Exhibit 10.7
SECOND AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
SECOND AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT dated as of
November 30, 1999 by and among (i) InFlow, Inc., a Delaware corporation (the
"Company"), (ii) Art Zeile, Xxxx Xxxx and Xxxxxxx X. Xxxxx, as holders of the
common stock (the "Common Stock") of the Company (the "Common Holders") and
(iii) the undersigned holders of the Series A and Series B Preferred Stock of
the Company (collectively, the "Purchasers" and each individually a
"Purchaser"). The Series A and Series B Preferred Stock shall be referred to
herein as "Preferred Shares" and the Common Stock held by the Common Holders
shall be referred to herein as "Common Shares"). This Agreement amends and
restates in its entirety the Stockholders Agreement dated as of October 28, 1999
among the Company, the Common Holders and certain of the Purchasers.
1. Definitions.
(a) Purchaser Holders. For purposes of this Agreement, the term
"Purchaser Holders" shall mean the Purchasers or persons who have acquired
shares from such Purchasers or the Purchasers' transferees or assignees in
accordance with the provisions of this Agreement.
(b) New Securities. For purposes of this Agreement, the term "New
Securities" shall mean any capital stock of the Company whether now authorized
or not, and rights, options or warrants to purchase such capital stock, and
securities of any type whatsoever that are, or may become, convertible into or
exchangeable for such capital stock; provided that the term "New Securities"
does not include (i) securities issued upon conversion of the Preferred Shares;
(ii) securities issued pursuant to the acquisition of another business entity or
business segment of any such entity by the Company by merger, purchase of
substantially all the assets or other reorganization whereby the Company will
own not less than fifty-one percent (51%) of the voting power of such business
entity or business segment of any such entity; (iii) any borrowings, direct or
indirect, from financial institutions or other persons by the Company, whether
or not presently authorized, including any type of loan or payment evidenced by
any type of debt instrument, provided such borrowings do not have any equity
features including warrants, options or other rights to purchase capital stock
and are not convertible into capital stock of the Company; (iv) securities
issued to employees, consultants, officers or directors of the Company pursuant
to any stock option, stock purchase or stock bonus plan, agreement or
arrangement approved by the Board of Directors; (v) securities issued to vendors
or customers or to other persons in similar commercial situations with the
Company if such issuance is approved by the Board of Directors; (vi) securities
issued in connection with obtaining lease financing, whether issued to a lessor,
guarantor or other person if such issuance is approved by the Board of
Directors; (vii) securities issued in a Qualified Public Offering (as defined in
Section 13 below); (viii) securities issued in connection with any stock split,
stock dividend or recapitalization of the Company; and (ix) any right, option or
warrant to acquire any security convertible into the
securities excluded from the definition of New Securities pursuant to
subsections (i) through (viii) above.
(c) Equity Securities. For purposes of this Agreement, the term
"Equity Securities" shall mean any securities having voting rights in the
election of the Board of Directors or any securities evidencing an ownership
interest in the Company, or any securities convertible into or exercisable for
any shares of the foregoing, or any agreement or commitment to issue any of the
foregoing.
(d) Company Holders. For purposes of this Agreement, the term
"Company Holders" shall mean any Common Holder and any Person who acquires
shares of Common Stock pursuant to the Option Plan as a result of the exercise
of options granted thereunder after the date hereof.
(e) Person. For purposes of this Agreement, the term "Person" shall
mean any individual, firm, corporation, partnership, trust, limited liability
company, incorporated or unincorporated association, joint venture, joint stock
company or other entity of any kind.
(f) Option Plan. For purposes of this Agreement, the term "Option
Plan" shall mean the Company's 1997 Stock Option Plan, as amended.
(g) Stock. For purposes of this Agreement, the term "Stock" shall
mean the Preferred Shares and the Common Shares.
(h) Stockholder. For purposes of this Agreement, the term
"Stockholder" shall mean a Purchaser Holder or a Company Holder.
2. Transfer Restrictions; Right of First Refusal.
(a) Before any Stock (the "Offered Shares") may be sold or
transferred by any Stockholder (the "Selling Stockholder"), the Selling
Stockholder shall deliver a notice by certified mail (the "Sale Notice") to the
principal business office of the Company and to each of the Purchaser Holders
(and, if necessary in order to comply with Section 4, the other Stockholders)
stating (i) the Selling Stockholder's bona fide intention to sell or transfer
the Offered Shares, (ii) the number of such shares to be sold or transferred,
(iii) the price and terms for which the Selling Stockholder proposes to sell or
transfer the Offered Shares, and (iv) the name and address of the proposed
purchaser or transferee and that such purchaser or transferee is committed to
acquire the stated number of shares on the stated price and terms. The Company,
upon the request of the Selling Stockholder, will provide a list of the
addresses of the Purchaser Holders (and, if required in order to comply with
Section 4, the other Stockholders).
(b) In the event that the Selling Stockholder is a Common Holder (an
"RFR Holder"), the Company shall have the right at any time within twenty (20)
days of receipt of the Sale Notice (the "Company Election Period") to elect to
purchase some or all of the Offered Shares at the price per share specified in
the Sale Notice, or if no price is specified therein, at the Fair Market Value
thereof. "Fair Market Value" shall be determined by the Board
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of Directors of the Company in good faith (with at least one Series B Director
(as defined in Section 7 below) voting to approve the value so determined).
(c) If the Company desires to purchase all or any part of the Offered
Shares from the RFR Holder, the Company shall communicate in writing its
election to purchase to the RFR Holder and the Purchaser Holders, which
communication shall state the number of Offered Shares the Company desires to
purchase and shall be given to the RFR Holder and the Purchaser Holders in
accordance with the notice requirements of this Agreement prior to or
concurrently with the expiration of the Company Election Period.
(d) If the Company does not elect to purchase all of the Offered Shares
from the RFR Holder, each Purchaser Holder shall have the absolute right at any
time within ten (10) days following the expiration of the Company Election
Period (the "Purchaser Election Period") to elect to purchase, at the price per
share specified in the Sale Notice, or if no price is specified therein, at the
Fair Market Value thereof, that portion of the balance of the Offered Shares
from the RFR Holder as shall be equal to the number of such Offered Shares
multiplied by a fraction, the numerator of which shall be the number of
Preferred Shares then owned by each Purchaser Holder and the denominator of
which shall be the aggregate number of Preferred Shares then owned by all of the
Purchaser Holders. (The amount of Offered Shares that each Purchaser Holder is
entitled to purchase under this Section 2(e) shall be referred to as its "Pro
Rata Share").
(e) If any Purchaser Holder elects not to exercise its option to purchase
its Pro Rata Share of the Offered Shares from the RFR Holder, then those
Purchaser Holders that do exercise their option shall have the option, for an
additional five (5) days following the end of the Purchaser Election Period, to
elect to acquire the Offered Shares that could have been acquired by the
nonexercising Purchaser Holders in proportion to the relative number of
Preferred Shares held by the exercising Purchaser Holders.
(f) If the Company and/or the Purchaser Holders elect to purchase all or
any portion of the Offered Shares from the RFR Holder, any written communication
of an election to so purchase delivered by the Company or the Purchaser Holders
shall, when taken in conjunction with the offer, be deemed to constitute a
valid, legally binding and enforceable agreement for the sale and purchase of
the stated Offered Shares. Sales of the Offered Shares to be sold to the
Company and/or the Purchaser Holders pursuant to this Section 2 shall be made at
the offices of the Company on the 60th day following the date of the Sale Notice
(or if such 60th day is not a business day, then on the next succeeding business
day). Such sales shall be effected by the delivery to the Company of a
certificate or certificates evidencing the Offered Shares to be purchased by the
Company or the Purchaser Holders duly endorsed for transfer to such party,
against payment to the RFR Holder of the purchase price therefor by the party
purchasing such Offered Shares.
(g) If the Company and/or the Purchaser Holders do not purchase all of the
Offered Shares from the RFR Holder, then, subject to the other terms of this
Agreement all, but not less than all, of the Offered Shares not so purchased may
be sold by the RFR Holder at any time within ninety (90) days after the date of
the Sale Notice. Any such sale shall be to
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the proposed transferee specified in the Sale Notice, at not less than the price
and upon other terms and conditions, if any, not more favorable to the proposed
transferee than those specified in the offer. If the Offered Shares are not sold
within such 90-day period, the RFR Holder shall not thereafter transfer any
Offered Shares without again complying with the requirements of this Section 2.
(h) In the event that the Selling Stockholder is a Purchaser Holder,
the Company shall have the right to approve the proposed transferee(s) of the
Offered Shares, which approval shall not be unreasonably withheld (it being
understood that the Company's failure to approve a proposed transferee that the
Company believes in good faith constitutes an actual or potential competitor of
the Company shall be conclusively deemed reasonable).
(i) If Offered Shares are sold pursuant to this Section 2 to any
purchaser who is not a party to this Agreement, it shall be a condition of such
sale that the purchaser shall execute a counterpart of this Agreement and the
Offered Shares so sold shall be subject to this Agreement.
3. Preemptive Right.
(a) The Right. If the Company shall propose to issue any New
Securities, it shall first offer to sell to each Purchaser Holder a Ratable
Portion of such New Securities on the same terms and conditions and at the
lowest price as such New Securities are offered to any person. "Ratable Portion"
shall mean that portion of such New Securities equal to the fraction determined
by dividing the number of shares of Common Stock held by the Purchaser Holder
(assuming full conversion and exercise of all convertible or exercisable
securities) by the number of Common Shares then outstanding (assuming full
conversion and exercise of all convertible or exercisable securities but
excluding the New Securities so issued).
(b) Notice. The Company shall give written notice of the proposed
issuance of New Securities to each Purchaser Holder not later than thirty (30)
days prior to issuance. Such notice shall contain all material terms and
conditions of the issuance and of the New Securities. Each Purchaser Holder may
elect to exercise all or any portion of its rights under this Section 3 by
giving written notice to the Company within thirty (30) days of the Company's
notice. If the consideration paid by others for the New Securities is not cash,
the value of the consideration shall be determined in good faith by the
Company's Board of Directors (with at least one Series B Director (as defined in
Section 7 below) voting to approve the value so determined), and any electing
Purchaser Holder shall pay the cash equivalent thereof as so determined. All
payments shall be delivered by electing Purchaser Holders to the Company not
later than the date specified by the Company in its notice, but in no event
earlier than thirty-five (35) days after the Company's notice. Each Purchaser
Holder shall have a right of over allotment such that, if any other Purchaser
Holder fails to exercise the right to purchase its full Ratable Portion of the
New Securities, the other participating Purchaser Holders may, before the date
ten (10) days following the expiration of the thirty (30) day period, set forth
above, exercise an additional right to purchase, on a pro rata basis, the New
Securities not previously purchased by so notifying the Company, in writing,
within such ten (10) day period. Each Purchaser Holder shall be entitled to
apportion New Securities to be purchased among its
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partners and affiliates (which, in the case of First Union Capital Partners,
Inc., shall be deemed to include First Union Corporation or any Person directly
or indirectly controlling, controlled by or under common control with First
Union Corporation and, in the case of Meritage Private Equity Fund, L.P. shall
include Meritage Investment Partners, LLC and any entity controlling, controlled
by or under common control with such Person), provided that such Purchaser
Holder notifies the Company of such allocation.
4. Right of Co-Sale.
(a) The Right. If at any time a Selling Stockholder proposes to
sell any shares of Stock to any third party in a transaction involving the sale
of more than five percent (5%) of the then-outstanding Common Stock determined
on an as-converted basis (a "Co-Sale Transaction"), then the Sale Notice
required by Section 2 shall be delivered to all Stockholders. In the event that,
after giving effect to all purchases of such Stock by the Company and the
Purchaser Holders pursuant to Section 2, the amount of Stock to be sold to such
third party continues to represent at least five percent (5%) of the then-
outstanding Common Stock on an as-converted basis, then each Stockholder which
notifies the Selling Stockholder in writing within 30 days following receipt of
the Sale Notice (a "Co-Seller") shall have the opportunity to sell a pro rata
portion of the remaining Stock which the Selling Stockholder proposes to sell to
such third party in the Co-Sale Transaction. In the event a Co-Seller exercises
its right of co-sale hereunder, the Selling Stockholder shall assign so much of
his interest in the proposed agreement of sale as the Co-Seller shall be
entitled to and shall request hereunder, and the Co-Seller shall assume such
part of the obligations of the Selling Stockholder under such agreement as shall
relate to the sale of the securities by the Co-Seller. For the purposes of this
Section 4, the "pro rata portion" which each Co-Seller shall be entitled to sell
shall be an amount of Stock equal to a fraction of the total amount of Stock
proposed to be sold to such third party (after giving effect to all purchases
pursuant to Section 2), the numerator of which shall be the number of shares of
Stock owned by such Co-Seller and the denominator of which shall be the total
number of shares of Stock then held by the Selling Stockholder and all Co-
Sellers (giving effect in each case to the conversion of all Preferred Shares
into Common Stock). Insofar as possible this right of co-sale shall apply to
Stock of the same class or classes as the Stock subject to the Sale Notice. If
any Person desiring to exercise its rights of co-sale hereunder does not have a
sufficient amount of Stock of the same class as the Stock subject to the Sale
Notice, such Person may substitute Stock of another class so long as such class
ranks senior in liquidation to the class of Stock subject to the Sale Notice. In
the event the proposed Transfer is of Common Stock and a Person wishing to
exercise its rights of co-sale hereunder does not have sufficient shares of
Common Stock, but has Preferred Shares, such Person may convert a sufficient
number of Preferred Shares into Common Stock in accordance with the procedures
set forth in the Certificate of Incorporation, as amended.
(b) Failure to Notify. If withinthirty (30) days following
receipt of the Sale Notice, any Stockholder fails to notify the Selling
Stockholder that it desires to participate in the Co-Sale Transaction, then the
Selling Stockholder may effect the Co-Sale Transaction within a period of ninety
(90) days after the date of the Sale Notice without the participation of such
Stockholder. Any such sale shall be made only to persons identified in the Sale
Notice and at the same price and upon the same terms and conditions as those set
forth in the Sale Notice.
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In the event the Selling Stockholder has not sold the Stock or entered
into an agreement to sell the Stock within such ninety (90) day period, the
Selling Stockholder shall not thereafter sell any Equity Securities without
again complying with Section 2 and this Section 4.
(c) Prohibited Transfers. In the event that a Selling Stockholder
should sell any Stock in contravention of the co-sale rights under this
Agreement (a "Prohibited Transfer"), each holder of such co-sale rights, in
addition to such other remedies as may be available at law, in equity or
hereunder, shall have the put option provided below, and such Selling
Stockholder shall be bound by the applicable provisions of such option. In the
event of a Prohibited Transfer, each holder of co-sale rights shall have the
right to sell to such Selling Stockholder the type and number of shares of Stock
equal to the number of shares each holder of co-sale rights would have been
entitled to transfer to the purchaser under Section 4(b) hereof had the
Prohibited Transfer been effected pursuant to and in compliance with the terms
hereof. Such sale shall be made on the following terms and conditions:
(i) The price per share at which the shares are to be sold to the
Selling Stockholder shall be equal to the price per share paid by the
purchaser to such Selling Stockholder in such Prohibited Transfer. The
Selling Stockholder shall also reimburse each co-sale rights holder for
any and all fees and expenses, including legal fees and expenses,
incurred pursuant to the exercise or the attempted exercise of the
rights under Section 4.
(ii) Within ninety (90) days after the date on which a holder of
co-sale rights received notice of the Prohibited Transfer or otherwise
became aware of the Prohibited Transfer, such Person shall, if
exercising the option created hereby, deliver to the Selling
Stockholder the certificate or certificates representing shares to be
sold, each certificate to be properly endorsed for transfer.
(iii) Such Selling Stockholder shall, upon receipt of the
certificate or certificate for the shares to be sold by a co-sale
rights holder pursuant to this Section 4(e), pay the aggregate purchase
price therefor and the amount of reimbursable fees and expenses, as
specified in Section 4(e)(i), in cash or by other means acceptable to
the co-sale rights holder.
5. Limitations to Rights of First Refusal and Co-Sale. Notwithstanding
the provisions of Sections 2 and 4 of this Agreement, each Purchaser Holder may
sell or otherwise assign, with or without consideration, an unlimited amount of
Stock to any spouse or member of his immediate family, or to a custodian,
trustee (including a trustee of a voting trust), executor or other fiduciary for
the account of his spouse or members of his immediate family, or to a trust for
himself, or to a charitable remainder trust or, in the case of First Union
Capital Partners, Inc., to First Union Corporation or any Person directly or
indirectly controlling, controlled by or under common control with First Union
Corporation or, in the case of Meritage Private Equity Fund, L.P., to Meritage
Investment Partners, LLC and any Person controlling, controlled by or under
common control with such Person or any of their respective partners or, in the
case of J.P.
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Xxxxxx Investment Corporation or Sixty Wall Street SBIC Fund, L.P., to X.X.
Xxxxxx & Co. Incorporated and any Person controlling, controlled by or under
common control with X.X. Xxxxxx & Co. Incorporated or, in the case of General
Electric Capital Corporation, to General Electric Corporation and any Person
controlling, controlled by or under common control with General Electric
Corporation or, in the case of Xxxxxxxx, Xxxxxx & Xxxxx II, L.P., to Xxxxxxxx,
Xxxxxx & Xxxxx LLC and any Person controlling, controlled by or under common
control with Xxxxxxxx, Xxxxxx & Xxxxx LLC; provided that each such transferee or
assignee, prior to the completion of the sale, transfer or assignment shall have
executed documents assuming the obligations of the Purchaser Holder under this
Agreement with respect to the transferred securities. Notwithstanding the
provisions of Section 4 of this Agreement, each of Art Zeile and Xxxx Xxxx may
sell his Common Shares without the participation of any Co-Seller following the
termination of his employment with the Company, other than for Cause, or
following a material reduction in his (i) duties and responsibilities or (ii)
compensation, unless agreed to by such Common Holder or required by law, or a
material change in his responsibilities which are not agreed to by such Common
Holder. As used herein, "Cause" shall mean a termination for any of the
following reasons: (i) engaging in intentional misconduct which would tend to
discredit the Company; (ii) being convicted of a felony; (iii) committing an act
of fraud against the Company or the willful material misappropriation of
property belonging to the Company; (iv) materially breaching any proprietary
information agreement between such Common Holder and the Company or (v)
willfully disregarding such Common Holder's duties despite adequate warnings
from the Board.
6. Drag-Along Rights. If holders of at least seventy-five percent
(75%) of the then outstanding Preferred Shares approve a transaction to sell, or
in any other way, directly or indirectly convey, assign, distribute, pledge,
encumber or otherwise dispose of all or substantially all of the Company's
assets, property or business or merge into or consolidate with any other
corporation (other than a wholly-owned subsidiary of the Company) or effect any
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of the Company is disposed of (collectively, a "Drag-
Along Transaction"), then, upon thirty (30) days written notice to the other
Stockholders and the Company (the "Drag-Along Notice"), which notice shall
include reasonable details of the proposed transaction, including the proposed
time and place of closing and the consideration to be received by the
Stockholders in such transaction, each Stockholder shall be obligated to, and
shall sell, transfer and deliver, or cause to be sold, transferred and
delivered, to such third party, all of his Equity Securities in the same
transaction at the closing thereof (and will deliver certificates for all of his
shares at the closing, free and clear of all liens, claims, or encumbrances
except those arising under this Agreement and the Amended and Restated
Investors' Rights Agreement of even date herewith). Each Common Holder shall
receive the same consideration per share on an as-converted to Common Stock
basis upon consummation of the Drag-Along Transaction as is received by the
holders of Preferred Shares after giving effect to any liquidation preference to
which any Person is entitled to pursuant to the Company's Certificate of
Incorporation, as amended; provided, however, that if within thirty (30) days of
receipt of the Drag-Along Notice, the Company irrevocably commits in writing to
use its best efforts to complete a firm commitment underwritten public offering
pursuant to an effective registration statement under the Securities Act
covering the offer and sale of the Company's Common Stock at a price per share
of not less than the price per share which the holders of the Equity Securities
(on an as-converted to
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Common Stock basis) would receive upon the consummation of the Drag-Along
Transaction (a "Qualified IPO"), then the closing of the Drag-Along Transaction
shall be suspended until the earlier of (i) one hundred twenty (120) days after
the Company so commits or (ii) the date the Company determines that it will be
unable to complete the Qualified IPO within such 120-day period.
7. Board of Directors.
(a) Composition. The Stockholders agree that, in any election of
directors of the Company (or action by written consent in lieu thereof), they
shall vote all shares of capital stock of the Company owned or controlled by
them (or act by written consent) to elect a Board of Directors comprised of
seven members designated as follows:
(i) two directors (the "Common Directors"), each of whom shall
be an executive officer of the Company designated by the holders of a
majority of the then-outstanding Common Stock (currently Art Zeile and
Xxxx Xxxx);
(ii) one director (the "Series A Director") designated by the
holders of a majority of the then-outstanding Series A Preferred Stock
(currently X. Xxxxx Xxxxxxx) so long as at least 1,650,000 shares of
Series A Preferred Stock remain outstanding;
(iii) two directors (the "Series B Directors") designated by the
holders of a majority of the then-outstanding Series B Preferred
Stock, of which one member shall be designated by First Union Capital
Partners, Inc. (initially Xxxxx Xxxxxx) and one member shall be
designated by Meritage Private Equity Fund, L.P. (initially X. Xxxxxxx
Xxxxxxxxxx, Jr.), in each case so long as such Stockholder and its
affiliates continues to hold at least 1,149,851 shares of Series B
Preferred Stock; and
(iv) two independent directors (the "Outside Directors")
selected by the holders of a majority of the then-outstanding Common
Stock and approved by the holders of a majority of the then-
outstanding Series A and Series B Preferred Stock (currently Xxxxxxx
X. Xxxxx and a director to be determined).
The obligation to vote shares in accordance with this Section 7 shall be
specifically applicable to and enforceable against any transferees of the
parties hereto.
(b) Vacancies; Removal. In the event of any vacancy in the Board of
Directors, each of the Stockholders agree to vote all shares of stock owned or
controlled by them and to otherwise use their best efforts to fill such vacancy
so that the Board of Directors of the Company will include directors designated
as provided in Section 7(a) above. Each of the Stockholders agrees to vote all
shares of stock owned by them for the removal of a director whenever (but only
whenever) there shall be presented to the Board of Directors the written
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direction that such director be removed executed by the person or persons
entitled to designate such director pursuant to Section 7(a).
(c) Meetings. The Board of Directors shall hold regularly scheduled
meetings as determined by a majority of the Board of Directors. The Company
will give each Director written notice at least three (3) days (24 hours, in the
case of a telephone meeting) in advance of all meetings of the Board of
Directors and all meetings of committees of the Board of Directors. If the
Company proposes to take any action by written consent in lieu of a meeting of
its Board of Directors or any committee thereof, the Company shall give written
notice thereof to each such Director prior to the effective date of such consent
describing in reasonable detail the nature and the substance of such action.
(d) Expenses and Insurance. The Company shall reimburse all persons
serving as directors, consistent with the Company's policies for such
reimbursement, if any, for their actual and reasonable out-of-pocket expenses
incurred in attending meetings of the Board of Directors and all committees
thereof. In addition, the Company shall maintain directors' and officers'
liability insurance from reputable insurers of sound financial standing in such
amounts as shall be reasonably requested by the Board of Directors.
(e) Compensation Committee of the Board of Directors. The Board of
Directors shall establish a compensation committee (the "Compensation
Committee") to which it shall delegate the authority to take all actions with
respect to the Option Plan. The Compensation Committee shall consist of four
members, one of which shall be a Common Director who is also an officer of the
Company (which person shall be a non-voting member), two of which shall be the
Series B Directors and one of which shall be an Outside Director.
8. Legend. Each existing or replacement certificate for shares
now owned by the Purchasers and Company Holders shall bear the following legend
upon its face:
"THE OWNERSHIP, VOTING, TRANSFER, ENCUMBRANCE, PLEDGE, ASSIGNMENT OR
OTHER DISPOSITION OF THIS CERTIFICATE AND THE SHARES OF STOCK
REPRESENTED THEREBY, ARE SUBJECT TO THE RESTRICTIONS CONTAINED IN A
STOCKHOLDERS' AGREEMENT AMONG THE COMPANY AND CERTAIN STOCKHOLDERS.
COPIES OF THE AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE
SECRETARY OF THE COMPANY."
9. Public Offering. In the event that the Board of Directors of the
Company approves an initial public offering of the Common Stock of the Company,
each of the Company Holders shall take all necessary or desirable actions in
connection with the consummation of the initial public offering. In the event
that such public offering is an underwritten offering and the managing
underwriters advise the Company in writing that in their opinion the current
capital structure may adversely affect the marketability of the offering, each
of the Company Holders
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shall consent to and vote for a recapitalization, reorganization and/or exchange
of the Company's capital stock into securities that the managing underwriters
and the Board of Directors find acceptable and shall take all necessary or
desirable actions in connection with the consummation of the recapitalization,
reorganization and/or exchange; provided that the resulting securities reflect
and are consistent with the rights and preferences set forth in the Company's
Certificate of Incorporation as in effect immediately prior to such public
offering.
10. "Market Stand-Off" Agreement. Each Company Holder hereby agrees
that, during the period of duration (not to exceed one-hundred eighty (180) days
in the case of the Company's initial public offering or 90 days in any
subsequent registration) specified by the Company and an underwriter of Common
Stock or other securities of the Company following the effective date of the
Company's registration statement in connection with its initial firm-commitment
underwritten offering of Common Stock or other securities to the general public,
it shall not, to the extent requested by the Company or such underwriter,
directly or indirectly sell, offer to sell, contract to sell (including, without
limitation, any short sale), grant any option to purchase or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) any
securities of the Company held by it, except Common Stock or other securities
included in such registration. In order to enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to such securities of
each Company Holder (and the shares or securities of every other person subject
to the foregoing restriction) until the end of such period. This covenant shall
survive termination of this Agreement pursuant to Section 13.
11. Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable overnight courier service
(charges prepaid), or transmitted by facsimile or electronic mail (with request
for immediate confirmation of receipt in a manner customary for communications
of such type and with physical delivery of the communication being made by one
of the other means specified in this Section as promptly as practicable
thereafter). Such notices, demands and other communications shall be addressed
(i) in the case of a Stockholder, to his or its address as is designated in
writing from time to time by such party, (ii) in the case of the Company, to its
principal office, and (iii) in the case of any transferee of a party to this
Agreement or its transferee, to such transferee at its address as designated in
writing by such transferee to the Company from time to time.
12. Assignment of Rights. This Agreement and the rights and
obligations of the parties hereunder shall inure to the benefit of, and be
binding upon, the parties' respective successors, assigns and legal
representatives; provided, however, that the rights of the Stockholders
hereunder are only assignable to an assignee or transferee (i) who acquires all
of the securities of the Company held by the transferring Stockholder on the
date hereof or, if less than all, securities representing at least fifty percent
(50%) of the securities of the Company held by such transferring Stockholder as
of the date of this Agreement, or (ii) or to a transferee described in the first
sentence of Section 5, and it shall be a requirement of such transfer that such
assignee shall then become a party to this Agreement.
10
13. Term. This Agreement shall terminate upon the earlier of (i) the
closing of a firm commitment underwritten public offering pursuant to an
effective registration statement under the Securities Act covering the offer and
sale of the Company's Common Stock (x) at a price per share of not less than
$26.00 (as adjusted for stock splits, reverse stock splits and the like effected
after the date of this Agreement), (y) resulting in gross proceeds to the
Company of not less than $50,000,000, and (z) after which the Common Stock is
either listed on a national securities exchange or traded in the NASDAQ National
Market System (a "Qualified Public Offering"); (ii) ten years from the date of
this Agreement; (iii) the acquisition of the Company by another entity by means
of any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation) that results in the
Company's stockholders immediately prior to such transaction not holding (by
virtue of such shares or securities issued solely with respect thereto) at least
50% of the voting power of the surviving or continuing entity; (iv) a sale,
conveyance or disposition of all or substantially all of the assets of the
Company unless the Company's stockholders immediately prior to such transaction
will, as a result of such sale, conveyance or disposition hold (by virtue of
securities issued as consideration for such sale, conveyance or disposition) at
least 50% of the voting power of the purchasing entity; or (v) the effectuation
by the Company or its stockholders of a transaction or series of related
transactions that results in the Company's stockholders immediately prior to
such transaction not holding (by virtue of such shares or securities issued
solely with respect thereto) at least 50% of the voting power of the Company.
14. Entire Agreement. This instrument contains the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all other agreements between or among any of the parties with respect
to the subject matter hereof and cannot be altered or otherwise amended except
pursuant the terms of Section 17 below. This Agreement shall be interpreted
under the laws of the State of Colorado without reference to its principles of
conflicts of law.
15. Attorneys' Fees. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
16. Further Instruments and Actions. The parties agree to execute
such further instruments and to take such further action as may reasonably be
necessary to carry out the intent of this Agreement. The parties further agree
to cooperate affirmatively with the Company, to the extent reasonably requested
by the Company to enforce rights and obligations to this Agreement.
17. Amendments and Waivers. Any term of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of at least seventy-five percent (75%) of the outstanding
Preferred Shares; provided, however, that any amendment or waiver adversely
affecting the rights of the persons holding Common Shares and not similarly
adversely affecting the rights of holders of Preferred Shares shall require the
written consent of a majority in interest of the outstanding Common Shares. Any
amendment or waiver effected in
11
accordance with this Section shall be binding upon the Company and all
Stockholders and their respective successors and assigns.
18. Rights; Separability. Unless otherwise expressly provided
herein, a Company Holder's rights hereunder are several rights, not rights
jointly held with any other Company Holder. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
12
IN WITNESS WHEREOF, this Agreement has been duly executed effective as
of the date and year first above written.
INFLOW, INC.
By: /s/ Art Zeile
___________________________________
Art Zeile
President and Chief Executive Officer
Address: 0000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, XX 00000
PURCHASERS:
MERITAGE PRIVATE EQUITY FUND, L.P.
MERITAGE PRIVATE EQUITY PARALLEL FUND, L.P.
MERITAGE ENTREPRENEURS FUND, L.P.
By Meritage Investment Partners, LLC
General Partner
By: /s/ X. Xxxxxxx Xxxxxxxxxx, Jr.
___________________________________
X. Xxxxxxx Xxxxxxxxxx, Jr.
Managing Member
Address: 0000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, XX 00000
FIRST UNION CAPITAL PARTNERS, INC.
By: /s/ X. Xxxxx Xxxxxxx III
___________________________________
X. Xxxxx Xxxxxxx III
Senior Vice President
Address: 000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
00
XXXXX XXXX XXXXXX SBIC FUND, L.P.,
by Sixty Wall Street SBIC Corporation, its General
Partner
By: __________________________________
Its: __________________________________
Address: 000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
X.X. XXXXXX INVESTMENT CORPORATION
By: __________________________________
Its: __________________________________
Address: 000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Xxxxx X. Xxxxxxxxx
___________________________________
Xxxxx X. Xxxxxxxxx
Manager of Operations
Address: 000 Xxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
XXXXXXXX, XXXXXX AND XXXXX II, X.X.
Xxxxxxxx, Xxxxxx & Xxxxx LLC,
General Partner
By: /s/ Xxxxx Van Genderen
____________________________________
Xxxxx Van Genderen, Partner
Address: Republic Plaza
000 00xx Xxxxxx
Xxxxx 0000
Xxxxxx, XX 00000
14
/s/ Art Zeile
--------------------------------------
Art Zeile
/s/ Xxxx Xxxx
--------------------------------------
Xxxx Xxxx
COMMON HOLDERS:
/s/ Art Zeile
--------------------------------------
Art Zeile
/s/ Xxxx Xxxx
--------------------------------------
Xxxx Xxxx
/s/ Xxxxxxx X. Xxxxx
--------------------------------------
Xxxxxxx X. Xxxxx
15
INVESTORS' RIGHTS AGREEMENT
COUNTERPART AND ACKNOWLEDGEMENT
-------------------------------
TO: INFLOW, INC.
RE: Amended and Restated Investors' Rights Agreement dated as of October 28,
1999 by and among InFlow, Inc. and certain other persons set forth therein
(as amended, the "Agreement")
The undersigned hereby agrees to be bound by the terms of the Agreement,
and shall be entitled to all benefits of an "Investor" (as defined in the
Agreement and as modified herein) pursuant to the Agreement, as fully and
effectively as through the undersigned had executed a counterpart of the
Agreement together with the other parties to the Agreement. The undersigned
hereby acknowledges having received and reviewed a copy of the Agreement.
IN WITNESS WHEREOF, the parties have executed this Counterpart and
Acknowledgement as of December ___, 1999.
INVESTOR:
XXXX INFLOW TRUST
/s/ Xxxx Xxxxx Xxxx
---------------------------------------
Xxxx Xxxxx Xxxx, Trustee
Address:
-------------------------------------
-------------------------------------
-------------------------------------
AGREED TO AND ACKNOWLEDGED:
INFLOW, INC.
By: /s/ Art Zeile
------------------------------------------------
Art Zeile, President and Chief Executive Officer
By: /s/ Xxxx Xxxx
------------------------------------------------
Xxxx Xxxx, Chief Operating Officer and Secretary
Address: 000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
INVESTORS' RIGHTS AGREEMENT
COUNTERPART AND ACKNOWLEDGEMENT
TO: InFlow, Inc.
RE: Amended and Restated Investors' Rights Agreement dated as of October 28,
1999 by and among InFlow, Inc. and certain other persons set forth therein
(as amended, the "Agreement")
The undersigned hereby agrees to be bound by the terms of the Agreement,
and shall be entitled to all benefits of an "Investor" (as defined in the
Agreement and as modified herein) pursuant to the Agreement, as fully and
effectively as through the undersigned had executed a counterpart of the
Agreement together with the other parties to the Agreement. The undersigned
hereby acknowledges having received and reviewed a copy of the Agreement.
IN WITNESS WHEREOF, the parties have executed this Counterpart and
Acknowledgement as of December ___, 1999.
INVESTOR:
ZEILE INFLOW TRUST
/s/ Xxxx Xxxxx
---------------------------------------
Xxxx Xxxxx, Trustee
Address:
-------------------------------------
-------------------------------------
-------------------------------------
AGREED TO AND ACKNOWLEDGED:
INFLOW, INC.
By: /s/ Art Zeile
------------------------------------------------
Art Zeile, President and Chief Executive Officer
By: /s/ Xxxx Xxxx
------------------------------------------------
Xxxx Xxxx, Chief Operating Officer and Secretary
Address: 000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
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