EXHIBIT 4.3
RECRUITSOFT, INC.
SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
OCTOBER 21, 2003
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TABLE OF CONTENTS
PAGE
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1. Registration Rights........................................................................................ 1
1.1 Definitions....................................................................................... 1
1.2 Piggyback Registration Rights..................................................................... 2
1.3 Required Registration............................................................................. 4
1.4 Registration on Form S-3.......................................................................... 5
1.5 Registration Procedures........................................................................... 6
1.6 Furnish Information............................................................................... 8
1.7 Expenses of Registration.......................................................................... 8
1.8 No Delay of Registration.......................................................................... 8
1.9 Indemnification................................................................................... 8
1.10 Reports under Securities Exchange Act of 1934..................................................... 10
1.11 Assignment of Registration Rights................................................................. 11
1.12 "Market Stand-Off" Agreement...................................................................... 11
1.13 Registrations outside U........................................................................... 12
1.14 Termination of Registration Rights................................................................ 12
2. Right of First Refusal on Company Issuance................................................................. 12
2.1 Right of First Refusal............................................................................ 12
2.2 Over-Allotment Option............................................................................. 12
2.3 Pro Rata Share.................................................................................... 12
2.4 New Securities.................................................................................... 13
2.5 Procedure......................................................................................... 13
2.6 Waiver of Right of First Refusal.................................................................. 15
2.7 Termination and Assignment........................................................................ 15
2.8 Company Right to Terminate Issuance of New Securities............................................. 15
3. Restrictions on Transfer of Shares......................................................................... 15
3.1 Restrictions on Transfer.......................................................................... 15
3.2 Restricted Shares................................................................................. 16
3.3 Sales to Competitors.............................................................................. 16
3.4 Right of First Refusal on Communicade's Series B Preferred Stock.................................. 16
3.5 Termination and Nonassignment..................................................................... 18
4. Right of First Refusal on Restricted Shares................................................................ 19
4.1 General........................................................................................... 19
4.2 Exceptions........................................................................................ 19
4.3 Investors' Right of First Refusal on Restricted Shares............................................ 20
4.4 Termination and Nonassignment..................................................................... 20
5. Right of Co-Sale Respecting Shares......................................................................... 20
5.1 Grant; Notice..................................................................................... 20
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TABLE OF CONTENTS
(CONTINUED)
PAGE
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5.2 Right of Co-Sale................................................................................... 21
5.3 Transfer of Shares upon Failure to Exercise Right of Co-Sale....................................... 22
5.4 Binding Effect of Right of Co-Sale................................................................. 22
5.5 Termination of Right of Co-Sale.................................................................... 22
5.6 Delivery Requirements.............................................................................. 22
5.7 Exceptions......................................................................................... 22
5.8 Legend............................................................................................. 23
5.9 Conditions to Exercise of the Investors' Rights.................................................... 23
5.10 Assignment of Right of Co-Sale..................................................................... 23
6. Covenants of the Company.................................................................................... 23
6.1 Delivery of Financial Statements................................................................... 23
6.2 Inspection......................................................................................... 24
6.3 Board of Directors................................................................................. 24
6.4 Negative Covenants................................................................................. 26
6.5 Termination of Covenants........................................................................... 27
7. Miscellaneous............................................................................................... 27
7.1 Successors and Assigns............................................................................. 27
7.2 Governing Law...................................................................................... 27
7.3 Counterparts....................................................................................... 27
7.4 Titles and Subtitles............................................................................... 27
7.5 Notices............................................................................................ 27
7.6 Expenses........................................................................................... 28
7.7 Amendments and Waivers............................................................................. 28
7.8 Aggregation of Stock............................................................................... 28
7.9 Severability....................................................................................... 28
7.10 Entire Agreement................................................................................... 28
7.11 Dispute Resolution................................................................................. 28
7.12 Remedies........................................................................................... 29
7.13 No Inconsistent Agreements......................................................................... 29
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RECRUITSOFT, INC.
SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
THIS SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (this
"Agreement") is made as of the 21st day of October 2003, by and among
Recruitsoft, Inc., a Delaware corporation (the "Company") and the Investors
listed on Exhibit A hereto (collectively, the "Investors").
RECITALS
WHEREAS, the Company, Kangaroo Acquisition Corporation and Xxxxx Xxxxx,
Inc. ("Xxxxx Xxxxx") are entering into an Agreement and Plan of Merger (the
"Merger Agreement") of even date herewith;
WHEREAS, in order to induce certain stockholders of Xxxxx Xxxxx (the
"Series D Holders") to exchange their shares of Xxxxx Xxxxx capital stock for
shares of the Company's Series D Preferred Stock pursuant to the Merger
Agreement, the Company and certain of its stockholders (the "Prior Holders")
desire that the Company grant to the Series D Holders listed in Exhibit A
certain of the registration and other rights set forth herein; and
WHEREAS, all Investors desire that this Agreement shall govern the
registration and other rights of all Investors.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. The Company covenants and agrees as
follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "1934 Act" shall mean the
Securities Exchange Act of 1934, as amended.
(b) The term "Act" means the Securities Act of
1933, as amended.
(c) The term "Holder" means any person owning or
having the right to acquire Registrable Securities or any permitted assignee
thereof pursuant to the terms of Section 1.11.
(d) The term "Ownership Percentage" means and
includes, with respect to each Holder of Registrable Securities requesting
inclusion of Registrable Securities in an offering pursuant to this Agreement,
the number of Registrable Securities held by such Holder divided by the
aggregate of all Registrable Securities held by all Holders requesting
registration in such offering.
(e) The term "Public Offering" means and
includes the closing of a firm commitment underwritten public offering pursuant
to an effective registration statement under the Act, covering the offer and
sale of securities to the general public for the account of the Company.
(f) The terms "register", "registered" and
"registration" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration statement or
document.
(g) The term "Registrable Securities" means (i)
Class A Common Stock issuable or issued upon conversion of the Company's Series
A Preferred Stock or the exercise of exchange rights of the Class A or Class B
preferred exchangeable shares of 0000-0000 Xxxxxx Inc., as applicable and as
specified on Exhibit A hereto; (ii) Class A Common Stock issuable or issued upon
conversion of the Company's Series B Preferred Stock as specified on Exhibit A
hereto; (iii) Class A Common Stock issuable or issued upon conversion of the
Company's Series C Preferred Stock; (iv) Class A Common Stock issuable or issued
upon conversion of the Series D Preferred Stock (the "Series D Shares") acquired
by the Series D Holders pursuant to the Merger Agreement; provided, however,
that the term "Registrable Securities" shall not include the Series D Shares for
purposes of Sections 1.3 and 1.4 and provided further that the holders of Series
D Shares shall not be deemed to be Investors for purposes of Section 5; (v) the
additional shares of Class A Common Stock currently held by certain Investors as
specified on Exhibit A hereto; (vi) any Class A Common Stock issued (or issuable
upon conversion or exercise of any warrant, right or other security which is
issued) to the Xxxx Investors pursuant to Section 2 in connection with the
Company's issuance of securities in a firm commitment underwritten Public
Offering covering the offer and sale of securities of the Company; and (vii) any
Class A Common Stock of the Company issued as (or issuable upon the conversion
or exercise of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to, or in exchange for or in
replacement of, the foregoing, excluding in all cases, however, any shares sold
or transferred by a person in a transaction in which the rights under this
Section 1 are not assigned.
(h) The term "SEC" shall mean the Securities and
Exchange Commission.
(i) The term "Qualified Public Offering" shall
mean a firm commitment underwritten public offering by the Company pursuant to a
registration statement on Form S-1 under the Act (or equivalent), with a price
per share of at least $1.4721 (as adjusted for subdivisions, combinations and
stock dividends with respect to such shares) and net proceeds to the Company of
at least Twenty-five Million Dollars ($25,000,000).
1.2 Piggyback Registration Rights.
(a) Registration Rights. If at any time the
Company shall determine to register under the Act (including pursuant to a
demand of any stockholder of the Company exercising registration rights other
than pursuant to Section 1.3 hereof) any of its common stock (other than a
registration relating solely to the sale of securities to participants in a
Company employee benefits plan, a registration on any form which does not
include substantially the same
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information as would be required to be included in a registration statement
covering the sale of Registrable Securities or a registration in which the only
common stock being registered is common stock issuable upon conversion of debt
securities which are also being registered), it shall send to each Holder
written notice of such determination and, if within fifteen (15) days after
receipt of such notice, such Holder shall so request in writing, the Company
shall use its commercially reasonable best efforts to include in such
registration statement all of the Registrable Securities that such Holder
requests to be registered.
(b) Underwriting. If the registration of which
the Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as part of the written
notice given pursuant to Section 1.2(a). In such event, the right of any Holder
to registration pursuant to this Section 1.2 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of Registrable
Securities in the underwriting to the extent provided herein. All Holders
proposing to distribute their Registrable Securities through such underwriting
shall (together with the Company and the other holders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by
the Company. Notwithstanding any other provision of this Section 1.2, if the
managing underwriter determines in its sole discretion that marketing factors
require a limitation of the number of shares to be underwritten, the managing
underwriter may limit on a pro rata basis the Registrable Securities to be
included in such registration (i) in the case of the Company's initial Public
Offering to an amount equal to zero, and (ii) in the case of any other Public
Offering to an amount not less than thirty percent (30%) of the total number of
securities to be included in the registration. The Company shall so advise all
Holders distributing their Registrable Securities through such underwriting, and
the number of shares of Registrable Securities and other securities that may be
included in the registration and underwriting on behalf of persons other than
the Company shall be allocated in the following order of priority (A) first, to
the Company, (B) second, among the Holders requesting to sell Registrable
Securities according to each Holder's Ownership Percentage, and (C) third, to
the extent additional securities may be included therein, pro rata among the
other selling stockholders according to the total amount of securities owned by
each such stockholder; provided, however, that the number of shares of
Registrable Securities to be included in such underwriting shall not be reduced
unless all other securities (other than securities of the Company) are first
entirely excluded from the underwriting. This order of priority cannot be
altered unless approved by the Holders of a majority of all outstanding shares
of the Registrable Securities. To facilitate the allocation of shares in
accordance with the above provisions, the Company may round the number of shares
allocated to any Holder or other holder to the nearest 100 shares.
If any of the Holders disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the managing underwriter.
(c) Right to Terminate Registration. The Company
shall have the right to terminate or withdraw any registration initiated by it
under this Section 1.2 prior to the effectiveness of such registration whether
or not any Holder has elected to include Registrable Securities in such
registration.
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1.3 Required Registration.
(a) On as many as but not more than two
occasions in the case of the Holders of Series C Preferred Stock and one
occasion in the case of Holders of Series B Preferred Stock, not earlier than
the earlier of either (i) one hundred eighty (180) days after the completion by
the Company of its initial Public Offering or (ii) January 1, 2004, the Holders
of at least thirty percent (30%) of the Series C Preferred Stock then
outstanding or the shares of Class A Common Stock issued on conversion thereof,
or the Holders of at least 30% of the Series B Preferred Stock then outstanding
or the shares of Class A Common Stock issued on conversion thereof, may require
the Company, at the Company's expense, to register some or all of such Holders'
Registrable Securities, provided that each such registration covers an offering
with an aggregate offering price that is not less than $5,000,000. Such
Holder(s) shall notify the Company in writing that it or they intend to offer or
cause to be offered for public sale all or any portion of the Registrable
Securities, and within ten (10) days of the receipt after such notice, the
Company will so notify all holders of Registrable Securities.
(b) Upon written request of any Holder given
within thirty (30) days after the receipt by such Holder from the Company of
such notification, the Company will use its commercially reasonable best efforts
to cause all of the Registrable Securities that may be requested by any Holder
thereof (including the Holder or Holders giving the initial notice of intent to
offer (each an "Initiating Holder" and collectively the "Initiating Holders"))
to be registered under the Act as expeditiously as possible. The Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practical, but in any event within ninety (90) days
after receipt by the Company of the request of the Initiating Holder.
(c) Notwithstanding anything contained in this
Section 1.3 or Section 1.4 to the contrary, if the Company furnishes to the
Holders requesting any registration pursuant to such sections a certificate
signed by the President of the Company stating that, in the good faith judgment
of the Board of Directors of the Company, such registration would be seriously
detrimental to the Company and that it is in the best interests of the Company
to defer the filing of a registration statement, then the Company shall have the
right to defer the filing of a registration statement with respect to such
offering for a period of not more than ninety (90) days from receipt by the
Company of the request by the Initiating Holder; provided, however, that the
Company may not exercise such right more than once in any twelve-month period.
(d) If the Initiating Holders intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as part of their request and the
Company shall include such information in the written notice referred to above.
(e) If the registration to be effected pursuant
to this Section 1.3 is a registration in connection with the Company's initial
Public Offering, the underwriter shall be selected by the Company and shall be
reasonably acceptable to the Holders of a majority of the Registrable Securities
included in such registration. In all subsequent registrations effected pursuant
to this Section 1.3, the underwriter shall be selected by the Holders of a
majority of the Registrable Securities included in such registration and shall
be reasonably acceptable to the Company. In any
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event, the right of any Holder to include his, her or its Registrable Securities
in such registration shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable Securities in
the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriters selected for such
underwriting.
(f) Notwithstanding the foregoing, if the
managing underwriter advises the Holders of Registrable Securities included in
such registration in writing that marketing factors require a limitation of the
number of shares to be underwritten, then the Initiating Holders shall so advise
all Holders of Registrable Securities which would otherwise be underwritten
pursuant hereto, and the number of shares of Registrable Securities that may be
included in the underwriting shall be allocated among such Holders according to
each such Holder's Ownership Percentage. (g) Notwithstanding the foregoing, the
Company shall not be obligated to effect, or to take any action to effect, any
registration pursuant to this Section 1.3: (i) after the Company has effected
two (2) registrations in the case of the Holders of Series C Preferred Stock or
the shares of Class A Common Stock issued on conversion of the Series C
Preferred Stock, and one registration in the case of the Holders of Series B
Preferred Stock or the shares of Class A Common Stock issued on conversion of
the Series B Preferred Stock, pursuant to this Section 1.3 and such
registrations have been declared or ordered effective and kept effective for the
period set forth in Section 1.5(a) and the Company has registered at least 80%
of the total number of Registrable Securities requested to be included therein,
(ii) during the period starting with the date forty-five (45) days prior to the
Company's good faith estimate of filing of, and ending on a date one hundred
eighty (180) days after the effective date of, a registration statement filed
under the Act (other than a registration of securities in a Rule 145 transaction
or relating solely to the sale of securities to participants in a Company stock
plan), provided that the Company is actively employing in good faith its
commercially reasonable best efforts to cause such registration statement to
become effective and provided further that the Holders were given the
opportunity to fully participate in such registration pursuant to, and the
Company otherwise complied with its obligations under, Section 1.2 above, or
(iii) if the Company delivers notice to the Holders of Registrable Securities
within 30 days of any registration request of the Company's intent to file a
registration statement for the initial Public Offering within 45 days of such
notice, or (iv) if the Initiating Holders propose to dispose of shares of
Registrable Securities that may be immediately registered on Form S-3 pursuant
to a request made pursuant to Section 1.4 below; provided that in such
situation, the Company shall include in the Form S-3 registration statement any
information reasonably requested to be included in such registration, if any.
1.4 Registration on Form S-3. Notwithstanding Section
1.3, in case the Company shall receive from a Holder or Holders a written
request or requests that the Company effect a registration on Form S-3 (or any
similar form promulgated by the SEC) and any related qualification or compliance
with respect to all or a part of the Registrable Securities owned by such Holder
or Holders, the Company will, not more than twice in any year (365-day period):
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(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders;
and
(b) as soon as practicable, use its commercially
reasonable best efforts to effect such registration and all such qualifications
and compliances as may be so requested and as would permit or facilitate the
sale and distribution of all or such portion of such Holder's or Holders'
Registrable Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
twenty (20) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 1.4: (1) if
Form S-3 is not available for such offering by the Holders; (2) if the Company
shall furnish to the Holders a certificate signed by the President of the
Company stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its stockholders
for such Form S-3 Registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than ninety (90) days after receipt of the
request of the Holder or Holders under this Section 1.4; provided, however, that
the Company shall not utilize this right more than once in any twelve month
period; (3) if such Form S-3 registration covers an offering with reasonably
anticipated aggregate proceeds of less than $500,000; or (4) if the Company has
effected two (2) registrations pursuant to this Section 1.4 within the past
twelve (12) months and such registrations have been declared or ordered
effective.
(c) In the event the Company is ineligible to
use Form S-3 under General Instruction I.A. of such form due to actions strictly
within the Company's control, the Company will use its commercially reasonable
best efforts to effect such registration on Form S-1 upon written request from
the Holders of a majority of the Registrable Securities requested to be included
in such registration, subject to the provisions under Section 1.3 of this
Agreement, and such registration on Form S-1 shall not count as a registration
effected pursuant to Section 1.3.
(d) Subject to the foregoing, the Company shall
use its commercially reasonable best efforts to file a registration statement
covering the Registrable Securities and other securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Holders. Registrations effected pursuant to this Section 1.4 shall not be
counted as demands for registration effected pursuant to Sections 1.2 or 1.3,
respectively. If the Holders giving the initial notice under this Section 1.4
propose to offer the Registrable Securities by means of an underwriting, the
terms of Sections 1.3(d) and (e) shall apply.
1.5 Registration Procedures. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its reasonable
best efforts to cause such registration statement to become effective and keep
such registration statement effective for a period of one hundred eighty
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(180) days or, if earlier, until the distribution contemplated in the
Registration Statement has been completed;
(b) Prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection with such registration statement as may be necessary to
comply with the provisions of the Act;
(c) Furnish to the Holders participating in such
registration such numbers of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Act, and such other
documents as they may reasonably request in order to facilitate the public
offering of Registrable Securities owned by them;
(d) Use its reasonable best efforts to register
and qualify the securities covered by such registration statement under such
other securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service or process in any such state or jurisdictions;
(e) In the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter of such
offering (and each Holder participating in such underwriting shall also enter
into and perform its obligations under such an agreement);
(f) Use its reasonable best efforts to cooperate
with the Holders in the disposition of the securities covered by such
registration statement, including without limitation in the case of an
underwritten offering pursuant to Section 1.3 causing key executives of the
Company to participate under the direction of the managing underwriter in a
"road show" scheduled by such managing underwriter in such locations and of such
duration as in the judgment of such managing underwriter are appropriate for
such underwritten offering;
(g) Use its reasonable best efforts to obtain
all legal opinions, auditors' consents and comfort letters and experts
cooperation as may be required, including furnishing to each Holder
participating in such registration on the date that such Holder's Registrable
Securities are delivered to the underwriters for sale, or if such securities are
not being sold through underwriters on the date that the registration statement
with respect to such Registrable Securities becomes effective, (i) an opinion,
dated as of such date, of counsel for the Company and (ii) a "cold comfort"
letter, dated as of such date, signed by the independent certified public
accountants of the Company, in each case in form and substance as is customarily
given to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Holders participating in such registration;
(h) Notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
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state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing;
(i) Cause all such Registrable Securities
registered pursuant hereunder to be listed on each securities exchange on which
similar securities issued by the Company are then listed; and
(j) Provide a transfer agent and registrar for
all Registrable Securities registered hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
1.6 Furnish Information. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to this
Section 1 with respect to the Registrable Securities of any selling Holder that
such Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities.
1.7 Expenses of Registration. The Company shall bear and
pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Sections 1.2, 1.3 and 1.4 for each Holder (which right may be
assigned as provided in Section 1.11), including (without limitation) all
registration, filing, and qualification fees, printers and accounting fees
relating or apportionable thereto and the fees and disbursements of counsel for
the Company and no more than one counsel for all the selling Holders, but
excluding underwriting discounts and commissions relating to Registrable
Securities.
1.8 No Delay of Registration. No Holder shall have any
right to obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.9 Indemnification. In the event any Registrable
Securities are included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company
will indemnify and hold harmless each Holder, any underwriter (as defined in the
Act) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Act or the 1934 Act, against any losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Act, the 1934 Act or other federal or state law, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, any state securities law or
any rule or regulation promulgated under the Act, the 1934 Act or any state
securities law; and the Company will pay to
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each such Holder, underwriter or controlling person any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action, as such expenses are incurred;
provided, however, that the indemnity agreement contained in this subsection
1.9(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without the consent
of the Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any case for any such loss, claim, damage, liability, or
action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished by
any such Holder, underwriter or controlling person for use in such registration.
(b) To the extent permitted by law, each Holder
will indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, severally but not jointly,
against any losses, claims, damages, or liabilities (joint or several) to which
any of the foregoing persons may become subject, under the Act, the 1934 Act or
other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder; and each such Holder will pay any legal or other
expenses reasonably incurred by any person intended for use in such registration
to be indemnified pursuant to this subsection 1.9(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
1.9(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder, which consent shall not be unreasonably withheld; provided, that,
in no event shall any indemnity by any Holder under this subsection 1.9(b)
exceed the net proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified
party under this Section 1.9 of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under this Section
1.9, deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with one
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party (together with all other indemnified parties which may be
represented without conflict by one counsel) shall have the right to retain one
separate counsel, with the fees and expenses to be paid by the indemnifying
party, if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action shall not relieve such indemnifying party of any liability to
the indemnified party under this Section 1.9 unless and to the extent that the
failure to deliver notice is materially prejudicial to its ability to defend
such action. Any omission to so deliver written notice to the
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indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 1.9.
(d) If the indemnification provided for in this
Section 1.9 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage, or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations; provided, that, in no event shall any contribution by any Holder
under this subsection 1.9(d) exceed the net proceeds from the offering received
by such Holder. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent
that the provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with the underwritten public
offering are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.
(f) The obligations of the Company and Holders
under this Section 1.9 shall survive the completion of any offering of
Registrable Securities in a registration statement under this Section 1, and
otherwise.
1.10 Reports under Securities Exchange Act of 1934. With a
view to making available to the Holders the benefits of Rule 144 promulgated
under the Act ("Rule 144") and any other rule or regulation of the SEC that may
at any time permit a Holder to sell securities of the Company to the public
without registration or pursuant to a registration on Form S-3, the Company
agrees to:
(a) make and keep public information available,
as those terms are understood and defined in Rule 144, at all times after ninety
(90) days after the effective date of the first registration statement filed by
the Company for the offering of its securities to the general public;
(b) file with the SEC in a timely manner all
reports and other documents required of the Company under the Act and the 1934
Act; and
(c) furnish to any Holder, so long as the Holder
owns any Registrable Securities, forthwith upon request (i) a written statement
by the Company that it has complied with the reporting requirements of Rule 144
(at any time after ninety (90) days after the effective date of
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the first registration statement filed by the Company), the Act and the 1934 Act
(at any time after it has become subject to such reporting requirements), or
that it qualifies as a registrant whose securities may be resold pursuant to
Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company, and (iii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the SEC which
permits the selling of any such securities without registration or pursuant to
such form.
1.11 Assignment of Registration Rights. The rights to
cause the Company to register Registrable Securities pursuant to this Section 1
may be assigned (but only with all related obligations) by a Holder to a
transferee or assignee of such securities who, after such assignment or
transfer, holds at least five hundred thousand (500,000) shares of Registrable
Securities (subject to appropriate adjustment for stock splits, dividends,
combinations and other recapitalizations), provided: (a) the Company is, within
a reasonable time before such transfer, furnished with written notice of the
name and address of such transferee or assignee and the securities with respect
to which such registration rights are being assigned; (b) such transferee or
assignee agrees in writing to be bound by and subject to the terms and
conditions of this Agreement, including without limitation the provisions of
Section 1.12 below; and (c) such assignment shall be effective only if
immediately following such transfer the further disposition of such securities
by the transferee or assignee is restricted under the Act. For the purposes of
determining the number of shares of Registrable Securities held by a transferee
or assignee of a holder of Registrable Securities, (i) the holdings of
affiliated partnerships, limited liability companies and other entities and
their constituent or retired partners or members or limited partners
(collectively, "Affiliated Persons"), and (ii) the holdings of spouses,
ancestors, lineal descendants and siblings who acquire Registrable Securities by
gift, will or intestate succession (collectively, "Family Members"), shall in
each case be aggregated together, provided that all assignees and transferees
who would not qualify individually for assignment of registration rights shall
designate in writing to the Company from time to time a single attorney in-fact
on behalf of the entire group of Affiliated Persons or Family Members, as the
case may be, for the purpose of exercising any rights, receiving notices or
taking any action under this Section 1.
1.12 "Market Stand-Off" Agreement. Each Holder hereby
agrees that, during the period of duration specified by the Company and the
underwriter of common stock or other securities of the Company, following the
effective date of a registration statement of the Company filed under the Act in
connection with its initial Public Offering, 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 or affiliated entities who agree to be similarly bound) any securities of
the Company held by it at any time during such period except Registrable
Securities included in such registration; provided, however, that:
(a) all officers, directors and all holders of
more than five percent (5%) of all outstanding shares of the voting stock of the
Company enter into similar agreements; and
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(b) such market stand-off time period shall not
exceed one hundred eighty (180) days.
Each Holder agrees to provide to the underwriters of the initial Public
Offering such further agreement as such underwriters may reasonably require in
connection with this market stand-off agreement. 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 the applicable period.
1.13 Registrations outside U. S. The Company shall not
register its securities for sale to the general public in any country other than
the United States without the prior written consent of the holders of a majority
of the Series C Preferred Stock then outstanding.
1.14 Termination of Registration Rights. The right of any
Holder to inclusion in any registration pursuant to Section 1.2 or to request
registration pursuant to Sections 1.3 and 1.4 shall terminate upon the earlier
of (i) five years after the date of the Company's initial Public Offering, or
(ii) such time as Rule 144 or another similar exception under the Securities Act
is available for the sale of all of such Holder's Registrable Securities within
a three (3) month period without registration and such Holder owns less than one
percent (1%) of the outstanding capital stock of the Company.
2. Right of First Refusal on Company Issuance.
2.1 Right of First Refusal. The Company hereby grants to
each Investor a right of first refusal ("Right of First Refusal") to purchase
such Investor's Pro Rata Share (as defined in Section 2.3 below) of any New
Securities (as defined in Section 2.4 below) which the Company may, from time to
time, propose to issue and sell.
2.2 Over-Allotment Option. In the event that the
Investors together do not purchase all of the New Securities pursuant to the
Right of First Refusal granted in Section 2.1 above, then those Investors that
shall have purchased their full Pro Rata Share of such New Securities shall also
have the right to purchase up to all of the remaining New Securities (the
"Over-Allotment Option"), in addition to such New Securities as they shall
already have elected to purchase, if they shall have so elected as provided for
in Section 2.5(a) below. If more than one Investor elects to exercise such
Investor's Over-Allotment Option, and the aggregate number of shares of New
Securities such Investors elect to purchase exceeds the aggregate number of
shares of New Securities then remaining, then the shares of New Securities to be
purchased pursuant to the Over-Allotment Option shall be divided among such
Investors according to their respective Pro Rata Share, or on such other basis
as such Investors may agree upon amongst themselves in writing.
2.3 Pro Rata Share. Each Investor's "Pro Rata Share," for
purposes of this Section 2, is equal to the fraction obtained by dividing (a)
the sum of the total number of shares of any (i) Common Stock, (ii) Common Stock
issuable upon conversion of any Preferred Stock and (iii) Common Stock issuable
upon exercise of any options or warrants, then held by such Investor by (b) the
sum of the total number of shares of (i) Common Stock, (ii) Common Stock
issuable upon
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the conversion of Preferred Stock and (iii) Common Stock issuable upon any
exercise of any options or warrants then outstanding.
2.4 New Securities. Except as set forth below, "New
Securities" shall mean any shares of capital stock of the Company, including
Common Stock and Preferred Stock, whether or not now authorized, and rights,
options or warrants to purchase said shares of Common Stock or Preferred Stock
and securities of any type whatsoever that are, or may by their terms become,
convertible into said shares of Common Stock or Preferred Stock. Notwithstanding
the foregoing, "New Securities" do not include the following: (i) shares of
Common Stock issued upon the conversion of the Series A Preferred Stock; (ii)
shares of Common Stock issued upon the conversion of the Series B Preferred
Stock; (iii) shares of Common Stock issued upon the conversion of the Series C
Preferred Stock (iv) shares of Common Stock issued upon the conversion of the
Series D Preferred Stock (v) shares of Common Stock or Preferred Stock, or
options or other rights to purchase Common Stock or Preferred Stock, issued or
granted to employees, officers, directors and consultants of the Company
pursuant to any one or more employee stock incentive plans or agreements either
approved, or within an aggregate amount approved (currently 20,665,018 shares),
by the Company's Board of Directors; (vi) securities issued or issuable pursuant
to financing transactions approved by the Company's Board of Directors
including, but not limited to, equipment leases or bank lines of credit,
provided that the specific issuance is approved by the Board; (vii) shares of
Common Stock or other securities issued as a dividend or distribution on, or in
connection with a split of or recapitalization of, any of the capital stock of
the Company; (viii) shares of capital stock of the Company issued pursuant to
warrants outstanding as of the date hereof; (ix) securities issued by the
Company pursuant to the acquisition of another corporation or other entity by
the Company by merger, purchase of all or substantially all of the capital stock
or assets, or other reorganization as a result of which the stockholders of the
Company will continue to hold more than fifty percent (50%) of the voting
securities of the Company; (x) securities issued in a firm commitment
underwritten Public Offering covering the offer and sale of securities of the
Company; provided, however, that the foregoing exception shall not apply to the
Xxxx Investors (as defined below) unless the Xxxx Investors or their affiliates
are offered the right to purchase up to five percent (5%) of the securities
offered in such Public Offering at the offering price per share, net of
underwriters commissions or discounts, (xi) the 17,879,362 shares of Series A
Common Stock to be issued in exchange for the 17,879,362 class A preferred
exchangeable shares of 0000-0000 Xxxxxx Inc., or (xii) the 6,350,400 shares of
Series A Preferred Stock to be issued in exchange for the 6,350,400 class B
preferred exchangeable shares of 0000-0000 Xxxxxx Inc. (the shares referenced in
(xi) and (xii) above to be issued pursuant to the Articles of 0000-0000 Xxxxxx
Inc. and the Covenant Agreement between the Company and 0000-0000 Xxxxxx Inc.
dated November 24, 1999). The "Xxxx Investors" shall mean Xxxx Capital Venture
Fund, L.P., BCIP Associates II, BCIP Trust Associates II, BCIP Associates II-B,
BCIP Trust Associates II-B and RGIP, LLC.
2.5 Procedure.
(a) In the event the Company proposes to
undertake an issuance of New Securities, it shall give each Investor written
notice (the "Company Notice") of its intention, describing the amount and type
of New Securities to be issued, and the price and terms upon which
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the Company proposes to issue the same. Each Investor shall have twenty (20)
days from the date of receipt of the Company Notice to exercise such Investor's
Right of First Refusal to purchase up to such Investor's respective Pro Rata
Share of such New Securities for the price and upon the terms specified in the
Company Notice by delivering written notice (the "Right of First Refusal
Election Notice") to the Company and stating therein the quantity of New
Securities to be purchased.
(b) If the Company shall have received one or
more Right of First Refusal Election Notices within twenty (20) days from the
date all Investors are deemed to have received the Company Notice as described
in Section 2.5(a) hereof, in which one or more (but less than all) Investors
have elected to purchase their full Pro Rata Share of the New Securities, the
Company shall immediately give each such Investor notice (the "Over-Allotment
Notice") indicating the aggregate amount of New Securities as to which the
Investors shall not have exercised their respective Rights of First Refusal.
Each Investor who shall have elected to purchase at least its full Pro Rata
Share of such New Securities, pursuant to this Section 2.5, shall have ten (10)
days upon receipt of the Over-Allotment Notice to give notice (the
"Over-Allotment Election Notice") to the Company whether it elects to exercise
its Over-Allotment Option granted in Section 2.2 hereof (and, if so, the maximum
number of additional shares of New Securities it elects to purchase pursuant
thereto).
(c) Settlement for the New Securities to be
purchased by the Investors pursuant to this Section 2.5 shall be made in cash
within twenty (20) days from the Investors' deemed date of receipt of the
Company Notice or within ten (10) days from the Investors' deemed receipt of the
Over-Allotment Notice, if applicable; provided, however, that if the terms of
payment for the New Securities specified in the Company Notice were for other
than cash against delivery, each Investor shall pay in cash to the Company the
fair market value of such consideration as mutually agreed upon by the Company
and a majority of the Investors who elect to purchase New Securities or, if no
such agreement is reached, as determined by an investment banking firm mutually
acceptable to the Company and a majority of the Investors who elect to purchase
New Securities, which appraisal shall be final, within five (5) days of such
determination if such determination is made after fifteen (15) days following
receipt of the Company Notice or five (5) days following receipt of the
Over-Allotment Notice, if applicable.
(d) In the event that the Investors have not
elected to purchase all of the New Securities within the later of twenty (20)
days of the deemed receipt of Company Notice pursuant to clause (a) above or ten
(10) days of the deemed receipt of the Over-Allotment Notice pursuant to clause
(b) above, the Company shall have ninety (90) days thereafter to sell the New
Securities not elected to be purchased by Investors at the price and upon the
terms no more favorable to the purchasers of such securities than specified in
the Company Notice. In the event the Company has not sold some or all of the New
Securities within said ninety (90) day period, the Company shall not thereafter
issue or sell any unsold New Securities without first offering such securities
to the Investors in the manner provided above.
(e) If any Investor shall have failed to deliver
to the Company its Right of First Refusal Election Notice or Over-Allotment
Election Notice within the time periods described in
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this Section 2.5, such Investor shall be deemed to have waived its Right of
First Refusal or Over-Allotment Option, as the case may be, as to such financing
to which such notice pertains.
2.6 Waiver of Right of First Refusal. The Right of First
Refusal may be waived as to any given issuance of New Securities (a) on behalf
of the holders of Series A Preferred Stock, by the holders of not less than
two-thirds (2/3) of the Series A Preferred Stock then outstanding (acting on an
as-converted to Common Stock basis), (b) on behalf of the holders of Series B
Preferred Stock, by the holders of not less than two-thirds (2/3) of the Series
B Preferred Stock then outstanding (acting on an as-converted to Common Stock
basis), (c) on behalf of the holders of Series C Preferred Stock, by the holders
of not less than two-thirds (2/3) of the Series C Preferred Stock then
outstanding (acting on an as-converted to Common Stock basis), (d) on behalf of
the holders of Series D Preferred Stock, by the holders of not less than sixty
percent (60%) of the Series D Preferred Stock (e) on behalf of the Xxxx
Investors by the Xxxx Investors, and (f) on behalf of the holders of Class A
Common Stock, by the holders of not less than two-thirds (2/3) of the Common
Stock then outstanding.
2.7 Termination and Assignment. The Right of First
Refusal granted in this Section 2 shall expire upon the effective date of the
Company's Qualified Public Offering. The Right of First Refusal is
non-assignable except to any transferee to whom registration rights may be
transferred pursuant to Section 1.11 of this Agreement.
2.8 Company Right to Terminate Issuance of New
Securities. Notwithstanding the foregoing, the Company may in its sole
discretion terminate any proposed issuance of New Securities in respect of which
the Company has given Company Notice, at any time prior to the consummation
thereof. The foregoing provision shall apply even in the event one or more
Investors shall have exercised their Rights of First Refusal hereunder;
provided, however, that no New Securities shall then have been issued.
3. Restrictions on Transfer of Shares.
3.1 Restrictions on Transfer. Except as otherwise
provided in this Agreement, Xxxx Xxxxxxxxx, Xxxxxx Xxxxxxx and Xxxxx Xxxx and
their spouses and personal holding companies (collectively, the "Founders"), any
employees of the Company holding more than 150,000 shares of the Company's
capital stock or options to purchase shares of the Company's capital stock as of
the record date fifteen (15) days prior to delivery of Notice (as defined in
Section 5.1(b)) ("Key Employees") and the Holders of the Series A Preferred
Stock and Telesystem Software Ventures Limited Partnership ("Series A Holders"
and "Telsoft" respectively and collectively with the "Founders" and "Key
Employees," the "Restricted Holders") will not sell, assign, transfer, pledge,
hypothecate, or otherwise encumber or dispose of in any way, all or any part of
or any interest in the Restricted Shares (as defined below) now or hereafter
owned or held by the Restricted Holders. Any sale, assignment, transfer, pledge,
hypothecation or other encumbrance or disposition of the Restricted Shares by
the Restricted Holders not made in conformance with this Agreement shall be null
and void, shall not be recorded on the books of the Company and shall not be
recognized by the Company.
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3.2 Restricted Shares. For purposes of this Agreement,
the term "Restricted Shares" shall mean any securities of the Company held by or
payable to the Restricted Holders or their spouses or personal holding companies
or having voting rights in the election of the Board of Directors of the
Company, or any securities evidencing an ownership interest in the Company, or
any securities convertible into or exercisable for any shares of the foregoing
owned as of the date hereof or any time hereafter, or any agreement or
commitment to issue any of the foregoing.
3.3 Sales to Competitors. Without the approval of the
Board of Directors, Communicade (as defined in Section 6.3) will not sell or
transfer any of the Series B Preferred Stock now or hereafter owned or held by
Communicade, to any of the entities listed on Exhibit B hereto (or any
Competitor Affiliates thereof), nor will Communicade sell or transfer any of the
Series B Preferred Stock now or hereafter owned or held by Communicade to any
entity that becomes after the date hereof a substantial direct competitor of the
Company (or any Competitor Affiliate thereof) and such proposed transfer could
reasonably be expected to have a material adverse effect on the Company, as
determined by the Board of Directors of the Company, acting in good faith;
provided, however, that this Section 3.3 and Section 3.4 shall not prohibit
Communicade from participating in or effecting any transaction pursuant to a
merger, consolidation, sale of assets, recapitalization or other transaction
approved by the Board of Directors of the Company. For purposes of this Section
3.3, a "Competitor Affiliate" of any particular entity means any other entity
controlling or controlled by such entity, where "control" means the possession
of the power to direct the management and policies of a person or entity through
the ownership of voting securities.
3.4 Right of First Refusal on Communicade's Series B
Preferred Stock.
(a) General. In the event that Communicade
proposes to sell or transfer (or, if pursuant Section 3.4(b), sells or
transfers) any Series B Preferred Stock, including in a transaction in which the
Series B Preferred is sold or transferred together with other assets with no
specific amount of consideration specifically allocated thereto (such a
transaction, a "Bundled Transaction"), then prior to effecting such sale or
transfer (or, if pursuant to Section 3.4(b), immediately following such sale or
transfer), Communicade (and, if applicable, the Pre-ROFR Transferee (as defined
in Section 3.4(b)) shall give the Series C Holders the opportunity to purchase
such shares in the following manner:
(i) Communicade shall give notice (the
"Communicade Transfer Notice") to Xxxx Capital Venture Fund, L.P. ("Bain"), on
behalf of the Series C Holders, in writing of such intention to sell or transfer
(or, in accordance with Section 3.4(b), of such sale or transfer of) any of the
Series B Preferred Stock then held by Communicade for cash or a promissory note
(or other consideration, the value of which is set forth in the Communicade
Transfer Notice), specifying the securities sold or transferred or proposed to
be sold or transferred, the price per share therefor or proposed price per share
therefor (subject to the immediately following sentence, the "Communicade
Transfer Price"), the name of the transferee or transferees or the proposed
transferee or transferees and the maturity date, amortization schedule, interest
rate and security terms of such promissory note, if applicable. In the event
that any Series B Preferred Stock is sold or transferred in a Bundled
Transaction, (x) the Communicade Transfer Price therefor will be determined by
Communicade or
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the Pre-ROFR Transferee, at Communicade's option, and (y) the Communicade
Transfer Notice shall not be deemed to have been given by Communicade (or
received by Bain) until the Communicade Transfer Price has been determined as
set forth in clause (x) and communicated to Bain.
(ii) Each Series C Holder shall have the
right, exercisable by written notice given by such Series C Holder to Bain
within three business days after receipt of such Communicade Transfer Notice
from Communicade to purchase for cash from Communicade (or, if pursuant to
Section 3.4(b), from the Pre-ROFR Transferee) all or any portion of the Series C
Holder's Pro Rata Share (as determined below) of the securities specified in
such Communicade Transfer Notice. Each Series C Holder's "Pro Rata Share," for
purposes of this Section 3.4, is equal to the fraction obtained by dividing (a)
the sum of the total number of shares of any Common Stock issuable upon
conversion of Series C Preferred Stock then held by such Series C Holder by (b)
the total number of shares of Common Stock issuable upon conversion of Series C
Preferred Stock then outstanding. In the event that the Series C Holders
together do not purchase all of the securities specified in the Communicade
Transfer Notice, then the Bain Investors shall have the right to purchase up to
all of the remaining securities specified in the Communicade Transfer Notice.
Within five business days after receipt of the Communicade Transfer Notice from
Communicade (the "Series C Exercise Period"), Bain shall give notice to
Communicade (and, if applicable, the Pre-ROFR Transferee) as to that portion of
the securities specified in the Communicade Transfer Notice, if any, which the
Series C Holders elect to purchase pursuant to this Section 3.4 (the
"Election").
(iii) If the Series C Holders exercise
their right of first refusal within the Series C Exercise Period, within five
business days after receipt by Communicade (and, if applicable, the Pre-ROFR
Transferee) of notice of the Election, the Series C Holders exercising such
right (the "Electing Series C Holders") and Communicade (or, if applicable, the
Pre-ROFR Transferee) shall execute definitive, binding agreements relating to
the purchase on the terms set forth in the Communicade Transfer Notice (the date
such documents are executed, the "Commitment Date"). Upon execution of such
documentation, the Electing Series C Holders and Communicade (or, if applicable,
the Pre-ROFR Transferee) shall be legally obligated to consummate the purchase
contemplated thereby. The closing of the purchase of the securities with respect
to which such right has been exercised shall take place within five business
days after the Commitment Date; provided that in no event will such closing
occur later than on the 15th business day following the initial receipt of the
Communicade Transfer Notice from Communicade.
(iv) With respect to Series B Preferred
Stock not already sold or transferred pursuant to Section 3.4(b), if the Series
C Holders do not exercise their right of first refusal hereunder within the
Series C Exercise Period, Communicade shall be free, subject to the provisions
of Section 3.3, during the period of ninety (90) days following the expiration
of such time for exercise to enter into an agreement to sell the securities
specified in the Communicade Transfer Notice, to the specified proposed
transferee or another investor which is acquiring the securities solely for
investment purposes, on terms no less favorable to Communicade than the terms
specified in such Communicade Transfer Notice, provided that the closing of the
purchase and sale of such securities shall take place within sixty (60) days
after Communicade enters into such agreement.
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(v) Without limiting the generality or
effect of any other provision hereof, in no event will Communicade be obligated
to furnish Bain more information in connection with a transaction covered hereby
than the information expressly set forth in Section 3.4(a)(i), and no agreement
providing for any such transaction will include any representation, warranty or
covenant except for standard representations and warranties (and related
indemnification covenants) relating to due authorization, execution, delivery
and the binding nature of the transaction documents and, in the case of the
seller of the Series B Preferred Stock, ownership of and the absence of liens on
the Series B Preferred Stock to be sold or transferred.
(b) Notwithstanding Section 3.4(a) but subject
to Section 3.3, nothing herein will be deemed to restrict Communicade from
selling or transferring any shares of Series B Preferred Stock to a third party
(the "Pre-ROFR Transferee"), including in a Bundled Transaction, prior to
complying with the terms and provisions of Section 3.4(a) (a "Pre-ROFR
Transfer"), provided that, in the definitive agreements relating to the purchase
of the Series B Preferred Stock by the Pre-ROFR Transferee from Communicade,
Communicade and the Pre-ROFR Transferee expressly agree and acknowledge that (i)
the effectiveness of the Pre-ROFR Transfer is subject to the rights of the
Series C Holders under Section 3.4(a) hereof, (ii) the Series C Holders will be
entitled to exercise their rights to purchase such Series B Preferred Stock
directly from the Pre-ROFR Transferee rather than Communicade on the terms set
forth in the Communicade Transfer Notice in accordance with and within the time
periods set forth in Section 3.4(a), and (iii) clauses (i) and (ii) and any
corresponding rights to enforce the provisions thereof are intended to be for
the benefit of the Series C Holders.
(c) Exceptions. The rights of first refusal
pursuant to this Section 3.4 shall not apply to any transfer of Series B
Preferred Stock by Communicade to any person or entity controlling, controlled
by or under common control with Communicade (each a "Communicade Limited
Transferee"), provided in any such case that the transferee agrees to be bound
by the provisions of this Agreement with respect to any further transfers. This
Agreement shall be binding upon each Communicade Limited Transferee and, prior
to the completion of a transfer of Series B Preferred Stock to a Communicade
Limited Transferee, such Communicade Limited Transferee or his or its legal
representative shall have executed documents assuming the obligations of
Communicade under this Agreement with respect to the transferred shares of
Series B Preferred Stock, which documents shall be in the form of Exhibit C
hereto. Such transferred shares of Series B Preferred Stock shall remain subject
to the terms of this Agreement, including without limitation Section 3.3 and
this Section 3.4, and references to Communicade hereunder shall be deemed
thereafter to apply to and include the Communicade Limited Transferee.
3.5 Termination and Nonassignment . The right of first
refusal set forth in Section 3.4 shall terminate upon the earliest to occur of
(i) the closing of the Company's initial Public Offering, (ii) December 31,
2004, and (iii) the transfer by Bain to any person or entity other than a person
or entity controlling, controlled by or under common control with Bain (a "Bain
Affiliate") of more than 25% of the Series C Preferred Stock held by Bain on the
date hereof. The right of first refusal set forth in this Section 3.4 is
non-assignable except to any transferee to whom registration rights may be
transferred pursuant to Section 1.11 of this Agreement. The restriction on
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selling to competitors set forth in Section 3.3 shall terminate upon the
transfer by Bain to a non-Bain Affiliate of more than 75% of the Series C
Preferred Stock held by Bain on the date hereof.
4. Right of First Refusal on Restricted Shares.
4.1 General. In the event that a Restricted Holder
proposes to make any sale or transfer of any of the Restricted Shares, then
prior to effecting such sale or transfer the Restricted Holder shall give the
Company the opportunity to purchase such shares in the following manner:
(a) Such Restricted Holder shall give notice
(the "Transfer Notice") to the Company in writing of such intention, specifying
the securities proposed to be sold or transferred, the proposed price per share
therefor (the "Transfer Price"), the name of the proposed transferee or
transferees and the other material terms upon which such disposition is proposed
to be made, including such other terms and information as the Company may
reasonably request in order to confirm the bona fide nature of the proposed
transaction.
(b) The Company shall have the right,
exercisable by written notice given by the Company to such Holder within twenty
(20) days after receipt of such Transfer Notice (the "Company Exercise Period")
to purchase all or any portion of the securities specified in such Transfer
Notice.
(c) If the Company exercises its right of first
refusal hereunder, the closing of the purchase of the securities with respect to
which such right has been exercised shall take place within thirty (30) days
after the Company gives notice of such exercise, which period of time shall be
extended if necessary to comply with applicable securities laws and regulations.
Upon exercise of its right of first refusal, the Company and such Restricted
Holder shall be legally obligated to consummate the purchase contemplated
thereby and shall use their best efforts to secure any approvals required in
connection therewith.
(d) Subject to the Investors' right of first
refusal described in Section 4.3 of this Agreement below, if the Company does
not exercise its right of first refusal hereunder within the Company Exercise
Period, such Restricted Holder shall be free, subject to the Investors' rights
under Section 5, during the period of ninety (90) days following the expiration
of such time for exercise to enter into an agreement to sell the securities
specified in such Transfer Notice, to the specified proposed transferee or
another investor which is solely a financial investor acquiring for investment
purposes, on terms no less favorable to such Restricted Holder than the terms
specified in such Transfer Notice, provided that the closing of the purchase and
sale of such securities shall take place within sixty (60) days after such
Holder enters into such agreement.
4.2 Exceptions. The right of first refusal herein shall
not apply to any transfer of Restricted Shares by a Restricted Holder without
receipt of consideration by the Restricted Holder to any of the following
parties (each a "Limited Transferee") (a) to any Family Member (as defined in
Section 1.11) of any Restricted Holder who is an individual, or to a trust for
the benefit of the Restricted Holder or the Restricted Holder's Family Members
or (ii) to any Affiliated Person (as defined in Section 1.11) of a Restricted
Holder that is an entity, provided in any such case that the
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transferee agrees to be bound by the provisions of this Agreement with respect
to any further transfers. This Agreement shall be binding upon each Limited
Transferee and, prior to the completion of a transfer of Restricted Shares to a
Limited Transferee, such Limited Transferee or his or its legal representative
shall have executed documents assuming the obligations of the Restricted Holder
under this Agreement with respect to the transferred Restricted Shares, which
documents shall be in form and substance reasonably satisfactory to the
Investors owning not less than two-thirds (2/3) of the Series A Preferred or
Series B Preferred or Series C Preferred or Series D Preferred, as applicable,
evidenced by such Investors' written acknowledgment of such satisfaction. Such
transferred Restricted Shares shall remain "Restricted Shares" hereunder, and
references to a "Restricted Holder" hereunder shall be deemed thereafter to
apply to and include the Limited Transferee.
4.3 Investors' Right of First Refusal on Restricted
Shares. The Company agrees that in the event that the Company declines to
exercise in full the right of first refusal set forth herein between such
Restricted Holders and the Company, the Company will provide each Investor with
notice of such determination at least fifteen (15) days prior to the end of the
Company Exercise Period. Each Investor shall then have the right to submit,
prior to the end of the Company Exercise Period, notice of its irrevocable
commitment to exercise such right of first refusal within thirty (30) days after
receipt of the Company's notice (the "Investor Exercise Period") in an amount
equal to the Investor's Pro Rata Share as determined under Section 2.3 of this
Agreement. Upon expiration of the Company Exercise Period, the Company will
provide notice to all Investors as to whether or not the right of first refusal
has been or will be exercised by the Company or the Investors. If any Investors
do not exercise their right of first refusal, the Restricted Shares that would
otherwise be allocated to such non-exercising Investors shall be offered to each
exercising Investor on a pro-rata basis (based upon the number of shares of
Registrable Securities held by such exercising Investor relative to the
aggregate number of Registrable Securities held by all such exercising
Investors), provided that the right of first refusal must be exercised, if at
all, prior to the expiration of the Investor Exercise Period.
4.4 Termination and Nonassignment. The right of first
refusal set forth in Section 4 of this Agreement herein shall terminate upon the
closing of the Company's initial Public Offering. The right of first refusal set
forth in this Section 4 is non-assignable except to any transferee to whom
registration rights may be transferred pursuant to Section 1.11 of this
Agreement.
5. Right of Co-Sale Respecting Shares.
5.1 Grant; Notice.
(a) In the event that, after compliance with the
provisions of Section 4, the Restricted Holder proposes to sell, transfer or
otherwise dispose of (a "Transfer") any of the Restricted Shares to any proposed
investor or transferee (a "Transferee"), each Investor shall have a right of
co-sale on the terms described in Section 5.2 below to sell such Investor's
Co-Sale Pro Rata Share (as defined in Section 5.2(b) below) of such Restricted
Shares.
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(b) The selling Restricted Holder (the "Selling
Restricted Holder") shall deliver a notice (the "Notice") to each Investor and
to the Company stating, in reasonable detail, (i) its bona fide intention to
Transfer such Restricted Shares, (ii) the number of such Restricted Shares to be
Transferred, (iii) the price and material terms and conditions upon which the
proposed Transfer is to be made, (iv) the identity of each of the Transferees
and (v) all other information reasonably necessary to fully describe the
proposed Transfer. The Notice shall include a copy of any written proposal or
letter of intent or other agreement relating to the proposed Transfer.
(c) Within thirty (30) days after delivery of
the Notice, each Investor shall indicate in writing to the Selling Restricted
Holder and the Company whether it elects to exercise its co-sale right as
provided in Section 5.2 below, by delivery of a notice of exercise (the
"Investor Election Notice") to the Selling Restricted Holder, with a copy to the
Company, within such thirty (30) day period. Any Investor's failure to deliver a
Investor Election Notice with respect to such Restricted Shares within such
thirty (30) day period shall be deemed to be delivery of a Investor Election
Notice indicating such Investor's election to not exercise any co-sale rights
with respect to the proposed Transfer.
5.2 Right of Co-Sale.
(a) In the event that any Restricted Holder
proposes a Transfer of Restricted Shares to any Transferee any Investor who
delivers a Investor Election Notice in accordance with Section 5.1(c) above
indicating an election to exercise such Investor's right of co-sale with respect
to the Transfer referred to by the Notice and the number of shares such Investor
elects to sell (up to such Investor's Co-Sale Pro Rata Share), shall have the
right of co-sale to sell to the Transferee all or any part of that number of
shares of Common Stock or Preferred Stock (or Common Stock issued upon
conversion thereof) equal to its Co-Sale Pro Rata Share of the Restricted Shares
subject to the Notice on the terms and conditions set forth in the Notice. If
the consideration to be paid by the Transferee is of a nature that cannot be
given to such Investor, then such Investor shall have the right to sell its
Co-Sale Pro Rata Share of the Restricted Shares subject to the Notice to the
Selling Restricted Holder at the fair market value per share of such
consideration as reasonably determined by the Board of Directors of the Company
acting in good faith. To the extent that any prospective Transferee refuses to
purchase shares or other securities from such Investor exercising its right of
co-sale hereunder or to the extent the Selling Restricted Holder wishes to delay
the purchase of shares or other securities from the Investor, the Selling
Restricted Holder shall not sell to such prospective Transferee any securities
unless and until, simultaneously with such sale, the Selling Restricted Holder
shall purchase such shares or other securities from such Investor for the same
consideration and on the same terms and conditions as the proposed Transfer
described in the Notice.
(b) Each Investor's "Co-Sale Pro Rata Share" for
purposes of the right of co-sale hereunder is that number of shares of Common
Stock equal to the product obtained by multiplying (i) the aggregate number of
shares of Common Stock covered by the Notice by (ii) the fraction obtained by
dividing (a) the sum of the total number of shares of any (i) Common Stock, (ii)
Common Stock issuable upon conversion of any Preferred Stock and (iii) Common
Stock
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issuable upon exercise of any options or warrants, then held by such Investor by
(b) the sum of the total number of shares of (i) Common Stock, (ii) Common Stock
issuable upon the conversion of Preferred Stock and (iii) Common Stock issuable
upon any exercise of any options or warrants then outstanding.
If the Investor elects to sell to the Transferee, then the Restricted
Holder shall assign to the Investor as much of the Restricted Holder's interest
in the agreement for the sale of the Restricted Shares as the Investor shall be
entitled to pursuant to the terms hereof.
5.3 Transfer of Shares upon Failure to Exercise Right of
Co-Sale. Subject to the Investors' respective rights of co-sale, the Selling
Restricted Holder may, not later than ninety (90) days following delivery to the
Investors and the Company of the Notice, conclude a Transfer of any or all of
the Restricted Shares covered by the Notice to the extent the Investors have not
exercised their rights of co-sale on terms and conditions the same or
substantially the same as those described in the Notice.
5.4 Binding Effect of Right of Co-Sale. The right of
co-sale shall be binding upon any Transferee of Restricted Shares other than a
Transferee acquiring Restricted Shares in a transaction which complies with this
Section 5.
5.5 Termination of Right of Co-Sale. Notwithstanding
anything in this Section 5 to the contrary, the rights of co-sale shall
terminate on the closing of the Company's Qualified Public Offering.
5.6 Delivery Requirements. Each Investor shall effect its
participation in any Restricted Holder's sale of Restricted Shares by promptly
delivering to the Restricted Holder for transfer to the Transferee:
(a) One or more certificates, properly endorsed
for transfer, representing that number of shares of Common Stock or Preferred
Stock which at such time such Investor elects to sell pursuant to the terms
hereof; provided, however, that if the Transferee objects to the delivery of
Preferred Stock in lieu of Common Stock, such Investor shall convert such
Preferred Stock into Common Stock and deliver such Common Stock in lieu thereof.
The Company agrees to make any such conversion concurrent with the actual
transfer of such shares to the Transferee; or
(b) An assignment separate from certificate, via
facsimile or otherwise, which represents the Investor's Co-Sale Pro Rata Share.
The Company agrees to effect any such assignment concurrent with the actual
transfer of such shares to the Transferee.
5.7 Exceptions. Notwithstanding anything to the contrary
in this Section 5, but subject to Section 4.1, the Founders may transfer of up
to 44,108 shares in the case of Xxxx Xxxxxxxxx, 1,029,019 shares in the case of
Xxxxxx Xxxxxxx, and 181,523 shares in the case of Xxxxx Xxxx. The Restricted
Holders may transfer the Restricted Shares to any of the following parties (each
a "Limited Transferee") (i) to any Family Member (as defined in Section 1.11) of
any Restricted Holder who is an individual, or to a trust for the benefit of the
Restricted Holder or the
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Restricted Holder's Family Members; (ii) to any Affiliated Person (as defined in
Section 1.11) of a Restricted Holder that is an entity, provided in any such
case that the transferee agrees to be bound by the provisions of this Agreement
with respect to any further transfers. This Agreement shall be binding upon each
Limited Transferee and, prior to the completion of a transfer of Restricted
Shares to a Limited Transferee, such Limited Transferee or his or its legal
representative shall have executed documents assuming the obligations of the
Restricted Holder under this Agreement with respect to the transferred
Restricted Shares, which documents shall be in form and substance reasonably
satisfactory to the Investors owning not less than two-thirds (2/3) of the
Series A Preferred or Series B Preferred or Series C Preferred or Series D
Preferred, as applicable, evidenced by such Investors' written acknowledgment of
such satisfaction. Such transferred Restricted Shares shall remain "Restricted
Shares" hereunder, and references to a "Restricted Holder" hereunder shall be
deemed thereafter to apply to and include the Limited Transferee.
5.8 Legend. All certificates or instruments representing
Restricted Shares or the shares of Series B Preferred Stock held by Communicade,
whether now outstanding or subsequently issued, shall be surrendered to the
Company for endorsement or be endorsed by the Company prior to their issuance
with the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO, AND MAY
BE TRANSFERRED ONLY IN COMPLIANCE WITH, AN INVESTOR RIGHTS AGREEMENT
AMONG THE HOLDER OF THESE SECURITIES AND CERTAIN OTHER HOLDERS OF THE
COMPANY'S STOCK, WHICH INCLUDES TRANSFER RESTRICTIONS, A COPY OF WHICH
IS ON FILE AT THE PRINCIPAL OFFICE OF THE ISSUER.
The Company shall not transfer any of the Restricted Shares or the
shares of Series B Preferred Stock held by Communicade on its books without
first ascertaining compliance with all of the applicable provisions of this
Agreement with respect to such transfer.
5.9 Conditions to Exercise of the Investors' Rights.
Exercise of the Investors' rights under Section 5 hereof shall be subject to and
conditioned upon, and any Selling Restricted Holder and the Company shall use
their best efforts to assist the Investors in, compliance with applicable laws.
5.10 Assignment of Right of Co-Sale. The right of co-sale
pursuant to this Section 5 may be assigned (but only with all related
obligations) to any transferee to whom registration rights may be transferred
pursuant to Section 1.11 of this Agreement.
6. Covenants of the Company.
6.1 Delivery of Financial Statements. The Company shall
deliver to (i) each Investor, so long as such Investor (including its Affiliated
Persons and Family Members) shall be a Series A Holder, Series B Holder, Series
C Holder or Series D Holder that owns at least five percent (5%) of the
Company's outstanding shares and (ii) each of (A) Infinity Capital Venture Fund
1999,
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L.P., Infinity Capital VF Affiliates 1999, L.P. and Infinity Capital VF
Affiliates 1999 (Q), L.P. ("Infinity Capital"), (B) Venrock Associates, Venrock
Associates II, L.P. and Venrock Entrepreneurs Fund, L.P. ("Venrock Associates"),
(C) RRE Ventures II LP, RRE Ventures Fund II LP and (D) Wachovia Capital
Investments, Inc., so long as such entity holds at least 90% of the shares
issued to them pursuant to the Merger Agreement:
(a) as soon as practicable, but in any event
within ninety (90) days after the end of each fiscal year of the Company
thereafter, an income statement for such fiscal year, a balance sheet of the
Company and statement of Stockholders' equity as of the end of such year, and a
statement of cash flows for such year, such year-end financial reports to be in
reasonable detail, prepared in accordance with generally accepted accounting
principles ("GAAP"), and audited and certified by independent public accountants
of nationally recognized standing selected by the Company;
(b) as soon as practicable, but in any event
within forty-five (45) days after the end of each of the first three (3)
quarters of each fiscal year of the Company, an unaudited profit or loss
statement and a statement of cash flows for such fiscal quarter and an unaudited
balance sheet as of the end of such fiscal quarter in reasonable detail prepared
in accordance with GAAP, except for footnotes and normal year-end adjustments;
(c) as soon as practicable, but in any event
within forty-five (45) days after the end of each month that is not the end of a
fiscal quarter, an unaudited profit and loss statement and statement of cash
flows for such month and an unaudited balance sheet as of the end of such month
in reasonable detail prepared in accordance with GAAP, except for footnotes and
normal year-end adjustments;
(d) as soon as practicable, but in any event
prior to thirty (30) days before the end of each fiscal year, a budget and
business plan for the next fiscal year, including balance sheets, income
statements and statements of cash flows prepared on a quarterly basis, and as
soon as prepared, any other budgets or revised budgets prepared by the Company;
and
(e) such other information relating to the
financial condition, business, or corporate affairs of the Company as such
Investor may from time to time reasonably request.
6.2 Inspection. So long as an Investor (including its
Affiliated Persons and Family Members) holds at least five percent (5%) of the
Company's outstanding shares, the Company shall permit such Investor, at such
Investor's expense, to visit and inspect the Company's properties, and to
discuss the Company's affairs, finances and accounts with the Company's
officers, employees and outside accountants, all at such reasonable times as may
be requested by such Investor.
6.3 Board of Directors. Xxxx Capital Venture Fund, L.P.
shall be entitled to nominate one member to the Company's Board of Directors
(the "Bain Nominee"), and Communicade Investments Ltd. and its affiliates
(collectively, "Communicade") and Telesystem Software Ventures Limited
Partnership ("Telsoft") shall each be entitled to nominate one member to
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the Company's Board of Directors (the "Communicade Nominee" and the "Telsoft
Nominee", respectively, and collectively with the Bain Nominees, the
"Nominees"), at each meeting or pursuant to each consent of the Company's
stockholders for the election of directors, and to remove from office their
respective Nominee and to fill any vacancy caused by the resignation, death or
removal of their Nominees. The President and the Chairman of the Board of the
Company shall each be members of the Board of Directors (the "Management
Directors"), and the members of the Board of Directors, with the consent of the
Bain Investors, shall collectively nominate two independent directors who shall
not be affiliated with any of the Bain Investors, Communicade, Telsoft or
management (the "Independent Directors," and collectively with the Management
Directors, the "Appointees"). Xxxx Xxxxx shall be entitled to be nominated as
one of the Independent Director Appointees for a term of two years unless
removed for cause under the Bylaws of the Company and the General Corporation
Law of the State of Delaware. Each Investor hereby agrees to vote all of their
shares of Class A Common Stock, Class B Common Stock, Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
any other voting securities of the Company now owned or hereafter acquired in
favor of the election of the Nominees and the Appointees to the Board.
(a) The Company shall call, promptly following
receipt of a request of Xxxx Capital Venture Fund, L.P. in case of the Bain
Nominee, Communicade in the case of the Communicade Nominee or Telsoft in the
case of the Telsoft Nominee, a special meeting of the stockholders of the
Company to elect a Nominee to the Board and to cause the removal of the Nominee
if Xxxx Capital Venture Fund, L.P. in case of the Bain Nominee, Communicade in
the case of the Communicade Nominee or Telsoft in the case of the Telsoft
Nominee shall request the removal of their respective Nominees in writing for
any reason. Xxxx Capital Venture Fund, L.P. in case of the Bain Nominee,
Communicade in the case of the Communicade Nominee and Telsoft in the case of
the Telsoft Nominee shall have the right to designate a new nominee in the event
their respective Nominees shall be removed pursuant to this Section 6.3(a) or
shall vacate his directorship for any reason.
(b) The Company shall use reasonable efforts to
prevent any action from being taken by the Board during the pendency of any
vacancy due to death, resignation or removal of a Nominee, unless Xxxx Capital
Venture Fund, L.P. in case of the Bain Nominee, Communicade in the case of the
Communicade Nominee and Telsoft in the case of the Telsoft Nominee shall have
failed to act to nominate and elect a replacement in a timely manner.
(c) The Company shall enter into indemnity
agreements with the Nominees on terms no less favorable than any other director
of the Company, and cause the Nominees (and any former Nominees) to be covered
on any insurance policy maintained from time to time by the Company or any other
person covering acts and omissions of the directors and officers of the Company
in their capacity as such. The Company shall pay the reasonable out-of-pocket
expenses incurred by each Nominee in connection with attending the meetings of
the Board and any committees thereof.
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(d) The Company and each Investor shall take all
action necessary to ensure that the Bylaws and the Board do not provide for a
number of directors (including any vacant seats) on the Board greater than
seven.
(e) So long as the Bain Investors own at least
thirty percent (30%) of the number of shares of Series C Preferred Stock
purchased by the Bain Investors under the Purchase Agreement (as defined below),
Xxxx Capital Venture Fund, L.P. shall be entitled to designate one
representative to attend all meetings of the Board as an observer and receive
notice of such meetings and all other documentation distributed to the Board
when and as distributed to the Board. The Company shall pay the reasonable
out-of-pocket expenses incurred by such observer in connection with attending
the meetings of the Board.
6.4 Negative Covenants.
(a) So long as the Bain Investors own at least
seventy-five (75%) percent of the number of shares of Series C Preferred Stock
purchased by the Bain Investors under the Purchase Agreement, the Company shall
not without first obtaining approval (by vote or written consent, as provided by
law) of the Bain Investors:
(i) sell, convey, or otherwise dispose
of all or substantially all of its property or business or merge with or into or
consolidate with any other corporation (other than a wholly-owned subsidiary
corporation) or effect a merger, consolidation or any other transaction or
series of related transactions in which more than 50% of the voting power of the
Company is disposed of, provided that the Company may effect a merger effected
solely for the purpose of changing the domicile of the Company without approval
of the holders of a majority of the Series C Preferred Stock;
(ii) declare or pay any dividends on, or
redeem, any shares of capital stock other than the Series C Preferred Stock in
accordance with its terms as provided for in the Company's Fifth Amended and
Restated Certificate of Incorporation;
(iii) increase or decrease the authorized
number of members of the Board of Directors of the Company;
(iv) materially alter its business plan
or make any material change in the nature of its current and prospective
business, or enter into new lines of business as carried on at the date hereof
or as contemplated in written materials delivered to the Board of Directors of
the Company prior to the date hereof.
(b) If the Bain Investors own less than
seventy-five (75%) percent of the number of shares of Series C Preferred Stock
purchased by the Bain Investors under the Series C Preferred Stock Purchase
Agreement dated as of January 19, 2001 (the "Purchase Agreement"), then so long
as at least ten percent (10%) of the Series C Preferred Stock remain
outstanding, the Company shall not without first obtaining approval (by vote or
written consent, as provided by law) of the holders of at least a majority of
the outstanding shares of Series C Preferred Stock:
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(i) sell, convey, or otherwise dispose of all or
substantially all of its property or business or merge with or into or
consolidate with any other corporation (other than a wholly-owned subsidiary
corporation) or effect a merger, consolidation or any other transaction or
series of related transactions in which more than 50% of the voting power of the
Company is disposed of, provided that the Company may effect a merger effected
solely for the purpose of changing the domicile of the Company without approval
of the holders of a majority of the Series C Preferred Stock;
(ii) declare or pay any dividends on, or redeem,
any shares of capital stock other than the Series C Preferred Stock in
accordance with its terms as provided for in the Company's Fifth Amended and
Restated Certificate of Incorporation.
(iii) increase or decrease the authorized number
of members of the Board of Directors of the Company; or
(iv) materially alter its business plan or make
any material change in the nature of its current and prospective business, or
enter into new lines of business as carried on at the date hereof or as
contemplated in written materials delivered to the Board of Directors of the
Company prior to the date hereof.
6.5 Termination of Covenants. The covenants set forth in
this Section 6 shall terminate and be of no further force or effect upon the
closing of the Qualified Public Offering.
7. Miscellaneous.
7.1 Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties
(including transferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
7.2 Governing Law. This Agreement shall be governed by
and construed under the laws of the State of Delaware without reference to
conflict of laws rules.
7.3 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
7.4 Titles and Subtitles. The titles and subtitles used
in this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.5 Notices. All notices and other communications
required or permitted hereunder shall be in writing, shall be effective when
given, and shall in any event be deemed to be given upon receipt or, if earlier,
(a) five (5) days after deposit with the U.S. Postal Service or other
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applicable postal service, if delivered by first class mail, postage prepaid,
(b) upon delivery, if delivered by hand, (c) one (1) business day after the
business day of deposit with Federal Express or similar overnight courier,
freight prepaid or (d) one (1) business day after the business day of facsimile
transmission, if delivered by facsimile transmission with copy by first class
mail, postage prepaid, and shall be addressed (i) if to an Investor, at the
Investor's addresses as set forth on Exhibit A hereto and (ii) if to the
Company, at the address of its principal corporate offices (attention:
Secretary), or in any such case at such other address as a party may designate
by ten (10) days' advance written notice to the other party pursuant to the
provisions above.
7.6 Expenses. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
7.7 Amendments and Waivers. Any term of this Agreement
may be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Securities then outstanding; provided, however,
that in the event that such amendment or waiver adversely affects the
obligations and/or rights of any Holder or class of Holders in a different
manner than the other Holders or any other class of Holders, such amendment or
waiver shall also require the written consent of such Holder or majority in
interest of such class of Holders, as the case may be. Any amendment or waiver
effected in accordance with this paragraph shall be binding upon each holder of
any Registrable Securities then outstanding, each future holder of all such
Registrable Securities, and the Company.
7.8 Aggregation of Stock. All shares of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
and Series D Preferred Stock of the Company held or acquired (or Class A Common
Stock issuable upon conversion thereof) by affiliated entities or persons
(including partners or constituent members and former partners and former
constituent members) shall be aggregated together for the purpose of determining
the availability or discharge of any rights under this Agreement. For purposes
of this Section 7.8, the Company may rely on such person whom a group of
related persons shall designate from time to time for information relating to
the affiliations of entities or persons.
7.9 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
7.10 Entire Agreement. This Agreement (including the
Exhibits hereto, if any) constitutes the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof,
and supersedes all prior agreements and understandings with respect to the
subject matter hereof (including without limitation the Amended and Restated
Investor Rights Agreement dated as of January 19, 2001 by and among the Company
and the Prior Holders (the "Prior Agreement")).
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7.11 Dispute Resolution. If there arises a dispute between
any party to this Agreement, and any other party to this Agreement regarding
this Agreement, those parties agree to negotiate in good faith to resolve the
dispute between them regarding this Agreement. If the negotiations do not
resolve the dispute to the reasonable satisfaction of both parties, then each
party shall nominate one partner, member or senior officer of the rank of Vice
President or higher as its representative. These representatives shall, within
thirty (30) days of a written request by either party to call such a meeting,
meet in person and alone (except for one assistant for each party) and shall
attempt in good faith to resolve the dispute. If the disputes cannot be resolved
by such senior managers in such meeting, the parties agree that they shall, if
requested in writing by either party, meet within thirty (30) days after such
written notification for one day with an impartial mediator mutually agreed upon
by the parties and consider dispute resolution alternatives other than
litigation. If any alternative method of dispute resolution is not agreed upon
within thirty (30) days after the one day mediation, either party may begin
litigation proceedings. This procedure shall be a prerequisite before taking any
additional action hereunder.
7.12 Remedies. Subject to Section 7.11, in the event of a
breach by the Company of its obligations under this Agreement, each Holder, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of any
of the provisions of this Agreement and hereby further agrees that, in the event
of any action for specific performance in respect of such breach, it will waive
the defense that a remedy at law would be adequate.
7.13 No Inconsistent Agreements. Except for the Prior
Agreement, which shall terminate and be of no further force and effect as of the
date of this Agreement, the Company has not, as of the date hereof, and will
not, on or after the date hereof, enter into any agreement with respect to its
securities which is inconsistent with or more favorable to any stockholder on
the date hereof than the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The Company shall not, directly
or indirectly, enter into any merger, consolidation or reorganization in which
the Company is not the surviving corporation unless the proposed surviving
corporation, prior to the merger, consolidation or reorganization, agrees in
writing to assume the obligations of the Company under this Agreement, and for
that purpose references herein to "Registrable Securities" shall be deemed to be
references to the securities to which holders of Registrable Securities would be
entitled to receive in exchange for Registrable Securities in any such merger,
consolidation or reorganization unless such securities were registered under the
Act in connection with the merger, consolidation or reorganization.
-29-
IN WITNESS WHEREOF, the parties have executed this Second Amended and
Restated Investor Rights Agreement as of the date first above written.
RECRUITSOFT, INC.
By: /s/ Xxxxx Xxxx
---------------------------------------
Xxxxx Xxxx
Chief Executive Officer
Address: 000 Xx-Xxxxxxx Xxxx, Xxxxx 000
Xxxxxx (Xxxxxx)
X0X 0X0
Xxxxxx
INVESTORS:
COMMUNICADE INVESTMENT
COMPANY OF NEVADA, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxxx
-------------------------------------
Title: Managing Director
------------------------------------
XXXX CAPITAL VENTURE FUND, L.P.
By: Xxxx Capital Venture Partners, L.P.,
its general partner
By: Xxxx Capital Investors, LLC,
its general partner
By: /s/ Xxxxxxx Xxxxxxxx
---------------------------------------
Name: Xxxxxxx Xxxxxxxx
-------------------------------------
Title: Managing Director
-----------------------------------
[Signature Page to Investor Rights Agreement]
BCIP ASSOCIATES II
BCIP TRUST ASSOCIATES II
BCIP ASSOCIATES II-B
BCIP TRUST ASSOCIATES II-B
By: Xxxx Capital, Inc.,
their Managing Partner
By: /s/ Xxxxxxx Xxxxxxxx
---------------------------------------
Name: Xxxxxxx Xxxxxxxx
--------------------------------------
Title: Managing Director
-------------------------------------
RGIP, LLC
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
E-SQUAM INVESTORS I, L.P.
By: E-GPI, Inc.
----------------------------------------
Name:
--------------------------------------
Title: Managing General Partner
-------------------------------------
SUNAPEE SECURITIES, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
GENERAL CATALYST GROUP, LLC
By: General Catalyst Partners, LLC
its Managing Partner
By: /s/ Xxxxxxx X. Xxxxxxxxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
---------------------------------------
Title: Member and Chief Financial Officer
--------------------------------------
NB CAPITAL PARTNERS INC., A CORPORATION
INCORPORATED UNDER THE LAWS OF THE PROVINCE
OF ONTARIO, AND NB CAPITAL PARTNERS NOMINEE
INC., A CORPORATION INCORPORATED UNDER THE
LAWS OF CANADA, IN THEIR CAPACITY AS GENERAL
PARTNER AND NOMINEE RESPECTIVELY OF NB
CAPITAL VENTURE FUND, LP AND ITS PARALLEL
INVESTORS.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
COMMUNICADE INVESTMENTS LTD.
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxxxxx
---------------------------------------
Title: Managing Director
--------------------------------------
TELESYSTEM LTD.
By: /s/ Xxxxxxx Xxxxxx
-----------------------------------------
Name: Xxxxxxx Xxxxxx
---------------------------------------
Title: President
--------------------------------------
TELESYSTEM SOFTWARE VENTURES LIMITED
PARTNERSHIP BY TELSOFT VENTURES, INC., ITS
GENERAL PARTNER
By: /s/ Xxxxxx Xxxxxx
-----------------------------------------
Name: Xxxxxx Xxxxxx
---------------------------------------
Title: President
--------------------------------------
ASSOCIATION DE BIENFAISANCE ET DE RETRAITE
DES POLICIERS ET POLICIERS DE LA COMMUNAUTE
URBAINE DE MONTREAL
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
GRYFFINDOR CAPITAL PARTNERS I, LLC
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
INFINITY CAPITAL VENTURE FUND 1999, L.P.
By: Infinity Capital VF 1999
Management LLC, a
California limited liability
company
By: /s/ Xxxx Xxxxxx Xxxxxxxx
-----------------------------------------
Name: Xxxx Xxxxxx Xxxxxxxx
---------------------------------------
Title: Managing Director
--------------------------------------
INFINITY CAPITAL VF AFFILIATES 1999, L.P.
By: Infinity Capital VF 1999
Management LLC, a California limited
liability company
By: /s/ Xxxx Xxxxxx Xxxxxxxx
.........................
Name: Xxxx Xxxxxx Xxxxxxxx
....................
Title: Managing Director
.................
INFINITY CAPITAL VF AFFILIATES 1999 (Q),
L.P.
By: Infinity Capital VF 1999
Management LLC, a California limited
liability company
By: /s/ Xxxx Xxxxxx Xxxxxxxx
........................
Name: Xxxx Xxxxxx Xxxxxxxx
....................
Title: Managing Director
.................
VENROCK ASSOCIATES
By: /s/ Xxxxxxx X. Xxxxx
....................
Name: Xxxxxxx X. Xxxxx
................
Title: General Partner
...............
VENROCK ASSOCIATES II, L.P.
By: /s/ Xxxxxxx X. Xxxxx
....................
Name: Xxxxxxx X. Xxxxx
................
Title: General Partner
...............
RRE VENTURES II LP
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------------------
Name: Xxxxxx X. Xxxxxxx
---------------------------------------
Title: General Partner
--------------------------------------
RRE VENTURES FUND II LP
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------------------
Name: Xxxxxx X. Xxxxxxx
---------------------------------------
Title: General Partner
--------------------------------------
WACHOVIA INVESTORS, INC.
By: /s/ Xxx Xxxxxxx
-----------------------------------------
Name: Xxx Xxxxxxx
---------------------------------------
Title: Vice President
--------------------------------------
WACHOVIA CAPITAL INVESTMENTS, INC.
By: /s/ Xxx Xxxxxxx
-----------------------------------------
Name: Xxx Xxxxxxx
---------------------------------------
Title: Vice President
--------------------------------------
XXXXXX XXXXX XXXXX
--------------------------------------------
XXXXXX X. XXXXXXX
/s/ Xxxxxx X. Xxxxxxx
--------------------------------------------
DB EQUITY, LLC
Xxxxx Xxxxxxxxxx LLP
By: /s/ Xxxxxxx X. Xxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxx
---------------------------------------
Title: Partner
--------------------------------------
XXXXXXX X. XXXX
/s/ Xxxxxxx X. Xxxx
--------------------------------------------
XXXXXX WAX
/s/ Xxxxxx Wax
--------------------------------------------
XXX XXXXXXX
/s/ Xxx Xxxxxxx
--------------------------------------------
COMDISCO, INC.
By: /s/ Xxxxxx X. Xxxx
-----------------------------------------
Name: Xxxxxx X. Xxxx
---------------------------------------
Title: Vice President
--------------------------------------
TGI FINANCIAL, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
......................
Name: Xxxxxx X. Xxxxxxxx
..................
Title: President
.........
IN WITNESS WHEREOF, the parties have executed this Second Amended and
Restated Investor Rights Agreement as of the date first above written.
FOUNDERS:
XXXX XXXXXXXXX
/s/ Xxxx Xxxxxxxxx
--------------------------------------------
XXXXXX XXXXXXX
/s/ Xxxxxx Xxxxxxx
--------------------------------------------
XXXXX XXXX
/s/ Xxxxx Xxxx
--------------------------------------------
[Signature Page to Investor Rights Agreement]
