1
EXHIBIT 4.1
SECOND AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
THIS SECOND AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT ("Agreement")
is entered into as of February 27, 1998, by and among 2Way Media, Inc., a
Delaware corporation (the "Company"), the holders of Series A, Series B and
Series C Stock of the Company (the "Prior Investors"), the undersigned
purchasers of Series D Stock and additional signatories to this Agreement, if
any, who purchase Series D Stock pursuant to the Series D Securities Purchase
Agreement subsequent to the date hereof (the "New Investors," or, collectively
with the "Prior Purchasers, the "Investors").
RECITALS
A. Concurrently herewith, the New Investors and the Company are entering
into a Series D Securities Purchase Agreement (the "Series D Agreement")
pursuant to which the New Investors are purchasing from the Company up to
17,614,379 shares of Series D Stock of the Company and warrants to purchase up
to 2,242,187 shares of Series D Stock of the Company (to be adjusted for any
additional closing).
B. The Company and the Prior Investors have entered into that certain
Investors Rights Agreement dated August 29, 1995, as amended on July 12, 1996
and September 30, 1997 (collectively the "Prior Agreement"), granting certain
registration and other rights to the New Investors.
C. To permit the Company to grant the New Investors the same rights as
have been granted to the Prior Investors under the Prior Agreement, the parties
hereto desire to amend and restate the Prior Agreement as set forth herein.
D. The Board of Directors of the Company has determined that it is in the
best interests of the Company to amend and restate the Prior Agreement to make
the New Investors parties thereto in accordance herewith.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, the parties agree that, effective as of
the Closing (as defined in the Series D Agreement), the Prior Agreement is
hereby amended and restated to read in its entirety as follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean common stock, $0.001 par value per share, of the
Company.
1
2
"Conversion Stock" shall mean the shares of Common Stock issued or
issuable upon conversion of the Series A Stock issued pursuant to the Series A
Agreement, upon conversion of the Series B Stock issued pursuant to the Series B
Agreement, upon conversion of the Series C stock issued pursuant to the Series C
Agreement, upon conversion of the Series D Stock issued pursuant to the Series D
Agreement, the shares of Common Stock issuable upon exercise of a warrant to
purchase Common Stock issued to Allen & Company Incorporated pursuant to a
Warrant Agreement by and between the Company and Allen & Company Incorporated
dated September 8, 1997, the shares of Common Stock issuable upon exercise of
such Series D stock as issuable upon exercise of any NBC Warrant and the shares
of Common Stock issuable upon exercise of such Series D Stock as issuable upon
exercise of the GE Capital Warrant.
"GE Capital" shall mean General Electric Capital Corporation, a New
York corporation.
"GE Capital Warrant" shall mean the warrant to purchase 300,000 shares of
Series D Stock (as adjusted pursuant to the terms of such warrant) issued to GE
Capital, pursuant to the Series D Agreement.
"Holder" shall mean the holders of Registrable Securities, securities
convertible into Registrable Securities or warrants to acquire Registrable
Securities or securities convertible into Registrable Securities and any person
holding such securities to whom the rights under this Agreement have been
transferred in accordance with this Agreement.
"Initiating Holders" shall mean any Holder or Holders who in the aggregate
hold or have the power to acquire (through conversion or exercise of other
securities) at least 30% of the Registrable Securities.
"NBC" shall mean NBC Multimedia, Inc., a Delaware corporation.
"NBC Warrant" shall mean the warrant to purchase 1,942,187 shares of
Series D Stock (as adjusted pursuant to the terms of such warrant) issued to
NBC, pursuant to the Series D Agreement or any other warrants issued to NBC
pursuant to Section 2.1 of the Series D Agreement (collectively the "NBC
Warrants").
"Registrable Securities" means (i) the Conversion Stock and (ii) any
Common Stock of the Company issued or issuable with respect to, or in exchange
for or in replacement of the securities referred to in clause (i) above or other
securities convertible into or exercisable for such securities upon any stock
split, stock dividend, recapitalization, merger, consolidation or similar event,
provided, however, that shares of Common Stock or other securities convertible
into or exercisable for such securities shall only be treated as Registrable
Securities for the purposes of Sections 2.5, 2.6 or 2.7 hereof if and so long as
they have not been sold to or through a broker or dealer or underwriter in a
public distribution or a public securities transaction.
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 the declaration or ordering of the
effectiveness of such registration statement.
2
3
"Registration Expenses" shall mean all expenses, except as otherwise
stated below, incurred by the Company in complying with Sections 2.5, 2.6 and
2.7 hereof, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and disbursements of counsel
for the Company and special counsel to the Selling Holders, blue sky fees and
expenses, the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the Company
which shall be paid in any event by the Company).
"Restricted Securities" shall mean the securities of the Company required
to bear the legend set forth in Section 2.2 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the Registrable Securities
registered by or for the accounts of the Holders.
"Selling Holders" shall mean all Holders seeking to sell or selling Shares
pursuant to this Agreement.
"Series A Agreement" shall mean that certain Securities Purchase Agreement
dated October ___, 1994, pursuant to which the Company issued the Series A
Stock.
"Series B Agreement" shall mean that certain Securities Purchase Agreement
dated August 29, 1995, pursuant to which the Company issued the Series B Stock.
"Series B, Series C and Series D Investor" shall mean a purchaser of
Series B, Series C, or Series D Stock or an NBC Warrant or the GE Capital
Warrant pursuant to the Series B, Series C or Series D Agreement.
"Series C Agreement" shall mean that certain Securities Purchase Agreement
dated March 29, 1996, pursuant to which the Company issued the Series C Stock.
"Series A Stock" shall mean Preferred Stock, $0.001 par value per share,
of the Company and designated as Series A Stock.
"Series B Stock" shall mean Preferred Stock, $0.001 par value per share,
of the Company and designated as Series B Stock.
"Series C Stock" shall mean Preferred Stock, $0.001 par value per share,
of the Company and designated as Series C Stock.
"Series D Stock" shall mean Preferred Stock, $0.001 par value per share,
of the Company and designated as Series D Stock.
3
4
"Shares" shall mean the shares of the Company's (i) Series A Stock
currently outstanding, (ii) Series B Stock currently outstanding, (iii) Series C
Stock issued pursuant to the Series C Agreement, (iv) Series D Stock, (v) the
Series D Stock issuable upon exercise of the NBC Warrant and (vi) the Series D
Stock issuable upon exercise of the GE Capital Warrant.
2. Transfer Restrictions and Registration Rights.
2.1 Restrictions on Transferability. The Shares and the Conversion
Stock shall not be sold, assigned, transferred or pledged except upon the
conditions specified in this Section 2, which conditions are intended to ensure
compliance with the provisions of the Securities Act. The Investors will cause
any proposed purchaser, assignee, transferee, or pledgee of the Shares or the
Conversion Stock held by the Investors to agree to take and hold such securities
subject to the provisions and upon the conditions specified in this Section 2.
2.2 Restrictive Legend. Each certificate representing (i) the
Shares, (ii) the Conversion Stock and (iii) any other securities issued in
respect of the Shares or the Conversion Stock upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event, shall
(unless otherwise permitted by the provisions of Section 2.3 or 2.4 below) be
stamped or otherwise imprinted with a legend in the following form (in addition
to any legend required under applicable state corporate or securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION UNLESS THE TRANSFER IS IN ACCORDANCE WITH RULE 144 OR SIMILAR
RULE OR UNLESS THE CORPORATION RECEIVES AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT. THE SHARES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN ADDITIONAL
RESTRICTIONS ON TRANSFER AS SET FORTH IN A SECURITIES PURCHASE AGREEMENT
AMONG THE CORPORATION, THE HOLDER OF RECORD OF THE SHARES EVIDENCED HEREBY
AND CERTAIN OTHER STOCKHOLDERS OF THE CORPORATION AND A CERTAIN SECOND
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT DATED AS OF FEBRUARY 27,
1998 BY AND AMONG THE CORPORATION AND CERTAIN SHAREHOLDERS OF THE
CORPORATION. COPIES OF THESE AGREEMENTS COVERING THE PURCHASE OF THESE
SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY
WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
CORPORATION.
4
5
The Investors and Holders consent to the Company making a notation on its
records and giving instructions to any transfer agent of the Shares or the
Conversion Stock in order to implement the restrictions on transfer established
in this Section 2.
2.3 Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 2.3. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities (other than (i) a
transfer not involving a change in beneficial ownership, or (ii) a transfer of
Restricted Securities by any Holder to any of its partners, or retired partners,
limited liability company members, affiliates or to the estate of any of its
partners or retired partners, or (iii) transfers in compliance with Rule 144, so
long as the Company is furnished with reasonably satisfactory evidence of
compliance with such Rule), unless there is in effect a registration statement
under the Securities Act covering the proposed transfer, the holder thereof
shall give written notice to the Company of such holder's intention to effect
such transfer, sale, assignment or pledge. Each such notice shall describe the
manner and circumstances of the proposed transfer, sale, assignment or pledge in
sufficient detail, and shall be accompanied, at such holder's expense, by either
(i) a written opinion of legal counsel who shall, and whose legal opinion shall
be, reasonably satisfactory to the Company addressed to the Company, 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 Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the holder to the
Company. In addition, prior to any sale, assignment, transfer or pledge of the
Company's Restricted Securities, any buyer, assignee, transferee or pledgee of
the Company's Restricted Securities shall agree in writing to be bound by the
restrictions set forth in this Agreement. Each certificate evidencing the
Restricted Securities transferred as above provided shall bear, except if such
transfer is made pursuant to Rule 144, the appropriate restrictive legend set
forth in Section 2.2 above, except that such certificate shall not bear such
restrictive legend if in the opinion of counsel for such holder and in the
reasonable opinion of the Company such legend is not required in order to
establish compliance with any provision of the Securities Act.
2.4 Removal of Restrictions on Transfer of Securities. Any legend
referred to in Section 2.2 hereof stamped on a certificate evidencing (i) the
Shares, (ii) the Conversion Stock or (iii) any other securities issued in
respect of the Shares or the Conversion Stock upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event and the stock
transfer instructions and record notations with respect to such security shall
be removed and the Company shall issue a certificate without such legend to the
holder of such security if such security is registered under the Securities Act,
or if such holder provides the Company with an opinion of counsel (which may be
counsel for the Company) reasonably acceptable to the Company to the effect that
a public sale or transfer of such security may be made without registration
under the Securities Act or such holder provides the Company with reasonable
assurances, which may, at the option of the Company, include an opinion of
counsel reasonably satisfactory to the Company, that such security can be sold
pursuant to Section (k) of Rule 144
5
6
under the Securities Act. The Company will cause legend removal to be authorized
or provide a written response as to why legends may not be removed within 10
days of receipt of any such request.
2.5 Requested Registration.
(a) Request for Registration. In case the Company shall
receive from Initiating Holders a written request that the Company effect any
registration, qualification or compliance with respect to (i) shares
representing 30% or more of the Registrable Securities or (ii) shares of
Registrable Securities with an expected aggregate offering price to the public
of at least $5,000,000, the Company will:
(i) within ten days of the receipt by the Company of
such notice, give written notice of the proposed registration, qualification or
compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts to
effect such registration, qualification or compliance (including, without
limitation, appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations issued
under the Securities Act and any other governmental requirements or regulations)
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 Holder or Holders joining in such request as are specified in
a written request received by the Company within 20 days after such written
notice is given by the Company;
Provided, however, that the Company shall not be obligated to take any
action to effect any such registration, qualification or compliance pursuant to
this Section 2.5:
(A) 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;
(B) Prior to the earlier of (i) August 31,
1999 or (ii) the expiration of four months following completion of the Company's
first registered public offering of its stock;
(C) During the period starting with the date
ninety (90) days prior to the Company's estimated date of filing of, and ending
on the date six (6) months immediately following the effective date of, any
registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction, with respect to an
employee benefit plan), provided that the Company is actively employing in good
faith all reasonable efforts to cause such registration statement to become
effective;
6
7
(D) After the Company has effected three such
registrations pursuant to this Section 2.5(a) covering all shares requested to
be registered by the Holders initiating or joining such request, and such
registrations have been declared or ordered effective, and, if the method of
disposition specified by such initiating or requesting Holders shall have been a
firm commitment underwritten public offering, all such shares shall have been
sold pursuant thereto;
(E) If the Company shall furnish to such
Holders a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors it would be seriously detrimental
to the Company or its shareholders for a registration statement to be filed in
the near future, then the Company's obligation to use its best efforts to
register, qualify or comply under this Section 2.5 shall be deferred for a
period not to exceed 90 days from the date of receipt of written request from
the Initiating Holders; provided, however, that the Company shall not exercise
such right more than once in any twelve-month period.
Subject to the foregoing clauses (A) through (E), 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.
(b) Underwriting. In the event that a registration requested
pursuant to Section 2.5 is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as part of the notice
given pursuant to Section 2.5(a)(i). In such event, the right of any Holder to
registration pursuant to Section 2.5 shall be conditioned upon such Holder's
participation in the underwriting arrangements required by this Section 2.5, and
the inclusion of such Holder's Registrable Securities in the underwriting to the
extent requested shall be limited to the extent provided herein.
The Company shall (together with all Holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter of recognized national standing
selected for such underwriting by the Company and reasonably acceptable to a
majority of the Holders proposing to distribute their securities through such
underwriting. Notwithstanding any other provision of this Section 2.5, if the
managing underwriter in its good faith judgment advises the Initiating Holders
in writing that marketing factors require a limitation of the number of shares
to be underwritten, then the Company shall so advise all holders of Registrable
Securities and the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated among all
Holders thereof in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities requested by such Holders to be included in
such registration statement or in such other manner as shall be agreed to by the
Company and Holders of a majority of the Registrable Securities proposed to be
included in such registration. No Registrable Securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration. To facilitate the allocation of shares in
accordance with the above provisions, the Company or the underwriters may round
the number of shares allocated to any Holder to the nearest 100 shares.
7
8
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such Holder may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and such Registrable Securities shall not be
transferred in a public distribution prior to 90 days after the effective date
of such registration, or such other shorter period of time as the underwriters
may require.
2.6 Company Registration.
(a) Notice of Registration. If at any time or from time to
time the Company shall determine to register any of its securities, either for
its own account or the account of a security holder or holders, other than (i) a
registration relating solely to employee benefit plans, (ii) a registration
relating solely to a Commission Rule 145 transaction, or (iii) a registration
pursuant to Section 2.5 hereof, the Company will:
(i) promptly give to each Holder written notice thereof;
and
(ii) subject to Section 2.6(b), 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 within 20 days after
such written notice is given by the Company, by any Holder.
(b) 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 as a part of the written notice given
pursuant to Section 2.6(a)(i). In such event the right of any Holder to
registration pursuant to Section 2.6 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 2, if the managing
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the managing underwriter in its good faith
judgment may limit the Registrable Securities and other securities to be
distributed through such underwriting. The Company shall so advise all Holders
distributing their securities through such underwriting of such limitation and
the number of shares of Registrable Securities that may be included in the
registration (and underwriting if any) shall be allocated among all Holders in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities requested by such Holders to be included in such Registration
Statement. To facilitate the allocation of shares in accordance with the above
provisions, the Company may round the number of shares allocated to any Holder
or holder to the nearest 100 shares. If any Holder or holder disapproves of the
terms of any such underwriting, such Holder or holder may elect to withdraw
therefrom by written notice to the Company and the managing underwriter. Any
securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration, and shall not be transferred in a public
8
9
distribution prior to 90 days after the effective date of the registration
statement relating thereto, or such other shorter period of time as the
underwriters may require.
(c) Right to Terminate Registration. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
Section 2.6 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration shall be borne by the Company in
accordance with Section 2.8 hereof.
2.7 Registration on Form S-3.
(a) If any Holder or Holders request that the Company file a
registration statement on Form S-3 (or any successor form to Form S-3), or any
similar short-form registration statement, for a public offering of Registrable
Securities, the reasonably anticipated aggregate price to the public of which,
net of underwriting discounts and commissions (if any), would exceed $1,000,000
and the Company is a registrant entitled to use Form S-3 to register the
Registrable Securities for such an offering, the Company shall use its best
efforts to cause such Registrable Securities to be registered on such form for
the offering and to cause such Registrable Securities to be qualified in such
jurisdictions as the Holder or Holders may reasonably request; provided,
however, that the Company shall not be required to effect more than two
registrations pursuant to this Section 2.7 in any twelve (12) month period.
After the Company's first public offering of its securities, the Company will
use its best efforts to make all filings necessary to qualify for Form S-3
registration or a similar short-form registration. The provisions of Section
2.6(b) shall be applicable to each registration initiated under this Section
2.7.
(b) Notwithstanding the foregoing, the Company shall not be
obligated to take any action pursuant to this Section 2.7: (i) 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; (ii) if the Company, within
ten (10) days of the receipt of the request of the initiating Holders, gives
notice of its bona fide intention to effect the filing of a registration
statement with the Commission within ninety (90) days of receipt of such request
(other than with respect to a registration statement relating to a Rule 145
transaction, or an offering solely to employees); (iii) during the period
starting with the date sixty (60) days prior to the Company's estimated date of
filing of, and ending on the date three (3) months immediately following, the
effective date of any registration statement pertaining to securities of the
Company (other than a registration of securities in a Rule 145 transaction or
with respect to an employee benefit plan), provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective; or (iv) if the Company shall furnish to such
Holder a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors it would be seriously detrimental
to the Company or its shareholders for registration statements to be filed in
the near future, then the Company's obligation to use its best efforts to file a
registration statement shall be deferred for a period not to exceed 90 days from
the receipt of the request to
9
10
file such registration by such Holder; provided, however, that the Company shall
not exercise such right more than once in any twelve-month period.
2.8 Expenses of Registration. All Registration Expenses incurred in
connection with registrations pursuant to Sections 2.5, 2.6 and 2.7 shall be
borne by the Company. All Selling Expenses relating to securities registered on
behalf of the Holders shall be borne by the holders of securities included in
such registration pro rata with the Company and among each other on the basis of
the number of shares so registered.
2.9 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 2,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least one hundred
eighty (180) days or until such earlier date as the distribution described in
the Registration Statement has been completed;
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders participating in such registration
and to the underwriters of the securities being registered such reasonable
number of copies of the registration statement, preliminary prospectus, final
prospectus and such other documents as such underwriters may reasonably request
in order to facilitate the public offering of such securities.
(d) Furnish, at the request of any Holder requesting
registration of Registrable Securities, at the time such securities are
delivered to the underwriters (if any) for sale in connection with a
registration pursuant to this Section 2.9, (i) an opinion, dated such date, of
the counsel representing the Company for the purposes of such registration, in
form and substance as is customarily given to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities and (ii) a letter dated the
date of commencement of the offering and a "bring-down" letter dated as of the
closing date of such offering, from the independent accountants of the Company,
in form and substance as is customarily given by independent accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities.
(e) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in such states or jurisdictions.
10
11
(f) Notify each Holder of Registrable Securities covered by
such registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
2.10 Indemnification.
(a) The Company will indemnify each Holder, each of its
officers, directors, partners, shareholders and legal counsel, and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
and each underwriter, if any, and each person who controls any underwriter
within the meaning of Section 15 of the Securities Act, against all expenses,
claims, losses, damages or liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement, prospectus, offering circular or other document, or any amendment or
supplement thereto, 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 Company of the Securities Act or any rule or regulation
promulgated under the Securities Act applicable to the Company in connection
with any such registration, qualification or compliance, and the Company will
reimburse each such Holder, each of its officers, directors, partners,
shareholders and legal counsel and each person controlling such 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, preparing or defending any such claim, loss, damage, liability or
action; provided, however, 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 omission or alleged untrue statement
or omission, made in reliance upon and in conformity with written information
furnished to the Company and signed by such Holder, controlling person or
underwriter and intended to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such
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 legal counsel, 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, and each other Holder, each of its officers, directors, partners
and legal counsel and each person controlling such 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
11
12
misleading, and will reimburse the Company, such Holders, such directors,
officers, 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 and signed by such
Holder and intended to be specifically for use therein. Notwithstanding the
foregoing, the liability of each Holder under this subsection (b) shall be
limited to the proportion of any such loss, claim. damage, liability or expense
which is equal to the proportion that the public offering price of the shares
sold by such Holder under such registration statement bears to the total public
offering price of all securities sold thereunder, but not to exceed the proceeds
received by such Holder from the sale of Registrable Securities covered by such
registration statement after deducting all underwriting discounts, selling
commissions and stock transfer taxes paid for incurred in connection with the
issuance and sale of such Registrable Securities. A Holder will not be required
to enter into any agreement or undertaking in connection with any registration
under this Section 2 providing for any indemnification or contribution on the
part of such Holder greater than the Holder's obligations under this Section
2.10(b).
(c) Each party entitled to indemnification under this Section
2.10 (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 litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably 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 Section 2 unless the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action and provided further, that the Indemnifying Party shall not
assume the defense for matters as to which there is a conflict of interest or
separate and different defenses but shall bear the expense of such defense
nevertheless. 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.
(d) If the indemnification provided for paragraphs (a) through
(c) of this Section 2.10 is unavailable or insufficient to hold harmless an
indemnified party under such paragraphs in respect of any losses, claims,
damages or liabilities or actions in respect thereof referred to therein, then
each indemnifying party shall in lieu of indemnifying such indemnified party
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or actions in such proportion as
appropriate to reflect the relative fault of the Company, on the one hand, and
the underwriters and the Holder of such
12
13
Registrable Securities, on the other, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or actions
as well as any other relevant equitable considerations, including the failure to
give any notice under paragraph (c). The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact relates to information supplied by the Company, on the one
hand, or the underwriters or the Holders of such Registrable Securities, on the
other, and to the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
each of the Holders agrees that it would not be just and equitable if
contributions pursuant to this paragraph were determined by pro rata allocation
(even if all of the Holders of such Registrable Securities were treated as one
entity for such purpose) or by any other method of allocation which did not take
account of the equitable considerations referred to above in this paragraph. The
amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages, liabilities or action in respect thereof, referred to above in
this paragraph, shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
paragraph, no Holder shall be required to contribute any amount in excess of the
lesser of (i) the proportion that the public offering price of shares sold by
such Holder under such registration statement bears to the total public offering
price of all securities sold thereunder, but not to exceed the proceeds received
by such Holder for the sale of Registrable Securities covered by such
registration statement after deducting all underwriting discounts, selling
commissions and stock transfer taxes paid or incurred in connection with the
issuance and sale of such Registrable Securities or (ii) the amount of any
damages which such Holder would have otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission. No person guilty of
fraudulent misrepresentations (within the meaning of Section 11(f) of the
Securities Act), shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation.
2.11 Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as shall be
requested by the Company and which is necessary for legal compliance purposes in
connection with any registration, qualification or compliance referred to in
this Section 2.
2.12 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Restricted Securities to the public without
registration, after such time as a public market exists for the Common Stock of
the Company, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended.
13
14
(b) Use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Securities Exchange Act of 1934, as amended (at any time
after it has become subject to such reporting requirements).
(c) So long as an Investor owns any Restricted Securities to
furnish to the Investor forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
(at any time after 90 days after 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 Securities Exchange Act of 1934 (at
any time after it has become subject to such reporting requirements), a copy of
the most recent annual or quarterly report of the Company, and such other
reports and documents of the Company and other information in the possession of
or reasonably obtainable by the Company as an Investor may reasonably request in
availing itself of any rule or regulation of the Commission allowing an Investor
to sell any such securities without registration.
2.13 Transfer of Registration Rights. The rights to cause the
Company to register securities granted Holders under Sections 2.5, 2.6 and 2.7
may be assigned to a transferee or assignee in connection with any transfer or
assignment of Registrable Securities by a Holder of not less than 50,000 shares
of Registrable Securities, or to any transferee or assignee who is a general or
limited partner or affiliate of such Holder or a limited partnership, limited
liability company member or investment fund under common management and control
with such Holder, is a constituent partner of a Holder or the estate of such
constituent partner, provided that such transfer may otherwise be effected in
accordance with applicable securities laws and that any such transferee agrees
to execute and deliver to the Company an undertaking to be bound by the
provisions of this Agreement.
2.14 Rule 144A Information. Whenever the Company receives a request
for the following information from Initiating Holders, then the Company shall
within 60 days after the date of such request provide the information required
in Rule 144A(d)(4) under the Securities Act to such Initiating Holders and any
person or persons designated by the Initiating Holders as a prospective buyer in
a transaction pursuant to Rule 144A. The Company's obligations pursuant to this
Section 2.14 shall extend to any person who acquires shares of the Company's
Series A, Series B, Series C, Series D Stock, any NBC Warrant, the GE Capital
Warrant and/or Conversion Stock as a result of a transaction pursuant to Rule
144A.
2.15 Limitations on Subsequent Registration Rights. From and after
the date of this Agreement, the Company will not grant additional registration
rights except pursuant to an amendment to this Agreement signed by the Company
and the holders of two thirds (2/3) of the Registrable Securities.
2.16 Termination of Registration Rights. The rights granted under
this Section 2 shall terminate as to any Holder upon the later of (i) the fifth
anniversary of the consummation of the initial underwritten public offering of
the Company's securities pursuant to a registration statement filed under the
Securities Act (the "IPO Closing Date") or (ii) at such
14
15
time as such Holder is able to sell publicly without registration all
Registrable Securities then held by such Holder, if any, within a ninety day
period pursuant to Rule 144 of the Securities Act.
2.17 Termination of Restrictions on Registrable Securities. All
restrictions on Shares, Registrable Securities and Conversion Stock shall, to
the fullest extent possible in compliance with applicable federal securities
laws, terminate on the IPO Closing Date.
3. Series B, Series C and Series D Investors' Right of First Refusal.
3.1 Right of First Refusal Upon Issuances of Securities by the
Company.
(a) Subject to the preferential rights provided to NBC
Multimedia, Inc. pursuant to Section 5 hereof, the Company hereby grants, on the
terms set forth in this Section 3.1, to each Series B, Series C and Series D
Investor the right of first refusal to purchase all or any part of such Series
B, Series C and Series D Investor's pro rata share, respectively, of the New
Securities (as defined in Section 3.1(b)) which the Company may, from time to
time, propose to sell and issue. The Series B, Series C and Series D Investors
may purchase said New Securities on the same terms and at the same price at
which the Company proposes to sell the New Securities. The pro rata share of
each Series B, Series C or Series D Investor, respectively, for purposes of this
right of first refusal, is the ratio of the total number of shares of Common
Stock held by such Series B, Series C or Series D Investor, respectively,
including any shares of Common Stock into which shares of Series B, Series C or
Series D Stock held by such Series B, Series C or Series D Investor are
convertible, to the total number of shares of Common Stock outstanding
immediately prior to the issuance of the New Securities (including any shares of
Common Stock into which outstanding shares of Series B, Series C or Series D
Stock are convertible); provided, however, in the event the Company proposes to
enter into any transaction for the sale of New Securities that would result in a
change of control in 50% or more of the voting securities of the Company, the
pro rata share of each Series B, Series C or Series D Investor shall be the
ratio of the total number of shares of Series B, Series C or Series D Stock held
by such Series B, Series C or Series D Investor, respectively, including any
shares of Common Stock into which shares of Series B, Series C or Series D Stock
held by such Series B, Series C or Series D Investor have been converted, to the
total number of shares of Series B, Series C and Series D Stock outstanding
immediately prior to the issuance of the New Securities (including any shares of
Common stock into which outstanding shares of Series B, Series C or Series D
Stock have been converted.)
(b) "New Securities" shall mean any capital stock of the
Company, whether now authorized or not, and any rights, options or warrants to
purchase said capital stock, and securities of any type whatsoever that are, or
may become, convertible into said capital stock; provided that "New Securities"
does not include (i) the Series D Stock issued pursuant to the Series D
Agreement, (ii) any NBC Warrant, (iii) the GE Capital Warrant, (iv) the Series D
Stock issuable upon exercise of any NBC Warrant, (v) the Series D Stock issuable
upon exercise of the GE Capital Warrant, (vi) the Conversion Stock, (vii)
securities offered pursuant to a
15
16
registration statement filed under the Securities Act, as hereinafter defined,
(viii) securities issued pursuant to the acquisition of another corporation by
the Company by merger, purchase of substantially all of the assets or other
reorganization, (ix) all shares of Common Stock or other securities hereafter
issued or issuable to officers, directors, employees, scientific advisors or
consultants of the Company pursuant to any employee or consultant stock
offering, plan or arrangement unanimously approved by the board of directors of
the Company, (x) all shares of Common Stock or other securities hereafter issued
in connection with or as consideration for acquisition or licensing of
technology, which issuances are approved by the board of directors of the
Company (xi) all shares of Common Stock or other securities hereafter issued
pursuant to warrants, rights or options, provided that (A) the rights of first
refusal established hereby applied to the initial sale or grant by the Company
of such warrants, rights or options or (B) such warrants, options or rights were
issued before the date hereof, and (xii) up to an aggregate of 250,000 shares of
Common Stock or other securities issued in connection with equipment leasing or
equipment financing arrangements approved by the Board of Directors of the
Company.
(c) In the event the Company proposes to undertake an issuance
of New Securities, it shall give to the Series B, Series C and Series D
Investors written notice (the "Notice") of its intention, describing the type of
New Securities, the price, the terms upon which the Company proposes to issue
the same. The Series B, Series C and Series D Investors shall have until the
date of closing of the issuance of the New Securities (the "New Securities
Closing Date"), which date shall not be less than thirty (30) days from the date
of the Notice, to purchase their pro rata share (as described above) of the New
Securities for the price and upon the terms specified in the Notice by giving
written notice to the Company and stating therein the quantity of New Securities
to be purchased and forwarding payment for such New Securities to the Company on
the New Securities Closing Date. Each Series B, Series C and Series D Investor
that agrees to purchase more than its pro rata share may purchase that number of
securities for which the Series B, Series C and Series D Investors are entitled
to subscribe but for which such Series B, Series C and Series D Investors have
not subscribed ("Available Securities"), up to such oversubscribing Series B,
Series C and Series D Investor's pro rata share of such Available Securities,
determined by allocating among such oversubscribing Series B, Series C and
Series D Investors in proportion to their relative holdings of equity interests
in the Company (as determined in calculating pro rata shares) provided that no
such Series B, Series C and Series D Investor shall be allocated more than the
number of securities which such Series B, Series C and Series D Investor agreed
to purchase.
(d) The right of first refusal granted under this Section 3.1
shall expire upon:
(i) The IPO Closing Date.
(ii) For each Series B, Series C and Series D
Investor, the date on which such Series B, Series C and Series D Investor no
longer holds a minimum of 250,000 of the Shares or of the Conversion Stock
issued upon conversion thereof or the number of Shares of Common Stock and
Series B, Series C and Series D Stock originally purchased by such Series B,
Series C and Series D Investor, whichever is less.
16
17
3.2 Assignment of Rights. The right of first refusal granted under
this Section is assignable by any Series B Investor, Series C Investor or Series
D Investor to any transferee of a minimum of 50,000 Shares or 50,000 shares of
Conversion Stock or to any transferee who is a general or limited partner or
limited liability company member or affiliate of such Series B Investor, Series
C Investor or Series D Investor, or a limited partnership or investment fund
under common management and control with such Series B Investor, Series C
Investor or Series D Investor.
4. Right of First Refusal.
4.1 Proposed Voluntary Transfer of Securities.
(a) Subject to the provisions of this Agreement, whenever any
Investor has received an offer from a third party (other than in connection with
transfers in compliance with clauses (i) and (ii) of the first parenthetical of
Section 2.3 of this Agreement whether with or without consideration or in
connection with an initial public offering, merger or acquisition involving the
Company) (the "Third Party Offeror") to buy for cash (a "Third Party Offer") all
or any portion of its Shares (the "Offered Securities") and such investor
desires to accept the Third Party Offer, such Investor (the "Selling Investor")
shall make an offer (the "Right of First Refusal") to sell the Offered
Securities to the other Investors in accordance with the provisions and
procedures set forth below. Such Right of First Refusal shall be effected upon
the same terms and conditions as the Third Party Offer.
(b) The Selling Investor shall send written notice of the
Right of First Refusal (the "Notice") to the other Investors and the Company,
which shall state the number of shares constituting the Offered Securities and
the proposed purchase price per share thereof (the "Third Party Offer Price").
The Notice shall also state the material terms and conditions of the Third Party
Offer.
(c) The Investors (other than the Selling Investor) shall have
the right;
(i) to purchase all (but not less than all) of the
Offered Securities at a purchase price equal to the Third Party Offer Price and
upon the terms and conditions of the Third Party Offer; or
(ii) to elect not to exercise the Right of First
Refusal.
(d) The Right of First Refusal shall be exercisable by written
notice to the Selling Investor with a copy to the Company given within fifteen
(15) days after receipt of the Notice described in subsection (b) above the
("Notice Period"). A failure to give such notice within the Notice Period shall
be regarded as a rejection of the Right of First Refusal.
(e) Notwithstanding anything to the contrary in this Section
4.1 hereto, Intel Corporation agrees that whenever it receives a Third Party
Offer from a Third Party Offeror to purchase all or any portion of its Series C
Stock or Series D Stock, Intel will first negotiate in good faith to sell its
Series C Stock or Series D Stock to the Company for a period of not less
17
18
than 30 days before selling its Series C Stock or Series D Stock to any Third
Party Offeror. Upon completion of such 30 day period, Intel shall be free to
sell its shares without any contractual right of first refusal whatsoever and
free of any Right of First Refusal as set forth in this Section 4.1 for a period
of no longer than 180 days. This Section 4.1(e) shall apply to Intel's Right of
First Refusal and with respect to Intel shall supersede Section 4.1(a)-(d)
above.
(f) Notwithstanding anything to the contrary in this Section
4.1 hereto, SOFTBANK Ventures, Inc. ("Softbank") and its assignees shall have
the right to assign (by sale or otherwise) any and all shares of Series C or
Series D Stock to any affiliated entity, including any affiliated corporation,
partnership, limited liability company or investment fund.
(g) Notwithstanding anything to the contrary in this Section
4.1 hereto, each Series D Investor and its assignees shall have the right to
assign (by sale or otherwise) any and all shares of Series D Stock held by such
Series D Investor or assignee to any affiliated entity, including any affiliated
corporation, partnership, limited liability company or investment fund.
4.2 Sale to Other Investors. The closing of the purchase of Offered
Securities subscribed to by any Investors under subsection (4.1) above shall be
held at the principal office of the Company at 11:00 a.m. local time on the 30th
day after the date on which the Notice Period shall have expired or at such
other time and places as the parties to the transaction may agree. At such
closing, the Selling Investor shall deliver certificates representing the
Offered Securities, duly endorsed, and such Offered Securities shall be free and
clear of any liens, claims, options, charges, encumbrances or rights (other than
those arising hereunder) and the Selling Investor shall so represent and
warrant, and shall further represent and warrant that is the beneficial and
record owner of such Offered Securities. An Investor purchasing Offered
Securities shall deliver at the closing payment in full in immediately available
funds for the Offered Securities purchased by it. At such closing, all of the
parties to the transaction shall execute such additional documents as are
otherwise necessary or appropriate.
4.3 Sale to Third Party Offeror. Unless the other Investors elect to
purchase all of the Offered Securities under subsection (4.1), the Selling
Investor may sell the Offered Securities to the Third Party Offeror on the terms
and conditions of the Third Party Offer; provided, however, that such sale is
bona fide and the closing occurs within ninety (90) days of the expiration of
the Notice Period. If such sale is not consummated within such 90-day period,
the restrictions provided for herein shall again become effective, and no
transfer of such Offered Securities may be made thereafter without again
offering the same to the other Investors in accordance with this Agreement.
4.4 Termination. The right of First Refusal set forth in this
Section 4 shall terminate automatically at the IPO Closing Date.
5. NBC Preferential Right.
(a) In any private or public financing or transaction in which
the Company repurchases its equity held by third party shareholders after the
date hereof, NBC
18
19
Multimedia, Inc. ("NBC") shall have the right to purchase, at market rates
established in the relevant financing or at the relevant purchase price
established in such transaction, preferred or common equity of the Company that
is involved in such transaction until such time as NBC has actually purchased a
number equal to 10% of the aggregate shares of capital stock the Company on a
fully diluted basis as of the completion of the Series D financing shares of the
Company, which shares shall be over and above (i) the shares of Series D Stock
issued and sold to NBC on the date hereof and (ii) the shares of Series D Stock
and/or Conversion Stock issuable to NBC upon exercise and/or conversion of the
NBC Warrants. The Company will provide the exact number of shares specified in
this Section 5(a) within ninety (90) days after the Closing Date.
(b) The rights granted under this Section 5 shall rank in
priority to the right of first refusal provided to certain other parties
pursuant to Section 3.1 hereof, and the rights of such other parties thereto may
be exercised (i) with respect to any New Securities, only after NBC has declined
to purchase such New Securities under this Section 5 or (ii) following
termination of the rights granted under this Section 5.
(c) The rights granted under this Section 5 shall expire upon
the date upon which NBC has actually purchased that number of shares of the
Company specified in Section 5(a) above over and above (i) the shares of Series
D Stock issued and sold to NBC on the date hereof and (ii) the shares of Series
D Stock and/or Conversion Stock issuable to NBC upon exercise and/or conversion
of the NBC Warrants.
(d) The rights granted under this Section 5 are assignable by
NBC to any transferee of a minimum of 250,000 Shares or 250,000 shares of
Conversion Stock or to any affiliated entity, including any affiliated
corporation, partnership, limited liability company or investment fund.
6. Further Agreements. The parties hereto hereby agree as follows:
(a) The rights and obligations of the Compensation Committee
and Finance Committee of the Company's Board of Directors and the Chairman of
each such committee shall be transferred to the full Board of Directors.
(b) Any increase or change in the compensation at any employee
or officer of the Company who is also a director of the Company shall be
unanimously approved by members of the Board of Directors who are not also
employees or officers of the Company.
(c) All parties agree to take any and all legal actions,
including voting their shares in such a manner as to give effect to the
provisions of this Agreement.
7. Board and Voting Agreements.
7.1 Board of Directors Nominee. Until such time as the IPO Closing
Date, as long as:
19
20
(a) Lee Entertainment L.L.C. or any of its affiliates ("Lee")
own at least twenty-five percent (25%) of the originally purchased shares of
Series C Stock or Common Stock, each investor who holds Series C Stock agrees to
vote all shares of Series C Stock held by such Investor by written consent or a
duly held meeting of stockholders in favor of the representative of Lee to serve
as a nominee of the Series C Stock to the Company's Board of Directors.
(b) As long as Intel Corporation ("Intel") owns at least
seventy-five percent (75%) of the originally purchased shares of Series C Stock
or Series D Stock or Common Stock, each investor who holds Series C Stock agrees
to vote all shares of Series C Stock held by such Investor by written consent or
a duly held meeting of stockholders in favor of the representative of Intel to
serve as a nominee of the Series C Stock to the Company's Board of Directors. As
an alternative to Section 6.1(b), Intel shall, solely at its option, have the
right to appoint a person to attend all board meetings as an observer on Intel's
behalf. In the event that Intel elects to appoint an observer rather than a
director there shall remain a vacancy on the Board to be filled only by Intel at
such time as it chooses to appoint a director.
(c) As long as SOFTBANK owns at least seventy-five percent
(75%) of the originally purchased shares of Series C Stock or Common Stock,
SOFTBANK shall have the right to appoint a person to attend all board meetings
as an observer on its behalf.
(d) As long as Island or an affiliate of Island (collectively,
"Island Entities") owns at least seventy-five percent (75%) of the shares of
Series C Stock originally purchased by Island, or has the power to vote or
dispose of, or to direct the vote or disposition of such shares, each Investor
who or which holds Series C Stock agrees to vote all shares of Series C Stock
held by such Investor by written consent or a duly held meeting of stockholders
in favor of the representative of Island Entities to serve as a director of the
Company elected by the holders of the Series C Stock. The director
representative of the Island Entities shall be Lawrence Mestel, Christopher
Blackwell or such other nominee of the Island Entities who is approved by the
Board of Directors of the Company, which approval shall not be unreasonably
withheld.
(e) As long as GE Capital owns, has the power to vote or
dispose of, or has the power to direct the vote or disposition of, at least
seventy-five percent (75%) of the shares of Series D Stock originally purchased
by GE Capital, (i) GE Capital shall have the right to appoint a person to attend
all board meetings as an observer on its behalf and (ii) upon distribution to
the members of the board of directors, the Company shall deliver to GE Capital a
copy of all written materials and information so distributed in advance of, or
at, each board meeting.
(f) As long as Avalon Technology LLC or an affiliate of Avalon
Technology LLC owns at least seventy-five percent (75%) of the shares of Series
D Stock originally purchased by Avalon Technology LLC, or has the power to vote
or dispose of or to direct the vote or disposition of such shares, each Investor
who or which holds Series D Stock agrees to vote all shares of Series D Stock
held by such Investor by written consent or a duly held meeting of stockholders
in favor of the representative of Avalon Technology LLC to serve
20
21
as a director of the Company elected by the holders of the Series D Stock. The
director representative of Avalon Technology LLC shall be Richard D. Snyder or
such other nominee who is approved by the Board of Director of the Company,
which approval shall not be unreasonably withheld.
(g) Upon (i) the exercise by GE Capital of the GE Capital
Warrant, (ii) the exercise by NBC of the NBC Warrant and (iii) if on the date of
such exercise GE Capital or an affiliate of GE Capital owns at least
seventy-five percent (75%) of the shares of Series D Stock originally purchased
by GE Capital, each Investor who or which holds Series B, Series C and/or Series
D Stock agrees to vote all shares of Series B, Series C and Series D Stock held
by such Investor by written consent or a duly held meeting of stockholders in
favor of (i) the removal of any director elected by the holders of the Series B,
Series C and Series D Stock, voting as a separate class, pursuant to the
Company's Second Amended and Restated Certificate of Incorporation, who has not
been nominated by GE Capital and (ii) the election of the nominee of GE Capital
to serve as a director of the Company elected by the holders of Series B, Series
C and Series D Stock. The director representative of GE Capital shall be
approved by the Board of Directors of the Company, which approval shall not be
unreasonably withheld.
7.2 Series B, Series C and Series D Board Seat. With respect to
Section 4(b) in the Company's Second Amended and Restated Certificate of
Incorporation, regarding the director elected to the Company's Board of
Directors by mutual agreement between a majority of the holders of the
outstanding shares of Series B Stock, a majority of the holders of the
outstanding shares of Series C Stock and a majority of the holders of the
outstanding shares of Series D Stock, each voting as a separate class except as
set forth in Section 7.1(g) above, should the majority of the holders of such
Series B, Series C and Series D Stock be unable to mutually agree upon such a
director, such Board membership shall remain vacant until such time as a
majority of the holders of the outstanding shares of Series B, Series C and
Series D Stock each voting as a separate class shall mutually agree upon such a
director. Such Board member shall be elected annually and shall serve a one-year
term expiring upon the occurrence of the next annual shareholder meeting of the
Company.
7.3 Series B and Series C Investors Voting Arrangement. Lee and The
Phoenix Partners II Limited Partnership, The Phoenix Partners III Limited
Partnership and The Phoenix Partners IV Limited Partnership (collectively
"Phoenix") hereby agree as follows:
(a) Not to vote any shares of Series A, Series B or Series C
Stock held by such parties in order to (i) block a liquidation of the Company in
which proceeds from such transaction equal or exceed $2.85 per share or (ii) to
block any merger, sale, acquisition or otherwise of the Company in which
proceeds from such transaction equal or exceed $2.85 per share of the Company's
Series C Stock (adjusted for stock splits, recapitalizations and the like).
(b) Lee and Phoenix also agree not to vote any shares of
Series A, Series B or Series C Stock held by such parties in order to block any
financing for the Company in pari passu preferred or senior preferred stock
(which preference will be limited to the dollar amount of investment) up to an
amount of $2 million.
21
22
(c) Lee and Phoenix acknowledge thereby that by the voting
arrangements set forth in this Section 6, each has waived, in the circumstances
set forth in this Section, their respective protective rights to block certain
transactions as granted to holders of the Series B and Series C Stock as set
forth in the Company's Second Amended and Restated Certificate of Incorporation.
7.4 Side Letter. The signatories hereto are aware of the terms,
conditions and existence of the three Side Letter Agreements dated March 5,
1996, February 27, 1998 and February 27, 1998, respectively by and between Intel
and the Company and of the Side Letter Agreement dated July 12, 1996 by and
between Island Trading Co., Inc. and the Company.
8. Miscellaneous.
8.1 Waivers and Amendments. The obligations of the Company and the
rights of the Investors and holders of Shares and Conversion Stock under this
Agreement may be waived (either generally or in a particular instance, either
retroactively or prospectively and either for a specified period of time or
indefinitely) only with the written consent of the Company and the Investors
holding more than eighty percent (80%) of the Shares and Conversion Stock, and
with the same consent the Company, when authorized by resolution of its Board of
Directors, may enter into a supplementary agreement for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of this Agreement; provided, however, that no such waiver or supplemental
agreement shall reduce the aforesaid percentage of Shares and Conversion Stock,
the Investors holding which are required to consent to any waiver or
supplemental agreement without the consent of the record holders of all of the
Shares and Conversion Stock and no such waiver or supplemental agreement shall
adversely affect any Series of Series A, Series B, Series C or Series D Stock in
a manner different than any other Series of such stock without the approval of
eight percent (80%) of the holders of the outstanding voting shares of such
series provided, further, that no such waiver or supplemental agreement shall
adversely affect the rights of any NBC Warrant, the GE Capital Warrant, the
Series D Stock issuable upon exercise of any NBC Warrant, the Series D Stock
issuable upon exercise of the GE Capital Warrant or any shares of Series D Stock
issued pursuant to the Series D Agreement in a manner different from any other
holder of Series D Stock without the prior written consent of the holder of such
NBC Warrant, GE Capital Warrant or Series D Stock. Notwithstanding the
foregoing, no such supplemental agreement, amendment, waiver or other instrument
effected in accordance with this Section 8.1 shall increase the obligations of
any Investor or holder of Shares or Conversion Stock unless such Investor or
holder shall have consented thereto in writing. Upon the effectuation of each
such waiver, consent, agreement, amendment or modification the Company shall
promptly give written notice thereof to the record holders of the Shares and
Conversion Stock who have not previously consented thereto in writing. Neither
this Agreement nor any provisions hereof may be changed, waived, discharged or
terminated orally, but only by a signed statement in writing. In addition,
notwithstanding this Section 8.1, there shall be no change to any provision of
this Agreement which grants rights or benefits to a particular Investor without
the prior written consent of such Investor.
22
23
8.2 Governing Law. This Agreement shall be governed in all respects
by the laws of the State of California as such laws are applied to agreements
between California residents entered into and to be performed entirely within
California.
8.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
8.4 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.
8.5 Notices. All notices and other communications required or
permitted hereunder shall be effective upon receipt and shall be in writing and
may be delivered in person, by telecopy, overnight delivery service or U.S.
mail, in which event it may be mailed by first-class, certified or registered,
postage prepaid, addressed (a) if to an Investor or Holder, at such address as
such Investor or Holder shall have furnished the Company in writing or (b) if to
the Company, at such address as the Company shall have furnished to the
Investors and Holders in writing. Notwithstanding the foregoing, all notices and
communications to addresses outside the United States shall be given by
telecopier and confirmed in writing sent by overnight or two-day courier
service.
8.6 Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
8.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
8.8 Nominees. Securities registered in the name of a nominee for an
Investor or Holder shall, for purposes of this Agreement, be treated as being
owned by such Investor or Holder.
Remainder of Page Intentionally Left Blank
23
24
The foregoing Second Amended and Restated Investors Rights Agreement is
hereby executed as of the date first above written.
COMPANY:
2WAY MEDIA, INC.
By: /s/ Robert D. Roback
-----------------------------------
Title: President
-----------------------------------
PRIOR INVESTORS:
THE PHOENIX PARTNERS II
LIMITED PARTNERSHIP
By the Phoenix Management
Partners II, its General Partner
By: /s/ David B. Johnston
-----------------------------------
David B. Johnston,
General Partner
THE PHOENIX PARTNERS III
LIMITED PARTNERSHIP
By the Phoenix Management
Partners III, its General Partner
By: /s/ David B. Johnston
-----------------------------------
David B. Johnston,
General Partner
25
COUNTERPART SIGNATURE PAGE
TO THE
2WAY MEDIA, INC.
SECOND AMENDED AND RESTATED
INVESTORS RIGHTS AGREEMENT
DATED FEBRUARY 27, 1998
THE PHOENIX PARTNERS IV
LIMITED PARTNERSHIP
By the Phoenix Management
IV, L.L.C. its General Partner
By: /s/ David B. Johnston
-----------------------------------
David B. Johnston,
Member
INTEL CORPORATION
By: /s/ Arvind Sodhani
-----------------------------------
Title: Vice President and Treasurer
-----------------------------------
Signature:
-------------------------------
LEE ENTERTAINMENT L.L.C.
By: Mie Kyung Lee
-----------------------------------
Title: Executive Director
-----------------------------------
Signature: /s/ Mie Kyung Lee
-------------------------------
26
COUNTERPART SIGNATURE PAGE
TO THE
2WAY MEDIA, INC.
SECOND AMENDED AND RESTATED
INVESTORS RIGHTS AGREEMENT
DATED FEBRUARY 27, 1998
ISLAND TRADING CO, INC.
By: Lawrence Mestel
-----------------------------------
Title: Chief Operating Officer
-----------------------------------
Signature: /s/ Lawrence Mestel
-------------------------------
SOFTBANK VENTURES INC.
By: Yoshitaka Kitao
-----------------------------------
Title: President and CEO
-----------------------------------
Signature: /s/ Yoshitaka Kitao
-------------------------------
NEW INVESTORS:
GENERAL ELECTRIC CAPITAL CORPORATION
By: Russell W. Howard
-----------------------------------
Title: Region Operations Manager
-----------------------------------
Signature: /s/ Russell W. Howard
-------------------------------
27
COUNTERPART SIGNATURE PAGE
TO THE
2WAY MEDIA, INC.
SECOND AMENDED AND RESTATED
INVESTORS RIGHTS AGREEMENT
DATED FEBRUARY 27, 1998
AVALON TECHNOLOGY LLC
By: Richard D. Snyder
-----------------------------------
Title: President
-----------------------------------
Signature: /s/ Richard D. Snyder
-------------------------------
NBC MULTIMEDIA, INC.
By: Edmond Santos
-----------------------------------
Title: Vice President
-----------------------------------
Signature: /s/ Edmond Santos
-------------------------------
GATEWAY 2000, INC.
By: N/A
-----------------------------------
Title:
-----------------------------------
Signature:
-------------------------------
28
COUNTERPART SIGNATURE PAGE
TO THE
2WAY MEDIA, INC.
SECOND AMENDED AND RESTATED
INVESTORS RIGHTS AGREEMENT
DATED FEBRUARY 27, 1998
DIGITAL VENTURES LIMITED
By: Grange Trustees Limited
----------------------------------
Title: Secretary
----------------------------------
Signature: For and on behalf of Grange
Trustees Limited, Authorized
Signatory
ALLEN & COMPANY INCORPORATED
By: Stanley S. Shuman
----------------------------------
Title: Executive Vice President
----------------------------------
Signature: /s/ Stanley S. Shuman
------------------------------
FOUNDING SHAREHOLDERS:
/s/ David Goldberg
-----------------------------------------
David Goldberg
/s/ Robert Roback
-----------------------------------------
Robert Roback
29
AMENDMENT NO. 1
TO SECOND AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
This Amendment No. 1 dated May 29, 1998 (the "Rights Agreement Amendment")
to Second Amended and Restated Investors Rights Agreement dated February 27,
1998 (the "Rights Agreement"), is entered into by and among Launch Media, Inc.,
a Delaware corporation (the "Company"), the undersigned holders of Series A,
Series B, Series C and Series D Stock of the Company (the "Prior Investors"),
Allen & Company Incorporated as a holder of a warrant to purchase the Company's
Common Stock and Goran Enterprises Limited as a new investor of Series D Stock
(hereinafter the "New Investor"). Capitalized terms used herein and not
otherwise defined herein shall have the same meanings as in the Rights
Agreement.
RECITALS
A. The Company and the holders of Series D Stock have previously entered
into the Series D Securities Purchase Agreement dated February 27, 1998.
B. The Company, the Prior Investors and Allen & Company Incorporated have
previously entered into the Rights Agreement.
C. Concurrent herewith, the Company, holders of the Company's Series D
Stock and the New Investor are entering into an Amendment No. 1 to the Series D
Securities Purchase Agreement (the "Amendment") to provide for among other
things, the issuance and sale of up to 2,287,582 shares of Series D Stock to the
New Investor in an Additional Closing (as defined in the Amendment).
D. The Board of Directors of the Company has determined that it is in the
best interests of the Company to amend the Rights Agreement in the form hereof.
E. It is intended that by its signatures hereto the New Investor becomes a
party to the Rights Agreement, as amended by this Agreement, effective as of the
date upon which it purchases shares of Series D Stock and be included in the
definition of "Investors" as that term is defined in the Rights Agreement.
NOW, THEREFORE, IT IS AGREED between the parties as follows:
A new Section 7.1(h) in the form set forth below is hereby added to the
Rights Agreement as follows:
"(h) As long as Goran Enterprises Limited or an affiliate of Goran
Enterprises Limited in the aggregate owns at least seventy-five percent (75%) of
the shares of Series D Stock originally purchased by Goran Enterprises Limited,
or has the power to vote or dispose of or to
1
30
direct the vote or disposition of such shares, each Investor who or which holds
Series D Stock agrees to vote all shares of Series D Stock held by such Investor
by written consent or a duly held meeting of stockholders in favor of the
representative of Goran Enterprises Limited to serve as a director of the
Company elected by the holders of the Series D Stock. The director
representative of Goran Enterprises Limited shall be Thomas Hoegh or such other
nominee who is approved by the Board of Directors of the Company, which approval
shall not be unreasonably withheld."
7. By its signature hereto, the New Investor becomes a party to the Rights
Agreement, as amended by this Agreement, and are included for all purposes in
the definition of Investors as that term is defined in the Rights Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date referenced above.
"COMPANY"
LAUNCH MEDIA, INC.
By: /s/ Robert D. Roback
--------------------------------
Name: Robert D. Roback
--------------------------------
Title: President
--------------------------------
2
31
COUNTERPART SIGNATURE PAGE TO
LAUNCH MEDIA, INC. AMENDMENT NO. 1 TO
SECOND AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
DATED AS OF MAY 29, 1998
"PRIOR INVESTOR"
THE PHOENIX PARTNERS II LIMITED PARTNERSHIP
By: By the Phoenix Management Partners II
Its: General Partner
By: /s/ David B. Johnston
-------------------------------------
David B. Johnston
General Partner
"PRIOR INVESTOR"
THE PHOENIX PARTNERS III LIMITED PARTNERSHIP
By: The Phoenix Management Partners III
Its: General Partner
By: /s/ David B. Johnston
-------------------------------------
David B. Johnston
General Partner
"PRIOR INVESTOR"
THE PHOENIX PARTNERS IV LIMITED PARTNERSHIP
By: The Phoenix Management IV, L.L.C.
Its: General Partner
By: /s/ David B. Johnston
-------------------------------------
David B. Johnston
Member
3
32
COUNTERPART SIGNATURE PAGE TO
LAUNCH MEDIA, INC. AMENDMENT NO. 1 TO
SECOND AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
DATED AS OF MAY 29, 1998
"PRIOR INVESTOR"
INTEL CORPORATION
By: /s/ Arvind Sodhani
-------------------------------------
Title: Vice President and Treasurer
-------------------------------------
"PRIOR INVESTOR"
LEE ENTERTAINMENT L.L.C.
By: [Illegible]
-------------------------------------
Title: President
-------------------------------------
"PRIOR INVESTOR"
SOFTBANK VENTURES INC.
By: /s/ Yoshitaka Kitao
------------------------------------
Name: Yoshitaka Kitao
------------------------------------
Title: President and CEO
------------------------------------
4
33
"PRIOR INVESTOR"
ISLAND TRADING CO., INC.
By: /s/ Lawrence Mestel
------------------------------------
Name: Lawrence Mestel
------------------------------------
Title: COO
------------------------------------
COUNTERPART SIGNATURE PAGE TO
LAUNCH MEDIA, INC. AMENDMENT NO. 1 TO
SECOND AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
DATED AS OF MAY 29, 1998
"PRIOR INVESTOR"
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Russell W. Howard
------------------------------------
Name: Russell W. Howard
------------------------------------
Title: Region Operations Manager
------------------------------------
"PRIOR INVESTOR"
NBC MULTIMEDIA, INC.
By: /s/ C. Glowacki
------------------------------------
Name: C. Glowacki
------------------------------------
Title: Vice President
------------------------------------
"PRIOR INVESTOR"
AVALON TECHNOLOGY LLC
By: /s/ Richard D. Snyder
------------------------------------
Name: Richard D. Snyder
------------------------------------
Title: Avalon Ventures LLC
------------------------------------
5
34
COUNTERPART SIGNATURE PAGE TO
LAUNCH MEDIA, INC. AMENDMENT NO. 1 TO
SECOND AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
DATED AS OF MAY 29, 1998
"PRIOR INVESTOR"
ALLEN & COMPANY INCORPORATED
By: /s/ Stanley S. Shuman
------------------------------------
Name: Stanley S. Shuman
------------------------------------
Title: Exec. V.P.
------------------------------------
"PRIOR INVESTOR"
DIGITAL VENTURES LIMITED
By: For and on behalf of
Grange Trustees Limited,
Authorized Signatory
------------------------------------
Name: Grange Trustees Limited
------------------------------------
Title: Secretary
------------------------------------
"NEW INVESTOR"
GORAN ENTERPRISES LIMITED
By: For and on behalf of
Grange Trustees Limited,
Authorized Signatory
------------------------------------
Name: Grange Trustees Limited
------------------------------------
Title: Secretary
------------------------------------
6