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EXHIBIT 4.1
RIGHTS AGREEMENT
This Rights Agreement (the "Agreement") is entered into as of the day
of December, 1996, by and among NetRight Technologies, Inc., a Delaware
corporation (the "Company"), the undersigned purchasers of Series A Preferred
Stock of the Company (the "Purchasers") and Xxxxxxx Xxxxxxxx and Xxxxx Xxxxxxxxx
(collectively as the "Founders" and singularly as a "Founder").
RECITALS
A. The Company proposes to sell up to 291,080 shares of Common Stock
and up to 1,500,000 shares of Series A Preferred Stock to the Purchasers
pursuant to a Series A Preferred Stock Purchase Agreement of even date herewith
(the "Series A Agreement").
B. By this Agreement, the Company, the Purchasers and the Founders
desire to provide for certain registration and other rights as set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, the parties agree as follows:
1. Registration Rights.
1.1 Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
(a) "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
(b) "Conversion Stock" means the Common Stock issued or issuable
upon conversion of the Series A Preferred Stock.
(c) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
(d) "Holder" shall mean any shareholder of the Company holding
Registrable Securities and any person holding Registrable Securities to whom the
rights under this Section 1 have been transferred in accordance with Sections
1.11 hereof.
(e) "Initiating Holders" shall, in the case of a registration
under Section 1.2, mean any Holder or Holders of at least thirty percent (30%)
of the outstanding Registrable Securities (adjusted after the original issuance
thereof for stock splits, stock dividends, recapitalizations and the like), or
in the case of a registration under Section 1.4, the Holder or Holders of at
least ten percent (10%) of the outstanding Registrable Securities (adjusted
after the original issuance thereof for stock splits, stock dividends,
recapitalizations and the like).
(f) "Registrable Securities" means (i) the Conversion Stock; or
(ii) stock issued in respect of the stock referred to in (i) as a result of a
stock split, stock dividend, recapitalization or the like, which has not been
sold to the public. Except for subsections 1.1(e), 1.2, 1.4, 1.5, 1.10 and 2.1,
Registrable Securities shall mean shares of Common Stock of the Company issued
or issued after the date hereof to the Employee-Holders as such term is defined
in Section 1.3(c) hereof.
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(g) The terms "register," "registered" and "registration" refer
to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
(h) "Registration Expenses" shall mean all expenses, except
Selling Expenses, incurred by the Company in complying with Sections 1.2, 1.3
and 1.4 hereof, including, without limitation, all registration, qualification
and filing fees, printing expenses, escrow fees, fees and disbursements of
counsel for the Company, blue sky fees and expenses, the expense of any special
audits incident to or required by any such registration (but excluding the
compensation of regular employees of the Company which shall be paid in any
event by the Company) and the reasonable fees and disbursements of one counsel
for all Holders in the event of each registration provided for in Sections 1.2,
1.3 and 1.4 hereof.
(i) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
(j) "Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the securities
registered by the Holders and, except as set forth above, all reasonable fees
and disbursements of counsel for the selling Holders.
(k) "Shares" shall mean the Company's Series A Preferred Stock
sold pursuant to the Series A Agreement.
1.2 Requested Registration.
(a) Request for Registration. At any time after December 31,
2001, in case the Company shall receive from Initiating Holders a written
request that the Company effect a registration with respect to their Registrable
Securities having a reasonably anticipated aggregate offering price to the
public of not less than $7.5 million, the Company will:
(i) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts to effect
such registration, qualification or compliance (including, without limitation,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act and any other governmental requirements or regulations) as may be
so requested and as would permit or facilitate the sale and distribution of all
or such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request received
by the Company within twenty (20) days after receipt of such written notice from
the Company; provided, however, that the Company shall not be obligated to take
any action to effect any such registration, qualification or compliance pursuant
to this Section 1.2:
(A) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
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(B) At any time during the period starting with the
date sixty (60) days prior to the Company's good faith estimate of the date of
filing of, and ending on a date one hundred eighty (180) days after the
effective date of, a registration statement pursuant to Section 1.3 hereof;
provided that the Company is actively employing in good faith all reasonable
efforts to cause such registration statement to become effective;
(C) After the Company has effected two (2) such
registration pursuant to this Section 1.2(a), and such registrations has been
declared or ordered effective; or
(D) If the Company shall furnish to such Holders a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its Holders for a registration statement to be filed in the near
future, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 1.2 shall be deferred for a period not to
exceed sixty (60) days from the date of receipt of written request from the
Initiating Holders, provided that the Company may not use this right more than
once in any twelve month period.
Subject to the foregoing clauses (A) through (D), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable, after receipt of the request or
requests of the Initiating Holders.
(b) Underwriting. In the event that a registration pursuant to
this Section 1.2 is for a registered public offering involving an underwriting,
the Company shall so advise the Holders as part of the notice given pursuant to
Section 1.2(a)(i). In such event, the right of any Holder to participate in such
registration shall be conditioned upon such Holder's participation in the
underwriting arrangements required by this Section 1.2, and the inclusion of
such Holder's Registrable Securities in the underwriting to the extent requested
shall be limited to the extent provided herein.
The Company shall (together with all Holders proposing to distribute
their securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by a majority in interest of the Initiating Holders, but subject to the
Company's reasonable approval. Notwithstanding any other provision of this
Section 1.2, if the managing underwriter advises the Initiating Holders in
writing that marketing factors require a limitation of the number of shares to
be underwritten, then the Company shall so advise all participating Holders and
the number of shares of Registrable Securities that may be included in the
registration and underwriting shall be allocated among all Holders thereof in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by such Holders at the time of filing the registration
statement. No Registrable Securities excluded from the underwriting by reason of
the underwriter's marketing limitation shall be included in such registration.
To facilitate the allocation of shares in accordance with the above provisions,
the Company or the underwriters may round the number of shares allocated to any
Holder to the nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities, and/or other securities so withdrawn shall also be
withdrawn from registration, and such securities shall not be transferred in a
public distribution prior to ninety (90) days after the effective date of such
registration, or such other shorter period of time as the underwriters may
require.
If the underwriter has not limited the number of Registrable Securities
to be underwritten, the Company may include securities for its own account (or
for the account of other purchasers) in such
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registration if the managing underwriter so agrees and if the number of
Registrable Securities that would otherwise have been included in such
registration and underwriting will not thereby be limited.
1.3 Company Registration.
(a) Notice of Registration. If at any time or from time to time
the Company shall determine to register any of its securities, either for its
own account or the account of a security holder or holders, other than (i) a
registration relating solely to employee benefit plans, (ii) a registration
relating solely to a Commission Rule 145 transaction, or (iii) a registration
effected pursuant to Sections 1.2 or 1.4 hereof, the Company will:
(i) promptly give to each Holder written notice thereof;
and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within twenty (20) days after receipt of such written notice
from the Company, by any Holder.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 1.3(a)(i). In such event the right of any Holder to
registration pursuant to Section 1.3 shall be conditioned upon such Holder's
participation in such underwriting to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company and the other holders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the managing underwriter selected for such underwriting by the
Company, but subject to the reasonable approval of Holders holding more than a
majority of the Registrable Securities to be included in such registration.
Notwithstanding any other provision of this Section 1.3, if the managing
underwriter determines that marketing factors require limitation of the number
of shares to be underwritten, the managing underwriter may limit the Registrable
Securities to be included in such registration. The Company shall so advise all
Holders and other holders distributing their securities through such
underwriting and the number of shares of securities that may be included in the
registration and underwriting (other than on behalf of the Company) shall be
allocated among all Holders and such other holders (provided that such other
holders have contractual rights to participate in such registration in
accordance with Sections 1.3(c) or 1.5 hereof which are not subordinate to the
Holders) in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities or other securities requested to be included in such
registration by such Holders and such other holders; provided, however, in no
event shall the amount of Registrable Securities of the Holders included in the
offering be reduced below thirty percent (30%) of the total amount of securities
included in such offering, unless such offering is the initial public offering
of the Company's securities in which case the Holders may be excluded entirely
if the underwriters make the determination described above or the Holders
holding a majority of the Registrable Securities consent in writing to such a
reduction; provided that in each such case, no shares held by any Holder shall
be so excluded from such registration until all shares proposed to be registered
by the Founders or other parties granted registration rights pursuant to Section
1.3(c) hereof are excluded from the registration. To facilitate the allocation
of shares in accordance with the above provisions, the Company may round the
number of shares allocated to any Holder or holder to the nearest 100 shares. If
any Holder or holder disapproves of the terms of any such underwriting, he may
elect to withdraw therefrom by written notice to the Company and the managing
underwriter. Any securities withdrawn from such underwriting shall be withdrawn
from such registration, and shall not be transferred in a public distribution
prior to ninety (90) days after the effective date of the registration statement
relating thereto, or such other shorter period of time as the underwriters may
require.
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(c) Registration Rights of Founders, Officers, Directors and
Employees. Upon any sale by the Company of shares of its Common Stock to the
public in a firmly underwritten public offering, subject to the cutback
described in Section 1.3(b) above, the Founders and any other officer, director
or employees designated by the Company's Board of Directors by unanimous vote
shall be entitled to include any of their shares of Common Stock in any
registration by the Company under this subsection 1.3, if such persons who
choose to include any of their securities in such registration shall continue to
serve the Company as officer, director or employee on the effective date of such
registration statement, and such persons agree to be bound by all other
provisions of this Agreement and participate in any such registration on the
same basis as each Holder in accordance with all applicable provisions of this
Agreement (such persons are collectively referred to as "Employee-Holders").
1.4 Registration on Form S-3.
(a) If any Initiating Holders request that the Company file a
registration statement on Form S-3 (or any successor form to Form S-3) for a
public offering of shares of the Registrable Securities the reasonably
anticipated aggregate price to the public of which, net of underwriting
discounts and commissions, would exceed $500,000, and the Company is a
registrant entitled to use Form S-3 to register the Registrable Securities for
such an offering, the Company shall use its best efforts to cause such
Registrable Securities to be registered for the offering on such form and to
cause such Registrable Securities to be qualified in such jurisdictions as the
Holder or Holders may reasonably request; provided, however, that the Company
shall not be required to effect more than one (1) registration pursuant to this
Section 1.4 in any twelve (12) month period. The substantive provisions of
Section 1.2(b) shall be applicable to each registration initiated under this
Section 1.4.
(b) Notwithstanding the foregoing, the Company shall not be
obligated to take any action pursuant to this Section 1.4:
(i) in any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(ii) if the Company, within ten (10) days of the receipt of
the request of the Initiating Holders, gives notice of its bona fide intention
to effect the filing of a registration statement with the Commission within
sixty (60) days of receipt of such request (other than with respect to a
registration statement relating to a Rule 145 transaction, an offering solely to
employees or any other registration which is not appropriate for the
registration of Registrable Securities), and in which event the amount of
Registrable Securities of such Initiating Holders included in such offering
shall not be subject to the limitations provided for in Section 1.3(b) above;
(iii) within one hundred eighty (180) days of the effective
date of any registration referred to in Sections 1.2 and 1.3 above; or
(iv) if the Company shall furnish to such Holder a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or the Purchasers for registration statements to be filed in the
near future, then the Company's obligation to use its best efforts to file a
registration statement shall be deferred for a period not to exceed sixty (60)
days from the receipt of the request to file such registration by such Holder,
provided that the Company may not use this right more than once in any twelve
month period.
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1.5 Limitations on Subsequent Registration Rights. From and after
the date hereof, without the approval of the holders of a majority of the
Registrable Securities, the Company shall not enter into any agreement, except
agreements entered in conjunction with an equipment lease financing that has
been unanimously approved by the Company's Board of Directors, granting any
holder or prospective holder of any securities of the Company registration
rights equal to or superior to those of the Holders. Upon obtaining such
approval, the Company will grant the Holders any rights of first refusal or
registration rights granted to subsequent purchasers of the Company's equity
securities to the extent such subsequent rights are superior, in the good faith
judgment of the Company's Board of Directors, to those rights granted hereunder.
Nothing in this Section 1.5 shall be deemed to restrict the Company's right to
grant registration rights to individual Employee-Holders pursuant to Section
1.3(c) above.
1.6 Expenses of Registration. All Registration Expenses incurred in
connection with all registrations pursuant to Sections 1.2, 1.3 and 1.4 shall be
borne by the Company. Unless otherwise stated, all Selling Expenses relating to
securities registered on behalf of the Holders shall be borne by the Holders of
such securities pro rata on the basis of the number of shares so registered.
1.7 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 1,
the Company will keep each Holder advised in writing as to the initiation of
each registration and as to the completion thereof. At its expense the Company
will:
(a) Prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least one hundred
eighty (180) days or until the distribution described in the registration
statement has been completed;
(b) Furnish to the Holders participating in such registration
and to the underwriters of the securities being registered such reasonable
number of copies of the registration statement, preliminary prospectus, final
prospectus and such other documents as such underwriters may reasonably request
in order to facilitate the public offering of such securities.
(c) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be
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stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing, and at the request of any such Holder,
prepare and furnish to such Holder a reasonable number of copies of a supplement
to or an amendment of such prospectuses as may be necessary so that, as
thereafter delivered to the purchasers of such shares, such prospectuses shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing.
1.8 Indemnification.
(a) To the extent permitted by law, the Company will indemnify
each Holder, each of its officers and directors and partners, and each person
controlling such person within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification or compliance has been
effected pursuant to this Section 1, 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 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 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 the Securities Act or any rule or regulation promulgated under
the Securities Act, the Exchange Act, any state securities laws or any rule or
regulation thereunder 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 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 to any
such person 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, made in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder,
controlling person or underwriter and stated to be specifically for use therein
or the preparation thereby. It is agreed that the indemnity obligation of this
Section shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Company (which consent has not been unreasonably withheld).
(b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration, qualification or compliance is being effected,
indemnify the Company, each of its directors and officers, 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 any untrue
statement of a material fact contained in any registration statement,
prospectus, offering circular or other document, or any omission to state
therein a material fact required to be stated therein or necessary to make the
statements 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,
preparing 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
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 or the preparation thereby; provided,
however, that the obligations of such Holder hereunder shall not apply to
amounts paid in settlement of any such claims,
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losses, damages or liabilities (or actions in respect thereof) if such
settlement is effected without the consent of such Holder (which consent shall
not be unreasonably withheld). Notwithstanding the foregoing, the liability of
each Holder under this subsection (b) shall be limited to an amount equal to the
net proceeds from the offering received by such Holder, unless such liability
arises out of or is based on willful conduct by such Holder.
(c) Each party entitled to indemnification under this Section
1.8 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party (together with all other indemnified
parties which may be represented without conflict by one counsel) may
participate in such defense at such party's expense, provided; however, that the
Indemnified Party shall have the right to retain its own counsel, with the fees
and expenses to be paid by the Indemnifying Party, if representation of such
Indemnified Party by the counsel retained by the Indemnifying Party would be
appropriate due to actual or potential differing interests between such
Indemnified Party and any other party represented by such counsel in such
proceeding, and provided further that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 1 unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action
and provided further, that the Indemnifying Party shall not assume the defense
for matters as to which there is a conflict of interest or separate and
different defenses. 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 a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with defense of
such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 1.8 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
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the 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 of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission; provided, however, that, in any such case, no such Holder
will be required to contribute any amount in excess of the gross proceeds from
the offering received by such Holder.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
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(f) The obligations of the Company and the Holders under this
Section 1.8 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Agreement, and otherwise.
1.9 Information by Holder. The Holders of Registrable Securities
shall furnish to the Company such information regarding such Holders, the
Registrable Securities held by them and the distribution proposed by such
Holders as the Company may request in writing and as shall be required in
connection with any registration, qualification or compliance referred to in
this Section 1.
1.10 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Registrable Securities to the public without
registration, after such time as a public market exists for the Common Stock of
the Company, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Exchange Act;
(b) Use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements); and
(c) So long as a Holder owns any Registrable Securities to
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144 (at any
time after ninety (90) days after the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), 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 Purchaser may reasonably request in availing
itself of any rule or regulation of the Commission allowing a Purchaser to sell
any such securities without registration.
1.11 Transfer of Registration Rights. The rights to cause the
Company to register securities granted to the Purchasers under sections 1.2, 1.3
and 1.4 may be assigned to a transferee or assignee reasonably acceptable to the
Company in connection with any transfer or assignment of Registrable Securities
by a Purchaser provided that, except in the case of an assignment to a partner
or affiliate of a Purchaser, (i) the transferor provides the Company with
written notice of the proposed transfer; (ii) the transferee acquires at least
10,000 shares of the transferor's Registrable Securities not sold to the public;
and (iii) the transferee or assignee of such rights assumes the obligations of
such Holder under this Section 1. For the purposes of determining the number of
shares of Registrable Securities held by a transferee or assignee, the holdings
of transferees and assignees of a partnership who are partners or retired
partners of such partnership (including spouses and ancestors, lineal
descendants and siblings of such partners or spouses who acquire Registrable
Securities by gift, will or intestate succession) shall be aggregated together
with the partnership; provided that all assignees and transferees who would not
qualify individually for assignment of registration rights shall have a single
attorney-in-fact for the purpose of exercising any rights, receiving notices or
taking any action under this Section 1.
1.12 Standoff Agreement. Each Holder agrees in connection with the
Company's initial public offering of the Company's securities that, upon request
of the Company or the underwriters managing any underwritten offering of the
Company's securities, not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any Registrable Securities
(other than those
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included in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, for one hundred eighty (180) days or
for such period of time from the effective date of such registration as is
agreed upon by holders of a majority of the outstanding capital stock of the
Company; provided, that the officers and directors of the Company who own stock
of the Company and any shareholder holding more than five percent (5%) of the
outstanding voting securities of the Company also agree to such restrictions.
1.13 Termination. Any registration rights granted pursuant to this
Section 1 shall terminate with respect to any Holder at such date, (i) six (6)
years after the closing date of the Company's initial public offering or (ii)
after the Company's initial public offering, when all remaining Registrable
Securities held or entitled to be held by such Holder may be sold under Rule 144
during any three (3) month period.
2. Right of First Offer Upon Issuance of Securities by the Company.
2.1 Right of First Offer. The Company hereby grants to each
Purchaser of Shares (or Conversion Stock) as adjusted for stock splits, stock
dividends, recapitalizations and the like) (the "Rights Holder") the right of
first offer to purchase a pro rata share of New Securities (as defined in this
Section 2.1) which the Company may, from time to time, propose to sell and
issue. For purposes of this right of first offer, a pro rata share for a Rights
Holder is the ratio that the number of Shares (on an as-converted basis) or
Conversion Stock then held by such Rights Holder bears to the sum of the total
number of shares of Shares, Conversion Stock and Common Stock outstanding
immediately prior to the issuance of New Securities, assuming full conversion of
the Shares and exercise of all outstanding rights, options and warrants to
acquire Common Stock of the Company.
(a) "Equity Securities" shall mean (i) any Common Stock,
Preferred Stock or other security of the Company, (ii) any security convertible,
with or without consideration into any Common Stock, Preferred Stock or other
security (including any option to purchase such a convertible security), (iii)
any security carrying any warrant or right to subscribe to or purchase any
Common Stock, Preferred Stock or other security or (iv) any such warrant or
right.
(b) Except as set forth below, "New Securities" shall mean any
Equity Securities, whether now authorized or not, and rights, options or
warrants to purchase said Equity Securities. Notwithstanding the foregoing, "New
Securities" does not include (i) Common Stock issued to employees, officers,
consultants or directors of the Company pursuant to sales or options granted at
any time after the date of incorporation of the Company pursuant to a plan or
agreement unanimously approved by the Company's Board of Directors; (ii)
securities offered to the public generally pursuant to a registration statement
under the Securities Act; (iii) securities issued pursuant to the acquisition of
another corporation by the Company by merger, purchase of substantially all of
the assets or other reorganization whereby the Company or its purchasers own not
less than fifty-one percent (51%) of the voting power of the surviving or
successor corporation; (iv) the Conversion Stock; (v) warrant or warrants for
the purchase of shares of capital stock of the Company (and stock issued upon
exercise of such warrant or warrants) which have been unanimously approved by
the Board of Directors of the Company and issued in connection with an equipment
lease, equipment financing or bank line financing; (vi) stock issued in
connection with any stock split, stock dividend or recapitalization by the
Company; (vii) shares of Series A Preferred Stock issued on or before February
14, 1997 at a price not less than $0.71 per share; and (viii) securities of the
Company which holders of a majority of the Shares agreed in writing with the
Company will not be included in the term "New Securities."
(c) In the event the Company proposes to undertake an issuance
of New Securities, it shall give each Rights Holder written notice of its
intention, describing the type of New
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Securities, and the price and terms upon which the Company proposes to issue the
same. Each Rights Holder shall have fifteen (15) days from the date of receipt
of any such notice to agree to purchase up to its respective pro rata share of
such New Securities for the price and upon the applicable terms specified in the
notice by giving written notice to the Company and stating therein the quantity
of New Securities to be purchased.
(d) In the event a Rights Holder fails to exercise the right of
first refusal within said fifteen (15) day period, the Company shall have sixty
(60) days thereafter to sell or enter into an agreement (pursuant to which the
sale of New Securities covered thereby shall be closed, if at all, within sixty
(60) days from the date of said agreement) to sell the New Securities not
elected to be purchased by Rights Holders at the price and upon the terms no
more favorable to the purchasers of such securities than specified in the
Company's notice. In the event the Company has not sold the New Securities
within said sixty (60) day period (or sold and issued New Securities in
accordance with the foregoing within sixty (60) days from the date of said
agreement), the Company shall not thereafter issue or sell any New Securities,
without first offering such securities in the manner provided above.
(e) The right of first offer granted under this Agreement shall
expire upon the closing of the first firm commitment underwritten offering of
the Company's securities to the public pursuant to an effective registration
statement under the Securities Act.
(f) The right of first offer hereunder may be assigned to a
transferee or assignee reasonably acceptable to the Company in connection with
any transfer or assignment of Registrable Securities provided that the
transferor provides the Company with written notice of the proposed transfer and
(i) the transferee acquires all of the transferor's Registrable Securities not
sold to the public; (ii) the transferee acquires at least 10,000 shares (as
adjusted for stock splits, stock dividends, recapitalizations and the like) of
the transferor's Registrable Securities not sold to the public; or (iii) the
transferee is a partner, shareholder or affiliate of the Holder. For the
purposes of determining the number of shares of Shares held by a transferee or
assignee, the holdings of transferees and assignees of a partnership who are
partners or retired partners of such partnership (including spouses and
ancestors, lineal descendants and siblings of such partners or spouses who
acquire Shares by gift, will or intestate succession) shall be aggregated
together with the partnership; provided that all assignees and transferees who
would not qualify individually for assignment at registration rights shall have
a single attorney-in-fact for the purpose of exercising any rights, receiving
notices or taking any action under this Section 2.
3. Covenants.
3.1 Information Rights.
(a) The Company shall deliver to each Holder that holds at least
100,000 shares of a single class of Shares, as soon as practicable, but in any
event within ninety (90) days after the end of each fiscal year of the Company,
an income statement for such fiscal year, a balance sheet of the Company as of
the end of such year, and a schedule as to the sources and applications of funds
for such year, such year-end financial reports to be in reasonable detail,
prepared in accordance with generally accepted accounting principles, and
reviewed by independent public accountants of nationally recognized standing
selected by the Company.
(b) The Company shall deliver to each Holder, so long as it
holds at least 100,000 shares of a single class of Shares:
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(i) within forty-five (45) days after the end of each
quarter, an unaudited income statement and schedule as to the sources and
applications of funds and balance sheet and comparison to budget for and as of
the end of such quarter, as the case may be, in reasonable detail;
(ii) as soon as practicable, but in any event thirty (30)
days prior to the end of each fiscal year, a budget and business plan for the
next fiscal year, prepared on a monthly basis, including balance sheets and
sources and applications of funds statements for such months and, as soon as
prepared, any other budgets or revised budgets prepared by the Company; and
(iii) such other information relating to the financial
conditions, business, prospects or corporate affairs of the Company as each
Holder; or any assignee of such Holder may from time to time request; provided,
however, that the Company shall not be obligated to provide information which it
deems in good faith to be proprietary.
3.2 Inspection. The Company shall permit each Holder, holding at
least 100,000 shares, at such Holder's expense, to visit and inspect the
Company's properties, to examine its books of account and records and to discuss
the Company's affairs, finances and accounts with its officers, all at such
reasonable times as may be requested by such Holder; provided, however, that the
Company shall not be obligated pursuant to this Section 3.2 to provide access to
any information which it reasonably considers to be a trade secret or similar
confidential information.
3.3 Independent Accountants. Until the consummation of a public
offering of the Company's Common Stock, the Company will retain independent
public accountants of recognized national standing who shall certify the
Company's financial statements at the end of each fiscal year. In the event the
services of the independent public accountants so selected, or any firm of
independent public accountants hereafter employed by the Company, are
terminated, the Company will promptly thereafter engage another firm of
independent public accountants of recognized national standing.
[3.4 Internal Revenue Code Section 1202. The Company shall furnish
to each Holder, and shall use reasonable commercial efforts to make such filings
with the Internal Revenue Service, as shall from time to time be required
pursuant to Section 1202(d)(1) of the Code. In addition, the Company agrees that
it will not make any purchases of its stock within the meaning of and which
would exceed the limitation contained in Section 1202(c)(3)(B) of the Code with
respect to the Shares, unless such purchases have been consented to by holders a
majority of the Shares, or are required by contractual obligations entered into
prior to the Closing. Any such information provided to the Holders under this
Section 3.4 shall not be disclosed by any Holder to any party except as required
and solely in order for such Holder to claim any benefits under Section 1202 of
the Code.]
3.5 Proprietary Information and Inventions Agreements. The Company
will cause each employee and consultant now or hereafter employed by it or any
subsidiary with access to confidential information to enter into a proprietary
information and assignment of inventions agreement substantially in the form
approved by the Board of Directors.
3.6 Termination of Covenants. The covenants set forth in this
Section 3 shall terminate as to each Holder and be of no further force or effect
immediately upon the consummation of an underwritten public offering of the
Company's Common Stock.
4. Confidentiality. Each of the Holders agrees to keep confidential and
not to disclose to persons other than its officers, directors, employees,
professional consultants and advisors any information concerning the Company
which is confidential or proprietary ("Confidential Information"), except as
otherwise required by law or as deemed necessary by a Holder to be disclosed to
its own partners. No
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Confidential Information shall be used or disclosed by a Holder for any purpose
except in connection with the transactions contemplated by the purchase
agreements pursuant to which each Holder acquired his or her respective Shares
and the agreements executed and delivered in connection with such purchase
agreement and in the enforcement of his or her rights thereunder. Each Holder
shall use the same level of care with the Confidential Information as it uses
with its own confidential information. Notwithstanding the foregoing, the
restrictions set forth in this Section shall not be applicable to any
information that is publicly available, any information independently developed
by a Holder or its professional consultants, any information known to a Holder
or its professional consultants before the disclosure thereof by the Company, or
any information disclosed to a Holder by a person not known by the Holder to
have any confidentiality duty to the Company.
5. Miscellaneous.
5.1 Governing Law. This Agreement shall be governed in all respects
by the laws of the State of California as applied to transactions taking place
between California residents and wholly within the State of California.
5.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser and
the closing of the transactions contemplated hereby.
5.3 Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
5.4 Entire Agreement; Amendment. This Agreement constitutes the full
and entire understanding and agreement between the parties with regard to the
subjects hereof, and no party shall be liable or bound to any other party in any
manner by any warranties, representations or covenants except as specifically
set forth herein. With the written consent of the Company and the record or
beneficial holders of at least two-thirds (2/3) of the Shares and Conversion
Stock, the obligations of the Company and the rights of the Holders of the
Registrable Securities under this Agreement may be waived (either generally or
in a particular instance, either retroactively or prospectively, and either for
a specified period of time or indefinitely), and with the same consent the
Company, when authorized by resolution of its Board of Directors, may enter into
a supplementary agreement for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement;
provided, however, that any amendment which would adversely effect the Founders
who possess registration rights pursuant to this Agreement at such time, in a
manner different than the Holders of Registrable Securities, shall additionally
require the consent of the Founders holding at least two-thirds (2/3) of the
Registrable Securities held by the Founders. Upon the effectuation of each such
waiver, consent, agreement or amendment or modification, the Company shall
promptly give written notice thereof to the record holders of the Registrable
Securities who have not previously consented thereto in writing. This Agreement
or any provision hereof may be changed, waived, discharged or terminated only by
a statement in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought, except to the extent
provided in this Section 5.4. Notwithstanding anything herein to the contrary,
this Agreement may be amended without the consent of any Holder to add as a
Holder any persons who purchase Shares on or before February 14, 1997.
5.5 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be delivered personally,
mailed by first class mail, postage prepaid, certified or registered mail,
return receipt requested, facsimile or delivered by courier or overnight
delivery, addressed (a) if to any Holder, at such Holder's address as set forth
on his or her signature page hereto, or at such other address as such Holder
shall have furnished to the Company in writing, or (b) if to the Company,
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at 000 Xxxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxxxx 00000, or at such other address as
the Company shall have furnished to the Holder in writing. Notices that are
delivered personally, by courier or overnight delivery shall be deemed received
upon personal delivery, or if delivered by facsimile, upon confirmation of
facsimile receipt, or if by mail, three (3) days after deposit in the United
States mail.
5.6 Delays or Omissions. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to any holder
of any Shares, upon any breach or default of the Company under this Agreement,
shall impair any such right, power or remedy of such holder nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any holder of any
breach or default under this Agreement, or any waiver on the part of any holder
of any provisions or conditions of this agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
holder, shall be cumulative and not alternative.
5.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
5.8 Severability. If any provision of this Agreement, or the
application thereof, shall for any reason and to any extent be invalid or
unenforceable the remainder of this Agreement and application of such provision
to persons or circumstances shall be interpreted so as best to reasonably effect
the intent of the parties hereto, the parties further agree to replace such void
or unenforceable provision of this Agreement with a valid and enforceable
provision which will achieve to the extent possible, the economic, business and
other purposes of the void or unenforceable provision.
5.9 Attorneys' Fees. If any action at law or in equity (including
arbitration) is necessary to enforce or interpret the terms of this Agreement,
the prevailing party shall be entitled to reasonable attorneys' fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled as determined by such court, equity or arbitration proceeding.
5.10 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY"
NETRIGHT TECHNOLOGIES, INC.
By: ___________________________________
Xxxxxxx Xxxxxxxx, President
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COUNTERPART SIGNATURE PAGE
TO NETRIGHT TECHNOLOGIES, INC. RIGHTS AGREEMENT
DATED AS OF DECEMBER , 1996
"HOLDER" OR "FOUNDER"
If you are an individual, Name (Please Print)
please sign and print your name
to the right _____________________________________
_____________________________________
Signature
Address: ____________________________
If you are signing on behalf of Name (Please Print)
an entity, please print the
name of the entity and sign to the
right, indicating your title _____________________________________
Signature
Title: ______________________________
Address: ____________________________
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AMENDMENT NUMBER ONE
TO RIGHTS AGREEMENT
This Amendment Number One to Rights Agreement is made as of August 28,
1997 by and among NetRight Technologies, Inc. (the "Company"), Xxxxxxx Xxxxxxxx
and Xxxxx Xxxxxxxxx (collectively, the "Founders") and the undersigned
stockholders of the Company (collectively, the "Rights Holders").
RECITALS
A. Investors who purchased shares of Series A Preferred Stock of the
Company pursuant to the Company's Series A Preferred Stock Purchase Agreement
dated as of December 27, 1996 (the "Purchase Agreement") entered into a Rights
Agreement dated as of December 27, 1996 (the "Rights Agreement").
B. Contemporaneously herewith, the Purchase Agreement is being amended
pursuant to Amendment Number One thereto (the "Purchase Agreement Amendment"),
dated as of this date, to permit the Company to sell through August 15, 1997
(the "Extended Date") an additional 985,917 shares of Series A Preferred Stock
(the "Additional Series A Shares").
C. The Rights Holders desire that each Investor (as defined in the
Purchase Agreement Amendment) purchasing Additional Series A Shares pursuant to
the Purchase Agreement Amendment have all rights of a "Purchaser" under the
Rights Agreement, as amended hereby, on the terms set forth in this Amendment.
D. Under Section 2 of the Rights Agreement, Rights Holders have a right
of first offer with respect to the Company's issuance of equity securities,
which such Rights Holders desire to waive with respect to the issuance of
Additional Series A Shares pursuant to the Purchase Agreement Amendment on or
prior to the Extended Date and with respect to the Company's issuance of shares
of Common Stock issuable upon conversion of such Additional Series A Shares (the
"Conversion Shares").
AGREEMENT
The parties hereto, intending to be legally bound, hereby agree as
follows:
1. Definitions. Unless otherwise defined or specified in this
Amendment, all capitalized terms used herein will have the meanings set forth in
the Rights Agreement.
2. Waiver of Right of First Offer. Rights Holders hereby waive, on
behalf of all Rights Holders, all rights of first offer under Section 2 of the
Rights Agreement with respect to the Company's offer, sale and issuance of
Additional Series A Shares pursuant to the Purchase Agreement Amendment on or
prior to the Extended Date and with respect to the Company's issuance of the
Conversion Shares.
3. Rights and Obligations of Purchasers. For all purposes of the Rights
Agreement, effective upon the satisfaction of Section 4 below and the execution
and delivery of this Amendment by the Company, the Founders and a Rights Holder
on or prior to the Extended
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Date: (a) the Additional Series A Shares issued to each Investor pursuant to the
Purchase Agreement Amendment will be included in the definition of "Shares" and
(b) such Investor will be a "Purchaser" and "Holder."
4. Effectiveness of Amendment. This Amendment will not be effective
unless this Amendment (or a separate consent with the same purpose) has been
executed and delivered by the Company, the Founders and the Holders of at least
two-thirds (2/3) of the Shares and Conversion Stock (as defined in the Rights
Agreement).
5. Continued Effect. Except as otherwise expressly provided herein, the
Rights Agreement will continue in full force and effect, in accordance with its
terms.
6. Miscellaneous. This Amendment will be governed in all respects by
the laws of the State of California as such laws are applied to agreements
between California residents entered into and to be performed entirely within
California. This Amendment constitutes the full and entire understanding and
agreement among the parties with regard to the subjects hereof and supersedes
all prior written and oral agreements, representations and commitments, if any,
among the parties with respect to such subjects. This Amendment may be executed
in any number of counterparts, each of which will be an original, but all of
which together will constitute one instrument. Any provision of this Amendment
may be waived or modified only in accordance with the provisions set forth in
Section 5.4 of the Purchase Agreement.
The parties have executed this Waiver as of the date first above
written.
NETRIGHT TECHNOLOGIES, INC. RIGHTS HOLDER
By:___________________________________ Name:_______________________________
Xxxxxxx Xxxxxxxx, President (Please print or type)
By:_________________________________
(Please print or type)
Title: _____________________________
(Please print or type)
Signature: _________________________
FOUNDERS:
____________________________________
Xxxxxxx Xxxxxxxx
____________________________________
Xxxxx Xxxxxxxxx
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AMENDMENT NUMBER TWO
TO RIGHTS AGREEMENT
This Amendment Number Two to Rights Agreement (the "Amendment") is made
as of December 15, 1997 by and among NetRight Technologies, Inc. (the
"Company"), Xxxxxxx Xxxxxxxx and Xxxxx Xxxxxxxxx (collectively, the "Founders")
and each of the persons named in Schedule A attached hereto (collectively,
"Purchasers" and individually, a "Purchaser").
RECITALS
A. Investors who purchased shares of Series A Preferred Stock of the
Company pursuant to the Company's Series A Preferred Stock Purchase Agreement
dated as of December 27, 1996 (the "Series A Purchase Agreement") entered into a
Rights Agreement dated as of December 27, 1996 (the "Rights Agreement").
B. The Series A Purchase Agreement and Rights Agreement were
subsequently amended to extend the closing date of sales of Series A Preferred
Stock under to the Series A Purchase Agreement to February 28, 1997 and March
14, 1997 pursuant to letter agreements dated February 13, 1997 and March 4,
1997, respectively.
C. Certain other investors who purchased shares of Series A Preferred
Stock of the Company pursuant to Amendment Number One to the Series A Purchase
Agreement dated as of August 28, 1997 entered into Amendment Number One of the
Rights Agreement to receive rights of "Purchasers" under the Rights Agreement
(the Rights Agreement, as previously amended hereafter referred to as the
"Amended Rights Agreement").
D. The Company and certain of the Purchasers are entering into a Series
B Preferred Stock Purchase Agreement dated as of the date of this Amendment (the
"Series B Purchase Agreement"), pursuant to which, subject to the satisfaction
of certain conditions, such Purchasers are agreeing to purchase from the Company
a total of up to 3,200,000 shares of Series B Preferred Stock of the Company
(the "Series B Preferred Stock") on the terms set forth in the Series B Purchase
Agreement in an initial closing on the date hereof (the "Initial Closing Date")
and in one or more additional closings through March 15, 1998 (the "Final
Closing Date").
E. The parties to the Amended Rights Agreement desire that each
Purchaser purchasing shares of Series B Preferred Stock pursuant to the Series B
Purchase Agreement have all rights of a "Purchaser" under the Amended Rights
Agreement, as amended hereby, on the terms set forth in this Amendment.
D. Under Section 2 of the Amended Rights Agreement, parties to the
Amended Rights Agreement have a right of first offer with respect to the
Company's issuance of equity securities, which such parties to the Amended
Rights Agreement desire to waive with respect to the issuance of Series B
Preferred Stock pursuant to the Series B Purchase Agreement.
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AGREEMENT
The parties hereto, intending to be legally bound, hereby agree as
follows:
1. Definitions. Unless otherwise defined or specified in this
Amendment, all capitalized terms used herein will have the meanings set forth in
the Amended Rights Agreement.
2. Purchasers' Rights and Obligations. Effective upon (i) the
purchase by any Purchaser of shares of the Company's Series B Preferred Stock at
the closing of the sale and purchase of shares under the Series B Purchase
Agreement; (ii) the execution and delivery by such Purchaser of a signature page
to this Amendment; (iii) the execution and delivery by the Company of a
signature page to this Amendment; and (iv) the satisfaction of the conditions
set forth in Section 4 of this Amendment, such Purchaser will be a "Purchaser"
for all purposes of the Amended Rights Agreement, as amended hereby, and the
following sections of the Amended Rights Agreement will be amended as follows:
Section 1.1(b) will be amended by deleting such provision in its
entirety and replacing it with the following:
(b) "Conversion Stock" means the Common Stock issued or issuable
upon conversion of the Series A Preferred Stock and Series B Preferred
Stock.
Section 1.1(e) will be amended by deleting such provision in its
entirety and replacing it with the following:
(e) "Initiating Holders" shall, in the case of a registration
under Section 1.2, mean any Holder or Holders of at least fifty percent
(50%) of the outstanding Registrable Securities, or in the case of a
registration under Section 1.4, the holder or Holders of at least ten
percent (10%) of the outstanding Registrable Securities, all as
adjusted after the original issuance thereof for stock splits, stock
dividends, recapitalizations and the like.
Section 1.1(k) will be amended by deleting such provision in its
entirety and replacing it with the following:
(k) "Shares" shall mean the Company's Series A Preferred Stock
and Series B Preferred Stock.
Section 1.2(a) will be amended by deleting the introductory
sentence in its entirety and replacing it with the following:
(a) Request for Registration. At any time after December 31,
2001, in case the Company shall receive from Initiating Holders a
written request that the Company effect a registration with respect to
their Registrable Securities having a reasonably anticipated aggregate
offering price to the public of not less than $15,000,000, the Company
will:
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Section 2.1 will be amended by adding the following to the end of
the introductory paragraph of Section 2.1:
Notwithstanding the foregoing, the Company hereby grants to Xxxxx Xxxxx
Digital Systems GmbH & Co. ("Leitz") the additional right to purchase
shares of Series B Preferred Stock issued on or before March 15, 1998
at a price of $1.57 per share such that the number of shares of Series
B Preferred Stock held by Leitz after each such sale of Series B
Preferred Stock represents 10.1% of all the then outstanding shares of
Common Stock, Conversion Stock, Shares and outstanding options pursuant
to the Company's 1997 Stock Option Plan. Such right terminates upon
March 15, 1998.
Section 2.1(b) will be amended by deleting such provision in its
entirety and replacing it with the following:
(b) Except as set forth below, "New Securities" shall mean any
Equity Securities, whether now authorized or not, and rights, options
or warrants to purchase said Equity Securities. Notwithstanding the
foregoing, "New Securities" does not include (i) Common Stock issued to
employees, officers, consultants or directors of the Company pursuant
to sales or options granted at any time after the date of incorporation
of the Company pursuant to a plan or agreement unanimously approved by
the Company's Board of Directors; (ii) securities offered to the public
generally pursuant to a registration statement under the Securities
Act; (iii) securities issued pursuant to the acquisition of another
corporation by the Company by merger, purchase of substantially all of
the assets or other reorganization whereby the Company or its
purchasers own not less than fifty-one percent (51%) of the voting
power of the surviving or successor corporation; (iv) the Conversion
Stock; (v) warrant or warrants for the purchase of shares of capital
stock of the Company (and stock issued upon exercise of such warrant or
warrants) which have been unanimously approved by the Board of
Directors of the Company and issued in connection with an equipment
lease, equipment financing or bank line financing; (vi) stock issued in
connection with any stock split, stock dividend or recapitalization by
the Company; (vii) shares of Series A Preferred Stock issued on or
before August 28, 1997 at a price not less than $0.71 per share; (viii)
shares of Series B Preferred Stock issued on or before March 15, 1998
at a price of not less than $1.57 per share, subject to the
introductory paragraph of Section 2.1 with regard to Leitz; and (ix)
securities of the Company which holders of a majority of the Shares
agreed in writing with the Company will not be included in the term
"New Securities."
Section 3.1(b) is hereby deleted in its entirety.
The following is added as a new Section 3.7:
3.7 Voting Proxy. Unless waived in writing by the Company, which
waiver shall be exercisable by the Company in its sole and absolute
discretion, each holder of Series B Preferred Stock shall be required
to grant an irrevocable voting proxy in favor of
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the Company upon the closing of such acquisition, or at such later time
as the Company may request. The voting proxy shall give Xxxxxxx
Xxxxxxxx, the President of the Company, or his successor, the right to
vote the shares (including shares issued or issuable upon conversion of
such shares) of such holder's Series B Preferred Stock in the event the
vote or written consent of stockholders is solicited for approval of a
merger or consolidation of the Company into or with any other
corporation or corporations in which the stockholders of the Company
shall own less than a majority of the voting securities of the
surviving corporation and for which pooling of interest accounting
treatment is a requirement fo the transaction (a "Corporate
Transaction"); provided, however, that such voting proxy shall not be
effective unless (i) the Company's Board of Directors votes in favor of
the Corporate Transaction; (ii) holder of 80% of the outstanding shares
of the Company (other than Series B Preferred Stock) vote in favor of
the Corporate Transaction; and (iii) holders of Series B Preferred
Stock will receive no less than the liquidation preference due to
holders of Series B Preferred Stock (as provided for in the Company's
Amended and Restated Certificate of Incorporation).
2. Waiver of Right of First Offer. In executing this Amendment,
Purchasers (as defined in the Amended Rights Agreement) representing at least
two-thirds (2/3's) of the aggregate Shares and Conversion Stock hereby waive, on
behalf of all such Purchasers, all rights of first offer under Section 2 of the
Rights Agreement with respect to the Company's offer, sale and issuance of
Series B Preferred Stock pursuant to the Series B Purchase Agreement through the
Final Closing Date.
3. Effectiveness of Amendment. This Amendment will not be effective
unless this Amendment (or a separate consent with the same purpose) has been
executed and delivered by the Company, the Founders and the holders of at least
two-thirds (2/3) of the Shares and Conversion Stock (as defined in the Amended
Rights Agreement). Notwithstanding anything herein to the contrary, Purchasers
purchasing Series B Preferred Stock through the Final Closing Date may be added
as a "Purchaser" for the purposes of the Amended Rights Agreement without the
consent of any Founders, Purchasers (as defined in the Amended Rights Agreement)
or prior Purchasers of Series B Preferred Stock.
4. Continued Effect. Except as otherwise expressly provided herein,
the Amended Rights Agreement will continue in full force and effect, in
accordance with its terms.
5. Miscellaneous. This Amendment will be governed in all respects by
the laws of the State of California as such laws are applied to agreements
between California residents entered into and to be performed entirely within
California. This Amendment constitutes the full and entire understanding and
agreement among the parties with regard to the subjects hereof and supersedes
all prior written and oral agreements, representations and commitments, if any,
among the parties with respect to such subjects. This Amendment may be executed
in any number of counterparts, each of which will be an original, but all of
which together will constitute one instrument. Any provision of this Amendment
may be waived or modified only in accordance with the provisions set forth in
Section 5.4 of the Amended Rights Agreement.
4
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The parties have executed this Amendment as of the date first above
written.
NETRIGHT TECHNOLOGIES, INC. PURCHASER:
By:___________________________________ Name:_______________________________
Xxxxxxx Xxxxxxxx, President (Please print or type)
By:_________________________________
(Please print or type)
Title: _____________________________
(Please print or type)
Signature: _________________________
FOUNDERS:
______________________________________ ____________________________________
Xxxxxxx Xxxxxxxx Xxxxx Xxxxxxxxx
5
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Schedule A
Purchaser Series A Shares Series B Shares
--------- --------------- ---------------
Anthelion Capital LLC 352,113
GCWF Investment Partners 35,211
Xxxx Xxx Xxx/Xxxxxx Thu Thi Le 38,592
Xxxxx Xxxxxxxx 49,296
Xxx X. Xxxxxx/Xxx X. Xxx 38,592
Xxxxx Xxxxxxxx/Xxxxx Xxxxxxxx 29,295
Rajdak Investments LLC 281,690
Xxxxxxx Xxxxxx 35,211
Xxxxx Xxxxxxxxx 257,434
Xxxx Xxxxx 140,845
Unterberg Harris Private
Equity Partners L.P. 754,366
Unterberg Xxxxxx, X.X. 323,940
Unterberg Harris 40lK Profit
Sharing Plan FBO Xxxx Xxxxxxxxx 14,086
Unterberg Harris 401K Profit
Sharing Plan FBO Xxxx Xxxx Xxxxx 14,086
Unterberg Harris Private
Equity Partners, C.V. 161,127
Xxxxxx Xxxxxxx 81,689
Xxxx Xxxxxx and Xxxxxxxx
Xxxxxx TTEES of the Xxxxxx
Family `93 Revocable Trust 206,417
Xxxxx Xxxxx 39,718
Xxxxx Xxxxx Digital GmbH & Co. 1,273,885
Xxxxxx X. Xxxxx Xx. and Xxxxx X. 15,923
Satloff, Trustee U/D/T 5/19/93 FBO
Xxxxxxx Xxxx Xxxxx
Xxxxxx X. Xxxxx Xx. and Xxxxx X. 15,923
Satloff, Trustee U/D/T 5/19/93 FBO
Xxxxxx Xxxxxxxxx Xxxxxxx
Xxxxxx X. Xxxxx Xx. and Xxxxx X. 15,923
Satloff, Trustee FBO
Hannah Xxxxxx Xxxxx Trust
24
Xxxxxx X. Xxxxx Xx. and Xxxxx X. 15,923
Satloff, Trustee FBO
Xxxxxxxx Xxxx Xxxxxxx
Xxxxxx Xxxxxx, Jr. 127,388
A. Xxxxxx Xxxxxx, Trustee
FBO Xxxx Xxxx dated 5/8/96 31,847
A. Xxxxxx Xxxxxx, Trustee
FBO Xxxxx Xxxxxx dated 5/8/96 31,847
X.X. Xxxxxxxxx, Towbin LLC 127,388
A. Xxxxxx Xxxxxx 63,694
Unterberg Harris Private
Equity Partners L.P. 262,420
Unterberg Harris Private
Equity Partners, CV 56,050
Xxxxxx X. Xxxxxxxxx 127,388
NEA Ventures 1998, Limited
Partners 1,592
New Enterprise Associates VII,
Limited Partnership 1,016,886
NEA Presidents Fund, L.P. 15,923
25
AMENDMENT NUMBER THREE
TO RIGHTS AGREEMENT
This Amendment Number Three to Rights Agreement (the "Amendment") is
made as of September 28, 1998 by and among NetRight Technologies, Inc. (the
"Company"), Xxxxxxx Xxxxxxxx and Xxxxx Xxxxxxxxx (collectively, the "Founders")
and each of the persons named in Schedule A attached hereto (collectively,
"Purchasers" and individually, a "Purchaser").
RECITALS
A. Investors who purchased shares of Series A Preferred Stock of the
Company pursuant to the Company's Series A Preferred Stock Purchase Agreement
dated as of December 27, 1996 (the "Series A Purchase Agreement") entered into a
Rights Agreement dated as of December 27, 1996 (the "Rights Agreement").
B. The Series A Purchase Agreement and Rights Agreement were
subsequently amended to extend the closing date of sales of Series A Preferred
Stock under to the Series A Purchase Agreement to February 28, 1997 and March
14, 1997 pursuant to letter agreements dated February 13, 1997 and March 4,
1997, respectively.
C. Certain other investors who purchased shares of Series A Preferred
Stock of the Company pursuant to Amendment Number One to the Series A Purchase
Agreement dated as of August 28, 1997 entered into Amendment Number One of the
Rights Agreement to receive rights of "Purchasers" under the Rights Agreement.
D. Investors who purchased shares of Series B Preferred Stock of the
Company pursuant to the Company's Series B Preferred Stock Purchase Agreement
dated as of December 15, 1997 (the "Series B Purchase Agreement) entered into
Amendment Number Two of the Rights Agreement to receive rights of "Purchasers"
under the Rights Agreement (the Rights Agreement, as previously amended
hereafter referred to as the "Amended Rights Agreement").
E. The Company and certain of the Purchasers are entering into a Series
C Preferred Stock Purchase Agreement dated as of the date of this Amendment (the
"Series C Purchase Agreement"), pursuant to which, subject to the satisfaction
of certain conditions, such Purchasers are agreeing to purchase from the Company
a total of up to 2,100,000 shares of Series C Preferred Stock of the Company
(the "Series C Preferred Stock") on the terms set forth in the Series C Purchase
Agreement in an initial closing on the date hereof (the "Initial Closing Date")
and in one or more additional closings through the Additional Closing Deadline
(as defined in the Series C Purchase Agreement).
F. The parties to the Amended Rights Agreement desire that each
Purchaser purchasing shares of Series C Preferred Stock pursuant to the Series C
Purchase Agreement have all rights of a "Purchaser" under the Amended Rights
Agreement, as amended hereby, on the terms set forth in this Amendment.
1
26
G. Under Section 2 of the Amended Rights Agreement, parties to the
Amended Rights Agreement have a right of first offer with respect to the
Company's issuance of equity securities, which such parties to the Amended
Rights Agreement desire to waive with respect to the issuance of Series C
Preferred Stock pursuant to the Series C Purchase Agreement.
AGREEMENT
The parties hereto, intending to be legally bound, hereby agree as
follows:
1. Definitions. Unless otherwise defined or specified in this
Amendment, all capitalized terms used herein will have the meanings set forth in
the Amended Rights Agreement.
2. Purchasers' Rights and Obligations. Effective upon (i) the
purchase by any Purchaser of shares of the Company's Series C Preferred Stock at
a closing under the Series C Purchase Agreement; (ii) the execution and delivery
by such Purchaser of a signature page to this Amendment; (iii) the execution and
delivery by the Company of a signature page to this Amendment; and (iv) the
satisfaction of the conditions set forth in Section 4 of this Amendment, such
Purchaser will be a "Purchaser" for all purposes of the Amended Rights
Agreement, as amended hereby, and the following sections of the Amended Rights
Agreement will be amended as follows:
Section 1.1(b) will be amended by deleting such provision in its
entirety and replacing it with the following:
(b) "Conversion Stock" means the Common Stock issued or issuable
upon conversion of the Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock.
Section 1.1(e) will be amended by deleting such provision in its
entirety and replacing it with the following:
(e) "Initiating Holders" shall, in the case of a registration
under Section 1.2, mean any Holder or Holders of at least fifty percent
(50%) of the outstanding Registrable Securities, or in the case of a
registration under Section 1.4, the holder or Holders of at least ten
percent (10%) of the outstanding Registrable Securities, all as
adjusted after the original issuance thereof for stock splits, stock
dividends, recapitalizations and the like.
Section 1.1(k) will be amended by deleting such provision in its
entirety and replacing it with the following:
(k) "Shares" shall mean the Company's Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock.
Section 1.2(a) will be amended by deleting the introductory
sentence in its entirety and replacing it with the following:
2
27
(a) Request for Registration. At any time after December 31,
2001, in case the Company shall receive from Initiating Holders a
written request that the Company effect a registration with respect to
their Registrable Securities having a reasonably anticipated aggregate
offering price to the public of not less than $12,000,000, the Company
will:
Section 2.1(b) will be amended by deleting such provision in its
entirety and replacing it with the following:
(b) Except as set forth below, "New Securities" shall mean any
Equity Securities, whether now authorized or not, and rights, options
or warrants to purchase said Equity Securities. Notwithstanding the
foregoing, "New Securities" does not include (i) Common Stock issued to
employees, officers, consultants or directors of the Company pursuant
to sales or options granted at any time after the date of incorporation
of the Company pursuant to a plan or agreement unanimously approved by
the Company's Board of Directors; (ii) securities offered to the public
generally pursuant to a registration statement under the Securities
Act; (iii) securities issued pursuant to the acquisition of another
corporation by the Company by merger, purchase of substantially all of
the assets or other reorganization whereby the Company or its
purchasers own not less than fifty-one percent (51%) of the voting
power of the surviving or successor corporation; (iv) the Conversion
Stock; (v) warrant or warrants for the purchase of shares of capital
stock of the Company (and stock issued upon exercise of such warrant or
warrants) which have been unanimously approved by the Board of
Directors of the Company and issued in connection with an equipment
lease, equipment financing or bank line financing; (vi) stock issued in
connection with any stock split, stock dividend or recapitalization by
the Company; (vii) shares of Series A Preferred Stock issued on or
before August 28, 1997 at a price not less than $0.71 per share; (viii)
shares of Series B Preferred Stock issued on or before March 15, 1998
at a price of not less than $1.57 per share, subject to the
introductory paragraph of Section 2.1 with regard to Leitz; (ix) shares
of Series C Preferred Stock issued on or before the Additional Closing
Deadline at a price of not less than $2.10 per share; and (x)
securities of the Company which holders of a majority of the Shares
agreed in writing with the Company will not be included in the term
"New Securities."
Section 3.7 is hereby deleted in its entirety, and replaced by
the following:
3.7 Board of Directors. Prior to December 31, 1998, an individual
with relevant industry experience (the "Outside Board Number") who is
mutually agreeable to the President of the Company and the NEA
Representative (as defined in the Series C Purchase Agreement) will be
appointed to the Company's Board of Directors to replace a then
existing board member or as an additional board member, as determined
by the Company, in its sole discretion. The Outside Board Member will
receive a nonstatutory stock option to purchase 100,000 shares of the
Company's Common Stock pursuant to the Company's 1997 Stock Option
Plan, such option to vest on a monthly basis over four years beginning
as of the date the Outside Board Member commences service on the
Company's Board of Directors and continuing to vest as long as such
service continues.
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28
3. Waiver of Right of First Offer. In executing this Amendment,
Purchasers (as defined in the Amended Rights Agreement) representing at least
two-thirds (2/3's) of the aggregate Shares and Conversion Stock hereby waive, on
behalf of all such Purchasers, all rights of first offer under Section 2 of the
Rights Agreement with respect to the Company's offer, sale and issuance of
Series C Preferred Stock pursuant to the Series C Purchase Agreement through the
Additional Closing Deadline.
4. Effectiveness of Amendment. This Amendment will not be effective
unless this Amendment (or a separate consent with the same purpose) has been
executed and delivered by the Company, the Founders and the holders of at least
two-thirds (2/3) of the Shares and Conversion Stock (as defined in the Amended
Rights Agreement). Notwithstanding anything herein to the contrary, Purchasers
purchasing Series C Preferred Stock through the Additional Closing Deadline may
be added as a "Purchaser" for the purposes of the Amended Rights Agreement
without the consent of any Founders, Purchasers (as defined in the Amended
Rights Agreement) or prior Purchasers of Series C Preferred Stock.
5. Continued Effect. Except as otherwise expressly provided herein,
the Amended Rights Agreement will continue in full force and effect, in
accordance with its terms.
6. Miscellaneous. This Amendment will be governed in all respects by
the laws of the State of California as such laws are applied to agreements
between California residents entered into and to be performed entirely within
California. This Amendment constitutes the full and entire understanding and
agreement among the parties with regard to the subjects hereof and supersedes
all prior written and oral agreements, representations and commitments, if any,
among the parties with respect to such subjects. This Amendment may be executed
in any number of counterparts, each of which will be an original, but all of
which together will constitute one instrument. Any provision of this Amendment
may be waived or modified only in accordance with the provisions set forth in
Section 5.4 of the Amended Rights Agreement.
4
29
The parties have executed this Amendment as of the date first above
written.
NETRIGHT TECHNOLOGIES, INC. PURCHASER:
By:___________________________________ Name:_______________________________
Xxxxxxx Xxxxxxxx, President (Please print or type)
By:_________________________________
(Please print or type)
Title: _____________________________
(Please print or type)
Signature: _________________________
FOUNDERS:
______________________________________ ____________________________________
Xxxxxxx Xxxxxxxx Xxxxx Xxxxxxxxx
AMENDMENT NUMBER THREE
TO RIGHTS AGREEMENT
5
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Schedule A to Amendment Number
Three to Rights Agreement
PURCHASER SERIES A SHARES SERIES B SHARES SERIES C SHARES
--------- --------------- --------------- ---------------
Anthelion Capital LLC 352,113
GCWF Investment Partners 35,211
Xxxx Xxx Xxx/Xxxxxx Thu Thi Le 38,592
Xxxxx Xxxxxxxx 49,296
Xxx X. Xxxxxx/Xxx X. Xxx 38,592
Xxxxx Xxxxxxxx/Xxxxx Xxxxxxxx 29,295
Rajdak Investments LLC 281,690
Xxxxxxx Xxxxxx 35,211
Xxxxx Xxxxxxxxx 257,434
Xxxx Xxxxx 140,845
Unterberg Harris Private Equity 754,366
Partners X.X.
Xxxxxxxxx Xxxxxx, X.X. 323,940
Unterberg Harris 40lK Profit Sharing 14,086
Plan FBO Xxxx Xxxxxxxxx
Xxxxxxxxx Xxxxxx 401KProfit Sharing 14,086
Plan FBO Xxxx Xxxx Xxxxx
Unterberg Harris Private Equity 161,127
Partners, C.V.
Xxxxxx Xxxxxxx 81,689
Xxxx Xxxxxx and Xxxxxxxx Xxxxxx TTEES 206,417
of the Xxxxxx Family `93 Revocable
Trust
6
31
Xxxxx Xxxxx 39,718
Xxxxx Xxxxx Digital GmbH & Co. 1,273,885
Xxxxxx X. Xxxxx Xx. and Xxxxx X. 15,923
Satloff, Trustee U/D/T 5/19/93 FBO
Xxxxxxx Xxxx Xxxxx
Xxxxxx X. Xxxxx Xx. and Xxxxx X. 15,923
Satloff, Trustee U/D/T 5/19/93 FBO
Xxxxxx Xxxxxxxxx Xxxxxxx
Xxxxxx X. Xxxxx Xx. and Xxxxx X. 15,923
Satloff, Trustee FBO Hannah Xxxxxx
Xxxxx Trust
Xxxxxx X. Xxxxx Xx. and Xxxxx X. 15,923
Satloff, Trustee FBO Xxxxxxxx Xxxx
Xxxxxxx
Xxxxxx Xxxxxx, Jr. 127,388
A. Xxxxxx Xxxxxx, Trustee FBO Xxxx 31,847
Olim dated 5/8/96
A. Xxxxxx Xxxxxx, Trustee FBO Xxxxx 31,847
Towbin dated 5/8/96
X.X. Xxxxxxxxx, Towbin LLC 127,388
A. Xxxxxx Xxxxxx 63,694
Unterberg Harris Private Equity 262,420
Partners X.X.
Xxxxxxxxx Xxxxxx Private Equity 56,050
Partners, CV
7
32
Xxxxxx X. Xxxxxxxxx 127,388
NEA Ventures 1998, Limited Partners 1,592 1,191
New Enterprise Associates VII, Limited 1,016,886 1,692,503
Partnership
NEA Presidents Fund, L.P. 15,923 11,905
Xxxxx Xxxxxxx 47,619
Xxxxxx Xxxxx 50,000
Xxxxx Xxxxxx 50,000
GCWF Investment Partners 23,810
Victoria W-Y Xxx 2,381
Xxxxxx X. Xxxxxxx 8,571
Cornerstone Properties I, LLC 91,429
8
