Exhibit 10.6
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FORM OF FIRST AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
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This First Amended and Restated Investor Rights Agreement, dated as of
September 22, 2000, is entered into by and among Convergent Networks, Inc., a
Delaware corporation (the "Company"), Xxxx Xxxx, Xxxxx-Xxxx Xxxx and Xxxx X.
Xxxxxxxx (individually, a "Management Stockholder" and, collectively, the
"Management Stockholders"), the individuals and entities listed on Attachment A
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hereto (the "Existing Investors"), and the individuals and entities listed on
Attachment B hereto (the "New Investors" and, collectively with the Existing
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Investors, the "Investors").
BACKGROUND
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WHEREAS, the Company, the Management Stockholders and certain of the
Existing Investors are parties to an Investor Rights Agreement dated as of July
14, 1998 (the "Original Agreement");
WHEREAS, the Original Agreement has been amended on February 10, 1999, July
1, 1999, December 17, 1999, February 15, 2000 and March 31, 2000;
WHEREAS, the Original Agreement, as amended to date, may only be amended by
a written instrument signed by the Company and stockholders holding at least 67%
of the Registrable Shares (as defined below) held by all Stockholders (as
defined below);
WHEREAS, the undersigned hold at least 67% of the Registrable Shares held
by all Stockholders;
WHEREAS, the Company, certain of the Existing Investors and the New
Investors have entered into a Series D Preferred Stock Purchase Agreement of
even date herewith (the "Purchase Agreement"); and
WHEREAS, the Company, the Management Stockholders and the Investors wish to
amend and restate the Original Agreement in the manner set forth below;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, and the consummation of the sale and purchase of
the Series D Preferred Stock pursuant to the Purchase Agreement, and for other
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto agree as follows:
ARTICLE I. DEFINITIONS
1. Certain Definitions. As used in this Agreement, the following terms
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shall have the following respective meanings:
"Commission" means the United States Securities and Exchange
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Commission, or any other federal agency at the time administering the Securities
Act.
"Common Stock" means the Common Stock, $0.00001 par value, of the
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Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
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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.
"Initial Public Offering" means the initial public offering of shares
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of Common Stock pursuant to a Registration Statement at a price to the public of
at least $20.44 per share (adjusted for stock splits, stock dividends and
similar events) resulting in gross proceeds to the Company and any selling
stockholders of at least $50,000,000.
"Management Stockholders" means the Management Stockholders and any
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persons or entities to whom the rights granted and obligations assumed under
this Agreement are transferred by the Management Stockholders, their successors
or assigns pursuant to Section 2 of Article V.
"Registration Statement" means a registration statement filed by the
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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 4 of
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Article III.
"Registrable Shares" means (i) the shares of Common Stock issued or
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issuable upon conversion of the Shares, (ii) with respect to Section 2 of
Article III, shares of Common Stock held by the Management Stockholders, (iii)
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
Investors pursuant to Article IV of this Agreement, and (iv) any other shares of
Common Stock issued in respect of such shares (because of stock splits, stock
dividends, reclassifications, recapitalizations or similar events); provided,
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however, that shares of Common Stock which are Registrable Shares shall cease to
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be Registrable Shares (a) upon any sale pursuant to a Registration Statement or
Rule 144 under the Securities Act, (b) upon any sale in any manner to a person
or entity which, by virtue of Section 2 of Article V, is not entitled to the
rights provided by this Agreement, or (c) at such time as such shares are
eligible for resale pursuant to Rule 144(k) under the Securities Act. 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
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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 (i) the shares of Series A Preferred Stock, $0.01 par
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value per share, of the Company, (ii) the shares of Series B Preferred Stock,
$0.01 par value per share, of the Company, (iii) the shares of Series C
Preferred Stock, $0.01 par value per share, of the Company, and the shares of
Series D Preferred Stock, $0.01 par value per share, of the Company.
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"Stockholders" means the Investors and any persons or entities to whom
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the rights granted under this Agreement are transferred by the Investors, their
successors or assigns pursuant to Section 2 of Article V.
ARTICLE II. VOTING RIGHTS
1. Voting of Shares. In any and all elections of directors of the Company
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(whether at a meeting or by written consent in lieu of a meeting), each Investor
and Management Stockholder shall vote or cause to be voted all Voting Shares (as
defined in Section 2 of Article II) owned by him or it, or over which he or it
has voting control, and otherwise use his or its respective best efforts, so as
to fix the number of directors at six and to elect as directors (i) one
representative designated by the holders of a majority of the then outstanding
shares of Common Stock, (ii) the Chief Executive Officer of the Company, (iii)
one representative designated by Battery Ventures IV, L.P., (iv) one
representative designated by Matrix Partners V, L.P., and (v) two
representatives whom is neither a stockholder, director, officer or employee of
the Company, to be agreed upon by the directors designated pursuant to clauses
(ii), (iii) and (iv) above, one of whom is currently Xxxxxxx Xxxxxx.
2. Voting Shares. "Voting Shares" shall mean and include any and all
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shares of the Common Stock, Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and/or shares of capital
stock of the Company, by whatever name called, which carry voting rights
(including voting rights which arise by reason of default) which are now owned
or subsequently acquired by an Investor or Management Stockholder, however
acquired, including without limitation stock splits and stock dividends.
3. Restrictive Legend. All certificates representing Voting Shares owned
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or hereafter acquired by the Investors and Management Stockholders or any
transferee bound by this Agreement shall have affixed thereto a legend
substantially in the following form:
"The shares of stock represented by this certificate are
subject to certain voting agreements as set forth in the
First Amended and Restated Investor Rights Agreement by and
among the registered owner of this certificate, the Company
and certain other stockholders of the Company, a copy of
which is available for inspection at the offices of the
Secretary of the Company."
4. Transfers of Voting Rights. Any transferee to whom Voting Shares are
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transferred by an Investor or Management Stockholder, whether voluntarily or by
operation of law, shall be bound by the voting obligations imposed upon the
transferor under this Agreement, and shall be entitled to the rights granted to
the transferor under this Agreement, to the same extent as if such transferee
were an Investor or Management Stockholder hereunder.
ARTICLE III. REGISTRATION RIGHTS
1. Required Registrations.
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(a) At any time beginning 180 days after the closing of the Company's
first underwritten public offering of shares of Common Stock pursuant to a
Registration Statement, a
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Stockholder or Stockholders holding in the aggregate at least 35% 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 having an aggregate offering price of at least
$5,000,000 (based on the then current market price). If the Stockholder or
Stockholders initiating the registration intend(s) to distribute the Registrable
Shares by means of an underwriting, such Stockholder or Stockholders shall so
advise the Company in its request. In the event such registration is
underwritten, the right of other Stockholders to participate in such
registration 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 other Stockholders. Such
Stockholders shall have the right, by giving written notice to the Company
within 30 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 reasonable 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 $1,000,000 (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 other
Stockholders. Such Stockholders shall have the right, by giving written notice
to the Company within 30 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 reasonable
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 two
registrations pursuant to paragraph (a) above; provided, however, that such
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obligation shall be deemed satisfied only when a registration statement covering
the applicable Registrable Shares shall have (i) become effective and, if such
method of disposition is a firm commitment underwritten public offering, all
such Registrable Shares have been sold pursuant thereto, or (ii) been 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). There shall be no limit on the number of
registrations which may be requested pursuant to paragraph (b) above. In
addition,
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the Company shall not be required to effect any registration (other than on Form
S-3 or any successor form relating to secondary offerings) within six months
after the effective date of any other Registration Statement on Form S-1 of the
Company.
(d) If at the time of any request to register Registrable Shares
pursuant to this Section 1, the Company is engaged or has plans to engage within
90 days of the time of the request in a registered public offering of securities
for its own account 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 12-
month period.
2. Incidental Registration.
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(a) Whenever the Company proposes to file a Registration Statement at
any time and from time to time, whether at the request of any Stockholder or
otherwise (other than a Registration Statement filed in connection with the
Company's initial public offering of Common Stock), it will, prior to such
filing, give written notice to all Stockholders and all Management Stockholders
of its intention to do so and, upon the written request of a Stockholder or
Stockholders, or a Management Stockholder or Management Stockholders, given
within 30 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 reasonable best efforts to cause all Registrable Shares which the
Company has been requested by such Stockholder or Stockholders, or Management
Stockholder or Management 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, or Management Stockholder or Management
Stockholders; provided, however, that the Company shall have the right to
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postpone or withdraw any registration effected pursuant to this Section 2
without obligation to any Stockholder or Management Stockholder.
(b) In connection with any registration under this Section 2 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. If in the opinion of the managing underwriter it is desirable 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, however, that no persons or
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entities other than the Company, the Stockholders, the Management Stockholders
and other persons or entities holding registration rights 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
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total ownership of shares of Common Stock (giving effect to the conversion into
Common Stock of all securities convertible thereinto); provided, however, that
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if the Registration Statement is filed by the Company upon the exercise of
demand registration rights held by stockholders other than holders of
Registrable Shares ("Other Holders") and does not include shares to be sold for
the account of the Company, then the Other Holders shall be entitled to include
all of the shares requested by them to be included in such Registration
Statement before holders of Registrable Shares shall be entitled to include
Registrable Shares therein. 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.
3. Registration Procedures. If and whenever the Company is required by the
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provisions of this Agreement to use its reasonable 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 reasonable 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 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
or Management 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 or
Management Stockholder may reasonably request in order to facilitate the public
sale or other disposition of the Registrable Shares owned by the selling
Stockholder or Management 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 Stockholder or
Management Stockholder shall reasonably request, and do any and all other acts
and things that may be necessary or desirable to enable the selling Stockholder
or Management Stockholder to consummate the public sale or other disposition in
such states of the Registrable Shares owned by the selling Stockholder or
Management Stockholder; provided, however, that the Company shall not be
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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.
(e) Use its best efforts to have the Registrable Shares listed,
subject to notice, on the NASDAQ National Market or other applicable exchange.
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If the Company has delivered preliminary or final prospectuses to the
selling Stockholders or Management 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 or Management
Stockholders and, if requested, the selling Stockholders or Management
Stockholders shall immediately cease making offers of Registrable Shares and
return all prospectuses to the Company. The Company shall promptly provide each
selling Stockholder and Management Stockholder with revised prospectuses and,
following receipt of the revised prospectuses, the selling Stockholder or
Management Stockholder shall be free to resume making offers of the Registrable
Shares.
Notwithstanding the foregoing, each selling Stockholder and Management
Stockholder shall cease making offers or sales pursuant to a Registration
Statement during any period (not to exceed 90 days in any 12-month period) in
which the Company determines, by notice to each selling Stockholder and
Management Stockholder, that it is in possession of material non-public
information.
4. Allocation of Expenses. The Company will pay all Registration Expenses
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of all registrations under this Agreement; provided, however, that if a
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registration under Section 1 of Article III 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 Article III, Section 1,
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 4, the term
"Registration Expenses" shall mean all expenses incurred by the Company in
complying with Article III, Section 1, 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 Stockholder(s) to represent the selling Stockholder(s),
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' and
Management Stockholders' own counsel (other than the counsel selected to
represent all selling Stockholder(s)).
5. Indemnification and Contribution.
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(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
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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,
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however, that the Company will not be liable in any such case to the extent that
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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; provided, however, that the obligations of such Stockholders
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hereunder shall be limited to an amount equal to the proceeds to each
Stockholder of Registrable Shares sold in connection with such registration.
(c) Each party entitled to indemnification under this Article III,
Section 5 (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
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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
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Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Article III, Section 5. 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
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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
Article III, Section 5 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 Article III, Section 5 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 Article III, Section 5; 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
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any such case, (A) no such holder will be required to contribute any amount in
excess of the proceeds to it of all Registrable Shares sold by it pursuant to
such Registration Statement, and (B) 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.
6. Indemnification with Respect to Underwritten Offering. In the event
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that Registrable Shares are sold pursuant to a Registration Statement in an
underwritten offering pursuant to Article III, Section 1, the Company agrees to
enter into an underwriting agreement containing customary representations and
warranties with respect to the business and operations of an issuer 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.
7. Information by Holder. Each Stockholder and Management Stockholder
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including Registrable Shares in any registration shall furnish to the Company
such information regarding such Stockholder or Management Stockholder and the
distribution proposed by such Stockholder or Management 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.
8. "Stand-Off" Agreement. Except with respect to transfers permitted by
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Section 7.2(2) of the Purchase Agreement where the transferee agrees in writing
to be subject to the
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terms and conditions of any lock-up agreement to which the transferor is a party
relating to the securities of the Company being transferred, each Stockholder
and Management 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 specified period of
time (not to exceed 180 days) following the effective date of such Registration
Statement; provided that:
(a) such agreement shall only apply to the first Registration
Statement covering Common Stock to be sold on its behalf to the public in an
underwritten offering;
(b) all officers and directors of the Company and all holders of at
least 5% of the Company's capital stock enter into similar agreements; and
(c) the Company and the managing underwriter shall agree not to
release (other than early releases granted to parties other than officers and
directors of the Company, in an aggregate amount not to exceed 100,000 shares of
Common Stock) any of the parties listed in subparagraph (b) above prior to the
grant of a proportional release to the Stockholders.
9. Limitations on Subsequent Registration Rights. The Company shall not,
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without the prior written consent of Stockholders holding at least 67% of the
Registrable Shares held by all Stockholders, 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 include
securities of the Company in any Registration Statement, unless under the terms
of such agreement, such holder or prospective holder may include such securities
in any such registration only on terms substantially similar to the terms on
which holders of Registrable Shares may include shares in such registration.
10. Rule 144 Requirements. After the earliest of (a) the closing of the
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sale of securities of the Company pursuant to a Registration Statement, (b) the
registration by the Company of a class of securities under Section 12 of the
Exchange Act, or (c) the issuance by the Company of an offering circular
pursuant to Regulation A under the Securities Act, the Company agrees to:
(i) Comply with the requirements of Rule 144(c) under the Securities
Act with respect to current public information about the Company;
(ii) 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
(iii) Furnish to any holder of Registrable Shares upon request (A) 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), (B) a copy of the most recent annual or quarterly report of the
Company, and (C) 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.
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ARTICLE IV. RIGHT OF FIRST REFUSAL
1. Right of First Refusal
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(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,
including, without limitation, shares of preferred stock, (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 Article IV of this
Agreement. The Company shall deliver to the Stockholders a written notice of any
proposed or intended 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, (iii) identify the persons or entities, if known, to which or
with which the Offered Securities are to be offered, issued, sold or exchanged,
and (iv) offer to issue and sell to or exchange with each of the Stockholders
(A) such portion of the Offered Securities as the aggregate number of Shares
(including shares of Common Stock issuable upon conversion of the Shares even if
such conversion has not yet been effected) then held by such Stockholder bears
to the total number of shares of Common Stock then outstanding (including shares
of Common Stock issuable upon conversion of convertible securities even if such
conversion has not yet been effected) (the "Basic Amount"), and (B) such
additional portion of the Offered Securities as such Stockholder indicates it
will purchase or acquire should other Stockholders acquire less than all of the
Offered Securities initially offered to the other Stockholders (the
"Undersubscription Amount"). Each Stockholder shall have the right, for a period
of 30 days following delivery of the Offer, to purchase or acquire, at the 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 Stockholder 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 Stockholder's Basic Amount that such
Stockholder elects to purchase and, if such Stockholder shall elect to purchase
all of its Basic Amount, the Undersubscription Amount (if any) that such
Stockholder elects to purchase (the "Notice of Acceptance"). If the Basic
Amounts subscribed for by all Stockholders are less than the total Offered
Securities, then each Stockholder 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
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exceed the difference between the Offered Securities and the Basic Amounts
subscribed for (the "Available Undersubscription Amount"), each Stockholder 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 Stockholder bears to the total
Undersubscription Amounts subscribed for by all Stockholders, subject to
rounding by the Board of Directors to the extent it reasonably deems necessary.
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(c) To the extent that Notices of Acceptance are not given by the
Stockholders in respect of all the Offered Securities, the Company shall have 90
days from the expiration of the period set forth in Article IV, Section 1(a) 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 Stockholders (the "Refused
Securities"), but only to the offerees or purchasers described in the Offer and
only upon terms and conditions (including, without limitation, unit prices and
interest rates) 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 Article IV, Section 1(c)), then each Stockholder 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 Stockholder elected to
purchase pursuant to Article IV, Section 1(b) 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 Stockholders pursuant to Article IV, Section
1(b) prior to such reduction) and (ii) the denominator of which shall be the
amount of all Offered Securities. In the event that any Stockholder 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 Stockholders in accordance with Article IV, Section
1(a).
(e) Upon the closing of the issuance, sale or exchange of all or less
than all the Refused Securities, the Stockholders shall acquire from the
Company, and the Company shall issue to the Stockholders, the number or amount
of Offered Securities specified in the Notices of Acceptance, as reduced
pursuant to Article IV, Section 1(d) if the Stockholders have so elected, upon
the terms and conditions specified in the Offer. The purchase by the
Stockholders of any Offered Securities is subject in all cases to the
preparation, execution and delivery by the Company and the Stockholders of a
purchase agreement relating to such Offered Securities reasonably satisfactory
in form and substance to the Stockholders and their respective counsel.
(f) Any Offered Securities not acquired by the Stockholders or other
persons in accordance with Article IV, Section 1 may not be issued, sold or
exchanged until they are again offered to the Stockholders under the procedures
specified in this Article.
2. Excluded Issuances. The rights of the Stockholders under this Article
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IV shall not apply to:
(a) Common Stock issued as a stock dividend to holders of Common
Stock or upon any subdivision or combination of shares of Common Stock;
(b) The issuance of the Shares and any shares of Common Stock issued
upon conversion thereof;
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(c) Shares of Common Stock, or options exercisable therefor, issuable
to officers, directors, consultants and employees of the Company or any
subsidiary pursuant to any plan, agreement or arrangement approved by a vote of
the Board of Directors of the Company or the Compensation Committee of the Board
of Directors;
(d) 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;
(e) Shares of Common Stock sold by the Company in an underwritten
public offering pursuant to an effective registration statement under the
Securities Act; or
(f) Up to 1,000,000 shares of Common Stock issued by the Company,
with the approval of a majority of the Board of Directors, in connection with
lease financings, strategic alliances and similar arrangements.
ARTICLE V. GENERAL
1. Termination. Article II of this Agrement shall terminate on the
-----------
earlier of (a) the tenth anniversary of the date of this Agreement or (b) the
closing of an Initial Public Offering. All of the Company's obligations to
register Registrable Shares under Article III of this Agreement shall terminate
on the tenth anniversary of the Initial Public Offering. Article IV of this
Agreement shall terminate upon the earlier of (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 an Initial Public Offering.
2. Transfer of Rights. This Agreement, and the rights and obligations of
------------------
the Stockholders and Management Stockholders hereunder, may be assigned by the
Stockholders and Management Stockholders to any person or entity to which Shares
are transferred by the Stockholders or Management Stockholders, and such
transferee shall be deemed a "Stockholder" or "Management Stockholder" for
purposes of this Agreement; provided that (i) the transferee provides written
notice of such assignment to the Company and (ii) no assignee shall be a
customer or competitor of the Company unless the Board of Directors of the
Company otherwise agrees.
3. Severability. The provisions of this Agreement are severable, so that
------------
the invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other term or provision of this
Agreement, which shall remain in full force and effect.
4. Specific Performance. In addition to any and all other remedies that
--------------------
may be available at law in the event of any breach of this Agreement, the
Stockholders shall be entitled to specific performance of the agreements and
obligations of the Company and the Stockholders hereunder and to such other
injunctive or other equitable relief as may be granted by a court of competent
jurisdiction.
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5. Governing Law. This Agreement shall be governed by, and construed and
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enforced in accordance with, the laws of the State of Delaware (without
reference to the conflicts of law provisions thereof).
6. 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 Convergent Networks, Inc., 000 Xxxxxxxxxx Xxxxxx,
Xxxxx 0, Xxxxxx, Xxxxxxxxxxxxx 00000, Attention: President, or at such other
address or addresses as may have been furnished in writing by the Company to the
Purchasers, with a copy to Xxxx and Xxxx LLP, 00 Xxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000, Attention: Xxxx X. Xxxxxxx, Esq.;
If to an Investor, at his or its address as set forth on Attachment A or
------------
Attachment B, or at such other address or addresses as may have been furnished
------------
to the Company in writing by such Investor; or
If to a Management Stockholder, at his address set forth below his
signature to this Agreement.
Notices provided in accordance with this Article V, Section 6 shall be
deemed delivered upon personal delivery or two business days after deposit in
the mail.
7. Complete Agreement; Amendments. This Agreement constitutes the full
------------------------------
and complete agreement of the parties hereto with respect to the subject matter
hereof. This Agreement may be amended and any provision may be waived,
prospectively or retroactively, at any time by a written instrument signed by
the Company and Stockholders holding at least 67% of the Registrable Shares then
held by all Stockholders. 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.
8. Pronouns. Whenever the content may require, any pronouns used in this
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Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns and pronouns shall include the plural, and vice
versa.
9. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, and all of which
together shall constitute one Agreement binding on all the parties hereto.
10. Captions. Captions of sections have been added only for convenience
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and shall not be deemed to be a part of this Agreement.
11. Addition of Investors. Each purchaser of shares of Series A Preferred
---------------------
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock of the Company under the respective Stock Purchase Agreement shall become
a party to, and an "Investor" under, this Agreement upon the closing of its
purchase of its respective shares thereunder and its execution of a counterpart
signature page to this Agreement.
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12. Cancellation of Original Agreement. This Agreement replaces the
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Original Agreement, as amended to date, in its entirety, and such Original
Agreement shall hereafter be null and void.
13. Aggregation of Stock. All shares of Series D Preferred Stock and
--------------------
Common Stock held or acquired by affiliated entities or persons shall be
aggregated for the purpose of determining the availability of any rights under
this Agreement.
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Attachment A
Existing Investors
------------------
Matrix Partners V, L.P.
0000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxx
Fax: 000-000-0000
Matrix V Entrepreneurs Fund L.P.
0000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxx
Fax: 000-000-0000
Battery Ventures IV, L.P.
20 Xxxxxxx Street, Suite 000
Xxxxxxxxx Xxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attn: Xxxx Xxxxxx
Fax: 000-000-0000
Battery Investment Partners IV, L.L.C.
20 Xxxxxxx Street, Suite 000
Xxxxxxxxx Xxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attn: Xxxx Xxxxxx
Fax: 000-000-0000
North Bridge Venture Partners II, L.P.
000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xx Xxxxxxxx
Fax: 000-000-0000
Worldview Technology Partners III, L.P.
000 Xxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
Attn: Xxxx Xxxxx
Fax: 000-000-0000
Worldview Technology International III, L.P.
000 Xxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
Attn: Xxxx Xxxxx
Fax: 000-000-0000
Worldview Strategic Partners III, L.P.
000 Xxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
Attn: Xxxx Xxxxx
Fax: 000.000.0000
VantagePoint Communications Partners, L.P.
0000 Xxxxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, XX 00000
VantagePoint Venture Partners III (Q), L.P.
0000 Xxxxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, XX 00000
VantagePoint Venture Partner III, L.P.
0000 Xxxxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, XX 00000
B.A.B.P., L.L.C.
c/o GLOBAL NAPs, Inc.
00 Xxxxxxxxxx Xxxx
Xxxxxx, XX 00000
Attn: Xxxxx Xxxxx
Tel: 000.000.0000
Fax: 000.000.0000
Xxxxxxx Xxxxxxxx
c/x Xxxxxxxx, Xxxxxxx & Xxxxxxx
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Fax: 000.000.0000
Xxxxx Xx
000 Xxxxxxx Xxxx
Xxxxxxxx, XX 00000
Xxxxxx Xxxxxxxx
0000 Xxxxx Xxxxxx
Xxxxxxxx, XX 00000
Xxxxxx Xxxxxxxxx
00 Xxxxxxxxx Xxx
Xx. Xxxxxx, XX 00000
Xxxxxx Xxxxxxxx
000 Xxxxx Xxxxxxx Xxxx
Xxxxxxx, XX 00000
XxXxxxxxx Consulting Self/Employed Profit Sharing Retirement Plan
Xxxx X. XxXxxxxxx, Trustee
0000 Xxxxxxx Xxxx #0
Xxxxxxx, XX 00000
Xxxx Xxxx
c/o Convergent Networks, Inc.
000 Xxxxxxxxxx Xxxxxx
Xxxxx Xxxxx
Xxxxxx, XX 00000
Hwang-Xxxx Xxxx
c/o Convergent Networks, Inc.
000 Xxxxxxxxxx Xxxxxx
Xxxxx Xxxxx
Xxxxxx, XX 00000
Xxxxxxxx Xxxx
c/o The Yankee Group
00 Xx. Xxxxx Xxxxxx
Xxxxxx, XX 00000
Xxxxxxxx Xxxx
00000 Xxxxxxxxx Xxxx
Xxxxxx, XX 00000
Xxxx Xxx
000 Xxxx Xxxxx Xxxx
Xxxxx Xxxxxxx, XX 00000
Xxxxx Xx
000 Xxxxxxx Xxxx
Xxxxxxxx, XX 00000
Xxxxxxx XxXxxxxx
000 Xxxx Xxxx
Xxxxx, XX 00000
Xxxxxx Xxxxxxxxx
00 Xxxxxxx Xxxx
Xxxxxxxx, XX 00000
Xxxxxx X. Xxxxxxx
c/o Convergent Networks, Inc.
000 Xxxxxxxxxx Xxxxxx
Xxxxx Xxxxx
Xxxxxx, XX 00000
Attachment B
New Investors
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PUTNAM OTC AND EMERGING GROWTH FUND
XXXXXX FUNDS TRUST-PUTNAM EQUITY FUND 2000
XXXXXX FUNDS TRUST-XXXXXX TECHNOLOGY FUND
c/o Putnam Investments
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: General Counsel
PUTNAM WORLD TRUST II-PUTNAM EMERGING INFORMATION
SCIENCES FUND
c/o Putnam Investments
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: General Counsel
Pilgrim Xxxxxx Hybrid Partners I, L.P.
000 XxXxxxxxx Xxxx
0 Xxxxx, XX 00000
Attn: Xxxxxxx XxXxxxxxxx
Fax: 000-000-0000
Pilgrim Xxxxxx Hybrid Partners II, L.P.
000 XxXxxxxxx Xxxx
0 Xxxxx, XX 00000
Attn: Xxxxxxx XxXxxxxxxx
Fax: 000-000-0000
Xxxxxx Small Capitalization Equity Fund, Snorklebay & Co.
Xxxxxxx and Xxxxxx
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx
Tel: 000-000-0000
Xxxxxx Variable Series - Small Capitalization Growth Portfolio-
Snailsand & Co.
Xxxxxxx and Xxxxxx
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx
Tel: 000-000-0000
