SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8.-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) DECEMBER 10, 1999
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LYNCH INTERACTIVE CORPORATION
-----------------------------
DELAWARE 1-15097 06-1458056
(State or other jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
401 THEODORE FREMD AVENUE, RYE, NEW YORK 10580
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 914/921-8821
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ITEM 5. OTHER
On December 10, 1999, Registrant completed the private placement of a $25
million Convertible Promissory Note to Cascade Investment LLC ("Cascade"). The
Note matures on December 10, 2004, bears interest at 6% per annum, and is
convertible into Registrant's Common Stock at the rate of one share for each $85
principal amount of the Note. Sale of the Note was exempt from registration
under Securities Act of 1933, as amended, pursuant to Section 4(2) thereof. As
part of the transaction, Registrant agreed to give the holders of the Note
certain rights to have the shares of Common Stock into which the Note is
convertible registered under the Securities Act of 1933, as amended. To assist
the Registrant with the placement, the Chairman of Registrant agreed to give
Cascade a one-time option to sell the Note to him at 105% of the principal
amount thereof on December 15, 2000, secured by a letter of credit. Registrant
had announced previously that it had planned to place the Note. The proceeds
will be used for general corporate purposes, including possible acquisitions.
For more detailed information, reference is made to the exhibits filed herewith.
This report contains certain forward looking information, including without
limitation use of proceeds and possible acquisitions. This information is based
on certain assumptions, projections and estimates. As a result, it is subject to
uncertainties, risks and inaccuracies, which could be material.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(C) EXHIBITS
Exhibit 4.6 (i) Note Purchase Agreement dated as of December 10, 1999, between
Registrant and Cascade Investment LLC ("Cascade"), a Washington limited
liability company .
Exhibit 4.6 (ii) Convertible Promissory Note dated December 10, 1999.
Exhibit 4.6 (iii) Registration Rights Agreement dated as of December 10, 1999,
between Registrant and Cascade.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LYNCH INTERACTIVE CORPORATION
DATE: DECEMBER 14, 1999 BY: /S/ROBERT E. DOLAN
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Robert E. Dolan
Chief Financial Officer
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EXHIBITS
Exhibit 4.6 (i) Note Purchase Agreement dated as of December
19, 1999, between Registrant and Cascade Investment
LLC ("Cascade").
Exhibit 4.6 (ii) Convertible Promissory Note dated December 10, 1999.
Exhibit 4.6 (iii) Registration Rights Agreement dated as of December
10, 1999, between Registrant and Cascade.
THIS NOTE PURCHASE AGREEMENT (THE "AGREEMENT") is made as of December
10, 1999, by and among Cascade INVESTMENT LLC, A WASHINGTON LIMITED LIABILITY
COMPANY ("BUYER"), and Lynch Interactive Corporation, a Delaware CORPORATION
("SELLER")
INTRODUCTION
1. Seller desires to sell to Buyer and Buyer and Buyer desires to
purchase from Seller the CONVERTIBLE PROMISSORY NOTE (THE "NOTE") in the form
attached as Exhibit A.
2. Buyer will, simultaneous upon entering into this Agreement, enter
into an Option to Sell AGREEMENT (THE "OPTION") WITH MARIO J. GABELLI
("GABELLI") providing for the sale, at Buyer's option, of the Note to Gabelli.
The Option is secured by an irrevocable standby letter of credit.
NOW, THEREFORE, in consideration of the mutual promises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
AGREEMENT
1. PURCHASE AND SALE.
1.1 PURCHASE AND SALE. At the Closing, as defined in Section 1.3 below,
Buyer shall purchase from Seller and Seller shall issue to Buyer the Note. Buyer
and Seller shall enter into a Registration Rights AGREEMENT IN THE FORM OF
EXHIBIT B (THE "REGISTRATION RIGHTS AGREEMENT"). The Note is convertible into
the NUMBER OF SHARES OF COMMON STOCK OF THE SELLER (THE "CONVERSION SHARES") and
on the terms as provided in this Agreement.
1.2 PURCHASE PRICE. In consideration for the sale of the Note, Buyer
shall pay to Seller, by wire transfer in immediately available funds, Twenty
Five Million U.S. Dollars (U.S. $25,000,000) (the "Consideration").
1.3 CLOSING. THE CLOSING OF THE PURCHASE AND SALE OF THE NOTE
HEREUNDER (THE "CLOSING") shall be held by telephone among the parties and their
respective legal counsel. The Closing shall be effective upon the receipt by all
parties of facsimile signatures of the other parties to such agreements and the
receipt of the Consideration; provided, that each party covenants to submit to
the other party promptly by overnight delivery execution originals of
counterpart signature pages. The Closing will be held at 10:00 A.M. on December
10, 1999, or at such other time and place upon which Seller and Buyer shall
agree.
2. REPRESENTATIONS AND WARRANTIES.
2.1 SELLER'S REPRESENTATIONS AND WARRANTIES. Except as disclosed to
Buyer in writing prior to the date hereof, Seller represents and warrants to
Buyer as follows:
2.1.1 ORGANIZATION; STANDING AND POWER. The Seller is a
corporation duly organized and validly existing under the laws of the State of
Delaware, has all requisite power and authority to own, lease, and operate its
properties and to carry on its business as now being conducted, and is duly
qualified and in good standing to do business in each jurisdiction in which it
is required to be so qualified by applicable laws.
2.1.2 CAPITAL STRUCTURE; OWNERSHIP OF SHARES. The authorized
capital stock of the Seller CONSISTS OF TEN MILLION (10,000,000) SHARES OF
COMMON STOCK (THE "SHARES"), of which 1,412,383 Shares are issued and
outstanding. All of the Shares have been duly authorized and validly issued, are
fully paid and nonassessable, and were issued in compliance with applicable
federal and state securities laws. Other than as DISCLOSED IN SELLER'S SEC
REPORTS (as defined below), there are not any options, warrants, calls,
conversion rights, commitments, agreements, contracts, understandings,
restrictions, arrangements, or rights of any character to which the Seller is a
party or by which the Seller may be bound obligating the Seller to issue,
deliver, or sell, or cause to be issued, delivered, or sold, additional shares
of the capital stock of the Seller, or obligating the Seller to grant, extend,
or enter into any such option, warrant, call, conversion right, commitment,
agreement, restriction, or right. Delivery of the Shares to Buyer upon
conversion of the Note will vest valid title thereto in Buyer, free and clear of
all liens, encumbrances, claims, and limitations of every kind.
2.1.3 AUTHORITY. Seller has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery by Seller of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate actions on the part of Seller. This
Agreement has been duly executed and delivered by Seller and constitutes a valid
and binding obligation of Seller enforceable in accordance with its terms,
except that such enforceability may be subject to (i) bankruptcy, insolvency,
reorganization, or other similar laws relating to enforcement of creditors'
rights generally, and (ii) general equitable principles.
2.1.4 NO CONFLICT. The execution and delivery of the Agreement
and the performance of the transactions contemplated hereunder will not violate,
conflict with, constitute a default or breach under, any material agreement,
contract, or instrument to which Seller may be bound or of any judgment, order,
decree to which Seller may be bound, nor will the execution, delivery and
performance of this Agreement result in the creation of any mortgage, pledge,
lien, encumbrance or charge upon the Shares.
2.1.5 LITIGATION. Except as disclosed in the SEC Reports,
there is no pending or, to the best of Seller's knowledge, threatened lawsuit,
administrative proceeding, arbitration, labor dispute or GOVERNMENTAL
INVESTIGATION ("LITIGATION") to which the Seller is a party or by which any
material portion of its assets, taken as a whole, may be bound, which
Litigation, if adversely determined, would have a material adverse effect on the
Seller.
2.1.6 ACCURACY OF REPORTS; FINANCIAL STATEMENTS. All reports
required to be filed with the SEC by the Seller during the twelve month period
preceding the date of this Agreement under the Securities EXCHANGE ACT OF 1934,
AS AMENDED (THE "EXCHANGE ACT"), copies of which have been made available to the
Buyer (the "SEC REPORTS"), have been duly and timely filed, were in substantial
compliance with the requirements of their respective forms when filed, were
complete and correct in all material respects as of the dates at which the
information was furnished, and contained (as of such dates) no untrue statement
of a material fact nor omitted to state material fact necessary in order to make
the statements made therein in light of the circumstances in which MADE NOT
MISLEADING. THE FINANCIAL STATEMENTS OF THE SELLER INCLUDED IN THE SEC REPORTS
(THE "FINANCIAL STATEMENTS") comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto. The Financial Statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied and fairly present the consolidated financial position of the Seller and
any subsidiaries at the dates thereof and the consolidated results of operations
and consolidated cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal, recurring adjustments). Except as set forth in
the SEC Reports, the Seller does not have any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) required by GAAP to
be set forth on a balance sheet of the Seller or in the notes thereto which
could reasonably be expected to have a material adverse effect on the Seller.
2.1.7 SOLVENCY; NO DEFAULT. The Seller has sufficient funds,
assets and cash flow to pay its debts and other liabilities as they become due,
and the Seller is not in default with respect to any material debt or liability.
2.1.8 DISCLOSURE. No representation or warranty of the Seller
contained in this Agreement or the exhibits attached hereto (when read together
and taken as a whole), contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements contained
herein or therein in light of the circumstances under which they were made not
misleading.
2.2 BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer makes the following
representations and warranties.
2.2.1 INVESTMENT PURPOSE. The Buyer is purchasing the Note for
its own account as principal for investment only and not with a present view
towards the public sale or distribution thereof, except pursuant TO SALES
REGISTERED OR EXEMPTED FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT") .
2.2.2 ACCREDITED INVESTOR STATUS. The Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D and has such
business and financial experience as is required to give it the capacity to
protect its own interests in connection with the purchase of the Note.
2.2.3 RELIANCE ON EXEMPTIONS. The Buyer understands that the
Note is being offered and sold to it in reliance upon specific exemptions from
the registration requirements of United States federal and state securities laws
and that the Seller is relying upon the truth and accuracy of, and the Buyer's
compliance with, the representations, warranties, agreements, covenants,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Note.
2.2.4 INFORMATION. The Buyer has been furnished with all
materials relating to the business, finances and operations of the Seller and
materials relating to the offer and sale of the Note which have been requested
by the Buyer. Buyer has been afforded the opportunity to ask questions of the
Seller and has received what the Buyer believes to be satisfactory answers to
any such inquiries. Neither such inquiries nor any other due diligence
investigation conducted by the Buyer or any of its advisors or representatives
shall modify, amend or affect the Buyer's right to rely on the Seller's
representations and warranties contained in Section 2.1 above. The Buyer
understands that its investment in the Note involves a significant degree of
risk.
2.2.5 GOVERNMENTAL REVIEW. The Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of the Note.
2.2.6 TRANSFER OR RESALE. The Buyer understands that (i) no
public market now exists for the Note and that the Seller has made no assurances
that a public market will ever exist for the Note, (ii) except as provided in
the Registration Rights Agreement, the Note has not been and are not being
registered under the 1933 Act or any applicable state securities laws, and may
not be transferred unless (a) subsequently included in an effective registration
statement thereunder, (b) the Buyer shall have delivered to the Seller an
opinion of counsel (which opinion shall be reasonably satisfactory to the
Seller) to the effect that the Note to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration; (c) sold pursuant
to Rule 144 promulgated under the 1933 Act (or a successor rule) ("Rule 144"))
or (d) except in connection with the exercise of the Option, (iii) any sale of
such Note made in reliance on Rule 144 may be made only in accordance with the
terms of said Rule and further, if Rule 144 is not applicable, any resale of
such Note under circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined in
the 1933 Act) may require compliance with some other exemption under the 1933
Act or the rules and regulations thereunder, and (iv) neither the Seller nor any
other person is under any obligation to register such Note under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder (in each case, other than pursuant to the Registration
Rights Agreement).
2.2.7 LEGENDS. The Buyer understands that the Note, and, until
such time as the Conversion Shares have been registered under the 1933 Act as
contemplated by the Registration Rights Agreement, the Conversion Shares, may
bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for such
Note):
(i) The following legend under the 1933 Act:
"THE NOTE REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND EXCEPT FOR
ANY TRANSFERS SPECIFICALLY AUTHORIZED UNER THE TERMS OF THE NOTE, MAY NOT BE
OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED ABSENT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR COMPLIANCE WITH RULE 144
PROMULGATED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS
NOT REQUIRED"; and
(ii) Any other legend required by the laws of any
state in which the Note will be
issued.
The legend set forth above shall be removed and the Seller
shall issue a certificate without such legend to the holder of any Security upon
which it is stamped, if, unless otherwise required by applicable state
securities laws, (a) such Security is registered for sale under an effective
registration statement filed under the 1933 Act, or (b) such holder provides the
Seller with an opinion of counsel, satisfactory to the Seller, to the effect
that a public sale or transfer of such Security may be made without registration
under the 1933 Act and such sale or transfer is effected or (c) such holder
provides the Seller with reasonable assurances that such Security can be sold
pursuant to Rule 144 under the 1933 Act (or successor rule thereto) without
restriction as to the number of Note acquired as of a particular date that can
then be immediately sold. The Buyer agrees to sell all Conversion Shares,
including those represented by a certificate(s) from which the legend has been
removed, in compliance with applicable prospectus delivery requirements, if any.
2.2.8 AUTHORIZATION; ENFORCEMENT. The Buyer represents and
warrants to the Seller that (i) the Buyer has all requisite legal and corporate
or other power and capacity and has taken all requisite corporate or other
action to execute and deliver this Agreement, to purchase the Note to be
purchased by it and to carry out and perform all of its obligations under this
Agreement, and (ii) this Agreement constitutes the legal, valid and binding
obligation of the Buyer, enforceable in accordance with its terms, except (1) as
limited by applicable bankruptcy, insolvency, reorganization, or similar laws
relating to or affecting the enforcement of creditors' rights generally and (2)
as limited by equitable principles generally and (iii) to the extent that
indemnification provisions in the Registration Rights Agreement may be limited
by applicable federal or state securities laws.
3. DELIVERIES AT CLOSING.
3.1 DELIVERIES BY BUYER. Buyer shall deliver the following items to
Seller:
3.1.1 The Consideration, by wire transfer in immediately
available funds .
3.1.2 An executed copy of this Agreement;
3.1.3 An executed copy of the Registration Rights Agreement.
3.2 DELIVERIES BY SELLER. Seller shall deliver the following
items:
3.2.1 The executed Note;
3.2.2 An executed copy of this Agreement;
3.2.3 An executed copy of the Registration Rights Agreement
; and
3.2.4 An opinion of Seller's legal counsel, dated as of the
Closing Date, in substantially the form as Exhibit C attached hereto
4. COVENANTS.
4.1 RESERVATION OF SHARES. Seller shall at all times have authorized
and reserved for the purpose of issuance that number of shares of Common Stock
equal to the Conversion Shares (as such number may be adjusted from time to time
pursuant to the terms of the Note). If at any time the number of shares of
Common Stock authorized and reserved for issuance is for any reason below the
number of Conversion Shares, the Seller will promptly take all corporate action
necessary to authorize and reserve a sufficient number of shares, including
without limitation calling a special meeting of shareholders to authorize
additional shares to meet the Seller's obligations hereunder, and using its
reasonable best efforts to obtain shareholder approval of an increase in such
authorized number of shares.
4.2 AMEX LISTING. Seller shall promptly secure the listing of the
Conversion Stock authorized to be issued upon conversion of the Note upon the
American Stock Exchange or such other national securities exchange or
over-the-counter market upon which shares of Common Stock are then listed, and
shall maintain, so long as any other shares of Common Stock shall be so listed,
such listing of such shares of Common Stock.
5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations, warranties
and covenants contained in this Agreement shall survive the Closing; provided,
however, that a claim for a breach of a representation or warranty (but not for
a breach of a covenant or agreement) must be brought within one (1) year of the
execution of this Agreement. In the event Investor brings a claim within the one
(1) year period, such representations and warranties shall continue to survive
solely with regard to such claim until such claim has been finally resolved and
all indemnification rights with respect thereto have been satisfied.
6.. MISCELLANEOUS.
6.1 ENTIRE AGREEMENT. This Agreement and the documents listed in
Section 3.2 (other than the opinion of Seller's legal counsel) represents the
entire agreement among the parties with respect to the transactions contemplated
herein and supersedes all prior agreements, written or oral, with respect
thereto. This Agreement may be amended only by an instrument that is executed
and authorized by all parties hereto.
6.2 EXPENSES. Buyer and Seller will pay their own respective expenses,
including attorneys' fees, in connection with the negotiation of this Agreement,
the performance of its obligations hereunder, and the consummation of the
transactions contemplated by this Agreement.
6.3 SUCCESSORS AND ASSIGNS. This Agreement and all of the provisions
hereof will be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns; provided, however, that
neither this Agreement nor any of the rights, interests or obligations hereunder
may be assigned by either party without the prior written consent of the other
party.
6.4 GOVERNING LAW; CONSENT TO JURISDICTION. Except as stated below,
this Agreement shall be governed by the laws of the State of Washington. The
parties hereby irrevocably and unconditionally submit in any legal action or
proceeding relating to this Agreement to the non-exclusive general jurisdiction
of the courts of the United States located in the Western District of Washington
and, in any such action or proceeding, consent to jurisdiction in such courts
and waive any objection to the venue in any such court. In the event that the
federal court selected by Cascade shall not have jurisdiction, Lynch agrees to
submit to the jurisdiction of the courts of the State of Washington located in
King County. In the event Investor transfers or assigns the Note to a person not
an affiliate, then this Note shall be governed by and construed in accordance
with the laws of the State of New York and the consent to jurisdiction in the
State of Washington stated above is hereby revoked.
6.5 NONWAIVER. The failure of either party to insist upon strict
adherence to any one or more of the covenants and restrictions in this
Agreement, on one or more occasion, shall not be construed as a waiver, nor
deprive either party of the right to require strict compliance thereafter with
the same.
6.6 ATTORNEYS' FEES AND EXPENSES. In any suit or action brought to
enforce this Agreement, or to obtain an adjudication, declaratory or otherwise,
of rights hereunder, the losing party shall pay to the prevailing party
reasonable attorneys' fees and all other costs and expenses that may be incurred
by the prevailing party in such action.
6.7 PUBLICITY. Seller shall not issue any public statement (such as
press releases, letters to shareholders, speeches and similar statements)
concerning the beneficial owner of Buyer without the prior written consent of
the Buyer; provided, however, that such disclosure may be made if such approval
has been requested and not received and the Seller concludes (after consulting
with counsel) that it is required by law or stock exchange regulation to make
such disclosure in a press release or other public statement. With respect to
any press release issued by Seller, Seller shall use reasonable efforts to
provide copies to Buyer prior to public dissemination thereof and shall
incorporate Buyer's comments to such press release, if any, in good faith.
6.8 NOTICES. Any notice required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and shall be effective for five days
after being placed in the mail, if mailed by regular U.S. mail, or upon receipt,
if delivered personally or by courier (including a recognized overnight delivery
service) or by facsimile, in each case addressed to a party. The addresses for
such communications shall be:
If to the Seller:
Lynch Interactive Corporation
401Theodore Fremd Avenue
Rye, NY 10580
Attn: Robert Dolan
With copy to:
Mario J. Gabelli
One Corporate Center at Rye
555 Theodore Fremd Avenue
Rye, NY 10580
If to Buyer:
Cascade Investment LLC
2365 Carillon Point
Kirkland, WA 98033
Attn: Michael Larson, Business Manager
With copy to:
Mark R. Beatty
Preston Gates & Ellis LLP
701 Fifth Avenue
Suite 5000
Seattle, WA 98104
Each party shall provide notice to the other of any changes in address.
(THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK)
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SIGNATURE PAGE - NOTE PURCHASE AGREEMENT
NOTICE: ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first mentioned above.
SELLER BUYER
LYNCH INTERACTIVE CORPORATION CASCADE INVESTMENT LLC
By ________________________________ By ____________________________
Robert Dolan, Chief Financial Officer Michael Larson, Business Manager
NEITHER THE NOTE REPRESENTED HEREBY NOR THE SECURITIES INTO WHICH THIS NOTE IS
CONVERTIBLE HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"). EXCEPT FOR ANY TRANSFERS SPECIFICALLY AUTHORIZED UNDER
THE TERMS OF THE NOTE, NEITHER THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE
IS CONVERTIBLE MAY BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR
COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL,
THAT SUCH REGISTRATION IS NOT REQUIRED
CONVERTIBLE PROMISSORY NOTE
$25,000,000.00 Dated: December 10, 1999
Rye, New York
FOR VALUE RECEIVED, THE UNDERSIGNED, LYNCH INTERACTIVE CORPORATION, A DELAWARE
CORPORATION. ("LYNCH"), promises TO PAY TO THE ORDER OF CASCADE INVESTMENT LLC,
A WASHINGTON LIMITED LIABILITY COMPANY ("CASCADE"), at 2365 Carillon Point,
Kirkland, WA 98033, or at such other place or places as the holder hereof may
designate in writing, the principal sum of TWENTY-FIVE MILLION and NO/100
DOLLARS ($25,000,000), plus interest, in lawful, immediately available money of
the United States of America.
THIS CONVERTIBLE PROMISSORY NOTE ("NOTE") is issued by Lynch pursuant to that
certain Note Purchase Agreement DATED AS OF DECEMBER 10, 1999 (THE "PURCHASE
AGREEMENT") between Lynch and Cascade. Capitalized terms not otherwise defined
in this Note shall have the meaning set forth in the Purchase Agreement, which
definitions are incorporated herein. Cascade, and no other holder of this Note,
has the right, expiring December 1, 2000, to SELL THIS NOTE PURSUANT TO THE
OPTION TO SELL AGREEMENT (THE "OPTION") by and between Cascade Investment LLC
and MARIO J. GABELLI ("GABELLI") dated as of December 10, 1999. The obligations
of Gabelli under the Option are SECURED BY AN IRREVOCABLE STANDBY LETTER OF
CREDIT (THE "LETTER OF CREDIT") issued by Morgan Guaranty Trust COMPANY OF NEW
YORK (THE "LETTER OF CREDIT ISSUER").
Lynch further agrees as follows:
1. INTEREST RATE AND INTEREST PAYMENT. Interest on the outstanding principal
balance of this Note shall accrue at the rate of six percent (6%) per annum,
payable semiannually on each June 10 and December 10, commencing June 10, 2000.
Upon the occurrence and during the continuance of an Event of Default, interest
on the outstanding principal balance of this Note shall accrue at the rate of
fifteen percent (15%) per annum (the "DEFAULT RATE") and shall also be
compounded quarterly. However, in no event shall the interest rate exceed the
maximum rate permitted by Washington law. Interest accrued but not otherwise
paid shall in any event be payable on the Maturity Date specified below.
2. PAYMENT OF PRINCIPAL. The outstanding principal balance of this Note,
together with all accrued but unpaid interest, shall be due and payable on
December 10, 2004 or such earlier date
<PAGE>
upon which the Holder accelerates the date for which principal and interest are
due as provided in this Note PURSUANT TO SECTION 4 HEREOF ("MATURITY DATE"). Any
payment on this Note shall first be applied to costs and fees, if any, described
in Section 11 of this Note, then to interest and then to principal. If it is
ever determined that the rate of interest was in excess of any maximum rate (if
any) prescribed by law, then that portion of interest payments representing any
amounts in excess of said maximum shall be applied as provided in the preceding
sentence.
3. PURCHASE AGREEMENT; NO PREPAYMENTS; CALL. This Note is issued pursuant to the
terms of the Purchase Agreement. Lynch agrees and acknowledges that the
conversion feature of this Note during the term of the Note is a valuable right
and that Cascade would not have entered into this Note without assurances that
the Note would not be called or prepaid by Lynch. Accordingly, Lynch
acknowledges and agrees that it will not, without the consent of Cascade, except
upon acceleration hereof, make any prepayments of principal on this Note. In the
event Cascade assigns or transfers all or any portion of this Note, Lynch may
call this Note to the extent so assigned or transferred by Cascade at par
(without premium or penalty) upon ten (10) days written notice to such holder.
4. DEFAULT AND ACCELERATION. If Lynch fails to pay when due any amount of
principal or interest due under this Note, or if an Event of Default described
in Section 5 (c) - 5 (f)occurs and shall not be cured within the time period
provided therein, then all amounts due or to become due under this Note shall,
upon written notice to Lynch by the holder, become immediately due and payable
and such amounts shall include principal and all interest accrued thereon;
provided, however, that if Lynch cures a payment default, the holder shall have
thirty (30) days from the date the cure is effected in which to accelerate all
amounts due under this Note. The holder may, at its sole option, upon thirty
days prior written notice given no later than thirty day following an event
described below, also require that all amounts due or to become due under this
Note shall become immediately due and payable (including interest) upon the
occurrence of the closing date of the sale of all or substantially all of
Lynch's assets, or the closing date of any merger or consolidation of or with
Lynch, if Lynch's common stockholders immediately prior to such sale of assets,
merger or consolidation do not own more than fifty percent (50%) of the
outstanding common stock of the surviving or successor corporation. However, a
transaction by Lynch solely to change the state of its incorporation from
Delaware to another state of the United States shall not be deemed an event
described in the preceding clause.
5. EVENT OF DEFAULT. THE TERMS "EVENT OF DEFAULT", "DEFAULT" OR "DEFAULT" shall
mean any one or more of the following events:
(A) PAYMENT DEFAULT. Lynch shall fail to pay or cause to be
paid when due any portion of the Note;
or
(B) FAILURE UNDER LETTER OF CREDIT. The Letter of Credit Issuer shall
fail to honor a conforming draw under the Letter of Credit.
(C) BREACH OF OTHER COVENANTS OR FAILURE OF ANY CONDITION. Lynch shall
fail to perform, keep or observe any agreement or covenant not involving the
payment of principal or interest under this Note, contained in this Note or the
Purchase Agreement and any such failure shall remain unremedied for thirty (30)
days after written notification thereof shall have been given to Lynch by the
holder; notwithstanding the preceding clause, if the Default is of a nature that
is not susceptible to cure within 30 days and if Lynch commences to cure the
Default within said 30-day period, Lynch shall not be deemed to be in Default if
it diligently prosecutes said cure thereafter to completion and cures said
Default by the sixtieth (60th) day after the date of said notice; or
(D) BREACH OF REPRESENTATION OR WARRANTY. Any representation or
warranty made by Lynch in the Purchase Agreement shall prove to have been untrue
or misleading when made in any material respect; provided that Cascade has not
transferred the Note in whole and declares the default during the period in
which any such representation and warranty survives as provided in the Purchase
Agreement; or
(E) CROSS DEFAULTS (PAYMENT AND OTHER). Lynch shall be in default in a
principal amount of ten million dollars ($10,000,000) or more in the payment of
any indebtedness for borrowed money of Lynch to any person. Notwithstanding the
foregoing, there shall not be an Event of Default under this section (e) until
expiration of, without cure, any period for cure contained in any other
agreement regarding such indebtedness. A default by Lynch in connection with
such indebtedness to any person other than Cascade shall not be a default under
this section (e), unless such default allows the person holding such
indebtedness to accelerate the indebtedness; or
(F) BANKRUPTCY ETC. Lynch shall dissolve or liquidate or take an
equivalent action or an involuntary petition shall have been filed under any
federal or state bankruptcy, reorganization, insolvency, moratorium or similar
statute against Lynch, or, prior to expiration or termination of the Letter of
Credit, the Letter of Credit Issuer, or a custodian, receiver, trustee, assignee
for the benefit of creditors or other similar official shall be appointed to
take possession, custody, or control of the property of Lynch, or, prior to
expiration or termination of the Letter of Credit, the Letter of Credit Issuer,
unless such petition or appointment is set aside or withdrawn or ceases to be in
effect within ninety (90) days from the date of said filing or appointment; or
Lynch or, prior to expiration or termination of the Letter of Credit, the Letter
of Credit Issuer shall become insolvent or admit in writing generally its
inability to pay its debts as they mature, or shall file any petition or action
for relief relating to any bankruptcy, reorganization, insolvency or moratorium
law, or any other law or laws for the relief of, or relating to, debtors; or
Lynch or, prior to expiration or termination of the Letter of Credit, the Letter
of Credit Issuer shall make an assignment generally for the benefit of creditors
or enter into an agreement of composition generally with its creditors; or Lynch
shall fail generally to pay its debts as they become due; or Lynch shall fail to
promptly have discharged any judgment, execution, garnishment or attachment of
such consequence as would reasonably be likely to impair the ability of Lynch to
carry on its operations as presently conducted or to fulfill its obligations
under this Note.
6. RIGHT OF CONVERSION. The holder shall have the right to convert the
outstanding balance of the Note to common stock of Lynch under the terms and
conditions specified in Exhibit A to this Note.
7. RIGHT TO PUT THE NOTE. During the period between December 1and December 10,
2000, Cascade, and no other holder of this Note, may, pursuant to the Option,
require Gabelli to purchase this Note under the terms and conditions and for the
purchase price specified in the Option. Lynch acknowledges and agrees that this
Note may be transferred to Gabelli or the Letter of Credit Issuer pursuant to
the Option or the Letter of Credit, respectively, without any registration of
this Note under the Acts or any other restrictions.
8. WAIVERS BY LYNCH. Lynch waives presentment for payment, demand, notice of
nonpayment, notice of protest and protest of this Note, and all notices in
connection with the delivery, acceptance, or dishonor of this Note. Lynch agrees
that (a) if for any reason any amount due hereunder is paid by cashier's,
certified teller's check or other check, there shall be no discharge of Lynch's
obligation until said check be finally paid by the issuer thereof; and (b) the
provisions of RCW 62A.3-311 shall not entitle Lynch to any accord and
satisfaction of any now or hereafter existing claim in dispute between Cascade
and Lynch (or any of their respective successors and assigns), all of which
provisions and rights are hereby waived.
9. NO WAIVER. THE HOLDER shall not by any act or omission or commission be
deemed to waive any of its rights or remedies under this Note or the Purchase
Agreement unless such waiver shall be in writing and signed by the holder, and
then only to the extent specifically set forth therein. In the event this Note
is transferred, no waiver shall be effective unless in writing and signed by the
holders of a majority of the principal amount of the Note; provided, that no
waiver may reduce the amount of, or delay payment of, principal and interest
payable hereunder without the written consent or waiver of all holders of any
portion of the Note.
10. COSTS AND FEES. Upon demand therefor, Lynch agrees to pay to the holder all
costs and fees arising out of enforcing this Note, whether incurred in any court
action, arbitration, or mediation, on appeal, in any bankruptcy (or state
receivership or other insolvency or similar proceedings or circumstances), in
any forfeiture, and for any post-judgment collection services.
11. APPLICATION OF ARTICLE 3. LYNCH AND CASCADE AGREE THAT, SUBJECT TO THE
SPECIFIC TERMS HEREOF AND TO THE EXTENT THAT WASHINGTON LAW APPLIES, THE
PROVISIONS OF ARTICLE 3 OF THE UNIFORM COMMERCIAL CODE OF WASHINGTON PERTAINING
TO INSTRUMENTS SHALL BE APPLIED TO THIS NOTE, EVEN IF THIS NOTE IS NOT DEEMED TO
BE AN "INSTRUMENT" OR A "NEGOTIABLE INSTRUMENT" THEREUNDER.
12. APPLICATION OF TRUST INDENTURE ACT. If this Note will at any time become
subject to the Trust Indenture Act of 1939, Lynch will make appropriate
revisions hereto and will enter into an indenture with an appropriate trustee so
as to comply fully with such act.
13. TRANSFER. This Note may be transferred only in denominations of $1,000 or
integral multiples thereof. Any holder hereof may obtain one or more new Notes
at any time in any such denominations by surrendering this Note to Lynch with a
written request therefor.
14. GOVERNING LAW; VENUE. Except as noted below, this Note shall be governed by
and construed in accordance with the laws of the State of Washington. In any
court proceeding, Lynch agrees to submit to the jurisdiction of the federal
court selected by Cascade, and venue of any action concerning this Note shall be
in King County, Washington state. In the event that the federal court selected
by Cascade shall not have jurisdiction, Lynch agrees to submit to the
jurisdiction of the Washington state court in King County selected by Cascade.
Lynch hereby irrevocably waives to the fullest extent permitted by law any
objection which it may now or hereafter have to the laying of such venue and any
claim that any such forum is an inconvenient forum. Nothing in this Section
shall impair the right of Cascade to bring any action or proceeding against
Lynch or its property in the courts of any other county or jurisdiction and
Lynch irrevocably submits to the nonexclusive jurisdiction of the appropriate
courts (as selected by Cascade) of the jurisdiction in which Lynch is organized
or any place where any property or any office of Lynch is located. In the event
Investor transfers or assigns this Note to a person not an affiliate, then this
Note shall be governed by and construed in accordance with the laws of the State
of New York and the consent to jurisdiction in the State of Washington stated
above is hereby revoked.
NOTICE: ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
LYNCH INTERACTIVE CORPORATION,
a Delaware Corporation
BY
ITS
<PAGE>
EXHIBIT A
CONVERSION RIGHTS
A. CONVERSION FORMULA. Cascade or, upon transfer and assignment of this
Note to one or more holders (each, including for purposes of this exhibit
Cascade, a "Holder"), each Holder shall have the right (the "CONVERSION
RIGHTS"), AT ITS OPTION, AT ANY TIME DURING THE TERM OF THIS NOTE (THE
"CONVERSION PERIOD"), to convert the Note in accordance with the provisions of
this Exhibit A, in whole or in part, into fully paid and nonassessable
Conversion Shares. The number of Conversion Shares into which the Note may be
converted shall be determined by dividing the aggregate principal amount by the
Conversion Price (as defined below) in effect at the time of such conversion.
B. CONVERSION PRICE. THE INITIAL "CONVERSION PRICE" shall be equal to
Eighty Five Dollars ($85.00) per share. Upon the occurrence of any Extraordinary
Event from and after the date of this Agreement, the Conversion Price shall be
adjusted by multiplying the then current Conversion Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such Extraordinary Event and the denominator of which shall
be the number of shares of Common Stock outstanding immediately after such
Extraordinary Event, and the product so obtained shall thereafter be the then
current Conversion Price. The Conversion Price, as so adjusted, shall be
readjusted in the same manner upon the OCCURRENCE OF ANY SUCCESSIVE
EXTRAORDINARY EVENT. THE PHRASE "EXTRAORDINARY EVENT" shall mean the occurrence
of any of the following events: (i) the issuance of Common Stock as a dividend
or other distribution on outstanding shares of Common Stock; (ii) a subdivision
of outstanding Common Stock into a greater number of shares of Common Stock; or
(iii) a combination of outstanding shares of Common Stock into a smaller number
of shares of Common Stock.
The Conversion Price will also be adjusted for issuance's of
Common Stock or rights thereto at less than fair market value and for excess
distribution payments. Accordingly, in the event Lynch issues any shares of
Common Stock for cash or other securities at a price per share less than the
market price per share at the earlier of the time such shares were issued or the
time the rights to acquire such shares were issued, the Conversion Price will be
adjusted by multiplying the Conversion Price in effect immediately prior to such
issuance times a fraction the numerator of which is the number of shares
outstanding immediately prior to such issuance plus the number of shares that
would have been issued at the aggregate price if the price had been equal to the
market price per share at the relevant time and the denominator of which is the
number of shares outstanding immediately after such issuance. At the time of any
conversion of all or any portion of the Note, the same adjustment shall be made
with respect to any outstanding rights to acquire Common Stock at a price per
shares less than the market price per share at the time such rights were issued
except that the denominator shall be the number of shares that would be
outstanding upon exercise of all such rights. Further, in the event Lynch
distributes during any twelve month period any cash, securities or other
property in respect of its Common Stock, or purchases any shares of Common Stock
at a price greater than the market value thereof at the time of the purchase,
and the sum of such cash, the value of such securities or other property (as
determined in good faith by Lynch's Board of Directors) and the excess price per
outstanding share of Common Stock, exceeds $1.50 per share of Common Stock
(calculated on a cumulative basis immediately prior to the record date for each
such distribution and at the time of each such purchase and adjusted for
Extraordinary Events), the Conversion Price shall be reduced by the amount
thereof per share of Common Stock during such year in excess of $1.50 per share.
In the event Lynch merges or is consolidated with, or sells,
leases or otherwise transfers all or substantially all of its assets to, any
other entity (other than a merger in which the shares of Common Stock are not
altered or exchanged for any other securities or property) or in the event the
shares of Common Stock are exchanged for any other securities, the Note will
thereafter be convertible into the amount of securities or other property that
would have been received if the Note had been converted into Common Stock at the
then effective Conversion Price immediately prior to such merger, consolidation,
sale, lease, transfer or exchange and the Conversion Price shall be
appropriately adjusted.
C. NOTICE OF CONVERSION. To exercise the Conversion Rights, a Holder
shall give written notice to Lynch at the address set forth in Section 6.8 of
the Purchase Agreement of its election to convert the same (and, if the Note has
not already been surrendered, should deliver the Note for cancellation to
Lynch), and shall state in such notice the name or names in which the
certificate or certificates for Conversion Shares are to be issued. The number
of Conversion Shares shall be computed as specified in the preceding Section A.
The conversion shall be deemed to have been made immediately prior to the close
of business on the date of surrender OF THE NOTE (THE "CONVERSION DATE"), and
the Holder shall be treated for all purposes as the record holder of such
Conversion Shares as of such date.
D. MECHANICS AND EFFECT OF CONVERSION.
(1) FRACTIONAL SHARES. No fractional shares of Stock shall be
issued upon conversion of the Convertible Note. In lieu of the issuance of any
fractional shares to a Holder by Lynch upon conversion of the Convertible Note,
Lynch shall pay to such Holder the cash equivalent of any amount of outstanding
principal and accrued interest that is not so converted, such payment to be in
the form as provided below.
(2) MECHANICS OF CONVERSION. A Holder shall surrender the Note
(if not previously surrendered), duly endorsed without warranty, representation
or recourse, except that the Note shall be transferred free and clear of all
liens and encumbrances and no other party has any beneficial interest in the
Note, at the principal office of Lynch set forth in Section 6.8 of the Purchase
Agreement. At its expense, Lynch shall direct its transfer agent for the Common
Stock to, as soon as practicable thereafter, issue and deliver to the Holder (i)
a certificate or certificates for the number of Conversion Shares to which
Holder shall be entitled upon such conversion (bearing such legends as are
required by applicable state and federal securities laws in the opinion of
counsel to Lynch), and (ii) any other securities and property to which Holder
shall be entitled upon such conversion under the terms of the Note, including a
check payable to Holder for any cash amounts payable as described in Section
D(1).
(3) EFFECT OF CONVERSION. On and after the Conversion Date
Holder shall be treated for all purposes as the record holder of the Conversion
Shares. If Holder shall convert less than the full amount of principal, interest
and other amounts owing under the Note, such amounts not converted shall
continue to be outstanding and payable by Lynch pursuant to the terms of the
Convertible Note and this Agreement. Upon full conversion of the Note, Lynch
shall be forever released from its obligations and liabilities under the Note.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (THIS "AGREEMENT") is made and
entered into as of December 10, 1999 BY AND AMONG CASCADE INVESTMENT LLC, A
WASHINGTON LIMITED LIABILITY COMPANY (THE "INVESTOR"), and Lynch INTERACTIVE
CORPORATION, A DELAWARE CORPORATION (THE "COMPANY").
RECITALS
A. Investor has agreed to purchase from the Company, and the Company
has agreed to sell to the INVESTOR, A $25 MILLION CONVERTIBLE PROMISSORY NOTE
(THE "NOTE") pursuant to a Note Purchase Agreement, dated of EVEN DATE HEREWITH
BY AND AMONG THE COMPANY AND INVESTOR (THE "PURCHASE AGREEMENT"). The Note is
convertible INTO COMMON STOCK ("COMMON STOCK") of the Company on the terms and
conditions set forth in the Note.
B. The Purchase Agreement provides that Investor shall be granted
certain information and registration rights, all as more fully set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
1. INFORMATION
1.1 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Registrable Securities (as defined below) to the public without
registration, the Company agrees to use all reasonable efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act (as defined
below), at all times after the date of this Agreement;
(b) File with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
1934 Act (as defined below) (at any time after it has become subject to such
reporting requirements); and
(c) So long as any person owns all or any portion of the Note
or any Registrable Securities, furnish to such holder forthwith upon request a
written statement by the Company as to its compliance with the reporting
requirements of said Rule 144, and of the Securities Act and the 1934 Act, a
copy of the most recent annual or quarterly report of the Company, and such
other reports and documents of the Company as Investor may reasonably request in
availing itself of any rule or regulation of the Commission allowing Investor to
sell any such securities without registration.
-1-
<PAGE>
2. REGISTRATION RIGHTS.
2.1 DEFINITIONS. For purposes of this Section 2:
(A) REGISTRATION. The terms "register," "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such registration statement.
(B) REGISTRABLE SECURITIES. The term "Registrable Securities"
means: (1) all the shares of Common Stock of the Company issued or issuable upon
the conversion of the Note; and (2) all shares of Common Stock of the Company
issued as a dividend or other distribution with respect to, or in exchange for
or in replacement of, all such shares of Common Stock described in clause (1) of
this subsection (b); excluding in all cases, however, any Registrable Securities
sold by a person pursuant to Rule 144 promulgated under the Securities Act or
pursuant to a registration statement.
(C) REGISTRABLE SECURITIES THEN OUTSTANDING. The number of
shares of "Registrable Securities then Outstanding" shall mean the number of
shares of Common Stock which are Registrable Securities and (1) are then issued
and outstanding or (2) are then issuable pursuant to the exercise or conversion
of the Note.
(D) FORM S-3. The term "Form S-3" means such form under the
Securities Act as is in effect on the date hereof or any successor registration
form under the Securities Act subsequently adopted by the SEC which permits
inclusion or incorporation of substantial information by reference to other
documents fried by the Company with the SEC.
(E) SEC. The term "SEC" or "Commission" means the U.S.
Securities and Exchange Commission.
(F) SECURITIES ACT. The term "Securities Act" means
the Securities Act of 1933, as amended.
(G) 1934 ACT. The term "1934 Act" means the Securities
Exchange Act of 1934, as amended.
2.2 DEMAND REGISTRATION.
(A) REQUEST BY HOLDERS. If the Company shall receive at any
time after the first anniversary of this Agreement (but not within 12 months of
the effective date of another demand registration statement effected by the
Company on behalf of any holder of Registrable Securities pursuant to this
Section 2.2, or within six months of the effective date of a registration
statement effected on behalf of any holder of Registrable Securities pursuant to
Section 2.4), a written request from any holder of Registrable Securities who
holds Registrable Securities in excess of 1% of the then outstanding number of
shares of Common Stock (each such PERSON ELIGIBLE TO MAKE A REQUEST, AN
"ELIGIBLE HOLDER" AND EACH SUCH PERSON WHO MAKES A REQUEST, A "REQUESTOR") that
the Company file a registration statement under the Securities Act covering the
registration of Registrable Securities pursuant to this Section 2.2, then the
Company shall, within ten (10) business days of the receipt of SUCH WRITTEN
REQUEST, GIVE WRITTEN ACKNOWLEDGMENT OF SUCH REQUEST ("REQUEST ACKNOWLEDGMENT")
to each Eligible Holder (if any). If an Eligible Holder desires to include in
any such registration statement all or any part of the Registrable Securities
then held, the Eligible Holder shall, within ten (10) days after receipt of the
above-described notice from the Company, so notify the Company in writing, and
in such notice shall inform the Company of the number of Registrable Securities
the Eligible Holder wishes to include in such registration statement. Eligible
Holders who elect to participate in an offering (including but not limited to a
Requestor) ARE REFERRED TO COLLECTIVELY AS "SELLING SHAREHOLDERS". The Company
shall effect, as soon as practicable, the registration under the Securities Act
of all Registrable Securities which the Selling Shareholders request to be
registered and included in such registration, subject only to the limitations of
this Section 2.2; provided that the Registrable Securities requested by the
Requestor(s) to be registered pursuant to such request must either: (i) be at
least twenty five percent (25%) of all Registrable Securities then outstanding
(but having an anticipated aggregate public offering price of at least
$5,000,000) or (ii) have an anticipated aggregate public offering price (before
any underwriting discounts and commissions) of not less than $10,000,000.
(B) UNDERWRITING. If a Requestor initiates the registration
request under this Section 2.2 and intends to distribute the Registrable
Securities covered by its request by means of an underwriting, then the
Requestor shall so advise the Company as a part of its request made pursuant to
this Section 2.2. In such event, the right of the Selling Shareholders to
include their Registrable Securities in such registration shall be conditioned
upon each Selling Shareholder's participation in such underwriting and the
inclusion of their Registrable Securities in the underwriting to the extent
provided herein. If the Requestor proposes to distribute its securities through
such underwriting, each Selling Shareholder shall enter into an underwriting
agreement in customary form with the managing underwriter or underwriters
selected for such underwriting by the Company and the Requestor. Notwithstanding
any other provision of this Section 2.2, if the underwriter(s) advise(s) the
Company in writing that marketing factors require a limitation of the number of
securities to be underwritten then the Company shall so advise the Selling
Shareholders, and the managing underwriter(s) may exclude shares (including
Registrable Securities) from the registration and the underwriting, and the
number of shares that may be included in the registration and the underwriting
shall be allocated, first, to the Requestor, and second, to the Selling
Shareholders based on the relative proportion of shares of all such Selling
Shareholders requested to be so registered, and third, to the Company. If a
Selling Shareholder disapproves of the terms of any such underwriting, the
Selling Shareholder may elect to withdraw therefrom by written notice to the
Company and the underwriter, delivered at least ten (10) business days prior to
the effective date of the registration statement. Any Registrable Securities
excluded and withdrawn from such underwriting shall be withdrawn from the
registration.
(C) MAXIMUM NUMBER OF DEMAND REGISTRATIONS. The Company is
obligated to effect only two (2) such registrations pursuant to this Section
2.2.
(D) DEFERRAL. Notwithstanding the foregoing, if the Company
shall furnish to the Selling Shareholders, a certificate signed by the President
or Chief Executive Officer of the Company stating that in the good faith
judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such registration statement
to be filed at that time and it is therefore essential to defer the filing of a
registration statement pursuant to this Section 2.2, then the Company shall have
the right to defer such filing for a period of not more than 180 days after
receipt of the request of the Requestor; provided, however, that the Company may
not utilize this right more than once in any twelve (12) month period.
2.3 PIGGYBACK REGISTRATIONS. The Company shall notify each Eligible
Holder in writing at least twenty (20) business days prior to filing any
registration statement under the Securities Act for purposes of effecting a
public offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to any registration
under Section 2.2 or Section 2.4 of this Agreement, to any employee benefit plan
or a corporate reorganization, business combination or other rule 145
transaction or to the extent prohibited by an agreement between the Company and
other security holders) and will afford each Eligible Holder an opportunity to
include in such registration statement all or any part of the Registrable
Securities then held by each Eligible Holder. If an Eligible Holder of
Registrable Securities desires to include in any such registration statement all
or any part of the Registrable Securities then held, the Eligible Holder shall,
within ten (10) days after receipt of the above-described notice from the
Company, so notify the Company in writing, and in such notice shall inform the
Company of the number of Registrable Securities the Eligible Holder wishes to
include in such registration statement. If the Eligible Holder decides not to
include all of its Registrable Securities in any registration statement
thereafter filed by the Company, Eligible Holder shall nevertheless continue to
have the right to include any Registrable Securities in any subsequent
registration statement or registration statements as may be filed by the Company
with respect to offerings of its securities, all upon the terms and conditions
set forth herein.
(A) UNDERWRITING. If a registration statement under which the
Company gives notice under this Section 2.3 is for an underwritten offering,
then the Company shall so advise Eligible Holders. In such event, the right of
Eligible Holders to include Registrable Securities in a registration pursuant to
this Section 2.3 shall be conditioned upon the Eligible Holder's participation
in such underwriting and the inclusion of Eligible Holder's Registrable
Securities in the underwriting to the extent provided herein. Each Selling
Shareholder shall, in such event, enter into an underwriting agreement in
customary form with the managing underwriter or underwriter(s) selected for such
underwriting. Notwithstanding any other provision of this Agreement, if the
managing underwriter determine(s) in good faith that marketing factors require a
limitation of the number of shares to be underwritten, then the managing
underwriter(s) may exclude shares (including Registrable Securities) from the
registration and the underwriting, and the number of shares that may be included
in the registration and the underwriting shall be allocated, first, to the
Company, and second, to any other shareholder who has exercised a demand
registration right, and third, to all other Selling Shareholders (and any other
shareholders with similar rights), based on the relative proportion of shares of
all such Selling Shareholders or other shareholders requested to be so
registered. If any Selling Shareholder who has elected to participate in the
underwritten offering disapproves of the terms of any such underwriting, such
Selling Shareholder may elect to withdraw therefrom by written notice to the
Company and the underwriter, delivered at least ten (10) business days prior to
the effective date of the registration statement. Any Registrable Securities
excluded or withdrawn from such underwriting shall be excluded and withdrawn
from the registration.
2.4 FORM S-3 REGISTRATION. In case the Company shall receive from a
Requestor a written request 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 the Requestor, then the Company will as soon as
practicable, effect 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 the Requestor's Registrable
Securities as are specified in such request; provided, however, that the Company
shall not be obligated to effect any such registration, qualification or
compliance pursuant to this Section 2.4:
(i) if Form S-3 is not available for such
offering by the Requestor;
(ii) if the Requestor proposes to sell
Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than $5,000,000;
(iii) if the Company shall furnish to the Requestor a
certificate signed by the President or Chief Executive Officer of the
Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
shareholders 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 no more than once during any twelve month period for a
period of not more than 180 days after receipt of the request of the Requestor
under this Section 2.4;
(iv) if the Company has, within the twelve (12) month
period preceding the date of
such request, already effected two (2) registrations for the Requestor pursuant
to Section 2.2 and Section 2.4; or
(v) in any particular 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 or become subject to taxation in any jurisdiction
where it would be required to pay taxes solely as a result of such filing.
(E) NOT DEMAND REGISTRATION. Form S-3 registrations
shall not be deemed to be demand registrations as described in Section 2.2
above.
2.5 OBLIGATIONS OF THE COMPANY.
(A) EXPENSES. All expenses incurred in connection with a
registration pursuant to Sections 2.2, 2.3 and 2.4 including without limitation
all registration and qualification fees, printers' and accounting fees, fees and
disbursements of counsel for the Company, and the reasonable costs and expenses
of one counsel for the Selling Shareholders, but in no event shall the aggregate
cost of such counsel exceed $10,000 pursuant to this Agreement (but excluding
underwriters' and brokers' discounts and commissions), shall be borne by the
Company. Each Selling Shareholders shall bear its respective proportionate share
(based on the total number of shares sold in such registration) of all
underwriting discounts or commissions payable to underwriters or brokers in
connection with such offerings.
(B) REGISTRATION. Whenever required to effect the registration
of any Registrable Securities under this Agreement, the Company shall, as
expeditiously as reasonably possible:
(i) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use all reasonable
efforts to cause such registration statement to become effective, and, upon the
request of Requestor, (y) keep a registration statement requested pursuant to
Section 2.2 effective for up to ninety (90) days and (z) keep a registration
statement requested pursuant to Section 2.4 effective indefinitely pursuant to
SEC Rule 415; provided, however, that the Selling Shareholders shall suspend
use of a prospectus contained in any such registration statement immediately
upon receipt of notice from the Company that the prospectus does not meet the
requirements of the 1933 Act, 1934 Act or applicable regulations. In such
event, the Company shall use all reasonable efforts to amend promptly the
registration statement to confirm the prospectus to the requirements of the
1933 Act, 1934 Act and applicable regulations, unless the Company delivers a
certificate signed by the President or Chief Executive Officer of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for an amendment to 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
amendment to the Form S-3 registration statement for a period of not more
than 60 days; provided that this deferral mechanism may not be exercised
more than once during any twelve month period and the ninety day period
referenced in clause (y) above shall be extended one day for each day
that the Company elects to defer the filing under this sentence.
(ii) 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.
(iii) Furnish to each Selling Shareholder or its agents
such number 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 the Registrable Securities owned by them that are included in
such registration.
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities
or Blue Sky laws of such jurisdictions as shall be reasonably requested by
the Selling Shareholders, 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 or become subject to taxation in any jurisdiction where it would
be required to pay taxes solely as a result of such filing.
(v) 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(s) of such offering.
Each Selling Shareholder shall also enter into and perform its obligations
under such an agreement.
(vi) Notify each Selling Shareholder at any time when a
prospectus relating to Registrable Securities 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.
(vii) Furnish, at the request of Requestor, on the date
that such Registrable Securities are delivered to the underwriters for sale,
if such securities are being sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that the
registration statement with respect
to such securities becomes effective, (i) an opinion, dated as of such date, of
the counsel representing the Company for the purposes of such registration, in
form and substance as is customarily given to underwriters in an underwritten
public offering and reasonably satisfactory to Requestor, addressed to the
underwriters, if any, and to the Selling Shareholders (ii) a "comfort" letter
dated as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering and
reasonably satisfactory to Requestor, addressed to the underwriters, if any, and
to Requestor.
2.6 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Sections 2.2, 2.3 or
2.4 that each Selling Shareholder shall furnish to the Company such information
regarding it, the Registrable Securities held by it, and the intended method of
disposition of such securities as shall be required to timely effect the
registration of their Registrable Securities.
2.7 DELAY OF REGISTRATION. Neither Requestor nor any Eligible 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 2.
2.8 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 2.2, 2.3 or 2.4:
(A) BY THE COMPANY. To the extent permitted by law, the
Company will indemnify and hold harmless, each Selling Shareholder, and their
respective members, officers, employees and agents, any underwriter (as defined
in the Securities Act) for the Selling Shareholders and each person, if any, who
controls any Selling Shareholder or underwriter within the meaning of the
Securities Act or the 1934 Act against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the 1934 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 1934 Act, any federal or state securities
law or any role or regulation promulgated under the Securities Act, the
1934 Act or any federal or state securities law in connection with the
offering covered by such registration statement; and the Company will
reimburse each Selling Shareholder and their respective members, officers,
employees and agents, underwriter or controlling person for any legal or other
expenses reasonably incurred by them, as incurred, in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided however, that (A) the Company will not be liable, in an offering in
which the Company did not execute an underwriting agreement or in which there
was no underwriter, to any Selling Shareholder under this section with respect
to any preliminary prospectus or the final prospectus to the extent that any
such loss, liability, claim, damage or expense of such holder results from the
fact that a Selling Shareholder sold Registrable Securities to a person to whom
there was not sent or given, at or prior to the written confirmation of such
sale, a copy of the final prospectus if the Company has previously and
timely furnished copies thereof to such holder; (B) the indemnity agreement
contained in this subsection 2.8(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 written consent of the Company (which consent
shall not be unreasonably withheld), and (C) the Company shall not be liable in
any such case 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 a Selling Shareholder, or their
respective members, officers, employees and agents, underwriter or controlling
person thereof .
In addition, the Company agrees that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
arising out of or based upon any statement or omission, or any alleged statement
or omission, described in this Section, the Company will reimburse each Selling
Shareholder on a monthly basis for all reasonable legal fees or other expenses
incurred in connection with investigating or defending any such claim, action,
investigation, inquiry or proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the Company's obligation
to reimburse each Selling Shareholder for such expenses and the possibility that
such payments might later be held to have been improper by a court of competent
jurisdiction. To the extent that any such interim reimbursement payment is so
held to have been improper, the person that received such payment shall promptly
return it to the Company, together with interest, compounded daily, determined
on the basis of the prime rate announced from time to time by Morgan Guaranty
Trust Company of New York (or its successor) (the "Prime Rate"). Any such
interim reimbursement payments which are not made to a Selling Shareholder or
any person entitled to indemnity within 30 days of a request for reimbursement
shall bear interest at the Prime Rate from the date of such request.
(B) BY EACH SELLING SHAREHOLDER. To the extent permitted by
law, each Selling Shareholder will indemnify and hold harmless the Company, each
of its directors, each of its officers who have signed the registration
statement, each person, if any, who controls the Company within the meaning of
the Securities Act, and any underwriter against any losses, claims, damages or
liabilities (joint or several) to which the Company or any such director,
officer, controlling person, or underwriter may become subject under the
Securities Act, the 1934 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 Selling Shareholder expressly for use in
connection with such registration; and such Selling Shareholder will reimburse
any legal or other expenses reasonably incurred by the Company or any such
director, officer, controlling person, or underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this subsection
2.8(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 such Selling Shareholder, which consent shall not be unreasonably withheld;
and provided further, that the total amounts payable in indemnity by any Selling
Shareholder under this Section 2.8(b) in respect of any Violation shall not
exceed the proceeds (net of underwriters' and brokers' discounts and
commissions) received by such Selling Shareholder in the registered offering out
of which such Violation arises. For the avoidance of doubt, this provision shall
not impose any indemnity obligation on a Selling Shareholder to the extent that
the Violation did not occur in reliance upon and in conformity with written
information furnished by such person.
(C) NOTICE. Promptly after receipt by an indemnified party
under this Section 2.8 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 2.8,
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 if the indemnifying party
assumes such defense the indemnifying party shall have no further liability for
the fees and expenses of counsel paid by the indemnified party, except that an
indemnified party shall have the right to retain its own counsel, with the fees
and expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential conflict of 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 2.8, 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 2.8.
(D) CONTRIBUTION. If the indemnification provided in this
section 2.8 is unavailable or insufficient to hold harmless an indemnified party
under Section 2.8(a) or (b), then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to above (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Selling Shareholders on the other from the offering of the
securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and the Selling Shareholder(s) on the other
in connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other equitable considerations.
The relative benefits received by the Company on the one hand and the Selling
Shareholder(s) on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering received by the Company bear to the total
net proceeds received by the Selling Shareholder(s). The relative fault 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 related to information supplied by the Company or written
information supplied by a Selling Shareholder, and the parties' relevant intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this paragraph (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending against any action or claim that is the subject of
this section. Notwithstanding the provisions of this section, a Selling
Shareholder shall not be required to contribute any amount in excess of the
amount of the total net proceeds (net of commissions) received by such Selling
Shareholder from the sale of the securities pursuant to this Agreement exceeds
the amount of any damages or expenses that a Selling Shareholder has otherwise
been required to pay, or has incurred, by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(F) SURVIVAL. The obligations of the Company and Eligible
Holders under this Section 2.8 shall survive the completion of any offering of
Registrable Securities in a registration statement, and otherwise.
2.9 "MARKET STAND-OFF" AGREEMENT. Each Eligible Holder hereby agrees
that it shall not, if it beneficially owns more than 5% of the common stock of
the Company and to the extent requested by the Company or an underwriter of
securities of the Company, sell or otherwise transfer or dispose of any
Registrable Securities or other shares of stock of the Company then owned (other
than to donees, family members or affiliates of such Eligible Holder who agree
to be similarly bound) for up to seven (7) days preceding the offering and up to
ninety (90) days following the effective date of a registration statement of the
Company filed under the Securities Act with respect to shares of common stock or
securities exercisable for or convertible into shares of common stock; provided,
however, that all officers and directors of the Company then holding Common
Stock of the Company and all persons owning more than five percent (5%) of
Common Stock of the Company or securities exercisable for or convertible into
more than five percent (5%) of Common Stock of the Company shall be similarly
restricted.
2.10 TERMINATION OF THE COMPANY'S OBLIGATIONS. The Company shall have
no obligations pursuant to Sections 2.2 through 2.4 with respect to: (i) any
request or requests for registration made by a Requestor on a date more than
five (5) years after the date of this Agreement at a time when such Requestor is
not an affiliate of the Company; or (ii) any Registrable Securities proposed to
be sold by a Requestor in a registration pursuant to Section 2.2, 2.3 or 2.4 if,
in the opinion of counsel to the Company, all such Registrable Securities then
requested to be registered by such Requestor may be sold in a three month period
without registration under the Securities Act pursuant to Rule 144 under the
Securities Act.
3. GENERAL PROVISIONS.
3.1 RIGHT TO DIRECTORSHIP/OBSERVER STATUS. The Investor shall have the
right to have a person designated by it nominated to the Board of Directors of
Lynch or, at any time Investor chooses, to attend and speak at meetings of the
Board of Directors in an observer capacity (but in such case with no voting or
other rights). At each meeting of shareholders at which any director of the
class to which such director designee is assigned are to be elected during the
period such holder continues to hold such principal amount or such shares and at
least 10% of the fully diluted or outstanding shares, such designee shall be
included in the Board of Directors' slate of nominees for election to the Board
of Directors. Notwithstanding the foregoing, Lynch may refuse a request by
Investor to designate (or continue to designate) a particular person if the
Board of Directors determines that such person is subject to removal for cause
or that such person's status as a director or observer would raise significant
regulatory or competitive issues. In such case, Investor may designate a
substitute person who would not be so disqualified.
3.2 SUCCESSORS AND ASSIGNS. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties. This Agreement shall extend to all successive
transferees of the Note and Registrable Securities, each of which persons are
hereby made third party beneficiaries hereof and may enforce the terms of this
Agreement as if such person was a direct party hereto.
3.3 THIRD PARTIES. Nothing in this Agreement, express or
implied, is intended to confer upon any person, other than the parties hereto
and their successors and assigns and third party beneficiaries hereof, any
rights or remedies under or by reason of this Agreement.
3.4 GOVERNING LAW AND VENUE. Except as noted below, this
Agreement shall be governed by and construed in accordance with the laws of the
State of Washington. In any court proceeding, Lynch agrees to submit to the
jurisdiction of the federal court selected by Investor, and venue of any action
concerning this Note shall be in King County, Washington state. In the event
that the federal court selected by Investor shall not have jurisdiction, Lynch
agrees to submit to the jurisdiction of the Washington state court in King
County selected by Investor. Lynch hereby irrevocably waives to the fullest
extent permitted by law any objection which it may now or hereafter have to the
laying of such venue and any claim that any such forum is an inconvenient forum.
Nothing in this Section shall impair the right of Investor to bring any action
or proceeding against Lynch or its property in the courts of any other county or
jurisdiction and Lynch irrevocably submits to the nonexclusive jurisdiction of
the appropriate courts (as selected by Investor) of the jurisdiction in which
Lynch is organized or any place where any property or any office of Lynch is
located. In the event Investor transfers or assigns this Note in whole, but not
in part, to a person not an affiliate, then this Note shall be governed by and
construed in accordance with the laws of the State of New York and the consent
to jurisdiction in the State of Washington stated above is hereby revoked.
3.5 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.
3.6 HEADINGS. The headings and captions used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement. All references in this Agreement to sections,
paragraphs, exhibits and schedules shall, unless otherwise provided, refer to
sections and paragraphs hereof and exhibits and schedules attached hereto, all
of which exhibits and schedules are incorporated herein by this reference.
3.7 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered, certified mail,
Federal Express, or other express courier, postage prepaid and addressed to
Investor at 2365 Carillon Point, Kirkland, Washington 98033, Attn: Michael
Larson, and to Company, at 401 Theodore Fremd Avenue, Rye, NY 10580, Attn:
Robert E. Dolan, or at such other address as any party or Company may designate
by giving ten (10) days advance written notice to all other parties.
3.8 ATTORNEYS' FEES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to recover its reasonable attorneys' fees, experts' fees and costs,
including those for pretrial, trial, on appeal, in arbitration and in bankruptcy
and all other costs and necessary disbursements associated with any such
actions, in addition to any other relief to which such party may be entitled.
3.9 ADJUSTMENTS FOR STOCK SPLITS, ETC. Wherever in this Agreement there
is a reference to a specific number of shares of Common Stock of the Company of
any class or series, then, upon the occurrence of any subdivision, combination
or stock dividend of such class or series of stock, the specific number of
shares so referenced in this Agreement shall automatically be proportionally
adjusted to reflect the affect on the outstanding shares of such class or series
of stock by such subdivision, combination or stock dividend.
3.10 AGGREGATION OF STOCK. All shares 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.
3.11 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of Company and Investor (or, following assignment and
transfer of the Note, by those holders owning more than 50% of the principal
amount of the Note). Any amendment or waiver effected in accordance with this
Section shall be binding upon each future holder of Registrable Securities, and
Company. No waiver of any of the provisions of this Agreement shall be deemed to
be or shall constitute a waiver of any other provisions hereof, whether or not
similar, nor shall any such waiver constitute a continuing waiver. No waiver
shall be binding unless expressed as such in a document executed by the party
making the waiver.
3.12 SEVERABILITY. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision(s) shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision(s) were so excluded and shall be enforceable in accordance with
its terms.
3.13 ENTIRE AGREEMENT. This Agreement, together with all exhibits and
schedules hereto, constitutes the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and all
prior negotiations, correspondence, agreements, understandings duties or
obligations between the parties with respect to the subject matter hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the date and year first above written.
"COMPANY":
LYNCH INTERACTIVE CORPORATION, a Delaware
corporation
BY
Robert E. Dolan
Chief Financial Officer
"INVESTOR":
CASCADE INVESTMENT LLC, a Washington limited
liability company
BY
Michael Larson, Business Manager
