EXHIBIT 10.21
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
This Agreement dated as of June 9, 1999 is entered into by and among
Network Management Services, Inc., a Minnesota corporation (the "Company"), Xxxx
Xxxxxxx, Xxxxxxx Xxxxxxx and Xxxxxxx Xxxxxxx (the "Founders") and the entities
and persons set forth under the heading "Purchasers" on Exhibit A to this
Agreement (the "Purchasers").
WHEREAS, the Company and the Purchasers have entered into an Amended and
Restated Series C Preferred Stock Purchase Agreement of even date herewith (the
"Purchase Agreement"); and
WHEREAS, the Company, the Founders and certain of the Purchasers have
previously executed an Investors' Rights Agreement dated March 19, 1996 and an
Amended and Restated Investors' Rights Agreement dated as of May 3, 1999 (the
"Investors' Rights Agreement"); and
WHEREAS, the Company and the Purchasers desire to provide for certain
arrangements with respect to the registration of shares of capital stock of the
Company under the Securities Act of 1933, certain rights of first refusal with
respect to future issuances of stock, and to amend and restate the Investors'
Rights Agreement in its entirety;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
1. Registration Rights.
1.1 Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"Commission" means the Securities and Exchange Commission, or any
other Federal agency at the time administering the Securities Act.
"Common Stock" means the common stock, $.01 par value per share,
of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and regulations
of the Commission issued under such act, as they each may, from time
to time, be in effect.
"Registration Statement" means a registration statement filed by
the Company with the Commission for a public offering and sale of
Common Stock (other than a registration statement on Form S-8 or Form
S-4, or their successors, or any other form for a similar limited
purpose, or any registration statement covering only securities
proposed to be issued in exchange for securities or assets of another
corporation).
"Registration Expenses" means the expenses described in Section
1.5.
"Registrable Shares" means (i) the shares of Common Stock issued
or issuable upon conversion of the Shares, (ii) any shares of Common
Stock, and any shares of Common Stock issued or issuable upon the
conversion or exercise of any other securities, acquired by the
Purchasers pursuant to Section 2 of this Agreement and (iii) any other
shares of Common Stock issued in respect of such shares (because of
stock splits, stock dividends, reclassifications, recapitalizations,
or similar events); provided, however, that shares of Common Stock
which are Registrable Shares shall cease to be Registrable Shares (i)
upon any sale pursuant to a Registration Statement or Rule 144 under
the Securities Act or (ii) upon any sale in any manner to a person or
entity which, by virtue of Section 3 of this Agreement, is not
entitled to the rights provided by this Agreement. Wherever reference
is made in this Agreement to a request or consent of holders of a
certain percentage of Registrable Shares, the determination of such
percentage shall include shares of Common Stock issuable upon
conversion of the Shares even if such conversion has not yet been
effected.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar Federal statute, and the rules and regulations of the
Commission issued under such act, as they each may, from time to time,
be in effect.
"Shares" means shares of Series A Convertible Preferred Stock,
$0.01 par value per share (the "Series A Preferred Stock"), Series B
Convertible Preferred Stock, $0.01 par value per share (the "Series B
Preferred Stock") and Series C Convertible Preferred Stock, $0.01 par
value per share (the "Series C Preferred Stock") of the Company.
"Stockholders" means the Purchasers and any persons or entities
to whom the rights granted under this Agreement are transferred by any
Purchasers, their successors or assigns pursuant to Section 3 hereof.
1.2 Required Registrations.
(a) At any time after the earlier of April 30, 2002 or six months
after the closing of the Company's first underwritten public offering of
shares of Common Stock pursuant to a Registration Statement, a Stockholder
or Stockholders holding in the aggregate at least 30% of the Registrable
Shares may request, in writing, that the Company effect the registration on
Form S-1 or Form S-2 (or any successor form) of Registrable Shares owned by
such Stockholder or Stockholders having an aggregate offering price of at
least $30,000,000 (based on the then current market price or fair value).
If the holders initiating the registration intend to distribute the
Registrable Shares by means of an underwriting, they shall so advise the
Company in their request. In the event such registration is underwritten,
the right of other Stockholders to participate shall be conditioned on such
Stockholders' participation in such underwriting. Upon receipt of any such
request, the Company shall promptly give written notice of such proposed
registration to all of the other Stockholders. Such Stockholders shall have
the right, by giving written notice to the Company within 20 days after the
Company provides its notice, to elect to have included in such registration
such of their Registrable Shares as such
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Stockholders may request in such notice of election; provided that if the
underwriter (if any) managing the offering determines that, because of
marketing factors, all of the Registrable Shares requested to be registered
by all Stockholders may not be included in the offering, then all
Stockholders who have requested registration shall participate in the
registration pro rata based upon the number of Registrable Shares which
they have requested to be so registered. Thereupon, the Company shall, as
expeditiously as possible, use its best efforts to effect the registration
on Form S-1 or Form S-2 (or any successor form) of all Registrable Shares
which the Company has been requested to so register.
(b) At any time after the Company becomes eligible to file a
Registration Statement on Form S-3 (or any successor form relating to
secondary offerings), a Stockholder or Stockholders may request the
Company, in writing, to effect the registration on Form S-3 (or such
successor form), of Registrable Shares having an aggregate offering price
of at least $10,000,000 (based on the then current public market price).
Upon receipt of any such request, the Company shall promptly give written
notice of such proposed registration to all Stockholders. Such Stockholders
shall have the right, by giving written notice to the Company within 20
days after the Company provides its notice, to elect to have included in
such registration such of their Registrable Shares as such Stockholders may
request in such notice of election; provided that if the underwriter (if
any) managing the offering determines that, because of marketing factors,
all of the Registrable Shares requested to be registered by all
Stockholders may not be included in the offering, then all Stockholders who
have requested registration shall participate in the registration pro rata
based upon the number of Registrable Shares which they have requested to be
so registered. Thereupon, the Company shall, as expeditiously as possible,
use its best efforts to effect the registration on Form S-3 (or such
successor form) of all Registrable Shares which the Company has been
requested to so register.
(c) The Company shall not be required to effect more than three
registrations pursuant to paragraph (a) above.
(d) If at the time of any request to register Registrable Shares
pursuant to this Section 1.2, the Company is engaged or has fixed plans to
engage within 30 days of the time of the request in a registered public
offering as to which the Stockholders may include Registrable Shares
pursuant to Section 1.3 or is engaged in any other activity which, in the
good faith determination of the Company's Board of Directors, would be
adversely affected by the requested registration to the material detriment
of the Company, then the Company may at its option direct that such request
be delayed for a period not in excess of six months from the effective date
of such offering or the date of commencement of such other material
activity, as the case may be, such right to delay a request to be exercised
by the Company not more than once in any two-year period.
1.3 Incidental Registration.
(a) Whenever the Company proposes to file a Registration Statement
(other than pursuant to Section 1.2) at any time and from time to time, it
will, prior to such filing, give written notice to all Stockholders of its
intention to do so and, upon the written request of a
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Stockholder or Stockholders given within 20 days after the Company provides
such notice (which request shall state the intended method of disposition
of such Registrable Shares), the Company shall use its best efforts to
cause all Registrable Shares which the Company has been requested by such
Stockholder or Stockholders to register to be registered under the
Securities Act to the extent necessary to permit their sale or other
disposition in accordance with the intended methods of distribution
specified in the request of such Stockholder or Stockholders; provided that
the Company shall have the right to postpone or withdraw any registration
effected pursuant to this Section 1.3 without obligation to any
Stockholder.
(b) In connection with any registration under this Section 1.3
involving an underwriting, the Company shall not be required to include any
Registrable Shares in such registration unless the holders thereof accept
the terms of the underwriting as agreed upon between the Company and the
underwriters selected by it, provided terms of the underwriting are
consistent with this Agreement. If in the opinion of the managing
underwriter it is appropriate because of marketing factors to limit the
number of Registrable Shares to be included in the offering, then the
Company shall be required to include in the registration only that number
of Registrable Shares, if any, which the managing underwriter believes
should be included therein; provided that (i) in no event shall the number
of Registrable Shares included in the offering (other than the initial
public offering of Common Stock) be reduced below 30% of the total number
of shares of Common Stock (giving effect to the conversion into Common
Stock of all securities convertible thereinto) included in the offering,
and (ii) no persons or entities other than the Company, the Stockholders
and persons or entities holding registration rights granted in accordance
with Section 1.10 hereof shall be permitted to include securities in the
offering. If the number of Registrable Shares to be included in the
offering in accordance with the foregoing is less than the total number of
shares which the holders of Registrable Shares have requested to be
included, then the holders of Registrable Shares who have requested
registration and other holders of securities entitled to include them in
such registration shall participate in the registration pro rata based upon
their total ownership of shares of Common Stock (giving effect to the
conversion into Common Stock of all securities convertible thereinto). If
any holder would thus be entitled to include more securities than such
holder requested to be registered, the excess shall be allocated among
other requesting holders pro rata in the manner described in the preceding
sentence.
1.4 Registration Procedures. If and whenever the Company is required
by the provisions of this Agreement to use its best efforts to effect the
registration of any of the Registrable Shares under the Securities Act, the
Company shall:
(a) file with the Commission a Registration Statement with
respect to such Registrable Shares and use its best efforts to cause
that Registration Statement to become and remain effective;
(b) as expeditiously as possible prepare and file with the
Commission any amendments and supplements to the Registration
Statement and the prospectus included in the Registration Statement as
may be necessary to keep the Registration Statement effective, in the
case of a firm commitment underwritten public offering, until each
underwriter has
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completed the distribution of all securities purchased by it and, in
the case of any other offering, until the earlier of the sale of all
Registrable Shares covered thereby or 120 days after the effective
date thereof;
(c) as expeditiously as possible furnish to each selling
Stockholder such reasonable numbers of copies of the prospectus,
including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as the
selling Stockholder may reasonably request in order to facilitate the
public sale or other disposition of the Registrable Shares owned by
the selling Stockholder; and
(d) as expeditiously as possible use its best efforts to register
or qualify the Registrable Shares covered by the Registration
Statement under the securities or Blue Sky laws of such states as the
selling Stockholders shall reasonably request, and do any and all
other acts and things that may be necessary or desirable to enable the
selling Stockholders to consummate the public sale or other
disposition in such states of the Registrable Shares owned by the
selling Stockholder; provided, however, that the Company shall not be
required in connection with this paragraph (d) to qualify as a foreign
corporation or execute a general consent to service of process in any
jurisdiction.
If the Company has delivered preliminary or final prospectuses to the
selling Stockholders and after having done so the prospectus is amended to
comply with the requirements of the Securities Act, the Company shall
promptly notify the selling Stockholders and, if requested, the selling
Stockholders shall immediately cease making offers of Registrable Shares
and return all prospectuses to the Company. The Company shall promptly
provide the selling Stockholders with revised prospectuses and, following
receipt of the revised prospectuses, the selling Stockholders shall be free
to resume making offers of the Registrable Shares.
1.5 Allocation of Expenses. The Company will pay all Registration
Expenses of all registrations under this Agreement; provided, however, on a
one time only basis, that if a registration under Section 1.2 is withdrawn
at the request of the Stockholders requesting such registration (other than
as a result of information concerning the business or financial condition
of the Company which is made known to the Stockholders after the date on
which such registration was requested) and if the requesting Stockholders
elect not to have such registration counted as a registration requested
under Section 1.2, the requesting Stockholders shall pay the Registration
Expenses of such registration pro rata in accordance with the number of
their Registrable Shares included in such registration. For purposes of
this Section 1.5, the term "Registration Expenses" shall mean all expenses
incurred by the Company in complying with this Agreement, including,
without limitation, all registration and filing fees, exchange listing
fees, printing expenses, fees and expenses of counsel for the Company and
the fees and expenses of one counsel selected by the selling Stockholders
to represent the selling Stockholders, state Blue Sky fees and expenses,
and the expense of any special audits incident to or required by any such
registration, but excluding underwriting discounts, selling commissions and
the fees and expenses of selling Stockholders' own counsel (other than the
counsel selected to represent all selling Stockholders).
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1.6 Indemnification and Contribution.
(a) In the event of any registration of any of the Registrable
Shares under the Securities Act pursuant to this Agreement, the
Company will indemnify and hold harmless the seller of such
Registrable Shares, each underwriter of such Registrable Shares, and
each other person, if any, who controls such seller or underwriter
within the meaning of the Securities Act or the Exchange Act against
any losses, claims, damages or liabilities, joint or several, to which
such seller, underwriter or controlling person may become subject
under the Securities Act, the Exchange Act, state securities or Blue
Sky laws or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material
fact contained in any Registration Statement under which such
Registrable Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained in the
Registration Statement, or any amendment or supplement to such
Registration Statement, or arise out of or are based upon the omission
or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
and the Company will reimburse such seller, underwriter and each such
controlling person for any legal or any other expenses reasonably
incurred by such seller, underwriter or controlling person in
connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company will
not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any untrue
statement or omission made in such Registration Statement, preliminary
prospectus or final prospectus, or any such amendment or supplement,
in reliance upon and in conformity with information furnished to the
Company, in writing, by or on behalf of such seller, underwriter or
controlling person specifically for use in the preparation thereof.
(b) In the event of any registration of any of the Registrable
Shares under the Securities Act pursuant to this Agreement, each
seller of Registrable Shares, severally and not jointly, will
indemnify and hold harmless the Company, each of its directors and
officers and each underwriter (if any) and each person, if any, who
controls the Company or any such underwriter within the meaning of the
Securities Act or the Exchange Act, against any losses, claims,
damages or liabilities, joint or several, to which the Company, such
directors and officers, underwriter or controlling person may become
subject under the Securities Act, Exchange Act, state securities or
Blue Sky laws or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement under which such
Registrable Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained in the
Registration Statement, or any amendment or supplement to the
Registration Statement, or arise out of or are based upon any omission
or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, if
the statement or omission was made in reliance upon and in conformity
with information relating to such seller furnished in writing to the
Company by or on behalf of such seller specifically for use in
connection with the preparation of such Registration Statement,
prospectus, amendment or supplement;
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(c) Each party entitled to indemnification under this Section 1.6
(the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, 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 be
unreasonably withheld); 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
1.6. The Indemnified Party may participate in such defense at such
party's expense; provided, however, that the Indemnifying Party shall
pay such expense 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 the Indemnified
Party and any other party represented by such counsel in such
proceeding. No Indemnifying Party, in the defense of any such claim or
litigation shall, except with the consent of each Indemnified 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 of such claim or litigation, and no Indemnified
Party shall consent to entry of any judgment or settle such claim or
litigation without the prior written consent of the Indemnifying
Party.
(d) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which either
(i) any holder of Registrable Shares exercising rights under this
Agreement, or any controlling person of any such holder, makes a claim
for indemnification pursuant to this Section 1.6 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
1.6 provides for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of any such
selling Stockholder or any such controlling person in circumstances
for which indemnification is provided under this Section 1.6; then, in
each such case, the Company and such Stockholder will contribute to
the aggregate losses, claims, damages or liabilities to which they may
be subject (after contribution from others) in such proportions so
that such holder is responsible for the portion represented by the
percentage that the public offering price of its Registrable Shares
offered by the Registration Statement bears to the public offering
price of all securities offered by such Registration Statement, and
the Company is responsible for the remaining portion; provided,
however, that, in any such case, (i) no such holder will be required
to contribute any amount in excess of the net proceeds to it of all
the Registrable Shares sold by it pursuant to such Registration
Statement, (ii) no person or entity guilty of fraudulent
misrepresentation, within the meaning of Section 11(f) of the
Securities Act, shall be entitled to contribution from any person or
entity who is not guilty of such fraudulent misrepresentation.
1.7 Indemnification with Respect to Underwritten Offering. In the
event that Registrable Shares are sold pursuant to a Registration Statement
in an underwritten offering pursuant to Section 1.2, the Company agrees to
enter into an underwriting agreement containing customary representations
and warranties with respect to the business and operations of an issuer
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of the securities being registered and customary covenants and agreements
to be performed by such issuer, including without limitation customary
provisions with respect to indemnification by the Company of the
underwriters of such offering.
1.8 Information by Holder. Each Stockholder including Registrable
Shares in any registration shall furnish to the Company such information
regarding such Stockholder and the distribution proposed by such
Stockholder as the Company may reasonably request in writing and as shall
be required in connection with any registration, qualification or
compliance referred to in this Agreement.
1.9 "Stand-Off" Agreement. Each Stockholder, if requested by the
Company and the managing underwriter of an offering by the Company of
Common Stock or other securities of the Company pursuant to a Registration
Statement, shall agree not to sell publicly or otherwise transfer or
dispose of any Registrable Shares or other securities of the Company held
by such Stockholder for a period of 180 days following the effective date
of such Registration Statement; provided, that:
(a) such agreement shall only apply to the Registration Statement
covering the Company's initial public offering of Common Stock in an
underwritten offering; and
(b) all officers and directors of the Company shall enter into
similar agreements.
1.10 Limitations on Subsequent Registration Rights. The Company shall
not, without the prior written consent of Stockholders holding at least 80%
of the Registrable Shares, enter into any agreement (other than this
Agreement) with any holder or prospective holder of any securities of the
Company which would allow such holder or prospective holder to (i) include
securities of the Company in any Registration Statement, unless under the
terms of such agreement, such holder or prospective holder includes such
securities in a registration statement in which the registration rights of
such holder or prospective holder are subordinate to the holders of
Registrable Shares, or (ii) make a demand registration which could result
in such registration statement being declared effective prior to May 3,
2005.
1.11 Rule 144 Requirements. After the earliest of (i) the closing of
the sale of securities of the Company pursuant to a Registration Statement,
(ii) the registration by the Company of a class of securities under Section
12 of the Exchange Act, or (iii) the issuance by the Company of an offering
circular pursuant to Regulation A under the Securities Act, the Company
agrees to:
(a) comply with the requirements of Rule 144(c) under the
Securities Act with respect to current public information about the
Company;
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(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); and
(c) furnish to any holder of Registrable Shares upon request (i)
a written statement by the Company as to its compliance with the
requirements of said Rule 144(c), and the reporting requirements of
the Securities Act and the Exchange Act (at any time after it has
become subject to such reporting requirements), (ii) a copy of the
most recent annual or quarterly report of the Company, and (iii) such
other reports and documents of the Company as such holder may
reasonably request to avail itself of any similar rule or regulation
of the Commission allowing it to sell any such securities without
registration.
1.12 Mergers, Etc. The Company shall not, directly or indirectly,
enter into any merger, consolidation or reorganization in which the Company
shall not be the surviving corporation unless the proposed surviving
corporation shall, prior to such merger, consolidation or reorganization,
agree in writing to assume the obligations of the Company under this
Agreement, and for that purpose references hereunder to "Registrable
Shares" shall be deemed to be references to the securities which the
Stockholders would be entitled to receive in exchange for Registrable
Shares under any such merger, consolidation or reorganization; provided,
however, that the provisions of this Section 1.12 shall not apply in the
event of any merger, consolidation or reorganization in which the Company
is not the surviving corporation if all Stockholders are entitled to
receive in exchange for their Registrable Shares consideration consisting
solely of (i) cash, (ii) securities of the acquiring corporation which may
be immediately sold to the public without registration under the Securities
Act, or (iii) securities of the acquiring corporation which the acquiring
corporation has agreed to register within 90 days of completion of the
transaction for resale to the public pursuant to the Securities Act.
1.13 Termination. All of the Company's obligations to register
Registrable Shares under this Agreement shall terminate seven years after
the closing of the Company's initial public offering of Common Stock
pursuant to a Registration Statement, or as to any Purchaser, when all of
the Registrable Shares of such Purchaser may be sold under Rule 144 in any
three month period.
2. Right of First Refusal
(a) The Company shall not issue, sell or exchange, agree to issue,
sell or exchange, or reserve or set aside for issuance, sale or exchange,
(i) any shares of its Common Stock, (ii) any other equity securities of the
Company, (iii) any option, warrant or other right to subscribe for,
purchase or otherwise acquire any equity securities of the Company, or (iv)
any debt securities convertible into capital stock of the Company
(collectively, the "Offered Securities"), unless in each such case the
Company shall have first complied with this Section 2. The Company shall
deliver to each Purchaser, who then holds shares of Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock (or shares of
Common Stock into which such shares have been converted) that had an
aggregate purchase price of $500,000 or more ("Qualifying Purchaser") and
each Founder a written notice of any proposed or intended
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issuance, sale or exchange of Offered Securities (the "Offer"), which Offer
shall (i) identify and describe the Offered Securities, (ii) describe the
price and other terms upon which they are to be issued, sold or exchanged,
and the number or amount of the Offered Securities to be issued, sold or
exchanged, and (iii) offer to issue and sell to or exchange with such
Qualifying Purchaser or Founder (A) such portion of the Offered Securities
as the aggregate number of shares of Common Stock issuable upon conversion
of Shares then held by such Qualifying Purchaser or Common Stock then held
by such Founder, plus any shares of Common Stock issued upon conversion of
Shares held by such Qualifying Purchaser or Common Stock then held by such
Founder, bears to the total number of shares of Common Stock issuable upon
conversion of Shares then held by all Purchasers and Common Stock then held
by all Founders plus any outstanding shares of Common Stock issued upon
conversion of Shares held by the Purchasers and Common Stock then held by
all Founders (the "Basic Amount"), and (B) any additional portion of the
Offered Securities as such Qualifying Purchaser or Founder shall indicate
it will purchase or acquire should the other Qualifying Purchasers and
Founders subscribe for less than their Basic Amounts (the
"Undersubscription Amount"). For purposes of this Section 2, (x) JMI Equity
Fund III, L.P. and JMI Equity Side Fund, L.P. shall be deemed to be one
Qualifying Purchaser which owns all the Shares owned by JMI Equity Fund
III, L.P. and JMI Equity Side Fund, L.P., (y) any Offered Securities
purchasable by such Qualifying Purchaser may be purchased by JMI Equity
Fund III, L.P., JMI Equity Side Fund, L.P. or any combination thereof; and
(z) and all notices to be delivered to such Qualifying Purchaser shall be
delivered to JMI Equity Fund III, L.P. Each Qualifying Purchaser or Founder
shall have the right, for a period of 30 days following delivery of the
Offer, to purchase or acquire, at a price and upon the other terms
specified in the Offer, the number or amount of Offered Securities
described above. The Offer by its term shall remain open and irrevocable
for such 30-day period.
(b) To accept an Offer, in whole or in part, a Qualifying Purchaser or
Founder must deliver a written notice to the Company prior to the end of
the 30-day period of the Offer, setting forth the portion of the Qualifying
Purchaser's or Founder's Basic Amount that such Qualifying Purchaser or
Founder elects to purchase and, if such Qualifying Purchaser or Founder
shall elect to purchase all of its Basic Amount, the Undersubscription
Amount (if any) that such Qualifying Purchaser or Founder elects to
purchase (the "Notice of Acceptance"). If the Basic Amounts subscribed for
by all Qualifying Purchasers and Founders are less than the total Offered
Securities, then each Qualifying Purchaser or Founder who has set forth
Undersubscription Amounts in its Notice of Acceptance shall be entitled to
purchase, in addition to the Basic Amounts subscribed for, all
Undersubscription Amounts it has subscribed for; provided, however that
should the Undersubscription Amounts subscribed for exceed the difference
between the Offered Securities and the Basic Amounts subscribed for (the
"Available Undersubscription Amount"), each Qualifying Purchaser or Founder
who has subscribed for any Undersubscription Amount shall be entitled to
purchase only that portion of the Available Undersubscription Amount as the
Undersubscription Amount subscribed for by such Qualifying Purchaser or
Founder bears to the total Undersubscription Amounts subscribed for by all
Purchasers and Founder, subject to rounding by the Board of Directors to
the extent it reasonably deems necessary.
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(c) In the event that Notices of Acceptance are not given by the
Qualifying Purchasers or Founders in respect of all the Offered Securities,
the Company shall have 90 days from the expiration of the period set forth
in Section 1(a) above to issue, sell or exchange all or any part of such
Offered Securities as to which a Notice of Acceptance has not been given by
the Qualifying Purchasers or Founders (the "Refused Securities"), but only
upon terms and conditions which are not more favorable, in the aggregate,
to the acquiring person or persons or less favorable to the Company than
those set forth in the Offer.
(d) In the event the Company shall propose to sell less than all the
Refused Securities (any such sale to be in the manner and on the terms
specified in Section 2.1(c) above), then each Qualifying Purchaser or
Founder may, at its sole option and in its sole discretion, reduce the
number or amount of the Offered Securities specified in its Notice of
Acceptance to an amount that shall be not less than the number or amount of
the Offered Securities that the Qualifying Purchaser or Founder elected to
purchase pursuant to Section 2.1(b) above multiplied by a fraction, (i) the
numerator of which shall be the number or amount of Offered Securities the
Company actually proposes to issue, sell or exchange (including Offered
Securities to be issued or sold to Qualifying Purchasers or Founders
pursuant to Section 2.1(b) above prior to such reduction) and (ii) the
denominator of which shall be the amount of all Offered Securities. In the
event that any Qualifying Purchaser or Founder so elects to reduce the
number or amount of Offered Securities specified in its Notice of
Acceptance, the Company may not issue, sell or exchange more than the
reduced number or amount of the Offered Securities unless and until such
Securities have again been offered to the Qualifying Purchasers or Founders
in accordance with Section 2.1(a) above.
(e) Upon the closing of the issuance, sale or exchange of all or less
than all the Refused Securities, the Qualifying Purchasers or Founders
shall acquire from the Company, and the Company shall issue to the
Qualifying Purchasers or Founders, the number or amount of Offered
Securities specified in the Notices of Acceptance, as reduced pursuant to
Section 2.1(d) above if the Qualifying Purchasers or Founders have so
elected, upon the terms and conditions specified in the Offer. The purchase
by the Qualifying Purchasers or Founders of any Offered Securities is
subject in all cases to the preparation, execution and delivery by the
Company and the Qualifying Purchasers or Founders of a purchase agreement
relating to such Offered Securities reasonably satisfactory in form and
substance to the Qualifying Purchasers or Founders and their respective
counsel.
(f) Any Offered Securities not acquired by the Qualifying Purchasers
or Founders or other persons in accordance with Section 2.1(c) above may
not be issued, sold or exchanged until they are again offered to the
Qualifying Purchasers or Founders under the procedures specified in this
Agreement.
(g) The rights of the Qualifying Purchasers or Founders under this
Agreement shall not apply to:
(1) Common Stock issued as a stock dividend to holders of Common
Stock or upon any subdivision or combination of shares of Common
Stock,
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(2) the issuance of shares of Common Stock upon conversion of
outstanding shares of Series A Preferred Stock, Series B Preferred
Stock or Series C Preferred Stock,
(3) shares of Common Stock, or options exercisable therefor,
including options outstanding on the date of this Agreement (such
number to be proportionately adjusted in the event of any stock
splits, stock dividends, recapitalizations or similar events occurring
on or after the date of this Agreement) issuable to officers,
directors, consultants and employees of the Company and any subsidiary
pursuant to any plan, agreement or arrangement approved by a vote of
not less than a majority of the Board of Directors of the Company
including the unanimous vote of the members of the Board of Directors
nominated solely by the holders of the Shares,
(4) securities issued solely in consideration for the acquisition
(whether by merger or otherwise) by the Company or any of its
subsidiaries of all or substantially all of the stock or assets of any
other entity,
(5) shares of Common Stock sold by the Company in a firm
commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act, or
(6) shares of Common stock issued upon exercise of any warrants
or options that are issued and outstanding as of the date of this
Agreement.
2.2 Termination of Agreement. The Right of First Refusal in this
Section 2 shall terminate upon the earliest of the following events:
(a) The sale of all or substantially all of the assets or
business of the Company, by merger, sale of assets or otherwise; or
(b) The closing of the Company's initial public offering of
shares of Common Stock pursuant to an effective registration statement
under the Securities Act resulting in at least $30,000,000 of gross
proceeds to the Company and a market capitalization of at least
$120,000,000; or
(c) With respect to the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock, respectively, upon less
than fifteen percent of such authorized class being outstanding.
3. Transfers of Rights. This Agreement, and the rights and obligations of
each Purchaser hereunder, may be assigned by such Purchaser to any person or
entity to which Shares are transferred by such Purchaser, and such transferee
shall be deemed a "Purchaser" for purposes of this Agreement; provided that the
transferee provides written notice of such assignment to the Company.
-12-
4. Investor Rights Agreement Superseded. This Agreement shall supersede the
terms of the Investor Rights Agreement, which is hereby terminated. By executing
this Agreement, each party waives any rights it may have or be deemed to have
under Section 2 of the Investor Rights Agreement with respect to the issuance of
the Series C Preferred Stock of the Company or any shares issuable upon the
conversion thereof.
5. Amendment to the Investor Rights Agreement. The Investor Rights
Agreement is hereby amended and restated on the terms and conditions contained
in this Agreement to read in its entirety as provided herein.
6. General.
(a) Notices. All notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be delivered by hand or
mailed by first class certified or registered mail, return receipt
requested, postage prepaid:
If to the Company, at 0000 Xxxxxxx Xxxxxxxxx, Xxxxxxxxxxx, Xxxxxxxxx
00000, Attention: President, with a copy to Xxx Xxxxxx, Esq., Xxxxxx &
Whitney LLP, 000 Xxxxx 0xx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000,
If to a Founder, at his or her address set forth under his or her name
on the signature page attached hereto.
If to a Purchaser, at his or its address set forth on Exhibit A, with
a copy to Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP, 000 Xxxx Xxxxxx, Xxxxxx, XX
00000, Attention: Xxxxx X. Xxxx, Esq. and Xxxx X. Xxxxxxx, Esq.
or, in any such case at such other address or addresses as shall have been
furnished in writing by such party to the others.
(b) Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to
such subject matter.
(c) 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), with the written consent of the Company and the holders of
at least 80% of the then outstanding Shares (including shares issued upon
conversion thereof); provided, that this Agreement may be amended with the
consent of the holders of less than all Shares only in a manner which
affects all Shares in the same fashion. 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.
-13-
(d) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which shall be one and the same document.
(e) Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
(f) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Minnesota.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have executed the Investors' Rights
Agreement as of the date first written above.
COMPANY:
--------
NETWORK MANAGEMENT SERVICES, INC.
By: /s/ Xxxx Xxxxx
------------------------------------
Name: Xxxx Xxxxx
Title: Chief Executive Officer
PURCHASERS:
-----------
CB HEALTHCARE FUND, L.P.
By: CB Health Ventures, L.L.C.
By: /s/ Xxxxxxxxx Xxxxx
------------------------------------
Name: Xxxxxxxxx Xxxxx
Title: Manager
NORTH BRIDGE VENTURE PARTNERS, L.P.
By: North Bridge Venture Management, L.P.,
its General Partner
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: General Partner
NEW ENTERPRISE ASSOCIATES VI,
LIMITED PARTNERSHIP
By: NEA Partners VI, Limited Partnership
its General Partner
By: /s/ Xxxx X. Xxxxx
------------------------------------
Name: Xxxx X. Xxxxx
Title: General Partner
TRELLIS HEALTH VENTURES L.P.
By: THV Management LLC
its General Partner
By: /s/ Xxxx Xxxxxx
------------------------------------
Name: Xxxx Xxxxxx
Title: Manager
JMI EQUITY FUND III, L.P.
By: JMI Associates III, LLC
Its General Partner
By: /s/ Xxxx X. Xxxxxx
------------------------------------
Xxxx X. Xxxxxx
Managing Member
JMI EQUITY SIDE FUND, L.P.
By: JMI Side Associates, L.L.C.
Its General Partner
By: /s/ Xxxx X. Xxxxxx
------------------------------------
Xxxx X. Xxxxxx
Managing Member
FOUNDERS:
---------
/s/ Xxxx Xxxxxxx
----------------------------------------
Xxxx Xxxxxxx
Address: 0000 Xxxxxx Xxx. Xx.
Xxxxxxxxxxx, XX 00000
/s/ Xxxxxxx Xxxxxxx
----------------------------------------
Xxxxxxx Xxxxxxx
Address: 0000 Xxxxxx Xxx. X.
Xxxxxxxxxxx, XX 00000
/s/ Xxxxxxx Xxxxxxx
----------------------------------------
Xxxxxxx Xxxxxxx
Address: 3408 000 Xx. X.
Xxxxxxxxxx, XX 00000
