treated by the Corporation and all other persons dealing with this Warrant
as the absolute owner hereof for any purposes and as the person entitled to
exercise the rights represented by this Warrant, or to the transfer hereof on
the books of the Corporation, any notice to the contrary notwithstanding; but
until each transfer on such books, the Corporation may treat the registered
holder hereof as the owner hereof for all purposes.
9. REORGANIZATIONS, ETC. In case, at any time during the Exercise Period,
of any capital reorganization, of any reclassification of the stock of the
Corporation (other than a change in par value or from par value to no par value
or from no par value to par value or as a result of a stock dividend or
subdivision, split-up or combination of shares), or the consolidation or merger
of the Corporation with or into another corporation (other than a consolidation
or merger in which the Corporation is the continuing operation and which does
not result in any change in the Common Stock) or of the sale of all or
substantially all the properties and assets of the Corporation as an entirety to
any other corporation, this Warrant shall, after such reorganization,
reclassification, consolidation, merger or sale, be exercisable for the kind and
number of shares of stock or other securities or property of the Corporation or
of the corporation resulting from such consolidation or surviving such merger or
to which such properties and assets shall have been sold to which such holder
would have been entitled if he had held the Common Stock issuable upon the
exercise hereof immediately prior to such reorganization, reclassification,
consolidation, merger or sale. In any such reorganization or other action or
transaction described above, appropriate provision shall be made with respect to
the rights and interests of the holder of this Warrant to the end that the
provisions hereof (including, without limitation, provisions for adjustments of
the Warrant Price and of the number of shares purchasable and receivable upon
the exercise of this Warrant) shall thereafter be applicable, as nearly as may
be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise hereof. The Corporation will not effect any such
consolidation, merger or sale unless, prior to the consummation thereof, the
successor corporation or entity (if other than the Corporation) resulting from
such transaction or the corporation or entity purchasing such assets shall
assume by written instrument, executed and mailed or delivered to the registered
holder hereof at the last address of such holder appearing on the books of the
Corporation, the obligation to deliver to
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such holder such shares of stock, securities or assets as, in accordance with
the foregoing provision, such holder may be entitled to purchase.
10. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost,
stolen, mutilated or destroyed, the Corporation may, on such terms as to
indemnity or otherwise as it may in its discretion impose (which shall, in the
case of a mutilated Warrant, include the surrender thereof), issue a new
Warrant of like denomination and tenor as the Warrant so lost, stolen, mutilated
or destroyed. Any such new Warrant shall constitute an original contractual
obligation of the Corporation, whether or not the allegedly lost, stolen,
mutilated or destroyed Warrant shall be at any time enforceable by anyone.
11. MODIFICATION AND WAIVER. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
12. NOTICES. All notices, advices and communications to be given or
otherwise made to any party to this Agreement shall be deemed to be sufficient
if contained in a written instrument delivered in person or by telecopier or
duly sent by first class registered or certified mail, return receipt
requested, postage prepaid, or by overnight courier, or by electronic mail, with
a copy thereof to be sent by mail (as aforesaid) within 24 hours of such
electronic mail, addressed to such party at the address set forth below or at
such other address as may hereafter be designated in writing by the addressee
to the addresser listing all parties:
If to the Corporation, to:
NewsReal, Inc.
66 Canal Center Plaza,
Alexandria, Virginia 22314
Attention: Chief Financial Officer
Telecopier: (703) 548-5161
e-mail address:
and
If to AOL as follows:
America Online, Inc.
22000 AOL Way
Dulles, Virginia 20166
Attention: General Counsel
Telecopier: (703) 265-2208
e-mail address:
Or to such other address as the party to whom notice is to be given may have
furnished to the other parties hereto in writing in accordance herewith. Any
such notice or communication shall be deemed to have been delivered and
received (i) in the case of personal delivery or delivery by telecopier, on the
date of such deliver, (ii) in the case of nationally-recognized overnight
courier,
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on the next business day after the date when sent and (ii) in the case of
mailing, on the third business day following that on which the piece of mail
containing such communication is posted. As used in this Section 14, "business
day" shall mean any day other than a day on which banking institutions in the
Commonwealth of Virginia are legally closed for business.
13. BINDING EFFECT ON SUCCESSORS; SURVIVAL. This Warrant shall be binding
upon any corporation succeeding the Corporation by merger, consolidation or
acquisition of all or substantially all of the Corporation's assets. All of the
obligations of the Corporation relating to the Common Stock issuable upon the
exercise of this Warrant shall survive the exercise and termination of this
Warrant. All of the covenants and agreements of the Corporation shall inure to
the benefit of the successors and assigns of AOL.
14. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of
the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. This Warrant
shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the State of Delaware.
15. FRACTIONAL SHARES. No fractional shares shall be issued upon exercise
of this Warrant. The Corporation shall, in lieu of issuing any fractional
share, pay the holder entitled to such fraction a sum in cash equal to such
fraction multiplied by the then Fair Market Value of one Warrant Share.
* * *
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IN WITNESS WHEREOF, the undersigned have caused this Warrant and Warrant
Agreement to be executed by their duly authorized officers on the date first
above written.
NEWSREAL, INC.
/s/ DAVID C. HOPPMANN
By:________________________
Name: David C. Hoppman
Title: President and CEO
/s/ JEFFREY P. MASSA
ATTEST:____________________________
JEFFERY P. MASSA, SECRETARY
AMERICA ONLINE, INC.
By:________________________
Name:
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FORM OF SUBSCRIPTION
(To be signed upon exercise of Warrant)
The undersigned, the holder of the Warrant, hereby irrevocably elects to
exercise the purchase rights represented by such Warrant for, and to purchase
thereunder, shares of of NewsReal, Inc. and
herewith makes payment of $ therefor, and requests that the
certificates for such shares be issued in the name of and delivered to,
, whose address is .
Dated:
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(Signature)
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(Address)
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NOTICE OF EXCHANGE
(To be executed by the Holder in
order to exchange the Warrant.)
The undersigned hereby irrevocably elects to exchange this Warrant into
shares (the foregoing number constituting the number of Warrant
Shares to be issued pursuant to Section 3 of this Warrant) of of
NewsReal, Inc., minus any shares to be deducted from the foregoing number in
accordance with the terms of this Warrant, according to the conditions thereof.
The undersigned desires to consummate such exchange on .
Dated:
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Name of Holder:
By:
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FORM OF ASSIGNMENT
(To be signed only upon transfer of Warrant)
For value received, the undersigned hereby sells, assigns and transfers
unto the right represented by the Warrant to purchase shares
of of NewsReal, Inc., to which the Warrant relates, and appoints
[Name of Attorney] to transfer such right on the books of NewsReal, Inc., with
full power of substitution in the premises.
Dated:
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(Signature)
Signed in the presence of:
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EXHIBIT A
NUMBER OF SHARES FOR WHICH THE
WARRANT SHALL BE EXERCISABLE: 832,691
Subject to the terms hereof, the Warrant Shares shall vest as follows:
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Number of Warrant Shares Vesting
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(A) 277,563 Fully vested upon issuance of the Warrant
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(B) 277,564 At such time as the Corporation earns gross
revenues of one million seven hundred fifty
thousand dollars ($1,750,000) from all revenue
streams in connection with the Agreement,
including, without limitation, Advertising
Revenue, Transaction Revenues, subscription
fees, license fees, and any other amounts
received in connection with any sale, license,
or distribution in connection with the
Agreement; provided that in no event shall
these shares vest prior to twelve (12) months
from the date hereof.
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(C) 277,564 At such time as the Corporation earns gross
revenues of three million five hundred
thousand dollars ($3,500,000) from all revenue
streams in connection with the Agreement,
including, without limitation, Advertising
Revenue, Transaction Revenues, subscription
fees, license fees, and any other amounts
received in connection with any sale, license,
or distribution in connection with the
Agreement; provided that in no event shall
these shares vest prior to twelve (12) months
from the date hereof.
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EXHIBIT B
ADDITIONAL RIGHTS
1. Financial and Business Information. From and after the date on which AOL
exercises any of the Warrant Shares underlying this Warrant or otherwise
acquires shares of the Corporation's capital stock, the Corporation shall
deliver to AOL:
(a) Quarterly Statements - as soon as practicable, and in any event
within 30 days after the close of each of the first three fiscal quarters of
each fiscal year of the Corporation, a consolidated balance sheet, statement of
income and statement of cash flows of the Corporation and its subsidiaries as
at the close of such quarter and covering operations for such quarter and the
portion of the Corporation's fiscal year ending on the last day of such
quarter, prepared in accordance with generally accepted accounting principles
("GAAP"), subject to audit and year-end adjustments, setting forth in each case
in comparative form the figures for the comparable period of the previous
fiscal year.
(b) Annual Statements - as soon as practicable after the end of each
fiscal year of the Corporation, and in any event within 90 days thereafter,
duplicate copies of:
(i) consolidated and consolidating balance sheets of the Corporation
and its subsidiaries at the end of such year; and
(ii) consolidated and consolidating statements of income,
stockholders' equity and cash flows of the Corporation and its subsidiaries for
such year, setting forth in each case in comparative form the figures for the
previous fiscal year, accompanied by an opinion thereon of independent
certified public accountants of recognized national standing selected by the
Corporation, which opinion shall state that such financial statements fairly
present the financial position of the Corporation and any subsidiaries on a
consolidated basis and have been prepared in accordance with GAAP (except for
changes in application in which such accountants concur) and that the
examination of such accountants in connection with such financial statements
has been made in accordance with generally accepted auditing standards, and
accordingly included such tests of the accounting records and such other
auditing procedures as were considered necessary in the circumstances.
2. Transfers Of Stock.
2.1. Right to Transfer. Except in accordance with Section 2.3 of this
Agreement, neither AOL nor any other permitted holder of this Warrant shall have
the right to Transfer the Warrant Shares acquired upon exercise of this Warrant
in a single transaction or any series of related transactions. For purposes of
this Agreement, a "Transfer" shall mean any direct or indirect sale, gift,
assignment or other disposition or transfer of shares of the Corporation's
Common Stock, or any interest therein, and any pledge or hypothecation of shares
of Common Stock, or any interest therein. Notwithstanding anything herein to the
contrary, nothing in this Agreement shall preclude or prevent any Transfer: (i)
to the Corporation; (ii) to any entity controlled by,
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under common control with or that controls AOL; or (iii) which may be required
by law or by a regulatory authority.
2.2 Drag-Along Rights. (a) If at any time and from time to time
the Corporation or the investors listed on Schedule II hereto (the "QIP
Investors") determine, in accordance with, and pursuant to, the provisions of
Section 7(b) of the Securities Purchase Agreement dated December 11, 1997, to
sell the Corporation to a third party that is not an affiliate the QIP
Investors (the "Proposed Transferee"), the Corporation, upon the request of the
QIP Investors, shall have the right ("Drag-Along Right") to require AOL to sell
to the Proposed Transferee all shares of Common Stock then owned by AOL, upon
the same terms and conditions and concurrently with the sale by the QIP
Investors of their securities in the Corporation; provided, however, that AOL
shall not be required to sell under this Section 2.2(a) at a purchase price
less than (a) $4.65 per share of Common Stock during the first 12 months
following the date on which AOL first acquires Warrant Shares upon the exercise
of all or a portion of this Warrant, (b) $5.58 per share of Common Stock during
months 13 through 24 following such date, and (c) $3.72 per share of Common
Stock after 24 months following such date. AOL agrees to take all steps
necessary to enable it to comply with the provisions of this Section 2.2, to
facilitate the exercise of the Drag-Along Right.
(b) To exercise a Drag-Along Right, the QIP Investors
or the Corporation shall give AOL a written notice (a "Drag-Along Notice")
containing (a) the name and address of the Proposed Transferee and (b) the
proposed purchase price, terms of payment and other material terms and
conditions of the Proposed Transferee's offer. AOL shall thereafter be
obligated to sell the shares of Common Stock held by them subject to such
Drag-Along Notice.
(c) If the QIP Investors determine to exercise their
rights, in accordance with Section 2.2 hereof, to require AOL to sell all
shares of Common Stock then owned by AOL, then the QIP Investors in their sole
discretion have the right to determine that a sale of all or substantially all
of the assets of the Corporation, a voluntary liquidation of the Corporation or
a merger of the Corporation (each a "sale of the Corporation") is preferable to
a sale of all of the capital stock of the Corporation, whereupon the
Corporation or the QIP Investors shall give written notice to AOL of the QIP
Investors' determination to cause a sale of the Corporation (a "Sale Notice").
Upon receipt of such Sale Notice, AOL agrees to use its good faith efforts to
cooperate with the QIP Investors in effecting a sale of the Corporation,
including, without limitation, voting shares of capital stock of the
Corporation beneficially owned by AOL in favor of or granting written consent
to a sale of the Corporation.
(d) The Corporation and AOL agree that the QIP Investors
shall have third party beneficiary rights to enforce this Section 2.2 of this
Agreement against the Corporation and AOL.
2.3. Certain Conditions to Stock Issuances and Transfers. No
Transfer of the shares of the Corporation's Common Stock owned by AOL shall be
valid or recorded in
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the Corporation's stock transfer books unless the transferees of such shares
shall have furnished to the Corporation (a) the written agreement of the
transferee to be bound by the terms and conditions of this Agreement (as if
such transferee were a party hereto), (b) if required by the Corporation's
Board of Directors, a written opinion of counsel (which opinion shall be
reasonably satisfactory to the Corporation) that the proposed Transfer may be
effected without registration under the Securities Act, and (c) a written
agreement to the effect that the transferee is acquiring such shares for its
own account, for investment, and not with a view to, or for sale in connection
with, the distribution thereof, and such transferee understands that such
shares have not been registered under the Securities Act and that such shares
must be held indefinitely unless a subsequent disposition thereof is registered
under the Securities Act or exempt from the registration requirements thereof,
or other agreements required by applicable securities laws and otherwise
acceptable to the Corporation.
2.4. Representations and Warranties. As of the date of this Agreement and
on each date on which AOL exercises all or any portion of this Warrant, each
party hereto represents and warrants to each other party solely as to such
party:
(a) if such party is not an individual or a corporation, it is a
validly existing partnership or limited liability Corporation or other entity
as indicated on the signature page of this Agrement.
(b) if such party is not an individual, the execution, delivery and
performance by such party of this Agreement has been duly authorized.
(c) if such party is an individual, he has full power and authority
to enter into this Agreement.
(d) if such party is a corporation, it is validly existing and in
good standing in the jurisdiction in which it is incorporated.
(e) the agreements set forth in this Agreement constitute valid and
binding obligations of such party.
(f) the execution, delivery and performance of this Agreement by such
party will not (i) violate any provision of law, any order of any court or
other agency of government applicable to the Investor, any provision of any
note, bond, mortgage, indenture, license, lease, contract, agreement or other
instrument or obligation to which such party or its properties or assets are
bound, or the organizational documents of such party or (ii) conflict with,
result in a breach of or constitute (with due notice or lapse of time or both)
a default under any such note, bond, mortgage, indenture, license, lease,
contract, agreement or other instrument or obligation, or result in the
creation or imposition of any lien, charge, restriction, claim or encumbrance
of any nature upon any of the securities of the Corporation owned by such party.
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2.5. Injunctive Relief. The parties hereto declare that it is impossible to
measure in money the damages which will accrue to the parties hereto by reason
of the failure of any party hereto to perform any of its obligations set forth
in this Section 2. Therefore, the parties hereto shall have the right to
specific performance of such obligations, and if any party hereto shall
institute any action or proceeding to enforce the provisions hereof, the parties
hereto hereby waive the claim or defense that the party instituting such action
or proceeding has an adequate remedy at law. Such remedies shall, however, be
cumulative and not exclusive and shall be in addition to any other remedies
which any party may have under this Agreement or otherwise.
2.6. Termination. The provisions of Section 2 shall terminate upon the
closing of, and shall not apply to the Transfer of any shares hereunder
pursuant to, an initial public offering of the Corporation's Common Stock, or
any security issued in exchange for or as replacement of such Common Stock
pursuant to a registration under the Securities Act (the "IPO").
3. Registration Rights.
3.1 Definitions. As used in this Section 3:
(a) the terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act (and any post-effective amendments filed or
required to be filed) and the declaration or ordering of effectiveness of such
registration statement;
(b) the term "Registrable Securities" means (i) the shares of the
Corporation's Common Stock owned by AOL, (ii) any additional shares of Common
Stock acquired by AOL and (iii) any capital stock of the Corporation issued as
a dividend or other distribution with respect to, or in exchange for or in
replacement of, the shares of Common Stock referred to in clause (i) or (ii);
(c) the term "Other Shareholders" shall mean any other shareholders
of the Corporation who are granted registration rights that would affect the
rights granted to AOL under this Agreement;
(d) "Registration Expenses" shall mean all expenses incurred by the
Corporation in compliance with Section 3 hereof, including, without limitation,
all registration and filing fees, listing fees, printing expenses, fees and
disbursements of counsel for the Corporation, fees and expenses of one counsel
for all AOL and Other Shareholders, blue sky fees and expenses and the expense
of any special audits incident to or required by any such registration (but
excluding the compensation of regular employees of the Corporation, which shall
be paid in any event by the Corporation);
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(e) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities;
(f) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar law then in force; and
(g) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar law then in force.
3.2. Corporation Registration.
(a) If the Corporation shall determine to register any of its equity
securities, other than a registration relating solely to employee stock option
and benefit plans utilizing Form S-8, or a registration of shares issued in a
reclassification, merger, consolidation or transfer of assets transaction
utilizing Form S-4, or any registration form which does not permit secondary
sales, the Corporation will:
(i) promptly give to AOL a written notice thereof (which shall
include a list of the jurisdictions in which the Corporation intends to attempt
to qualify such securities under the applicable blue sky or other state
securities laws); and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made by AOL within fifteen days after receipt of the written notice
from the Corporation described in clause (i) above, except as set forth in
Section 3.2(b) below. Such written request may specify all or a part of AOL's
Registrable Securities.
(b) If the registration pursuant to this Section 3.2 involves an
underwritten offering of the securities being registered, whether or not for
sale for the account of the Corporation, to be distributed on a firm commitment
basis by or through one or more underwriters of recognized national or regional
standing under underwriting terms appropriate for such a transaction, the
Corporation shall so advise AOL as a part of the written notice given pursuant
to Section 3.2(a)(i). In such event, the right of AOL to registration pursuant
to this Section 3.2 shall be conditioned upon AOL's participation in such
underwriting and the inclusion of AOL's Registrable Securities in the
underwriting to the extent provided herein. In that event, AOL shall (together
with the Corporation and the Other Shareholders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters selected for
underwriting by the Corporation. Notwithstanding any other provision of this
Section 3.2, if the Corporation's representative determines in good faith that
marketing factors require a limitation on the number of shares to be
underwritten, the Corporation 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 manner: the number of securities that may be included in the
registration and
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underwriting by AOL and the Other Shareholders shall be reduced, on a pro rata
basis (based on the number of shares held by such holder), by such minimum
number of shares as is necessary to comply with such limitation. If AOL or any
Other Shareholders disapprove of the terms of any such underwriting, such
person may elect to withdraw therefrom by written notice to the Corporation and
the underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
3.3. Expenses of Registration.
All Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to this Agreement shall be borne by the
Corporation, and all Selling Expenses shall be borne by AOL whose Registrable
Securities are so registered pro rata on the basis of the number of their
shares so registered; provided, however, that the Corporation shall not be
required to pay any Registration Expenses if, as a result of the withdrawal of
a request for registration by AOL, the registration statement does not become
effective, in which case AOL and Other Shareholders requesting registration,
including such holder(s) so withdrawing, shall bear such Registration Expenses
pro rata on the basis of the number of their shares so included in the
registration request.
3.4. Registration Procedures.
In the case of each registration effected by the Corporation pursuant to this
Agreement, the Corporation will keep AOL advised in writing as to the
initiation of each registration and as to the completion thereof. At its
expense, the Corporation will:
(a) keep such registration effective for a period of 180 days or
until AOL have completed the distribution described in the registration
statement relating thereto, whichever first occurs; provided, however, that
such 180-day period shall be extended for a period of time equal to the period
during which AOL refrains from selling any securities included in such
registration in accordance with the provisions in Section 3.8 hereof; provided
that Rule 415, or any successor rule under the Securities Act, permits an
offering on a continuous or delayed basis, and provided further that applicable
rules under the Securities Act governing the obligation to file a
post-effective amendment permit, in lieu of filing a post-effective amendment
which (y) includes any prospectus required by Section 10(a) of the Securities
Act or (z) reflects facts or events representing a material or fundamental
change in the information set forth in the registration statement, the
incorporation by reference of information required to be included in (y) and
(z) above to be contained in periodic reports filed pursuant to Section 12 or
15(d) of the Exchange Act in the registration statement; and
(b) furnish such number of prospectuses and other documents
incident thereto as AOL from time to time may reasonably request.
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3.5. Indemnification.
(a) The Corporation will indemnify AOL, and each of its officers,
directors, shareholders and representatives, as the case may be, with respect
to each registration which has been effected pursuant to this Agreement, and
each underwriter (including any officers, directors and partners), if any, and
each person who controls any underwriter within the meaning of the Securities
Act, against all claims, losses, damages, expenses 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 registration statement, notification
or the like) 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, in
light of the circumstances in which they were made, not misleading, or any
violation by the Corporation of the Securities Act or any rule or regulation
applicable to the Corporation and relating to action or inaction required of
the Corporation in connection with any such registration, qualification or
compliance, and will reimburse AOL, each of its respective officers, directors
and shareholders, 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 Corporation 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 omission based upon
written information furnished to the Corporation by AOL or underwriter and
stated to be specifically for use therein.
(b) AOL will, if Registrable Securities held by it are included in
the securities as to which such registration, qualification or compliance is
being effected, indemnify the Corporation, each of its directors and officers
and each underwriter, if any, of the Corporation's securities covered by such a
registration statement, each person who controls the Corporation or such
underwriter, each Other Shareholder and each of their officers, directors, and
partners, and each person controlling such Other Shareholder 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 made by AOL, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements by AOL therein not misleading, and will reimburse the Corporation and
such Other Shareholders, directors, officers, 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 Corporation by AOL, and stated to be specifically for use
therein; provided, however, that the obligations of AOL hereunder and under
Section 3.5(d) shall be limited to an amount equal to the net proceeds to AOL of
securities sold pursuant to such registration statement or prospectus.
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(c) 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 timely approval
shall not unreasonably be withheld) and the Indemnified Party may participate in
such defense at such party's expense (unless the Indemnified Party shall have
reasonably concluded that there may be a conflict of interest between the
Indemnifying Party and the Indemnified Party in such action, in which case the
fees and expenses of counsel shall be at the expense of the Indemnifying Party),
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 unless the Indemnifying Party is materially prejudiced
thereby. No Indemnifying Party, in the defense of any such claim or litigation
shall, except with the consent of each 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. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with the defense of
such claim and litigation resulting therefrom.
(d) 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 loss, liability, claim, damage or expense referred to
herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and the of the Indemnified Party on the other
in connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense, as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue (or alleged untrue) statement of a material fact or the
omission (or alleged 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.
(e) The foregoing indemnity agreement of the Corporation and AOL is
subject to the condition that, insofar as they relate to any loss, claim,
liability or damage made in a preliminary prospectus but eliminated or remedied
in the amended prospectus on file with the Securities and Exchange Commission
("SEC") at the time the registration statement in question becomes effective or
the amended prospectus filed with the SEC pursuant to SEC Rule 424(b) (the
"Final Prospectus"), such indemnity agreement shall not inure to the benefit of
any underwriter if a copy of the Final Prospectus was furnished
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to the underwriter and was not furnished to the person asserting the loss,
liability, claim or damage at or prior to the time such action is required by
the Securities Act.
3.6 Information by AOL.
AOL shall furnish to the Corporation such information regarding AOL and the
distribution proposed by AOL as the Corporation may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Agreement.
3.7 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 restricted securities to the
public without registration, the Corporation agrees to:
(a) make and keep public information available as those terms are
understood and defined in Rule 144, at all times from and after ninety (90) days
following the effective date of the first registration under the Securities Act
filed by the Corporation for an offering of its securities to the general
public;
(b) use its best efforts to file with the SEC in a timely manner all
reports and other documents required of the Corporation under the Securities Act
and the Exchange Act at any time after it has become subject to such reporting
requirements; and
(c) so long as AOL owns any Registrable Securities, furnish to AOL,
upon request, a written statement by the Corporation 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 Corporation 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), a copy of the most recent annual or quarterly
report of the Corporation, and such other reports and documents so filed as AOL
may reasonably request in availing itself of any rule or regulation of the SEC
allowing AOL to sell any such securities without registration.
3.8 "Market Stand-off" Agreement.
AOL agrees, if requested by the Corporation and an underwriter of Common
Stock (or other securities) of the Corporation, not to sell or otherwise
transfer or dispose of any shares (or other securities) of the Corporation held
by AOL during such period as the underwriter may reasonably require, such period
not to exceed 180 days following the effective date of a registration statement
of the Corporation filed under the Securities Act, provided that such agreement
only applies to the IPO. If requested by the underwriters, AOL shall execute a
separate agreement to the foregoing effect. The Corporation may impose
stop-transfer instructions with respect to the shares (or securities) subject to
the foregoing restriction until the end of said period. The provisions of this
Section 3.8 shall be binding upon any transferee who acquires Registrable
Securities.
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3.9. Assignment.
The rights set forth in this Section 3 may be assigned, in whole or in
part, to any permitted transferee of Registrable Securities (who shall be
considered thereafter to be bound by all obligations and limitations of this
Agreement).
3.10. Limited Scope of Registration Rights.
AOL's registration rights hereunder shall extend only to Registrable
Securities acquired upon exercise of this Warrant or acquired in any other
manner, and shall not apply to this Warrant.
4. IPO Participation Right.
Prior to the Corporation's filing of a registration statement with the SEC in
connection with a proposed public offering of the Corporation's equity
securities pursuant to an effective registration statement under the Securities
Act of 1933, as amended (the "Corporation IPO"), the Corporation may, in its
sole discretion, offer to AOL (the "Offer Notice") the right to participate in
a private placement of the Corporation's equity securities to be consummated
simultaneously with the Corporation IPO. Within fifteen (15) days following
receipt of such Offer Notice, AOL shall notify the Corporation whether, in its
sole discretion, it will participate in such purchase of the Corporation's
equity securities. AOL's right to purchase such equity securities shall be
limited to no more than three percent (3%) of the total number of shares to be
offered to the public in the Corporation IPO and to the extent otherwise
limited by the Corporation's underwriters. AOL's failure to timely respond to
the Corporation's notice shall be deemed a waiver of its right to participate
in the issuance of equity securities in the IPO.