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Exhibit 10.3
RESTATED INVESTORS RIGHTS AGREEMENT
This Restated Investors Rights Agreement is entered into and made
effective as of March 31, 2000 by and among Triton Network Systems, Inc., a
Delaware corporation (the "Company") and the investors designated on Schedule A
attached hereto or on the signature pages hereto (each an "Investor" and
collectively the "Investors").
Pursuant to a Restated Investors Rights Agreement dated as of October
18, 1999 (the "Prior Agreement"), the Company has granted certain rights to
holders of its Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock. The Company is entering into an Acquisition and License
Agreement with International Business Machines Corporation; and in connection
therewith, the Company is issuing shares of Series C Preferred Stock. The
Company has also entered into an equipment lease financing with FINOVA Capital
Corporation and is issuing FINOVA a warrant to purchase shares of the Company's
Common Stock. The Company and Investors holding 67% of the Registrable
Securities wish to amend this Agreement to include shares issued to IBM and
FINOVA as Registrable Securities.
NOW, THEREFORE, the Company and the Investors hereby agree that the
Prior Agreement shall be amended and restated by this Agreement, and the
parties hereto further agree as follows:
1. Information and Observation Rights.
1.1 Financial Information. The Company will provide to
each Investor and L.H. Friend, Weinress, Xxxxxxxx & Xxxxxxx, Inc. (and its
affiliates) the following information:
(a) As soon as practicable after the end of
each fiscal year, and in any event within 90 days thereafter, a consolidated
balance sheet of the Company and its subsidiaries, if any, as of the end of
such fiscal year, and consolidated statements of income, stockholders' equity
and cash flows of the Company and its subsidiaries, if any, for such year,
prepared in accordance with generally accepted accounting principles ("GAAP")
consistently applied and setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail. Such financial
statements shall be accompanied by a report and opinion thereon by independent
public accountants of national standing selected by the Company's Board of
Directors. At least thirty (30) days prior to the beginning of each fiscal
year, the Company will furnish to each Investor an annual budget and operating
plans for such fiscal year.
(b) So long as an Investor (and its affiliates)
or L.H. Friend, Weinress, Xxxxxxxx & Xxxxxxx, Inc. (and its affiliates) holds
at least 100,000 shares of the Company's Preferred Stock or Common Stock (or
Common Stock issuable upon conversion of Preferred Stock or a Warrant
exercisable for shares of Common Stock or a combination thereof), as soon as
practicable after the end of each month and in any event within 20 days
thereafter, a consolidated balance sheet of the Company and its subsidiaries,
if any, as of the end of each such month, consolidated statements of income,
consolidated statements of changes in financial condition, and a consolidated
statement of cash flow of the Company and its subsidiaries for such period and
for the current fiscal year
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to date, and setting forth in each case in comparative form the figures for
corresponding periods in the previous fiscal year, and setting forth in
comparative form the budgeted figures for such period and for the current
fiscal year then reported, prepared in accordance with GAAP (other than for
accompanying notes), subject to changes resulting from year-end audit
adjustments, all in reasonable detail and signed by the principal financial or
accounting officer of the Company.
1.2 Additional Information. So long as an Investor (and
its affiliates), or L.H. Friend, Weinress, Xxxxxxxx & Xxxxxxx, Inc. (and its
affiliates) holds at least 100,000 shares of the Company's Preferred Stock or
Common Stock (or Common Stock issuable upon conversion of Preferred Stock or a
warrant exercisable for shares of Common Stock or a combination thereof), the
Company will allow such stockholder or such stockholder's representative to
visit and inspect any of the properties of the Company (upon reasonable advance
notice). The Company will deliver or provide to any Investor with reasonable
promptness, (i) copies of all notices, minutes, consents and the like provided
to the Board of Directors of the Company, and (ii) such other information and
data, including access to books, records, officers and accountants, with
respect to the Company and its subsidiaries as any such Investor may from time
to time reasonably request; provided, however, that the Company shall not be
obligated to provide any information that it reasonably considers in good faith
to be a trade secret or to contain confidential or classified information.
1.3 Board Observation Rights. Representatives of
Bessemer Venture Partners, Advent International Corporation, Xxxxx Capital,
TeleSoft Partners IA, L.P., Chase Venture Capital Associates, L.P., MeriTech
Capital Partners and Xxxxxxx Xxxxx & Associates shall be entitled (i) to attend
as observers all meetings of the Board of Directors, including meetings held in
person or by conference call, and (ii) to receive all notices of Board meetings
and Board actions and all written materials provided to the Board of Directors
at the same time as such notices and materials are provided to the Board of
Directors.
1.4 Termination of Covenants. The rights set forth in
Sections 1.1, 1.2 and 1.3 shall terminate and be of no further force or effect
upon the closing of a public offering of the Company's securities pursuant to
an effective registration statement filed by the Company under the Securities
Act of 1933, as amended, or on the date the Company otherwise becomes subject
to the reporting requirements under Section 13 or 15(d) of the Securities
Exchange Act, as amended, whichever first occurs.
2. Registration Rights.
2.1 Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
(a) "Commission" shall mean the Securities and
Exchange Commission or any other federal agency at the time administering the
Securities Act.
(b) "Founders" shall mean the persons listed on
Exhibit B of the Co-Sale Agreement dated November 7, 1997.
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(c) "Outside Director" shall mean a member of
the Board of Directors of the Company, who is not a representative of any
Preferred Stock Holder, a Founder, an officer of the Company (other than the
Chairman) or a member of the board of directors of Military Commercial
Technologies, Inc.
(d) "Preferred Holder" shall mean an Investor
holding the Preferred Stock of the Company or the Common Stock issuable on the
conversion thereof.
(e) "Holder" shall mean an Investor holding
Registrable Securities or securities convertible into Registrable Securities
and any person holding such securities to whom the rights under this Section 2
have been transferred in accordance with Section 2.11 hereof.
(f) "Initiating Holders" shall mean any Holder
or Holders who in the aggregate hold at least 20% of the shares of Common Stock
issuable upon conversion of the Preferred Stock.
(g) "Registrable Securities" means (i) the
Common Stock issuable upon conversion of the Series A, Series B and Series C
Preferred Stock, including Series C Preferred Stock issued to IBM Corporation;
(ii) Common Stock issued to L3 Communications Corporation ("L3"); (iii) all
shares of Common Stock held by the Founders as of the date of this Agreement,
(iv) the Common Stock issuable upon exercise of warrants held by LH. Friend,
Weinress, Xxxxxxxx & Xxxxxxx, Inc. and certain of its affiliates; (v) all
shares of Common Stock held by Outside Directors of the corporation, (vi) the
Common Stock issuable upon the exercise of warrants held by Lighthouse Capital
Partners II, L.P., Comdisco Ventures, Inc., and FINOVA Capital Corporation
(vii) Common Stock issued to Lockheed Xxxxxx Corporation ("Lockheed") in
exchange for termination of Lockheed's right to receive royalty payments under
the License Agreement dated June 12, 1997, and (viii) any Common Stock of the
Company issued or issuable in respect of the Series A, Series B or Series C
Preferred Stock or other securities issued or issuable pursuant to the
conversion of the Series A, Series B or Series C Preferred Stock upon any stock
split, stock dividend, recapitalization, or similar event; provided however
that shares of Common Stock or other securities shall only be treated as
Registrable Securities (A) if and so long as they have not been sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, or (B) prior to the date such securities have been sold
or, together with all other shares of Common Stock or other securities held by
a given Holder, are available for immediate sale in a transaction exempt from
the prospectus delivery requirements of the Securities Act so that all transfer
restrictions and legends with respect thereto are removed upon the consummation
of such sale. The term "Class I Registrable Securities" shall refer to
Registrable Securities held by Preferred Holders and Lockheed Xxxxxx
Corporation, the term "Class II Registrable Securities" shall refer to
Registrable Securities held by the Founders and Outside Directors, and the term
"Class III Registrable Securities" shall refer to all other Registrable
Securities.
(h) The terms "register," "registered" and
"registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act, and the
declaration or ordering of the effectiveness of such registration statement.
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(i) "Registration Expenses" shall mean all
expenses, except as otherwise stated below, incurred by the Company in
complying with Sections 2.2, 2.3 and 2.4 hereof, including, without limitation,
all registration, qualification and filing fees, printing expenses, escrow
fees, fees and disbursements of counsel for the Company, reasonable fees and
disbursements of a single counsel to for the Holders, blue sky fees and
expenses, the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the
Company which shall be paid in any event by the Company).
(j) "Restricted Securities" shall mean the
securities of the Company required to bear a legend indicating that transfer is
restricted in the absence of registration.
(k) "Securities Act" shall mean the Securities
Act of 1933, as amended, or any similar federal statute and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time.
(l) "Selling Expenses" shall mean all
underwriting discounts, selling commissions and stock transfer taxes and costs
of special counsel to the Holders, if any, applicable to the securities
registered by the Holders.
2.2 Requested Registration.
(a) Request for Registration. In case the
Company shall receive from Initiating Holders (excluding Founders and Outside
Directors) a written request that the Company effect any registration,
qualification or compliance with respect to at least 20% of the shares of
Registrable Securities held by such Initiating Holders (or a lesser percentage
if the anticipated gross proceeds from the offering exceed $2,000,000), the
Company will (i) within ten days of the receipt by the Company of such notice,
give written notice of the proposed registration, qualification or compliance
to all other Holders and (ii) as soon as practicable, use its best efforts to
effect such registration, qualification or compliance (including, without
limitation, appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations issued
under the Securities Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are specified in
a written request received by the Company within 20 days after receipt of such
written notice from the Company; provided, however, that the Company shall not
be obligated to take any action to effect any such registration, qualification
or compliance pursuant to this Section 2.2(a):
(i) Prior to one year following the
effective date of the Company's first registered public offering of its
securities;
(ii) After the Company has effected two
registrations pursuant to this Section 2.2(a), which registrations have been
declared or ordered effective;
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(iii) If the Company shall furnish to
such Holders a certificate signed by the Chairman of the Board of the Company
stating that in the good faith judgment of the Board of Directors it would be
seriously detrimental to the Company and its stockholders for a registration
statement to be filed at such time, then the Company's obligation to make such
filing shall be deferred for a period not to exceed 90 days from the date of
receipt of written request from the Initiating Holders; provided, however, that
the Company shall not exercise such right more than once in any twelve-month
period.
(b) Underwriting. In the event that a
registration pursuant to this Section 2.2 is for a registered public offering
involving an underwriting, the Company shall so advise the Holders as part of
the notice given pursuant to Section 2.2(a). In such event, the right of any
Holder to registration pursuant to this Section 2.2 shall be conditioned upon
such Holder's participation in the underwriting arrangements required by this
Section 2.2, and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent requested shall be limited to the extent provided
herein.
The Company shall (together with all Holders proposing to distribute
their securities through such underwriting) enter into an underwriting
agreement in customary form with the managing underwriter selected for such
underwriting by the majority of the Holders proposing to distribute their
securities through such underwriting and reasonably acceptable to the Company.
Notwithstanding any other provision of this Section 2.2, if the managing
underwriter advises the Company in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the Company shall
so advise all holders of Registrable Securities and the number of shares of
Registrable Securities that may be included in the registration and
underwriting shall be allocated first among the holders of Class I Registrable
Securities, in proportion, as nearly as practicable, to the respective amounts
of Class I Registrable Securities held by such Holders at the time of filing
the registration statement, second, among the holders of Class II Registrable
Securities in proportion, as nearly as practicable, to the respective amount of
Class II Registrable Securities held by such Holders at the time of filing the
Registration Statement, and third, the balance, if any, shall be allocated
among the holders of Class III Registrable Securities in proportion, as nearly
as practicable, to the respective amount of Class III Registrable Securities
held by such Holders at the time of filing the registration statement. No
Registrable Securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such registration. To
facilitate the allocation of shares in accordance with the above provisions,
the Company or the underwriters may round the number of shares allocated to any
Holder to the nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms of
the underwriting, such Holder may elect to withdraw therefrom by written notice
to the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration.
2.3 Company Registration.
(a) Notice of Registration. If at any time or
from time to time the Company shall determine to register any of its
securities, either for its own account or the account of
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a security holder or holders, other than a registration relating solely to
employee benefit plans, or a registration relating solely to a Commission Rule
145 transaction, the Company will (i) give to each Holder written notice
thereof at least 30 days prior to filing, and (ii) include in such registration
(and any related qualification under blue sky laws or other compliance), and in
any underwriting involved therein, all the Registrable Securities specified in
a written request or requests, made within 15 days after receipt of such
written notice from the Company, by any Holder.
(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 a part of the written
notice given pursuant to 2.3(a). In such event the right of any Holder to
registration pursuant to 2.3 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 securities through such underwriting shall (together with the
Company) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 2.3, if the managing
underwriter or Company determines that marketing factors require a limitation
of the number of shares to be underwritten, the managing underwriter may limit
or completely exclude the Registrable Securities and other securities to be
distributed through such underwriting; provided, however, that in an
underwriting other than the Company's initial public offering of equity
securities, the amount of Registerable Securities to be sold by the Holders in
the underwriting may not be reduced below 25% of the total number of shares to
be sold in the offering. The Company shall so advise all Holders distributing
their securities through such underwriting of such limitation (or exclusion, if
applicable) and the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated (if
applicable) first among the holders of Class I Registrable Securities, in
proportion, as nearly as practicable, to the respective amounts of Class I
Registrable Securities held by such Holders at the time of filing the
registration statement, second, among the holders of Class II Registrable
Securities, in proportion, as nearly as practicable, to the respective amounts
of Class II Registrable Securities held by such Holders at the time of filing
the registration statement, and third, the balance, if any, shall be allocated
among the holders of Class III Registrable Securities in proportion, as nearly
as practicable, to the respective amounts of Class III Registrable Securities
held by such Holders at the time of filing the registration statement. In no
event will shares of any other selling stockholder be included in such
registration which would reduce the number of shares which may be included by
Holders without the written consent of Holders of not less than 67% of the
Registrable Securities proposed to be sold in the offering. 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 holder to the nearest 100
shares.
If any Holder disapproves of the terms of any such underwriting, such
Holder may elect to withdraw therefrom by written notice to the Company and the
managing underwriter. Any securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
(c) Right to Terminate Registration. The
Company shall have the right to terminate or withdraw any registration
initiated by it under this Section 2.3 prior to the effectiveness
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of such registration whether or not any Holder has elected to include
securities in such registration. The Registration Expenses of such withdrawn
registration shall be borne by the Company in accordance with Section 2.5
hereof.
(d) Superior Rights. The Company shall not
grant rights superior to any stockholder under Sections 2.2, 2.3 or 2.4 without
the written consent of the holders of at least 67% of the Preferred Stock or
Common Stock issuable upon conversion of the Preferred Stock.
2.4 Registration on Form S-3.
(a) Request for Registration. If any Holder or
Holders (other than the Founders and L3) request that the Company file a
registration statement on Form S-3 (or any successor form to Form S-3), or any
similar short-term registration statement, for a public offering of Registrable
Securities, the reasonably anticipated aggregate price to the public of which
would exceed $500,000, and the Company is a registrant entitled to use Form S-3
to register the Registrable Securities for such an offering, the Company shall:
(i) promptly give written notice of
the proposed registration, and any related qualification or compliance, to all
other Holders of Registrable Securities; and
(ii) as soon as practicable 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 fifteen (15) 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 2.4(a):
(1) in any particular
jurisdiction in which the Company would be required to execute a general
consent to service of process in effecting such registration, qualification or
compliance unless the Company is already subject to service in such
jurisdiction and except as may be required by the Securities Act;
(2) more than twice in any
twelve month period; or
(3) if the Company shall
furnish to such Holders a certificate signed by the Chairman of the Board of
the Company stating that in the good faith judgment of the Board of Directors
it would be seriously detrimental to the Company and its stockholders for a
registration statement to be filed at such time, then the Company's obligation
to make such filing shall be deferred for a period not to exceed 60 days from
the date of receipt of written request from the Initiating Holders; provided,
however, that the Company shall not exercise such right more than once in any
twelve-month period.
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(b) Covenants and Underwriting. After the
Company's first registered public offering of its securities, the Company will
use its best efforts to qualify for Form S-3 registration or a similar
short-form registration. The provisions of Section 2.2(b) shall be applicable
to each registration initiated under Section 2.4(a).
2.5 Expenses of Registration. All Registration Expenses
incurred in connection with registrations pursuant to Sections 2.2, 2.3 and 2.4
shall be borne by the Company. All Selling Expenses relating to securities
registered on behalf of the Holders shall be borne by the holders of securities
included in such registration pro rata with the Company and among each other on
the basis of the number of shares so registered. In addition, the expenses in
excess of $15,000 of any special audit required in connection with a requested
registration shall be borne pro rata by the selling stockholders.
2.6 Registration Procedures. In the case of each
registration, qualification or compliance effected by the Company pursuant to
this Section 2, the Company will keep each Holder advised in writing as to the
initiation of each registration, qualification and compliance and as to the
completion thereof. At its expense the Company will:
(a) Prepare and file with the Commission a
registration statement with respect to such securities and use its best efforts
to cause such registration statement to become and remain effective until the
distribution described in the Registration Statement has been completed (up to
a maximum of 90 days);
(b) Prepare and file with the Commission 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 Securities Act with respect to the
disposition of all securities covered by such registration statement.
(c) Furnish to the Holders participating in
such registration and to the underwriters of the securities being registered
such reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such underwriters may
reasonably request in order to facilitate the public offering of such
securities.
(d) Enter into and perform its obligations
under a written underwriting agreement in customary form and substance
reasonably satisfactory to the Company, the Holders and the managing
underwriter or underwriters of the public offering of such securities, if the
offering is to be underwritten in whole or in part;
(e) Use its best efforts to register or qualify
the securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such participating Holders
may reasonably request within ten (10) days prior to the original filing of
such registration statement, except that the Company shall not for any purpose
be required to execute a general consent to service of process or to qualify to
do business as a foreign corporation in any jurisdiction where it is not so
qualified;
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(f) 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 Securities 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 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.
(g) Furnish, at the request of any Holder
requesting registration of Registrable Securities pursuant to this Agreement,
on the date that such Registrable Securities are delivered to the underwriters
for sale in connection with a registration pursuant to this Agreement, (i) an
opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, 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 requesting registration of Registrable Securities
and (ii) a letter dated such date, from the independent accountants of the
Company, in form and substance as is customarily given by independent
accountants to underwriters in an underwritten public offering, addressed to
the underwriters, if any, and to the Holders requesting registration of
Registrable Securities.
2.7 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 2.
2.8 Indemnification. In the event any Registrable
Securities are included in a registration statement under this Section 2:
(a) To the extent permitted by law, the Company
will indemnify and hold harmless each selling Holder, each of its officers,
directors, partners and legal counsel, and each person controlling such Holder
within the meaning of Section 15 of the Securities Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
Section 3, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading, or any violation or alleged violation by the Company 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 in connection with any such registration, qualification or
compliance ("Violation"), and the Company will reimburse each such Holder, each
of its officers, directors, partners, and legal counsel and each person
controlling such Holder, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing
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or defending any such claim, loss, damage, liability or action, provided that
the Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission or alleged untrue statement or omission, made in
reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder, controlling person or
underwriter and stated to be specifically for use therein.
(b) To the extent permitted by law, each Holder
will, if Registrable Securities held by such Holder are included in the
securities as to which such registration, qualification or compliance is being
effected, indemnify the Company, each of its directors, officers, and legal
counsel, each underwriter, if any, of the Company's securities covered by such
a registration statement, each person who controls the Company or such
underwriter within the meaning of Section 15 of the Securities Act, and each
other Holder, each of its officers, directors, partners and legal counsel and
each person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any Violation, will reimburse
the Company, such Holders, such directors, officers, persons, underwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such Violation is made in such registration statement, prospectus, offering
circular or other document in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by such
Holder and stated to be specifically for use therein. Notwithstanding the
foregoing, the liability of each Holder under this subsection (b) shall be
limited in an amount equal to the net proceeds to each such Holder of
Registrable Securities sold as contemplated herein. This indemnity agreement
shall not apply to amounts paid in settlement of any such claim, loss, damage,
liability or action if such settlement is effected without the written consent
of the Holder, which consent shall not be unreasonably withheld. A Holder will
not be required to enter into any agreement or undertaking in connection with
any registration under this Section 2 providing for any indemnification or
contribution on the part of such Holder greater than the Holder's obligations
under this Section 2.8(b).
(c) Each party entitled to indemnification
under this Section 2.8 (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party") promptly after
such Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the defense of
any such claim or any litigation resulting therefrom, provided that counsel for
the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval shall
not unreasonably be withheld), and the Indemnified Party may participate in
such defense at such party's expense, and provided further that the failure of
any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 2 unless the failure
to give such notice is materially prejudicial to an Indemnifying Party's
ability to defend such action and provided further, that the Indemnifying Party
shall not assume the defense for matters as to which there is a conflict of
interest or separate and different defenses but shall bear the expense of such
defense nevertheless. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified
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Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation.
(d) If the indemnification provided for in this
Section 2.8 is held by a court of competent jurisdiction to be unavailable to
an indemnified party with respect to any losses, claims, damages or liabilities
referred to herein, the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall to the extent permitted by applicable law
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability 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 Violation(s) that
resulted in such loss, claim, damage or liability, as well as any other
relevant equitable considerations. The relative fault of the indemnifying party
and of the indemnified party shall be determined by a court of law 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; provided, that in no event shall any
contribution by a Holder hereunder exceed the net proceeds from the offering
received by such Holder.
2.9 Information by Holder. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to this
Section 2 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 reasonably required to effect the registration of
such Holder's Registrable Securities.
2.10 Rule 144 Reporting. With a view to making available
the benefits of certain rules and regulations of the Commission which may at
any time permit the sale of the Restricted Securities to the public without
registration, after such time as a public market exists for the Common Stock of
the Company, the Company agrees to use its best efforts to:
(a) Make and keep public information available,
as those terms are defined in Rule 144 under the Securities Act, at all times
after the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
(b) Use its best efforts to file with the
Commission in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act (at any time after it has
become subject to such reporting requirements);
(c) So long as an Investor owns any Restricted
Securities, upon request, (i) a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 (at any time after
90 days after the effective date of the first registration statement filed by
the Company for an offering of its securities to the general public), and of
the Securities Act and the Exchange Act (at any time after it has become
subject to such reporting requirements), (ii) a copy of
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the most recent annual or quarterly report of the Company and (iii) such other
reports and documents of the Company and other information in the possession of
or reasonably obtainable by the Company as an Investor may reasonably request
in availing itself of any rule or regulation of the Commission allowing an
Investor to sell any such securities without registration.
2.11 Transfer of Registration Rights. The rights to cause
the Company to register securities granted Holders under Sections 2.2, 2.3 and
2.4 may be assigned (i) to a transferee or assignee in connection with any
transfer or assignment of Registrable Securities by a Holder of not less than
100,000 shares of Registrable Securities or such lesser number if such shares
constitute all of the Registrable Securities then held by such Holder, (ii) to
any transferee or assignee who is a constituent partner or member or retired
partner of a Holder or the estate of such partner, or to any transferee or
assignee who is a family member of the Holder or a trust for the benefit of the
Holder or any family member of the Holder or a parent corporation or subsidiary
corporation of the Holder or (iii) pursuant to the terms of that certain
co-investment letter by and among certain Investors and TeleSoft Management,
L.L.C., provided that, with respect to each such transfer or assignment, the
Company be given prior written notice of the transfer, the transferee or
assignee agree in writing to all provisions contained in this Section 2 and
that such transfer otherwise be effected in accordance with applicable
securities laws.
2.12 Standoff Agreement. Each Holder agrees in connection
with the Company's initial public offering of the Company's securities, upon
request of the underwriters managing any underwritten offering of the Company's
securities, not to sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any Registrable Securities (other than
those included in the registration) without the prior written consent of the
Company or such underwriters, as the case may be, for such period of time (not
to exceed one hundred eighty (180) days) from the effective date of such
registration as may be requested by the underwriters provided that all
directors, officers and one percent (1%) stockholders are subject to a similar
standoff agreement.
2.13 Termination of Registration Rights. The rights
granted under this Section 3 shall terminate on the first to occur of (i) the
fifth anniversary of the consummation of the initial underwritten public
offering of the Company's securities pursuant to a effective registration
statement filed under the Securities Act, or (ii) as to any Holder, the date on
which such Holder is able to offer for sale all of its Registrable Securities
within a given three-month period pursuant to Rule 144 of the Securities Act.
3. Right of First Offer.
3.1 General. Except for (i) conversion rights applicable
to the Company's Preferred Stock, (ii) securities issued pursuant to an
underwritten public offering pursuant to an effective registration statement
under the Securities Act, (iii) securities issued pursuant to the Company's
acquisition of another corporation by merger, purchase of substantially all the
assets or other corporate reorganization, (iv) securities issued in connection
with any stock split or stock dividend of the Company, (v) securities issued
after the date hereof to employees, officers, directors or consultants of the
Company pursuant to stock purchase or stock option plans, stock bonuses or
awards, contracts or other arrangements that are approved by the Company's
board of directors,
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(vi) warrants or other securities issued to financial institutions or
commercial lenders in connection with equipment financing transactions approved
by the Company's board of directors and (vii) securities issued in connection
with strategic corporate partner agreements approved by the Company's board of
directors, the Company will not, nor will it permit any subsidiary to,
authorize or issue any shares of stock of the Company of any class and will not
authorize, issue or grant any options, warrants, conversion rights or other
rights to purchase or acquire any shares of stock of the Company of any class
without offering the Investors the right of first refusal described below. In
the event the Company grants subsequent purchasers any rights of first refusal
or registration rights which are, in the good faith judgment of the Board of
Directors, superior to those granted to the Holders pursuant to this Agreement,
then the Holders shall receive such rights. Notwithstanding anything to the
contrary contained herein or in the Prior Agreement, the undersigned holders of
not less than 67% of the Registrable Securities hereby agree, on behalf of all
Holders, that the rights to participation and notice under Section 3 of the
Prior Agreement shall not apply to the offer and sale of shares of the
Company's Series C Preferred Stock sold pursuant to that certain Series C
Preferred Stock Purchase Agreement of date even herewith.
3.2 Right of First Offer.
(a) Each Investor and Military Commercial
Technologies, Inc. shall have a right of first refusal to purchase an amount of
equity securities of the Company of any class or kind which the Company
proposes to sell (other than the issuance of shares contemplated by Section 3.1
above) sufficient to maintain such Investor's proportionate beneficial
ownership interest in the Company. If the Company wishes to make any such sale
of its securities, it shall give the Investors written notice of the proposed
sale. The notice shall set forth (i) the Company's bona fide intention to offer
such shares and (ii) the material terms and conditions of the proposed sale
(including the number of shares to be offered and the price, if any, for which
the Company proposes to offer such shares), and shall constitute an offer to
sell such securities to the Investors on such terms and conditions. Any
Investor may accept such offer by delivering a written notice of acceptance to
the Company within sixty (60) days after receipt of the Company's notice of the
proposed sale. Any Investor exercising its right of first refusal shall be
entitled to participate in the purchase of such securities on a pro rata basis
to the extent necessary to maintain such Investor's proportionate beneficial
ownership interest in the Company (for purposes of determining the pro rata
interest of the Investor, any Investor or other security holder shall be
treated as owning that number of shares of Common Stock into which any
outstanding convertible securities may be converted and for which any
outstanding options or warrants may be exercised). The Company shall promptly,
in writing, inform each Investor which elects to purchase its pro rata portion
of such shares of any other Investor's failure to do so, in which case the
Investors electing to purchase such shares shall have the right to purchase all
or a portion of such shares on a pro rata basis, on terms no less favorable to
the Investor, for a period of 120 days. An Investor shall be entitled to
apportion the right of first refusal hereby granted among itself and its
partners, affiliates and related parties in such proportions it deems
appropriate. If the Investor does not accept such offer within sixty (60) days,
then that portion of the shares which is not purchased may be offered to other
parties on terms no less favorable to the Company for a period of 120 days.
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(b) In lieu of delivering Notice to the
Investors prior to the sale of Company offered securities to third parties, as
provided in Section 3, above, the Company may elect first to sell Company
offered securities to third parties and then to offer Investors the opportunity
to purchase their pro rata portions of the Company offered securities. Such
offer shall remain in effect for sixty (60) days after notice to the Investors
and, if accepted, the closing of the sale of Company offered securities shall
occur within sixty (60) days after the date of the acceptance notice.
3.3 Expiration of Right of First Refusal. The right of
first refusal granted under this Agreement shall expire when a sale of
securities pursuant to a registration statement filed by the Company under the
Securities Act in connection with a firm commitment underwritten offering of
its securities to the general public is consummated.
3.4 Assignment. The right of first refusal granted under
this Section 3 may be assigned (i) to a transferee or assignee in connection
with any transfer or assignment of Registrable Securities by a Holder of not
less than 50,000 shares of Registrable Securities, or such lesser number if
such shares constitute all of the registrable securities then held by such
holder, (ii) to any transferee or assignee who is a constituent, member or
partner or retired partner of a Holder of the estate of such partner, or to any
transferee or assignee who is a family member of the Holder or a trust for the
benefit of the Holder or any family member of the Holder or any parent
corporation or subsidiary corporation of the Holder, or (iii) pursuant to the
terms of that certain co-investment letter by and among certain Investors and
TeleSoft Management, L.L.C., provided that, with respect to each such transfer
or assignment, the Company be given prior written notice of the transfer, the
transferee or assignee agree writing to all provisions contained in this
Section 3 and that such transfer otherwise be effected in accordance with
applicable laws.
4. SBIC.
4.1 Non-Discrimination. So long as TeleSoft Partners IA,
L.P. ("TeleSoft") and Chase Venture Capital Associates, L.P. ("Chase") hold any
securities of the Company, the Company will at all times comply with the
non-discrimination requirements of 13 C.F.R. Parts 112, 113 and 117.
4.2 Form 468. Within 45 days after the end of each
fiscal year and at such other times as TeleSoft or Chase, may reasonably
request, the Company shall deliver to TeleSoft or Chase, as the case may be, a
written assessment, in form and substance reasonably satisfactory to them in
order to permit them to file SBA Form 468, of the economic impact of their
financing specifying the full-time equivalent jobs created or retained in
connection with such investment and the impact of the financing on the
Company's business in term of profits and on taxes paid by the Company and the
employees. Upon request, the Company promptly (and in any event within 20 days
of such request) will furnish to TeleSoft and Chase all information reasonably
requested by them in order for them to comply with the requirements of 13
C.F.R. Section 107.620 or to prepare and file SBA Form 468 and any other
information requested or required by the SBA or any other similar governmental
agency asserting jurisdiction over such investor. The Company shall afford to
representatives of the SBA reasonable access to the books, records, and
properties of the Company and its subsidiaries in accordance with 13 C.F.R.
Section 107.620(c). Any submission of any financial information under
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this paragraph shall include a certificate of the Company's president, chief
executive officer, treasurer or chief financial officer.
4.3 Stockholder Increase. So long as TeleSoft and Chase
hold any securities of the Company, the Company shall notify them (i) at least
15 days prior to taking any action after which the number of record holders of
the Company's voting securities would be increased from fewer than 50 to 50 or
more, and (ii) of any other action or occurrence after which the number of
record holders of the Company's voting securities was increased (or would
increase) from fewer than 50 to 50 or more, as soon as practicable after the
Company becomes aware that such other action or occurrence has occurred or is
proposed to occur.
4.4 Ineligibility. In the event that the Company becomes
a business ineligible for financing pursuant to 13 C.F.R. Section 107.720
during the 12 month period following TeleSoft's or Chase's acquisition of the
Company's Preferred Stock (an "Ineligibility Event"), the Company acknowledges
that without SBA approval, TeleSoft and Chase will not be permitted to retain
its investment in the Company. Accordingly, following the occurrence of an
Ineligibility Event, the Company agrees to use its reasonable commercial
efforts to facilitate a transfer of any securities then held by them.
5. Miscellaneous.
5.1 Waivers and Amendments. With the written consent of
the Company and the Holders of more than 67% of the Registrable Securities, the
obligations of the Company and the rights of the Holders under this Agreement
may be waived (either generally or in a particular instance, either
retroactively or prospectively and either for a specified period of time or
indefinitely), and with the same consent, the Company, when authorized by
resolution of its board of directors, may amend this Agreement or enter into a
supplementary agreement for the purpose of adding any provisions of this
Agreement; provided, however, that (i) any amendment to this Agreement which
solely adds as new Investors parties who purchase Series C Preferred Stock of
the Company subsequent to the date hereof shall not require any approval by the
Holders of Registrable Securities and may be effected by adding additional
signature pages and Additional Schedule I pages hereto and (ii) no such waiver
or supplemental agreement shall reduce the above percentage of Registrable
Securities, the Holders of which are required to consent to any waiver or
supplemental agreement, without the consent of the record or beneficial holders
of all of the Registrable Securities. Neither this Agreement nor any provisions
hereof may be changed, waived, discharged or terminated orally, but only by a
signed statement in writing. Any amendment, waiver or supplementary agreement
effected in accordance with this paragraph shall be binding upon each Holder or
any Registrable Securities then outstanding, each future Holder of all such
Registrable Securities and the Company.
5.2 Additional Investors. Notwithstanding the foregoing
Section 5.1, the Company may add as a "Holder" a commercial lending institution
that has loaned funds to the Company, or an equipment lessor to the Company,
with respect to securities issued to such commercial lending institution or
equipment lessor in connection with such loan or lease of equipment,
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without obtaining the consent of the Holders. Any party added to this Agreement
pursuant to this Section 5.2 shall be deemed a Holder of Class III Registrable
Securities.
5.3 Termination of Prior Agreements. The Investors, as
holders of more than 67% of the registrable securities under the Prior
Agreement, hereby amend and restate the Prior Agreement to read as set forth in
this Agreement.
5.4 Notices. All notices and other communications
required or permitted hereunder shall be in writing and, except as otherwise
noted herein, shall be deemed effectively given upon personal delivery,
delivery by nationally recognized courier or upon deposit with the United
States Post Office, (by first class mail, postage prepaid) addressed: (a) if to
the Company, at 0000 XxxxxXxxx Xxxxxx, Xxxxxxx, XX 00000 (or at such other
address as the Company shall have furnished to the Holders in writing)
attention of President with a copy to Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, 000
Xxxx Xxxx Xxxx, Xxxx Xxxx, XX 00000, Attention Xxxxxxx X. Xxxxxxx, Esq. and (b)
if to a Holder, at the latest address of such person shown on the Company's
records.
5.5 Descriptive Headings. The descriptive headings
herein have been inserted for convenience only and shall not be deemed to limit
or otherwise affect the construction of any provisions hereof.
5.6 Governing Law. This Agreement shall be governed by
and interpreted under the laws of the State of California as applied to
agreements among California residents, made and to be performed entirely within
the State of California.
5.7 Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same instrument, but only one of
which need be produced.
5.8 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 attorney's fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
5.9 Successors and Assigns. Except as otherwise
expressly provided in this Agreement, this Agreement shall benefit and bind the
successors, assigns, heirs, executors and administrators of the parties to this
Agreement.
5.10 Entire Agreement. This Agreement supersedes any and
all prior agreements to which the Investors may be a party, or under which they
are entitled to rights with respect to the registration of the Company's stock
and the other matters contemplated hereby, and constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter of this Agreement.
5.11 Separability; Severability. Unless expressly
provided in this Agreement, the rights of each Investor under this Agreement
are several rights, not rights jointly held with any other Investors. Any
invalidity, illegality or limitation on the enforceability of this Agreement
with
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respect to any Investor shall not affect the validity, legality or
enforceability of this Agreement with respect to the other Investors. If any
provision of this Agreement is judicially determined to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not be affected or impaired.
5.12 Stock Splits. All references to numbers of shares in
this Agreement shall be appropriately adjusted to reflect any stock dividend,
split, combination or other recapitalization of shares by the Company occurring
after the date of this Agreement.
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