Exhibit 4.2
FIRST AMENDMENT TO AMENDED AND
RESTATED
INVESTOR RIGHTS AGREEMENT DATED
FEBRUARY 16, 2005
OF PHOTOWORKS,
INC.
AND CONSENT AND
WAIVER
This First Amendment to the Amended
and Restated Investor Rights Agreement dated February 16, 2005 (the
" Rights Agreement ") and Consent to Issuance of Securities,
Waiver of Right of First Refusal and Waiver of Antidilution Rights
(the “ Amendment, Waiver and Consent ”) is
entered into as of July 27, 2005 by and among PhotoWorks, Inc., a
Washington corporation (the “ Company ”), and
the holders of at least a majority of the Registrable Securities
(as defined in the Rights Agreement).
RECITALS
A. The
Company and the Investors are parties to the Rights Agreement.
Capitalized terms used herein without definition shall have the
meaning ascribed to them in the Rights Agreement.
B. The
Rights Agreement may be amended, and any provision of the Rights
Agreement may be waived, with the written consent of the Company
and the holders of a majority of the Registrable Securities then
outstanding. The undersigned represent at least the requisite
parties to amend the Rights Agreement pursuant to the terms
thereof.
C. The
Company and the undersigned Investors (who hold at least a majority
of the Registrable Securities currently outstanding), on behalf of
themselves and the other applicable stockholders of the Company,
desire to amend the Rights Agreement on the terms set forth below
in order to add the parties listed on Schedule 1 hereto (the
“ Purchasers ”) as parties thereto in connection
with such Purchasers’ purchase of the Company's Common Stock
(the " Stock ") pursuant to the Convertible Note, Warrant
and Common Stock Purchase Agreement dated February 16, 2005, as
amended (the “ Existing Purchase Agreement
”), the Common Stock
Purchase Agreement of even date herewith (the " Purchase
Agreement ") or the conversion of certain subordinated
convertible debentures (the “ Debentures ”)
issued pursuant to the Subordinated Convertible Debenture Purchase
Agreement dated April 25, 2001, as applicable. Additionally,
certain of the Investors desire to consent to the issuance of the
Stock, waive any applicable anti-dilution or preemptive rights held
by such Investors in connection with such issuance, and waive
certain timing requirements with respect to the Second Closing (as
that term is defined in the Existing Purchase
Agreement).
AGREEMENT
NOW, THEREFORE, in consideration of
the foregoing recitals and the mutual promises hereinafter set
forth, the parties hereto agree as follows:
1.
Amendment
. The Rights Agreement is hereby amended to (a)
add each Purchaser as a party thereto and an "Investor" and
“Holder” thereunder, and (b) modify the definition of
“Registrable Securities” under Section 1.1(i) to read
in its entirety as follows (the provisions being added by this
Amendment, Waiver and Consent appearing below in
italics):
"The term “ Registrable
Securities ” means (i) the shares of Common Stock
issuable or issued upon exchange of the Series A Preferred pursuant
to the Share Exchange Agreement dated as of February 16, 2005,
between the Company and the holders of the Series A Preferred,
other than shares for which registration rights have terminated
pursuant to Section 1.10 hereof, (ii) the shares of
Common Stock issuable or issued upon conversion of the
Series B Debentures, other than shares for which registration
rights have terminated pursuant to Section 1.10 hereof,
(iii) the shares of Common Stock issuable or issued upon
conversion of the New Notes, other than shares for which
registration rights have terminated pursuant to Section 1.10
hereof, (iv) the shares of Common Stock issued at the Second
Closing pursuant to the New Purchase Agreement, (v)
the shares of Common Stock issued pursuant to the Common Stock
Purchase Agreement between the Company and JMS LLC, Custodian for
the benefit of Jeffrey Harvey IRA, dated July 27, 2005 ,
(vi) the shares of Common Stock issuable or issued upon
exercise of the Warrants, other than shares for which registration
rights have terminated pursuant to Section 1.10 hereof, and
(vii) 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), (ii), (iii), (iv), (v) or
(vi), 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
s
