Exhibit 10.1.6
INVESTORS RIGHTS AGREEMENT
INVESTORS RIGHTS AGREEMENT (this "Agreement") is dated as of May 23, 2000 by and
among (i) Beacon Power Corporation, a Delaware corporation (the "COMPANY"), (ii)
the stockholders of the Company who are listed on Schedule A hereto (each, a
"SCHEDULE A STOCKHOLDER" and collectively, the "SCHEDULE A STOCKHOLDERS"), and
(iii) the other stockholders of the Company listed on Schedule B hereto (each,
an "INVESTOR" and collectively, the "INVESTORS"). The Schedule A Stockholders
and the Investors are collectively referred to herein as the "STOCKHOLDERS" and
individually as a "STOCKHOLDER". Certain terms used in this Agreement are
defined in EXHIBIT A hereto.
R E C I T A L S
A. Each of the Investors has made an investment in the Company by acquiring
shares of the Company's capital stock (the "SHARES").
B. In consideration of the investment made in the Company by each of the
Investors, the Schedule A Stockholders and the Company have agreed to enter into
this Agreement and to grant to the Investors the rights set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the mutual promises and
covenants contained herein, the Stockholders and the Company (each a "PARTY" and
collectively, the "PARTIES") agree as follows:
1. BOARD OF DIRECTORS REPRESENTATION
1.1. REPRESENTATION. From and after the date hereof, each Stockholder shall vote
all of the voting securities of the Company over which such Stockholder has
voting control so as to effect the following:
(a) Subject to clause (c) below, the authorized number of directors of the
Company's Board of Directors (the "BOARD") shall be established at seven
members.
(b) The following Persons shall be elected to the Board at
each election of directors during the term of this Agreement:
(i) two Persons designated by Perseus Capital, L.L.C.
("PERSEUS");
(ii) one Person designated by DQE Enterprises, Inc.
("DUQUESNE");
(iii) subject to Section 1.3 herein, one Person designated by GE Capital Equity
Investments, Inc. ("GE");
(iv) one Person designated by Mechanical Technologies
Incorporated ("MTI");
(v) one Person designated by SatCon Technology
Corporation ("SATCON"); and
(vi) Xxxxxxx Xxxxxxx for as long as he remains the Chief
Executive Officer of the Company or, if Xx. Xxxxxxx
ceases to be the Chief Executive Officer of the Company,
one Person jointly chosen by SatCon and Perseus.
The Persons elected to the Board pursuant to clauses (i) through (iv) are
referred to herein as the "INVESTOR REPRESENTATIVES".
(c) At any time, any Person designated to serve on the Board
hereunder may be removed from the Board (and thereupon from
all committees thereof) with or without cause, at the written
request of the Stockholder (or Stockholders) that designated
such director in accordance herewith.
(d) In the event that any Person designated to serve on the
Board hereunder for any reason ceases to serve as a director
of the Board or any committee thereof during such director's
term of office, the resulting vacancy on the Board or any
Committees shall be filled by a Person designated by the
Stockholder (or Stockholders) that designated the director
vacating the office in accordance herewith.
(e) In the event (i) the Company breaches in any material
respect any of its covenants or agreements under the
Securities Purchase Agreement dated as of May 23, 2000 by and
among the Company, Perseus, Duquesne, Micro-Generation
Technology Fund, L.L.C. ("MICRO"), GE, MTI, Penske Corporation
and the Beacon Group Energy Investment Fund, L.P. ("Beacon
Fund") (the "CLASS F AGREEMENT") or any Related Agreement (as
defined in the Class F Agreement) and fails to cure such
breach within 30 days after the delivery of a written notice
to the Company describing such breach in reasonable detail,
(ii) it becomes known that any of the representations and
warranties of the Company contained in the Class F Agreement
were not true and correct in all material respects as the date
of the Closing (as defined in the Class F Agreement) and such
inaccuracy is not cured within 30 days after the delivery of a
written notice to the Company describing such inaccuracy in
reasonable detail, (iii) the Company fails to redeem any
shares of its Class F Preferred Stock as required by the
Company's Certificate of Incorporation (as then in effect) at
the time such redemption is required (including without
limitation any failure to redeem that is based on a lack of
legally available funds or any other legal or contractual
prohibition or restriction upon redemption), or (iv) the
Company or any of its subsidiaries becomes the subject of any
proceeding under the Bankruptcy Code or any similar statute
(whether voluntarily or involuntarily), then upon the
occurrence of any such event the Board shall be increased by
two additional members who shall be designated by holders of a
majority of the outstanding shares of the Company's Class F
Preferred Stock. To the extent any cure of a breach by the
Company described in clause (i) or (ii) of the immediately
preceding sentence would not cure any adverse effect resulting
from such initial breach, no cure
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period shall be deemed to be available to the Company with respect to such
breach. Such increase in the size of the Board shall continue in effect until
the breach or inaccuracy referenced in clause (i) or (ii) has been fully cured,
the redemption referenced in clause (iii) has been fully effected, or the
proceeding referenced in clause (iv) has been dismissed, as the case may be.
1.2. ANNUAL BUDGET. At least 15 days prior to the beginning of each fiscal year,
the Board shall, with the approval of a majority of the Investor
Representatives, approve and adopt a budget for the Company for such fiscal year
(in each case, an "Annual Budget").
1.3. OBSERVER RIGHTS. For so long as Micro holds any capital stock of the
Company, the Company shall invite a representative from Micro to attend all
meetings of the Board, at the Company's expense, in a nonvoting observer
capacity. For so long as Beacon Fund holds at least 5% of the capital stock of
the Company, on a fully diluted basis, the Company shall invite a representative
from Beacon Fund to attend all meetings of the Board, at the Company's expense,
in a nonvoting observer capacity. GE may, at its sole discretion, elect to have
a representative attend meetings of the Board as an observer in lieu of
designating a director pursuant to Section 1.1(b)(iii) above. The Company shall
provide all such representatives with the same financial and other information
that is provided to the members of the Board in connection with any meetings of
the Board. As a condition of the observer rights granted in this Section, each
of Micro, Beacon Fund and GE agrees to abide by the Company's xxxxxxx xxxxxxx
rules to the extent they are applicable to all members of the Board, and each
such representatives of Micro, Beacon Fund and GE shall agree to abide by the
Company's xxxxxxx xxxxxxx rules to the extent they are applicable to all members
of the Board.
1.4 RESTRICTIONS ON SALES BY MANAGEMENT. Except for transfers to Family Members,
the Company shall prohibit each of its officers and other members of the
Company's management team who hold in excess of 100,000 shares on a fully
diluted basis from transferring any shares of capital stock of the Company
without the Company first obtaining the affirmative vote of at least a
two-thirds majority of the holders of Class F Preferred Stock, provided such
two-thirds majority must consist of at least two holders of Class F Preferred
Stock.
2. REGISTRATION RIGHTS
2.1. DEFINITIONS. For purposes of this Section 2:
"Commencement Date" means the 180th day after the date on which the first of the
following events occurs: (i) the Company consummates its initial public offering
of securities under the Securities Act, (ii) the company registers a class of
securities under Section 12(b) or 12(g) of the Exchange Act or (iii) the Company
becomes required to file periodic reports with the Commission under Section
15(d) of the Exchange Act.
"Commission" means the Securities and Exchange Commission or any successor
thereto.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any
successor statute.
"Holder" means (i) an Investor, (ii) the partners, members or stockholders of an
Investor collectively provided that such partners, members or stockholders act
through such Investor or its successor and (iii) any person or entity to whom an
Investor or any person or entity identified in clause (ii) of this definition
sells, transfers or assigns Registrable Securities, other than in a sale
pursuant to Rule 144 under the Securities Act or a registration effected
pursuant to this Agreement.
"Majority-In-Interest" means Holders of a majority of the Registrable
Securities.
"Register," "registered," and "registration" refer to an underwritten
registration effected by preparing and filing with the Commission a registration
statement or similar document in compliance with the Securities Act, and the
declaration or ordering by the Commission of effectiveness of such registration
statement or document.
"Registration Expenses" means all expenses in connection with the Company's
performance of or compliance with its obligations under this Section 2,
including, without limitation, all (i) registration, qualification and filing
fees; (ii) fees, costs and expenses of compliance with securities or blue sky
laws (including reasonable fees, expenses and disbursements of counsel for the
underwriters in connection with blue sky qualifications of the Registrable
Securities under the laws of such jurisdictions as the managing underwriter or
underwriters in a registration may designate, subject to the limitation as set
forth in subsection (h) of Section 2.5 hereof); (iii) printing expenses; (iv)
messenger, telephone and delivery expenses; (v) fees, expenses and disbursements
of counsel for the Company and of all independent certified public accountants
retained by the Company (including the expenses of any special audit and "cold
comfort" letters required by or incident to such performance); (vi) Securities
Act liability insurance if the Company so desires; (vii) fees, expenses and
disbursements of any other individuals or entities retained by the Company in
connection with the registration of the Registrable Securities; (viii) fees,
costs and expenses incurred in connection with the listing of the Registrable
Securities on each national securities exchange or automated quotation system on
which the Company has made application for the listing of its Common Stock; and
(ix) internal expenses of the Company (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties and expenses of any annual audit). Registration Expenses shall
not include selling commissions, discounts or other compensation paid to
underwriters or other agents or brokers to effect the sale of Registrable
Securities, or counsel fees and any other expenses incurred by Holders in
connection with any registration that are not specified in the immediately
preceding sentence.
"Registrable Securities" means any shares of Common Stock of the Company owned
by any Holder or that may be acquired by any Holder upon the conversion of any
convertible security or the exercise or conversion of any warrant, option or
similar right owned by any Holder, but only to the extent such shares constitute
"restricted securities" under Rule 144 under the Securities Act. Notwithstanding
the
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foregoing, (i) until such time as all Registrable Securities held by Holders
other than SatCon have been sold pursuant to Rule 144 under the Securities Act
or a registration effected pursuant to this Agreement, securities held by SatCon
and its Affiliates shall not exceed, in the aggregate, 20% of the total
Registrable Securities held by all Investors and (ii) no shares of Common Stock
of the Company owned by any Schedule A Stockholder (other than SatCon) shall
constitute Registrable Securities for purposes of Section 2.2 hereof.
"Requestor" means the Holder or Holders that request the registration in
question.
"Securities Act" means the Securities Act of 1933, as amended, or any successor
statute.
2.2. DEMAND REGISTRATIONS.
(a) REQUEST FOR REGISTRATION. If at any time on or after the
Commencement Date, the Majority-In-Interest with respect to
any registration to be effected on a Form S-1 (or any
successor long form) or any Holder with respect to any
registration to be effected on a form other than a Form S-1
(or any successor long form) submits a written request (a
"Demand Notice") to the Company that the Company register
Registrable Securities under and in accordance with the
Securities Act (a "Demand Registration"), then the Company
shall:
(i) within five days after receipt of such Demand
Notice, give written notice of the proposed registration
to all other Holders; and
(ii) as soon as practicable, use best efforts to effect
such registration as may be so requested and as would
permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are
specified in such request, together with all or such
portion of the Registrable Securities of any Holders
joining in such request as are specified in written
requests received by the Company within 20 days after
the date the Company mails the written notice referred
to in clause (i) above.
Notwithstanding the foregoing, if the Company shall furnish to the Holders a
certificate signed by the president of the Company stating that in the good
faith judgment of the Board, it would be seriously detrimental to the Company or
its stockholders for a registration statement to be filed on or before the date
filing would be required in connection with any Demand Registration and it is
therefore essential to defer the filing of such registration statement, the
Company shall have the right to defer such filing or delay its effectiveness for
a reasonable period not to exceed 60 days provided that such right shall not be
exercised more than once with respect to a request for registration hereunder
during any period of twelve consecutive months. The Company will pay all
Registration Expenses in connection with such withdrawn request for
registration.
Notwithstanding the foregoing, the Company shall not be required to effect (i)
more than two registrations on any form other than a Form S-3 (or any successor
short
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form), (ii) any registration where the anticipated aggregate gross proceeds from
the sale of the Registrable Securities to be included in such registration is
less than $500,000, or (iii) any registration requested within less than six
months after the filing of another registration pursuant to this Section 2 in
which all of the Registrable Securities requested to be included in such
registration by participating Holders were so included.
(b) UNDERWRITING. In connection with any registration under
this Section 2.2, if so requested by the Requestor, the
Company shall enter into an underwriting agreement with one or
more underwriters selected by the Requestor having terms and
conditions customary for such agreements.
(c) SHELF REGISTRATION. If at the time the Company registers
Registrable Securities under the Securities Act pursuant to
this Section 2.2, the sale or other disposition of such
Registrable Securities by the Holders may be made pursuant to
a registration statement on Form S-3 (or any successor form
that permits the incorporation by reference of future filings
by the Company under the Exchange Act), such registration
statement, unless otherwise directed by the Requestor, shall
be filed as a "shelf" registration statement pursuant to Rule
415 under the Securities Act (or any successor rule). Any such
shelf registration shall cover the disposition of all
Registrable Securities in one or more underwritten offerings,
block transactions, broker transactions, at-market
transactions and in such other manner or manners as may be
specified by the Requestor. The Company shall use its best
efforts to keep such "shelf" registration continuously
effective as long as the delivery of a prospectus is required
under the Securities Act in connection with the disposition of
the Registrable Securities registered thereby and in
furtherance of such obligation, shall supplement or amend such
registration statement if, as and when required by the rules,
regulations and instructions applicable to the form used by
the Company for such registration or by the Securities Act or
by any other rules and regulations thereunder applicable to
shelf registrations. On one occasion during each twelve
consecutive months such shelf registration statement remains
effective, upon their receipt of a certificate signed by the
president of the Company in accordance with the last paragraph
of Section 2.2(a) hereof, the Holders will refrain from making
any sales of Registrable Securities under the shelf
registration statement for a period of up to 60 days; provided
that this right to cause the Holders to refrain from making
sales shall not be exercised by the Company during the one
year period following any exercise of the Company's right to
defer the filing or delay its effectiveness of a registration
statement under the penultimate paragraph of Section 2.2(a).
2.3. COMPANY REGISTRATION.
(a) NOTICE OF REGISTRATION. If at any time or from time to
time, the Company shall determine to register any of its
Capital Stock, whether or not for its own account, other than
a registration relating to employee benefit plans or a
registration effected on Form S-4, the Company shall:
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(i) provide to each Holder written notice thereof at
least twenty days prior to the filing of the
registration statement by the Company in connection with
such registration; and
(ii) include in such registration, and in any
underwriting involved therein, all those Registrable
Securities specified in a written request by each Holder
received by the Company within fifteen days after the
Company mails the written notice referred to above,
subject to the provisions of Section 2.3(b) below.
(b) UNDERWRITING. The right of any Holder to registration
pursuant to this Section 2.3 shall be conditioned upon the
participation by such Holder in the underwriting arrangements
specified by the Company in connection with such registration
and the inclusion of the Registrable Securities of such Holder
in such underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Securities
through such underwriting shall (together with the Company)
enter into an underwriting agreement in customary form with
the managing underwriter selected for such underwriting by the
Company and take all other actions, and deliver such opinions
and certifications, as may be reasonably requested by such
managing underwriter. Notwithstanding any other provision of
this Section 2.3, if the managing underwriter determines that
marketing factors require a limitation of the number of shares
to be underwritten, the managing underwriter may limit the
number of Registrable Securities to be included in such
registration. The Company shall so advise all Holders
distributing Registrable Securities through such underwriting,
and there shall be excluded from such registration and
underwriting, to the extent necessary to satisfy such
limitation, first shares which the Company wishes to register
for the account of third parties, then shares held by the
Holders and, thereafter, to the extent necessary, shares which
the Company wishes to register for its own account. As among
the Holders as a group, the number of Registrable Securities
that may be included in the registration and underwriting
shall be allocated in proportion, as nearly as practicable, to
the respective amounts of Registrable Securities required to
be included (determined without regard to any requirement of a
request to be included in such registration) in such
registration held by all Holders at the time of filing the
registration statement. To facilitate the allocation of shares
in accordance with the above provisions, the Company may round
the number of shares allocated to any Holder to the nearest
100 shares.
(c) RIGHT TO TERMINATE REGISTRATION. The Company shall have
the right to terminate or withdraw any registration initiated
by it under this Section 2.3 prior to the effectiveness of
such registration whether or not any Holder has elected to
include Registrable Securities in such registration.
2.4. EXPENSE OF REGISTRATION. All Registration Expenses incurred in connection
with the registration and other obligations of the Company pursuant to Sections
2.2, 2.3 and 2.5 shall be borne by Company.
2.5. REGISTRATION PROCEDURES. If and whenever the Company is required by the
provisions of this Section 2 to effect the registration of Registrable
Securities, the Company shall:
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(a) promptly prepare and file with the Commission a
registration statement with respect to such Registrable
Securities on any form that may be utilized by the Company and
that shall permit the disposition of the Registrable
Securities in accordance with the intended method or methods
of disposition thereof, and use its best efforts to cause such
registration statement to become effective as promptly as
practicable and remain effective thereafter as provided
herein, provided that prior to filing a registration statement
or prospectus or any amendments or supplements thereto,
including documents incorporated by reference after the
initial filing of any registration statement, the Company will
furnish to each of the Investors whose Registrable Securities
are covered by such registration statement, their counsel and
the underwriters copies of all such documents proposed to be
filed sufficiently in advance of filing to provide them with a
reasonable opportunity to review such documents and comment
thereon;
(b) prepare and file with the Commission such amendments (including
post-effective amendments) and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective and current and to comply with the provisions
of the Securities Act with respect to the sale or other disposition of all
Registrable Securities covered by such registration statement, including such
amendments (including post-effective amendments) and supplements as may be
necessary to reflect the intended method of disposition by the prospective
seller or sellers of such Registrable Securities, provided that except in the
case of a shelf registration under Section 2.2(c) such registration statement
need not be kept effective and current for longer than 120 days subsequent to
the effective date of such registration statement;
(c) provide customary indemnity and contribution arrangements
to any qualified independent underwriter or qualified
independent pricer as defined in Schedule E of the Bylaws of
the National Association of Securities Dealers, Inc. (a
"Qualified Independent Underwriter/Pricer"), if requested by
such Qualified Independent Underwriter/Pricer, on such
reasonable terms as such Qualified Independent
Underwriter/Pricer customarily requires;
(d) subject to receiving reasonable assurances of
confidentiality, for a reasonable period after the filing of
such registration statement, and throughout each period during
which the Company is required to keep a registration
effective, make available for inspection by the selling
holders of Registrable Securities being offered, and any
underwriters, and their respective counsel, such financial and
other information and books and records of the Company, and
cause the officers, directors, employees, counsel and
independent certified public accountants of the Company to
respond to such inquiries as shall be reasonably necessary, in
the judgment of such counsel, to conduct a reasonable
investigation within the meaning of Section 11 of the
Securities Act;
(e) promptly notify the selling holders of Registrable
Securities and any underwriters and confirm such advice in
writing, (i) when such registration statement or the
prospectus included therein or any prospectus amendment or
supplement or post-effective amendment has been filed, and,
with respect to such registration statement
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or any post-effective amendment, when the same has become effective, (ii) of any
comments by the Commission, by the National Association of Securities Dealers
Inc. ("NASD"), and by the blue sky or securities commissioner or regulator of
any state with respect thereto or any request by any such entity for amendments
or supplements to such registration statement or prospectus or for additional
information, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of such registration statement or the initiation or
threatening of any proceedings for that purpose, (iv) if at any time the
representations and warranties of the Company cease to be true and correct in
all material respects, (v) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, or (vi) at any time when a prospectus is required
to be delivered under the Securities Act, that such registration statement,
prospectus, prospectus amendment or supplement or post-effective amendment, or
any document incorporated by reference in any of the foregoing, contains an
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they are made, not misleading;
(f) furnish to each selling holder of Registrable Securities
being offered, and any underwriters, prospectuses or
amendments or supplements thereto, in such quantities as they
may reasonably request and as soon as practicable, that update
previous prospectuses or amendments or supplements thereto;
(g) permit selling holders of Registrable Securities to rely
on any representations and warranties made to any underwriter
of the Company or any opinion of counsel or "cold comfort"
letter delivered to any such underwriter, and indemnify each
such holder to the same extent that it indemnifies any such
underwriter;
(h) use best efforts to (i) register or qualify the
Registrable Securities to be included in a registration
statement hereunder under such other securities laws or blue
sky laws of such jurisdictions within the United States of
America as any selling holder of such Registrable Securities
or any underwriter of the securities being sold shall
reasonably request, (ii) keep such registrations or
qualifications in effect for so long as the registration
statement remains in effect and (iii) take any and all such
actions as may be reasonably necessary or advisable to enable
such holder or underwriter to consummate the disposition in
such jurisdictions of such Registrable Securities owned by
such holder; PROVIDED, HOWEVER, that the Company shall not be
required for any such purpose to (x) qualify generally to do
business as a foreign corporation in any jurisdiction wherein
it would not otherwise be required to qualify but for the
requirements of this Section 2.5(h), (y) subject itself to
taxation in any such jurisdiction or (z) consent to general
service of process in any such jurisdiction;
(i) cause all such Registrable Securities to be listed or
accepted for quotation on each securities exchange or
automated quotation system on which the Company's Common Stock
then trades;
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(j) otherwise use best efforts to comply with all applicable
provisions of the Securities Act, and rules and regulations of
the Commission, and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering
a period of at least twelve months which shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158
thereunder; and
(k) provide a legal opinion of the Company's outside counsel,
dated the effective date of such registration statement (and,
if such registration statement includes an underwritten public
offering, dated the date of the closing under the underwriting
agreement), with respect to the registration statement, each
amendment and supplement thereto, the prospectus included
therein (including the preliminary prospectus) and such other
documents relating thereto in customary form and covering such
matters of the type customarily covered by legal opinions of
such nature.
2.6. INDEMNIFICATION. In the event any of the Registrable Securities are
included in a registration statement under this Section 2:
(a) the Company will indemnify each Holder who participates in
such registration, each of its officers and directors and
partners and such Holder's separate legal counsel and
independent accountants, and each person controlling such
Holder within the meaning of Section 15 of the Securities Act,
and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities
Act, against all expenses, claims, losses, damages or
liabilities (or actions in respect thereof), including any of
the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering
circular or other document, or any amendment or supplement
thereto, incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or any
violation by the Company of any rule or regulation promulgated
under the Securities Act applicable to the Company in
connection with any such registration, qualification or
compliance, and the Company will reimburse each such Holder,
each of its officers and directors and partners and such
Holder's separate legal counsel and independent accountants
and each person controlling such Holder, each such underwriter
and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection
with investigating, preparing or defending any such claim,
loss, damage, liability or action, provided that the Company
will not be liable in any such case to the extent that any
such claim, loss, damage, liability or expense arises out of
or is based on any untrue statement or omission or alleged
untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Company
by an instrument duly executed by such Holder or underwriter
and stated to be specially for use therein.
(b) Each Holder, severally and not jointly, will, if
Registrable Securities held by such Holder are included in the
securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each
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of its directors and officers and its legal counsel and independent accountants,
each underwriter, if any, of the Company's securities covered by such a
registration statement, each person who controls the Company or such underwriter
within the meaning of Section 15 of the Securities Act, and each other such
Holder, each of its officers and directors and each person controlling such
Holder within the meaning of Section 15 of the Securities Act, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statement therein not misleading, and will reimburse the Company, such Holders,
such directors, officers, persons, underwriters or control persons for any legal
or any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by an instrument
duly executed by such Holder and stated to be specifically for use therein.
Notwithstanding any other provision herein, each Holder's indemnification
obligations under this Section 2.6(b) shall be limited to an amount not to
exceed the net proceeds received by such Holder resulting from sales pursuant to
such registration statement, prospectus, offering circular or other document.
(c) Each party entitled to indemnification under this Section
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 provided that
failure to give such prompt notice shall not relieve the
Indemnifying Party of its obligations hereunder unless it is
materially prejudiced thereby, and shall permit the
Indemnifying Party to assume the defense of any such claim or
any litigation resulting therefrom, provided that counsel for
the Indemnifying Party, who shall conduct the defense of such
claim or litigation, shall be approved by the Indemnified
Party (whose approval shall not unreasonably be withheld).
Such Indemnified Party shall have the right to employ separate
counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall be
that of such Indemnified Party unless (i) the Indemnifying
Party has agreed to pay such fees and expenses or (ii) the
Indemnifying Party shall have failed to assume the defense of
such action or proceeding and employ counsel reasonably
satisfactory to such Indemnified Party in any such action or
proceeding or (iii) the named parties to any such action or
proceeding (including any impleaded parties) include both such
Indemnified Party and the Indemnifying Party and such
Indemnified Party shall have been advised by counsel that
there may be one or more legal defenses available to such
Indemnified Party which are different from or additional to
those available to the Indemnifying Party (in which case, if
such Indemnified Party notifies the Indemnifying Party in
writing of an election to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party
shall not have the right to assume the defense of such action
or proceeding on behalf of such Indemnified Party, it being
understood, however, that the Indemnifying Party then shall
have the right to employ
11
separate counsel at its own expense and to participate in the defense thereof,
and shall not, in connection with any one such action or proceeding or separate
but substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys at any time for all Indemnified Parties, which firm shall be
designated in writing by a majority of the Indemnified Parties who are eligible
to select such counsel). 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 to such claim or
litigation. No Indemnified Party may consent to entry of any judgment or enter
into any settlement without the prior written consent of the Indemnifying Party.
(d) If the indemnification provided for in this Section 2.6 is
held by a court of competent jurisdiction to be unavailable to
an Indemnified Party with respect to any loss, liability,
claim, damage or expense referred to herein, then the
Indemnifying Party, in lieu of indemnifying the Indemnified
Party, shall contribute to the amount paid or payable by such
Indemnified Party with respect to such loss, liability, claim,
damage or expenses in the proportion that is appropriate to
reflect the relative fault of the Indemnifying Party and the
Indemnified Party in connection with the statements or
omissions that resulted in such loss, liability, claim,
damage, or expense, as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party
and the Indemnified Party shall be determined by reference to,
among other things, whether the untrue or alleged untrue
statement of material fact or the omission to state a material
fact relates to information supplied by the Indemnifying Party
or by the Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such statement or omission. Notwithstanding any other
provision herein, each Holder's contribution obligations under
this Section 2.6(d) shall be limited to an amount not to
exceed the net proceeds received by such Holder resulting from
sales pursuant to such registration statement, prospectus,
offering circular or other document.
2.7. RULE 144 REPORTING. With a view to making available the benefits of certain
rules and regulations of the Commission which may at any time permit the sale of
the Registrable Securities to the public without registration, after such time
as a public market exists for the Common Stock, the Company shall use reasonably
diligent efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities
Act, beginning 90 days after the Company registers a class of
securities under Section 12 of the Exchange Act or completes a
registered offering under the Securities Act; or
(b) 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);
12
(c) Furnish to any Holder promptly upon request a written statement as to its
compliance with the reporting requirements of Rule 144 (at any time after 90
days after the Company completes a registered offering under the Securities
Act), and of the Securities Act and the Exchange Act (at any time after it has
become subject to such reporting requirements), a copy of the most recent annual
or quarterly report of the Company, and such other reports and documents of the
Company and other information in the possession of or reasonably obtainable by
the Company as a Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Holder to sell Registrable Securities
without registration.
2.8. TERMINATION OF REGISTRATION RIGHTS. No Holder shall be entitled to exercise
any right provided for in this Section 2 after the earlier of (a) ten years
following the Commencement Date and (b) the date all Registrable Securities held
by such Holder may be sold in a single three-month period under Rule 144 under
the Securities Act.
2.9. INFORMATION TO BE PROVIDED BY THE HOLDERS. Each Holder whose Registrable
Securities are included in any registration pursuant to this Agreement shall
furnish the Company such information regarding such Holder and the distribution
proposed by such Holder as may be reasonably requested in writing by the Company
and as shall be required in connection with such registration or the
registration or qualification of such securities under any applicable state
securities law.
2.10. "STAND-OFF" AGREEMENT. Each Holder, if requested by the managing
underwriter of the initial public offering of securities by the Company, shall
agree not to sell or otherwise transfer or dispose of any Registrable Securities
or other securities of the Company then held by such Holder for a specified
period of time that is customary under the circumstances (not to exceed 180
days) following the effective date of the registration statement for such
offering; provided that (a) no such agreement shall be required unless the
officers, directors and any other stockholders holding at least 1% of the total
Common Share Equivalents enter into a similar agreement covering the same period
of time and (b) such agreement shall contain terms customary for such
agreements; and further provided, that if the managing underwriter agrees to
release any officer, director or stockholder holding at least 1% of the total
Common Share Equivalents (a "Released Holder") from its stand-off obligations
under this Section 2.10, all other Holders shall be released from their
respective stand-off obligations and be allowed to participate, together with
such Released Holder, on a pro rata basis in such offering. The Company may
impose stop transfer instructions to enforce any required agreement of the
Holders under this Section 2.10.
3. PURCHASE RIGHTS REGARDING FUTURE SALES OF CAPITAL SECURITIES BY THE
COMPANY
Subject to the terms and conditions specified in this Section 3, the Company
hereby grants to each Investor a purchase right with respect to future sales
by the Company of its Capital Securities (as hereinafter defined). Each Investor
shall be entitled to apportion the
13
purchase right hereby granted it among itself and its members, partners and
affiliates in such proportions as it deems appropriate. Each time the Company
proposes to offer any shares of, or any securities convertible into or
exercisable or exchangeable for any shares of, any class of its capital stock
(collectively, "Capital Securities"), the Company shall first make an offering
of such Capital Securities to each Investor in accordance with the following
provisions:
(a) The Company shall deliver a notice by certified mail (a
"Company Sales Notice") to the Investors stating (i) its bona
fide intention to offer such Capital Securities, (ii) the
number of such Capital Securities to be offered, and (iii) the
price and terms, if any, upon which it proposes to offer such
Capital Securities.
(b) Within 20 Business Days after receipt of a Company Sales
Notice, each Investor that desires to purchase any of the
Capital Securities specified in such Company Sales Notice at
the price and on the terms specified in such Sales Notice
shall provide to the Company a written notice (a "Company
Purchase Notice") setting forth the number of such Capital
Securities such Investor is willing to purchase. If the total
number of Capital Securities specified in all of the Company
Purchase Notices received by the Company within such period
exceeds the total number of Capital Securities specified in
such Company Sales Notice or such greater number of Capital
Securities that the Company is willing to sell at the price
and on the terms specified in such Company Sales Notice, then
the Capital Securities to be sold shall be allocated among the
Investors in the same proportion that each such Investor's
Common Share Equivalents bear to the total Common Share
Equivalents owned by all of the Investors that have delivered
Company Purchase Notices; provided that if such allocation
would result in any Investor being allocated Capital
Securities under this subsection (b) in excess of the total
number of Capital Securities that it specified in its Purchase
Notice, such excess Capital Securities shall be allocated
among the other Investors that have not been allocated Capital
Securities equal to the number of Capital Securities specified
in their Company Purchase Notices in a manner that results in
such other Investors receiving in the aggregate under this
subsection (b) an equal percentage of the total number of
Capital Securities specified in their respective Company
Purchase Notices. All allocations made pursuant to this
subsection (b) shall be rounded to the nearest whole Capital
Security. The Capital Securities allocated to each Investor
under this subsection (b) shall be purchased by such Investor
at the price and on the terms specified in the Company Sales
Notice at a closing to be held within 40 Business Days after
the delivery of the Company Sales Notice. Such date shall be
specified by the Company in a written notice delivered to each
Investor participating in such sale at least 10 Business Days
prior thereto.
(c) If all Capital Securities that the Investors are entitled
to purchase pursuant to Section 3(b) are not elected to be
purchased as provided in Section 3(b) hereof, the Company may,
during the 120-day period following the expiration of the
period provided in Section 3(b) hereof, offer the remaining
unsubscribed portion of such Capital Securities to any Person
or Persons at a price not less than, and upon terms no more
favorable to the offeree than, those specified in the Company
Sales Notice with respect thereto. If the Company does not
enter into an agreement for the sale of such Capital
Securities within such period, or if such agreement is not
consummated within 30
14
days of the execution thereof, the right provided hereunder shall be deemed to
be revived and such Capital Securities shall not be offered unless first
reoffered to the Investors in accordance herewith.
(d) The purchase right granted in this Section 3 shall not be
applicable (i) to the issuance or sale of Common Stock (or
options therefor) to consultants, officers, directors and
employees for the primary purpose of soliciting or retaining
their employment or services in a transaction or pursuant to a
plan approved by the Board, (ii) as part of or after a
Qualified Initial Public Offering, (iii) the issuance of
securities pursuant to the conversion or exercise of
outstanding convertible securities or warrants, options or
similar rights, (iv) the issuance of securities in connection
with a bona fide business acquisition by the Company, whether
by merger, consolidation, sale of assets, sale or exchange of
stock or otherwise, (v) the issuance of warrants, options or
similar securities to a bank or other institutional lender as
consideration for the extension of credit by such lender to
the Company, or (vi) the issuance of stock, warrants or other
securities or rights to persons or entities with which the
Company has business relationships provided such issuances are
for other than primarily equity financing purposes and
provided that at the time of any such issuance, the aggregate
of such issuance and similar issuances in the preceding
twelve-month period do not exceed 2% of the then outstanding
Common Stock of the Company (assuming full conversion and
exercise of all convertible and exercisable securities then
outstanding) or such issuance is expressly approved by a
majority of the director representatives of the Investors on
the Board.
4. INFORMATION AND INSPECTION RIGHTS
4.1 INFORMATION. The Company shall deliver to each Investor for so long as such
Investor (together with and any Persons whose securities are aggregated with
those of such Investor pursuant to Section 8.9 hereof for purposes of the
Agreement) holds 500,000 Common Share Equivalents:
(a) as soon as practicable, but in any event within 120 days
after the end of each fiscal year of the Company, an income
statement of the Company for such fiscal year, a cash flow
statement of the Company for such fiscal year, and a balance
sheet of the Company as of the end of such fiscal year, with
each such financial statement to be in reasonable detail,
prepared in accordance GAAP, and audited and certified by a
firm of independent public accountants of nationally
recognized standing selected by the Company;
(b) as soon as practicable, but in any event within sixty days
after the end of each of the first three quarters of each
fiscal year of the Company, unaudited statements of income and
cash flows of the Company for such fiscal quarter and an
unaudited balance sheet of the Company as of the end of such
fiscal quarter;
15
(c) within thirty days of the end of each calendar month, unaudited statements
of income and cash flows and balance sheet of the Company for and as of the end
of such month, in reasonable detail;
(d) as soon as practicable, but in any event at least thirty
days prior to the end of each fiscal year, a budget and
business plan of the Company for the next fiscal year,
prepared on a monthly basis, including balance sheets and
statements of cash flows for such months and, as soon as
prepared, any other budgets or revised budgets prepared by the
Company;
(e) with respect to the financial statements called for in subsections (b) and
(c) of this Section 4.1, an instrument executed by the Chief Financial Officer
or President of the Company certifying that such financial statements were
prepared in accordance with GAAP consistently applied with prior practice for
earlier periods (with the exception of footnotes that may be required by GAAP)
and fairly present the financial condition of the Company and its results of
operation, cash flows and changes in shareholders' equity for the period
specified, subject to year-end audit adjustments; and
(f) such other information relating to the financial
condition, business, prospects or corporate affairs of the
Company as such Investor may from time to time request.
4.2. INSPECTION. During any period in which a Investor is entitled to receive
the materials specified in Section 4.1 hereof, the Company shall permit such
Investor, at such Investor's expense, to visit and inspect the Company's
properties during normal business hours and upon reasonable prior notice, to
examine its books of account and records and to discuss the Company's affairs,
finances and accounts with its officers and accountants, all at such reasonable
times and upon reasonable notice as may be requested by such Investor.
5. RIGHT OF FIRST OFFER
5.1. NOTICE. In the event any Schedule A Stockholder (a "Selling Stockholder")
desires to sell, transfer or otherwise dispose of any or all of the shares of
capital stock of the Company owned of record or beneficially by such Stockholder
or any securities ultimately convertible into or exercisable for any such shares
of capital stock (collectively, the "Target Shares"), such Selling Stockholder
shall promptly deliver to the Company and the Investors, a written notice of
such intended disposition (a "Disposition Notice") setting forth the proposed
terms and conditions thereof, including the number and type of securities to be
disposed of, any conditions to such disposition, the proposed timing of such
disposition, and the minimum consideration such Selling Stockholder will accept
in payment for such securities. Except as otherwise provided herein, a Schedule
A Stockholder may not sell, transfer or otherwise dispose of any shares of
capital stock of the Company or any securities ultimately convertible into or
exercisable for such
16
shares of capital stock unless it delivers to the Company and the Investors a
Disposition Notice and complies with the provisions of this Section 5.1 or
unless the proposed sale, transfer or disposition is exempt under Section 5.6
hereof from the right of first offer granted herein.
5.2. THE COMPANY'S RIGHT. The Company shall, for a period of thirty days
following receipt of a Disposition Notice, have the right to purchase the Target
Shares specified therein upon the terms and conditions specified in the
Disposition Notice, subject to the conditions contained in this Section 5.2.
Such right shall be exercisable by written notice (the "Exercise Notice")
delivered to the Selling Stockholder and the Investors prior to the expiration
of such thirty-day exercise period. If such right is exercised with respect to
all of the Target Shares specified in the Disposition Notice, then the Company
shall complete the repurchase of such Target Shares, by no later than twenty
Business Days after the delivery of the Exercise Notice. At such time, the
Selling Stockholder shall deliver to the Company the certificates representing
the Target Shares to be repurchased, each certificate to be properly endorsed
for transfer. Alternatively, if such right is exercised with respect to only a
portion of the Target Shares specified in the Disposition Notice, then such
right to repurchase shall be contingent upon the election of one or more of the
Investors to repurchase the remaining Target Shares. The Company shall notify
the Investors of its intent to repurchase only a portion of the Target Shares
within the thirty-day exercise period above defined. In such event, the
Company's repurchase of such Target Shares shall be consummated, if at all, at
the time of the Investors' exercise of its repurchase rights in accordance with
Section 5.3 hereof. In the event one or more of the Investors do not elect to
repurchase the remaining Target Shares, the Company shall be deemed to have
waived its right under this Section 5.2.
5.3. THE INVESTORS' RIGHT. Subject to the rights of the Company under Section
5.2 hereof, for a period of the shorter of (i) thirty days from receipt of the
Disposition Notice and (ii) fifteen days from receipt of written notice of the
Company's election either to waive its purchase right or to repurchase only a
portion of the Target Shares, each of the Investors shall have the right to
purchase all of the Target Shares if the Company has elected to waive its right,
or all or a portion of the remaining balance of the Target Shares after the
Company has elected to repurchase only a portion thereof, upon the terms and
conditions specified in the Disposition Notice. The Investors shall exercise
such right in the same manner and subject to the same rights and conditions as
the Company, as more specifically set forth in paragraph 5.2 above. To the
extent that the Target Shares need to be allocated among the Investors, they
shall be allocated PRO RATA based on the holdings of Common Share Equivalents of
each Investor that desires to exercise its purchase right.
5.4. NON-EXERCISE OF PURCHASE RIGHT. In the event an Exercise Notice with
respect to any portion of the Target Shares is not given to the Selling
Stockholder by the Company or any of the Investors within the period specified
herein following the date of the Company's and the Investors' receipt of the
Disposition Notice, then subject to compliance with the provisions of Section
5.5 hereof, the Selling Stockholder shall have a period of 120 days thereafter
in which to sell the Target Shares upon terms and conditions (including the
purchase price) no more favorable to the acquirer than those
17
specified in the Disposition Notice. It shall be a condition to any such
disposition that the acquiror agree to be bound by and comply with all of the
provisions of this Agreement applicable to such Selling Stockholder with respect
to such Target Shares. In the event the Selling Stockholder does not consummate
the sale or disposition of the Target Shares within such 120 day period, the
Company's and the Investors' purchase rights shall continue to be applicable to
any subsequent disposition of the Target Shares by the Selling Stockholder until
such right terminates in accordance with Section 8.1 hereof.
5.5. EXEMPT TRANSFERS. Notwithstanding the foregoing, the purchase rights of the
Company and the Investors set forth in this Section 5 shall not apply to any
transfer by a Selling Stockholder to (a) the ancestors, descendants, siblings or
spouse of the Selling Stockholder or to trusts for the benefit of such persons
or the Selling Stockholder, (b) to such Selling Stockholder's Affiliates, or (c)
in the case of a Selling Stockholder that is a private investment company, to
the partners, members, stockholders or other investors of such Selling
Stockholders as a distribution or similar transfer from such Selling
Stockholder; provided that in each of the foregoing cases, the transferee shall
furnish the Investors and the Company with a written agreement to be bound by
and comply with all provisions of this Agreement. Such transferred stock shall
remain subject to the provisions of this Agreement, and such transferee shall be
treated as a "Stockholder" (and a transferee of a Schedule A Stockholder shall
be treated as a "Schedule A Stockholder") for the purposes of this Agreement.
5.6 ADDITIONAL RESTRICTION ON DISPOSITIONS BY MANAGEMENT. No Schedule A
Stockholder who is an officer or employee of the Company as of the date hereof
or becomes an officer or employee of the Company after the date hereof shall
sell or otherwise dispose of any shares of the capital stock of the Company
without the prior approval of a majority of the Investor Representatives on the
Board.
6. CO-SALE RIGHTS
6.1. NOTICE. In the event an Investor that holds at least 2,500,000 Common Share
Equivalents or a Schedule A Stockholder (a "Selling Major Stockholder") desires
to accept a bona fide offer from a financially capable acquiror for the sale,
transfer or other disposition of any or all of the shares of capital stock of
the Company owned of record or beneficially by such Selling Major Stockholder or
any securities ultimately convertible into or exercisable for any such shares of
capital stock (collectively, the "Sale Shares"), such Selling Major Stockholder
shall promptly deliver to the Company and the other Stockholders, a written
notice of such intended disposition (a "Sale Notice") setting forth the terms
and conditions thereof, including the number and type of securities to be
disposed of, any conditions to such disposition, the proposed timing of such
disposition, the consideration to be paid for such securities and the identity
of the proposed acquirer. Except as otherwise provided herein, a Selling Major
Stockholder may not sell, transfer or otherwise dispose of any shares of capital
stock of the Company or any securities ultimately convertible into or
exercisable for such shares of capital stock unless it delivers to the Company
and the Stockholders a Sales Notice and complies with the
18
provisions of this Section 6 or unless the proposed sale, transfer or
disposition is exempt under Section 6.6 hereof from the co-sale rights granted
herein.
6.2. GRANT OF CO-SALE RIGHTS. Each Stockholder (other than the Selling Major
Stockholder) shall have the right, exercisable upon written notice to the
Selling Major Stockholder within thirty days after receipt of the Selling Major
Stockholder's Sale Notice, to participate in such sale of the Sale Shares on the
same terms and conditions as those set forth in the Sale Notice. To the extent
any other Stockholder exercises such right of participation (a "Participating
Stockholder"), the number of shares of Sale Shares that the Selling Major
Stockholder may sell in the transaction shall be correspondingly reduced. The
right of participation of each Stockholder shall be subject to the terms and
conditions set forth in this Section 6.2.
(a) Each Participating Stockholder and the Selling Major Stockholder shall be
deemed to own the number of shares of Common Stock that it actually owns plus
the number of shares of Common Stock that are issuable upon conversion of any
convertible securities of the Company or upon the exercise of any warrants,
options or similar rights then owned by it at an exercise price less than the
purchase price specified in the Sale Notice.
(b) Each Participating Stockholder may sell all or any part of
a number of Sale Shares equal to the product obtained by
multiplying (i) the aggregate number of Sale Shares by (ii) a
fraction, the numerator of which is the number of shares of
Common Stock of the Company deemed to be owned by such
Participating Stockholder and the denominator of which is the
total number of outstanding shares of Common Stock of the
Company deemed to be owned by the Selling Major Stockholder
and all Participating Stockholders.
(c) Each Participating Stockholder may effect its
participation in the sale by delivering to the Selling Major
Stockholder for transfer to the acquirer one or more
certificates, properly endorsed for transfer, which represent:
(i) the number of shares that it elects to sell pursuant
to this Section 6.2;
(ii) that number of shares of convertible securities of
the Company that is at such time convertible into the
number of shares of Common Stock that it has elected to
sell pursuant to this Section 6.2; provided, however,
that if the acquirer objects to the delivery of
convertible securities of the Company in lieu of Common
Stock, the Participating Stockholder may, to the extent
permitted by the terms of such security, convert and
deliver Common Stock as provided in subparagraph (i)
above; or
(iii) a combination of the foregoing that in the aggregate represents the number
of shares of Common Stock to be sold by the Participating Stockholder.
19
6.3. PAYMENT OF PROCEEDS. The stock certificates that the Participating
Stockholders deliver to the Selling Major Stockholder pursuant to Section 6.2
shall be transferred by the Selling Major Stockholder to the acquirer in
consummation of the sale of the Sale Shares pursuant to the terms and conditions
specified in the Sale Notice, and the Selling Major Stockholder shall promptly
thereafter remit to the Participating Stockholders that portion of the sale
proceeds to which such Participating Stockholder is entitled by reason of its
participation in such sale.
6.4. NON-EXERCISE. The exercise or non-exercise of the rights of the
Participating Stockholders hereunder to participate in one or more sales of Sale
Shares made by the Selling Major Stockholder shall not adversely affect its
right to participate in subsequent sales by the Selling Major Stockholder. In
the event none of the Stockholders elect to exercise their co-sale rights
hereunder with respect to a disposition, the Selling Major Stockholder that sent
the Sale Notice regarding such disposition may consummate such disposition in
accordance with the terms specified in the Sale Notice but only within 90 days
after the expiration of the Stockholders' co-sale rights.
6.5. PROHIBITED TRANSFERS. In the event a Major Stockholder should sell any Sale
Shares of the Company in contravention of the co-sale rights of any other
Stockholder under this Agreement (a "Prohibited Transfer"), such other
Stockholder shall have the option to sell to the Selling Major Stockholder a
number of shares of Common Stock of the Company (either directly or through
delivery of convertible securities) equal to the number of shares that such
other Stockholder would have been entitled to sell had such Prohibited Transfer
been effected in accordance with Section 6.2 hereof, on the following terms and
conditions:
(a) The price per share at which the shares are to be sold to
the Selling Major Stockholder shall be equal to the price per
share paid to the Selling Major Stockholder by the third-party
acquiror or acquirer of the Selling Major Stockholder's Sale
Shares in the disposition referenced in the Sale Notice.
(b) The other Stockholder shall deliver to the Selling Major
Stockholder, within 30 days after it has received notice from
the Selling Major Stockholder or otherwise become aware of the
Prohibited Transfer, the certificate or certificates
representing shares to be sold, each certificate to be
properly endorsed for transfer.
(c) The Selling Major Stockholder shall, upon receipt of the
certificates for the repurchased shares, pay the aggregate
purchase price therefor, by certified check or bank draft made
payable to the order of such other Stockholder, and shall
reimburse the other Stockholder for any additional expenses
reasonably incurred, including reasonable legal fees and
expenses, incurred in effecting such purchase and resale.
6.6. EXEMPT TRANSFERS. The provisions of this Section 6 shall not apply (a) a
sale of any stock to the Company including pursuant to the exercise by the
Company of its purchase right under Section 5.1 hereof or (b) any transfer by a
Selling Major
20
Stockholder to (i) the ancestors, descendants, siblings or spouse of the Selling
Major Stockholder or to trusts for the benefit of such persons or the Selling
Major Stockholder, (ii) to such Selling Major Stockholder's Affiliates, or (iii)
in the case of a Selling Major Stockholder that is a private investment company,
to the partners, members, stockholders or other investors of such Selling Major
Stockholders as a distribution or similar transfer from such Selling Major
Stockholder; provided that in each of the foregoing cases in this clause (b),
the transferee shall furnish the Stockholders and the Company with a written
agreement to be bound by and comply with all provisions of this Agreement. Such
transferred stock shall remain subject to the provisions of this Agreement, and
such transferee shall be treated as a "Stockholder" (and a transferee of a
Schedule A Stockholder shall be treated as a "Schedule A Stockholder") for the
purposes of this Agreement.
7. LEGEND REQUIREMENTS
7.1. LEGEND. Each certificate representing the shares of capital stock (or
securities convertible into or exercisable for shares of capital stock) of the
Company owned by the Stockholders shall be endorsed with the following legend:
"THE SALE OR TRANSFER, THE VOTING AND CERTAIN OTHER RIGHTS RELATING
TO THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS AND CONDITIONS OF A CERTAIN INVESTOR RIGHTS AGREEMENT BY AND
AMONG THE COMPANY AND CERTAIN STOCKHOLDERS OF THE COMPANY. A COPY OF
SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY."
7.2. REMOVAL. The legend set forth in Section 7.1 hereof shall be
removed upon termination of this Agreement in accordance with the
provisions of Section 8.1.
8. MISCELLANEOUS PROVISIONS
8.1. TERMINATION. Except as otherwise provided herein, the rights and
obligations of the Company and the Stockholder under this Agreement (other than
Section 2 hereof) shall terminate as to any specific Stockholder at such time as
such Stockholder shall no longer own shares of Common Stock or securities of the
Company convertible or exercisable for shares of Common Stock that equal or
represent the right to acquire, in the aggregate, at least 500,000 shares of
Common Stock (subject to appropriate adjustment in the case of any stock
dividend, stock split or other recapitalization or similar transaction). Unless
sooner terminated in accordance with the preceding sentence, this Agreement
(other than Section 2 hereof) shall terminate immediately upon the earlier of
(a) the closing of a Qualified Initial Public Offering, (b) the closing of the
Company's sale of all or substantially all of its assets for a purchase price of
at least $200 million or the acquisition of the Company by another entity by
means of a merger or consolidation resulting in the exchange of the outstanding
shares of
21
the Company's outstanding stock for securities or consideration issued, or
caused to be issued, by the acquiring entity or its subsidiary, or (c) the
execution by the Company of a general assignment for the benefit of creditors or
the appointment of a receiver or trustee to take possession of the property and
assets of the Company.
8.2. NOTICES. All notices, requests and other communications hereunder shall be
in writing and shall be deemed to have been duly given at the time of receipt if
delivered by hand or by facsimile transmission or three days after being mailed,
registered or certified mail, return receipt requested, with postage prepaid, to
the following address or facsimile number (as the case may be): for the Company,
the address or facsimile number listed below the signature of the Company on the
Company's signature page hereto for each Stockholder, the address or facsimile
number specified for such Stockholder on SCHEDULE A or B hereto if any Party
shall have designated a different address or facsimile number by notice to the
other Parties given as provided above, then to the last address or facsimile
number so designated.
8.3. SEVERABILITY. In the event one or more of the provisions of this Agreement
should, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions of this Agreement, and this Agreement shall be construed and
interpreted in such manner as to be effective and valid under applicable law.
8.4. WAIVER OR MODIFICATION. Any amendment or modification of this Agreement
shall be effective only if evidenced by a written instrument executed by the
Company and by Investors that hold a two-thirds majority of the total Common
Share Equivalents held by all of the Investors; provided, that to the extent any
such amendment or modification would adversely affect any class of securities
issued by the Company, such amendment or modification shall only be effective
upon the affirmative vote of a majority of such class, voting as a class.
8.5. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to the
principles of conflicts of laws thereof. Each of the parties hereto hereby
waives any right to trial by jury in any action, suit or proceeding that may
arise out of or relate to this Agreement, any Related Agreement or any of the
transactions contemplated by this Agreement or any Related Agreement, whether
the matter asserted in such action, suit or proceeding is grounded in tort,
contract or otherwise.
8.6. ATTORNEYS' FEES. In the event of any dispute involving the terms hereof,
the prevailing parties shall be entitled to collect legal fees and expenses from
the other party to the dispute.
8.7. FURTHER ASSURANCES. Each Party agrees to act in accordance herewith and not
to take any action that is designed to avoid the intention hereof.
8.8. PERMITTED TRANSFEREES. Nothing in this Agreement shall be deemed to
prohibit an Investor from transferring any of its Registrable Securities to its
affiliates,
22
partners, members or stockholders provided that such transfers are made in
accordance with the securities registration requirements of the Securities Act
and any applicable state securities laws, or pursuant to an exemption from such
registration requirements.
8.9. SUCCESSORS AND ASSIGNS. This Agreement and the rights and obligations of
the Parties hereunder shall inure to the benefit of, and be binding upon, their
respective successors, assigns and legal representatives. Each Stockholder may
assign its rights hereunder to (i) any transferee of Shares held by such
Stockholder that holds, in the aggregate, at least 500,000 Common Share
Equivalents after such transfer, (ii) the ancestors, descendants, siblings or
spouse of such Stockholder or to trusts for the benefit of such persons or such
Stockholder, (iii) to such Stockholder's Affiliates, or (iv) in the case of a
Stockholder that is a private investment company, to the partners, members,
stockholders or other investors of such Selling Major Stockholders as a
distribution or similar transfer from such Selling Major Stockholder; provided
that in each of the foregoing cases, the transferee shall furnish the other
Stockholders and the Company with a written agreement to be bound by and comply
with all provisions of this Agreement. Such transferee shall be treated as a
"Stockholder" (and a transferee of a Schedule A Stockholder shall be treated as
a "Schedule A Stockholder") for the purposes of this Agreement.
8.10. AGGREGATION OF STOCK. For purposes of determining the availability of any
rights under this Agreement, the number of shares of Common Stock or other
securities of the Company deemed to be owned by a Stockholder or other Person
shall include all such shares or other securities owned by such Stockholder or
other Person, such Stockholder's (or other Person's) Affiliates and their
respective partners, members, or shareholders, and any other person or entity
that acquires any such shares or other securities from any of the foregoing by
gift, will or intestate succession.
8.11. NONSOLICITATION. During the period beginning on the date hereof and ending
on the third anniversary hereof (the "NONSOLICITATION PERIOD") the Company shall
not, nor shall the Company permit any of its officers, directors, employees,
agents or other representatives to, directly or indirectly, without prior
written consent of GE, (i) actively solicit any employee of, or (ii) actively
solicit any employee who, within the six months prior to the date of such
solicitation or hiring, had been an employee of, GE, GE Capital Equity Capital
Group, Inc. or GE Capital Structured Finance Group, Inc. It is understood that
generic advertising shall not constitute "active solicitation" for purposes of
this Section 8.11. GE may seek injunctive relief to prevent any such violations
during the Nonsolicitation Period and also may seek monetary damages in respect
of any violations of this Section 8.11.
8.12 TERMINATION OF CERTAIN OTHER RIGHTS. Upon the execution and delivery of
this Agreement, the Stockholders and the Company shall waive and forever release
all rights they may have under the following provisions of certain prior
agreements regarding the Company: (a) Sections 7.1, 7.3, 7.4, 7.5 and 7.6 of the
Securities Purchase Agreement, dated October 23, 1998, by and among the Company
and certain of the Purchasers (the "CLASS D AGREEMENT"), (b) all prior
registration rights granted by the Company under any previous agreement with the
Company (including without limitation
23
Exhibit F to the Class D Agreement and the Registration Rights Agreement dated
as of April 7, 2000 by and among the Company, Perseus, Duquesne, Micro and
SatCon), (c) Sections 6.1, 6.2, 6.3 and 6.4 of the Securities Purchase
Agreement, dated April 7, 2000, relating to the Class E Preferred Stock and (d)
Sections 1 through 4, 5.1, 5.2 and 6 the Shareholders Agreement dated as of
October 23, 1998 by and among the Company, Perseus, Duquesne, Micro and SatCon.
[Company Signature page]
IN WITNESS WHEREOF, the undersigned Stockholder has executed this Agreement as
of the day and year first above written.
BEACON POWER CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------
Name: Xxxxxxx X. Xxxxxxx
------------------------
Title: President
----------------
ADDRESS FOR NOTICE:
Beacon Power Corporation
------------------------
0X Xxxx Xxxxxx
--------------
Xxxxxx, XX 00000
----------------
Facsimile No.: (000) 000-0000
-----------------------------
Attn: Chief Executive Officer
-----------------------------
With a copy to:
Xxxxxxx & Xxxxxx, LLP
---------------------
000 Xxxxxxx Xxxxxx
------------------
Xxxxxx, XX 00000
----------------
Facsimile No.: (000) 000-0000
-----------------------------
Attn: Xxxxxx X. Xxxxx, Esq.
---------------------------
24
[Schedule A Stockholder Signature page]
IN WITNESS WHEREOF, the undersigned Schedule A Stockholder has executed this
Agreement as of the day and year first above written.
Signature:
/s/ Xxxxx X. Xxxxxx
---------------------------
Xxxxx X. Xxxxxx
Signature:
/s/ Xxxxxx X. Xxxxxxx
---------------------------
Xxxxxx X. Xxxxxxx
Signature:
/s/ Xxxxxxx X. Xxxxxx
---------------------------
Xxxxxxx X. Xxxxxx
Signature:
/s/ Xxxxxxx X. X'Xxxxxx
---------------------------
Xxxxxxx X. X'Xxxxxx
Signature
/s/ Xxxx X. X'Xxxxxxxx
---------------------------
Xxxx X. X'Xxxxxxxx
Signature:
/s/ Xxxxxx X. Xxxxxxxxx
---------------------------
Xxxxxx X. Xxxxxxxxx
SATCON TECHNOLOGY CORP.
By: /s/ Xxxx X. Xxxxx
---------------------------
Name: Xxxx X. Xxxxx
---------------------------
Title: Vice President of Finance,
Chief Financial Officer and Treasurer
-------------------------------------
25
IN WITNESS WHEREOF, the undersigned Investor has executed this Agreement as of
the date and year first written above.
PERSEUS CAPITAL, L.L.C.
By: /s/ Xxxxxx X. Xxxxxx
------------------------
Name: Xxxxxx X. Xxxxxx
----------------------
Title: Managing Director
------------------------
DQE ENTERPRISES, INC.
By: /S/ Xxxx X. Xxxxxx
----------------------
Name: Xxxx X. Xxxxxx
--------------------
Title: Vice President and Treasurer
-----------------------------------
MICRO-GENERATION
TECHNOLOGY FUND, L.L.C.
BY ARETE CORPORATION, ITS MANAGER
By: /s/ Xxxxxx X. Xxxx, Xx.
---------------------------
Xxxxxx X. Xxxx, Xx.
President
GE CAPITAL EQUITY INVESTMENTS, INC.
By: /s/ Xxxx Xxxxxx
-------------------------
Name: Xxxx Xxxxxx
--------------------------
Title: Vice President
-----------------------------
MECHANICAL TECHNOLOGY, INC.
By: /s/ Xxxxxxxxx X. Xxxx
-------------------------
Name: Xxxxxxxxx X. Xxxx
-----------------------
Title: Vice President
---------------------
PENSKE CORPORATION
By: /S/ Xxxxx X. Xxxx
---------------------
Name: Xxxxx X. Xxxx
-------------------
Title: Vice President and Treasurer
-----------------------------------
THE BEACON GROUP ENERGY
INVESTMENT FUND II, L.P.
By: Beacon Energy Investors II, L.P.,
its general partner,
BY: /s/ Xxxxxxx Xxxx
--------------------
Authorized Signatory
2
SATCON TECHNOLOGY CORP.
By: /s/ Xxxx X. Xxxxx
--------------------
Name: Xxxx X. Xxxxx
--------------------
Title: Vice President of Finance,
Chief Financial Officer and Treasurer
-------------------------------------
3
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement to which this Exhibit A is attached, the following
terms have the following meanings:
"Affiliate" of any Person (the "Subject Person") means any Person that Controls,
is Controlled by or is under common Control with the Subject Person.
"Business Day" means any day other than a Saturday, Sunday or other day on which
the national or state banks located in the District of Columbia, State of New
York or the State of Massachusetts are authorized to be closed.
"Common Share Equivalents" means all shares of Common Stock that are issued and
outstanding or are issuable upon the exchange, exercise or conversion of any
other security of the Company. The number of Common Share Equivalents owned by a
Person shall equal the sum of the number of shares of Common Stock owned by such
Person plus the number of shares of Common Stock issuable upon the exchange,
exercise or conversion of any other security of the Company owned by such
Person.
"Common Stock" means the common stock, par value $0.01 per share, of the
Company.
"Control" and derivatives thereof mean the power to control the management and
policies of the Controlled Person where by ownership of voting securities,
contract or otherwise.
"Family Members" means, as applied to any individual, such individual's spouse,
children (including stepchildren or adopted children), grandchildren, parents,
siblings, nieces, nephews or any spouse of any of the foregoing, and any trust
created solely for estate planning purposes for the exclusive benefit of any one
or more of them.
"GAAP" means United States generally accepted accounting principles consistently
applied.
"Person" means any individual, entity or governmental body.
"Qualified Initial Public Offering" means a public offering of Common
Stock pursuant to an effective registration statement under the
Securities Act of 1933, as amended, that is underwritten by one or
more nationally recognized investment banking firms or a syndicate
managed or co-managed by one or more nationally recognized investment
banking firms that results in the Company receiving at least $30
million in gross proceeds and the Common Stock being traded on the
New York Stock Exchange or the Nasdaq National Market and that is
made at an initial public offering price that reflects a market
capitalization value of at least $200 million.
SCHEDULE A
SatCon Technology Corporation
Xxxxx X. Xxxxxx
Xxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxx
Xxxxxxx X. X'Xxxxxx
Xxxx X. X'Xxxxxxxx
Xxxxxx X. Xxxxxxxxx
2
SCHEDULE B
Perseus Capital, L.L.C.
DQE Enterprises, Inc.
Micro-Generation Technology Fund, L.L.C.
GE Capital Equity Investments, Inc.
Mechanical Technology, Inc.
Penske Corporation
The Beacon Group Energy Investment Fund II, L.P.
SatCon Technology Corp.
3
