Exhibit 10.21
EXECUTION VERSION
INVESTOR'S RIGHTS AGREEMENT
JUNE 21, 2007
TABLE OF CONTENTS
Page
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1. Definitions ........................................................ 1
2. Registration Rights ................................................ 3
2.1 Demand Registrations on Form S-3 ............................. 3
2.2 Piggyback Registration ....................................... 5
2.3 Delay of Registration ........................................ 6
3. Voting Rights ...................................................... 6
3.1 Board Composition ............................................ 6
3.2 Term ......................................................... 6
3.3 Compensation ................................................. 6
3.4 Termination of Voting Rights ................................. 7
4. Obligations of the Company ......................................... 7
4.1 Registration ................................................. 7
4.2 Furnish Information and Other Investor Obligations ........... 8
5. Expenses of Registration ........................................... 8
5.1 Demand Registration .......................................... 9
5.2 Piggyback Registration ....................................... 9
6. Indemnification .................................................... 9
7. Successor Indemnification .......................................... 12
8. Reports Under Exchange Act ......................................... 12
9. Information Rights ................................................. 12
9.1 Delivery of Financial Statements ............................. 12
9.2 Inspection ................................................... 13
9.3 Termination of Information ................................... 14
9.4 Confidentiality .............................................. 14
10. Miscellaneous ...................................................... 14
10.1 Successors and Assigns ....................................... 14
10.2 Governing Law ................................................ 15
10.3 Arbitration .................................................. 15
10.4 Counterparts ................................................. 16
10.5 Titles and Subtitles ......................................... 16
10.6 Notices ...................................................... 16
10.7 Amendments and Waivers ....................................... 17
10.8 Severability ................................................. 17
10.9 Entire Agreement ............................................. 17
10.10 Delays or Omissions .......................................... 18
10.11 Acknowledgment ............................................... 18
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INVESTOR'S RIGHTS AGREEMENT
THIS INVESTOR'S RIGHTS AGREEMENT (this "Agreement") is made as of the
21st day of June, 2007, by and among NanoDynamics, Inc., a Delaware corporation
(the "Company"), and Nano-applications Holdings B.V., a company with limited
liability incorporated under the laws of The Netherlands (the "Investor").
RECITALS
WHEREAS, the Company and the Investor are parties to the Debenture
Purchase Agreement dated as of June 15, 2007 (the "Purchase Agreement") relating
to the 6% Convertible Debenture for Ten Million Dollars ($10,000,000.00) (the
"Debenture"); and
WHEREAS, in order to induce the Company to consummate the transactions
contemplated by the Purchase Agreement and to induce the Investor to invest
funds in the Company pursuant to the Purchase Agreement, the Investor and the
Company hereby agree that this Agreement shall govern the rights of the Investor
to cause the Company to register shares of Common Stock issuable to the
Investor, to receive certain information from the Company, to nominate one (1)
director to serve on the Company's Board of Directors (the "Board") and shall
govern certain other matters as set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, the parties hereby agree as follows:
1. Definitions. For purposes of this Agreement:
(a) "AAA" means the American Arbitration Association.
(b) "Affiliate" means, with respect to any Person, any other Person
that directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question. The term
"control" means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a Person, whether through
ownership of voting securities or general partnership or member interests, by
contract or otherwise. Without limiting the generality of the foregoing, a
Person shall be deemed to control any other Person in which it or any of its
Affiliates owns, directly or indirectly, a majority of the ownership interests.
(c) "Agreement" has the meaning set forth in the preamble hereto.
(d) "Arbitration Notice" has the meaning set forth in Section 10.3
hereto.
(e) "Arbitrator" has the meaning set forth in Section 10.3 hereto.
(f) "Board" means the Board of Directors of the Company.
(g) "Common Stock" means shares of the Company's common stock, par
value $0.001 per share.
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(h) "Company" means NanoDynamics, Inc, a Delaware corporation.
(i) "Damages" means any loss, damage, or liability (joint or several)
to which a party hereto may become subject under the Securities Act, the
Exchange Act, or other federal or state law, insofar as such loss, damage, or
liability (or any action in respect thereof) arises out of or is based upon (i)
any untrue statement or alleged untrue statement of a material fact contained in
any registration statement of the Company, including any preliminary prospectus
or Final Prospectus contained therein or any amendments or supplements thereto;
(ii) an 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 indemnifying party (or any of
its agents or Affiliates) of the Securities Act, the Exchange Act, any state
securities law, or any rule or regulation promulgated under the Securities Act,
the Exchange Act, or any state securities law.
(j) "Debenture" has the meaning set forth in the recitals hereto.
(k) "Dispute" has the meaning set forth in Section 10.3 hereto.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
(m) "Excluded Registration" means (i) a registration relating to the
sale of securities to employees, directors or consultants of the Company or one
of its Affiliates pursuant to a stock option, stock purchase, or similar plan;
(ii) a registration relating to a SEC Rule 145 transaction; (iii) a registration
on any form that does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities, (iv) a registration statement on Form S-4 or Form S-8 or
any substitute form that may be adopted by the SEC, (v) a registration statement
filed in connection with an exchange offer solely to the Company's existing
security holders or a merger or other combination involving the Company or (vi)
a registration in which the only Common Stock being registered is Common Stock
issuable upon conversion of debt securities, whether or not such debt securities
are also being registered.
(n) "Final Prospectus" has the meaning set forth in Section 6(d)
hereto.
(o) "Form S-3" means such form under the Securities Act as in effect
on the date hereof or any registration form under the Securities Act
subsequently adopted by the SEC that permits incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(p) "GAAP" means generally accepted accounting principles in the
United States in effect from time to time.
(q) "Investor" means Nano-applications Holdings B.V., a company with
limited liability incorporated under the laws of The Netherlands, or its
registered assigns.
(r) "IPO" means the Company's first underwritten public offering of
its Common Stock under the Securities Act.
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(s) "Person" means an individual, a partnership, a corporation
(including a business trust), a joint stock company, a limited liability
company, an unincorporated association, a joint venture or other entity or a
governmental authority.
(t) "Piggyback Registration" has the meaning set forth in Section 2.2
hereto.
(u) "Purchase Agreement" has the meaning set forth in the recitals
hereto.
(v) "Registrable Securities" means the Common Stock issuable or issued
upon conversion of the Debenture and any additional shares of Common Stock
issuable or issued in respect thereof pursuant to any corporate recapitalization
event that may hereafter be effectuated by the Company, including but not
limited to any stock split or stock dividend that may be declared, paid and/or
issued by the Company with respect to its Common Stock; provided however, that
Registrable Securities shall not include any shares hereafter transferred in a
transaction in which the transferor's rights under this Agreement with respect
to such shares were not assigned.
(w) "Registrable Securities then outstanding" means the number of
shares determined by adding (i) the number of shares of outstanding Common Stock
that are Registrable Securities (ii) the number of shares of Common Stock
issuable (but not yet issued) pursuant to any then-exercisable conversion rights
under the Debenture, and (iii) the number of shares of Common Stock issuable
(but not yet issued) by the Company in respect of those shares of Common Stock
described in subsections (i) and (ii) of this definition pursuant to any
corporate recapitalization event that may hereafter be effectuated by the
Company, including but not limited to any stock split or stock dividend that has
been declared but not yet paid or issued by the Company with respect to those
shares of Common Stock.
(x) "SEC" means the United States Securities and Exchange Commission.
(y) "SEC Rule 144" means Rule 144 promulgated by the SEC under the
Securities Act.
(z) "SEC Rule 145" means Rule 145 promulgated by the SEC under the
Securities Act.
(aa) "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
(bb) "Selling Expenses" means all underwriting fees, discounts,
selling commissions and transfer taxes allocable to the sale of Registrable
Securities.
2. Registration Rights.
The Company covenants and agrees as follows:
2.1 Demand Registrations on Form S-3.
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(a) If, at any time after the first anniversary of the closing of
the IPO and prior to the date on which the Investor may sell, transfer, assign
or otherwise dispose of all of its Registrable Securities without restriction
pursuant to Rule 144(k) under the Securities Act, the Company receives a request
from the Investor that the Company file a Form S-3 registration statement with
respect to the Registrable Securities then outstanding (each, a "Demand
Registration"), then the Company shall as soon as practicable, and in any event
within ninety (90) days after the date such request is given by the Investor,
file a Form S-3 registration statement under the Securities Act with respect to
the Registrable Securities that the Investor requested to be registered,
provided, however, that the Company's obligations under this Section 2.1 shall
apply only if (i) the Company is qualified, at the time of the request, to file
a Form S-3 under the Securities Act, and (ii) the anticipated aggregate gross
proceeds of the sale of such Registrable Securities pursuant to such Demand
Registration, calculated based upon the number of Registrable Securities which
the Investor requests to be registered and the average quoted closing price of
the Common Stock for the thirty (30) trading days immediately prior to such
request, shall equal or exceed $2,500,000.00 (the "Minimum Proceeds Threshold").
The Investor may not request more than two Demand Registrations pursuant to this
Agreement, and without limiting the other obligations of the Company under this
Agreement, the Company's obligation with respect to each such Demand
Registration under this Section 2.1(a) shall be deemed satisfied after such time
as any registration statement on Form S-3 filed by the Company pursuant to a
request for Demand Registration made by the Investor under this Section 2.1 has
been declared effective by the SEC, or the Company has exhausted its
commercially-reasonable efforts in seeking to secure the declaration of such
effectiveness.
(b) If the Investor intends to distribute the Registrable
Securities covered by its request by means of an underwriting, it shall so
advise the Company as a part of its request made pursuant to Section 2.1(a). In
such event, (i) the right of the Investor to include its Registrable Securities
in such registration pursuant to Section 2.1(a) shall be conditioned upon the
Investor's participation in such underwriting on the terms set forth herein, and
(ii) the Investor shall enter into an underwriting agreement upon customary
terms with the underwriter or underwriters managing the offering; provided that
such underwriting agreement shall not provide for indemnification or
contribution obligations on the part of the Investor materially greater than the
obligations of the Investor pursuant to Section 6. The Company shall have the
right to select the managing underwriter(s) for any underwritten offering
requested pursuant to Section 2.1(a), which selection must be made in each case
out of a pool of three underwriting firms chosen by the Company and the
Investor. With respect to either Demand Registration, if the managing
underwriter advises the Company in writing that marketing factors require a
limitation on the number of shares to be underwritten, the shares held by other
holders requesting registration pursuant to piggyback registration rights
granted by the Company shall be excluded from such registration statement and
underwriting to the extent deemed advisable by the managing underwriter, and if
a further reduction of the number of shares is required, the number of shares
that may be included in such registration statement and underwriting shall be
allocated among all holders requesting registration pursuant to demand
registration rights granted by the Company in proportion, as nearly as
practicable, to the respective number of shares of Common Stock that were
requested to be registered by each holder of such demand registration rights.
(c) Notwithstanding the foregoing obligations, with respect to
either Demand Registration, if the Company furnishes to the Investor a
certificate signed by the
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Company's chief executive officer stating that in the good faith judgment of the
Company's Board it would be materially detrimental to the Company and its
stockholders for such registration statement to either become effective or
remain effective for as long as such registration statement otherwise would be
required to remain effective, because such action would (i) materially interfere
with a significant acquisition, corporate reorganization, or other similar
transaction involving the Company; (ii) require premature disclosure of material
information that the Company has a bona fide business purpose for preserving as
confidential; (iii) render the Company unable to comply with requirements under
the Securities Act or Exchange Act or (iv) be materially detrimental to the
Company or its stockholders for such registration statement to be filed and it
is therefore necessary to defer the filing of such registration statement, then
the Company shall have the right to defer taking action with respect to such
filing, and any time periods with respect to filing or effectiveness thereof
shall be tolled correspondingly, for a period of not more than ninety (90) days
after the request of the Investor is given; provided, however, that the Company
may not invoke this right more than twice in any twelve (12) month period; and
provided further that the Company shall not register any securities for its own
account or that of any other stockholder during such ninety (90) day period
other than an Excluded Registration.
2.2 Piggyback Registration.
(a) If, at any time after the IPO, the Company proposes to file a
registration statement under the Securities Act with respect to an offering of
any equity securities by the Company for its own account or for the account of
any of its equity holders (other than any Excluded Registration), then the
Company shall in each such case give written notice of such proposed filing to
the Investor as soon as practicable (but in no event less than thirty (30) days
before the anticipated effective date of such registration statement), and in
such notice the Company shall offer to register such number of Registrable
Securities as the Investor may request (a "Piggyback Registration"). Subject to
the provisions contained in the third sentence of Section 2.2(b) below, the
Company shall include in each such Piggyback Registration all Registrable
Securities requested to be included in the registration for such offering by
written request of the Investor made within fifteen (15) days of the Investor's
receipt of the Company's notice of the registration. If at any time after giving
notice of its proposal to register securities as provided above in this Section
2.2(a) and prior to the effective date of any registration statement with
respect to such securities, the Company shall determine for any reason not to
register such securities the Company may, in its discretion, give notice of such
determination to the Investor and thereupon shall have no obligation to register
any Registrable Securities in connection with such registration; provided that
the Investor shall nevertheless continue to have the right to include
Registrable Securities in any subsequent registration statement or registration
statements as may be filed by the Company with respect to offerings of its
securities, all upon the terms and conditions set forth herein.
(b) If the registration for which the Company gives notice
pursuant to Section 2.2(a) is a registered public offering involving an
underwriting, the Company shall so advise the Investor as a part of the written
notice given pursuant to Section 2.2(a). In such event, (i) the right of the
Investor to include its Registrable Securities in such registration pursuant to
this Section 2.2 shall be conditioned upon the Investor's participation in such
underwriting on the terms set forth herein and (ii) all holders, including the
Investor, including securities to be
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registered in such registration shall enter into an underwriting agreement upon
customary terms with the underwriter or underwriters selected for the
underwriting by the Company. If the managing underwriter advises the Company in
writing that marketing factors require a limitation on the number of shares to
be underwritten, the Registrable Securities held by the Investor and shares held
by other holders participating in such registration by their exercise of
piggyback registration rights issued to them by the Company shall be excluded
from such registration statement and underwriting to the extent deemed advisable
by the managing underwriter, in proportion, as nearly as practicable, to the
respective number of shares of Common Stock that were requested to be registered
by the Investor and each such holder.
2.3 Delay of Registration.
The Investor shall not have any right to obtain or seek an injunction
restraining or otherwise delaying any registration pursuant to this Agreement as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 2.
3. Voting Rights.
3.1 Board Composition.
The Investor shall have the right to nominate at least one (1), but not more
than two (2), candidates to serve on the Board, provided that the Investor shall
not nominate any Person who is, directly or indirectly, an employee, officer,
director, manager, member, partner, consultant, advisor, equityholder (other
than a passive holder of less than five percent of all outstanding securities)
or in any other capacity an Affiliate of or associated with any direct or
indirect competitor of the Company (as determined by the Company, in its sole
judgment) or any supplier, customer, licensee, licensor, Affiliate, joint
venture partner or investor in such competitor. The Company shall recommend one
of the two nominees, at the Company's choosing, to the Company's stockholders
for election to the Board and ensure that such nominee is accorded substantially
equal treatment and promotion in presentation to the stockholders with all other
Company candidates, but shall not be liable to the Investor in the event that
the Company's stockholders fail to elect such nominee to the Board.
3.2 Term.
Any director that may be elected to serve on the Board pursuant to Section 3.1
shall begin his or her term upon the earlier to occur of (1) the closing of the
IPO and (2) the Company's filing with the SEC of a notice of withdrawal with
respect to the registration statement on Form S-1 related to the IPO, or as
otherwise mutually agreed upon in writing by the parties. In the event any such
director subsequently dies, resigns or is removed from the Board during his or
her tenure as a director, the Investor shall nominate a maximum of two (2)
candidates as such director's replacement (which candidates shall also be
unaffiliated in any way with any competitor of the Company to the full extent
described in the proviso clause of the first sentence of Section 3.1 above) for
action by the full Board as soon as practicable.
3.3 Compensation.
If any director who may be elected to serve on the Board pursuant to Section 3.1
shall qualify as an "independent director", as defined in the Exchange Act and
in the applicable rules and regulations of any national securities exchange or
trading system on which the Common Stock
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may then be listed and traded, then such director shall be entitled to receive
compensation equivalent to the compensation received by the Company's other
directors who are not employees of the Company.
3.4 Termination of Voting Rights.
The rights of the Investor to nominate candidates to serve on the Board pursuant
to Sections 3.1 and 3.2 shall terminate upon the repayment or conversion of the
full amount, including accrued interest, of the Debenture.
4. Obligations of the Company.
4.1 Registration.
Whenever required under Section 2.1 or Section 2.2 of this Agreement 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 commercially reasonable
efforts to cause such registration statement to become effective and, upon the
request of the Investor but subject to the provisions of Section 4.2 hereof,
keep such registration statement effective 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 Securities Act in
order to enable the disposition of all securities covered by such registration
statement;
(c) furnish to the Investor such numbers of copies of a
prospectus, including a preliminary prospectus, as required by the Securities
Act, and such other documents as the Investor may reasonably request in order to
facilitate its disposition Registrable Securities;
(d) use its commercially reasonable 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 Investor; provided, however, the Company shall not be required
to qualify to do business, become subject to taxation or file a general consent
to service of process in any such states 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 underwriter(s) of such offering (provided, however,
that the Company shall not be obligated by reason of this Agreement to cause a
special audit to be performed with respect to the Company's financial statements
in connection with such offering);
(f) use its commercially reasonable efforts to cause all such
Registrable Securities covered by such registration statement to be listed on a
national securities exchange or trading system and each securities exchange and
trading system (if any) on which similar securities issued by the Company may
then be listed;
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(g) provide a transfer agent and registrar for all Registrable
Securities registered pursuant to this Agreement and provide a CUSIP number for
all such Registrable Securities, in each case not later than the effective date
of such registration;
(h) subject to the confidentiality provisions of Section 9.4
below, promptly make available during normal business hours for inspection by
the Investor, any managing underwriter participating in any disposition pursuant
to such registration statement, and any attorney or accountant or other agent
retained by any such underwriter or selected by the Investor, all financial and
other records, pertinent corporate documents, and properties of the Company, and
cause the Company's officers, directors, employees, and independent accountants
to supply all information reasonably requested by the Investor and any such
underwriter, attorney, accountant or agent, in each case, as necessary or
advisable to verify the accuracy of the information in such registration
statement and to conduct appropriate due diligence in connection therewith;
(i) notify the Investor promptly after the Company receives
notice thereof, of the time when such registration statement has been declared
effective or a supplement to any prospectus forming a part of such registration
statement has been filed; and
(j) after such registration statement becomes effective, notify
the Investor of any request by the SEC that the Company amend or supplement such
registration statement or prospectus.
4.2 Furnish Information and Other Investor Obligations.
It shall be a condition precedent to the obligations of the Company to take any
action pursuant to Section 2.1 and Section 2.2 with respect to the Registrable
Securities that the Investor shall furnish to the Company such information
regarding itself, the Registrable Securities held by it, and any other
information reasonably requested by the Company as is reasonably required to
effect the registration of the Investor's Registrable Securities. In addition to
the foregoing, upon its receipt of any notice from the Company that the SEC has
requested the Company to amend or supplement any then-current registration
statement or prospectus, or that any event has occurred, any pending corporate
development exists, any error or omission in the then-current registration
statement or prospectus has been discovered, or any order suspending the
effectiveness of such registration statement or prospectus has been issued, the
Company shall promptly commence commercially-reasonable efforts to amend such
registration statement, or supplement such prospectus, to address such issue,
and the Investor agrees that it shall forthwith discontinue any distribution of
the Registrable Shares pursuant to the prospectus covering same until such time
as the Company shall have filed any required amendment or supplement to such
registration statement or prospectus, respectively, and, if so directed by the
Company, shall deliver to the Company all copies of the defective prospectus
covering such Registrable Shares that are then in Investor's and/or its
underwriters' possession or control, and thereafter resume distribution of the
Registrable Shares only in accordance with the Company's instructions, including
(if so specified by the Company) pursuant to any effective amendment or
supplement to the registration statement or prospectus, respectively, as may be
filed by the Company.
5. Expenses of Registration.
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5.1 Demand Registration.
Subject to the last sentence of this Section 5.1, all expenses up to a maximum
amount of $25,000 which are incurred in connection with registrations, filings
or qualifications pursuant to Section 2.1, including all registration, filing
and qualification fees, printers' and accounting fees (but excluding all Selling
Expenses and out-of-pocket expenses incurred by the Investor, including but not
limited to the fees and expenses of the Investor's counsel, all of which shall
be borne and paid by the Investor) shall be borne and shared pro rata between
the Company and the Investor; provided, however, that all expenses incurred in
excess of such $25,000 limit shall be borne and paid solely by the Investor. The
Company shall use its reasonable efforts to minimize any costs and expenses
incurred by the Investor hereunder, consistent with the Company's obligation to
comply with all applicable federal and state securities laws. If the Investor is
not the only shareholder selling shares pursuant to a Form S-3 registration
statement filed pursuant to Section 2.1(a), then the Investor and all other
selling holders shall share the Selling Expenses and all expenses in excess of
$25,000 pro rata based upon the number of securities each holder requests to be
registered on such registration statement.
5.2 Piggyback 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 Section 2.2 hereof for each holder, including all
registration, filing and qualification fees; printers' and accounting fees
relating thereto and the fees and disbursements of one counsel for the selling
holders selected by them, but excluding Selling Expenses related to the
Registrable Securities. The Investor and each other holder shall pay its
proportion of Selling Expenses relating to the sale or disposition of such
holder's securities pursuant to such registration statement.
6. Indemnification.
If any Registrable Securities are included in a registration statement under
Section 2 of this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless the Investor, and the partners, members, officers, directors,
and stockholders of the Investor; legal counsel and accountants for the
Investor; any underwriter (as defined in the Securities Act) for the Investor;
and each Person, if any, who controls the Investor or underwriter within the
meaning of the Securities Act or the Exchange Act, against any Damages, and the
Company will pay to the Investor, underwriter, controlling Person or other
aforementioned Person any legal or other expenses reasonably incurred thereby in
connection with investigating or defending any claim or proceeding from which
Damages may result, as such expenses are incurred; provided, however, that the
indemnity agreement contained in this Section 6(a) shall not apply to (i)
amounts paid in settlement of any such claim or proceeding if such settlement is
effected without the consent of the Company, which consent shall not be
unreasonably withheld, (ii) any Damages to the extent that they arise out of or
are based upon actions or omissions made in reliance upon and in conformity with
written information furnished by or on behalf of the Investor, underwriter,
controlling Person or other aforementioned Person expressly for use in
connection with such registration, or (iii) any Damages arising from the failure
of any party
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otherwise indemnifiable by the Company pursuant to this Section
6(a) to suspend all distribution of Registrable Securities when so advised by
the Company pursuant to Section 4.2.
(b) To the extent permitted by law, the Investor will indemnify
and hold harmless the Company, and 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 Securities Act, legal counsel and
accountants for the Company, any underwriter (as defined in the Securities Act),
any other holder selling securities in such registration statement, and any
controlling Person of any such underwriter or other holder, against any Damages,
in each case only to the extent that such Damages arise out of or are based upon
actions or omissions made in reliance upon and in conformity with written
information furnished by or on behalf of the Investor expressly for use in
connection with such registration; and the Investor will pay to the Company and
each other aforementioned Person any legal or other expenses reasonably incurred
thereby in connection with investigating or defending any claim or proceeding
from which Damages may result, as such expenses are incurred; provided, however,
that the indemnity agreement contained in this Section 6(b) shall not apply to
amounts paid in settlement of any such claim or proceeding if such settlement is
effected without the consent of the Investor, which consent shall not be
unreasonably withheld; and provided further that in no event shall any indemnity
under this Section 6(b) exceed the proceeds from the offering received by the
Investor (net of any Selling Expenses paid by the Investor), except in the case
of fraud or willful misconduct by the Investor.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action (including any
governmental action) for which a party may be entitled to indemnification
hereunder, such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 6, give the indemnifying
party notice of the commencement thereof. The indemnifying party shall have the
right to control such action (on a joint basis with any other indemnifying party
to which notice has been given, if applicable) and to assume the defense thereof
with counsel selected by the indemnifying party; provided, however, that an
indemnified party (together with all other indemnified parties that 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 action. The failure to give notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall relieve such indemnifying party of any liability to the indemnified
party under this Section 6, to the extent that such failure materially
prejudices the indemnifying party's ability to defend such action. The failure
to give notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 6.
(d) Notwithstanding anything else herein to the contrary, the
foregoing indemnity agreements of the Company and the Investor are subject to
the condition that, insofar as they relate to any Damages arising from any
untrue statement or alleged untrue statement of a material fact contained in, or
omission or alleged omission of a material fact from, a preliminary prospectus
(or necessary to make the statements therein not misleading) that has been
corrected in the form of prospectus included in the registration statement at
the time it becomes effective,
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or any amendment or supplement thereto filed with the SEC pursuant to Rule
424(b) under the Securities Act (the "Final Prospectus"), such indemnity
agreement shall not inure to the benefit of any Person if a copy of the Final
Prospectus was furnished to the indemnified party and such indemnified party
failed to deliver, at or before the confirmation of the sale of the shares
registered in such offering, a copy of the Final Prospectus to the Person
asserting the loss, liability, claim, or damage in any case in which such
delivery was required by the Securities Act.
(e) To provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any party
otherwise entitled to indemnification hereunder makes a claim for
indemnification pursuant to this Section 6 but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case, notwithstanding the fact
that this Section 6 provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of any party
hereto for which indemnification is provided under this Section 6, then, and in
each such case, such parties will contribute to the aggregate losses, claims,
damages, liabilities, or expenses to which they may be subject (after
contribution from others) in such proportion as is appropriate to reflect the
relative fault of each of the indemnifying party and the indemnified party in
connection with the statements, omissions or other actions that resulted in such
loss, claim, damage, liability or expense, as well as to reflect any other
relevant equitable considerations. 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 allegedly untrue statement of a material fact, or
the omission or alleged omission of 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; provided, however, that, in any such case,
(x) the Investor will not be required to contribute any amount in excess of the
public offering price of all such Registrable Securities offered and sold by the
Investor pursuant to such registration statement and (y) no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation; and provided further that in no
event shall the Investor's liability pursuant to this Section 6(e), when
combined with the amounts paid or payable by the Investor pursuant to Section
6(b), exceed the total aggregate amount of the proceeds from the offering
received by the Investor (net of any Selling Expenses paid by the Investor),
except in the case of willful misconduct or fraud by the Investor.
(f) 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.
(g) Unless otherwise superseded by an underwriting agreement
entered into in connection with the underwritten public offering, the
obligations of the Company and the Investor under this Section 6 shall survive
the completion of any offering of Registrable Securities in a registration under
Section 2, and otherwise shall survive the termination of this Agreement.
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7. Successor Indemnification.
If the Company or any of its successors or assignees consolidates with or merges
into any other Person and is not the continuing or surviving corporation or
entity of such consolidation or merger, then to the extent necessary, proper
provision shall be made so that the successors and assignees of the Company
assume the obligations of the Company with respect to indemnification of members
of the Board of Directors as in effect immediately before such transaction,
whether such obligations are contained in the Company's Bylaws, its Certificate
of Incorporation, or elsewhere, as the case may be.
8. Reports Under Exchange Act.
With a view to making available to the Investor the benefits of SEC Rule 144 and
any other rule or regulation of the SEC that may at any time permit the Investor
to sell securities of the Company to the public without registration or pursuant
to a registration on Form S-3, the Company shall:
(a) make and keep available adequate current public information,
as those terms are understood and defined in SEC Rule 144, at all times after
the effective date of the registration statement filed by the Company for the
IPO;
(b) use commercially reasonable efforts to file with the SEC in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act (at any time after the Company has become
subject to such reporting requirements); and
(c) furnish to the Investor, so long as the Investor owns any
Registrable Securities, forthwith upon request (i) to the extent accurate, a
written statement by the Company that it has complied with the reporting
requirements of SEC Rule 144 (at any time after ninety (90) days after the
effective date of the registration statement filed by the Company for the IPO),
the Securities Act, and the Exchange Act (at any time after the Company 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 the Company so qualifies); (ii) to the extent not publicly available, a
copy of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company with the SEC and (iii) such other
information in the possession of the Company or reasonably obtainable by it as
may be reasonably requested in availing the Investor of any rule or regulation
of the SEC that permits the selling of any such securities without registration
(at any time after the Company has become subject to the reporting requirements
under the Exchange Act) or pursuant to Form S-3 (at any time after the Company
so qualifies to use such form).
9. Information Rights.
9.1 Delivery of Financial Statements.
The Company shall deliver to the Investor:
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(a) as soon as practicable, but in any event within forty-five
(45) days after the end of each fiscal year of the Company, (i) an unaudited
balance sheet as of the end of such year, (ii) unaudited statements of income
and of cash flows for such year and (iii) an unaudited statement of
stockholders' equity as of the end of such year;
(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, unaudited statements of income and of cash flows for such
fiscal quarter, and an unaudited balance sheet and a statement of stockholders'
equity as of the end of such fiscal quarter, all prepared in accordance with
GAAP (except that such financial statements shall not contain all notes thereto
that may be required in accordance with GAAP);
(c) 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, a statement showing the number of shares of each class and
series of capital stock and securities convertible into or exercisable for
shares of capital stock outstanding at the end of the period, the Common Stock
issuable upon conversion or exercise of any outstanding securities convertible
or exercisable for Common Stock and the exchange ratio or exercise price
applicable thereto, and the number of shares of issued stock options and stock
options not yet issued but reserved for issuance, if any, all in sufficient
detail as to permit the Investor to calculate its respective percentage equity
ownership in the Company, and certified by the chief financial officer or chief
executive officer of the Company as being true, complete and correct; and
(d) with respect to the financial statements called for in
Section 9.1(a) and Section 9.1(b), an instrument executed by the chief financial
officer and chief executive officer of the Company certifying that such
financial statements were prepared in accordance with GAAP consistently applied
with prior practice for earlier periods (except as otherwise set forth in
Section 9.1(b)) and fairly present the financial condition of the Company and
its results of operation for the periods specified therein.
If, for any period, the Company has any subsidiary whose accounts are
consolidated with those of the Company, then in respect of such period the
financial statements delivered pursuant to the foregoing sections shall be the
consolidated and consolidating financial statements of the Company and all such
consolidated subsidiaries.
Notwithstanding anything else in this Section 9.1 to the contrary, the Company
may cease providing the information set forth in this Section 9.1 during the
period starting with the date sixty (60) days before the Company's good-faith
estimate of the date of filing of a registration statement if it reasonably
concludes it must do so to comply with the SEC rules applicable to such
registration statement and related offering; provided, however, the Company's
covenants under this Section 9.1 shall be reinstated at such time as the Company
is no longer actively employing its commercially reasonable efforts to cause
such registration statement to become effective.
9.2 Inspection.
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The Company shall permit the Investor (provided, however, the Board has not
reasonably determined that the Investor is a competitor of the Company), at the
Investor's expense and during normal business hours, to visit and inspect the
Company's properties; examine its books of account and records; and discuss the
Company's affairs, finances, and accounts with its officers, during normal
business hours of the Company as may be reasonably requested by the Investor;
provided, however, that the Company shall not be obligated pursuant to this
Section 9.2 to provide access to any information that it reasonably considers to
be a trade secret or confidential information (unless covered by an enforceable
confidentiality agreement, in form acceptable to the Company) or the disclosure
of which would adversely affect the attorney-client privilege between the
Company and its counsel.
9.3 Termination of Information.
The covenants set forth in Section 9.1 and Section 9.2 shall terminate and be of
no further force or effect immediately before the consummation of the IPO.
9.4 Confidentiality.
The Investor agrees that it will keep confidential and will not disclose,
divulge, or use for any purpose (other than to monitor its investment in the
Company) any confidential information obtained from the Company pursuant to the
terms of this Agreement (including notice of the Company's intention to file a
registration statement), unless such confidential information (a) is known or
becomes known to the public in general (other than as a result of a breach of
this Section 9.4 by such Investor), (b) is or has been independently developed
or conceived by the Investor without use of the Company's confidential
information, or (c) is or has been made known or disclosed to the Investor by a
third party without a breach of any obligation of confidentiality such third
party may have to the Company; provided, however, that the Investor may disclose
confidential information (i) to its attorneys, accountants, consultants and
other professionals to the extent necessary to obtain their services in
connection with monitoring its investment in the Company; (ii) to any
prospective purchaser of any Registrable Securities from the Investor, if such
prospective purchaser agrees to be bound by the provisions of this Section 9.4,
and the Board determines that such prospective purchaser is not a competitor;
(iii) to any Affiliate, partner, member, stockholder, or wholly owned subsidiary
of the Investor in the ordinary course of business, provided, however, the
Investor informs such Person that such information is confidential and directs
such Person to maintain the confidentiality of such information or (iv) as may
otherwise be required by law, provided, however the Investor promptly notifies
the Company of such disclosure and takes reasonable steps to minimize the extent
of any such required disclosure.
10. Miscellaneous.
10.1 Successors and Assigns.
The rights under this Agreement may be assigned (but only with all related
obligations) by the Investor to a transferee of Registrable Securities that is
not a competitor of the Company (as determined by the Company, in its sole
judgment); provided, however, that (i) the Investor's Board representation and
voting rights under Section 3 hereof shall not be transferable by the
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Investor except to an Affiliate; (ii) the Investor's information and inspection
rights under Sections 8, 9.1 and 9.2 shall not be transferable except to a
transferee that, after giving effect to such transfer, holds at least fifty
percent (50%) of all shares of Registrable Securities calculated on a
fully-diluted basis (subject to appropriate adjustment for stock splits, stock
dividends, combinations and other recapitalizations); (iii) no such transfer
shall increase the total number of demand registrations exercisable under this
Agreement (irrespective of whether exercised by the Investor, any such
transferee(s), or both of them), increase the Company's total expenses incurred
in connection therewith beyond that specified in Section 5.1, or decrease the
Minimum Proceeds Threshold applicable to any demand registration; (iv) no
piggyback registration rights shall be transferable except to a transferee that,
after giving effect to such transfer, holds at least thirty percent (30%) of all
shares of Registrable Securities calculated on a fully-diluted basis (subject to
appropriate adjustment for stock splits, stock dividends, combinations and other
recapitalizations); (v) the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee and the Registrable Securities with respect to which such rights are
being transferred and (vi) such transferee agrees in a written instrument
delivered to the Company to be bound by and subject to the terms and conditions
of this Agreement. For the purposes of determining the percentage of shares of
Registrable Securities held by a transferee with respect to subsections 10.1(ii)
and (iv) above, the holdings of a transferee that is an Affiliate, limited
partner, retired partner, member, retired member, or stockholder of the
Investor, shall be aggregated together and with those of the Investor; provided
further that all transferees who would not qualify individually for assignment
of rights shall have a single attorney-in-fact for the purpose of receiving
notices, or taking any action under this Agreement. The terms and conditions of
this Agreement inure to the benefit of and are binding upon the respective
successors and permitted assignees of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and permitted assignees any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided herein.
10.2 Governing Law.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York, without regard to the conflicts of law provisions of the
State of New York or any other state.
10.3 Arbitration.
In the event of any dispute, controversy or claim arising from or relating to
this Agreement or the alleged breach of this Agreement (each, a "Dispute"),
representatives of the Company and the Investor shall negotiate with each other
in good faith and use commercially reasonable efforts to resolve such Dispute.
Such representatives shall continue to meet and discuss resolution of the
dispute until the earliest to occur of the following dates: (i) an agreement
shall be reached by the parties resolving the Dispute or (ii) one party shall
notify the other party in writing (the "Arbitration Notice") that (a) no
agreement resolving the Dispute is likely to be reached and (b) it seeks to
commence an arbitration in accordance with the procedures set forth below. In
the event a party delivers an Arbitration Notice, the Dispute shall be settled
exclusively by final and binding arbitration in accordance with the Commercial
Arbitration Rules of the AAA. The party delivering the Arbitration Notice shall
notify the AAA in writing describing in reasonable detail
-15-
the nature of the Dispute. Within twenty (20) days following receipt by one
party of the other party's Arbitration Notice, each party shall select an
arbitrator. The two arbitrators selected by the parties shall, within ten (10)
days of their appointment, select as chairman of the tribunal, a third neutral
arbitrator (collectively with the party-appointed arbitrators, the "Arbitrators"
and each an "Arbitrator"). If the two party-appointed Arbitrators do not agree
on a third neutral Arbitrator, the third Arbitrator shall be selected by the
AAA. The arbitration hearing shall be held in New York, before the three
Arbitrators. Each of the Arbitrators shall be unaffiliated with either party or
its affiliates, shall not have any material financial dependence on either
party, and shall at all times remain neutral and wholly impartial. The
arbitration hearing shall commence within sixty (60) days of the appointment of
the third Arbitrator. The Arbitrators will not have any power to modify the
terms of this Agreement or to award punitive damages. Except as may be required
by law or with the consent of all parties involved in the proceeding, neither
party shall disclose or disseminate any information relating to a Dispute or to
the arbitration proceedings called for hereby except for disclosure to those of
its Affiliates, officers, employees, accountants, attorneys and agents whose
duties reasonably require them to have access to such information. The parties
in the arbitration shall share equally the costs and expenses of the
arbitration. Each party shall otherwise bear its own fees and expenses.
10.4 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.
10.5 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.
10.6 Notices.
All notices required or permitted hereunder shall be in writing and shall be
deemed effectively given: (i) upon personal delivery to the party to be
notified, (ii) when sent by confirmed facsimile if sent during normal business
hours of the recipient, if not, then on the next business day; (iii) five days
after having been sent by registered or certified mail, return receipt
requested, postage prepaid or (iv) one day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications to the Company shall be sent to the
following address or to such other address as the Company may designate by ten
(10) days' advance written notice to the Investor:
NanoDynamics, Inc.
000 Xxxxxxxx Xxxxxxxxx
Xxxxxxx, Xxx Xxxx 00000
Attention: Chief Executive Officer
With a copy to:
Loeb & Loeb LLP
000 Xxxx Xxxxxx
-00-
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxx, Esq.
All communications to the Investor shall be sent to the following address or to
such other address as the Investor may designate by ten (10) days' advance
written notice to the Company:
Nano-applications Holdings B.V.
Xxxxx Xxxxxxx 00X
0000 XX Xxxxxxxx, Xxx Xxxxxxxxxxx
Attention: General Counsel
With a copy to:
Xxxxx Xxxxx L.L.P.
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxx
10.7 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 Investor; and provided further that any provision hereof may be
waived by any waiving party on such party's own behalf, without the consent of
any other party. Notwithstanding the foregoing, this Agreement may not be
amended or terminated and the observance of any term hereof may not be waived
with respect to the Investor without the written consent of the Investor. The
Company shall give prompt notice of any amendment or termination hereof or
waiver hereunder. Any amendment, termination, or waiver effected in accordance
with this Section 10.7 shall be binding on all parties hereto, regardless of
whether any such party has consented thereto. No waivers of or exceptions to any
term, condition, or provision of this Agreement, in any one or more instances,
shall be deemed to be or construed as a further or continuing waiver of any such
term, condition, or provision.
10.8 Severability.
If one or more provisions of this Agreement are held to be unenforceable under
applicable law, such provisions 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.
10.9 Entire Agreement.
This Agreement (including any Schedules and Exhibits hereto) constitutes the
full and entire understanding and agreement among the parties with respect to
the subject matter hereof, and any other written or oral agreement relating to
the subject matter hereof existing between the parties is expressly canceled.
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10.10 Delays or Omissions.
No delay or omission to exercise any right, power, or remedy accruing to any
party under this Agreement, upon any breach or default of any other party under
this Agreement, shall impair any such right, power or remedy of such
nonbreaching or nondefaulting party, nor shall it be construed to be a waiver of
or acquiescence to any such breach or default, or to any similar breach or
default thereafter occurring, nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. All remedies, whether under this Agreement or by law or
otherwise afforded to any party, shall be cumulative and not alternative.
10.11 Acknowledgment.
The Company acknowledges that the Investor is in the business of venture capital
investing and therefore reviews the business plans and related proprietary
information of many enterprises, including enterprises which may have products
or services which compete directly or indirectly with those of the Company.
Nothing in this Agreement shall preclude or in any way restrict the Investor
from investing or participating in any particular enterprise whether or not such
enterprise has products or services which compete with those of the Company.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
NANODYNAMICS, INC.
By: /s/ XXXXX XXXXXXX
------------------------------------
Name: Xxxxx Xxxxxxx
Title: Chief Executive Officer
NANO-APPLICATIONS HOLDINGS B.V.
By: /s/ XXXXXX XXXXX
------------------------------------
Name: Xxxxxx Xxxxx
Title: Director
By: /s/ XXXX DEQUAE
------------------------------------
Name: Xxxx Dequae
Title: Director
Signature Page to Investor's Rights Agreement
