REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT is dated as of May 7, 1998 by and
among FlashNet Communications, Inc., a Texas corporation (together with its
successors and assigns, the "Company"), and each of the parties listed as
Investors on the execution page hereof (such parties are referred to below
collectively as the "Investors" and individually as an "Investor").
1. BACKGROUND. The Company has agreed to issue shares of its
Series A Convertible Preferred Stock, par value $1.00 per share (the
"Preferred Stock"), pursuant to that certain Stock Purchase Agreement dated
as of May 7, 1998 and made by and between the Company and the Investors (the
"Proposed Transaction"). The execution and delivery of this Agreement is a
condition to consummation of the Proposed Transaction.
2. REGISTRATION UNDER SECURITIES ACT, ETC.
2.1. REGISTRATION ON REQUEST.
(a) From time to time after the Initial Registration Date, upon the
written request of the Requisite Holders that the Company effect the
registration under the Securities Act of all or a portion (but not less than
$1,000,000 in aggregate offering price) of such holders' Registrable
Securities and specifying the intended method of disposition thereof and
whether or not such requested registration is to be an underwritten offering,
the parties hereto agree as follows:
(i) The Company will promptly give written notice of such requested
registration to all other holders of Registrable Securities, if any;
(ii) Promptly after the performance of any obligations imposed
under clause (i) of this Section 2.1(a), and subject to the limitations set
forth in subsection (e) of this Section 2.1, the Company will use its best
efforts to effect the registration under the Securities Act of the
Registrable Securities that the Company has been requested to register by
the Requisite Holders and the other holders of Registrable Securities by
written request given to the Company within thirty (30) days after the
giving of such written notice by the Company (which request shall specify
the intended method of disposition of such Registrable Securities), all to
the extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so to
be registered;
Notwithstanding anything to the contrary set forth in this Section 2.1(a),
the Company shall not be obligated to take any action to notify holders or to
effect any registration or qualification pursuant to this Section 2.1(a) if
the Company shall have furnished to the holders requesting registration a
certificate signed by both the President and the Chief Financial Officer of
the Company stating that, in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company
(with a brief explanation for the basis for such conclusion) for a
registration statement to be filed within the ninety (90) day period
following receipt of the request for registration and that it is therefore
essential and in the best interests of
the Company and its shareholders to defer the filing of such registration
statement, provided that such filing shall not be deferred beyond the earlier
to occur of ninety (90) days after receipt of the request notice or the
discontinuance of the perceived detriment to the Company.
(b) REGISTRATION OF OTHER SECURITIES. Whenever the Company shall
effect a registration pursuant to this Section 2.1 in connection with an
underwritten offering by one or more holders of Registrable Securities, no
securities other than Registrable Securities shall be included among the
securities covered by such registration unless (i) the managing underwriter
of such offering shall have advised each holder of Registrable Securities to
be covered by such registration in writing that the inclusion of such other
securities would not adversely affect such offering or (ii) the holders of
all Registrable Securities to be covered by such registration shall have
consented in writing to the inclusion of such other securities.
(c) REGISTRATION STATEMENT FORM. Registrations under this Section 2.1
shall be on such appropriate registration form of the Commission (i) as shall
be selected by the Company and as shall be reasonably acceptable to the
Requisite Holders, and (ii) as shall permit the disposition of such
Registrable Securities in accordance with the intended method or methods of
disposition specified in their request for such registration. The Company
agrees to include in any such registration statement all information that
holders of Registrable Securities being registered shall reasonably request.
(d) EXPENSES. The Company will pay all Registration Expenses in
connection with any registration requested pursuant to this Section 2.1.
Each holder of Registrable Securities shall pay all of his or its Selling
Expenses.
(e) LIMITATIONS ON REQUESTED REGISTRATIONS. The Company's obligation
to take or continue any action to effect a requested registration under this
Section 2.1 shall be subject to the proviso that the Company shall not be
required to effect more than two (2) registrations requested pursuant to this
Section 2.1 (or more than one (1) registration within any six (6) month
period); provided that, a registration requested pursuant to this Section 2.1
shall not be deemed to have been effected (A) unless a registration statement
with respect thereto has been declared effective for a period of at least
ninety (90) days, (B) if after a registration statement has become effective,
such registration is interfered with by any stop order, injunction or other
order or requirement of the Commission or other governmental agency or court
for any reason, or (C) if the conditions to closing specified in the purchase
agreement or underwriting agreement entered into in connection with such
registration are not satisfied, other than as a result of the voluntary
termination of such offering by the Requisite Holders (which shall include
the failure of the Requisite Holders to take action or to refrain from taking
action necessary for the conditions to closing to be satisfied).
(f) SELECTION OF UNDERWRITERS. If a requested registration pursuant to
this Section 2.1 involves an underwritten offering, the underwriter or
underwriters thereof shall be selected by the Company with the approval of
the Requisite Holders.
-2-
(g) PRIORITY IN REQUESTED REGISTRATIONS. If a requested registration
pursuant to this Section 2.1 involves an underwritten offering, and the
managing underwriter shall advise the Company in writing (with a copy to each
holder of Registrable Securities requesting registration) that, in its
opinion, the number of securities requested to be included in such
registration exceeds the number that can be sold in such offering within a
price range acceptable to the Requisite Holders, the Company will include in
such registration to the extent of the number that the Company is so advised
can be sold in such offering, Registrable Securities requested to be included
in such registration, pro rata among the holders thereof requesting such
registration on the basis of the percentage of the Registrable Securities of
the Company held by the holders of Registrable Securities that have requested
that such securities be included. In connection with any registration as to
which the provisions of this subsection (g) apply, no securities other than
Registrable Securities shall be covered by such registration; moreover, such
registration shall not reduce the number of available registrations under
subsection (e) of this Section 2.1 in the event that the managing underwriter
excludes from registration more than fifty percent (50%) of the aggregate
number of Registrable Securities requested to be included.
2.2. INCIDENTAL REGISTRATION.
(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If the Company at
any time proposes to register any of its securities under the Securities Act
(other than (i) in connection with a registration of securities issuable
under any employee benefit, retirement or similar plan, or (ii) with respect
to a Rule 145 transaction, or (iii) pursuant to Section 2.1), whether or not
for sale for its own account, it will each such time give prompt written
notice to all holders of Registrable Securities of its intention to do so and
of such holders' rights under this Section 2.2. Upon the written request of
any such holder made within thirty (30) days after the receipt of any such
notice (which request shall specify the Registrable Securities intended to be
disposed of by such holder and the intended method of disposition thereof),
the Company will use its best efforts to effect the registration under the
Securities Act of all Registrable Securities that the Company has been so
requested to register by the holders thereof, to the extent requisite to
permit the disposition (in accordance with the intended methods thereof as
aforesaid) of the Registrable Securities so to be registered, PROVIDED that
if, at any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement
filed in connection with such registration, the Company shall determine for
any reason not to register or to delay registration of such securities, the
Company may, at its election, give written notice of such determination to
each holder of Registrable Securities and, thereupon, (i) in the case of a
determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration (but
not from its obligation to pay the Registration Expenses in connection
therewith), without prejudice, however, to the rights of any holder or
holders of Registrable Securities entitled to do so to request that such
registration be effected as a registration under Section 2.1, and (ii) in the
case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities, for the same period as the delay in
registering such other securities. No registration effected under this
Section 2.2 shall be deemed to have been effected pursuant to Section 2.1 or
shall relieve the Company of its obligation to effect any registration
-3-
upon request under Section 2.1. The Company will pay all Registration
Expenses in connection with each registration of Registrable Securities
requested pursuant to this Section 2.2. Each holder of Registrable
Securities shall pay all of his or its Selling Expenses.
(b) PRIORITY IN INCIDENTAL REGISTRATIONS. If the registration of
which the Company gives written notice pursuant to Section 2.2(a) is for a
registered public offering involving an underwriting, the Company shall so
advise the holders of Registrable Securities as a part of such notice. In
such event, the right of any holder to registration pursuant to this
Section 2.2 shall be conditioned upon, and shall not be exercisable by any
holder without, such holder's participation in such underwriting and the
inclusion of such holder's Registrable Securities in the underwriting to the
extent provided herein. If required by the underwriter or underwriters
selected by the Company for such underwriting (collectively, the
"Underwriter"), then (i) all holders proposing to distribute their
Registrable Securities through such underwriting shall, to the extent
required by the Underwriter, enter into an underwriting agreement with the
Underwriter in customary form, and (ii) all holders shall agree not to sell
publicly any of their Registrable Securities for such period as the
Underwriter may reasonably request. Notwithstanding any other provision of
this Section 2.2, if the Underwriter determines that marketing or other
factors require a limitation of the number of securities to be underwritten,
then the Underwriter in its sole discretion may exclude from such
registration and underwriting some or all of the securities requested to be
included in such registration and underwriting by holders of Registrable
Securities and other parties other than the Company; provided, however, that
if all securities requested to be included in such registration and
underwriting by holders of Registrable Securities and parties other than the
Company are not so excluded by the Underwriter, then the number of such
included securities shall be allocated proportionately among all parties
(according to the number of securities requested to be registered) having the
right to request registration of securities (including holders of Registrable
Securities). If securities requested to be registered by holders of
Registrable Securities are excluded pursuant to this Section 2.2(b), such
exclusion shall be apportioned among such holders in the same proportion as
the number of such securities covered by the respective holder's instant
registration request bears to the total number of such securities covered by
the instant registration requests of all persons (including holders of
Registrable Securities). If any holder of Registrable Securities disapproves
of the terms of any underwriting subject to this Section 2.2(b), then such
holder may elect to withdraw therefrom by written notice to the Company and
the Underwriter. Any securities excluded or withdrawn from such underwriting
shall be withdrawn from such registration. The Company shall advise all
persons seeking to include their securities in such registration and
underwriting of the number of each such person's securities that may be so
included.
2.3. REGISTRATION PROCEDURES. If and whenever the Company is
required to use its best efforts to effect the registration of any
Registrable Securities under the Securities Act as provided in Sections 2.1
and 2.2, the Company will as expeditiously as possible:
(i) prepare and (as soon thereafter as possible or in any event no
later than sixty (60) days after the end of the period within which
requests for registration may be given
-4-
to the Company) file with the Commission the requisite registration
statement to effect such registration and thereafter use its best
efforts to cause such registration statement to become effective,
PROVIDED that the Company may discontinue any registration of its
securities that are not Registrable Securities (and, under the
circumstances specified in Section 2.2(a), its securities that are
Registrable Securities) at any time prior to the effective date of the
registration statement relating thereto;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement until such time as all of such securities have been
disposed of in accordance with the intended methods of disposition by the
seller or sellers thereof set forth in such registration statement;
provided, however, that the Company shall not be required to maintain the
effectiveness of any registration statement for more than one hundred
twenty (120) days;
(iii) furnish to each seller of Registrable Securities covered by
such registration statement such number of conformed copies of such
registration statement and of each such amendment and supplement thereto
(in each case including all exhibits), such number of copies of the
prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other prospectus
filed under Rule 424 under the Securities Act, in conformity with the
requirements of the Securities Act, and such other documents, as such
seller may reasonably request;
(iv) use its best efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement
under such other securities or blue sky laws of such jurisdictions as each
seller thereof shall reasonably request, to keep such registration or
qualification in effect for so long as such registration statement remains
in effect, and take any other action that may be reasonably necessary or
advisable to enable such seller to consummate the disposition in such
jurisdictions of the securities owned by such seller, except that the
Company shall not for any such purpose be required to qualify generally to
do business as a foreign corporation in any jurisdiction wherein it would
not but for the requirements of this subdivision (iv) be obligated to be so
qualified or to consent to general service of process in any such
jurisdiction;
(v) use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to
enable the seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(vi) furnish to each seller of Registrable Securities a signed
counterpart, addressed to such seller (and underwriters, if any) of:
-5-
(A) an opinion of counsel for the Company, dated the
effective date of such registration statement (and, if such
registration includes an underwritten public offering, dated the date
of the closing under the underwriting agreement), reasonably
satisfactory in form and substance to such seller, and
(B) a "comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an
underwritten public offering, dated the date of the closing under the
underwriting agreement), signed by the independent public accountants
who have certified the Company's financial statements included in such
registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to the underwriters in
underwritten public offerings of securities and, in the case of the
accountants' letter, such other financial matters, and, in the case of the
legal opinion, such other legal matters, as such seller may reasonably
request;
(vii) 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, upon discovery that, or
upon the happening of any event as a result of which, the prospectus included
in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to
be stated therein or necessary to make the statements therein not misleading
in the light of the circumstances under which they were made, and at the
request of any such seller promptly 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
purchasers of such securities, 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 in
the light of the circumstances under which they were made;
(viii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months, but not more than eighteen months,
beginning with the first full calendar month after the effective date of such
registration statement, which earnings statement shall satisfy the provisions
of Section 11(a) of the Securities Act, and will furnish to each such seller
at least five (5) business days prior to the filing thereof a copy of any
amendment or supplement to such registration statement or prospectus and
shall not file any thereof to which any such seller shall have reasonably
objected on the grounds that such amendment
-6-
or supplement does not comply in all material respects with the
requirements of the Securities Act or of the rules or regulations
thereunder;
(ix) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
registration statement;
(x) use its best efforts to list all Registrable Securities
covered by such registration statement on any securities exchange on which
any of the Registrable Securities is then listed; and
(xi) enter into such agreements and take such other actions as the
Requisite Holders shall reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information
regarding such seller and the distribution of such securities as the Company
may from time to time reasonably request in writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that upon receipt of any notice from the Company of
the happening of any event of the kind described in the subdivision (vii) of
this Section 2.3, such holder will forthwith discontinue such holder's
disposition of Registrable Securities pursuant to the registration statement
relating to such Registrable Securities until such holder's receipt of the
copies of the supplemented or amended prospectus contemplated by
subdivision (vii) of this Section 2.3 and, if so directed by the Company,
will deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such holder's possession of the prospectus
relating to such Registrable Securities current at the time of receipt of
such notice.
2.4 UNDERWRITTEN OFFERINGS.
(a) REQUESTED UNDERWRITTEN OFFERINGS. If requested by the
underwriters for any underwritten offering by holders of Registrable
Securities pursuant to a registration requested under Section 2.1, the
Company will enter into an underwriting agreement with such underwriters for
such offering, such agreement to be satisfactory in substance and form to
each such holder and the underwriters and to contain such representations and
warranties by the Company and such other terms as are generally prevailing in
agreements of this type, including, without limitation, indemnities to the
effect and to the extent provided in Section 2.7. The holders of Registrable
Securities to be distributed by such underwriters shall be parties to such
underwriting agreement and may, at their option, require that any or all of
the representations and warranties by, and the other agreements on the part
of, the Company to and for the benefit of such underwriters shall also be
made to and for the benefit of such holders of Registrable Securities and
that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement
-7-
be conditions precedent to the obligations of such holders of Registrable
Securities. Any such holder of Registrable Securities shall not be required
to make any representations or warranties to or agreements with the Company
or the underwriters other than representations, warranties or agreements
regarding such holder, such holder's Registrable Securities and such holder's
intended method of distribution and any other representation required by law.
(b) INCIDENTAL UNDERWRITTEN OFFERINGS. If the Company at any time
proposes to register any of its securities under the Securities Act as
contemplated by Section 2.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by any
holder of Registrable Securities as provided in Section 2.2 and subject to
the provisions of Section 2.2(b), arrange for such underwriters to include
all the Registrable Securities to be offered and sold by such holder among
the securities to be distributed by such underwriters. The holders of
Registrable Securities to be distributed by such underwriters shall be
parties to the underwriting agreement between the Company and such
underwriters and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of,
the Company to and for the benefit of such underwriters shall also be made to
and for the benefit of such holders of Registrable Securities and that any or
all of the conditions precedent to the obligations of such underwriters under
such underwriting agreement be conditions precedent to the obligations of
such holders of Registrable Securities. Any such holder of Registrable
Securities shall not be required to make any representations or warranties to
or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such holder, such
holder's Registrable Securities and such holder's intended method of
distribution and any other representation required by law.
2.5. PREPARATION; REASONABLE INVESTIGATION. In connection with
the preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, the Company will give the holders
of Registrable Securities registered under such registration statement, and
their counsel and accountants, the opportunity to participate in the
preparation of such registration statement, each prospectus included therein
or filed with the Commission, and each amendment thereof or supplement
thereto, and will give each of them such access to its books and records and
such opportunities to discuss the business of the Company with its officers
and the independent public accountants who have certified its financial
statements as shall be necessary, in the opinion of such holders' counsel, to
conduct a reasonable investigation within the meaning of the Securities Act.
2.6. ADDITIONAL RIGHTS OF HOLDERS. If any registration statement
prepared under this Agreement refers to any holder of Registrable Securities
by name or otherwise as the holder of any securities of the Company, then
such party shall have the right to require (x) the insertion therein of
language, in form and substance satisfactory to such party, to the effect
that the holding by such party of such securities does not necessarily make
such party a "controlling person" of the Company within the meaning of the
Securities Act and is not to be construed as a recommendation by such holder
of the investment quality of the Company's debt or equity securities covered
thereby and that such holding does not imply that such holder will assist in
-8-
meeting any future financial requirements of the Company, or (y) in the event
that such reference to such holder by name or otherwise is not required by
the Securities Act or any rules and regulations promulgated thereunder, the
deletion of the reference to such party.
2.7. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. In the event of any
registration of any securities of the Company under the Securities Act, the
Company will, and hereby does, indemnify and hold harmless the seller of any
Registrable Securities covered by such registration statement, its directors
and officers, each other Person who participates in the offering or sale of
such securities and each other Person, if any, who controls such seller
within the meaning of the Securities Act against any losses, claims, damages
or liabilities, joint or several, to which such seller or any such director
or officer or controlling person may become subject under the Securities Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which such securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, 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 the Company will
reimburse such seller and each such director, officer, and controlling person
for any legal or any other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, liability, action or
proceeding; PROVIDED that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and
in conformity with written information furnished to the Company through an
instrument duly executed by such seller specifically stating that it is for
use in the preparation thereof and, PROVIDED further that the Company shall
not be liable to any Person who participates as an underwriter, in the
offering or sale of Registrable Securities or any other Person, if any, who
controls such underwriter within the meaning of the Securities Act, in any
such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of such
Person's failure to send or give a copy of the final prospectus, as the same
may be then supplemented or amended, to the Person asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to
such Person if such statement or omission was corrected in such final
prospectus. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of such seller or any such
director, officer, underwriter or controlling person and shall survive the
transfer of such securities by such seller.
(b) INDEMNIFICATION BY THE SELLERS. The Company may require, as a
condition to including any Registrable Securities in any registration
statement filed pursuant to Section 2.3,
-9-
that the Company shall have received an undertaking satisfactory to it from
the prospective seller of such securities, to indemnify and hold harmless (in
the same manner and to the same extent as set forth in subdivision (a) of
this Section 2.7) the Company, each director of the Company, each officer of
the Company and each other Person, if any, who controls the Company within
the meaning of the Securities Act, with respect to any statement or alleged
statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, if such statement
or alleged statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company
through an instrument duly executed by such seller specifically stating that
it is for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement.
Such indemnity shall remain in full force and effect, regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling Person and shall survive the transfer of such
securities by such seller.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section 2.7,
such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the latter of the
commencement of such action, PROVIDED that the failure of any indemnified
party to give notice as provided herein shall not relieve the indemnifying
party of its obligations under the preceding subdivisions of this Section 2.7,
except to the extent that the indemnifying party is actually prejudiced by
such failure to give notice. In case any such action is brought against an
indemnified party, unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying parties may
exist in respect of such claim, the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred
by the latter in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the consent of
the indemnified party, consent to entry of any judgment or enter into any
settlement that 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) OTHER INDEMNIFICATION. Indemnification similar to that
specified in the preceding subdivisions of this Section 2.7 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification
of securities under any Federal or state law or regulation of any
governmental authority other than the Securities Act.
-10-
(e) INDEMNIFICATION PAYMENTS. The indemnification required by
this Section 2.7 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
2.8. ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company
will not effect or permit to occur any combination or subdivision that would
adversely affect the ability of the holders of Registrable Securities to
include such Registrable Securities in any registration of its securities
contemplated by this Section 2 or the marketability of such Registrable
Securities under any such registration.
3. DEFINITIONS. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
COMMISSION: The Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
EXCHANGE ACT: The Securities Exchange Act of 1934, 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. Reference
to a particular section of the Securities Exchange Act of 1934 shall
include a reference to the comparable section, if any, of any such
similar Federal statute.
INITIAL REGISTRATION DATE: The first to occur of the following:
(i) the date on which the Company consummates an offering of its
equity securities under a registration statement to be filed with the
Commission with respect to an initial public offering of the Company's
securities pursuant to the Securities Act, or (ii) the effective date
upon which the Company is merged into, consolidated with, or has sold
substantially all of its assets to, another Person who has previously
issued securities registered under the Securities Act.
PERSON: A corporation, an association, a partnership, a business, an
individual, a governmental or political subdivision thereof or a
governmental agency.
REGISTRABLE SECURITIES: All common stock of the Company that is
either: (i) issued by the Company (or a successor thereto) in
redemption or conversion of, or otherwise on account of or in exchange
for, the Preferred Stock issued pursuant to the Proposed Transaction,
or (ii) held from time to time by any Investor, together with any
securities issued or issuable with respect to the foregoing by way of
distribution or in connection with any reorganization or other
recapitalization, merger, consolidation or otherwise. As to any
particular Registrable Securities, once issued such securities shall
cease to be Registrable Securities when (a) a registration statement
with respect to the sale of such securities shall have become
-11-
effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (b) they
shall have been distributed to the public pursuant to Rule 144 or
Rule 144A (or any successor provision) under the Securities Act,
(c) they shall have been otherwise transferred, new certificates for
them not bearing a legend restricting further transfer shall have been
delivered by the Company and subsequent disposition of them shall not
require registration or qualification of them under the Securities Act
or any similar state law then in force, or (d) they shall have ceased
to be outstanding.
REGISTRATION EXPENSES: All expenses incident to the Company's
performance of or compliance with Section 2.1 or 2.2, including,
without limitation, all registration, filing and National Association
of Securities Dealers fees, all fees and expenses of complying with
securities or blue sky laws, all word processing, duplicating and
printing expenses, messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of any special audits or "cold
comfort" letters required by or incident to such performance and
compliance, premiums and other costs of policies of insurance against
liabilities arising out of the public offering of the Registrable
Securities being registered and any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities, but
excluding Selling Expenses, if any, provided that, in any case where
Registration Expenses are not to be borne by the Company, such
expenses shall not include salaries of Company personnel or general
overhead expenses of the Company, auditing fees, premiums or other
expenses relating to liability insurance required by underwriters of
the Company or other expenses for the preparation of financial
statements or other data normally prepared by the Company in the
ordinary course of its business or that the Company would have
incurred in any event.
REQUISITE HOLDERS: Any holder or holders of more than 30% of the
Registrable Securities.
SECURITIES ACT: The Securities Act of 1933, or any similar Federal
statute, and the rules and regulations of the Commission thereunder,
all as of the same shall be in effect at the time. References to a
particular section of the Securities Act of 1933 shall include a
reference to the comparable section, if any, of any such similar
Federal Statute.
SELLING EXPENSES: Underwriting discounts and commissions and stock
transfer taxes relating to securities registered by the Company and
the fees and disbursements incurred by the holders of Registrable
Securities to be registered (including, without limitation, the fees
and disbursements of legal counsel to the holders of such Registrable
Securities).
-12-
4. RULE 144 AND RULE 144A: If the Company shall have filed a
registration statement pursuant to the requirements of Section 12 of the
Exchange Act or a registration statement pursuant to the requirements of the
Securities Act, the Company will file the reports required to be filed by it
under the Securities Act and the Exchange Act and the rules and regulations
adopted by the Commission thereunder (or, if the Company is not required to
file such reports, will, upon the request of any holder of Registrable
Securities, make publicly available other information) and will take such
further action as any holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such holder
to sell Registrable Securities without registration under the Securities Act
within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time or (b) any
similar rule or regulation hereafter adopted by the Commission. Upon the
request of any holder of Registrable Securities, the Company will deliver to
such holder a written statement as to whether it has complied with such
requirements. After any sale of Registrable Securities pursuant to this
Section 4, the Company will, to the extent allowed by law, cause any
restrictive legends to be removed and any transfer restrictions to be
rescinded with respect to such Registrable Securities. In order to permit
the holders of Registrable Securities to sell the same, if they so desire,
pursuant to Rule 144A promulgated by the Commission (or any successor to such
rule), the Company will comply with all rules and regulations of the
Commission applicable in connection with use of Rule 144A (or any successor
thereto). Prospective transferees of Registrable Securities that are
Qualified Institutional Buyers (as defined in Rule 144A) that would be
purchasing such Registrable Securities in reliance upon Rule 144A may request
from the Company information regarding the business, operations and assets of
the Company. Within five (5) business days of any such request, the Company
shall deliver to any such prospective transferee copies of annual audited and
quarterly unaudited financial statements of the Company and such other
information as may be required to be supplied by the Company for it to comply
with Rule 144A.
5. AMENDMENTS AND WAIVERS. This Agreement may be amended and
the Company may take any action herein prohibited or omit to perform any act
herein required to be performed by it, only if the Company shall have
obtained the written consent to such amendment, action or omission to act of
the Requisite Holders. Each holder of any Registrable Securities at the time
or thereafter outstanding shall be bound by any consent authorized by this
Section 5, whether or not such Registrable Securities shall have been marked
to indicate such consent.
6. NOMINEES FOR BENEFICIAL OWNERS. In the event that any
Registrable Securities are held by a nominee for the beneficial owner
thereof, the beneficial owner thereof may, at its election, be treated as the
holder of such Registrable Securities for purposes of any request or other
action by any holder or holders of Registrable Securities pursuant to this
Agreement or any determination of any number or percentage of Registrable
Securities held by any holder or holders of Registrable Securities
contemplated by this Agreement. If the beneficial owner of any Registrable
Securities so elects, the Company may require assurances reasonably
satisfactory to it of such owner's beneficial ownership of such Registrable
Securities.
-13-
7. NOTICES. All communications provided for hereunder shall be
sent by first-class mail to such party at the address set forth opposite such
parties name on the execution page hereof or at such other address as the
Company shall have furnished to each holder of Registrable Securities at the
time outstanding.
8. ASSIGNMENT. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns. In addition, and whether or not any
express assignment shall have been made, the provisions of this Agreement
that are for the benefit of the parties hereto other than the Company shall
also be for the benefit of and enforceable by any subsequent holder of any
Registrable Securities, subject to the provisions respecting the minimum
numbers or percentages of Registrable Securities required in order to be
entitled to certain rights, or take certain actions, contained herein.
9. TERMINATION. This Agreement shall terminate when no
Registrable Securities remain outstanding.
10. DESCRIPTIVE HEADINGS. The descriptive headings of the
several sections and paragraphs of this Agreement are inserted for reference
only and shall not limit or otherwise affect the meaning hereof.
11. SPECIFIC PERFORMANCE. The parties hereto recognize and
agree that money damages may be insufficient to compensate the holders of any
Registrable Securities for breaches by the Company of the terms hereof and,
consequently, that the equitable remedy of specific performance of the terms
hereof will be available in the event of any such breach.
12. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED
BY, THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO PRINCIPLES OF CONFLICT
OF LAWS OR CHOICE OF LAW.
13. COUNTERPARTS. This Agreement may be executed simultaneously
in any number of counterparts, each of which shall be deemed an original, but
all such counterparts shall together constitute one and the same instrument.
-14-
IN WITNESS WHEREOF, the parties have executed this Agreement, or caused
this Agreement to be executed and delivered by their respective
representatives thereunto duly authorized, as of the date first above written.
COMPANY:
FLASHNET COMMUNICATIONS, INC.
By: /s/ M. Xxxxx Xxxxxx
------------------------------------
Name: M. Xxxxx Xxxxxx
-------------------------------
Title: President & Secretary
------------------------------
INVESTORS:
APOGEE FUND LP
By: Paradigm Capital
---------------------------------,
its General Partner
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxx
--------------------------
Title: President
--------------------------
/s/ Xxxxxx X. Xxxxxx
---------------------------------------
Xxxxxx X. Xxxxxx
ISP Investors, L.P.
By: Xxxxxxxxxx Capital Partners, LLC,
its General Partner
By: /s/ Xxxx Xxxxxxxxxx
-------------------------------
Name: Xxxx Xxxxxxxxxx
--------------------------
Title: G.P.
--------------------------
/s/ Xxxxx X. Xxxxxxx
---------------------------------------
Xxxxx X. Xxxxxxx
-15-
/s/ Xxxxxx Xxxx
---------------------------------------
J. Xxxxxx Xxxx, Xx.
/s/ Xxxx X. Xxxxxxxx
---------------------------------------
Xxxx X. Xxxxxxxx
FOURTEEN HILL CAPITAL, LP
By: Fourteen Hill Management, LLC,
its General Partner
By: Point West Capital Corporation,
its General Partner
By: /s/ Xxxxx X. Rodskog
-------------------------------
Name: Xxxxx X. Rodskog
--------------------------
Title: Senior Vice President
--------------------------
-16-
