Document:

Unassociated Document

Exhibit 10.31

WHITESMOKE, INC.

AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

This Amended and Restated Investors’ Rights Agreement (the “Agreement”) is made as of  January __, 2011 by and among WhiteSmoke, Inc., a Delaware corporation (the “Company”), (i) the investors listed on Exhibit A hereto, each of which is herein referred to as an “Investor” and together the “Investors”, (ii) the holders of Series A Preferred Stock and the holders of Series A-1 Preferred Stock listed on Exhibit B hereto; (iii) the holders of Series B Preferred Stock and the holders of Series B-1 Preferred Stock listed on Exhibit C hereto; and (iv) the holders of Series C Preferred Stock listed on Exhibit D.

 

RECITALS

 

The Company and the Investors are parties to a Convertible Loan Agreement dated June 2010, which loan was converted into Series D Preferred Shares on October 15, 2010, in accordance with the terms therein.  The Company hereby agrees that this Agreement shall govern the rights of the holders of Series D Preferred Stock, the holders of Series C Preferred Stock, holders of Series B Preferred Stock and the holders of Series B-1 Preferred Stock, to cause the Company to register shares of Common Stock issued or issuable to them and certain other matters as set forth herein.

 

AGREEMENT

 

The parties hereby agree as follows:

 

1.           Registration Rights. The Company and the Investors covenant and agree as follows:

 

1.1         Definitions. For purposes of this Agreement:

 

(a)           The term “Affiliated Fund” means, with respect to a Holder that is a limited liability company or a limited liability partnership, a fund or entity managed by the same manager or managing member or general partner or management company or by an entity controlling, controlled by, or under common control with such manager or managing member or general partner or management company;

 

(b)           The term “Exchange Act” means the Securities Exchange Act of 1934, as amended (and any successor thereto) and the rules and regulations promulgated thereunder;

 

(c)           The term “Form S-3” means such form under the Securities Act as in effect on the date hereof or any successor form under the Securities Act that permits significant incorporation by reference of the Company’s subsequent public filings under the Exchange Act;

  

 

  

 

(d)           The term “Holder” means any person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with Section 1.12 of this Agreement;

 

(e)           The term “Major Investor” means any holder of Preferred Stock holding that holds at least 5% of the outstanding shares of Common Stock (assuming conversion of all outstanding Preferred Shares) of the Company;

 

(f)           The term “Major Investors Group” means the groups of holders of Preferred Stock listed on Exhibit E hereto;

 

(g)           The term "Preferred Stock" means shares of any of the Company's Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock.

 

(h)           The term “Qualified IPO” means a firm commitment underwritten public offering by the Company of shares of its Common Stock with aggregate offering proceeds of at least $10 million and a simultaneous listing on a national securities exchange, in connection with which all the then-outstanding shares of Preferred Stock are converted into shares of Common Stock pursuant to the Company’s Restated Certificate of Incorporation as such Restated Certificate of Incorporation may be amended from time to time;

 

(i)            The terms “register,” “registered,” and “registration” refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document;

 

(j)            The term “Registrable Securities” means (i) the shares of Common Stock issuable or issued upon conversion of the Series D Preferred Stock, Series C Preferred Stock, Series B Preferred Stock and Series B-1 Preferred Stock, other than shares for which registration rights have terminated pursuant to Section 1.15 hereof, and (ii) any other shares of Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares listed in (i); excluding in all cases any Registrable Securities sold by a person in a transaction in which his or her rights under this Agreement are not assigned. Notwithstanding the foregoing, Common Stock or other securities shall only be treated as Registrable Securities if and so long as (A) they have not been sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction, (B) they have not been 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, if any, are removed upon the consummation of such sale, or (C) the Holder thereof is entitled to exercise any right provided in Section 1 in accordance with Section 1.15 below;

 

(k)           The number of shares of “Registrable Securities then outstanding” shall be determined by the number of shares of Common Stock outstanding which are, and the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities which are, Registrable Securities;

  

 

  

 

(l)            The term “SEC” means the Securities and Exchange Commission; and

 

(m)          The term “Securities Act” means the Securities Act of 1933, as amended (and any successor thereto) and the rules and regulations promulgated thereunder.

 

1.2         Request for Registration.

 

(a)           If the Company shall receive at any time after six months after the effective date of the Qualified IPO, a written request from the Holders of a majority of the Registrable Securities then outstanding (the “Initiating Holders”) that the Company file a registration statement under the Securities Act covering the registration of Registrable Securities with an anticipated aggregate offering price of at least $2,000,000 (net of any underwriters' discounts or commissions), then the Company shall, within 20 days of receiving such request, give written notice of such request to all Holders and shall, subject to the limitations of subsection 1.2(b), use all commercially reasonable efforts to effect a registration statement under the Securities Act covering all Registrable Securities which the Holders request to be registered within 20 days of the mailing of such notice by the Company.

 

(b)           If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request and the Company shall include such information in the written notice referred to in subsection 1.2(a). The underwriter will be selected by the Company, which underwriter shall be reasonably acceptable to a majority in interest of the Holders whose Registrable Securities are to be included in the underwriting. In such event, the right of any Holder to include his Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein. The Company and all Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Section 1.2, if the underwriter advises the Company in good faith that marketing factors require a limitation of the number of shares to be underwritten, then there shall be excluded from such registration and underwriting to the extent necessary to satisfy such limitation, first shares held by stockholders other than the Holders, secondly, shares which the Company may wish to register for its own account, and finally to the extent necessary Registrable Securities (pro rata to the respective number of Registrable Securities held by each Holder); provided, however, that in any event all Registrable Shares must be included in such registration prior to any other shares of the Company.

 

(c)           Notwithstanding the foregoing, if the Company shall furnish to Holders requesting a registration statement pursuant to this Section 1.2, a certificate signed by the President 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 and its stockholders for such registration statement to be filed, the Company shall have the right to defer such filing for a period of not more than 120 days after receipt of the request of the Initiating Holders; provided, however, that the Company may not utilize this right more than once in any twelve-month period, and provided, further, that the Company shall not register any securities for the account of itself or any other stockholder during such 120-day period (other than in a Qualified IPO, a registration relating solely to the sale of securities of participants in a Company stock plan, a registration relating to a corporate reorganization or transaction under Rule 145 of the Securities Act, or a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities which are also being registered).

  

 

  

 

(d)           In addition, the Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to this Section 1.2:

 

(i)           After the Company has effected two (2) registrations pursuant to this Section 1.2 and such registrations have been declared or ordered effective;

 

(ii)          During the period starting with the date 90 days prior to the Company’s good faith estimate of the date of filing of, and ending on a date 90 days after the effective date of, a registration subject to Section 1.3 hereof unless such offering is the initial public offering of the Company’s securities, in which case, ending on a date 180 days after the effective date of such registration subject to Section 1.3 hereof; provided that the Company is actively employing in good faith all commercially reasonable efforts to cause such registration statement to become effective;

 

(iii)          If the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 1.4 below; or

 

(iv)         In any jurisdiction in which the Company would be required to qualify to do business or execute a general consent to service of process in effecting such registration, unless the Company is already qualified to do business or subject to service of process in such jurisdiction.

 

1.3         Company Registration.

 

(a)           If the Company proposes to register (including for this purpose a registration effected by the Company for stockholders other than the Holders) any of its stock under the Securities Act in connection with the public offering of such securities solely for cash (other than a registration relating solely to the sale of securities to participants in a Company stock plan or a transaction covered by Rule 145 under the Securities Act, a registration in which the only stock being registered is Common Stock issuable upon conversion of debt securities which are also being registered, or any registration on any form which does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities), the Company shall, at such time, promptly give each Holder written notice of such registration. Upon the written request of each Holder given within 20 days after mailing of such notice by the Company in accordance with Section 3.4, the Company shall, subject to the provisions of Section 1.8, use all commercially reasonable efforts to cause to be registered under the Securities Act all of the Registrable Securities that each such Holder has requested to be registered.

  

 

  

 

(b)           The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 1.3 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such registration. The expenses of such registration shall be borne by the Company, in accordance with Section 1.7 hereof.

 

1.4         Form S-3 Registration. In case the Company shall receive from any Holder or Holders a written request or requests that the Company effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders where the aggregate net proceeds from the sale of such Registrable Shares equals to at least five hundred United States dollars ($500,000), the Company will within twenty (20) days after receipt of any such request:

 

(a)           promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders; and

 

(b)           use all commercially reasonable efforts to effect, as soon as practicable, such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder’s or Holders’ Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within 15 days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance, pursuant to this Section 1.4: (i) if Form S-3 is not available for such offering by the Holders; (ii) if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public of less than $5,000,000(net of any underwriters' discounts or commissions); (iii) if the Company shall furnish to the Holders a certificate signed by the President 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 and its stockholders for such Form S-3 Registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than 120 days after receipt of the request of the Holder or Holders under this Section 1.4; provided, however, that the Company shall not utilize this right more than once in any 12-month period; (iv) if the Company has, within the 12-month period preceding the date of such request, already effected two registrations on Form S-3 for the Holders pursuant to this Section 1.4; (v) in any jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance unless the Company is already qualified to do business or subject to service of process in that jurisdiction; or (vi) during the period ending 180 days after the effective date of a registration statement subject to Section 1.3.

 

(c)           Subject to the foregoing, the Company shall file a registration statement covering the Registrable Securities and other securities so requested to be registered as soon as practicable after receipt of the request or requests of the Holders. Registrations effected pursuant to this Section 1.4 shall not be counted as demands for registration or registrations effected pursuant to Sections 1.2 or 1.3, respectively.

 

1.5         Obligations of the Company. Whenever required under this Section 1 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

  

 

  

 

(a)           Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use all commercially reasonable efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for up to 120 days, or until the distribution described in such registration statement is completed, if earlier.

 

(b)           Prepare and file with the SEC 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 for up to 120 days, or until the distribution described in such registration statement is completed, if earlier.

 

(c)           Furnish to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them.

 

(d)           Use all commercially reasonable 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 unless the Company is already qualified to do business or subject to service of process in that jurisdiction.

 

(e)           In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement.

 

(f)           Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, such obligation to continue for 120 days.

 

(g)           Cause all such Registrable Securities registered pursuant to this Section 1 to be listed on each national securities exchange or trading system on which similar securities issued by the Company are then listed.

 

(h)           Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration.

  

 

  

 

1.6         Information From Holders. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 1 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Holder’s Registrable Securities. The Company shall have no obligation with respect to any registration requested pursuant to Section 1.2 or Section 1.4 of this Agreement if, as a result of the application of the preceding sentence, the anticipated aggregate offering price of the Registrable Securities to be included in the registration does not equal or exceed the anticipated aggregate offering price required to originally trigger the Company’s obligation to initiate such registration as specified in subsection 1.2(a) or subsection 1.4(b)(2), whichever is applicable.

 

1.7         Expenses of Registration. All expenses other than underwriting discounts and commissions incurred in connection with registrations, filings or qualifications pursuant to Sections 1.2, 1.3 and 1.4 including (without limitation) all registration, filing and qualification fees, printers’ and accounting fees, fees and disbursements of counsel for the Company, and the reasonable fees and disbursements of one counsel for the selling Holders selected by them with the approval of the Company, which approval shall not be unreasonably withheld, shall be borne by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 1.2 or 1.4 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all participating Holders shall bear such expenses), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one demand registration pursuant to Section 1.2; provided further, however, that if at the time of such withdrawal, the Holders (i) have learned of a material adverse change in the condition, business, or prospects of the Company that was not known to the Holders at the time of their request and (ii) have withdrawn the request with reasonable promptness following disclosure by the Company of such material adverse change, then the Holders shall not be required to pay any of such expenses and shall not forfeit their rights pursuant to Section 1.2.

 

1.8         Underwriting Requirements. In connection with any offering involving an underwriting of shares of the Company’s capital stock, the Company shall not be required under Section 1.3 to include any of the Holders’ securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by the Company (or by other persons entitled to select the underwriters), and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by the Company. If the total amount of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the amount of securities sold other than by the Company that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters determine in their sole discretion will not jeopardize the success of the offering (the securities so included to be apportioned pro rata among the selling stockholders according to the total amount of securities entitled to be included therein owned by each selling stockholder or in such other proportions as shall mutually be agreed to by such selling stockholders) but in no event shall the amount of securities of the selling Holders included in the offering be reduced below 40% of the total amount of securities included in such offering, unless such offering is the initial public offering of the Company’s securities, in which case, the selling stockholders may be excluded if the underwriters make the determination described above and no other stockholder’s securities are included. For purposes of the preceding parenthetical concerning apportionment, for any selling stockholder which is a holder of Registrable Securities and which is a venture capital fund, or a partnership or corporation, the Affiliated Funds, partners, retired partners and stockholders of such holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single “selling stockholder,” and any pro-rata reduction with respect to such “selling stockholder” shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such “selling stockholder,” as defined in this sentence.

  

 

  

 

1.9         Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 1.

 

1.10       Indemnification. In the event any Registrable Securities are included in a registration statement under this Section 1:

 

(a)           To the extent permitted by law, the Company will indemnify and hold harmless each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a “Violation”): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law; and the Company will pay to each such Holder, underwriter or controlling person, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this subsection 1.10(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable to any Holder, underwriter or controlling person for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, underwriter or controlling person.

  

 

  

 

(b)           To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter, any other Holder selling securities in such registration statement and any controlling person of any such underwriter or other Holder, against any losses, claims, damages, or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder will pay, as incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this subsection 1.10(b), in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this subsection 1.10(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided, that in no event shall any indemnity under this subsection 1.10(b) exceed the net proceeds from the offering received by such Holder, except in the case of willful fraud by such Holder.

 

(c)           Promptly after receipt by an indemnified party under this Section 1.10 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 1.10, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; 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 reasonable 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 to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 1.10, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 1.10.

 

(d)           If the indemnification provided for in this Section 1.10 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to 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 loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations; provided, that in no event shall any contribution by a Holder under this Subsection 1.10(d) exceed the net proceeds from the offering received by such Holder, except in the case of willful fraud by such Holder. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.

  

 

  

 

(e)           Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

 

(f)           The obligations of the Company and Holders under this Section 1.10 shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 1, and otherwise.

 

1.11       Reports Under the Exchange Act. With a view to making available to the Holders the benefits of Rule 144 promulgated under the Securities Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to:

 

(a)           Make and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times after 90 days after the effective date of the Qualified IPO so long as the Company remains subject to the periodic reporting requirements under Sections 13 or 15(d) of the Exchange Act;

 

(b)           Take such action, including the voluntary registration of its Common Stock under Section 12 of the Exchange Act, as is necessary to enable the Holders to utilize Form F-3 for the sale of their Registrable Securities, such action to be taken as soon as practicable after the end of the fiscal year in which the first registration statement filed by the Company for the offering of its securities to the general public is declared effective;

 

(c)           File with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and

 

(d)          Furnish to any Holder upon request, so long as the Holder owns any Registrable Securities, (i) a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after 90 days after the effective date of the Qualified IPO), the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form F-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form.

  

 

  

1.12       Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to this Section 1 may be assigned (but only with all related obligations) by a Holder to a transferee or assignee (i) of at least 100,000 shares of such securities (subject to adjustment for stock splits, stock dividends, reclassification or the like), (ii) that is a subsidiary, parent, partner, limited partner, retired partner, member, retired member or stockholder of a Holder, (iii) that is an Affiliated Fund, (iv) who is a Holder’s child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law (such a relation, a Holder’s “Immediate Family Member”, which term shall include adoptive relationships), or (v) that is a trust for the benefit of an individual Holder or such Holder’s Immediate Family Member, provided that the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; and provided, further, that such assignment shall be effective only if the transferee agrees to be bound by this Agreement and immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Securities Act. For the purposes of determining the number of shares of Registrable Securities held by a transferee or assignee, the holdings of transferees and assignees of (x) a partnership who are partners or retired partners of such partnership or (y) a limited liability company who are members or retired members of such limited liability company (including Immediate Family Members of such partners or members who acquire Registrable Securities by gift, will or intestate succession) shall be aggregated together and with the partnership or limited liability company; provided that all assignees and transferees who would not qualify individually for assignment of registration rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices or taking any action under Section 1.

 

1.13       Limitations on Subsequent Registration Rights.The Company shall not, without the prior written consent of the Holders of a majority of the outstanding Registrable Securities, enter into any agreement with any holder or prospective holder of any securities of the Company which would allow such holder or prospective holder (a) to include any of such securities in any registration filed under Section 1.2 hereof, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of his securities will not reduce the amount of the Registrable Securities of the Holders which is included or (b) to make a demand registration which could result in such registration statement being declared effective prior to the earlier of either of the dates set forth in subsection 1.2(a) or within 120 days of the effective date of any registration effected pursuant to Section 1.2.

 

1.14       Lock-Up Agreement.

 

(a)           Lock-Up Period; Agreement. In connection with the initial public offering of the Company’s securities and upon request of the underwriters managing such offering of the Company’s securities, each Holder agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company, however or whenever acquired (other than those included in the registration) without the prior written consent of such underwriters for such period of time (not to exceed 180 days) from the effective date of such registration statement as may be requested by the managing underwriters and to execute an agreement reflecting the foregoing as may be requested by the underwriters at the time of the Company’s initial public offering.

 

(b)           Limitations. The obligations described in Section 1.14(a) shall apply only if all officers and directors of the Company and all holders of greater than 1% (one percent) of the Company’s securities enter into similar agreements, and shall not apply to a registration relating solely to employee benefit plans, or to a registration relating solely to a transaction pursuant to Rule 145 under the Securities Act.

 

  

  

  

 

(c)           Stop-Transfer Instructions. In order to enforce the foregoing covenants, the Company may impose stop-transfer instructions with respect to the securities of each Holder (and the securities of every other person subject to the restrictions in Section 1.14(a)).

 

(d)           Transferees Bound. Each Holder agrees that prior to the Company’s initial public offering it will not transfer securities of the Company unless each transferee agrees in writing to be bound by all of the provisions of this Section 1.14, provided that this Section 1.14(d) shall not apply to transfers pursuant to a registration statement or transfers after the 12-month anniversary of the effective date of the Company’s initial registration statement subject to this Section 1.14.

 

1.15       Termination of Registration Rights. No Holder shall be entitled to exercise any right provided for in this Section 1 after the earlier of (i) five (5) years following the consummation of a Qualified IPO, (ii) with respect to any Holder, at such time after the Qualified IPO as Rule 144 or another similar exemption under the Securities Act is available for the sale of all of such Holder’s shares during a three-month period without registration, or (iii) upon termination of the Agreement, as provided in Section 3.1.

 

2.           Covenants of the Company.

 

2.1         Delivery of Financial Statements. The Company shall deliver to each Major Investor and to shareholders designated as representatives for such purpose by each Major Investors Group:

 

(a)           as soon as practicable, but in any event within 90 days after the end of each fiscal year of the Company, an income statement for such fiscal year, a balance sheet of the Company and statement of stockholder’s equity as of the end of such year, and a statement of cash flows for such year, such year-end financial reports to be in reasonable detail, prepared in accordance with generally accepted accounting principles (“GAAP”), and audited and certified by an accounting firm associated with one of the "Big 4" US accounting firms selected by the Company;

 

(b)           as soon as practicable, but in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Company, an unaudited profit or loss statement, a statement of cash flows for such fiscal quarter and an unaudited balance sheet as of the end of such fiscal quarter, reviewed by an accounting firm associated with one of the "Big 4" US accounting firms selected by the Company;

 

(c)           within 14 days of the end of each month, a monthly report in a form agreed by the Board of Directors;

 

(d)           as soon as practicable, but in any event 45 days prior to the end of each fiscal year, a budget and operating plan for the next fiscal year, prepared on a monthly basis, and, as soon as prepared, any other updated or revised budgets for such fiscal year prepared by the Company; and

 

  

  

  

 

(e)           with respect to the financial statements called for in subsections (b) and (c) of this Section 2.1, an instrument executed by the Chief Financial Officer or President of the Company and certifying that such financials were prepared in accordance with GAAP consistently applied with prior practice for earlier periods (with the exception of footnotes that may be required by GAAP) and fairly present the financial condition of the Company and its results of operation for the period specified, subject to year-end audit adjustment, provided that the foregoing shall not restrict the right of the Company to change its accounting principles consistent with GAAP, if the Board of Directors determines that it is in the best interest of the Company to do so.

 

2.2         Inspection. The Company shall permit each Major Investor and each shareholder designated as a representative for such purpose by each Major Investors Group, at such Major Investor’s and Major Investors Group’s expense, to visit and inspect the Company’s properties, to examine its books of account and records and to discuss the Company’s affairs, finances and accounts with its officers, all at such reasonable times as may be requested by the Major Investor or by such representatives of the Major Investors Groups; provided, however, that the Company shall not be obligated pursuant to this Section 2.2 to provide access to any information which it reasonably considers to be a trade secret or similar confidential information.

 

2.3         Right of First Offer. Subject to the terms and conditions specified in this Section 2.3, the Company hereby grants to each Major Investor and the Major Investors Groups listed in Exhibit D hereto (as long as each Major Investors Group continues to hold in the aggregate at least 5% of the Company's voting rights) (collectively for the purpose of this Section 2.3, "Investors") a right of first offer with respect to future sales by the Company of its Shares (as hereinafter defined). A Major Investor or a Major Investors Group who chooses to exercise the right of first offer may designate as purchasers under such right itself or its partners or affiliates, including Affiliated Funds and any member of the Major Investors Groups, in such proportions as it deems appropriate.

 

Each time the Company proposes to offer any shares of, or securities convertible into for any shares of, any class of its capital stock (“Shares”), the Company shall first make an offering of such Shares to each Major Investor and each Major Investors Group in accordance with the following provisions:

 

(a)           The Company shall deliver a notice (the “RFO Notice”) to the Major Investors and to the shareholders designated as representatives for this purpose by each of the Major Investors Groups stating (i) its bona fide intention to offer such Shares, (ii) the number of such Shares to be offered, and (iii) the price and terms, if any, upon which it proposes to offer such Shares.

 

(b)           Within 15 calendar days after delivery of the RFO Notice, each Investor may elect to purchase or obtain, at the price and on the terms specified in the RFO Notice, up to that portion of such Shares which equals the proportion that the number of shares of Common Stock issued and held, or issuable upon conversion of all convertible securities then held, by such Investor bears to the total number of shares of Common Stock then outstanding (assuming full conversion of all convertible securities), provided that a Major Investors Group may only elect to purchase at least 5% of the Shares. Such purchase shall be completed at the same closing as that of any third party purchasers or at an additional closing thereunder. The Company shall promptly, in writing, inform each Investor that purchases all the shares available to it (each, a “Fully-Exercising Investor”) of any other Investor’s failure to do likewise. During the 10-day period commencing after receipt of such information, each Fully-Exercising Investor shall be entitled to obtain that portion of the Shares for which Investors were entitled to subscribe but which were not subscribed for by the Investors that is equal to the proportion that the number of shares of Common Stock issued and held, or issuable upon conversion of all convertible securities then held, by such Fully-Exercising Investor bears to the total number of shares of Common Stock then outstanding (assuming full conversion of all convertible securities).

 

  

  

  

 

(c)           The Company may, during the 45-day period following the expiration of the period provided in subsection 2.3(b) hereof, offer the remaining unsubscribed portion of the Shares to any person or persons at a price not less than, and upon terms no more favorable to the offeree than those specified in the RFO Notice. If the Company does not enter into an agreement for the sale of the Shares within such period, or if such agreement is not consummated within 90 days of the execution thereof, the right provided hereunder shall be deemed to be revived and such Shares shall not be offered unless first reoffered to the Major Investors and the Major Investors Groups in accordance herewith.

 

(d)           The right of first offer in this Section 2.3 shall not be applicable to (i) the issuance of securities in connection with stock dividends, stock splits or similar transactions; (ii) the issuance or sale of Common Stock (or options therefor) to employees, consultants and directors of the Company, directly or pursuant to a stock option plan, restricted stock purchase plans or other stock plan approved by the Board of Directors; (iii) the issuance of securities in connection with bona fide acquisition, merger or similar transaction, the terms of which are approved by the Board of Directors; (iv) the issuance or sale of the Series D Preferred Stock or the Common Stock issuable upon conversion of the Series A Preferred Stock, the Series A-1 Preferred Stock, the Series B Preferred Stock, the Series B-1 Preferred Stock, the Series C Preferred Stock and Series D Preferred Stock; (v) the issuance of Common Stock in a Qualified IPO; or (vi) the issuance of securities which a majority of the directors determined should not entitle the Investors to a right of first offer. In addition to the foregoing, the right of first offer in this Section 2.3 shall not be applicable with respect to any Major Investor or to any member of a Major Investors Group and any subsequent securities issuance, if (x) at the time of such subsequent securities issuance, the Major Investor or such member of the Major Investor Group is not an “accredited investor”, as that term is then defined in Rule 501(a) under the Securities Act, and (y) such subsequent securities issuance is being offered only to accredited investors according to the unanimous written consent of the Company’s Board of Directors.

 

2.4         Termination of Covenants.

 

(a)           The covenants set forth in Sections 2.1 through Section 2.3 shall terminate as to each Holder and be of no further force or effect (i) immediately prior to the consummation of a Qualified IPO, or (ii) upon termination of the Agreement, as provided in Section 3.1.

 

(b)           The covenants set forth in Sections 2.1 and 2.2 shall terminate as to each Holder and be of no further force or effect when the Company first becomes subject to the periodic reporting requirements of Sections 13 or 15(d) of the Exchange Act, if this occurs earlier than the events described in Section 2.4(a) above.

  

 

  

 

	
  

	
3.

	
Termination of the Investor's Right Agreement dated June 30, 2009

 

The Company, the holders of Series C Preferred Stock, Series B Preferred Stock, the holders of Series B-1 Preferred Stock the holders of Series A Preferred Stock and the holders of Series A-1 Preferred Stock agree that this Agreement restated, amends, supersedes, and terminates the Investor's Right Agreement dated June 30, 2009.

 

	
  

	
4.

	
Miscellaneous

 

4.1      Automatic Additional Parties.  This Agreement shall automatically apply to any additional Series D Preferred Shares of the Company which may be issued under a Convertible Loan Agreement to be entered into between the Company and certain shareholders of the Company and potentially additional third parties; third parties which are not a party to this Agreement to which Series D Preferred Shares shall be issued shall automatically be deemed a party to this Agreement and be considered Investors under this Agreement for all intents and purposes.

 

4.2      Termination. This Agreement shall terminate, and have no further force and effect, when the Company shall consummate a transaction or series of related transactions deemed to be a liquidation, dissolution or winding up of the Company pursuant to the Company’s Restated Certificate of Incorporation, as such Restated Certificate of Incorporation may be amended from time to time.

 

4.3      Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto pertaining to the subject matter hereof, and any and all other written or oral agreements relating to the subject matter hereof existing between the parties hereto are expressly canceled.

 

4.4      Successors and Assigns. Except as otherwise provided in this Agreement, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties (including transferees of any of the Series D Preferred Stock, Series C Preferred Stock, the Series B Preferred Stock, the holders of Series B-1 Preferred Stock the Series A Preferred Stock, the holders of Series A-1 Preferred Stock or any Common Stock issued upon conversion thereof). Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

 

4.5      Amendments and Waivers. Any term of this Agreement may be amended or waived only with the written consent of the Company and the holders of a majority of the Registrable Securities then outstanding; provided, however, if such amendment or waiver would adversely affect the rights of a specific series of Preferred Stock in a manner different from the other series of Preferred Stock, then such amendment or waiver shall require the consent of the Investors holding a majority in interest of such series of Preferred Stock; and any amendment or waiver of the rights granted to the Major Investors in Section 2 above shall require the consent of a majority in interest of the Registrable Securities held by the Major Investors. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each party to the Agreement, whether or not such party has signed such amendment or waiver, each future holder of all such Registrable Securities, and the Company.

 

  

  

  

 

4.6      Notices. Unless otherwise provided, any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by overnight courier or sent by facsimile, or 48 hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, and addressed to the party to be notified at such party’s address or facsimile number as set forth on Exhibit A hereto or as subsequently modified by written notice.

 

4.7      Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement, and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

 

4.8      Governing Law. This Agreement and all acts and transactions pursuant hereto shall be governed, construed and interpreted in accordance with the laws of the State of Israel, without giving effect to principles of conflicts of laws.

 

4.9      Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

4.10    Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

4.11    Aggregation of Stock. All shares of the Preferred Stock 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.

 

[Signature Page Follows]

 

  

  

  

The parties have executed this Investors’ Rights Agreement as of the date first above written.

 

	
COMPANY:

	  
	  	  
	
WHITESMOKE, INC.

	
 

	  	  
	
By:

	/s/ Hilla Ovil Brenner, CEO	  
	  	  
	
Address:

	501 Silverside Road Wilmington, DE 19809	  
	  	  
	
Fax:

	372-3-6486133	  

 

  

  

  

The parties have executed this Investors’ Rights Agreement as of the date first above written.

 

INVESTORS

 

	
By:

	  	  
	  	  
	
Address:

	  	  
	  	  
	
Fax:

	  	  

  

  

  

EXHIBIT A

INVESTORS

	
 

Name

	 
	
Shani O.D.E Ltd.

	 
	
Lesser Trust

	 
	
Kaedan Investments Ltd.

	 
	
Kadean Capital Ltd.

	 
	
Marc Thalheim

	 
	 	 
	
G.K. Capital Ltd.

	 
	 	 
	
Lindsay Thalheim

	 
	
Gideon Michonik

	 
	
David Thalheim

	 
	
Yair Goldfinger

	 
	
Alex Hilman Holdings Ltd.

	 
	
Richard Gladstone

	 
	
Evolution Venture Capital Fund I (Israel) LP

	 
	
Evolution Venture Capital Fund  (Exempt) LP

	 
	
Isard Dunietz (or his successor)) as Trustee of the Isard Dunietz 2006 Trust, created by a Declaration of Trust dated July 19, 2006, as it may be amended or restated from time to time thereafter

	 
	
Kopelman Ltd.

	 
	
Roger Gladstone

David Nussbaum

	 
	
Dalewood Associates Ltd

	 
	
Paneem Ltd.

	 
	
Bernardo Cohen Investments Ltd.

	 

 

  

  

  

EXHIBIT B

HOLDERS OF SERIES A PREFERRED STOCK AND HOLDERS OF SERIES A-1 

PREFERRED STOCK

	
Name

	 
	 	 
	
Joel Ovil

	 
	 	 
	
Lea Ovil

	 
	 	 
	
Runway Ltd.

	 
	 	 
	
Netivim Ltd.

	 
	 	 
	
Aaron Nahumi

	 
	 	 
	
David Aber

	 
	 	 
	
Lucian Ventures, Inc.

	 
	 	 
	
Chen Zur

	 
	 	 
	
Shani O.D.E Ltd.

	 
	 	 
	
Kaedan Investments Ltd.

	 
	 	 
	
G.K. Capital Ltd.

	 
	 	 
	
Gideon Michonik

	 
	 	 
	
Shabtai Nuriel

	 
	 	 
	
Yair Goldfinger

	 
	 	 
	
Atom Corp.

	 
	 	 
	
Robert Gladstone

	 
	 	 
	
Roger Gladstone

	 
	 	 
	
David Nussbaum

	 
	 	 
	
BRMR, LLC

	 
	 	 
	
Ted Struhl

	 
	 	 
	
Dalewood Assoc.

	 

 

  

  

  

 

	 	 
	
Marc Thalheim

	 
	 	 
	
Lindsay Thalheim

	 
	 	 
	
David Thalheim

	 
	 	 
	
Zeevi Aber

	 
	 	 
	
Fire Guarantee Ltd.

	 
	 	 
	
Alex Hilman Holdings Ltd.

	 
	 	 
	
Kopelman Ltd.

	 

 

  

  

  

EXHIBIT C

HOLDERS OF SERIES B PREFERRED STOCK AND HOLDERS OF SERIES B-1 

PREFERRED STOCK

 

	
Name

	 
	 	 
	
Joel Ovil

	 
	 	 
	
Lea Ovil

	 
	 	 
	
Runway Ltd.

	 
	 	 
	
Netivim Ltd.

	 
	 	 
	
Aaron Nahumi

	 
	 	 
	
Lucian Ventures, Inc.

	 
	 	 
	
Chen Zur

	 
	 	 
	
Shani O.D.E Ltd.

	 
	 	 
	
Kaedan Investments Ltd.

	 
	 	 
	
G.K Capital Ltd.

	 
	 	 
	
Gideon Michonik

	 
	 	 
	
Shabtai Nuriel

	 
	 	 
	
Yair Goldfinger

	 
	 	 
	
Richard Gladstone

	 
	 	 
	
Robert Gladstone

	 
	 	 
	
Roger Gladstone

	 
	 	 
	
David Nussbaum

	 
	 	 
	
BRMR, LLC

	 
	 	 
	
Ted Struhl

	 
	 	 
	
Dalwood Assoc.

	 
	 	 

 

  

  

  

 

	
Marc Thalheim

	 
	 	 
	
Lindsay Thalheim

	 
	 	 
	
David Thalheim

	 
	 	 
	
Alex Hilman Holdings Ltd.

	 
	 	 
	
Avenue International Corp.

	 
	 	 
	
Partam Properties (1993) Ltd.

	 
	 	 
	
Andrew Rosen

	 
	 	 
	
Petty & Chris Conway

	 
	 	 
	
Evolution Venture Capital Fund I (Israel) LP

	 
	 	 
	
Evolution Venture Capital Fund I (Exempt) LP

	 
	 	 
	
Kopelman Ltd.

	 

 

  

  

  

EXHIBIT D

HOLDERS OF SERIES C PREFERRED STOCK AND SERIES D PREFERRED STOCK 

RESULTING FROM CONVERSION OF SERIES C PREFERRED SHARES INTO 

SERIES D PREFERRED STOCK

 

	
Name

	 
	 	 
	
Runway Ltd.

	 
	 	 
	
Aaron Nahumi

	 
	 	 
	
Lesser Trust

	 
	 	 
	
Shani O.D.E Ltd.

	 
	 	 
	
Kaedan Investments Ltd.

	 
	 	 
	
Kaedan Capital Ltd.

	 
	 	 
	
G.K Capital Ltd.

	 
	 	 
	
Gideon Michonik

	 
	 	 
	
Shabtai Nuriel

	 
	 	 
	
Yair Goldfinger

	 
	 	 
	
Richard Gladstone

	 
	 	 
	
Robert Gladstone

	 
	 	 
	
Roger Gladstone

	 
	 	 
	
David Nussbaum

	 
	 	 
	
BRMR, LLC

	 
	 	 
	
Ted Struhl

	 
	 	 
	
Dalwood Assoc.

	 
	 	 
	
Marc Thalheim

	 
	 	 
	
Lindsay Thalheim

	 
	 	 
	
David Thalheim

	 

 

  

  

  

 

	
Alex Hilman Holdings Ltd.

	 
	 	 
	
Avenue International Corp.

	 
	 	 
	
Partam Properties (1993) Ltd.

	 
	 	 
	
Andrew Rosen

	 
	 	 
	
Petty & Chris Conway

	 
	 	 
	
Evolution Venture Capital Fund I (Israel) LP

	 
	 	 
	
Evolution Venture Capital Fund I (Exempt) LP

	 
	 	 
	
Isard Dunietz as Trustee

	 
	 	 
	
Plimus Corporation Inc.

	 
	 	 
	
Kopelman Ltd.

	 

  

  

  

 

 EXHIBIT E

 

MAJOR INVESTORS GROUPS

 

	
Group A

	 
	
Joel Ovil

	 
	
Lea Ovil

	 
	
Runway Ltd.

	 
	
Netivim Ltd.

	 
	
Aaron Nahumi

	 
	
David Aber

	 
	
Lucian Ventures, Inc.

	 
	
Chen Zur

	 
	
Shani O.D.E Ltd.

	 
	
Zeevi Aber

	 
	
Fire Guarantee Ltd.

	 
	
Alex Hilman Holdings Ltd.

	 
	
Arnon Katz

	 
	
Partam Properties (1993) Ltd.

	 
	  	 
	
Group B

	 
	
Kaedan Investments Ltd.

	 
	
G.K. Capital Ltd.

	 
	
Gideon Michonik

	 
	
Shabtai Nuriel

	 
	
Yair Goldfinger

	 
	  	 
	
Group C

	 
	
Atom Corp.

	 
	
Robert Gladstone

	 
	
Roger Gladstone

	 
	
David Nussbaum

	 
	
BRMR, LLC

	 
	
Ted Struhl

	 
	
Dalewood Assoc.

	 
	
Marc Thalheim

	 
	
Lindsay Thalheim

	 
	
David Thalheim

	 
	
Andrew Rosen

	 
	
Petty & Chris ConwayExhibit 10.32

 

FORM OF

INDEMNIFICATION AGREEMENT

 

This INDEMNIFICATION AGREEMENT (this “Agreement”) is made as of _________ ___, 2011, between WhiteSmoke, Inc., a Delaware corporation (the “Company”), and _____________ (collectively with such person’s heirs, executors, administrators and other personal representatives, the “Indemnitee”), an officer or director of the Company.

 

WHEREAS, the Board of Directors has concluded that Company’s officers and directors should be provided with the maximum protection against risks relating to such positions in order to insure that the most capable persons will be attracted to such positions; and, therefore, has determined to contractually obligate itself to indemnify its officers and directors, and to assume for itself liability for expenses and damages in connection with claims lodged against such persons as a result of their service to the Company as provided in this Agreement;

 

WHEREAS, applicable law empowers corporations to indemnify a person who serves as a director, officer, employee or agent of a corporation or a person who serves at the request of a corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, or other enterprise; and

 

WHEREAS, the parties believe it appropriate to memorialize and reaffirm the Company’s indemnification obligations to the Indemnitee and, in addition, to set forth the agreements contained herein.

 

NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties agree as follows:

 

1.           Indemnification. (a) The Indemnitee shall be indemnified and held harmless by the Company against any judgments, penalties, fines, amounts paid in settlement and Expenses (as hereinafter defined) incurred in connection with any Proceeding (as hereinafter defined) to the maximum extent permitted by applicable law (including, without limitation, the General Corporation Law of the State of Delaware (“Delaware Law”)) as in effect on the date hereof and to such greater extent as Delaware Law may hereafter from time to time permit.  In addition, the Company agrees to advance to the Indemnitee Expenses incurred in connection with the foregoing.  “Proceeding” includes, without limitation, any threatened, pending, or completed claim, action, suit, investigation, or proceeding, whether brought by or in the right of the Company or otherwise and whether of a civil, criminal, administrative, or investigative nature, including any Proceeding in which the Indemnitee may be or may have been involved as a party, witness, or otherwise, (i) by reason of the fact that the Indemnitee is or was a director or officer of the Company, or any subsidiary or Affiliate (as defined below) of the Company, (ii) by reason of any actual or alleged error or misstatement or misleading statement made or suffered by the Indemnitee, (iii) by reason of any action taken by him or her or of any inaction on his or her part while acting as such director or officer, or (iv) by reason of the fact that he or she was serving at the request of the Company as a director, trustee, officer, employee, manager or agent of another corporation, limited liability company, partnership, joint venture, employee benefit plan, trust, or other entity or enterprise.  As used in this Agreement, the term “other enterprise” shall include (without limitation) employee benefit plans and administrative committees thereof, and the term “fines” shall include (without limitation) any excise tax assessed with respect to any employee benefit plan.  Any corporation, partnership, limited liability company, joint venture, trust, employee benefit plan, or other entity or enterprise on behalf of which the Indemnitee may be deemed to be acting in connection with his or her service to the Company shall be entitled to the benefits of the indemnity provided for by this Agreement to the same extent and under the same conditions upon which the Indemnitee is entitled to such indemnity.  As used in this Agreement, the term “Affiliate” shall include any corporation, limited liability company, partnership, joint venture, employee benefit plan, trust or other entity or enterprise affiliated with the Company.

 

  

1

  

 

(b)           The termination of any Proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself (i) adversely affect the rights of the Indemnitee to indemnification hereunder except as may be specifically provided herein, (ii) create a presumption that the Indemnitee did not act in good faith or in a manner which the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company or (iii) create a presumption that (with respect to any criminal action or proceeding) the Indemnitee had reasonable cause to believe that the Indemnitee’s conduct was unlawful.

 

(c)           For purposes of any determination of good faith hereunder, the Indemnitee shall be deemed to have acted in good faith if the Indemnitee’s action is based on the records or books of account of the Company or an Affiliate (as such term is defined below), including financial statements, or on information supplied to the Indemnitee by the officers of the Company or an Affiliate in the course of their duties, or on the advice of legal counsel for the Company or an Affiliate or on information or records given or reports made to the Company or an Affiliate by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Company or an Affiliate.  The provisions of this Section 1(c) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met any applicable standard of conduct required to be indemnified or exercise rights pursuant to this Agreement.

 

(d)           The knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Company or an Affiliate shall not be imputed to the Indemnitee for purposes of determining the right to indemnification under this Agreement.

 

  

2

  

2.           Interim Expenses.  Expenses (including attorneys’ fees) incurred by the Indemnitee in connection with any Proceeding shall be paid by the Company in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the Indemnitee to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Company hereunder.  The advances shall be paid by the Company to or on behalf of the Indemnitee within ten (10) days following delivery of a written request for an advance by the Indemnitee to the Company.  “Expenses” means all attorneys’ fees and expenses, retainers, court costs, transcript costs, duplicating costs, fees of experts, fees of witnesses, travel expenses, printing and binding costs, telephone charges, postage and delivery fees, service fees, all other costs and expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating or being or preparing to be a witness in a Proceeding and, in the event the Indemnitee is not receiving payment full-time as an employee of the company, per diem payments to the Indemnitee for each day spent by the Indemnitee in connection with prosecuting, defending, preparing to prosecute or defend, investigating or being or preparing to be a witness in a Proceeding in an amount equal to (a) in the case of former employees that had employment agreements with the Company, the last annual salary payable under the employment agreement between the Company and the Indemnitee divided by 365 and (b) in the case of all other Indemnitees that are former employees not described in clause (a) and directors, $150,000 divided by 365 and includes any fees, costs and expenses incurred in complying with requests of the Company or the Board of Directors under Section 7 or establishing and enforcing a right to indemnification under this Agreement

 

3.           Exceptions to Indemnifications.  Notwithstanding the foregoing, indemnity pursuant to Sections 1 or 2 need not be paid by the Company if and then only to the extent that payment is actually made irrevocably and in cash to the Indemnitee under a valid and collectible insurance policy paid for by the Company or under a valid and enforceable indemnity clause, bylaw or agreement of the Company.

 

4.           Notice of Claim.  The Indemnitee, as a condition precedent to his or her right to be indemnified under this Agreement, under any statute, or under any provision of the Company’s certificate of incorporation (the “Certificate”) or the Company’s bylaws (the “Bylaws”) providing for indemnification, shall give to the Company notice in writing as soon as practicable of any claim made against him or her for which indemnity will or could be sought under this Agreement, but a failure to give such notice shall affect the obligations of the Company hereunder only to the extent that the Company is actually and materially prejudiced thereby. Determination of the Indemnitee’s entitlement to indemnification shall be made promptly, but in no event later than forty-five (45) days after receipt by the Company of the Indemnitee’s written request for indemnification.  Further, if the person or persons empowered pursuant to Section 5(a) hereof to make a required determination with respect to entitlement to indemnification shall have failed to make the requested determination within forty-five (45) days after receipt by the Company of such request, the requisite determination in favor of entitlement to indemnification shall be conclusively deemed to have been made and the Indemnitee shall be absolutely entitled to such indemnification, absent (i) misrepresentation by the Indemnitee of a material fact in the request for indemnification or (ii) a final judicial determination that all or any part of such indemnification is expressly prohibited by law.

 

  

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5.           Procedure After Notice of Claim.

 

(a)           Upon notice by the Indemnitee for indemnification pursuant to Section 4 above, unless the Indemnitee has been successful on the merits in defense of any Proceeding or in defense of any claim, cause of action or allegation related to such Proceeding, a determination with respect to the Indemnitee’s entitlement thereto shall be made in the specific case by one of the following methods, which shall be at the election of the Indemnitee:  (i) by a majority vote of the Disinterested Directors (as defined below), (ii) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, (iii) by the Independent Legal Counsel (as defined below) in a written opinion to the Board of Directors of the Company, a copy of which shall be delivered to the Indemnitee, or (iv) by approval of the stockholders of the Company.  If it is so determined that the Indemnitee is entitled to indemnification, or the Indemnitee is otherwise entitled to indemnification, payment to the Indemnitee shall be made within thirty (30) days thereafter. The Indemnitee shall reasonably cooperate with the person, persons, or entity making such determination with respect to the Indemnitee’s entitlement to indemnification, including providing to such person, persons, or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to the Indemnitee and reasonably necessary to such determination.  Any costs or expenses (including attorneys’ fees and disbursements) incurred by the Indemnitee in so cooperating with the person, persons, or entity making such determination shall be borne by the Company (irrespective of the determination as to the Indemnitee’s entitlement to indemnification) and the Company shall indemnify and hold the Indemnitee harmless therefrom.  The burden of proving that the Indemnitee is not entitled to indemnification for any reason shall be upon the Company.  It is the parties’ intention that if the Company contests the Indemnitee’s right to indemnification, the question of the Indemnitee’s right to indemnification shall be for the court to decide, and neither the failure of the Disinterested Directors, the Independent Legal Counsel or the stockholders of the Company, as applicable, to have made a determination that indemnification of the Indemnitee is proper in the circumstances because the Indemnitee has met the applicable standard of conduct required by applicable law, nor an actual determination by the Disinterested Directors, the Independent Legal Counsel or the stockholders of the Company, as applicable, that the Indemnitee has not met such applicable standard of conduct, shall create a presumption that the Indemnitee has or has not met the applicable standard of conduct.  To the extent deemed appropriate by the court, interest shall be paid by the Company to the Indemnitee at a reasonable interest rate for amounts which the Company indemnifies or is obliged to indemnify the Indemnitee for the period commencing with the date on which the Indemnitee requested indemnification (or reimbursement or advance of an Expense) and ending with the date on which such payment is made to the Indemnitee by the Company.

 

  

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(b)         In the event the determination of entitlement to indemnification is to be made by the Independent Legal Counsel pursuant to Section 5(a) hereof, the Independent Legal Counsel shall be selected as provided in this Section 5(b).  The Independent Legal Counsel shall be selected by the Indemnitee (unless the Indemnitee shall request that such selection be made by the Board of Directors of the Company), and the Indemnitee shall give written notice to the Company advising it of the identity of the Independent Legal Counsel so selected.  If the Independent Legal Counsel is selected by the Board of Directors at the request of the Indemnitee, the Company shall give written notice to the Indemnitee advising him or her of the identity of the Independent Counsel so selected.  In either event, the Indemnitee or the Company, as the case may be, may, within ten (10) days after such written notice of selection shall have been received, deliver to the Company or to the Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Legal Counsel so selected does not meet the requirements of “Independent Legal Counsel” as defined below, and the objection shall set forth with particularity the factual basis of such assertion.  Absent a proper and timely objection, the person so selected shall act as the Independent Legal Counsel.  If such written objection is so made and substantiated, the Independent Legal Counsel so selected may not serve as the Independent Legal Counsel unless and until such objection is withdrawn or a court of competent jurisdiction has determined that such objection is without merit.  If, within ten (10) days after the submission of a notice by the Indemnitee for indemnification in accordance with Section 5(a) hereof, the Indemnitee elects (in accordance with Section 5(a) hereof) that an Independent Legal Counsel shall make such determination and an Independent Legal Counsel shall not have been selected without objection, either the Company or the Indemnitee may petition a court of competent jurisdiction for resolution of any objection which shall have been made by the Company or the Indemnitee to the other’s selection of the Independent Legal Counsel and/or for the appointment as the Independent Legal Counsel of a person selected by such court, and the person with respect to whom all objections are so resolved or the person so appointed shall act as the Independent Legal Counsel under Section 5(a) hereof.  Upon the non-appealable judgment, on the merits, pursuant to any judicial proceeding, that a person selected to serve as Independent Legal Counsel does not meet the requirements of “Independent Legal Counsel”, such person shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

 

(c)         The Company shall pay the reasonable fees and expenses of the Independent Legal Counsel and shall fully indemnify and hold harmless such Independent Legal Counsel against any and all Expenses, claims, liabilities, and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

 

(d)         As used herein, “Disinterested Director” shall mean a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by the Indemnitee.

 

(e)         As used herein, “Independent Legal Counsel” shall mean a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent:  (i) the Company or the Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder.  Notwithstanding the foregoing, the term “Independent Legal Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or the Indemnitee in an action to determine the Indemnitee’s rights under this Agreement.

 

  

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(f)           To the extent that a determination is made or deemed to have been made pursuant to the terms of this Section 5 that the Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding in the absence of (i) a misrepresentation of a material fact by the Indemnitee or (ii) a final judicial determination that all or any part of such indemnification is expressly prohibited by law.

 

6.           Failure to Indemnify.  (a) If a claim under this Agreement, under any statute, or under any provision of the Certificate or Bylaws providing for indemnification, is not paid in full by the Company promptly following a determination of entitlement to indemnification pursuant to Sections 4 and 5, the Indemnitee may, but need not, at any time thereafter bring an action against the Company to recover the unpaid amount of the claim and, if successful in whole or in part, the Indemnitee shall also be entitled to be paid for the Indemnitee’s reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with successfully establishing the right to indemnification, in whole or in part, in any such action shall also be indemnified by the Company.

 

(b)           It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in connection with any action, suit or proceeding in advance of its final disposition) that the Indemnitee has not met the standards of conduct that make it permissible under Delaware Law for the Company to indemnify the Indemnitee for the amount claimed, but the burden of proving such defense shall be on the Company and the Indemnitee shall be entitled to receive interim payments of Interim Expenses pursuant to Section 2 hereof unless and until such defense may be finally adjudicated by court order or judgment from which no further right of appeal exists.

 

(c)           In the event a determination has been made in accordance with the procedures set forth in Section 5 hereof, in whole or in part, that the Indemnitee is not entitled to indemnification, any adjudication referred to in Section 6(a) hereof shall be de novo and the Indemnitee shall not be prejudiced by reason of any such prior determination that the Indemnitee is not entitled to indemnification, and the Company shall bear the burden of proof specified in Section 5 hereof in such proceeding.

 

7.           Certain Agreements of the Indemnitee.

 

(a)           The Indemnitee agrees to cooperate with reasonable requests by the Board of Directors of the Company to enable the Company to coordinate the Indemnitee’s defense with, if applicable, the Company’s defense, provided, however, that the Indemnitee shall not be required to take any action that would in any way prejudice his or her defense or waive any defense or position available to him or her in connection with any action;

 

  

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(b)           If the Company has previously paid or advanced any Expenses of the Indemnitee in connection with any Proceeding, the Indemnitee agrees to cooperate with reasonable requests by the Board of Directors of the Company to subrogate to the Company any rights of recovery under insurance policies purchased by the Company or indemnities from third persons in favor of the Company;

 

(c)           The Indemnitee agrees to be represented in any action by a law firm mutually acceptable to the Company and the Indemnitee; and

 

(d)           The Indemnitee agrees to cooperate with the Company and its counsel and maintain any confidences revealed to him or her by the Company in connection with the Company’s defense of any action.  The Company agrees to cooperate with the Indemnitee and his or her counsel and maintain any confidences revealed to it by the Indemnitee in connection with the Indemnitee’s defense of any action.

 

8.           Partial Indemnification.  If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of Expenses, but not, however, for the total amount thereof, the Company shall nevertheless indemnify the Indemnitee for the portion of such Expenses to which the Indemnitee is entitled.

 

9.           Successors.  This Agreement establishes contract rights that shall be binding upon, and shall inure to the benefit of, the successors, assigns, heirs and legal representatives of the parties hereto.

 

10.         Contract Rights Not Exclusive.  The contract rights conferred by this Agreement shall be in addition to, but not exclusive of, any other right which the Indemnitee may have or may hereafter acquire under any statute, provision of the Certificate or Bylaws, agreement, vote of stockholders or disinterested directors or otherwise.

 

11.         Notice Obligations.  The Indemnitee shall give the Company notice of the institution of any investigation, claim, action, suit, or proceeding which is or may be subject to this Agreement and generally keep the Company informed of, and consult with the Company with respect to, the status of any such investigation, claim action, suit or proceeding.  In addition, all notices, requests, demands, and other communications under this Agreement shall be in writing and shall be deemed duly given on the date actual notice is received (including by facsimile or email).  The address for notice to the Indemnitee is as provided on the signature page of this Agreement, or as subsequently modified by written notice, and for notice to the Company is at its corporate headquarters and directed to the corporate secretary (or such other designee as the Company shall designate in a notice to the Indemnitee).

 

12.         Severability.  Should any provision or section of this Agreement, or any clause hereof, be held to be invalid, illegal or unenforceable, in whole or in part, the remaining provisions, sections and clauses of this Agreement shall remain fully enforceable and binding on the parties.

 

  

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13.           Choice of Law.  The validity, interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Delaware, without giving effect to the conflict of law provisions thereof.

 

14.           Continuation of Indemnification.  The indemnification under this Agreement shall continue as to the Indemnitee even though he or she may have ceased to be a director, officer, employee and/or agent of the Company and shall inure to the benefit of the heirs, executors, administrators and personal representatives of the Indemnitee.  The Company acknowledges that, in providing services to it, the Indemnitee is relying on this Agreement.  Accordingly, the Company agrees that its obligations hereunder will survive (i) any actual or purported termination of this Agreement by the Company or its successors or assigns whether by operation of law or otherwise, (ii) any change in the Certificate or Bylaws and (iii) termination of the Indemnitee’s services to the Company (whether such services were terminated by the Company or the Indemnitee), whether or not a claim is made or an action or Proceeding is threatened or commenced before or after the actual or purported termination of this Agreement, change in the Certificate or Bylaws or termination of the Indemnitee’s services.

 

15.           Counterparts.  This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one instrument.

 

[Signature Page Follows]

 

  

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and signed as of the day and year first above written.

 

	  	
WHITESMOKE, INC.

	  	  
	  	
By:

	  
	  	
Name:

	  	
Title:

	  	  
	  	
INDEMNITEE:

 

	  	  
	  	
Printed Name:

	  

 

	  	
Address:

	  
	  	  	  
	  	  	  

 

  

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