Exhibit 10.9(a)
FIRST AMENDMENT TO
INVESTOR RIGHTS AGREEMENT
This FIRST AMENDMENT TO INVESTOR RIGHTS AGREEMENT (this "First
Amendment") is made as of November 12 1999, by and among FREEI NETWORKS INC.,
a Washington corporation (the "COMPANY"), SEQUOIA CAPITAL IX, SEQUOIA CAPITAL
ANGEL FUND, SEQUOIA CAPITAL IX PRINCIPALS FUND (individually and
collectively, the "Series A Investors"), XX0.XXX ("MP3"), AXP VARIABLE
PORTFOLIO-STRATEGY AGGRESSIVE FUND ("AXPVP"), AXP STRATEGY AGGRESSIVE FUND
("AXPSAF"), IDS LIFE SERIES FUND, INC.-EQUITY PORTFOLIO ("IDS"), with respect
to that certain Investor Rights Agreement dated August 12, 1999 between the
Company and the Series A Investors (the "INVESTOR'S RIGHTS AGREEMENT"), a
true and correct copy of which is attached hereto as Exhibit A and
incorporated herein by this reference.
RECITALS
WHEREAS, the Company entered into a purchase and sale agreement with
the Series A Investors for the sale of an aggregate of 4,812,074 shares of
its Series A Convertible Preferred Stock (the "Series A Stock") pursuant to a
Series A Preferred Stock Purchase Agreement dated as of August 12, 1999 (the
"SERIES A PURCHASE AGREEMENT"), and
WHEREAS, as a condition of entering into the Series A Preferred
Stock Purchase Agreement, the Series A Investors were extended certain
registration, information, and other rights as set forth in the Investor
Rights Agreement, and
WHEREAS, the Company proposes to sell and issue 1,552,655 shares of its
Series B Convertible Preferred Stock (the "SERIES B STOCK") to MP3, AXPVP,
AXPSAF and IDS (each individually a "SERIES B INVESTOR" and collectively, the
"SERIES B INVESTORS") pursuant to the Series B Preferred Stock Purchase
Agreement the "SERIES B PURCHASE AGREEMENT") of even date herewith;
WHEREAS, as a condition of entering into the Series B Preferred
Stock Purchase Agreement, the Series B Investors have requested that the
Company extend to them registration rights, information rights, and certain
other rights as set forth below, and the Company is willing to grant such
rights to the Series B Investors on terms substantially similar as those
already granted to the Series A Investors pursuant to the Investor Rights
Agreements;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants, and conditions set forth herein and in
the Series B Purchase Agreement, the parties hereto mutually agree to amend the
Investor Rights Agreement, for the benefit of the Series B Investors, to provide
as follows:
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1. DEFINITIONS
A. The definition of "Registrable Securities" set forth in the Investor
Rights Agreement is hereby deleted in its entirety and replaced with the
following definition:
"REGISTRABLE SECURITIES" means (i) the shares of Common Stock issuable
or issued upon conversion of the Series A Stock or Series B Stock and (ii) any
shares of Common Stock of the Company issued (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 referenced in (i) above, excluding in all cases, however, any
Registrable Securities sold by a person in a private transaction in which the
transferor's rights under Section 2 are not assigned or assignable and any
Registrable Securities sold to the public pursuant to a registration statement
or Rule 144 promulgated under the Act
B. The definition of "INVESTOR" and "INVESTORS" as set forth in the
Preamble to the Investor Rights Agreement is hereby amended by adding the Series
B Investors such that each of the Series A Investors and Series B Investors
shall individually be considered an "Investor," and collectively they shall be
considered "Investors."
C. Unless the context requires otherwise, the term "PREFERRED STOCK"
shall mean both Series A Stock and Series B Stock.
D. Each reference to "Series A Preferred Stock" or "Series A Stock" in
Sections 4.2(b), 4.6, 5.2(b), 5.2(c), 5.4 and 6.7 shall be deleted and replaced
with "Preferred Stock."
2. REGISTRATION RIGHTS
Section 2.1(a) is hereby deleted and replaced with the following:
2.1 DEMAND REGISTRATION
(a) If the Company shall receive at any time or from time to time after
the earlier of (i) the effective date of the registration statement pertaining
to the Initial Offering or (ii) December 31, 2002 a written request from the
Holders of at least twenty five percent (25%) of the Registrable Securities then
outstanding (the "INITIATING HOLDERS") that the Company file a registration
statement under the Act covering the registration of the Registrable Securities
then outstanding, then the Company shall, within ten (10) days after the receipt
thereof, give written notice of such request to all Holders and shall, subject
to the limitations set forth in Section 2.1(b), use its best efforts to
effect, as soon as practicable and in any event within sixty (60) days after the
receipt of such request, the registration under the Act of all Registrable
Securities that Holders request to be registered within twenty days (20) of the
delivery of such notice by the Company in accordance with Section 6.5, provided
that the Registrable Securities requested by the Holders to be registered
pursuant to such request must have an anticipated aggregate public offering
price of not less than five million dollars' ($5,000,000).
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3. COVENANTS OF THE COMPANY
Section 3.1(b) is hereby deleted and replaced with the following:
3.1 DELIVERY OF FINANCIAL STATEMENTS.
(b) The Company shall deliver to each Holder who holds at least five
hundred thousand (500,000) Registrable Securities (or Common Stock issued or
issuable upon conversion thereof, as adjusted for stock splits, stock dividends,
and the like):....[remainder of section unchanged].
4. RIGHT OF FIRST REFUSAL
The first sentence of Section 4.1 is hereby deleted and replaced with
the following:
4.1 FUTURE SALES OF SHARES. Subject to the terms and conditions
specified in Section 4 of the Investor Rights Agreement, the Company hereby
grants to each Holder who holds at least five hundred thousand (500,000)
Registrable Securities a right of first refusal with respect to future sales by
the Company of its Shares.
The remainder of Section 4.1 is unchanged
6. MISCELLANEOUS
THE FOLLOWING SECTIONS ARE ADDED
6.11 RATIFICATION. Except as expressly set forth in this First
Amendment, the terms of the Investor Rights Agreement shall remain in full force
and effect, binding on all the parties to this First Amendment as if each party
hereto were an original signatory of the Investor Rights Agreement. In the event
of a conflict between the terms of this First Amendment and the terms of the
Investor Rights Agreement, the terms of this First Amendment shall control.
6.12 CONSENT TO STATEMENT OF RIGHTS AND PREFERENCES OF SERIES B STOCK.
The holders of Series A Stock unanimously consent to the filing of the Statement
of Rights and Preferences of Series B Stock (the "Series B Statement") as part
of the Company's Articles of Incorporation. The holders of the Series A Stock
acknowledge that the filing of the Series B Statement will materially after the
rights and preferences of the Series A Stock but agree that the purchase price
paid to the Company by the holders of Series B Stock constitutes fair
consideration for such alteration of tights and preferences.
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
THE COMPANY: FREEI NETWORKS, INC.
By: XXXXXX XXXXXXXXXX
----------------------------
Printed Name: Xxxxxx XxXxxxxxxx
Title: President
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INVESTOR SEQUOIA CAPITAL IX
SEQUOIA CAPITAL ANGEL FUND
SEQUOIA CAPITAL IX PRINCIPALS FUND
BY: SC IX Management, LLC
A California. Limited Liability Company
Its General Partner
By:/s/ Xxxx Xxxxxxx
----------------------------------
Its: Managing Member
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INVESTOR: XX0.XXX
By: /s/ Xxxxxx Xxxxxxxx
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Printed Name: Xxxxxx Xxxxxxxx
---------------
Title: President
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INVESTOR: AXP VARIABLE PORTFOLIO-STRATEGY
AGGRESSIVE FUND
By: XXXXXXXXX X. QUIRSTFELD
-----------------------------------
Printed Name: XXXXXXXXX X. QUIRSTFELD
-------------------------
Title: VICE PRESIDENT
---------------------------------
INVESTOR: AXP STRATEGY AGGRESSIVE FUND
By: XXXXXXXXX X. QUIRSTFELD
-----------------------------------
Printed Name: XXXXXXXXX X. QUIRSTFELD
-------------------------
Title: VICE PRESIDENT
---------------------------------
INVESTOR: IDS LIFE SERIES FUND, INC.- EQUITY
PORTFOLIO
By: XXXXXXXXX X. QUIRSTFELD
-----------------------------------
Printed Name: XXXXXXXXX X. QUIRSTFELD
-------------------------
Title: VICE PRESIDENT
---------------------------------
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FOUNDER: XXXXXX XXXXXXXXXX
XXXXXX XXXXXXXXXX
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FOUNDER: XXXXX XXXXX
XXXXX XXXXX
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FOUNDER: XXX XXXXX
XXX XXXXX
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