SERIES A PREFERRED STOCK PURCHASE AGREEMENT
Dated as of
December 16, 1999
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TABLE OF CONTENTS
1. Purchase and Sale of Stock............................................1
1.1. Sale and Issuance of Series A Preferred Stock................1
1.2. Closing......................................................1
1.3. Delivery.....................................................1
2. Representations and Warranties of the Company.........................2
2.1. Organization, Good Standing and Qualification................2
2.2. Capitalization...............................................2
2.3. Subsidiaries.................................................3
2.4. Liabilities..................................................3
2.5. Authorization................................................3
2.6. Valid Issuance of Preferred and Common Stock.................3
2.7. Governmental Consents........................................4
2.8. Litigation...................................................4
2.9. Compliance with Other Instruments............................4
2.10. Brokers or Finders...........................................5
3. Representations and Warranties of the Investors.......................5
3.1. Experience...................................................5
3.2. Purchase Entirely for Own Account............................5
3.3. Rule 144.....................................................6
3.4. No Public Market.............................................6
3.5. Access to Data...............................................6
3.6. Authorization................................................6
3.7. Principal Address............................................7
4. Conditions of the Investors' Obligations at Closing...................7
4.1. Representations and Warranties...............................7
4.2. Performance..................................................7
4.3. Compliance Certificate.......................................7
4.4. Absence of Litigation........................................7
4.5. Blue Sky.....................................................7
4.6. Opinion of Company Counsel...................................8
4.7. Supporting Documents.........................................8
4.8. Other Agreements.............................................8
4.9. Restated Certificate.........................................8
4.10. Stock Incentive Plan.........................................8
5. Conditions of the Company's Obligations at the Closing................8
5.1. Representations and Warranties...............................8
5.2. Performance..................................................9
5.3. Compliance Certificate.......................................9
5.4. Blue Sky.....................................................9
5.5. Other Agreements.............................................9
5.6. Absence of Litigation........................................9
5.7. Restated Certificate.........................................9
5.8. Stock Incentive Plan.........................................9
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6. Participation Rights.................................................10
7. Miscellaneous........................................................10
7.1. Governing Law...............................................10
7.2. Survival....................................................11
7.3. Successors and Assigns......................................11
7.4. Entire Agreement; Amendment.................................11
7.5. Notices, Etc................................................11
7.6. Delays or Omissions.........................................11
7.7. California Corporate Securities Law.........................12
7.8. Expenses....................................................12
7.9. Counterparts................................................12
7.10. Severability................................................12
7.11. Dispute Resolution..........................................12
Exhibits:
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Exhibit A List of Investors
Exhibit B License Agreement
Exhibit C Amended and Restated Certificate of Incorporation
Exhibit D Form of Opinion of Company Counsel
Exhibit E Stockholders Agreement
Exhibit F Common Stock Purchase Agreement
Exhibit G Warrants
Exhibit H 1999 Stock Incentive Plan
Exhibit I Form of DTN Promissory Note
Exhibit J Form of Opinion of DTN Counsel
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This Series A Preferred Stock Purchase Agreement (this "Agreement") is
made as of December 16, 1999 (the "Effective Date"), by and among EarthScan
Network Inc., a Delaware corporation (the "Company"), with its principal offices
located at 0000 Xxxxxxxx Xxxxxxx, Xxxxxxxxxxx, Xxx Xxxxxx, 00000 and the
Investors listed on Exhibit A attached hereto, each of which is referred to
herein as an "Investor" and all of which are collectively referred to herein as
the "Investors."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
1.1. Sale and Issuance of Series A Preferred Stock. Subject to the
terms and conditions of this Agreement, each Investor agrees to purchase and the
Company agrees to sell and issue to each Investor on the Closing Date, that
number of shares of Series A Preferred Stock set forth opposite such Investor's
name on Exhibit A hereto, with a fair market value as of the Closing Date of
$100.00 (One Hundred Dollars) per share. The shares of Series A Preferred Stock
to be sold to the Investors pursuant to this Agreement are collectively referred
to herein as the "Shares." In exchange for its Shares, Data Transmission Network
Corporation ("DTN") will pay to the Company in cash the aggregate amount of
$500,000 (Five Hundred Thousand U.S. Dollars) and will execute and deliver to
the Company the promissory note with an initial outstanding principal amount
equal to $2,500,000 (Two Million Five Hundred Thousand U.S. Dollars) in the form
attached hereto as Exhibit I (the "Promissory Note"). In exchange for its
Shares, Photon Research Associates, Inc. ("PRA") will grant to the Company the
exclusive licenses and other rights as set forth in the License Agreement
attached hereto as Exhibit B (the "License Agreement"). The Shares will have the
powers, rights, preferences, privileges and restrictions set forth in the
Amended and Restated Certificate of Incorporation, in the form attached hereto
as Exhibit C (the "Restated Certificate").
1.2. Closing. The closing of the purchase and sale of the Shares
hereunder (the "Closing") shall take place at the offices of Xxxxxx & Xxxxxxx,
000 "X" Xxxxxx, Xxx Xxxxx, Xxxxxxxxxx, at 10:00 a.m. on December 28, 1999, or at
such other time and place as the Company and the Investors mutually agree (the
"Closing Date").
1.3. Delivery. On the Closing Date, the Company will deliver to each
Investor a certificate or certificates registered in such Investor's name
representing the Shares purchased by the Investor, as set forth on Exhibit A
hereto, against (i) payment by DTN to the Company, by check or wire transfer, of
the cash portion of the purchase price for its Shares, together with the
execution and delivery of the Promissory Note, representing payment in full of
the purchase price for its Shares and (ii) execution and delivery of the License
Agreement by PRA, representing payment in full of the purchase price for its
Shares. In addition to the foregoing, each party will deliver at the Closing
such other agreements, instruments, documents and certificates which are
referred to in Sections 4 and 5 hereof. Immediately following the Closing, the
issuance of Shares will be recorded in the Company's share register.
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2. Representations and Warranties of the Company. Except as affected by
the transactions contemplated hereby, the Company hereby represents and warrants
to the Investors as of the date hereof and as of the Closing as follows:
2.1. Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
own its properties and carry on its business as currently conducted and as it is
currently planned to be conducted. The Company is duly qualified to do business
as a foreign corporation in each state in which the failure to do so could
reasonably be expected to result in a material adverse effect on the Company.
2.2. Capitalization. As of the date hereof and immediately prior to
the issuance of the Shares (i) the authorized capital stock of the Company
consists of 200,000 shares of Common Stock, and 100,000 shares of Preferred
Stock, of which 60,000 are designated Series A Preferred Stock (the "Series A
Stock") and 40,000 remain undesignated; and (ii) the Company has reserved 60,000
shares of Common Stock for issuance upon conversion of the Shares, 9,000 shares
of Common Stock for issuance to key employees pursuant to the Company's 1999
Stock Incentive Plan, 4,000 shares of Common Stock for issuance to certain key
employees, consultants and officers of the Company pursuant to the Common Stock
Purchase Agreement executed concurrently herewith, and 1,500 shares of Common
Stock for issuance upon exercise of certain Warrants (defined below) issued to
the Company's financial advisor concurrently herewith. Except as contemplated by
this Agreement, the Stockholders Agreement (defined below), the License
Agreement and the Warrants, there are no other outstanding rights, options,
warrants, preemptive rights, rights of first refusal or similar rights for the
purchase or acquisition from the Company (or any of its subsidiaries) of any
securities of the Company (or any of its subsidiaries) nor are there any
commitments to issue or execute any such rights, options, warrants, preemptive
rights or rights of first refusal. Neither the offer nor the issuance or sale of
the Shares constitutes an event, under any anti-dilution provisions of any
securities issued or issuable by the Company or any agreements with respect to
the issuance of securities by the Company, which will either increase the number
of shares issuable pursuant to such provisions or decrease the consideration per
share to be received by the Company pursuant to such provisions. Except as
provided in this Agreement, no holder of any security of the Company is entitled
to any preemptive or similar rights to purchase any securities of the Company
from the Company.
2.3. Subsidiaries. The Company does not own or control, directly or
indirectly, any interest in any other corporation, limited liability company,
trust, association or other business entity. The Company is not a participant in
any joint venture, partnership or similar arrangement.
2.4. Liabilities. The Company has no material liabilities or
obligations, absolute or contingent except liabilities and obligations that (i)
were incurred in the ordinary course of business or (ii) are set forth on
Schedule 2.4 attached hereto.
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2.5. Authorization. All corporate action on the part of the Company,
its officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement and each of such documents included
herein as Exhibits to this Agreement, hereinafter referred to as the "Ancillary
Documents," the performance of all obligations of the Company hereunder and
thereunder, and the authorization, issuance (or reservation for issuance), sale
and delivery of the Shares being sold hereunder and the Common Stock issuable
upon conversion of the Shares has been taken and this Agreement and the
Stockholders Agreement constitute valid and legally binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, subject to: (i) judicial principles limiting the availability of specific
performance, injunctive relief, and other equitable remedies; (ii) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect generally relating to or affecting creditors' rights; and (iii)
limitations on the enforceability of any indemnification provisions.
2.6. Valid Issuance of Preferred and Common Stock. The Shares being
purchased by the Investors hereunder, when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration expressed
herein, will be duly and validly issued, fully paid, and nonassessable, and will
be free of restrictions on transfer other than restrictions on transfer under
this Agreement and the Ancillary Documents and under applicable state and
federal securities laws. The Common Stock issuable upon conversion of the Shares
purchased under this Agreement has been duly and validly reserved for issuance
and, upon issuance in accordance with the terms of this Agreement and the
Restated Certificate, will be duly and validly issued, fully paid, and
nonassessable and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and the Ancillary Documents and
under applicable state and federal securities laws.
2.7. Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority, on the part of
the Company is required in connection with the offer, sale or issuance of the
Shares (and the Common Stock issuable upon conversion of the Shares) or the
consummation of any other transaction contemplated hereby, except for the
following: (i) the filing of a notice of exemption pursuant to Section 25102(f)
of the California Corporate Securities Law of 1968, as amended (the "California
Securities Law"), which shall be filed by the Company promptly following the
Closing; and (ii) the compliance with other applicable state and federal
securities laws, which compliance will have occurred within the appropriate time
periods therefor. Assuming that the representations of the Investors set forth
in Section 3 below are true and correct, the offer, sale and issuance of the
Shares in conformity with the terms of this Agreement are exempt from the
registration requirements of Section 5 of the Securities Act of 1933, as amended
(the "Securities Act"), and from the qualification requirements of Section 25110
of the California Securities Law.
2.8. Litigation. There is no action, suit, proceeding or
investigation pending or, to the best of the Company's knowledge, currently
threatened before any court, administrative agency or other governmental body
(nor, to best of the Company's knowledge, is there any basis for any such
action, suit, proceeding or investigation), which (i) would reasonably be
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expected to have a material adverse effect on the condition (financial or
otherwise), business, property, assets or liabilities of the Company, taken as a
whole, or (ii) would reasonably be expected to have an adverse effect on the
ability of the Company to consummate the transactions contemplated by this
Agreement or the Ancillary Documents, or which otherwise challenges or seeks to
prevent, enjoin, alter or materially delay the transactions contemplated by this
Agreement or the Ancillary Documents. The Company is not a party or subject to,
and none of the assets of the Company is bound by, the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality. To the best knowledge of the Company, the Company has not been
threatened with any action or proceeding under any business or zoning ordinance,
law or regulation.
2.9. Compliance with Other Instruments. The business and operations
of the Company have been and are being conducted in all material respects in
accordance with all applicable laws, rules and regulations of all governmental
authorities. The Company is not in violation or default of any provision of its
Certificate of Incorporation or By-laws, each as amended and in effect as of the
Closing. The Company is not in violation or default of any provision of any
instrument, mortgage, deed of trust, loan, contract, commitment, judgment,
decree, order or obligation to which it is a party or by which it or any of its
properties or assets are bound which would materially adversely affect the
condition (financial or otherwise), business, property, assets or liabilities of
the Company or of any provision of any federal, state or local statute, rule or
governmental regulation which would materially adversely affect the condition
(financial or otherwise), business, property, assets or liabilities of the
Company, taken as a whole. The execution, delivery and performance of and
compliance with this Agreement and the Ancillary Documents and the issuance and
sale of the Shares will not result in any such violation, be in conflict with or
constitute, with or without the passage of time or giving of notice, a default
under any such provision, require any consent or waiver under any such provision
(other than any consents or waivers that have been obtained), or result in the
creation of any mortgage, pledge, lien, encumbrance or charge upon any of the
properties or assets of the Company pursuant to any such provision. The Company
is not subject to any legal or contractual restriction which would prohibit it
from entering into or performing its obligations under this Agreement or the
Ancillary Documents.
2.10. Brokers or Finders. Except for the issuance of the Warrants
and payment of $180,000 in fees to the Company's financial advisor, Xxxxxxxx,
Xxxxxxx & Xxxxxxx, the Company has not engaged any brokers, finders or agents
and the Investors have not incurred, and will not incur, directly or indirectly,
as a result of any action taken by the Company, any liability for brokerage or
finders' fees or agents' commissions or any similar charges in connection with
this Agreement and the transactions it contemplates. The Company agrees to
indemnify and hold harmless the Investors from any liability for any commission
or compensation in the nature of a finder's fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Investors
or any of their respective officers, partners, employees or representatives is
responsible as a result of any action taken by the Company, except for fees
disclosed in the preceding sentence.
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3. Representations and Warranties of the Investors. Each Investor
severally and not jointly hereby represents and warrants as of the date hereof
and as of the Closing as follows:
3.1. Experience. Such Investor is experienced in evaluating start-up
companies such as the Company, and has either individually or through its
current officers such knowledge and experience in financial and business matters
that such Investor is capable of evaluating the merits and risks of the
Investor's prospective investment in the Company, and has the ability to bear
the economic risks of the investment. Investor is an "accredited investor"
within the meaning of Rule 501 promulgated under the Securities Act.
3.2. Purchase Entirely for Own Account. Such Investor is acquiring
the Shares (and the Common Stock issuable upon conversion of the Shares) for
investment for such Investor's own account and not with the view to, or for
resale in connection with, any distribution thereof. Such Investor understands
that the Shares (and the Common Stock issuable upon conversion of the Shares)
have not been registered under the Securities Act by reason of a specific
exemption from the registration provisions of the Securities Act which depends
upon, among other things, the bona fide nature of the investment intent as
expressed herein. Such Investor further represents that it does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to any third person with respect to any of the
Shares (or any Common Stock acquired upon conversion thereof). Such Investor
understands and acknowledges that the offering of the Shares pursuant to this
Agreement will not, and any issuance of Common Stock on conversion may not, be
registered under the Securities Act on the ground that the sale provided for in
this Agreement and the issuance of securities hereunder is exempt from the
registration requirements of the Securities Act.
3.3. Rule 144. Such Investor acknowledges that the Shares (and the
Common Stock issuable upon conversion of the Shares) must be held indefinitely
unless subsequently registered under the Securities Act or an exemption from
such registration is available. Such Investor is aware of the provisions of Rule
144 promulgated under the Securities Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions. Such Investor covenants that, in the absence of an effective
registration statement covering the stock in question, such Investor will sell,
transfer, or otherwise dispose of the Shares (and any Common Stock issued on
conversion thereof) only in a manner consistent with the such Investor's
representations and covenants set forth in this Section 3. In connection
therewith, such Investor acknowledges that the Company will make a notation on
its stock books regarding the restrictions on transfers set forth in this
Section 3 and will transfer securities on the books of the Company only to the
extent not inconsistent therewith.
3.4. No Public Market. Such Investor understands that no public
market now exists for any of the securities issued by the Company, and there is
no assurance that a public market will ever exist for the Shares (or the Common
Stock issuable upon conversion of the Shares).
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3.5. Access to Data. Such Investor has received and reviewed
information about the Company and has had an opportunity to discuss the
Company's business, management and financial affairs with its management and to
review the Company's facilities. Such Investor understands and acknowledges that
such discussions, as well as any written information issued by the Company, (i)
were intended to describe the aspects of the Company's business and prospects
which the Company believes to be material, but were not necessarily an
exhaustive description, and (ii) may have contained forward-looking statements
involving known and unknown risks and uncertainties which may cause the
Company's actual results in future periods or plans for future periods to differ
materially from what was anticipated and that no representations or warranties
were or are being made with respect to any such forward-looking statements or
the probability of achieving any of the results projected in any of such
forward-looking statements, except that the Company represents that all such
written information was prepared in good faith with a reasonable basis.
3.6. Authorization. Each of this Agreement and the Stockholders
Agreement when executed and delivered by such Investor will constitute a valid
and legally binding obligation of such Investor, enforceable in accordance with
its terms subject to: (i) judicial principles limiting the availability of
specific performance, injunctive relief, and other equitable remedies and (ii)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect generally relating to or affecting creditors' rights.
4. Conditions of the Investors' Obligations at Closing. The obligation
of each Investor to purchase Shares at the Closing is subject to the fulfillment
on or before the Closing Date of each of the following conditions by the
Company, the waiver of which shall not be effective against any Investor who
does not consent in writing thereto:
4.1. Representations and Warranties. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of the Closing Date.
4.2. Performance. Each party thereto (other than such Investor)
shall have performed and complied with all agreements, obligations and
conditions contained in this Agreement and the Ancillary Documents that are
required to be performed or complied with by it on or before the Closing Date.
4.3. Compliance Certificate. The President or Chief Executive
Officer of the Company shall deliver to each Investor on the Closing Date a
certificate stating that the conditions specified in Sections 4.1 and 4.2 have
been fulfilled.
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4.4. Absence of Litigation. No action, suit, or proceeding shall be
threatened, instituted or pending before any court or administrative agency of
any federal, state or local jurisdiction seeking an injunction, judgment, order,
decree, ruling, or charge which would prevent consummation of any of the
transactions contemplated by this Agreement or cause any of the transactions
contemplated by this Agreement to be rescinded following consummation.
4.5. Blue Sky. The Company shall have obtained all necessary permits
and qualifications, if any, or secured an exemption therefrom, required by any
state or country prior to the offer and sale of the Shares.
4.6. Opinion of Company Counsel. Each Investor shall have received
from Xxxxxx & Xxxxxxx, counsel for the Company, an opinion with respect to the
Shares, dated as of the Closing Date, in the form attached hereto as Exhibit D.
(a) A copy of resolutions of the Board of Directors of the
Company certified by the secretary of the Company authorizing and
approving the execution, delivery and performance of this Agreement;
(b) A certificate of incumbency executed by the secretary of
the Company certifying the names, titles and signatures of the officers
authorized to execute this Agreement and further certifying that the
Restated Certificate of the Company delivered to legal counsel for the
Investors at the time of the execution of this Agreement have been
validly adopted and have not been amended or modified.
4.8. Other Agreements. Each party thereto (other than such Investor)
shall have entered into: (i) the Stockholders Agreement between the Company and
certain named investors of even date herewith and attached in the form as
Exhibit E (the "Stockholders Agreement"); and (ii) the License Agreement. The
Company shall have entered into (a) the Common Stock Purchase Agreement in the
form attached hereto as Exhibit F (the "Common Agreement"); and (b) the five
year warrant to purchase 1,500 shares of Common Stock in the form attached
hereto as Exhibit G (the "Warrants").
4.9. Restated Certificate. The Restated Certificate shall have been
filed with the Secretary of State of the State of Delaware.
4.10. Stock Incentive Plan. The Company's Board of Directors shall
have adopted and approved the 1999 Stock Incentive Plan of the Company (the
"Stock Option Plan") in the form attached hereto as Exhibit H.
5. Conditions of the Company's Obligations at the Closing. The
obligations of the Company to each Investor under this Agreement are subject to
the fulfillment on or before the Closing Date of each of the following
conditions by that Investor:
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5.1. Representations and Warranties. The representations and
warranties of each Investor contained in Section 3 shall be true on and as of
the Closing Date with the same effect as though such representations and
warranties had been made on and as of the Closing Date.
5.2. Performance. Each Investor shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Closing
Date.
5.3. Compliance Certificate. An executive officer of each Investor
shall deliver to the Company at the Closing Date a certificate stating that the
conditions specified in Sections 5.1 and 5.2 have been fulfilled.
5.4. Blue Sky. The Company shall have obtained all necessary permits
and qualifications, if any, or secured an exemption therefrom, required by any
state for the offer and sale of the Shares.
5.5. Other Agreements. Each party thereto other than the Company
shall have entered into the: (i) Stockholders Agreement; (ii) the License
Agreement; (iii) the Common Agreement; and (iv) the Warrants.
5.6. Absence of Litigation. No action, suit, or proceeding shall be
threatened, instituted or pending before any court or administrative agency of
any federal, state or local jurisdiction seeking an injunction, judgment, order,
decree, ruling, or charge which would prevent consummation of any of the
transactions contemplated by this Agreement or cause any of the transactions
contemplated by this Agreement to be rescinded following consummation.
5.7. Restated Certificate. The Restated Certificate shall have been
filed with the Secretary of State of the State of Delaware.
5.8. Stock Incentive Plan. The Company's Board of Directors shall
have adopted and approved the Stock Incentive Plan.
5.9 Promissory Note. DTN shall have executed and delivered the
Promissory Note to the Company.
5.10 Opinion of DTN Counsel. The Company shall have received from
Xxxxxxxx Xxxxxx & Xxxxxxx, counsel for DTN, an opinion with respect to the
Promissory Note, dated as of the Closing Date, in the form attached hereto as
Exhibit J.
6. Participation Rights
6.1. The Company agrees that if it proposes to issue additional
equity securities or any instruments, options, warrants, convertible securities
or other rights for or convertible into additional equity securities
(collectively, "New Equity Securities"), each holder of Shares (or any Common
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Stock issued upon conversion thereof) shall be entitled to purchase a percentage
of such New Equity Securities to be issued by the Company equal to the
percentage of the Company's aggregate outstanding Shares (and any Common Stock
issued upon conversion thereof) held by such stockholder. If a holder elects not
to purchase all of the New Equity Securities to which it is entitled, then each
of the other such holders shall be entitled to purchase its proportionate share
of such New Equity Securities.
6.2. The rights set forth in Section 6.1 shall not apply to:
(a) shares issued in connection with acquisitions by the
Company or any of its subsidiaries of businesses or assets;
(b) shares issued to strategic partners of the Company or any
of its subsidiaries pursuant to transactions approved by the Company's
Board of Directors;
(c) shares reserved for issuance upon exercise of options or
warrants granted or to be granted to officers, directors, employees and
consultants of the Company or any of its subsidiaries and approved by
the Board of Directors of the Company;
(d) shares issued or issuable in connection with credit lines
and equipment financing and leasing;
(e) shares issued upon exercise or conversion of options,
warrants or convertible securities;
(f) shares issued pursuant to a registered public offering;
and
(g) shares issued in connection with stock splits, stock
dividends and similar events.
6.3. The rights set forth in this Section 6 shall terminate without
further action by the Company or any holder of Shares upon completion of a
firmly underwritten public offering by the Company.
7. Miscellaneous
7.1. Governing Law. This Agreement shall be governed in all respects
by the laws of the State of Delaware without regard to choice of laws or
conflict of laws provisions thereof.
7.2. Survival. The representations, warranties, covenants and
agreements made herein shall survive the closing of the transactions
contemplated hereby.
7.3. Successors and Assigns. Except as otherwise 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;
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provided, however, that the rights of each Investor to purchase Shares shall not
be assignable without the consent of the Company and the other Investor in their
sole discretion.
7.4. Entire Agreement; Amendment. This Agreement and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement among the parties with regard to the subjects hereof and thereof.
Neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought.
Notwithstanding the foregoing, holders of a majority of the outstanding Shares
(whether or not converted) may waive or amend, on behalf of each Investor and
other holders of Shares, any provisions hereof benefiting the Investors so long
as the effect thereof will be that all such Investors and other holders of
Shares will be treated equally.
7.5. Notices, Etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, return receipt requested, or otherwise
delivered by hand or by messenger, addressed (a) if to an Investor at such
Investor's address set forth on Exhibit A to this Agreement or at such other
address as such Investor shall have furnished to the Company in writing, or (b)
if to any other holder of any Shares, at such address as such holder shall have
furnished the Company in writing, or, until any such holder so furnishes an
address to the Company, then to and at the address of the last holder of such
Shares who has so furnished an address to the Company, or (c) if to the Company,
at its address set forth on the first page of this Agreement addressed to the
attention of the Corporate Secretary, or at such other address as the Company
shall have furnished to the Investors. If notice is provided by mail, notice
shall be deemed to be given upon proper deposit in a mailbox.
7.6. Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any holder of any Shares upon any breach or
default of the Company under this Agreement shall impair any such right, power
or remedy of such holder, nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any holder of any breach or default under this
Agreement, or any waiver on the part of any holder of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing or as provided in this
Agreement. All remedies, either under this Agreement or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
7.7. California Corporate Securities Law. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
13
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SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM THE QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
7.8. Expenses. The Company and each Investor shall bear their own
expenses and legal fees incurred on their behalf with respect to this Agreement
and the transactions contemplated hereby.
7.9. Counterparts. This Agreement may be executed in any number of
counterparts and signatures may be delivered by facsimile, each of which shall
be enforceable against the parties actually executing such counterparts, and all
of which together shall constitute one instrument.
7.10. Severability. If any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, portions of such provision, or such provision in its entirety, to the
extent necessary, shall be severed from this Agreement and the balance of this
Agreement shall be enforceable in accordance with its terms.
7.11. Dispute Resolution. Any dispute, claim or controversy arising
under this Agreement or in any way related to this Agreement, or its
interpretation, enforceability or inapplicability that cannot be resolved by
mutual agreement of the parties shall be submitted to binding arbitration. The
arbitration shall be conducted by a single arbitrator mutually agreed upon by
the parties or, if no arbitrator is mutually selected within thirty (30) days of
a demand therefor, then by a retired judge from the Judicial Arbitration and
Mediation Service/Endispute ("JAMS") office located in San Diego, California.
The arbitration shall be conducted in San Diego, California in accordance with
the Commercial Arbitration Rules of the American Arbitration Association. The
arbitration award shall be final and binding, and judgment on the award may be
entered in any court having jurisdiction thereof. The parties hereby consent to
the consolidation of any arbitration hereunder with any arbitration commenced
under the License Agreement, the Stockholders Agreement, the Common Stock
Purchase Agreement and/or the Warrants.
[SIGNATURE PAGE FOLLOWS]
14
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMPANY: EARTHSCAN NETWORK INC.
By:/s/ Xxxx Xxxxxx
------------------------------
Xxxx Xxxxxx
Title: President
By:/s/ Xxxxx Xxx Xxxxx
------------------------------
Xxxxx Xxx Xxxxx
Title:Corporate Secretary
INVESTORS: DATA TRANSMISSION NETWORK CORPORATION
By:/s/Xxxx X. Xxxxx
------------------------------
Xxxx X. Xxxxx
Title:President & COO
By:/s/ Xxxxx X. Xxxxxx
------------------------------
Xxxxx X. Xxxxxx
Title:SVP & CFO
PHOTON RESEARCH ASSOCIATES, INC.
By:/s/ Xxxxx X. Xxxx
-------------------------------
Xxxxx X. Xxxx
Title: CO-COB
By:/s/ Xxxxx Xxx Xxxxx
------------------------------
Xxxxx Xxx Xxxxx
Title:Corporate Secretary/Treasurer
15
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Exhibit A
List of Investors
"The reporting person agrees to furnish supplementally a copy of this omitted
Exhibit to the Securities and Exchange Commission upon request."
16
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Exhibit B
License Agreement
LICENSE AGREEMENT
THIS LICENSE AGREEMENT ("Agreement") is made as of December 16, 1999
(the "Effective Date") by and between Photon Research Associates, Inc., a
California corporation ("Licensor") and EarthScan Network Inc., a Delaware
corporation ("Licensee"), with reference to the following facts:
A. Licensor has developed and owns certain Technology.
B. Licensee is desirous of licensing and exploiting the Technology, on
the terms and conditions set forth within this Agreement.
NOW THEREFORE, in consideration of the foregoing and of the mutual
promises hereinafter set forth, as well as other good and valuable
consideration, the sufficiency of which is hereby acknowledged, the parties
agree as set forth below.
1. Definitions.
a. "Affiliate" shall mean any corporation or other business entity,
in whatever country organized, which, directly or indirectly, controls, is
controlled by or is under common control with Licensee. "Control" as used in
this definition shall mean the ownership of more than 50% of the issued share
capital or the legal power to direct or cause the direction of the general
management and policies of the party in question, by contract or otherwise.
b. "Documentation" means (i) the internal source code (including,
without limitation, all comments and procedural code, flow charts, schematics,
statements of principles of operations and architecture standards) for the
software included in the Licensed Products (other than Third Party Software);
(ii) development process documents (including schematics, diagrams and flow
charts) prepared in connection with the development of the Licensed Products
(other than Third Party Software); and (iii) the end user manual for the
Licensed Products.
c. "Improvements" means and comprises any correction, modification,
alteration, enhancement, improvement, update or revision to the Licensed
Products or the Documentation.
d. "Intellectual Property" means and comprises any patents, patent
applications, copyrights and copyright applications and trade secrets of
Licensor claiming or embodied in the Licensed Products, the Documentation or the
Improvements thereto.
e. "Know How" means and comprises technical data and information in
Licensor's possession necessary or helpful for Licensee to make, have made and
use the Licensed Products, the Documentation or any Improvements thereto,
including, but not limited to, techniques, methods, formulations, plans,
specifications, programs, schematics, designs and other similar information.
17
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f. "Licensed Products" means and comprises the "Tierra Station"
system and related software which incorporates or is derived in part from the
Technology and is described in Exhibit "A" attached hereto, but excluding any
Third Party Software.
g. "Technology" means and comprises the Know-How and Intellectual
Property.
h. "Third Party Software" means and comprises those software
programs owned by third parties which are used in connection with or are
integrated with the Licensed Products, as set forth on Exhibit "B" attached
hereto.
2. Grant of Licenses.
a. Technology License. Subject to the terms and conditions of this
Agreement, Licensor hereby grants to Licensee an exclusive (even as against
Licensor), worldwide, fully-paid, perpetual license, with rights to sublicense,
to (i) use, test, update, upgrade, enhance, modify, lease and sell the tangible
elements of the Technology, Licensed Products and Licensor's Improvements to
Licensed Products and Documentation to ingest, process, store and disseminate
information to customers within the Field of Exploitation (as defined in Section
2(b) below) and (ii) reproduce, make derivative works of, publicly perform,
publicly display in any form or medium, whether now known or later developed,
distribute, make and have made, use and sell any of the Technology and all
intangible elements of the Licensed Products and Documentation and Licensor's
Improvements to Licensed Products and Documentation for the purposes of
developing and marketing products and services of Licensee within the Field of
Exploitation. Notwithstanding the foregoing, Licensee will not sublicense,
distribute, lease or sell all or any portions of the Technology, Licensed
Products or Documentation or Licensor's Improvements thereto to third parties
without the prior approval of Licensee's Board of Directors.
b. Field of Exploitation. "Field of Exploitation" means all
commercial applications or markets for information disseminated through the
Licensed Products and any Improvements thereto, but excluding the exploitation
in any manner of Licensed Products and any Improvements thereto in military or
government intelligence applications or markets worldwide. Notwithstanding the
foregoing, if Licensor desires to exploit the Licensed Products or any
Improvements thereto in a commercial application or market that is otherwise
included in the Field of Exploitation, Licensor may so indicate its desire by
written notice to Licensee and Data Transmission Network Corporation ("DTN").
Within thirty (30) days following receipt of such notice, Licensee shall convene
a meeting of its Board of Directors, who shall consider such commercial
application or market described in Licensor's notice, and the Licensee's Board
of Directors shall determine whether Licensee shall (i) pursue such application
or market (in which case Licensee shall then use commercially reasonable efforts
to pursue such application or market, in light of Licensee's then-current
business plan and product development plan) or (ii) elect not to pursue such
application or market. However, if Licensee's Board of Directors is evenly split
on whether or not to pursue any such application or market and all of the
directors appointed by DTN (pursuant to Section ___ of that certain Stockholders
Agreement between Licensor, Licensee, DTN and other persons of even date
herewith) have voted to pursue such appplication or market, then such
application or market shall remain included in the Field of Exploitation
18
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regardless of whether Licensee pursues such application or market. If Licensee's
Board of Directors elects not to pursue any such application or market or the
Board is at an impasse other than under the circumstances described in the
preceding sentence, then such application or market shall thereafter be deemed
excluded from the Field of Exploitation and Licensor may pursue the exploitation
of such application or market independently.
c. Third Party Software. Notwithstanding any provision of this
Agreement to the contrary, Licensee acknowledges and agrees that the use of
Third Party Software is required to achieve the intended functionality of the
Licensed Products, that Licensee must independently obtain its own licenses to
use the Third Party Software, and that Licensor is not licensing or otherwise
providing to Licensee any rights to the Third Party Software or the
documentation related thereto. Licensor makes no representation or warranty
whatsoever concerning the Third Party Software or related documentation, or the
ability of Licensee to obtain the rights to use such software or related
documentation.
d. Ownership. The entire rights, title and interest in and full
ownership of the Licensed Products, Documentation and Technology, and all
Improvements and copies thereof, together with all Intellectual Property rights
claiming or embodied in the foregoing, shall remain exclusively with and the
exclusive property of Licensor, subject only to the right and license expressly
granted to Licensee herein. This Agreement does not provide Licensee with title
or ownership of the Licensed Products, Documentation or Technology, or any
Improvements thereto, but only a right of limited use.
3. Improvements.
a. Licensee Improvements. To the extent developed, written, or
conceived by Licensee or its agents or contractors after the Effective Date,
Licensee shall own all Improvements and all technology, know-how and
intellectual property claiming or embodied in such Improvements or the documents
related thereto (to the extent not already licensed to Licensee hereunder).
Licensee agrees to promptly disclose and deliver to Licensor all such
Improvements during the Term of this Agreement. Licensee hereby grants to
Licensor a non-exclusive, worldwide, fully-paid, perpetual license, with rights
to sublicense, to (i) use, test, update, upgrade, enhance, modify, lease and
sell the tangible elements of the technology, know-how and intellectual property
claiming or embodied in Licensor's Improvements to Licensed Products and
Documentation to ingest, process, store and disseminate information to customers
outside the Field of Exploitation and (ii) reproduce, make derivative works of,
publicly perform, publicly display in any form or medium, whether now known or
later developed, distribute, make and have made, use and sell all intangible
elements of Licensee's Improvements to Licensed Products and Documentation for
the purposes of developing and marketing products and services of Licensor
outside of the Field of Exploitation.
b. Licensor Improvements. To the extent developed, written, or
conceived by Licensor or its agents or contractors, Licensor shall own all
Improvements and all Technology claiming or embodied in such Improvements or the
documents related thereto. Licensor agrees to promptly disclose and deliver to
Licensee all such Improvements during the Term of this Agreement. All
Improvements by Licensor during the Term of this Agreement shall become a part
19
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of the Technology upon creation and subject to the licenses granted under
Section 2 and the other terms and conditions of this Agreement.
4. Non-Disclosure of Information.
a. Confidentiality Obligation. Each party shall keep in confidence,
use only for the purposes and as expressly authorized herein, and prevent the
disclosure to any person or persons (outside its organization or to any
unauthorized person or persons) of all of the ideas, processes, trade secrets,
inventions, discoveries, know-how, other technical research and development, and
commercial and proprietary information disclosed to such party by the other
party (collectively, "Proprietary Information"). Each party's obligation to keep
Proprietary Information of the other in confidence will include disclosing
Proprietary Information to employees or agents of such party only as necessary
for the performance of such party's obligations under this Agreement, requiring
third parties to whom such party discloses Proprietary Information to enter into
confidentiality obligations similar to those included in this Paragraph, marking
written copies of Proprietary Information as "Confidential/Proprietary Trade
Secret Information" and maintaining similar markings on files in which
Proprietary Information is stored. Either party shall have the right to disclose
Proprietary Information of the other to any sublicensee, subject to its first
obtaining the written agreement of such sublicensee to abide by the provisions
of this Section 4.
b. Information Not Included. Proprietary Information, as defined in
Paragraph 4(a), does not include any information which:
(i) was in the public domain at the time it was disclosed;
(ii) was independently known to a party at the time of
disclosure as shown by documentation sufficient to establish such knowledge,
from a source not subject to confidentiality obligations to the other party; or
(iii) was disclosed to a party by third parties not subject to
confidentiality obligations to the other party.
c. Documents. All documents, books, notebooks, papers, drawings,
sketches, formulas (or copies of extracts thereof), and other data of any kind
and description pertaining to the Proprietary Information (collectively,
"Proprietary Documents") that have been or will be disclosed by one party to the
other party have been or will be disclosed with a clear understanding by the
receiving party that they contained or will contain information valuable to the
disclosing party. The receiving party shall make only one copy of the
Proprietary Documents and Documentation (other than the end user manual) to
create an archive copy for use as a backup. Upon termination of this Agreement,
each party will promptly deliver to the other party all Proprietary Documents
and Documentation of the other party, including all copies of the Proprietary
Documents and Documentation in its possession.
d. Compelled Disclosure. In the event that a party or anyone to whom
such party transmits any Proprietary Information or Proprietary Documents of the
other party in accordance with this Agreement is legally requested (by oral
questions, interrogatories, request for information or documents, subpoena,
20
-234-
civil investigative demand or similar process) or otherwise required to disclose
any Proprietary Information or Proprietary Documents of the other party, such
party will provide the other party with notice, prior to disclosing such
Proprietary Information or Proprietary Documents, so that the other party may
seek an appropriate protective order and/or waive compliance with this
Agreement. If, in the absence of a protective order or the receipt of a waiver
hereunder, such party is nonetheless legally compelled to disclose such
information, it may, without liability hereunder, furnish that portion of such
Proprietary Information or Proprietary Documents.
5. [Intentionally Omitted.]
6. Marking Products. Licensee shall appropriately xxxx all Licensed Products
(and components thereof) as reasonably required by Licensor from time to time.
7. Representations and Warranties. Licensor represents and warrants to Licensee
and DTN as of the Effective Date that: (a) Licensor has the right, power and
authority to grant the licenses granted in this Agreement and to perform its
obligations hereunder; (b) the Technology does not infringe any U.S. or foreign
patent, trademark or copyright of any third party, nor is Licensor aware of any
threatened claim of any such infringement; (c) Licensor is not aware of any
third-party products which infringe on its proprietary rights in the Technology;
(d) this Agreement constitutes valid and legally binding obligations of
Licensor, enforceable against Licensor in accordance with its terms, subject to:
(i) judicial principles limiting the availability of specific performance,
injunctive relief, and other equitable remedies; (ii) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
generally relating to or affecting creditors' rights; and (iii) limitations on
the enforceability of indemnification provisions; (e) except with respect to
Third Party Software and hardware manufactured by third parties included in the
Licensed Products, for which no representation or warranty is made hereunder,
Licensor is the owner of all right, title and interest in and to the Licensed
Products and Technology and has not granted licenses thereunder to any other
entity in the Field of Exploitation; (f) except with respect to Third Party
Software and hardware manufactured by third parties included in the Licensed
Products, for which no representation or warranty is made hereunder, the
Licensed Products are free from defects in manufacture, materials and design;
(g) the Licensed Products function on the machines and with operating systems
for which they are designed; and (h) the Licensed Products conform to the
specifications and functions set forth in the Documentation. Licensor further
represents and warrants to Licensee and DTN that neither the performance nor the
functionality of the Licensed Products will be affected by any changes to the
date format or date calculations within any part of the Licensed Products either
before, during or after the year 2000. Without limiting the generality of the
foregoing, Licensor represents and warrants that the Licensed Products are year
2000 compliant. Year 2000 compliant means fault-free performance in the
processing of date and date-related data (including, but not limited to,
calculating, comparing and sequencing) by the Licensed Products, individually
and in combination, as a system. Fault-free performance means (i) no invalid or
incorrect results or abnormal termination will occur prior to, during and after
January 1, 2000 as a result of date or date-related data or data processing;
(ii) proper calculation and handling of leap years; and (iii) except for normal
user interfaces (e.g. four digit date entry) identified in the Documentation,
such date data processing shall be transparent to a user. Except as provided in
this Section 7, Licensor makes no representations or warranties, express or
implied, concerning this Agreement, the Technology, the Documentation or the
21
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Licensed Products. The representations and warranties of Licensor under this
Section 7 shall survive for a period of five years from and after the Effective
Date. Any claim for a breach of such representations and warranties or
indemnification in respect thereof must be asserted in writing with
particularity against Licensor prior to the expiration of such five-year period.
EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN THIS SECTION 7, LICENSOR
DISCLAIMS ALL OTHER WARRANTIES, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT
LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NON-INFRINGEMENT OR ARISING FROM A COURSE OF DEALING OR USAGE IN TRADE.
8. Indemnification.
a. Except for claims which are subject to Licensor's indemnification
as set forth in Section 8(b) below, Licensee hereby indemnifies and agrees to
hold harmless Licensor and its officers, directors and shareholders from and
against any and all claims, demands, and actions, and any liabilities, damages,
or expenses resulting therefrom, including court costs and reasonable attorneys'
fees, resulting from the manufacture or use (or misuse) of Licensed Products,
Documentation or Technology (or any Improvements thereto made by Licensee) by
Licensee or its Affiliates or any breach of Licensee's obligations under this
Agreement. Licensee's obligations under this Section 8(a) shall survive the
termination of this Agreement for any reason. Licensor agrees to give Licensee
prompt notice of any such claim, demand, or action and to cooperate in the
defense and settlement of said claim, demand, or action as reasonably requested
by Licensee; provided, that Licensee shall reimburse Licensor for all reasonable
expenses incurred by such cooperation. Licensee shall not settle any such claim,
demand or action without the prior written consent of Licensor, not to be
unreasonably withheld or delayed.
b. Licensor hereby indemnifies and agrees to hold harmless Licensee
and DTN and their respective officers and directors from and against any and all
claims, demands, and actions, and any liabilities, damages, or expenses
resulting therefrom, including court costs and reasonable attorneys' fees,
resulting from a breach of Licensor's representations and warranties or
covenants set forth herein. Subject to Section 7, Licensor's obligations under
this Section 8(b) shall survive the termination of this Agreement for any
reason. Licensee and DTN agree to give Licensor prompt notice of any such claim,
demand, or action and to cooperate in the defense and settlement of said claim,
demand, or action as reasonably requested by Licensor; provided, that Licensor
shall reimburse Licensee and DTN for all reasonable expenses incurred by such
cooperation. If Licensee's use of the Licensed Products or Improvements thereto
made by Licensor is enjoined, Licensee agrees to allow Licensor at Licensor's
option and expense, to either secure the right for Licensee to continue to
exercise its rights in such Licensed Products or Improvements, or to replace or
modify them in an equivalent manner so they become noninfringing. Licensee
hereby agrees that Licensor shall have no liability for or with respect to
infringement actions or claims to the extent that they arise by reason or result
from: (a) modification of Licensed Products or Improvements other than by
Licensor; or (b) Licensee's failure to utilize an updated or modified version
provided by Licensor; or (c) Licensor's compliance with Licensee's designs,
plans or specifications; or (d) the combination of non-infringing items with
items not supplied or specified by Licensor; provided, the infringement
described in (a) through (d) would have been avoided but for such modification,
use, compliance or combination; or (e) any infringement claim in which Licensee
22
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has an interest. Licensee shall indemnify Licensor from all claims and expenses,
including reasonable attorneys' fees, which are occasioned by the exceptions
stated in the preceding sentence of this paragraph.
9. Enforcement of Intellectual Property.
a. Enforcement. Licensee, at its sole expense, shall have the first
right, but not the obligation, to enforce all proprietary rights in the
Technology with respect to any suspected infringement of such proprietary rights
in the Field of Exploitation which occurs in whole or in part prior to the
termination of this Agreement and, subject to Section 9(c), to retain any
recovery arising out of the prosecution of such actions. Licensee shall promptly
notify Licensor if it becomes aware of any suspected infringement by third
parties of any proprietary rights in the Technology. Licensor shall have the
non-exclusive right to enforce the proprietary rights in the Technology with
respect to any suspected infringement in the Field of Exploitation which occurs,
if after thirty (30) days after Licensee's receipt of Licensor's request for
Licensee to initiate an action, Licensee has not initiated an action to enforce
such proprietary rights with respect to such infringement. Licensee shall
cooperate with Licensor in any such action at Licensor's request and expense,
but Licensee shall not be obligated to become a party to any such proceeding
unless the laws of the jurisdiction in which the action is to be filed preclude
Licensor from enforcing the proprietary rights in the Technology without joining
Licensee as a party. Licensor shall be entitled to any recovery from any
proceeding it pursues at its sole expense under this Section 9. Licensor shall
have the exclusive right to enforce all proprietary rights in the Technology
with respect to any suspected infringement outside the Field of Exploitation.
b. Right to Intervene. Each party shall have the right to intervene
in any action relating to an infringement of the Technology in the Field of
Exploitation brought by the other party, at the intervening party's sole
expense.
c. Joint Action. If any action relates to infringing activities
described above under Section 9(a) and the parties jointly participate in the
proceeding (in more than name only), each bearing their own expenses, then the
parties shall equitably share the recovery.
10. Termination.
a. Termination. This Agreement shall be effective as of the
Effective Date and shall continue in effect until terminated as provided in
Section 10(b) below (the "Term").
b. Termination Rights. This Agreement may be terminated, without
liability to the party terminating:
(i) By Licensee, upon 90 days' notice to Licensor.
(ii) By a party, immediately upon notice to the other party,
if:
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(1) that other party makes a general assignment of all or
substantially all of its assets for the benefit of its creditors;
(2) that other party applies for, consents to, or
acquiesces in the appointment of a receiver, trustee, custodian, or liquidator
for its business or all or substantially all of its assets;
(3) that other party files, or consents to or acquiesces
in, a petition seeking relief or reorganization under any bankruptcy or
insolvency laws; or
(4) a petition seeking relief or reorganization under any
bankruptcy or insolvency laws is filed against that other party and is not
dismissed within 90 days after it was filed.
(iii) By a party, immediately upon notice to the other party,
if the other party's material breach of this Agreement continues uncured or
uncorrected for 30 days after notice; provided, however, if the breaching party
(i) reasonably requires longer than 30 days to cure or correct such breach
within such 30-day period, and (ii) notifies the non-breaching party of the
circumstances requiring such longer period to cure or correct such breach and
the breaching party's plans to cure or correct such breach, then the cure period
shall be extended for such reasonable time as may be so required to effect such
cure or correction, subject to a maximum of 180 days, so long as during that
time the breaching party diligently acts in accordance with such plan to effect
that cure or correction.
c. Effect of Termination. Upon the termination of this Agreement:
(i) The rights and licenses granted hereby to Licensee shall
immediately terminate, notwithstanding the designation of such licenses as
perpetual hereunder; and
(ii) The rights and licenses granted hereby to Licensor under
Section 3(a) shall immediately terminate, notwithstanding the designation of
such licenses as perpetual hereunder;
(iii) each party shall immediately return to the other all
physical embodiments of all technology and Proprietary Information, including
all Proprietary Documents and documentation, owned by the other party. Each
party shall thereafter cease to use the technology and any Proprietary
Information, including all Proprietary Documents and documentation, of the other
party; and
(iv) notwithstanding the termination of license rights granted
to a party, said license rights shall survive such termination solely with
respect to those products (including improvements thereto) which have been sold,
leased or distributed to third parties during the Term of this Agreement.
24
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11. Limitation of Liability. In no event shall Licensor's total cumulative
liability to Licensee and/or DTN (considered in the aggregate), if any, for all
claims of any kind resulting from Licensor's breach of its representations and
warranties hereunder or indemnification in respect thereof or otherwise arising
from or relating to a breach of such representations and warranties, exceed
$3,000,000 in the aggregate. IN THE EVENT OF ANY CONFLICT BETWEEN THIS SECTION
11 AND ANY OTHER PROVISION OF THIS AGREEMENT, THIS SECTION 11 SHALL CONTROL.
THIS SECTION 11 SHALL APPLY NOTWITHSTANDING ANY FAILURE OF REMEDY HEREUNDER.
12. Miscellaneous.
a. Entire Agreement; Modifications. This Agreement contains the
entire agreement between the parties hereto with respect to the transactions
contemplated hereby, and contains all of the terms and conditions thereof and
supersedes all prior agreements and understandings relating to the subject
matter hereof. No changes or modifications of or additions to this Agreement
shall be valid unless the same shall be in writing and signed by each party
hereto.
b. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any one or more of the
provisions hereof shall not affect the validity and enforceability of the other
provisions hereof.
c. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties, their successors and assigns.
d. Waivers. No waiver of any of the provisions of this Agreement
shall be deemed to be or shall constitute a waiver of any other provision of
this Agreement, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver of any provision of this Agreement shall be binding
on the parties hereto unless it is executed in writing by the party making the
waiver.
e. Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and by overnight courier with next-day
delivery, and shall be effective as of the delivery date shown by such overnight
courier's documentation if sent postage prepaid, and properly addressed to the
following addresses:
If to Licensor:
Photon Research Associates, Inc.
0000 Xxxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Attention: Xxxxx Xxxxx, Corporate Secretary
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If to Licensee:
EarthScan Network Inc.
0000 Xxxxxxxx Xxxxxxx
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxx Xxxxxx, President
If to DTN:
Data Transmission Network Corp.
0000 X Xxxxx Xxxx., Xxxxx 000
Xxxxx, Xxxxxxxx 00000-0000
Attention: Xxxx Xxxxx, President
Either party may change the address to which notices to such party are to be
addressed by giving the other party hereto written notice of such change in the
manner herein set forth.
f. Governing Law. This Agreement is made and shall be governed by,
and construed and enforced in accordance with (i) the laws of the United States
of America and (ii) the internal laws of the State of California, without regard
to the conflict of laws principles thereof, as the same apply to agreements
executed solely by residents of California and wholly to be performed within
California.
g. Dispute Resolution. Any dispute, claim or controversy arising
under this Agreement or in any way related to this Agreement, or its
interpretation, enforceability or inapplicability that cannot be resolved by
mutual agreement of the parties shall be submitted to binding arbitration. The
arbitration shall be conducted by a single arbitrator mutually agreed upon by
the parties or, if no arbitrator is mutually selected within thirty (30) days of
a demand therefor, then by a retired judge from the Judicial Arbitration and
Mediation Service/Endispute ("JAMS") office located in San Diego, California.
The arbitration shall be conducted in San Diego, California in accordance with
the Commercial Arbitration Rules of the American Arbitration Association. The
arbitration award shall be final and binding, and judgment on the award may be
entered in any court having jurisdiction thereof. The parties hereby consent to
the consolidation of any arbitration hereunder with any arbitration commenced
under the Series A Preferred Stock Purchase Agreement, the Stockholders
Agreement, the Common Stock Purchase Agreement and/or the Warrants.
h. Independent Contractors. Each party is engaged in an independent
business and shall perform its obligations under this Agreement as an
independent contractor and not as an agent or representative of any other party.
Neither party shall have any right or authority to create any obligation or make
any representation or warranty in the name or on behalf of the other party. This
Agreement shall not be interpreted or construed to create an association, joint
venture or partnership between the parties or to impose any partnership
obligation or liability upon any party.
i. Attorneys' Fees. In any arbitration or other legal action
hereunder, the prevailing party shall be entitled, in addition to any other
26
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relief granted, to all actual out-of-pocket costs and expenses incurred by such
prevailing party in connection with such arbitration or action and the
enforcement and collection of any judgment rendered therein, including, without
limitation, all reasonable attorneys' fees, consultant fees and expert witness
fees, and a right to such costs and expenses shall be deemed to have accrued
upon the commencement of such action and shall be enforceable whether or not
such action is prosecuted to judgment.
j. Survival. The parties hereto agree that, upon termination or
expiration of this Agreement for any reason, Sections 1, 2(d), 4, 8, 10(c), 11
and 12 shall survive.
k. No Third-Party Benefits. None of the provisions of this Agreement
shall be for the benefit of, or enforceable by, any third-party beneficiary;
provided, however, that DTN shall be an express third-party beneficiary of the
representations and warranties set forth in Section 7 and the indemnification
provisions in Section 8(b) but in connection therewith shall be subject to the
provisions of Sections 4, 11 and 12 hereof.
l. Counterparts. This Agreement may be executed in several
counterparts all of which together shall constitute one and the same instrument
with the same force and effect as though each of the parties had executed the
same document.
m. Headings. The Section and Subsection headings used herein are for
convenience of reference only, are not a part of this Agreement and are not to
affect the construction of, or be taken into consideration in interpreting, any
provision of this Agreement.
n. Bankruptcy. THE PARTIES INTEND FOR THIS AGREEMENT AND THE
LICENSES GRANTED HEREUNDER PRIOR TO THE DATE OF TERMINATION PURSUANT TO THE
TERMS HEREOF TO COME WITHIN SECTION 365(n) OF THE U.S. BANKRUPTCY CODE AND,
NOTWITHSTANDING THE BANKRUPTCY OR INSOLVENCY OF LICENSOR OR LICENSEE, AS
APPLICABLE, THIS AGREEMENT AND THE LICENSES GRANTED HEREIN SHALL REMAIN IN FULL
FORCE AND EFFECT SO LONG AS LICENSEE OR LICENSOR, AS APPLICABLE, IS IN MATERIAL
COMPLIANCE WITH THE TERMS AND CONDITIONS HEREOF.
o. Compliance with Export Regulations. Licensee shall at all times
comply with all export control statutes and regulations of the United States and
foreign governments in effect from time to time, including the Export
Administration Regulations of the U.S. Department of Commerce. Licensee shall
not: (i) ship, transfer or export the Licensed Products or underlying
information or Technology or any Improvements thereto into any country to which
the U.S. has embargoed goods; or (ii) let it be used by anyone on the U.S.
Treasury Department's list of Specially Designated Nationals or the U.S.
Commerce Department's Table of Denial Orders. By using the Licensed Products or
any Improvements thereto, Licensee acknowledges the foregoing and represents and
warrants that it is not under the control of a national or resident of any such
country or on any such list.
[SIGNATURE PAGE FOLLOWS]
27
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IN WITNESS HEREOF, the parties hereto have executed this Agreement as
of the Effective Date.
Photon Research Associates, Inc.
By:/s/ Xxxxx X. Xxxx
----------------------------
Xxxxx X. Xxxx
Title: COB
By:/s/ Xxxxx Xxx Xxxxx
----------------------------
Xxxxx Xxx Xxxxx
Title: Corporate Secretary/Treasurer
EarthScan Network Inc.
By:/s/ Xxxx Xxxxxx
------------------------
Xxxx Xxxxxx
Title: President
By:/s/ Xxxxx Xxx Xxxxx
-----------------------------
Xxxxx Xxx Xxxxx
Title: Corporate Secretary/Treasurer
28
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EXHIBIT A
Description of Licensed Products
"The reporting person agrees to furnish supplementally a copy of this omitted
exhibit to the Securities and Exchange Commission upon request."
29
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EXHIBIT B
Description of Third Party Software
Microsoft Windows NT Server 4.0 (Includes Internet Information Server 4.0)
Microsoft Windows SQL Server 7.0 with Internet Extension
Microsoft Windows Visual Studio 6.0
ESRI MapObjects 2.0 and Internet Map Server 2.0
Research Systems, Inc.'s Interactive Data Language (IDL) 5.2
30
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Exhibit C
Amended and Restated Certificate of Incorporation
"The reporting person agrees to furnish supplementally a copy of this omitted
Exhibit to the Securities and Exchange Commission upon request."
31
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Exhibit D
Form of Opinion of Company Counsel
"The reporting person agrees to furnish supplementally a copy of this omitted
Exhibit to the Securities and Exchange Commission upon request."
32
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Exhibit E
Stockholders Agreement
THIS STOCKHOLDERS AGREEMENT (the "Agreement") is entered into as of
December 16, 1999 (the "Effective Date"), by and among EarthScan Network Inc., a
Delaware corporation (the "Company"), the persons set forth on the Schedule of
Preferred Stockholders attached hereto as Exhibit A (the "Preferred
Stockholders"), the persons set forth on the Schedule of Common Stockholders
attached hereto as Exhibit B (the "Founders"), and Xxxxxxxx, Xxxxxxx & Xxxxxxx,
LLC ("Warrant Holder"). The Preferred Stockholders, the Founders and the Warrant
Holder are referred to herein as the "Investors."
RECITALS
WHEREAS, concurrently herewith the Company and the Preferred
Stockholders are entering into a Series A Preferred Stock Purchase Agreement of
even date herewith (the "Preferred Agreement"), pursuant to which the Company
shall sell, and the Preferred Stockholders shall acquire, shares of the
Company's Series A Preferred Stock.
WHEREAS, concurrently herewith the Company and the Founders are
entering into a Common Stock Purchase Agreement of even date herewith (the
"Common Agreement"), pursuant to which the Company shall sell, and the Founders
shall acquire, shares of the Company's Common Stock. The shares of Common Stock
sold pursuant to the Common Agreement are collectively referred to as the
"Founder Shares."
WHEREAS, concurrently herewith the Company is granting to the Warrant
Holder certain five-year warrants to purchase 1,500 shares of the Company's
Common Stock ("the Warrants").
WHEREAS, the Company, the Preferred Stockholders, the Founders and the
Warrant Holder desire certain rights and are willing to undertake certain
obligations with respect to the outstanding securities of the Company which they
own or may acquire, as set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereto agree as follows:
SECTION 1.
Restrictions on Transferability;
Registration Rights
1.1 Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Affiliates" shall have the meaning set forth in Rule 405 of the
Securities Act.
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"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Company's Common Stock, par value $0.0001
per share.
"Common Stock Equivalents" shall mean all options ("Options") and stock
purchase rights ("Stock Purchase Rights") received by participants under the
Company's 1999 Stock Incentive Plan.
"Conversion Shares" shall mean the Common Stock issued or issuable upon
conversion of the Series A Preferred Stock or upon exercise of the Warrants.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute, and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
"Holder" shall mean (i) any Investor holding Registrable Securities and
(ii) any person holding Registrable Securities to whom the rights under this
Agreement have been transferred in accordance with Section 1.14 hereof, and
(iii) any holder of Common Stock Equivalents.
"Initiating Holders" shall mean any holder of Registrable Securities or
transferees of holders of Registrable Securities under Section 1.14 hereof who
in the aggregate are Holders of not less than fifty percent (50%) of the
Registrable Securities of Common Stock (including, without limiting the
definition of Conversion Shares, shares which will be issued upon the future
conversion of the Series A Preferred Stock or upon future exercise of the
Warrants).
"Permitted Transferee" means an Affiliate of any Investor or a Related
Party of any Investor.
"Qualified Public Offering" shall mean a firmly underwritten public
offering of Common Stock registered under the Securities Act, other than a
registration relating solely to a transaction under Rule 145 under the
Securities Act (or any successor thereto) or to an employee benefit plan of the
Company.
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.
"Registrable Common Stock" shall mean (i) the Common Stock; (ii) any
Common Stock or other securities issued or issuable with respect to the Common
Stock upon any stock split, stock dividend, recapitalization, or similar event;
provided, however, (x) the Registrable Common Stock shall not include
Registrable Securities, and (y) shares of Common Stock or other securities shall
only be treated as Registrable Common Stock if and so long as they have not been
(A) sold to or through a broker or dealer or underwriter in a public
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distribution or a public securities transaction, (B) sold in a transaction
exempt from the registration and prospectus delivery requirements of the
Securities Act under Section 4(1) thereof so that all transfer restrictions and
restrictive legends with respect thereto are removed upon the consummation of
such sale, (C) transferred in a transaction pursuant to which the registration
rights are not also assigned in accordance with Section 1.14 hereof, or (D)
become eligible for sale under Rule 144 of the Securities Act (or any similar or
successor rule).
"Registrable Securities" shall mean (i) the Conversion Shares; (ii) the
Founder Shares; (iii) Common Stock issued pursuant to the exercise of Options or
Stock Purchase Rights under the Company's 1999 Stock Incentive Plan; and (iv)
any Common Stock of the Company issued or issuable in respect to the Common
Stock referred to in clauses (i), (ii) and (iii) above by way of stock split,
stock dividend, recapitalization, or similar event; provided, however, that
shares of Common Stock or other securities shall only be treated as Registrable
Securities if and so long as they have not been (A) sold to or through a broker
or dealer or underwriter in a public distribution or a public securities
transaction, (B) sold in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under Section 4(1)
thereof so that all transfer restrictions and restrictive legends with respect
thereto are removed upon the consummation of such sale, (C) transferred in a
transaction pursuant to which the registration rights are not also assigned in
accordance with Section 1.14 hereof, or (D) become eligible for sale under Rule
144 of the Securities Act (or any similar or successor rule).
"Registration Expenses" shall mean all expenses incurred by the Company
in complying with Sections 1.5, 1.6 and 1.7 hereof, including, without
limitation, all registration, qualification, listing and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the Company and one
special counsel for the selling Holders, blue sky fees and expenses, and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company which shall
be paid in any event by the Company).
"Related Party" means an individual's spouse, issue, sibling, parent or
other member of his or her immediate family or a trust established for the
benefit of such person(s) for estate planning purposes.
"Restricted Securities" shall mean the securities of the Company
required to bear the legend set forth in Section 1.3 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder 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 securities registered by
the Holders, and all fees and disbursements of counsel for the Holders except as
provided under Registration Expenses.
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"Series A Preferred Stock" shall mean Series A Preferred Stock, $0.0001
par value per share, issued to certain Investors pursuant to that certain Series
A Preferred Stock Purchase Agreement of even date herewith.
"Shares" shall mean the Series A Preferred Stock sold to the Preferred
Stockholders pursuant to the Preferred Agreement, the Common Stock sold to
Founders pursuant to the Founders Agreements and the Warrants.
"Transfer" shall have the meaning set forth in Section 3.1 herein.
1.2 Restrictions. Subject to the provisions of Sections 2.1 and 2.2 of this
Agreement, neither the Shares nor the Conversion Shares may be sold, assigned,
transferred or pledged to any third party other than to a Permitted Transferee
of such Investor. Each Investor will cause any proposed purchaser, assignee,
transferee or pledgee of the Shares or the Conversion Shares held by such
Investor to assume the transferor's obligations under and agree to take and hold
such securities subject to the rights and upon the conditions and other
provisions specified in this Agreement, and, as applicable, the Series A
Preferred Stock Purchase Agreement and the Common Stock Purchase Agreement. The
provisions set forth in this Section 1.2 shall terminate immediately prior to
the consummation of a Qualified Public Offering.
1.3 Restrictive Legend. Each certificate representing (i) the Shares (other
than the Warrants), (ii) the Conversion Shares, and (iii) any other securities
issued in respect of the securities referenced in clauses (i) and (ii) upon any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event, shall (unless otherwise permitted by the provisions of Section 1.4 below)
be stamped or otherwise imprinted with a legend in the following form (in
addition to any legend required under applicable state securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE
ABSENCE OF SUCH REGISTRATION OR, IF THE COMPANY SO REQUESTS, UNLESS THE
COMPANY RECEIVES AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE
COMPANY) STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT."
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY."
Each Warrant shall bear the legends set forth above, but modified, as
appropriate, to replace the word "SHARES" with the word "WARRANTS". Each
Investor consents to the Company's making a notation on its records and giving
instructions to any transfer agent of the Restricted Securities in order to
36
-250-
implement the restrictions on transfer established in this Section 1.
1.4 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 1. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities, unless there is in
effect a registration statement under the Securities Act covering the proposed
transfer, the holder thereof shall give written notice to the Company of such
holder's intention to effect such transfer, sale, assignment or pledge. Each
such notice shall describe the manner and circumstances of the proposed
transfer, sale, assignment or pledge in sufficient detail to permit the Company
to ascertain transferor's compliance with this Section 1, 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, or (iii) any other evidence reasonably satisfactory to counsel to the
Company, 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 and the terms of 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 first
paragraph of the restrictive legend set forth in Section 1.3 above, except that
such certificate shall not bear such first paragraph of the restrictive legend
if, in the opinion of counsel for such holder and the Company, such legend is
not required in order to establish compliance with any provisions of the
Securities Act. Until the consummation of a Qualified Public Offering, each
certificate evidencing Restricted Securities transferred as above provided shall
bear the second paragraph of the restrictive legend set forth in Section 1.3
above.
1.5 Requested Registration.
(a) Request for Registration. If the Company shall receive from
Initiating Holders a written request that the Company effect any registration,
qualification or compliance, the Company will:
(i) promptly give written notice of the proposed registration,
qualification or compliance to all other Holders; and
(ii) as soon as practicable, and in any event within 120 days, use
its best efforts to effect such registration, qualification or compliance
(including, without limitation, the execution of an undertaking to file
post-effective amendments, appropriate qualification under applicable blue sky
or other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act 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
37
-251-
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 thirty (30)
days after receipt of such written notice from 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 1.5:
(1) In any particular jurisdiction in which the Company would
be required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required by the Securities
Act;
(2) Prior to six months following the effective date of a
Qualified Public Offering;
(3) During the period starting with the date sixty (60) days
prior to the Company's estimated date of filing of, and ending 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 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 and that the Company's
estimate of the date of filing such registration statement is made in good
faith;
(4) After the Company has effected two (2) such registrations
pursuant to this subparagraph 1.5(a), and each of such registrations has been
declared or ordered effective and the securities offered pursuant to each of
such registrations have been sold; or
(5) If the Company shall furnish to such Holders a
certificate, signed by the President or Chief Executive Officer of the Company,
stating that in the good faith judgment of the Board of Directors it would
adversely affect or would require the premature disclosure of any financing,
acquisition, disposition, or other corporate transaction, or would require the
Company to make public disclosure of information which would have a material
adverse effect on the Company, then the Company's obligation to use its best
efforts to register, qualify or comply under this Section 1.5 shall be deferred
for a period not to exceed one-hundred and twenty (120) days from the date of
receipt of written request from the Initiating Holders; provided, however, that
the Company may not utilize this right more than twice in any twelve (12) month
period.
Subject to the foregoing clauses (1) through (5), 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 pursuant to Section
1.5 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
1.5(a)(i). The right of any Holder to registration pursuant to Section 1.5 shall
be conditioned upon such Holder's participation in the underwriting arrangements
required by this Section 1.5 and the inclusion of such Holder's Registrable
Securities in the underwriting, to the extent requested, to the extent provided
herein.
38
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The Company shall (together with all Holders proposing to distribute
their securities through such underwriting) enter into and perform its
obligations under an underwriting agreement in customary form with the managing
underwriter selected for such underwriting by a majority in interest of the
Initiating Holders (which managing underwriter shall be reasonably acceptable to
the Company). Notwithstanding any other provision of this Section 1.5, if the
managing underwriter 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 held
by such Holders at the time of filing the registration statement. 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.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such person 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 during the period specified in Section
1.15.
1.6 Company Registration
(a) Notice of Registration. If at any 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 Rule 145
transaction, or (iii) a registration on any registration form that does not
permit secondary sales, the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests made within fifteen (15) days after receipt of such written notice from
the Company by any Holder, but only to the extent that such inclusion will not
diminish the number of securities included by the Company or by holders of the
Company's securities who have demanded such registration.
(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
1.6(a)(i). In such event, the right of any Holder to registration pursuant to
Section 1.6 shall be conditioned upon such Holder's participation in such
39
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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 and the other holders
distributing their securities through such underwriting) enter into and perform
its obligations under an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company (or by the
holders who have demanded such registration). Notwithstanding any other
provision of this Section 1.6, if the managing underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may exclude all Registrable Securities
from, or limit the number of Registrable Securities to be included in the
registration and underwriting on a pro rata basis based on the total number of
securities (including, without limitation, Registrable Securities) entitled to
registration pursuant to registration rights granted to the participating
Holders by the Company. 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 or other holder to the nearest 100 shares. If
any Holder or other holder disapproves of the terms of any such underwriting, he
or she 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 distribution during the period specified in Section
1.15.
(c) Right to Terminate Registration. The Company shall have the right
to terminate or withdraw any registration initiated by it under this Section 1.6
prior to the effectiveness of such registration, whether or not any Holder has
elected to include securities in such registration.
1.7 Registration on Form S-3
(a) The Company shall register (whether or not required by law to do
so) its Common Stock under the Exchange Act in accordance with the provisions of
the Exchange Act following the effective date of the first registration of any
securities of the Company on Form S-1 or any comparable or successor form or
forms, and the Company shall use its best efforts to qualify for registration on
Form S-3 or any comparable or successor form at such time.
(b) If any Holder or Holders of not less than twenty percent (20%) of
the Registrable Securities then outstanding requests that the Company file a
registration statement on Form S-3 (or any successor form to Form S-3) for a
public offering of shares of the Registrable Securities, the reasonably
anticipated aggregate price to the public of which, net of underwriting
discounts and commissions, 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 for the offering on such form. The
Company will (i) promptly give written notice of the proposed registration to
all other Holders, and (ii) as soon as practicable, use its best efforts to
40
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effect such registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and appropriate compliance
with applicable regulations issued under the Securities Act 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 thirty (30) days after receipt of the written notice from the Company
referred to in the preceding clause (i). The substantive provisions of Section
1.5(b) shall be applicable to each registration initiated under this Section
1.7.
(c) Notwithstanding the foregoing, the Company shall not be obligated
to take any action pursuant to this Section 1.7: (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) during the period
starting with the date sixty (60) days prior to the filing of, and ending on the
date six (6) months following the effective date of, any registration statement
(other than with respect to a registration statement relating to a Rule 145
transaction, an offering solely to employees or any other registration which is
not appropriate for the registration of Registrable Securities), provided that
the Company is actively employing in good faith all reasonable efforts to cause
such registration statement to become effective; or (iii) if the Company shall
furnish to such Holder a certificate signed by the President or Chief Executive
Officer of the Company stating that, in the good faith judgment of the Board of
Directors, it would adversely affect or would require the premature disclosure
of any financing, acquisition, disposition or other corporate transaction, or
would require the Company to make public disclosure of information which would
have a material adverse effect on the Company, then the Company's obligation to
use its best efforts to file a registration statement shall be deferred for a
period not to exceed one hundred twenty (120) days from the receipt of the
request to file such registration by such Holder or Holders; provided, however,
that the Company may not utilize this right more than twice in any twelve (12)
month period.
1.8 Limitations on Subsequent Registration Rights. From and after the date
hereof, the Company shall not enter into any agreement granting any holder or
prospective holder of any securities of the Company registration rights with
respect to such securities unless (i) such new registration rights, including
standoff obligations, are on a pari passu basis with those rights of the Holders
hereunder; or (ii) such new registration rights, including standoff obligations,
are subordinate to the registration rights granted Holders hereunder.
1.9 Expenses of Registration. All Registration Expenses incurred in
connection with any registration pursuant to Sections 1.5 and 1.6 shall be borne
by the Company, provided that the Company shall not be required to pay the
Registration Expenses of any registration proceeding begun pursuant to Section
1.5, the request of which has been subsequently withdrawn by the Initiating
Holders. In such case, (i) the Holders of Registrable Securities to have been
registered shall bear all such Registration Expenses pro rata on the basis of
the number of shares to have been registered, and (ii) the Company shall be
deemed not to have effected a registration pursuant to subparagraph 1.5(a) of
this Agreement. Notwithstanding the foregoing, however, if at the time of the
withdrawal, the Holders have learned of a material adverse change in the
condition, business or prospects of the Company from that known to the Holders
at the time of their request, of which the Company had knowledge at the time of
the request, then the Holders shall not be required to pay any of said
Registration Expenses. In such case, the Company shall be deemed not to have
effected a registration pursuant to subparagraph 1.5(a) of this Agreement.
41
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Unless otherwise stated, all Selling Expenses relating to securities registered
on behalf of the Holders and all Registration Expenses incurred in connection
with any registration pursuant to Section 1.7 shall be borne by the Holders of
the registered securities included in such registration pro rata on the basis of
the number of shares so registered.
1.10 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 1,
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
and, 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 ninety (90) days or until
the distribution described in the registration statement has been completed;
provided, however, that in the case of any registration of Registrable
Securities on Form S-3 which are intended to be offered on a continuous or
delayed basis, such period shall be extended, if necessary, to keep the
registration statement effective until all such Registrable Securities are sold,
provided that if Rule 415, or any successor rule under the Securities Act,
permits an offering on a continuous or delayed basis, and provided further that
if applicable rules under the Securities Act governing the obligation to file a
post-effective amendment permit, in lieu of filing a post-effective amendment
which (y) includes any prospectus required by Section 10(a)(3) of the Securities
Act or (z) reflects facts or events representing a material or fundamental
change in the information set forth in the registration statement, the
incorporation by reference of information required to be included in (y) and (z)
above shall be contained in periodic reports filed pursuant to Section 13 or
15(d) of the Exchange Act in the registration statement;
(b) 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;
(c) 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;
(d) Notify each seller 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
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state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of any such seller, prepare and
furnish to such seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchaser of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances then existing;
(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 any such states or jurisdictions;
(f) Cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed;
(g) Provide a transfer agent and registrar for all Registrable
Securities and a CUSIP number for all such Registrable Securities, in each case
not later than the effective date of such registration;
(h) Otherwise use its best efforts to comply with the applicable rules
and regulations promulgated by the Securities and Exchange Commission;
(i) If and to the extent obtained from the Company's independent
accountants, provide to each Holder a copy of any "comfort letter" regarding
such registration statement and prospectus; and
(j) Make available for inspection by any Holder participating in such
registration, any underwriter participating in any disposition pursuant to such
registration, and any attorney or accountant retained by any such Holder or
underwriter, all financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers and directors to
supply all information reasonably requested by any such Holder, underwriter,
attorney or accountant in connection with such registration statement; provided,
however, that such Holder, underwriter, attorney or accountant shall agree to
hold in confidence and trust all information so provided.
1.11 Indemnification
(a) The Company will indemnify each Holder, each of its officers and
directors and partners, and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Section 1, 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) arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
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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 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 and directors, 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, as such expenses are incurred,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based on
any untrue statement or omission or alleged untrue statement or omission, made
in reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder, controlling person or
underwriter and stated 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 and
officers, 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 such Holder, each of its officers and directors 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 not 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, as such expenses are incurred, in each case to the extent,
but only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder and stated to be specifically for use therein;
provided that in no event shall any indemnity under this subparagraph 1.11(b)
exceed the net proceeds received by such Holder in such registration. Each
Holder under this subparagraph 1.11(b) shall be severally, not jointly, liable.
(c) Each party entitled to indemnification under this Section 1.11 (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
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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; provided, however, that an Indemnified Party (together with all
other Indemnified Parties which may be represented without conflict by one
counsel) shall have the right to retain one separate counsel, with the fees and
expenses to be paid by the Indemnifying Party, if representation of such
Indemnified Party by the counsel retained by the Indemnifying Party would be
inappropriate due to actual or potential differing interests between such
Indemnified Party and any other party represented by such counsel in such
proceeding. The failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Section 1 unless the failure to give such notice is materially prejudicial to an
Indemnifying Party's ability to defend such action. 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 in this Section 1.11 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any claim, loss, damage, liability or action referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such claim, loss, damage, liability or action in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and the Indemnified party on the other in connection with
the actions that resulted in such claims, loss, damage, liability or action, as
well as any other relevant equitable considerations. The relative fault of the
Indemnifying Party and of the Indemnified Party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact related to information
supplied by the Indemnifying Party or by the Indemnified Party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Holders agree that it
would not be just and equitable if contribution pursuant to this Section 1.11(d)
were based solely upon the number of entities from whom contribution was
requested or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 1.11(d).
(e) The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages and liabilities referred to above in this Section
1.11 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, subject to the provisions of Section 1.11 hereof.
Notwithstanding the provisions of this Section 1.11, no Holder shall be required
to contribute any amount or make any other payments under this Agreement which
in the aggregate exceed the net proceeds (after selling expenses) received by
such Holder. No person guilty of fraudulent misrepresentation (within the
meaning of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
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1.12 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 the Company may request
in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Section 1.
1.13 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 Exchange Act;
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
(at any time after it has become subject to such reporting requirements); and
(c) So long as a Holder owns any Restricted Securities, to furnish to
the Holder 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
ninety (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 Exchange Act (at any time after it has become
subject to such reporting requirements), a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents of the
Company and other information in the possession of or reasonably obtainable by
the Company as a Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Holder to sell any such securities
without registration.
1.14 Transfer of Registration Rights. The rights to cause the Company to
register securities granted to any party hereto under Sections 1.5, 1.6 and 1.7
may be assigned to a transferee or assignee reasonably acceptable to the Company
in connection with any transfer or assignment of Registrable Securities by such
party (together with any Affiliate); provided that (a) such transfer may
otherwise be effected in accordance with applicable securities laws, (b) notice
of such assignment is given to the Company and the Company has given its consent
in writing to such transfer as provided above in this Section 1.14, and (c) such
transferee or assignee is a Permitted Transferee.
1.15 Standoff Agreement. Each Holder agrees in connection with any
registration of the Company's securities (other than a registration of
securities in a Rule 145 transaction or with respect to an employee benefit
plan) that, upon request of the underwriters managing any underwritten offering
of the Company's securities, not to sell, make any short sale of, loan, pledge
or otherwise hypothecate or encumber, grant any option for the purchase of, or
otherwise dispose of any Registrable Securities or Registrable Common Stock
(other than those included in the registration) without the prior written
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consent of such underwriters, as the case may be, for such period of time (not
to exceed one hundred eighty (180) days from the effective date of such
registration in the case of a registration for the Company's initial public
offering and ninety (90) days from the effective date of such registration in
the case of other registrations) as may be requested by such managing
underwriters.
1.16 Termination of Rights. The rights of any particular Holder to cause
the Company to register Registrable Securities under Sections 1.5, 1.6 and 1.7
shall terminate with respect to such Registrable Securities owned by such Holder
on the date such securities become eligible for sale under Rule 144 of the
Securities Act (or any similar or successor rule).
1.17 Additional Equity Securities. If the Company issues additional equity
securities in the future, the Company and the parties hereto shall cause any
person or entity who acquires such securities to become an Investor hereunder
and such holder and the Company shall execute a counterpart of this Agreement
and an amendment adding such holder's name hereto shall be a condition of any
issuance of such additional securities. The covenants set forth in this Section
1.17 shall terminate immediately prior to the consummation by the Company of a
qualified Public Offering.
SECTION 2.
TAG ALONG RIGHT; RIGHTS TO COMPEL SALE
2.1 Tag Along.
(a) At least 20 days prior to any proposed transfer (other than
pursuant to a public sale) of an aggregate of at least 20% of the outstanding
Common Stock (assuming the exercise of all options and warrants and the
conversion of all convertible securities) or more of the outstanding Common
Stock in a transaction or series of transactions to one or more bona fide third
parties and, for so long as they continue to own shares of Series A Preferred
Stock (or Common Stock issued upon conversion thereof), with the prior written
consent of each of DTN and PRA, in their sole and absolute discretion (a
"Transfer"), by one or more Investors making such a Transfer (the "Transferor"),
the Transferor shall give or cause to be given a written notice (the "Tag Along
Notice") to the Company and the other Investors (which may be included in the
Notice of Proposed Transfer delivered pursuant to section 1.4);
(b) Each Tag Along Notice shall specify: (i) the name of the proposed
transferee, (ii) the number of shares of Preferred Stock or Common Stock to be
transferred and (iii) the price per share and all other material terms and
conditions of the offer. Each Investor may participate in the contemplated
transfer described in the Tag Along Notice on a pro rata basis at the same price
per Share and on the same terms by delivering written to the Transferor within
15 days after delivery of the Tag Along Notice. The failure of an Investor to
provide the selling Investor with notice within such 15-day period shall be
deemed for all purposes of this Agreement to be an irrevocable election by such
Investor not to participate in the Transfer. If any Investor has elected to
participate in such Transfer, he or she may sell in the Transfer (at the same
price and on the same terms), a number of Shares equal to the product of (i) the
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quotient determined by dividing the percentage of the Corporation's total
outstanding shares which are owned by such participating Investor by the
percentage of the Corporation's total outstanding shares which are owned by the
Transferor and the participating Investors participating in such sale (as a
group) and (ii) the number of Shares to be sold in the contemplated Transfer.
(c) The Transferor shall use its reasonable best efforts to obtain the
agreement of the prospective transferee(s) to the participation by the Investors
in any contemplated Transfer, and the Transferor shall not transfer any of its
Shares to any prospective transferee if such prospective transferee(s) declines
to allow the participation by the Investors. Each Investor transferring Shares
pursuant to this section 2.1 shall be obligated to join on a pro rata basis
(based on the number of Shares to sold to the transferee(s)) in any
indemnification or other obligations that the Transferor reasonably agrees to
provide in connection with such Transfer (other than any such obligations that
relate specifically to a particular Investor such as indemnification with
respect to representations and warranties given by an Investor regarding such
Investor's title to and ownership of shares, provided that no Investor shall be
obligated in connection with such Transfer to agree to indemnify or hold
harmless the transferees with respect to an amount in excess of the net cash
proceeds paid to such Investor in connection with such Transfer).
(d) All reasonable costs and expenses incurred in connection with any
Transfer made pursuant to Section 2.1, including all cost and disbursements,
finders' fees or brokerage commissions and the fees and disbursements of a
single counsel representing all shares to be transferred in connection
therewith, shall be allocated pro rata between the Transferor and the
participating Investors based on the aggregate proceeds received by the
Transferor and the participating Investors in the Transfer.
(e) The rights and obligations of the parties set forth in this Section
2.1 shall terminate immediately prior to the consummation by the Company of a
Qualified Public Offering.
2.2 Rights to Compel Sale.
(a) If one or more Investors propose to sell all or any portion of
their Shares in any transaction or any series of transactions in which Shares in
an aggregate amount of at least 51% of the outstanding Common Stock (on a
fully-diluted basis assuming exercise of outstanding options and warrants and
conversion of convertible securities) will be sold to a third party, and, for so
long as they continue to own shares of Series A Preferred Stock (or shares of
Common Stock issued upon conversion thereof), with the prior written consent of
each of DTN and PRA, in their sole and absolute discretion, the selling
Investor(s) may compel all other Investors to sell their Pro Rata Share (as
defined below) of the aggregate number of Shares owned by such Investor (the
"Seller Shares") to such third party for the same per Share consideration and
otherwise on the terms and conditions provided in this Section 2.2.
(b) The selling Investor(s) shall send written notice of the exercise
of their rights pursuant to this Section 2.2 to each of the remaining Investors
(the "Drag Along Notice"), setting forth the percentage of the outstanding
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Common Stock to be transferred (the "Pro Rata Share"), the consideration per
Share to be paid by a third party purchaser and the other terms and conditions
of the transaction. Within 15 days following the date of the Drag Along Notice,
each Investor shall deliver certificates representing the Seller Shares, duly
endorsed, together with all other documents required to be executed in
connection with such transactions. If any Investor should fail to deliver such
certificates, the Company shall cause the books and records of the Company to
show that such Shares are bound by the provisions of this Section 2.2 and that
such Shares have been transferred to the third party purchaser and each Investor
consents to such action by the Company.
(c) Simultaneously with the consummation of the sale of the Shares
pursuant to this Section 2.2, the selling Investor(s) shall promptly, but in any
event not later than three (3) business days thereafter, remit to each other
Investor the total sale price of the Seller Shares sold by such Investor
pursuant thereto; and shall furnish such other evidence of the completion and
time of completion of such sale or other disposition and the terms thereof as
may be reasonably requested by such other Investor.
(d) The purchase from the Investor pursuant to this Section 2.2 shall
be on the same date of transfer and on the same terms and conditions as are to
be received by the selling Investor(s), which date, terms and conditions shall
be stated in the Drag Along Notice (provided, however, that if any securities
are to be received by the Investors in connection with such sale, each Investor
will have the right to receive non-voting securities). No Investor shall be
required to make any representations or warranties in connection with such sale
other than customary limited representations solely with respect to such
Investor's ownership of its Shares and authorization to participate in the
transaction.
(e) The rights and obligations of the parties set forth in this Section
2.2 shall terminate immediately prior to the consummation of a Qualified Public
Offering.
SECTION 3.
AFFIRMATIVE COVENANTS OF THE COMPANY
The Company hereby covenants and agrees as follows:
3.1 Financial Information. So long as an Investor is a holder of at least
10% of the issued and outstanding Series A Preferred Stock (including shares of
Common Stock issued upon conversion thereof), the Company will furnish to such
Investor the following reports:
(a) As soon as practicable after the end of each fiscal year, and in
any event within one hundred and twenty (120) days thereafter, consolidated
balance sheets of the Company and its subsidiaries, if any, as of the end of
such fiscal year, and consolidated statements of income and cash flows of the
Company and its subsidiaries, if any, for such year, prepared in accordance with
generally accepted accounting principles and setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail and certified by independent public accountants of national standing
selected by the Company; and
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(b) As soon as practicable after the end of each calendar quarter, and
in any event within 30 days thereafter, consolidated balance sheets of the
Company and its subsidiaries, if any, as of the end of each calendar quarter,
and consolidated statements of income and cash flow for such period and for the
current fiscal year to date, together with a comparison of such statements to
the Company's operating plan then in effect.
3.2 Assignment of Rights to Financial Information. The rights granted
pursuant to Section 3.1 may be assigned by an Investor to a Permitted
Transferee, provided that the Company receives notice thirty (30) days prior to
such assignment.
3.3 Termination of Covenants. The covenants set forth in Section 3 shall
terminate on, and be of no further force or effect after, the date on which the
Company is required to file reports with the Commission pursuant to Section 13
or 15(d) of the Exchange Act.
3.4 Definition of Investor. For purposes of determining the amount of
Shares held by an Investor, all Investors affiliated with any Investor shall be
treated as a single Investor.
SECTION 4.
Election of Directors; DEADLOCKS
4.1 Voting Agreement. Until the termination of the covenants contained in
this Section 4.1 in accordance with Section 4.2 below, and notwithstanding
anything in the Company's Amended and Restated Certificate of Incorporation or
Bylaws to the contrary, (i) the Company's Board of Directors shall consist of
six members, and (ii) at any annual or special meeting of the stockholders of
the Company at which one or more Board members are to be elected, or in any
action by written consent of the stockholders of the Company pursuant to which
one or more Board members are to be elected (whether such Board member(s) are to
be elected due to expiration of term, or a vacancy, removal or resignation),
each Investor agrees that he, she or it shall vote the Common Stock and other
voting securities of the Company held by such Investor in a manner consistent
with the following appointments: (i) three representatives appointed by Data
Transmission Network Corporation ("DTN") without limitations; and (ii) three
representatives appointed by Photon Research Associates, Inc. ("PRA") without
limitations. A Director appointed by DTN and a Director appointed by PRA shall
each serve as Co-Chairmen of the Board, with the initial Co-Chairmen being Xxxx
Xxxxx and Xxx Xxxx.
4.2 Termination of Voting Agreement. The covenants set forth in Section 4.1
shall terminate immediately prior to the consummation of a Qualified Public
Offering.
4.3 Impasses.
(a) Negotiation. In the event the Company's Board of Directors is
evenly split with respect to any proposed action by the Company which requires
the approval of its Board of Directors (an "Impasse"), the matter will be
immediately referred to the Co-Chairmen of the Board, who will attempt in good
faith to negotiate a mutually acceptable resolution for presentation to the
Board of Directors.
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(b) Mediation. If the Co-Chairmen of the Board are unable to agree on a
resolution which breaks the Impasse within ten (10) days, the parties will
attempt in good faith to reach a mutually acceptable resolution through a
non-binding mediation to be conducted in accordance with procedures to be agreed
upon by the parties at that time. The mediation process shall be concluded as
expeditiously as possible but not more than forty-five (45) days after the
expiration of the initial ten-day negotiation period. Any such mediation shall
be held in Albuquerque, New Mexico unless the parties otherwise agree to another
location.
(c) Impasse Sale.
(i) If the Impasse still exists following the conclusion of the
mediation referred to in Section 4.3(b) above, then either DTN or PRA, as the
case may be (the "First Party") may deliver written notice to the other party
(the "Second Party") of its election to commence an Impasse sale under this
Section 4.3(c) (an "Impasse Sale Notice"). The Impasse Sale Notice shall set
forth the purchase price (the "Purchase Price") for the First Party's entire
ownership interest in the Company determined in its sole discretion, and shall
constitute a binding offer by the First Party to (A) sell its entire ownership
interest in the Company to the Second Party for the Purchase Price, or (B) to
purchase the Second Party's entire ownership interest in the Company for the
Purchase Price.
(ii) Within thirty (30) days of its receipt of the Impasse Sale
Notice, the Second Party shall elect by written notice to the First Party (the
"Response") either to sell its entire ownership interest in the Company to the
First Party for the Purchase Price, or to purchase the First Party's entire
ownership interest in the Company for the Purchase Price. In the event the
Second Party fails to respond within the requisite 30-day period, the Second
Party shall be compelled to sell its entire ownership interest in the Company
for the Purchase Price.
(iii) Within one hundred twenty (120) days of the delivery of the
Response or, if no Response is delivered, the expiration of the 30-day period
described in clause (ii) above, the parties shall consummate the purchase and
sale of the selling party's entire ownership interest in the Company (the
"Impasse Sale Closing") in accordance with the Response and this Section 4.3(c).
The party acquiring the other party's ownership interest shall provide ten (10)
days' prior written notice to the other party of the date and time of the
Impasse Sale Closing.
(iv) The purchase and sale pursuant to this Section 4.3(c) shall be
accomplished through an escrow established at a title insurance or escrow
company mutually approved by the parties. The parties shall execute such further
instructions as the escrow holder and the purchasing party reasonably may
require to consummate such escrow, provided such instructions are not
inconsistent with the terms of this Agreement. Closing costs shall be shared
equally by the parties. The selling party shall transfer to the purchasing party
its entire ownership interest in the Company free and clear of all liens,
security interests and competing claims, and shall deliver to the purchasing
party such instruments of transfer and such evidence of due authorization,
execution and delivery and of the absence of such liens, security interests or
competing claims as the purchasing party shall reasonably request. The selling
party shall also deliver letters of resignation from the directors it has
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appointed pursuant to Section 4.1 above. At the Impasse Sale Closing, the
purchasing party shall pay the Purchase Price to the selling party by a wire
transfer of immediately available funds to a bank account designated by the
selling party.
(v) If the selling party or any of its affiliates is a guarantor of
any obligations of the Company or otherwise liable thereon, prior to the Impasse
Sale Closing the purchasing party shall use reasonable best efforts to obtain a
release of each such guaranty or liability in form and content reasonably
acceptable to the selling party and its guarantor affiliates. If such release
cannot be obtained prior to the Impasse Sale Closing, the purchasing party shall
hold the selling party and its guarantor affiliates harmless with respect to
such guarantees and liabilities in form and content reasonably acceptable to the
selling party and its guarantor affiliates.
(vi) If the purchasing party fails to close the transaction within
the 120-day period referred to in clause (iii) above, and such failure was
caused by or within the reasonable control of the purchasing party, then the
selling party may elect to acquire the defaulting purchasing party's entire
ownership interest in the Company for ninety percent (90%) of the Purchase
Price, by delivering written notice of such election to the defaulting
purchasing party within ten (10) days of the expiration of the 120-day period.
If the other party so elects, then the transaction shall be consummated in
accordance with clauses (iii)-(v) above. If the selling party does not deliver a
notice to the defaulting purchasing party within such 10-day period, then the
Company's business shall continue as before and the First Party may not deliver
another Impasse Sale Notice for a period of eighteen (18) months following the
date of such party's original Impasse Sale Notice.
(vii) Either party shall have the right to seek specific performance
of this Section 4.3(c) in a court of competent jurisdiction or arbitration, and
the other party shall not plead as a defense that an adequate remedy at law
exists.
(d) The covenants set forth in Section 4.3 shall terminate immediately
prior to the consummation of a Qualified Public Offering.
SECTION 5.
Miscellaneous
5.1 Assignment. Except as otherwise provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective successors and assigns of the parties hereto.
5.2 Third Parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
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5.3 Governing Law. This Agreement shall be governed by and construed under
the laws of the State of Delaware without regard to choice of laws or conflict
of laws' provisions thereof.
5.4 Counterparts. This Agreement may be executed in two or more
counterparts and signature pages may be delivered by facsimile, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
5.5 Notices. Any notice required or permitted by this Agreement shall be in
writing and shall be sent by prepaid registered or certified mail, return
receipt requested, addressed to the other party at the address shown below or at
such other address for which such party gives notice hereunder. Such notice
shall be deemed to have been given three (3) days after deposit in the mail.
5.6 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, portions of such provisions, or such
provisions in their entirety, to the extent necessary, shall be severed from
this Agreement, and the balance of this Agreement shall be enforceable in
accordance with its terms.
5.7 Amendment and Waiver. Any provision of this Agreement may be amended or
waived with the written consent of the Company and the Holders of at least
sixty-six and two-thirds percent (66-2/3%) of the outstanding shares of the
Registrable Securities; provided that (i) no such amendment or waiver shall
impose or increase any liability or obligation on a Holder without the consent
of such Holder; and (ii) no such amendment or waiver having a disproportionately
adverse effect on any Holder in relation to the other Holders may be made
without consent of such Holder. Any amendment or waiver effected in accordance
with this paragraph shall be binding upon each Holder of Registrable Securities
and the Company. In addition, the Company may waive performance of any
obligation owing to it, as to some or all of the Holders of Registrable
Securities, or agree to accept alternatives to such performance, without
obtaining the consent of any Holder of Registrable Securities. In the event that
an underwriting agreement is entered into between the Company and any Holder,
and such underwriting agreement contains terms differing from this Agreement, as
to any such Holder the terms of such underwriting agreement shall govern.
5.8 Effect of Amendment or Waiver. The Investors and their successors and
assigns acknowledge that by the operation of Section 5.7 hereof (but subject to
the limitations therein) the Holders of the requisite percentage of the
outstanding Registrable Securities, acting in conjunction with the Company, will
have the right and power to diminish or eliminate any or all rights pursuant to
this Agreement.
5.9 Rights of Holders. Each party to this Agreement shall have the absolute
right to exercise or refrain from exercising any right or rights that such party
may have by reason of this Agreement, including, without limitation, the right
to consent to the waiver or modification of any obligation under this Agreement,
and such party shall not incur any liability to any other party or other Holder
of any securities of the Company as a result of exercising or refraining from
exercising any such right or rights.
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5.10 Delays or Omissions. No delay or omission to exercise any right, power
or remedy accruing to any party to this Agreement, upon any breach or default of
the other party, shall impair any such right, power or remedy of such
non-breaching party nor shall it be construed to be a waiver of any such breach
or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be made in writing and shall be effective
only to the extent specifically set forth in such writing. All remedies, either
under this Agreement, or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
5.11 Entire Agreement. This Agreement constitutes the entire agreement of
the parties hereto related to the subject matter hereof, and supersedes all
prior agreements between the parties, whether written or oral, related to such
subject matter.
5.12 Aggregation of Stock. All securities held or acquired by Affiliated
entities or persons shall be aggregated together for the purpose of determining
the availability of any rights under this Agreement.
5.13 Dispute Resolution. Any dispute, claim or controversy arising under
this Agreement or in any way related to this Agreement, or its interpretation,
enforceability or inapplicability that cannot be resolved by mutual agreement of
the parties shall be submitted to binding arbitration. The arbitration shall be
conducted by a single arbitrator mutually agreed upon by the parties or, if no
arbitrator is mutually selected within thirty (30) days of a demand therefor,
then by a retired judge from the Judicial Arbitration and Mediation
Service/Endispute ("JAMS") office located in San Diego, California. The
arbitration shall be conducted in San Diego, California, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. The
arbitration award shall be final and binding, and judgment on the award may be
entered in any court having jurisdiction thereof. The parties hereby consent to
the consolidation of any arbitration hereunder with any and all arbitrations
commenced under the License Agreement, the Series A Preferred Stock Purchase
Agreement, the Common Stock Purchase Agreement and/or the Warrants.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
FOUNDERS:
/s/ Xxxx Xxxxxx
-----------------------------
Xxxx Xxxxxx
/s/ Xxxx Xxxxxxxx
-----------------------------
/s/ Xxx Xxxx
-----------------------------
Xxx Xxxx
COMPANY: EARTHSCAN NETWORK INC.
By:/s/ Xxxx Xxxxxx
----------------------
Xxxx Xxxxxx
Title: President
By:/s/ Xxxxx Xxx Xxxxx
----------------------
Xxxxx Xxx Xxxxx
Title:Corporate Secretary/Treasurer
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INVESTORS: DATA TRANSMISSION NETWORK CORPORATION
By:/s/ Xxxx X. Xxxxx
-------------------------
Xxxx X. Xxxxx
Title: President & COO
By: /s/ Xxxxx X. Xxxxxx
------------------------
Xxxxx X. Xxxxxx
Title: SVP & CFO
PHOTON RESEARCH ASSOCIATES, INC.
By:/s/ Xxxxx X. Xxxx
-------------------------
Xxxxx X. Xxxx
Title:CO-COB
By:/s/ Xxxxx Xxx Xxxxx
-------------------------
Xxxxx Xxx Xxxxx
Title:Corporate Secretary
XXXXXXXX, XXXXXXX & XXXXXXX, LLC
By:/s/ B. Xxxxx Xxxxxxxx, Xx.
----------------------------
B. Xxxxx Xxxxxxxx, Xx.
Title: Managing Director
By:
Title:
56
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A-1
EXHIBIT A
Schedule of Investors
Investor Name & Address
Photon Research Associates, Inc.
0000 Xxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Data Transmission Network Corporation
0000 X. Xxxxx Xxxx, #000
Xxxxx, XX 00000-0000
Xxxx Xxxxxx
0000 Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Xxxx Xxxxxxxx
0000 Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Xxx Xxxx
0000 Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxxxx, Xxx Xxxxxx 00000
57
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Exhibit F
Common Stock Purchase Agreement
"The reporting person agrees to furnish supplementally a copy of this omitted
Exhibit to the Securities and Exchange Commission upon request."
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Exhibit G
Warrants
"The reporting person agrees to furnish supplementally a copy of this omitted
Exhibit to the Securities and Exchange Commission upon request."
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Exhibit H
1999 Stock Incentive Plan
"The reporting person agrees to furnish supplementally a copy of this omitted
Exhibit to the Securities and Exchange Commission upon request."
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Exhibit I
Form of DTN Promissory Note
"The reporting person agrees to furnish supplementally a copy of this omitted
Exhibit to the Securities and Exchange Commission upon request."
61
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Exhibit J
Form of Opinion of DTN Counsel
"The reporting person agrees to furnish supplementally a copy of this omitted
Exhibit to the Securities and Exchange Commission upon request."
62
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