EXHIBIT 10.2
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (this "Agreement") is dated as of
November 12, 2004 by and among (i) NxtPhase T&D Corp., a Canadian corporation
(the "Company"), (ii) Perseus 2000, L.L.C., a Delaware limited liability company
("Perseus"), (iii) El Dorado Investment Company, an Arizona corporation ("El
Dorado"), (iv) GE Capital Equity Holdings, B.V., a company incorporated under
the laws of Netherlands ("GE"), (v) Working Opportunity Fund (EVCC) Ltd., a
British Columbia corporation ("WOF"), (vi) Hydro-Quebec Capitech Inc., a Quebec
corporation ("HQC"), (vii) Canadian Science and Technology Growth Fund Inc., a
Canadian corporation ("CSTGF"), and (viii) OPG Ventures Inc., an Ontario
corporation ("OPG"). Each of Perseus, El Dorado, GE, WOF, HQC, CSTGF and OPG are
sometimes referred to herein as a "Stockholder" and collectively as the
"Stockholders." Certain terms used in this Agreement are defined in Exhibit A
hereto.
R E C I T A L S
A. Each of the Stockholders has made an investment in the Company by acquiring,
by payment of cash consideration or the exchange of debt, or both, the Company's
Class A Preferred Shares (the "Class A Preferred").
B. In connection with such purchase of the Class A Preferred, and to induce the
Stockholders to consummate such purchase of the Class A Preferred, the Company
has agreed to enter into this Agreement and to grant to the Stockholders the
rights set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, the Stockholders and the Company
(collectively, the "Parties") agree as follows:
1. MANAGEMENT OF THE COMPANY.
1.1. Representation. From and after the date hereof, each Stockholder shall vote
all of the voting securities of the Company over which such Stockholder has
voting control so as to effect the following:
(a) The authorized number of directors of the Company's Board of Directors (the
"Board") shall be established at five members.
(b) The following persons shall be elected to the Board at each election of
directors, which shall occur annually, during the term of this Agreement:
(i) Three persons (the "Perseus Designees")
designated by Perseus;
(ii) One person designated by El Dorado ("El Dorado Designee"); and
(iii) One person designated by the holders of the Company's capital stock, on
an as-converted basis, which person shall be the incumbent Chief
Executive Officer of the Company.
(c) At any time, any Perseus Designee or El Dorado Designee may be removed
from the Board (and thereupon from all committees thereof), with or
without cause, at the written request of the Stockholder or
Stockholders that designated such director in accordance herewith.
(d) In the event that any person designated to serve on the Board hereunder
for any reason ceases to serve as a director of the Board or any
committee thereof during such director's term of office, the resulting
vacancy on the Board or any Committees shall be filled by a person
designated by the Stockholder or Stockholders that designated the
director vacating the office in accordance herewith.
1.2. Insurance. The Company shall at all times maintain insurance for its
officers and directors, in an amount equal to or greater than
US$1,000,000.
2. REGISTRATION RIGHTS.
2.1. Definitions. For purposes of this Section 2:
"Commencement Date" means the 180th day after the date on
which the Company consummates its initial public offering of securities under
the Securities Act.
"Commission" means the Securities and Exchange Commission or
any successor thereto.
"Demand Holder" means (i) a Stockholder, (ii) the partners,
members or stockholders of a Stockholder collectively provided that such
partners, members or stockholders act through such Stockholder or its successor,
and (iii) any person or entity to whom a Stockholder or any person or entity
identified in clause (ii) of this definition sells, transfers or assigns at
least 100,000 shares of the Company's Registrable Securities as adjusted for
stock dividends, stock splits, recapitalizations and the like, other than in a
sale pursuant to Rule 144 under the Securities Act or a registration effected
pursuant to this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute.
"Holder" means (i) a Stockholder, (ii) the partners, members
or stockholders of a Stockholder collectively provided that such partners,
members or stockholders act through such Stockholder or its successor, and (iii)
any person or entity to whom a Stockholder or any person or entity identified in
clause (ii) of this definition sells, transfers or assigns at least 100,000
shares of the Company's Registrable Securities as adjusted for stock dividends,
stock splits, recapitalizations and the like, other than in a sale pursuant to
Rule 144 under the Securities Act or a registration effected pursuant to this
Agreement.
"Long-Form Registration" means a registration effected on any
form approved by the Commission other than a Form S-3 or any other form that
provides for future incorporation by reference of information from reports filed
by the registrant under the Exchange Act, and qualification for distribution of
all or part of the Registrable Securities by long-form prospectus in each of the
provinces of Canada.
"Register," "registered," and "registration" refer to an
underwritten registration effected by preparing and filing with the Commission a
registration statement or similar document in compliance with the Securities
Act, and the declaration or ordering by the Commission of effectiveness of such
registration statement or document, and in Canada the filing and receipt of a
prospectus in each province of Canada.
"Registration Expenses" means all expenses incurred in
connection with the Company's performance of or compliance with its obligations
under this Section 2, including, without limitation, all (i) registration,
qualification and filing fees; (ii) fees, costs and expenses of compliance with
securities or blue sky laws (including reasonable fees, expenses and
disbursements of counsel for the underwriters in connection with blue sky
qualifications of the Registrable Securities under the laws of such
jurisdictions as the managing underwriter or underwriters in a registration may
designate, subject to the limitation as set forth in subsection (h) of Section
2.5 hereof); (iii) printing expenses; (iv) messenger, telephone and delivery
expenses; (v) fees, expenses and disbursements of counsel for the Company and of
all independent certified public accountants retained by the Company (including
the expenses of any special audit and "cold comfort" letters required by or
incident to such performance); (vi) Securities Act liability insurance if the
Company so desires; (vii) fees, expenses and disbursements of any other
individuals or entities retained by the Company in connection with the
registration of the Registrable Securities; (viii) fees, costs and expenses
incurred in connection with the listing of the Registrable Securities on each
national securities exchange or automated quotation system on which the Company
has made application for the listing or quotation of its Common Stock; and (ix)
internal expenses of the Company (including, without limitation, all salaries
and expenses of its officers and employees performing legal or accounting duties
and expenses of any annual audit). Registration Expenses shall not include
selling commissions, discounts or other compensation paid to underwriters or
other agents or brokers to effect the sale of Registrable Securities, or counsel
fees and any other expenses incurred by Holders in connection with any
registration that are not specified in the immediately preceding sentence.
"Registrable Securities" means (i) any shares of Common Stock
of the Company owned by any Holder or that may be acquired by any Holder upon
the conversion of any convertible security or the exercise of any warrant or
option owned by any Holder, but only to the extent such shares constitute
"restricted securities" under Rule 144 under the Securities Act, and (ii) any
shares of Common Stock issued or issuable pursuant to securities issued with
respect to or in exchange for the securities referenced in section (i) above
upon any stock split, stock dividend, recapitalization, substitution, or similar
event, but only to the extent such shares constitute "restricted securities"
under Rule 144 of the Securities Act, or in Canada, only to the extent a trade
of those shares of Common Stock by the Holder would constitute a distribution or
deemed distribution for the purposes of the securities laws of a province of
Canada, excluding in all cases, however, any Registrable Securities sold in a
transaction in which the rights under this Section 2 are not assigned.
"Requestor" means the Demand Holder or Demand Holders
requesting the registration in question. Actions taken by the Requestor shall be
taken by those Demand Holders making such request who hold a majority of the
Registrable Securities held by such Demand Holders.
"Securities Act" means the Securities Act of 1933, as amended,
or any successor statute.
"Short-Form Registration" means a registration effected on a
Form S-3 or any other form that provides for future incorporation by reference
of information from reports filed by the registrant under the Exchange Act, or
if available, a short-form prospectus in each province of Canada under the rules
for pricing of offerings after the prospectus is receipted or otherwise.
2.2. Demand Registrations.
(a) Request for Registration. If at any time after the Commencement Date one or
more Demand Holders (who in the case of a Long-Form Registration hold in the
aggregate at least 50% of the Registrable Securities then held by all Demand
Holders) submits a written request (a "Demand Notice") to the Company that the
Company register Registrable Securities under and in accordance with the
Securities Act (a "Demand Registration"), then the Company shall:
(i) within five days after receipt of such Demand
Notice, give written notice of
the proposed registration to all other Holders; and
(ii) as soon as practicable, use diligent efforts to
effect such registration as
may be so requested and as would permit or facilitate the sale and distribution
of all or such portion of such Registrable Securities as are specified in such
request, together with all or such portion of the Registrable Securities of any
Holders joining in such request as are specified in written requests received by
the Company within 20 days after the date the Company mails the written notice
referred to in clause (i) above.
Notwithstanding the foregoing, if the Company shall furnish to the
Holders a certificate signed by the president of the Company stating that in the
good faith judgment of the Board, it would be seriously detrimental to the
Company or its stockholders for a registration statement to be filed on or
before the date filing would be required in connection with a Demand
Registration and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing or
delay its effectiveness for a reasonable period not to exceed 120 days provided
that such right shall not be exercised more than once with respect to a request
for registration hereunder during any period of twelve consecutive months. The
Company will pay all Registration Expenses in connection with such withdrawn
request for registration.
Notwithstanding the foregoing, the Company shall not be required to
effect (i) more than one Long-Form Registration, (ii) any registration where the
anticipated aggregate gross proceeds from the sale of the Registrable Securities
to be included in such registration is less than $1,250,000, (iii) any
Short-Form Registration unless the Company is eligible to effect a Short-Form
Registration of the Registrable Securities proposed to be sold thereby, or (iv)
any registration requested within less than six months after the filing of
another registration pursuant to this Section 2 in which all of the Registrable
Securities requested to be included in such registration by participating
Holders were so included.
(b) Underwriting. In connection with any registration under this Section 2.2, if
so requested by the Requestor, the Company and the participating Holders shall
enter into an underwriting agreement with one or more underwriters selected by
the Requestor having terms and conditions customary for such agreements;
provided, however, that none of the Holders shall be required to make any
representations or warranties or provide indemnification except as relates to
such Holder's Registrable Securities, including such Holder's ownership of
shares and authority to enter into the underwriting agreement and to such
Holder's intended method of distribution, and the liability of such Holder shall
be limited to an amount equal to the net proceeds from the offering received by
such Holder, except in the case of willful fraud. Notwithstanding any other
provision of this Section 2.2, if the managing underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the number of Registrable
Securities to be included in such registration. The Company shall so advise all
Holders distributing Registrable Securities through such underwriting, and there
shall be excluded from such registration and underwriting, to the extent
necessary to satisfy such limitation, shares held by the Demand Holders. As
among the Demand Holders as a group, the number of Registrable Securities that
may be included in the registration and underwriting shall be allocated in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities required to be included (determined without regard to any requirement
of a request to be included in such registration) in such registration held by
all Demand Holders at the time of filing the registration statement. To
facilitate the allocation of shares in accordance with the above provisions, the
Company may round the number of shares allocated to any Demand Holder to the
nearest 100 shares. No securities to be sold by the Company or any Person that
is not a Holder may be included in any registration effected pursuant to this
Section 2.2 unless such inclusion is approved by the Holders of a majority of
the Registrable Securities to be included in such registration.
(c) Shelf Registration. If the Company effects a Short-Form Registration
pursuant to this Section 2.2, unless otherwise directed by the Requestor, such
Short-Form Registration shall be effected as a "shelf" registration pursuant to
Rule 415 under the Securities Act (or any successor rule). Any such shelf
registration shall cover the disposition of all Registrable Securities included
in such registration in one or more underwritten offerings, block transactions,
broker transactions, at-market transactions and in such other manner or manners
as may be specified by the Requestor. The Company shall use its best efforts to
keep such "shelf" registration continuously effective as long as the delivery of
a prospectus is required under the Securities Act in connection with the
disposition of the Registrable Securities registered thereby and in furtherance
of such obligation, shall supplement or amend such registration statement if, as
and when required by the rules, regulations and instructions applicable to the
form used by the Company for such registration or by the Securities Act or by
any other rules and regulations thereunder applicable to shelf registrations. On
one occasion during each twelve consecutive months such shelf registration
statement remains effective, upon their receipt of a certificate signed by the
Chief Executive Officer of the Company in accordance with Section 2.2 hereof,
the Holders will refrain from making any sales of Registrable Securities under
the shelf registration statement for a reasonable period not to exceed 120 days;
provided that this right to cause the Holders to refrain from making sales shall
not be exercised by the Company during the one year period following any
exercise of the Company's right to defer the filing or delay its effectiveness
of a registration statement under Section 2.2(a).
2.3. Company Registration.
(a) Notice of Registration. If at any time or from time to time, the Company
shall determine to register any of its Common Stock, whether or not for its own
account, other than a registration relating to employee benefit plans or a
registration effected on Form S-4, the Company shall:
(i) provide to each Holder written notice thereof at least 15 Business Days
prior to the filing of the registration statement by the Company in connection
with such registration; and
(ii) include in such registration, and in any
underwriting involved therein, all
those Registrable Securities specified in a written request by each Holder
received by the Company within 10 Business Days after the Company mails the
written notice referred to above, subject to the provisions of Section 2.3(b)
below.
(b) Underwriting. The right of any Holder to registration pursuant to this
Section 2.3 shall be conditioned upon the participation by such Holder in the
underwriting arrangements specified by the Company in connection with such
registration and the inclusion of the Registrable Securities of such Holder in
such underwriting to the extent provided herein. All Holders proposing to
distribute their Registrable Securities through such underwriting shall
(together with the Company) enter into an underwriting agreement in customary
form with the managing underwriter selected for such underwriting by the Company
and take all other actions, and deliver such opinions and certifications, as may
be reasonably requested by such managing underwriter; provided, however, that
none of the Holders shall be required to make any representations or warranties
or provide indemnification except as relates to such Holder's Registrable
Securities, including such Holder's ownership of shares and authority to enter
into the underwriting agreement and to such Holder's intended method of
distribution, and the liability of such Holder shall be limited to an amount
equal to the net proceeds from the offering received by such Holder, except in
the case of willful fraud. Notwithstanding any other provision of this Section
2.3, if the managing underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the managing underwriter
may limit the number of Registrable Securities to be included in such
registration. The Company shall so advise all Holders distributing Registrable
Securities through such underwriting, and there shall be excluded from such
registration and underwriting, to the extent necessary to satisfy such
limitation, first shares held by the Demand Holders and, thereafter, to the
extent necessary, shares which the Company wishes to register for its own
account. As among the Demand Holders as a group, the number of Registrable
Securities that may be included in the registration and underwriting shall be
allocated in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities required to be included (determined without regard to any
requirement of a request to be included in such registration) in such
registration held by all Demand Holders at the time of filing the registration
statement. To facilitate the allocation of shares in accordance with the above
provisions, the Company may round the number of shares allocated to any Demand
Holder to the nearest 100 shares.
(c) Right to Terminate Registration. The Company shall have the right to
terminate or withdraw any registration initiated by it under this Section 2.3
prior to the effectiveness of such registration whether or not any Holder has
elected to include Registrable Securities in such registration.
2.4. Expense of Registration. All Registration Expenses incurred in connection
with the registration and other obligations of the Company pursuant to Sections
2.2, 2.3 and 2.5 shall be borne by the Company. Notwithstanding the foregoing,
in the event that Demand Holders cause the Company to begin a registration
pursuant to Section 2.2, and the request for such registration is subsequently
withdrawn by the Demand Holders or such registration is not completed due to
failure to meet the net proceeds requirement set forth in such section or is
otherwise not successfully completed due to no fault of the Company, all Demand
Holders shall be deemed to have forfeited their right to one registration under
Section 2.2 unless the Demand Holders pay for, or reimburse the Company for, all
of the Registration Expenses incurred in connection with such withdrawn or
incomplete registration, provided further, however, that if at the time of such
withdrawal, the Demand Holders have learned of a material adverse change in the
condition, business or prospects of the Company from that known to the Demand
Holders at the time of their request and have withdrawn the request with
reasonable promptness following disclosure by the Company of such material
adverse change, then the Demand Holders shall not be required to pay any of such
expenses and shall retain their rights pursuant to Section 2.2. Unless otherwise
stated, all Selling Expenses relating to securities registered on behalf of the
Holders and all other expenses of the registration that are not Registration
Expenses, shall be borne by the Holders of such securities pro rata on the basis
of the number of shares so registered or proposed to be so registered.
2.5. Registration Procedures. If and whenever the Company is required by the
provisions of this Section 2 to effect the registration of Registrable
Securities, the Company shall:
(a) promptly prepare and file with the Commission a registration statement with
respect to such Registrable Securities on any form that may be utilized by the
Company and that shall permit the disposition of the Registrable Securities in
accordance with the intended method or methods of disposition thereof, and use
its reasonable diligent efforts to cause such registration statement to become
effective as promptly as practicable and remain effective thereafter as provided
herein, provided that prior to filing a registration statement or prospectus or
any amendments or supplements thereto, including documents incorporated by
reference after the initial filing of any registration statement, the Company
will furnish to each of the Stockholders whose Registrable Securities are
covered by such registration statement, their counsel and the underwriters
copies of all such documents proposed to be filed sufficiently in advance of
filing to provide them with a reasonable opportunity to review such documents;
(b) prepare and file with the Commission such amendments (including
post-effective amendments) and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective and current and to comply with the provisions
of the Securities Act with respect to the sale or other disposition of all
Registrable Securities covered by such registration statement, including such
amendments (including post-effective amendments) and supplements as may be
necessary to reflect the intended method of disposition by the prospective
seller or sellers of such Registrable Securities, provided that, except in the
case of a shelf registration, such registration statement need not be kept
effective and current for longer than 120 days subsequent to the effective date
of such registration statement;
(c) provide customary indemnity and contribution arrangements to any qualified
independent underwriter or qualified independent pricer (a "Qualified
Independent Underwriter/Pricer") as defined in Schedule E of the Bylaws of the
NASD, if requested by such Qualified Independent Underwriter/Pricer, on such
reasonable terms as such Qualified Independent Underwriter/Pricer customarily
requires;
(d) subject to receiving reasonable assurances of confidentiality, for a
reasonable period after the filing of such registration statement, and
throughout each period during which the Company is required to keep a
registration effective, make available for inspection by the selling Holders of
Registrable Securities being offered, and any underwriters, and their respective
counsel, such financial and other information and books and records of the
Company, and cause the officers, directors, employees, counsel and independent
certified public accountants of the Company to respond to such inquiries as
shall be reasonably necessary, in the judgment of such counsel, to conduct a
reasonable investigation within the meaning of Section 11 of the Securities Act;
(e) promptly notify the selling Holders of Registrable Securities and any
underwriters and confirm such advice in writing, (i) when such registration
statement or the prospectus included therein or any prospectus amendment or
supplement or post-effective amendment has been filed, and, with respect to such
registration statement or any post-effective amendment, when the same has become
effective, (ii) of any comments by the Commission, by the NASD, and by the blue
sky or securities commissioner or regulator of any state with respect thereto or
any request by any such entity for amendments or supplements to such
registration statement or prospectus or for additional information, (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of
such registration statement or the initiation or threatening of any proceedings
for that purpose, (iv) if at any time the representations and warranties of the
Company cease to be true and correct in all material respects, (v) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, or (vi) at any
time when a prospectus is required to be delivered under the Securities Act,
that such registration statement, prospectus, prospectus amendment or supplement
or post-effective amendment, or any document incorporated by reference in any of
the foregoing, contains an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading;
(f) furnish to each selling Holder of Registrable Securities being offered, and
any underwriters, prospectuses or amendments or supplements thereto, in such
quantities as they may reasonably request and as soon as practicable, that
update previous prospectuses or amendments or supplements thereto;
(g) permit selling Holders of Registrable Securities to rely on any
representations and warranties made to any underwriter of the Company or any
opinion of counsel or "cold comfort" letter delivered to any such underwriter,
and indemnify each such holder to the same extent that it indemnifies any such
underwriter;
(h) use reasonable diligent efforts to (i) register or qualify the Registrable
Securities to be included in a registration statement hereunder under such other
securities laws or blue sky laws of such jurisdictions within the United States
of America as any selling Holder of such Registrable Securities or any
underwriter of the securities being sold shall reasonably request, (ii) keep
such registrations or qualifications in effect for so long as the registration
statement remains in effect and (iii) take any and all such actions as may be
reasonably necessary or advisable to enable such holder or underwriter to
consummate the disposition in such jurisdictions of such Registrable Securities
owned by such holder; provided, however, that the Company shall not be required
for any such purpose to (x) qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not otherwise be required to
qualify but for the requirements of this Section 2.5(h), (y) subject itself to
taxation in any such jurisdiction or (z) consent to general service of process
in any such jurisdiction;
(i) cause all such Registrable Securities to be listed or accepted for quotation
on each securities exchange or automated quotation system on which the Company's
Common Stock then trades;
(j) file with the applicable securities regulatory authorities in each province
of Canada a copy of the prospectus to be included as part of the registration
statement; and
(k) otherwise use reasonable diligent efforts to comply with all applicable
provisions of the Securities Act, and rules and regulations of the Commission,
and make available to its security holders, as soon as reasonably practicable,
an earnings statement covering a period of at least twelve months which shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder.
2.6. Indemnification. In the event any of the Registrable Securities are
included in a registration statement under this Section 2:
(a) the Company will indemnify each Holder who participates in such
registration, each of its officers and directors and partners and such Holder's
separate legal counsel and independent accountants, and each person controlling
such Holder within the meaning of Section 15 of the Securities Act, and each
underwriter, if any, and each person who controls any underwriter within the
meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages or liabilities (or actions in respect thereof), including any of
the foregoing incurred in settlement of any litigation, commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any registration statement, prospectus, offering
circular or other document, or any amendment or supplement thereto, incident to
any such registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, or any violation by the Company of any
rule or regulation promulgated under the Securities Act applicable to the
Company in connection with any such registration, qualification or compliance,
and the Company will reimburse each such Holder, each of its officers and
directors and partners and such Holder's separate legal counsel and independent
accountants and each person controlling such Holder, each such underwriter and
each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission or alleged untrue statement or omission, made in reliance
upon and in conformity with written information furnished to the Company by an
instrument duly executed by such Holder or underwriter and stated to be
specially for use therein.
(b) Each Holder will, if Registrable Securities held by such Holder are included
in the securities as to which such registration, qualification or compliance is
being effected, indemnify the Company, each of its directors and officers and
its legal counsel and independent accountants, each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers and directors
and each person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statement therein not misleading, and will reimburse
the Company, such Holders, such directors, officers, persons, underwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder and
stated to be specifically for use therein.
(c) Each party entitled to indemnification under this Section 6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought provided
that failure to give such prompt notice shall not relieve the Indemnifying Party
of its obligations hereunder unless it is materially prejudiced thereby, and
shall permit the Indemnifying Party to assume the defense of any such claim or
any litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld). The Indemnifying Party shall not assume the defense for any matters
as to which there is a conflict of interest between the Indemnifying Party and
any Indemnified Party or as to which any Indemnified Party may have one or more
available defenses that are separate or different from the defenses available to
the Indemnifying Party. As to any matter where the Indemnifying Party is not
permitted to, or does not, assume the defense, the Indemnified Parties may
assume the defense and the Indemnifying Party shall pay, on an as-incurred
basis, the reasonable legal fees and expenses of one principal law firm (plus
appropriate local counsel) for each group of Indemnified Parties that may be
represented in such matter without conflict by the same counsel. As to all other
matters, each Indemnified Party shall have the right to employ counsel in any
such action and to participate in the defense thereof, but the fees and expenses
of such counsel shall be that of such Indemnified Party. No Indemnifying Party,
in the defense of any such claim or litigation, shall, except with the consent
of each Indemnified Party (whose consent shall not be unreasonably withheld),
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to such
claim or litigation. No Indemnified Party may consent to entry of any judgment
or enter into any settlement without the prior written consent of the
Indemnifying Party.
(d) If the indemnification provided for in this Section 2.6 is held by a court
of competent jurisdiction to be unavailable to an Indemnified Party with respect
to any loss, liability, claim, damage or expense referred to herein, then the
Indemnifying Party, in lieu of indemnifying the Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party with respect
to such loss, liability, claim, damage or expenses in the proportion that is
appropriate to reflect the relative fault of the Indemnifying Party and the
Indemnified Party in connection with the statements or omissions that resulted
in such loss, liability, claim, damage, or expense, as well as any other
relevant equitable considerations. The relative fault of the Indemnifying Party
and the Indemnified Party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
(e) Notwithstanding the foregoing, to the extent the provisions on
indemnification and contribution contained in any underwriting agreement entered
into in connection with an underwritten public offering provide broader
protection to any Indemnified Party than the provisions of this Agreement, the
provisions of such underwriting agreement shall control.
2.7. 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 to the public without registration, after such time
as a public market exists for the Common Stock, the Company shall use reasonably
diligent efforts to:
(a) Make and keep public information available, as those terms are understood
and defined in Rule 144 under the Securities Act, beginning 90 days after the
Company registers a class of securities under Section 12 of the Exchange Act or
completes a registered offering under the Securities Act; or
(b) File with the Commission in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act (at any
time after it has become subject to such reporting requirements);
(c) Furnish to any Holder promptly upon request a written statement as to its
compliance with the reporting requirements of Rule 144 (at any time after 90
days after the Company completes a registered offering under the Securities
Act), and of the Securities Act and the Exchange Act (at any time after it has
become subject to such reporting requirements), a copy of the most recent annual
or quarterly report of the Company, and such other reports and documents of the
Company and other information in the possession of or reasonably obtainable by
the Company as a Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Holder to sell Registrable Securities
without registration.
2.8. Termination of Registration Rights. No Holder shall be entitled to exercise
any right provided for in this Section 2 after the earlier of (a) five years
following the Commencement Date and (b) the date all Registrable Securities held
by such Holder may be sold in a single three-month period under Rule 144 under
the Securities Act.
2.9. Information To Be Provided by the Holders. Each Holder whose Registrable
Securities are included in any registration pursuant to this Agreement shall
furnish the Company such information regarding such Holder and the distribution
proposed by such Holder as may be reasonably requested in writing by the Company
and as shall be required in connection with such registration or the
registration or qualification of such securities under any applicable state
securities law. The Company shall have no obligation regarding registration if,
as a result of the preceding sentence, the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the aggregate
offering price required to originally trigger the Company's obligation to
initiate such registration as specified in subsection 2.2 above.
2.10. Limitations on Subsequent Registration Rights. From and after the date of
this Agreement, the Company shall not, without the prior written consent of
Stockholders holding at least two-thirds of the Common Share Equivalents held by
all of the Stockholders, enter into any agreement with any holder or prospective
holder of any securities of the Company that would allow such holder or
prospective holder (a) to include such securities in any registration filed
under this Agreement, unless under the terms of such agreement, such holder or
prospective holder may include such securities in any such registration only to
the extent that the inclusion of his securities will not reduce the amount of
Registrable Securities of the Holders which is included or would materially
affect the marketability of the offering as determined by the managing
underwriter or (b) to have registration rights superior to or otherwise more
favorable than, or which limit in any material respect, the registration rights
of the Holders set forth in this Agreement.
2.11. "Market Stand-Off" Agreement. Each Holder hereby agrees that, during the
period of duration (up to, but not exceeding, one hundred eighty (180) days)
specified by the Company and an underwriter of Common Stock or other securities
of the Company, following the effective date of the initial registration
statement of the Company filed under the Act, it shall not, to the extent
requested by the Company and such underwriter, directly or indirectly sell,
offer to sell, contract to sell (including, without limitation, any short sale),
grant any option to purchase or otherwise transfer or dispose of (other than to
donees, Affiliates (as defined in Rule 405 pursuant to the Act), partners,
former partners or shareholders of a Holder who agree to be similarly bound) any
Common Stock of the Company held by it at any time during such period except
Common Stock included in such registration; provided, however, that:
(a) such agreement shall be applicable only to the first such registration
statement of the Company which covers Common Stock (or other securities) to be
sold on its behalf to the public in an underwritten offering; and
(b) all officers and directors of the Company, all five-percent security
holders, and all other persons with registration rights (whether or not pursuant
to this Agreement) enter into similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period, and each Holder agrees
that, if so requested, such Holder will execute an agreement in the form
provided by the underwriter containing terms which are essentially consistent
with the provisions of this Section 2.11.
Notwithstanding the foregoing, the obligations described in this
Section 2.11 shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms which may be promulgated
in the future, or a registration relating solely to an SEC Rule 145 transaction
on Form S-4 or similar forms which may be promulgated in the future.
3. PURCHASE RIGHTS REGARDING FUTURE SALES OF CAPITAL SECURITIES BY THE COMPANY.
3.1. Definitions. For purposes of this Section 3:
"Capital Securities" means any shares of, or any securities
convertible into or exercisable or exchangeable for any shares of, any class of
capital stock of the Company.
"Proportionate Share" means, as to each Stockholder, the
percentage obtained by dividing the Common Share Equivalents (not taking into
consideration any options or warrants that are exercisable for shares of Common
Stock or Common Share Equivalents) ("Issued Equivalents") held by such
Stockholder by the total Issued Equivalents held by all Stockholders entitled to
exercise a purchase right under this Section 3.
3.2. Grant of Purchase Right.
Subject to the terms and conditions specified in this Section
3, the Company hereby grants to each Stockholder a purchase right with respect
to future sales by the Company of its Capital Securities. Each Stockholder shall
be entitled to apportion the purchase right hereby granted it among itself and
its members, partners and Affiliates in such proportions as it deems
appropriate. Each time the Company proposes to offer any Capital Securities, the
Company shall first offer to the Stockholders such Capital Securities in
accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail (an "Initial Company
Sales Notice") to the Stockholders stating (i) its bona fide intention to offer
such Capital Securities, (ii) the price and terms, if any, upon which it
proposes to offer such Capital Securities, and (iii) such Stockholder's
Proportionate Share of the Capital Securities (which shall be rounded to the
nearest whole Capital Security).
(b) Within 15 Business Days after receipt of an Initial Company Sales Notice,
each Stockholder that desires to purchase its Proportionate Share of the Capital
Securities as specified in such Initial Company Sales Notice at the price and on
the terms specified in such Initial Company Sales Notice shall provide to the
Company a written notice (the "Purchase Notice") setting forth such
Stockholder's agreement to purchase its Proportionate Share of the Capital
Securities. The Company shall promptly give written notice to each Stockholder
that elects to purchase its Proportionate Share of the Capital Securities (a
"Fully-Exercising Stockholder") of the amount of Capital Securities, if any,
that other Stockholders do not elect to purchase in response to the Initial
Company Sales Notice (the "Second Company Sales Notice"). Within five Business
Days after receipt of a Second Company Sales Notice, each Fully-Exercising
Stockholder that desires to purchase additional Capital Securities shall deliver
to the Company a written notice (an "Overallotment Notice") setting forth the
maximum number of additional Capital Securities it is willing to purchase at the
price and on the terms specified in the Initial Company Sales Notice. If the
total number of Capital Securities specified in all Overallotment Notices
received by the Company within such time period is less than or equal to the
number of Capital Securities specified in the Second Company Sales Notice, then
such Capital Securities shall be allocated to the Fully-Exercising Stockholders
as specified in their Overallotment Notices. If the total number of Capital
Securities specified in all Overallotment Notices received by the Company within
such time period is more than the number of Capital Securities specified in the
Second Company Sales Notice, then such Capital Securities shall be allocated
among the Fully-Exercising Stockholders that delivered Overallotment Notices on
a pro rata basis based on the maximum number of Capital Securities specified by
each Fully-Exercising Stockholder in such Overallotment Notices. The Capital
Securities allocated to each Stockholder under this subsection (b) shall be
purchased by such Stockholder at the price and on the terms specified in the
Initial Company Sales Notice at a closing to be held within 60 Business Days
after the delivery of the Initial Company Sales Notice. Such date shall be
specified by the Company in a written notice delivered to each Stockholder
participating in such sale at least ten Business Days prior thereto.
(c) If all of the Capital Securities that are offered in
accordance with this Section 3 are not elected to be obtained as provided in
Section 3(b) hereof, the Company may, during the 90-day period following the
expiration of the period during which a Fully-Exercising Stockholder may provide
an Overallotment Notice, offer the remaining unsubscribed portion of the Capital
Securities to any Person or Persons at a price not less than, and upon terms no
more favorable to the offeree than, those specified in the Initial Company Sales
Notice with respect thereto. If the Company does not enter into an agreement for
the sale of such Capital Securities within such period, or if such agreement is
not consummated within 30 days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such Capital Securities shall not be
offered unless first reoffered to the Stockholders in accordance herewith.
3.3. Exceptions. The purchase right granted in this Section 3 shall not be
applicable (a) to the issuance or sale of Common Stock (or options, warrants or
rights to subscribe therefor) under a stock purchase or stock option plan or
other arrangement or arrangements that are approved by the Company's Board, up
to a maximum of 462,000 shares of Common Stock, (b) pursuant to any rights,
agreements, options or warrants outstanding as of the date hereof and stock
issued pursuant to any such rights, agreements, options or warrants granted or
issued after the date hereof in compliance with this Agreement; (c) in
connection with any stock split, dividend or recapitalization by the Company;
(d) for consideration other than cash pursuant to a merger, consolidation,
strategic alliance, acquisition or similar business combination approved by the
Board; (e) pursuant to any equipment leasing, real property leasing or loan
arrangement, or debt financing from a bank or similar financial or lending
institution approved by the Board, the principal purpose of which is not to
raise equity capital; or (f) by the Company in connection with joint ventures,
manufacturing, marketing or distribution arrangements or technology transfer or
development arrangements; provided that such strategic transactions and the
issuance of stock in connection therewith have been approved by the Board and
the principal purpose thereof is not to raise equity capital.
4. PROTECTIVE PROVISIONS.
4.1. Stockholders. The Stockholders have the protective provisions set forth in
the Terms of the Class A Preferred Shares (the "Stockholder Protective
Provisions"), which provisions shall not be altered, amended or waived without
the prior written consent of holders holding at least two-thirds of the Class A
Preferred Shares. In addition, during the Option Exercise Period, except for (a)
up to 462,000 shares of Common Stock issued upon the exercise of options by
employees, consultants or others eligible under the Company's stock option
plans, or (b) upon the conversion of any shares of preferred stock convertible
into Common Stock, the Company shall not issue any shares of Common Stock
without the prior written consent of holders as of the date hereof holding at
least 95% of the outstanding shares of Common Stock outstanding as of the date
hereof.
4.2. Board. The following actions require the approval of the Board:
(a) adoption of a budget and business plan of the Company for the next fiscal
year ("Budget and Business Plan"), which shall be prepared on a monthly basis,
including balance sheets and statements of cash flows for such months and, as
soon as prepared, any other budgets or revised budgets prepared by the Company;
(b) the employment of any officer or employee of the Company whose annual
compensation exceeds US$100,000, and who is not part of any Budget and Business
Plan;
(c) the commencement or institution of any material litigation or similar
proceedings by the Company or any subsidiary thereof;
(d) the settlement or compromise of any claims by the Company or any subsidiary
thereof in excess of US$50,000;
(e) any material expenditure that singly or in the aggregate would cause the
Company's operating expenses to exceed the Budget and Business Plan by more than
$100,000 in any calendar year; and
(f) any other action outside the ordinary course of the Company's business
unless the Budget and Business Plan contemplate such action.
4.3. Inspection. During any period in which Perseus or El Dorado is entitled to
designate a member to the Board, the Company shall permit such Stockholder, at
its expense, to visit and inspect the Company's properties, to examine its books
of account and records and to discuss the Company's affairs, finances and
accounts with its officers, all at such reasonable times and upon reasonable
notice as may be requested by Perseus or El Dorado, as the case may be.
4.4. Information Rights. Within 30 days of the end of each fiscal quarter, the
Company shall mail to each holder of Class A Preferred shares unaudited
consolidated financial statements of the Company, prepared substantially in
accordance with generally accepted accounting principles. The Company also
agrees to provide the Stockholders with reasonable access, during normal
business hours, to the Company's senior management. To the extent that the
Company creates any regular business updates, it shall provide the same to the
Stockholders.
5. RIGHT OF FIRST REFUSAL.
5.1. Notice. In the event any Stockholder (a "Selling Stockholder") desires to
sell, transfer or otherwise dispose of any or all of the Capital Securities of
the Company owned of record or beneficially by such Stockholder or any
securities ultimately convertible into or exercisable for any such shares of
Capital Securities (collectively, the "Target Shares"), such Selling Stockholder
shall promptly deliver to the Company and the other Stockholders, a written
notice of such intended disposition (a "Disposition Notice") setting forth the
proposed terms and conditions thereof, including the number and type of
securities to be disposed of, any conditions to such disposition, the proposed
timing of such disposition, and the minimum consideration such selling
Stockholder will accept in payment for such securities. Except as otherwise
provided herein, a Stockholder may not sell, transfer or otherwise dispose of
any shares of capital stock of the Company or any securities ultimately
convertible into or exercisable for such shares of capital stock unless it
delivers to the Company and the other Stockholders a Disposition Notice and
complies with the provisions of this Section 5.1 or unless the proposed sale,
transfer or disposition is exempt under Section 5.6 hereof from the right of
first refusal granted herein. In the event that the sale or transfer is being
made pursuant to the provisions of Section 5.6, the Disposition Notice shall
state under which subsection the transfer is being made.
5.2. The Company's Right. The Company shall, for a period of 30 days following
receipt of a Disposition Notice, have the right to purchase the Target Shares
specified therein upon the terms and conditions specified in the Disposition
Notice, subject to the conditions contained in this Section 5.2. Such right
shall be exercisable by written notice (the "Exercise Notice") delivered to the
Selling Stockholder and the other Stockholders prior to the expiration of such
30-day exercise period. If such right is exercised with respect to all of the
Target Shares specified in the Disposition Notice, then the Company shall
complete the repurchase of such Target Shares, by no later than 20 Business Days
after the delivery of the Exercise Notice. At such time, the Selling Stockholder
shall deliver to the Company the certificates representing the Target Shares to
be repurchased, each certificate to be properly endorsed for transfer.
Alternatively, if such right is exercised with respect to only a portion of the
Target Shares specified in the Disposition Notice, then such right to repurchase
shall be contingent upon the election of one or more of the Stockholders to
repurchase the remaining Target Shares. The Company shall notify the
Stockholders of its intent to repurchase only a portion of the Target Shares
within the 30-day exercise period above defined. In such event, the Company's
repurchase of such Target Shares shall be consummated, if at all, at the time of
the Stockholders' exercise of its repurchase rights in accordance with Section
5.3 hereof. In the event one or more of the Stockholders do not elect to
repurchase the remaining Target Shares, the Company shall be deemed to have
waived its right under this Section 5.2.
5.3. The Stockholders' Right. Subject to the rights of the Company under Section
5.2 hereof, the Stockholders other than the Selling Stockholders, for a period
of the shorter of (i) 30 days from receipt of the Disposition Notice and (ii) 15
days from receipt of written notice of the Company's election either to waive
its purchase right or to repurchase only a portion of the Target Shares, shall
have the right to purchase all, or the remaining balance after the Company's
repurchase, of the Target Shares, upon the terms and conditions specified in the
Disposition Notice. The other Stockholders shall exercise such right in the same
manner and subject to the same rights and conditions as the Company, as more
specifically set forth in paragraph 5.2 above. To the extent that the Target
Shares need to be allocated among the other Stockholders, they shall be
allocated pro rata based on the holdings of Common Stock Equivalents of each
Stockholder that desires to exercise its purchase right.
5.4. Non-Exercise of Purchase Right. In the event an Exercise Notice with
respect to any portion of the Target Shares is not given to the Selling
Stockholder by the Company or any of the other Stockholders within the period
specified herein following the date of the Company's and the other Stockholders'
receipt of the Disposition Notice, then subject to compliance with the
provisions of Section 5.5 hereof, the Selling Stockholder shall have a period of
120 days thereafter in which to sell the Target Shares upon terms and conditions
(including the purchase price) no more favorable to the acquirer than those
specified in the Disposition Notice. It shall be a condition to any such
disposition that the acquiror agree to be bound by and comply with all of the
provisions of this Agreement applicable to such Selling Stockholder with respect
to such Target Shares. In the event the Selling Stockholder does not consummate
the sale or disposition of the Target Shares within such 120 day period, the
Company's and the other Stockholders' purchase rights shall continue to be
applicable to any subsequent disposition of the Target Shares by the Selling
Stockholder until such right terminates in accordance with Section 9.1 hereof.
5.5. No Partial Exercise of Right. In the event that the Company and/or the
other Stockholders do not exercise the purchase rights of pursuant to this
Section 5 with respect to all Target Shares described in a particular
Disposition Notice, then such right shall not apply to any Target Shares
described in such Disposition Notice.
5.6. Exempt Transfers. Notwithstanding the foregoing, the purchase rights of the
Company and the Stockholders set forth in this Section 5 shall not apply to any
transfer by a Selling Stockholder (a) to the ancestors, descendants, siblings or
spouse of the Selling Stockholder or to trusts for the benefit of such persons
or the Selling Stockholder, (b) to such Selling Stockholder's Affiliates, (c) in
the case of a Selling Stockholder that is a private investment company, to the
partners, members, stockholders or other investors of such Selling Stockholder
as a distribution or similar transfer from such Selling Stockholder, and (d) in
the case of CSGTF, to any investment vehicle managed by an entity under common
control with the Manager of CSGTF; provided that in each of the foregoing cases,
the transferee shall furnish the Stockholders and the Company with a written
agreement to be bound by and comply with all provisions of this Agreement.
Furthermore, the purchase rights of the Company and the Stockholders set forth
in this Section 5 shall not apply to any transfer in the case of WOF: (i) to any
member of the GrowthWorks Group; (ii) to any Person, where the transfer is in
connection with a reorganization of GrowthWorks; (iii) if it is required by law
to do so; (iv) if it resolves to transfer all or substantially all of its assets
or if the transfer is part of a portfolio sale of its assets; or (v) to any
Persons who are bona fide investors in a member of the GrowthWorks Group who are
entitled to participate in a distribution of the assets of the member of the
GrowthWorks Group upon winding-up, liquidation or dissolution where the capital
stock is distributed to them on such occurrence; provided that if such investors
are required to become parties to this Agreement, such investors (if more than
one) shall designate one person to represent all such investors pursuant to an
agency agreement reasonably satisfactory to the Company, and such representative
will become party to and be bound by this Agreement for and on behalf of such
investors.
6. CO-SALE RIGHTS.
6.1. Notice. In the event any Stockholder or Stockholders (individually and
collectively, the "Proposed Sellers") desire to accept a bona fide offer from a
financially capable acquiror for the sale, transfer or other disposition of at
least a majority of the then-outstanding shares of capital stock of the Company
owned of record or beneficially by them or any securities ultimately convertible
into or exercisable for any such shares of capital stock (collectively, the
"Sale Shares"), the Proposed Sellers shall promptly deliver to the Company and
the Stockholders, a written notice of such intended disposition (a "Sale
Notice") setting forth the terms and conditions thereof, including the number
and type of securities to be disposed of, any conditions to such disposition,
the proposed timing of such disposition, the consideration to be paid for such
securities and the identity of the proposed acquirer. Except as otherwise
provided herein, the Proposed Sellers may not sell, transfer or otherwise
dispose of any shares of capital stock of the Company or any securities
ultimately convertible into or exercisable for such shares of capital stock
unless they deliver to the Company and the Stockholders a Sale Notice and comply
with the provisions of this Section 6 or unless the proposed sale, transfer or
disposition is exempt under Section 6.6 hereof from the co-sale rights granted
herein.
6.2. Grant of Co-Sale Rights. Each Stockholder shall have the right, exercisable
upon written notice to the Proposed Seller within 20 days after receipt of the
Proposed Sellers' Sale Notice, to participate in such sale of the Sale Shares on
the same terms and conditions as those set forth in the Sale Notice. To the
extent any Stockholder exercises such right of participation (a "Participating
Stockholder"), the number of shares of Sale Shares that the Proposed Sellers may
sell in the transaction shall be correspondingly reduced. The right of
participation of each Stockholder shall be subject to the terms and conditions
set forth in this Section 6.2.
(a) Each Participating Stockholder and the Proposed Sellers shall be deemed to
own the number of shares of Common Stock that it actually owns plus the number
of shares of Common Stock that are issuable upon conversion of any convertible
securities of the Company or upon the exercise of any warrants, options or
similar rights then owned by it at an exercise price less than the purchase
price specified in the Sale Notice.
(b) Each Participating Stockholder may sell all or any part of a number of Sale
Shares equal to the product obtained by multiplying (i) the aggregate number of
Sale Shares by (ii) a fraction, the numerator of which is the number of shares
of Common Stock of the Company deemed to be owned by such Participating
Stockholder and the denominator of which is the total number of outstanding
shares of Common Stock of the Company deemed to be owned by all of the
Stockholders.
(c) Each Participating Stockholder may effect its participation in the sale by
delivering to the Proposed Seller for transfer to the acquirer one or more
certificates, properly endorsed for transfer, which represent:
(i) the number of shares that it elects to sell pursuant to this Section 6.2;
(ii) that number of shares of convertible securities of the Company that is at
such time convertible into the number of shares of Common Stock that it has
elected to sell pursuant to this Section 6.2; provided, however, that if the
acquirer objects to the delivery of convertible securities of the Company in
lieu of Common Stock, the Participating Stockholder may, to the extent permitted
by the terms of such security, convert and deliver Common Stock as provided in
subparagraph (i) above; or
(iii) a combination of the foregoing that in the aggregate represents the number
of shares of Common Stock to be sold by the Participating Stockholder.
6.3. Payment of Proceeds. The stock certificates that the Participating
Stockholders deliver to the Proposed Sellers pursuant to Section 6.2 shall be
transferred by the Proposed Sellers to the acquirer or acquirers, as applicable,
in consummation of the sale of the Sale Shares pursuant to the terms and
conditions specified in the Sale Notice, and the Proposed Sellers shall promptly
thereafter remit to the Participating Stockholders that portion of the sale
proceeds to which such Participating Stockholder is entitled by reason of its
participation in such sale.
6.4. Non-Exercise. The exercise or non-exercise of the rights of the
Participating Stockholders hereunder to participate in one or more sales of Sale
Shares made by the Proposed Sellers shall not adversely affect its right to
participate in subsequent sales by the Proposed Sellers. In the event none of
the Stockholders elect to exercise their co-sale rights hereunder with respect
to a disposition, the Proposed Sellers may consummate such disposition in
accordance with the terms specified in the Sale Notice but only within 90 days
after the expiration of the Stockholders' co-sale rights.
6.5. Prohibited Transfers. In the event the Proposed Sellers should sell any
Sale Shares of the Company in contravention of the co-sale rights of any
Stockholder under this Agreement (a "Prohibited Transfer"), such Stockholder
shall have the put option provided in this Section 6.5. In the event of a
Prohibited Transfer, such Stockholder shall have the option to sell to the
Proposed Sellers a number of shares of Common Stock of the Company (either
directly or through delivery of convertible securities) equal to the number of
shares that such Stockholder would have been entitled to sell had such
Prohibited Transfer been effected in accordance with Section 6.2 hereof, on the
following terms and conditions:
(a) The price per share at which the shares are to be sold to the Proposed
Sellers shall be equal to the price per share paid to the Proposed Sellers by
the third-party acquiror or acquirer of the Proposed Sellers' Sale Shares in the
disposition referenced in the Sale Notice.
(b) The Stockholder shall deliver to the Proposed Sellers, within 30 days after
it has received notice from the Proposed Sellers or otherwise become aware of
the Prohibited Transfer, the certificate or certificates representing shares to
be sold, each certificate to be properly endorsed for transfer.
(c) The Proposed Sellers shall, upon receipt of the certificates for the
repurchased shares, pay the aggregate purchase price therefor, by certified
check or bank draft made payable to the order of such Stockholder, and shall
reimburse the Stockholder for any additional expenses reasonably incurred,
including reasonable legal fees and expenses, incurred in effecting such
purchase and resale.
6.6. Exempt Transfers. The provisions of this Section 6 (other than Section 6.7)
shall not apply to a sale, transfer or other disposition (a) of any stock to the
Company, (b) of any stock to a Stockholder pursuant to the exercise of a
purchase right under Section 5.1 hereof, or (c) of any stock by the Proposed
Sellers to their Affiliates.
6.7. Transferee's Agreement to be Bound. The Proposed Sellers shall not sell,
transfer or otherwise dispose of any shares of capital stock of the Company
owned of record or beneficially by the Proposed Sellers or any securities
ultimately convertible into or exercisable for any such shares of capital stock
(whether or not exempt from the other provisions of this Section 6) unless the
person or entity acquiring such securities agrees to be bound by all of the
provisions of this Agreement (including without limitation this Section 6)
applicable to the Proposed Sellers and evidences such agreement by executing a
written agreement in substantially the form set forth as Exhibit B hereto.
7. OPTION.
7.1. Generally. The Company and the Stockholders (other than Perseus) hereby
grant to Perseus an option ("Option") to acquire all of the Common Stock
Equivalents (not already owned by Perseus) of, through either a stock purchase
or merger, or substantially all of the assets of, the Company. The Option may be
exercised by Perseus, or if assigned pursuant to Section 7.2 below, by such
assignee, within one calendar year of the date of this Agreement (the "Option
Exercise Period). To exercise the Option, Perseus or its assignee shall deliver
written notice ("Option Exercise Notice") to the Company postmarked with a date
that is within the Option Exercise Period. Upon receipt of the Option Exercise
Notice, the Company shall notify all of the Stockholders, including Perseus,
that the Option has been exercised.
7.2. Assignability. Perseus shall have the right, at any time during the Option
Exercise Period, to assign the Option and any rights related thereto to Beacon
Power Corp. or any Affiliate thereof ("Beacon"). If Perseus assigns the Option
to Beacon, Beacon will have all of the rights of Perseus as set forth in this
Section 7.
7.3. Consideration. If Perseus or Beacon exercises the Option pursuant to the
terms of this Section 7 (the "Exercising Party"), the Exercising Party shall use
its commercially reasonable efforts to consummate the purchase of all of the
capital stock or all or substantially all of the assets of the Company (the
"Option Transaction") within 120 days of the date of the Option Exercise Notice,
provided that such period may be extended as necessary, in order to obtain any
necessary approvals or consents required by any federal or state securities law,
rule or regulation, or the rules or regulations of any securities exchange or
trading system on which the securities of the Exercising Party are listed or
granted. At the closing of the Option Transaction, the Exercising Party shall
pay to the Company or the Stockholders or other holders of capital stock selling
Common Share Equivalents or entitled to receive the proceeds as part of such
transaction, as appropriate depending on the form of the Option Transaction,
shares of Beacon Power Corp. common stock, valued at their twenty-day volume
weighted average price as of the date of the Option Exercise Notice. The value
of all of the assets of the Company, or all of the Common Share Equivalents, for
purposes of the Option, shall be US$17.1 million (the "Option Price"), which
price assumes the following as at the Closing of the Option Transaction:
(a) neither the Company nor any of its subsidiaries has any outstanding
indebtedness, other than working capital obligations consistent with past
practice and performance; and
(b) 1,615,385 shares of Class A Preferred have been issued by the Company (as
adjusted for stock splits, stock dividends, recapitalizations and other similar
transactions).
To the extent that the Company or its subsidiaries has incurred
indebtedness other than working capital obligations described in section (a)
above, or has issued an amount of shares of Class A Preferred other than
1,615,385, then the Option Price shall be increased or reduced accordingly, on a
dollar for dollar basis, for each dollar of purchase price for shares of Class A
Preferred so issued or not issued. For purposes of reference, if the Company has
issued an amount of shares of Class A Preferred that have a stated value that
exceeds the amount referenced in (b) above by $1 million, then the Option Price
shall also be increased by $1 million.
7.4. Cooperation by Stockholders. Each of the Stockholders severally agrees to
take all actions necessary to consummate the sale of the Company upon exercise
of the Option, including, but not limited to, the sale by such Stockholders of
their Common Share Equivalents to the Exercising Party at a price that reflects
the Option Price above. Additionally, (a) if the sale is structured as a merger
or consolidation, each Stockholder shall waive any dissenters rights, appraisal
rights or similar rights in connection with such merger or consolidation; (b) if
the sale is structured as a sale of stock, each Stockholder shall agree to sell
all of its Common Share Equivalents or rights to acquire the same on the terms
and subject to the conditions as set forth in this Section 7; and (c) if the
sale is structured as a sale of assets, each Stockholder shall approve any
subsequent liquidation of the Company in connection therewith.
7.5. Distribution in the Case of an Asset Purchase. If the transaction
contemplated pursuant to the Option is consummated in the form of an asset
purchase, the Company agrees that promptly following such consummation, the
proceeds thereof shall be distributed to the holders of its capital stock.
8. LEGEND REQUIREMENTS.
8.1. Legend. Each certificate representing the shares of capital stock (or
securities convertible into or exercisable for shares of capital stock) of the
Company owned by the Stockholders shall be endorsed with the following legend:
"THE SALE OR TRANSFER, THE VOTING AND CERTAIN OTHER RIGHTS RELATING TO
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS
AND CONDITIONS OF A CERTAIN INVESTOR RIGHTS AGREEMENT BY AND AMONG THE
COMPANY AND CERTAIN STOCKHOLDERS OF THE COMPANY. A COPY OF SUCH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY."
8.2. Removal. The legend set forth in Section 8.1 hereof shall be removed upon
termination of this Agreement in accordance with the provisions of Section 9.1.
9. MISCELLANEOUS PROVISIONS.
9.1. Termination. Except for the rights granted in Section 2 hereof, the rights
and obligations of the Company and the Stockholders under this Agreement shall
terminate upon the closing of a Qualified Initial Public Offering. The rights
granted in Section 2 hereof shall terminate as provided in Section 2.8 hereof.
9.2. Notices. All notices, requests and other communications hereunder shall be
in writing and shall be deemed to have been duly given at the time of receipt if
delivered by hand or by facsimile transmission or three days after being mailed,
registered or certified mail, return receipt requested, with postage prepaid, to
the address or facsimile number (as the case may be) listed below the signature
of each Party on such Party's signature page hereto if any Party shall have
designated a different address or facsimile number by notice to the other
Parties given as provided above, then to the last address or facsimile number so
designated.
9.3. Severability. In the event one or more of the provisions of this Agreement
should, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions of this Agreement, and this Agreement shall be construed and
interpreted in such manner as to be effective and valid under applicable law.
9.4. Waiver or Modification. Any amendment or modification of this Agreement
shall be effective only if evidenced by a written instrument executed by the
Company and by Stockholders that hold two-thirds of the total Common Share
Equivalents held by all of the Stockholders.
9.5. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to the
principles of conflicts of laws thereof.
9.6. Attorneys' Fees. In the event of any dispute involving the terms hereof,
the prevailing parties shall be entitled to collect legal fees and expenses from
the other party to the dispute.
9.7. Further Assurances. Each Party agrees to act in accordance herewith and not
to take any action that is designed to avoid the intention hereof.
9.8. Sucessors and Assigns. This Agreement and the rights and obligations of the
Parties hereunder shall inure to the benefit of, and be binding upon, their
respective successors, assigns and legal representatives.
9.9. Aggregation of Stock. For purposes of determining the availability of any
rights under this Agreement, the number of shares of Common Stock or other
securities of the Company deemed to be owned by a Stockholder or other Person
shall include all such shares or other securities owned by such Stockholder or
other Person, such Stockholder's (or other Person's) Affiliates, members or
shareholders (or any of the partners of any of the foregoing), employees, and
any other person or entity that acquires such shares or other securities from
any of the foregoing by gift, will or intestate succession.
9.10 NO RIGHT TO JURY TRIAL. EACH PARTY HEREBY IRREVOCABLY WAIVES, AND
AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, COUNTERCLAIM OR OTHERWISE,
IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT ANY RIGHT TO A TRIAL
BY JURY.
[Company Signature page]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the day and year first above written.
NXTPHASE T&D CORP.
Signature:
By:/s/ Xxxxxx Xxxxxxxx
----------------------
Name: Xxxxxx Xxxxxxxx
Title: Chief Executive Officer
Address for Notice:
0000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx XX X0X 0X0
Facsimile No.: 000-000-0000
Attn: Chief Executive Officer
With a copy to:
Xxxxxx Xxxxxxx
0000 - 000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx XX X0X 0X0
Facsimile No.:
Attn: Candy Saga, Esq.
[Stockholder Signature page]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the day and year first above written.
PERSEUS 2000, L.L.C.
Signature:
By: /s/ Xxxx X. Xxx
Name: Xxxx X. Xxx
Title: Managing Director
Address for Notice:
Perseus 2000, L.L.C.
0000 Xxxxxxxxxxxx Xxx., X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000-0000
Attention: Xxxx Xxx, Managing Director
Facsimile: (000) 000-0000
With a copy to:
Xxxxxx & Xxxxxx LLP
0000 Xxxxxx Xxxx., Xxxxx 000
XxXxxx, XX 00000 XXX
Facsimile No.: (000) 000-0000
Attn: Xxxxxx X. Xxx, Esq.
[Stockholder Signature page]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the day and year first above written.
EL DORADO INVESTMENT COMPANY
Signature:
By: /s/ Xxxx Xxxx
Name: Xxxx Xxxx
Title: Venture Investment Manager
Address for Notice:
El Dorado Investment Company
000 X. 0xx Xxxxxx
Mail Station 9988
Xxxxxxx, XX 00000
With a copy to:
Xxxxxxxxx Traurig, LLP
0000 X. Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxx, Esq.
[Stockholder Signature page]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the day and year first above written.
WORKING OPPORTUNITY FUND (EVCC) LTD.
Signature:
By: /s/ Xxxxxx Xxxxxx
Name: Xxxxxx Xxxxxx
Title: Senior V.P., Investments
Address for Notice:
Working Opportunity Fund (EVCC) Ltd.
0000-0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, X.X. X0X 0X0
Facsimile No.: (000) 000-0000
Attn: Xxxxxx Xxxxxx
With a copy to:
Xxxxx, White & Xxxxxxxx
0000-0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, X.X. X0X 0X0
Facsimile No.: (000) 000-0000
Attn: Xxxxxx X. Xxxxx
[Stockholder Signature page]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the day and year first above written.
GE CAPITAL EQUITY HOLDINGS B.V.
Signature:
By: /s/ Xxxx Xxxxxx
Name: Xxxx Xxxxxx
Title: Attorney In Fact
Address for Notice:
GE Capital Equity Holdings, B.V.
Stravinskylaan 3105 7e etage
1077 ZX, Amsterdam
The Netherlands
Facsimile No.: 00 (00) 000-0000
Attn: Xxxxx Xxxxx
With a copy to:
GE Capital Equity Holdings, B.V.
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Facsimile No.: 000-000-0000
Attn: General Counsel
[Stockholder Signature page]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the day and year first above written.
HYDRO-QUEBEC CAPITECH INC.
Signature:
By: /s/ X. Xx Xxxxx
Name: X. Xx Xxxxx
Title: V.P. Investments
Address for Notice:
Hydro-Quebec Capitech Inc.
0000 Xxxxxxxxxx Xxxx
00xx Xxxxx, Xxxxxxxx, Xxxxxx X0X 0X0
Facsimile No.: 000-000-0000
Attn: Xxxxx X. Xxxxxx
With a copy to:
Xxxxx-Xxxxxxxx Xxxx
[Stockholders Signature page]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the day and year first above written.
CANADIAN SCIENCE AND TECHNOLOGY GROWTH
FUND INC.
By: /s/ Xxxx Xxxxxxx
Name: Xxxx Xxxxxxx
Title: Partner
Address for Notice:
000 Xxxxxxxxx Xxxxx 0000
Xxxxxx Xxxxxxx
X0X 0X0
Facsimile No.: 000-000-0000
Attn: Xxxx Xxxxxxx
[Stockholders Signature page]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the day and year first above written.
OPG VENTURES INC.
By: /s/ Xxxxx X. Xxxxxxx
Name: Xxxxx X. Xxxxxxx
Title: President and CEO
Address for Notice:
000 Xxxxxxxxxx Xxx.
Xxxxx X0X00
Xxxxxxx, Xxxxxxx X0X 0X0
Facsimile No.: 000-000-0000
Attn: Xxxxx X. Xxxxxxx
[Stockholders Signature page]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the 13 day of June 2005.
BEACON POWER CORPORATION
By: Xxxxx X. Xxxxxxx
Name: Xxxxx X. Xxxxxxx
Title: Chief Financial Officer
Address for Notice:
Beacon Power Corporation
000 Xxxxxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn.: F. Xxxxxxx Xxxx
President and CEO
Facsimile: (000) 000-0000
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement to which this Exhibit A is attached, the
following terms have the following meanings:
"Affiliate" of any Person (the "Subject Person") means any Person that
Controls, is Controlled by or is under common Control with the Subject Person,
including, in the case of CSTGF, any investment vehicle managed by an entity
under the common control with the Manager of CSTGF.
"Business Day" means any day other than a Saturday, Sunday or other day
on which the national or state banks located in the State of New York or the
province of British Columbia are authorized to be closed.
"Common Share Equivalents" means all shares of Common Stock that are
issued and outstanding or are issuable upon the exchange, exercise or conversion
of any other security of the Company. The number of Common Share Equivalents
owned by a Person shall equal the sum of the number of shares of Common Stock
owned by such Person plus the number of shares of Common Stock issuable upon the
exchange, exercise or conversion of any other security of the Company owned by
such Person.
"Common Stock" means the common stock, par value $0.001 per share, of
the Company.
"Control" and derivatives thereof mean the power to control the
management and policies of the Controlled Person whether by ownership of voting
securities, contract or otherwise.
"GAAP" means United States generally accepted accounting principles
consistently applied.
"GrowthWorks Group" means (i) WOF; (ii) Growth Works Capital Ltd.
("GrowthWorks"); (iii) any investment fund (whether corporation, limited
partnership, trust or other entity) to which GrowthWorks or any Affiliate or
Associate of GrowthWorks provides management or investment advisory services; or
(v) any Affiliate or Associate of the foregoing.
"NASD" means the National Association of Securities Dealers, Inc.
----
"Person" means any individual, entity or governmental body.
"Qualified Initial Public Offering" means a bona fide, firm commitment,
underwritten public offering of shares of Common Stock pursuant to (i) a
preliminary prospectus. and a prospectus if under Canadian provincial securities
laws and (ii) an effective registration statement under the United States
Securities Act of 1933, as amended, if under United States securities laws,
resulting in at least US$25 million of gross aggregate proceeds to the Company
and reflecting a pre-money valuation of the Company of at least US$50 million,
and results in the shares of Common Stock being listed on the Toronto Stock
Exchange, quoted on the Nasdaq Stock market or listed or quoted on another
senior securities exchange or market in the United States or Canada.
EXHIBIT B
JOINDER
THIS JOINDER AGREEMENT is entered into as of ____________________, by
_____________________ ("Joining Stockholder"). Capitalized terms used herein
without definition shall have the meaning assigned to such terms in that certain
Investor Rights Agreement by and among NxtPhase T&D Corporation ("Company") and
certain Stockholders of the Company, dated as of September __, 2004 ("Investor
Rights Agreement").
1. As of the date hereof, Joining Stockholder has become the owner of shares of
the Company's capital stock that it received in a transfer from
_________________, a Stockholder.
2. By execution and delivery of this Joinder Agreement, ___________ becomes a
party to, and agrees to be bound by all the terms and conditions of, the
Investor Rights Agreement, and shall have the same obligations and duties
thereunder as the other Stockholders who are party thereto. Attached hereto is a
duly executed counterpart signature page of the Investor Rights Agreement which
Joining Stockholder agrees shall be attached to and become a part of the
Investor Rights Agreement.
3. Joining Stockholder acknowledges that it has read and understood the Investor
Rights Agreement and the rights and obligations of a Stockholder thereunder.
4. Joining Stockholder's address for notice under the Investor Rights Agreement
is:
=============================
-----------------------------
5. THIS JOINDER AGREEMENT SHALL BE INTERPRETED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
This Joinder Agreement and the Investor Rights Agreement constitute the entire
agreement of Joining Stockholder with respect to the subject matter hereof.
Joining Stockholder and its permitted successors and assigns agree to execute
any instrument that may be necessary or proper to carry out the purposes and
intent of the Investor Rights Agreement and/or this Joinder Agreement, and to
evidence that such successors and assigns are and shall be bound by this Joinder
Agreement and the Investor Rights Agreement.
IN WITNESS WHEREOF, this Joinder Agreement is executed as of
the ___ day of _____, _________.
If an entity:
------------------------------------
By:
--------------------------------------------
Name:
--------------------------------------------
Title:
--------------------------------------------
If an individual:
------------------------------------
Name (Print):
-----------------------------------
