1
EXHIBIT 4.02
ELOQUENT, INC.
FOURTH AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
2
TABLE OF CONTENTS
PAGE
----
1. GENERAL............................................................. 1
1.1 Definitions................................................... 1
2. REGISTRATION; RESTRICTIONS ON TRANSFER.............................. 3
2.1 Restrictions On Transfer...................................... 3
2.2 Demand Registration........................................... 4
2.3 Piggyback Registrations....................................... 5
2.4 Form S-3 Registration......................................... 6
2.5 Expenses Of Registration...................................... 7
2.6 Obligations Of The Company.................................... 8
2.7 Termination Of Registration Rights............................ 9
2.8 Delay Of Registration; Furnishing Information................. 9
2.9 Indemnification............................................... 9
2.10 Assignment Of Registration Rights............................. 11
2.11 Amendment Of Registration Rights.............................. 11
2.12 Limitation On Subsequent Registration Rights.................. 11
2.13 "Market Stand-Off" Agreement.................................. 12
2.14 Rule 144 Reporting............................................ 12
3. OTHER COVENANTS..................................................... 12
3.1 Basic Financial Information And Reporting..................... 12
3.2 Inspection Rights............................................. 13
3.3 Confidentiality Of Records.................................... 13
3.4 Reservation Of Common Stock................................... 14
3.5 Stock Vesting................................................. 14
3.6 Key Man Insurance............................................. 15
3.7 Proprietary Information And Inventions Agreement.............. 15
3.8 Use Of Proceeds............................................... 15
3.9 "Market Stand-Off" Agreements................................. 15
3.10 Indemnification............................................... 15
3.11 Assignment Of Repurchase Rights And Company Right Of First
Refusal....................................................... 15
3.12 Board Of Directors............................................ 16
i
3
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
3.13 Qualified Small Business Stock................................ 16
3.14 Visitation Rights............................................. 17
3.15 Termination of Covenants...................................... 17
4. RIGHTS OF FIRST REFUSAL............................................. 17
4.1 Subsequent Offerings.......................................... 17
4.2 Exercise Of Rights............................................ 17
4.3 Issuance Of Equity Securities To Other Persons................ 17
4.4 Termination Of Rights Of First Refusal........................ 18
4.5 Transfer Of Rights Of First Refusal........................... 18
4.6 Excluded Securities........................................... 18
5. MISCELLANEOUS....................................................... 19
5.1 Governing Law................................................. 19
5.2 Survival...................................................... 19
5.3 Successors And Assigns........................................ 19
5.4 Severability.................................................. 19
5.5 Amendment And Waiver.......................................... 19
5.6 Delays Or Omissions........................................... 19
5.7 Notices....................................................... 20
5.8 Attorneys' Fees............................................... 20
5.9 Titles And Subtitles.......................................... 20
5.10 Counterparts.................................................. 20
ii
4
FOURTH AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
THIS FOURTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (the
"Agreement") is entered into as of the 20th day of October, 1999, by and among
ELOQUENT, INC., a Delaware corporation (the "Company"), and the investors listed
on Exhibit A hereto. The investors listed on Exhibit A hereto shall be referred
to hereinafter as the "Investors" and each individually as an "Investor."
RECITALS
WHEREAS, certain Investors were parties to that certain Third Amended and
Restated Investors' Rights Agreement dated as of June 22, 1998 by and between
the Company and such Investors (the "Prior Agreement"), pursuant to which the
Company granted such Investors certain registration rights, information rights,
rights of participation and other rights set forth in the Prior Agreement;
WHEREAS, in connection with the Company's issuance of Subordinated Notes
with Detachable Warrants pursuant to the Securities Purchase Agreement dated as
of the date hereof by and among the Company and certain of the Investors (the
"Purchase Agreement"), the Company and the Investors that were parties to the
Prior Agreement wish to amend and replace the Prior Agreement with this
Agreement and to include the other Investors (the "New Investors") as parties to
this Agreement; and
WHEREAS, the New Investors desire to become parties to this Agreement.
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement and in the
Purchase Agreement, the parties mutually agree as follows:
1. GENERAL.
1.1 DEFINITIONS. As used in this Agreement the following terms shall have
the following respective meanings:
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FINANCING WARRANTS" means (1) the warrants to purchase 37,188 shares of
Common Stock issued by the Company to Lighthouse Capital Partners, L.P., (2) the
warrants to purchase 71,798 shares of Common Stock issued by the Company to
Lighthouse Capital Partners II, L.P., (3) the warrants to purchase 14,450 shares
of Common Stock issued by the Company to Onset Enterprise Associates II, L.P.,
(4) the warrant to purchase 70,000 shares of Common Stock issued by the Company
to TBCC Funding Trust II and (5) the warrant to purchase 14,451 shares of Series
B Preferred Stock issued by the Company to Imperial Bancorp.
"FORM S-3" means such form under the Securities Act as in effect on the
date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC that
1.
5
permits inclusion or incorporation of substantial information by reference to
other documents filed by the Company with the SEC.
"HOLDER" means any person owning of record Registrable Securities that
have not been sold to the public or any assignee of record of such Registrable
Securities in accordance with Section 2.10 hereof.
"INITIAL OFFERING" means the Company's first firm commitment underwritten
public offering of its Common Stock registered under the Securities Act.
"INVESTOR NOTES" means the Subordinated Notes issued by the Company to
Investors pursuant to the Purchase Agreement.
"INVESTOR WARRANTS" means the warrants to purchase 1,500,000 shares of
Common Stock issued by the Company to Investors pursuant to the Purchase
Agreement.
"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 effectiveness of such
registration statement or document.
"REGISTRABLE SECURITIES" means (1) Common Stock of the Company issued or
issuable upon conversion of the Shares or upon exercise of the Investor
Warrants; (2) for purposes of Section 2.3 only, Common Stock of the Company
issued or issuable upon exercise of the Financing Warrants (or upon conversion
of any preferred stock issued or issuable upon exercise of any Financing
Warrants), and (3) any Common Stock of the Company issued as (or issuable upon
the conversion or exercise of any warrant, right or other security that is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of, such above-described securities. Notwithstanding the
foregoing, Registrable Securities shall not include any securities sold by a
person to the public either pursuant to a registration statement or Rule 144 or
sold in a private transaction in which the transferor's rights under Section 2
of this Agreement are not assigned.
"REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number of shares
determined by calculating the total number of shares of the Company's Common
Stock that are Registrable Securities and either (1) are then issued and
outstanding or (2) are issuable pursuant to then exercisable, exchangeable or
convertible securities.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the Company in
complying with Sections 2.2, 2.3 and 2.4 hereof, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, reasonable fees and disbursements not to exceed $15,000
of a single special counsel for the Holders, blue sky fees and expenses and 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).
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
2.
6
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale.
"SHARES" shall mean (1) the Company's Series A Preferred Stock issued
pursuant to the Series A Preferred Stock Purchase Agreement dated as of October
19, 1995 by and between the Company and certain of the Investors, (2) the
Company's Series B Preferred Stock issued pursuant to the Series B Preferred
Stock Purchase Agreement dated as of August 9, 1996 by and between the Company
and certain of the Investors, (3) the Company's Series C Preferred Stock issued
pursuant to the Series C Preferred Stock Purchase Agreement dated as of August
26, 1997 by and between the Company and certain of the Investors, (4) the
Company's Series D Preferred Stock issued pursuant to the Series D Preferred
Stock Purchase Agreement dated as of June 22, 1998 by and between the Company
and certain of the Investors and (5) the Company's Series E Preferred Stock
issued or issuable upon exchange of the Investor Notes pursuant to the Purchase
Agreement.
2. REGISTRATION; RESTRICTIONS ON TRANSFER.
2.1 RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition of all or any
portion of the Shares or Registrable Securities unless and until:
(i) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be bound by
this Section 2.1, (B) such Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (C) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(iii) Notwithstanding the provisions of paragraphs (i) and
(ii) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by a Holder that is (A) a partnership to its partners
or former partners in accordance with partnership interests, (B) a corporation
to its stockholders in accordance with their interest in the corporation, (C) a
limited liability company to its members or former members in accordance with
their interest in the limited liability company, (D) to the Holder's family
member or trust for the benefit of an individual Holder, or (E) to any
subsidiary of the Holder, provided the transferee will be subject to the terms
of this Section 2.1 to the same extent as if he were an original Holder
hereunder. In addition, no opinion of counsel will be necessary for transfers
made pursuant to Rule 144 under the Securities Act if there is no material
question as to the availability of current information under Rule 144(c), the
transferring Holder represents that it has complied with Rule 144(d) and (e) in
reasonable detail, the selling broker represents that it has complied with Rule
144(f) and the Company is provided with a copy of such Holder's notice of
proposed sale.
3.
7
(b) Each certificate representing Shares or Registrable Securities
shall (unless otherwise permitted by the provisions of the Agreement) be stamped
or otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws or as
provided elsewhere in this Agreement):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT
SUCH REGISTRATION IS NOT REQUIRED.
(c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable
state securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
2.2 DEMAND REGISTRATION.
(a) Subject to the conditions of this Section 2.2, if the Company
shall receive a written request from the Holders of at least 50% of the
Registrable Securities then outstanding (the "Initiating Holders") that the
Company file a registration statement under the Securities Act covering the
registration of at least 20% of the aggregate Registrable Securities or any
lesser percentage of such securities if the registration has an aggregate
offering price to the public in excess of $2,000,000 (a "Qualified Public
Offering"), then the Company shall, within 30 days of the receipt thereof, give
written notice of such request to all Holders, and subject to the limitations of
this Section 2.2, use its best efforts to effect, as soon as practicable, the
registration under the Securities Act of all Registrable Securities that the
Holders request to be registered.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 2.2
and the Company shall include such information in the written notice referred to
in Section 2.2(a). In such event, the right of any Holder to include its
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting by a
4.
8
majority in interest of the Initiating Holders (which underwriter or
underwriters shall be reasonably acceptable to the Company). Notwithstanding any
other provision of this Section 2.2, if the underwriter advises the Company that
marketing factors require a limitation of the number of securities to be
underwritten (including Registrable Securities) then the Company shall so advise
all Holders of Registrable Securities that would otherwise be underwritten
pursuant hereto, and the number of shares that may be included in the
underwriting shall be allocated to the Holders of such Registrable Securities on
a pro rata basis based on the number of Registrable Securities held by all such
Holders (including the Initiating Holders). Any Registrable Securities excluded
or withdrawn from such underwriting shall be withdrawn from the registration.
(c) The Company shall not be required to effect a registration
pursuant to this Section 2.2:
(i) after the Company has effected three registrations
pursuant to this Section 2.2, and such registrations have been declared or
ordered effective; or
(ii) if within 30 days of receipt of a written request from
Initiating Holders pursuant to Section 2.2(a), the Company gives notice to the
Holders of the Company's intention to make its Initial Offering within 90 days;
or
(iii) if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 2.2, a certificate signed by the
Chairman of the Board stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its stockholders for such registration statement to be effected at such time, in
which event the Company shall have the right to defer such filing for a period
of not more than 180 days after receipt of the request of the Initiating
Holders; provided that such right to delay a request shall be exercised by the
Company no more than once in any one-year period.
2.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registrable Securities in writing at least 30 days prior to the filing of any
registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans or with respect to corporate reorganizations or other transactions under
Rule 145 of the Securities Act) and will afford each such Holder an opportunity
to include in such registration statement all or part of such Registrable
Securities held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
shall, within 15 days after the above-described notice from the Company, so
notify the Company in writing. Such notice shall state the intended method of
disposition of the Registrable Securities by such Holder. If a Holder decides
not to include all of its Registrable Securities in any registration statement
thereafter filed by the Company, such Holder shall nevertheless continue to have
the right to include any Registrable Securities in any subsequent such
registration statement or registration statements as may be filed by the Company
with respect to offerings of its securities, all upon the terms and conditions
set forth herein.
(a) If the registration statement under which the Company gives
notice under this Section 2.3 is for an underwritten offering, the Company shall
so advise the Holders of
5.
9
Registrable Securities. In such event, the right of any such Holder to be
included in a registration pursuant to this Section 2.3 shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute their Registrable Securities through
such underwriting shall enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting by the
Company. Notwithstanding any other provision of the Agreement, if the
underwriter determines in good faith that marketing factors require a limitation
of the number of shares to be underwritten, the number of shares that may be
included in the underwriting shall be allocated, first, to the Company; second,
to the Holders on a pro rata basis based on the total number of Registrable
Securities held by the Holders; and third, to any stockholder of the Company
(other than a Holder) on a pro rata basis. No such reduction shall reduce the
securities being offered by the Company for its own account to be included in
the registration and underwriting, and in no event shall the amount of
securities of the selling Holders included in the registration be reduced below
33-1/3% of the total amount of securities included in such registration, unless
such offering is the Initial Offering and such registration does not include
shares of any other selling stockholders, in which event any or all of the
Registrable Securities of the Holders may be excluded in accordance with the
immediately preceding sentence. In no event will shares of any other selling
stockholder be included in such registration that would reduce the number of
shares that may be included by Holders without the written consent of Holders of
not less than 66-2/3% of the Registrable Securities proposed to be sold in the
offering.
(b) The Company shall have the right to terminate or withdraw any
registration initiated 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 securities in such registration. The Registration
Expenses of such withdrawn registration shall be borne by the Company in
accordance with Section 2.5 hereof.
2.4 FORM S-3 REGISTRATION. In case the Company shall receive from a Holder
or Holders of at least 25% of Registrable Securities a written request or
requests that the Company effect a registration on Form S-3 (or any successor to
Form S-3) or any similar short-form registration statement and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within 15
days after receipt of such written notice from the Company; provided, however,
that the Company shall not be obligated to effect any such registration,
qualification or compliance pursuant to this Section 2.4:
(i) if Form S-3 (or any successor or similar form) is not
available for such offering by the Holders, or
6.
10
(ii) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than $500,000, or
(iii) if the Company shall furnish to the Holders a
certificate signed by the Chairman of the Board of Directors of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its stockholders
for such Form S-3 Registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than 90 days after receipt of the request of
the Holder or Holders under this Section 2.4; provided, that such right to delay
a request shall be exercised by the Company not more than twice in any one-year
period, or
(iv) if the Company has, within the 12-month period preceding
the date of such request, already effected two registrations on Form S-3 for the
Holders pursuant to this Section 2.4, or
(v) in any particular jurisdiction in which the Company would
be required to qualify to do business or to execute a general consent to service
of process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. Registrations effected pursuant to this
Section 2.4 shall not be counted as demands for registration or registrations
effected pursuant to Sections 2.2 or 2.3, respectively.
2.5 EXPENSES OF REGISTRATION. All such Registration Expenses incurred in
connection with registrations requested pursuant to Section 2.2, Section 2.3 and
Section 2.4 after the first three registrations requested pursuant to each of
these sections shall be paid by the selling Holders pro rata in proportion to
the number of shares sold by each. All other Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 2.2 or any registration under Section 2.3 or Section 2.4 herein shall be
borne by the Company. All Selling Expenses incurred in connection with any
registrations hereunder, shall be borne by the holders of the securities so
registered pro rata on the basis of the number of shares so registered. The
Company shall not, however, be required to pay for expenses of any registration
proceeding begun pursuant to Section 2.2 or 2.4, the request of which has been
subsequently withdrawn by the Initiating Holders unless (a) the withdrawal is
based upon material adverse information concerning the Company of which the
Initiating Holders were not aware at the time of such request or (b) the Holders
of a majority of Registrable Securities agree to forfeit their right to one
requested registration pursuant to Section 2.2 or Section 2.4, as applicable, in
which event such right shall be forfeited by all Holders. If the Holders are
required to pay the Registration Expenses, such expenses shall be borne by the
holders of securities (including Registrable Securities) requesting such
registration in proportion to the number of shares for which registration was
requested. If the Company is required to pay the Registration Expenses of a
withdrawn offering pursuant to clause (a) above, then the Holders shall not
forfeit their rights pursuant to Section 2.2 or Section 2.4 to a demand
registration.
7.
11
2.6 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for up to 90 days or, if earlier, until
the Holder or Holders have completed the distribution related thereto.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use all reasonable 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(s) 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 stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Cause all such Registrable Securities registered hereunder to be
listed on each securities exchange on which similar securities issued by the
Company are then listed.
(h) Furnish, at the request of a majority of the Holders
participating in the registration, on the date that such Registrable Securities
are delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities and (ii) a letter
dated as of such date,
8.
12
from the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering and reasonably satisfactory to a
majority in interest of the Holders requesting registration, addressed to the
underwriters, if any, and if permitted by applicable accounting standards, to
the Holders requesting registration of Registrable Securities.
2.7 TERMINATION OF REGISTRATION RIGHTS. All registration rights granted
under this Section 2 shall terminate and be of no further force and effect seven
years after the date of the Company's Initial Offering. In addition, a Holder's
registration rights shall expire if (i) the Company has completed its Initial
Offering and is subject to the provisions of the Exchange Act, (ii) such Holder
(together with its affiliates, partners and former partners) holds less than 1%
of the Company's outstanding Common Stock (treating all shares of convertible
Preferred Stock on an as converted basis) and (iii) all Registrable Securities
held by such Holder may be sold under Rule 144 during any 90-day period.
2.8 DELAY OF REGISTRATION; FURNISHING INFORMATION.
(a) No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the selling
Holders shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as shall be required to effect the registration of their
Registrable Securities.
2.9 INDEMNIFICATION. In the event any Registrable Securities are included
in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, officers, directors and legal counsel
of each Holder, any underwriter (as defined in the Securities Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Securities Act or the Exchange Act, against any losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation") by the Company: (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law in
connection with the offering covered by such registration statement; and the
Company will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim,
9.
13
damage, liability or action; provided however, that the indemnity agreement
contained in this Section 2.9(a) 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 shall not be
unreasonably withheld, nor shall the Company be liable in any such case for any
such loss, claim, damage, liability or action to the extent that it arises out
of or is based upon a Violation that occurs in reliance upon and in conformity
with written information furnished expressly for use in connection with such
registration by such Holder, partner, officer, director, underwriter or
controlling person of such Holder.
(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 qualifications or compliance is being effected, indemnify and hold
harmless the Company, each of its directors, its officers, and legal counsel and
each person, if any, who controls the Company within the meaning of the
Securities Act, any underwriter and any other Holder selling securities under
such registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder, against any losses, claims,
damages or liabilities (joint or several) to which the Company or any such
director, officer, controlling person, underwriter or other such Holder, or
partner, director, officer or controlling person of such other Holder may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder under an
instrument duly executed by such Holder and stated to be specifically for use in
connection with such registration; and each such Holder will reimburse any legal
or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or other Holder, or partner, officer,
director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; provided, however,
that the indemnity agreement contained in this Section 2.9(b) 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 Holder, which consent
shall not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 2.9 exceed the net proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an 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 inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the
10.
14
indemnified party under this Section 2.9, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by a
Holder hereunder exceed the proceeds from the offering received by such Holder.
(e) The obligations of the Company and Holders under this Section
2.9 shall survive completion of any offering of Registrable Securities in a
registration statement. 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 that 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.
2.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the company to
register Registrable Securities pursuant to this Section 2 may be assigned by a
Holder to a transferee or assignee of Registrable Securities that (i) is a
subsidiary, parent, general partner, limited partner, retired partner or
officer, stockholder or other equity holder of a Holder, (ii) is a Holder's
family member or trust for the benefit of an individual Holder, or (iii)
acquires at least 20% of such Holder's shares of Registrable Securities (as
adjusted for stock splits and combinations); provided, however, (A) the
transferor shall, within ten days after such transfer, furnish to the Company
written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being assigned and
(B) such transferee shall agree to be subject to all restrictions set forth in
this Agreement.
2.11 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 2 may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of at least 66-2/3% of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 2.11 shall be binding upon each Holder and the Company. By acceptance of
any benefits under this Section 2, Holders of Registrable Securities hereby
agree to be bound by the provisions hereunder.
2.12 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the date of this
Agreement, the Company shall not, without the prior written consent of the
Holders of greater
11.
15
than 50% of the Registrable Securities, enter into any agreement with any holder
or prospective holder of any securities of the Company that would grant such
holder registration rights senior to those granted to the Holders hereunder. The
Company shall not, without the written consent of the Holders of greater than
50% of the Registrable Securities, grant any registration rights to any
purchaser of the Company's securities who purchases such securities after the
date of this Agreement unless such purchaser becomes a party to this Agreement.
2.13 "MARKET STAND-OFF" AGREEMENT. If requested by the Company as the
representative of the underwriters of Common Stock (or other securities) of the
Company, each Holder shall not sell or otherwise transfer or dispose of any
Shares or Common Stock (or other securities) of the Company held by each such
Holder (other than those included in the registration) for a period specified by
the representative of the underwriters not to exceed 180 days following the
effective date of a registration statement of the Company filed under the
Securities Act; provided that all officers and directors of the Company enter
into similar agreements.
The obligations described in this Section 2.13 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a SEC Rule 145 transaction on Form S-4 or similar forms that
may be promulgated in the future. The Company may impose stop-transfer
instructions with respect to the shares of Common Stock (or other securities)
subject to the foregoing restriction until the end of said 180-day period.
2.14 RULE 144 REPORTING. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC that may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act;
(c) So long as a Holder owns any Registrable Securities, furnish to
such Holder forthwith upon request: a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 of the Securities
Act, and of 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 as a Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing it to
sell any such securities without registration.
3. OTHER COVENANTS.
3.1 BASIC FINANCIAL INFORMATION AND REPORTING.
(a) The Company will maintain true books and records of account in
which full and correct entries will be made of all its business transactions
pursuant to a system of
12.
16
accounting established and administered in accordance with generally accepted
accounting principles consistently applied, and will set aside on its books all
such proper accruals and reserves as shall be required under generally accepted
accounting principles consistently applied.
(b) As soon as practicable after the end of each fiscal year of the
Company, and in any event within 120 days thereafter, the Company will furnish
each Investor owning and/or having the right to acquire, together with its
affiliates, not less than 300,000 shares of Registrable Securities (in each case
as adjusted for stock splits and combinations) (a "Major Investor") a
consolidated balance sheet of the Company, as at the end of such fiscal year,
and a consolidated statement of income and a consolidated statement of cash
flows of the Company, for such year, all prepared in accordance with generally
accepted accounting principles consistently applied and setting forth in each
case in comparative form the figures for the previous fiscal year, all in
reasonable detail. Such financial statements shall be accompanied by a report
and opinion thereon by independent public accountants of national standing
selected by the Company's Board of Directors.
(c) The Company will furnish each Major Investor, as soon as
practicable after the end of the first, second and third quarterly accounting
periods in each fiscal year of the Company, and in any event within 45 days
thereafter, a consolidated balance sheet of the Company as of the end of each
such quarterly period, and a consolidated statement of income and a consolidated
statement of cash flows of the Company for such period and for the current
fiscal year to date, prepared in accordance with generally accepted accounting
principles, with the exception that no notes need be attached to such statements
and year-end audit adjustments may not have been made.
(d) The Company will furnish each such Major Investor (i) at least
30 days prior to the beginning of each fiscal year an annual budget and
operating plans for such fiscal year (and as soon as available, any subsequent
revisions thereto); (ii) promptly after the Company's receipt thereof, each
"management letter" provided to the Company by the Company's independent public
accountants; and (iii) as soon as practicable after the end of each month, and
in any event within 20 days thereafter, a consolidated balance sheet of the
Company as of the end of each such month, and a consolidated statement of income
and a consolidated statement of cash flows of the Company for such month and for
the current fiscal year to date, including a comparison to plan figures for such
period, prepared in accordance with generally accepted accounting principles
consistently applied, with the exception that no notes need be attached to such
statements and year-end audit adjustments may not have been made.
3.2 INSPECTION RIGHTS. Each Investor shall have the right to visit and
inspect any of the properties of the Company or any of its subsidiaries, and to
discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, and to review such information as is reasonably
requested all at such reasonable times and as often as may be reasonably
requested; provided, however, that the Company shall not be obligated under this
Section 3.2 with respect to a competitor of the Company or with respect to
information that the Board of Directors determines in good faith is confidential
and should not, therefore, be disclosed.
3.3 CONFIDENTIALITY OF RECORDS.
13.
17
(a) Each Investor agrees not to use Confidential Information (as
hereinafter defined) of the Company for its own use or for any purpose except to
evaluate and enforce its equity investment in the Company. Each Investor shall
undertake to treat such Confidential Information in a manner consistent with the
treatment of its own information of such proprietary nature and agrees that it
shall protect the confidentiality of and use reasonable best efforts to prevent
disclosure of the Confidential Information to prevent it from falling into the
public domain or the possession of unauthorized persons. Each transferee of any
Investor who receives Confidential Information shall agree to be bound by such
provisions. For purposes of this Section, "Confidential Information" means any
information, technical data or know-how, including, but not limited to, the
Company's research, products, software, services, development, inventions,
processes, designs, drawings, engineering, marketing, or finances, that is
disclosed by the Company either directly or indirectly in writing, orally or by
drawings or inspection of parts or equipment and, if in written form, is stamped
"Confidential" or "Proprietary" or, if disclosed orally, is promptly confirmed
in writing to be Confidential Information.
(b) Confidential Information does not include information, technical
data or know-how that (i) is in the Investor's possession at the time of
disclosure as shown by Investor's files and records immediately prior to the
time of disclosure; (ii) before or after it has been disclosed to the Investor,
it is part of the public knowledge or literature, not as a result of any action
or inaction of the Investor; (iii) is disclosed to an Investor on a
non-confidential basis by a third party having a legal right to such
information; (iv) is independently developed by Investor, as properly documented
by the Investor; or (v) is approved for release by written authorization of
Company. The provisions of this Section shall not apply (i) to the extent that
an Investor is required to disclose Confidential Information pursuant to any
law, statute, rule or regulation or any order of any court or jurisdiction
process or pursuant to any direction, request or requirement (whether or not
having the force of law but if not having the force of law being of a type with
which institutional investors in the relevant jurisdiction are accustomed to
comply) of any self-regulating organization or any governmental, fiscal,
monetary or other authority; (ii) to the disclosure of Confidential Information
to an Investor's employees, counsel, accountants or other professional advisors;
(iii) to the extent that an Investor needs to disclose Confidential Information
for the protection of any of such Investor's rights or interest against the
Company, whether under this Agreement or otherwise; or (iv) to the disclosure of
Confidential Information to a prospective transferee of securities that agrees
to be bound by the provisions of this Section in connection with the receipt of
such Confidential Information.
3.4 RESERVATION OF COMMON STOCK. The Company will at all times reserve and
keep available, solely for issuance and delivery upon the conversion of the
Preferred Stock and the exercise of the Investor Warrants, all Common Stock
issuable from time to time upon such conversion or exercise. If at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of the Preferred Stock and the exercise of the Investor
Warrants, the Company shall promptly take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock as
appropriate.
3.5 STOCK VESTING. Unless otherwise approved by the Board of Directors,
all stock options and other stock equivalents issued after the date of this
Agreement to employees, directors, consultants and other service providers shall
be subject to vesting as follows: (i) 25% of such stock shall vest at the end of
the first year following the later of the date of issuance or such person's
services commencement date with the Company, and (ii) 75% of such stock shall
14.
18
vest monthly over the remaining three years. With respect to any shares of stock
purchased by any such person, the Company's repurchase option shall provide that
upon such person's termination of employment or service with the Company, with
or without cause, the Company or its assignee (to the extent permissible under
applicable securities laws and other laws) shall have the option to purchase at
cost any unvested shares of stock held by such person.
3.6 KEY MAN INSURANCE. Subject to the approval of the Board of Directors,
the Company will use its best efforts to obtain and maintain in full force and
effect term life insurance for key service providers and in the amounts
determined by the Board of Directors.
3.7 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. The Company shall
require all employees to execute and deliver a Proprietary Information and
Inventions Agreement substantially in the form provided to counsel to the New
Investors.
3.8 USE OF PROCEEDS. The Company shall use the proceeds from the sale of
the Series E Preferred Stock sold pursuant to the Purchase Agreement solely as
set forth therein.
3.9 "MARKET STAND-OFF" AGREEMENTS. The Company shall require all
purchasers of its capital stock to agree, if so requested by the Company or any
underwriter's representative in connection with the Initial Offering, not to
sell or otherwise transfer any securities of the Company during a period of up
to 180 days following the effective date of the registration statement of the
Company filed under the Securities Act with respect to the Initial Offering.
3.10 INDEMNIFICATION. The Company has and will maintain, for so long as
any representative of the Holders is a member of the Board of Directors,
provisions in its Certificate of Incorporation and Bylaws that allow it to
indemnify its officers and directors to the fullest extent permitted by Delaware
law.
3.11 ASSIGNMENT OF REPURCHASE RIGHTS AND COMPANY RIGHT OF FIRST REFUSAL.
At all times prior to the closing of the Initial Offering the Company shall
maintain in effect with respect to all outstanding shares of Common Stock a
right of first refusal with respect to any proposed sale or transfer of shares
of Common Stock substantially in the form currently contained in the Company's
Bylaws. If, at any time prior to the closing of the Initial Offering, the
Company elects not to exercise the right of first refusal as to the sale or
transfer of any shares of Common Stock, including without limitation, shares
issued upon exercise of employee stock options or pursuant to any employee
compensation or stock purchase program, the Company shall assign such right of
first refusal pro rata among the Significant Investors (as defined below) as
follows:
(a) Within 10 days following the receipt of a notice from a holder
of Common Stock (a "Transferring Holder") advising the Company of such holder's
desire to transfer any shares of Common Stock subject to the Company's right of
first refusal (an "Offer"), the Company shall make an election as to whether it
chooses to exercise its right to purchase such shares, and if the Company elects
not to purchase such shares it shall immediately deliver written notice (a
"Notice of Offer") of its election not to exercise its right of first refusal
and of its assignment of such right to each Investor owning and/or having the
right to acquire, together with its affiliates, not less than 150,000 shares of
Registrable Securities (in each case as adjusted for stock splits and
combinations) (a "Significant Investor"). Each Significant Investor shall have
the right and option, for a period of 15 days after delivery of the Notice of
Offer to the
15.
19
Investor, to accept, at the purchase price and on the terms specified in the
Notice of Offer (1) such Significant Investor's Proportionate Percentage, as
defined below, of the securities offered pursuant to the Offer and (2) any of
the securities offered pursuant to the Offer that are not accepted by the other
Significant Investors, in which case such securities not deemed to have been
offered to and accepted by the Significant Investors shall be deemed to have
been offered to and accepted by the Significant Investors that exercised their
option under this clause (2), pro rata in accordance with their respective
Proportionate Percentages (excluding, for the purpose of such calculation, any
Significant Investor not exercising its option under this clause (2)).
Acceptance of the Offer shall be made by each Significant Investor by the
delivery of a written notice to the Company and the Transferring Holder within
said 15-day period, which notice shall indicate such Significant Investor's
election to exercise its rights under this Section 3.12 and shall specify the
number of securities that such Significant Investor wishes to purchase and
whether such Significant Investor wishes to exercise its rights under clause (2)
above.
(b) Transfers of securities under the terms of this Section 3.12
shall be made at the offices of the Company on a mutually satisfactory business
day within 15 days after the expiration of the applicable time periods. Delivery
of certificates or other instruments evidencing such securities duly endorsed
for transfer shall be made on such date against payment of the purchase price
therefor.
(c) If effective acceptances are not received pursuant to Section
3.12(a) with respect to all securities offered for sale pursuant to the
aforesaid Notice of Offer, then the Transferring Holder may transfer to a third
party all of the securities so offered for sale or any part thereof at the price
and on the identical terms stated in the original Notice of Offer and in
accordance with the Bylaws.
(d) For purposes of this Section 3.12 only, the term "Proportionate
Percentage" shall mean, with respect to a Significant Investor, a fraction
(expressed as a percentage), the numerator of which is equal to the sum of the
total number of shares held by such Significant Investor (on an as-if-converted
to Common Stock basis) and the denominator of which is the total number of
shares held by all Significant Investors (on an as-if-converted to Common Stock
basis).
3.12 BOARD OF DIRECTORS. The Company will use its commercially reasonable
efforts to cause its Board of Directors to meet at least quarterly and, for so
long as a representative of Crosslink Omega Ventures III, L.P. (and its
affiliates) is on the Board of Directors, to cause such representative to remain
on the Audit Committee of the Board of Directors.
3.13 QUALIFIED SMALL BUSINESS STOCK. The Company shall submit to its
stockholders (including the Investors) and to the Internal Revenue Service any
reports that may be required under Section 1202(d)(1)(c) of the Code and any
related Treasury Regulations. In addition, within ten days after any Investor
has delivered to the Company a written request therefor, the Company shall
deliver to such Investor a written statement informing the Investor whether such
Investor's interest in the Company constitutes "qualified small business stock"
as defined in Section 1202(c) of the Code. The Company's obligation to furnish a
written statement pursuant to this Section 3.14 shall continue notwithstanding
the fact that a class of the Company's stock may be traded on an established
securities market.
16.
20
3.14 VISITATION RIGHTS. The Company shall allow one representative
designated by Menlo Ventures VII, L.P., for so long as it owns any Shares, to
attend all meetings of the Company's board of directors in a nonvoting capacity
and, in connection therewith, the Company shall give such representative copies
of all notices, minutes, consents and other materials, financial or otherwise,
that the Company provides to its board of directors, subject to confidentiality
and other limitations set forth in any management rights agreement between the
Company and Menlo Ventures VII, L.P.
3.15 TERMINATION OF COVENANTS. All covenants of the Company contained in
Section 3 of this Agreement shall expire and terminate as to each Investor on
the effective date of the registration statement pertaining to the Initial
Offering.
4. RIGHTS OF FIRST REFUSAL.
4.1 SUBSEQUENT OFFERINGS. Each Significant Investor shall have a right of
first refusal to purchase its pro rata share of all Equity Securities, as
defined below, that the Company may, from time to time, propose to sell and
issue after the date of this Agreement, other than the Equity Securities
excluded by Section 4.6 hereof. Each Significant Investor's pro rata share is
equal to the ratio of (A) the number of shares of the Company's Common Stock
(including all shares of Common Stock issued or issuable upon conversion of the
Shares, Investor Warrants or other convertible instruments) that such Investor
is deemed to be a holder of immediately prior to the issuance of such Equity
Securities to (B) the total number of shares of the Company's outstanding Common
Stock (including all shares of Common Stock issued or issuable upon conversion
of the Shares, the Investor Warrants or other convertible instruments)
immediately prior to the issuance of the Equity Securities and assuming exercise
of all outstanding options and warrants to purchase Securities of the Company.
The term "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.
4.2 EXERCISE OF RIGHTS. If the Company proposes to issue any Equity
Securities, it shall give each Significant Investor written notice of its
intention, describing the Equity Securities, the price and the terms and
conditions upon which the Company proposes to issue the same. Each Significant
Investor shall have 15 days from the giving of such notice to agree to purchase
its pro rata share of the Equity Securities for the price and upon the terms and
conditions specified in the notice by giving written notice to the Company and
stating therein the quantity of Equity Securities to be purchased.
Notwithstanding the foregoing, the Company shall not be required to offer or
sell such Equity Securities to any Significant Investor who would cause the
Company to be in violation of applicable federal securities laws by virtue of
such offer or sale. The closing of any purchase and sale hereunder shall take
place concurrently with, or as soon as practicable after, the closing of the
sale of Equity Securities to third parties.
4.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If not all of the
Significant Investors elect to purchase their pro rata share of the Equity
Securities, then the Company shall promptly notify in writing the Significant
Investors who do so elect and shall offer such Significant Investors the right
to acquire such unsubscribed shares. Such Significant Investors
17.
21
shall have five days after receipt of such notice to notify the Company of their
election to purchase all or a portion thereof of the unsubscribed shares. If
such Significant Investors fail to exercise in full the rights of first refusal,
the Company shall have 90 days thereafter to sell the Equity Securities in
respect of which the Significant Investor's rights were not exercised, at a
price and upon general terms and conditions materially no more favorable to the
purchasers thereof than specified in the Company's notice to the Significant
Investors pursuant to Section 4.2 hereof. If the Company has not sold such
Equity Securities within 60 days of the notice provided pursuant to Section 4.2,
the Company shall not thereafter issue or sell any Equity Securities, without
first offering such securities to the Significant Investors in the manner
provided above.
4.4 TERMINATION OF RIGHTS OF FIRST REFUSAL. The rights of first refusal
established by this Section 4 shall terminate upon the effective date of the
registration statement pertaining to a public offering that results in the
automatic conversion of the Shares into Common Stock and not apply to such
public offering.
4.5 TRANSFER OF RIGHTS OF FIRST REFUSAL. The rights of first refusal of
each Significant Investor under this Section 4 may be transferred to the same
parties, subject to the same restrictions as any transfer of registration rights
pursuant to Section 2.10.
4.6 EXCLUDED SECURITIES. The rights of first refusal established by this
Section 4 shall have no application to any of the following Equity Securities:
(a) Option Pool Shares, as defined in Article IV, Section
G.4.(j)(iv), of the Company's Amended and Restated Certificate of Incorporation;
(b) stock issued pursuant to any rights, agreements, options and
warrants outstanding as of the date of this Agreement;
(c) stock issued pursuant to any rights, agreements, options and
warrants granted after the date of this Agreement, provided that the rights of
first refusal established by this Section 4 applied with respect to the initial
sale or grant by the Company of such rights, agreements, warrants or options;
(d) any Equity Securities issued as consideration in a merger,
consolidation, acquisition or similar business combination approved by the
Company's Board of Directors;
(e) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
(f) shares of Common Stock issued upon conversion of the Shares or
exercise of the Investor Warrants or Financing Warrants;
(g) any Equity Securities issued pursuant to any equipment leasing
arrangement or bank financing approved by the Board of Directors; or
(h) the Investor Notes or the Series E Preferred Stock issuable upon
exchange of the Investor Notes.
18.
22
5. MISCELLANEOUS.
5.1 GOVERNING LAW. This Agreement is intended to take effect as a sealed
instrument and shall be governed by and construed under the laws of the State of
Massachusetts as applied to agreements among Massachusetts residents entered
into and to be performed entirely within Massachusetts.
5.2 SURVIVAL. The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by any Holder and the closing
of the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
5.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly 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
and shall inure to the benefit of and be enforceable by each person who shall be
a holder of Registrable Securities from time to time; provided, however, that
prior to the receipt by the Company of adequate written notice of the transfer
of any Registrable Securities specifying the full name and address of the
transferee, the Company may deem and treat the person listed as the holder of
such shares in its records as the absolute owner and holder of such shares for
all purposes, including the payment of dividends or any redemption price.
5.4 SEVERABILITY. In case any provision of the Agreement shall be invalid,
illegal, or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
5.5 AMENDMENT AND WAIVER.
(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of at least 66-2/3% of the Registrable Securities.
(b) Except as otherwise expressly provided, the obligations of the
Company and the rights of the Holders under this Agreement may be waived only
with the written consent of the holders of at least 66-2/3% of the Registrable
Securities.
(c) Notwithstanding Section 5.5(a), but subject to the other
provisions of this Agreement, this Agreement may be amended with only the
written consent of the Company to include additional purchasers of Shares as
"Investors," "Holders" and parties hereto.
5.6 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such
19.
23
Holder's part 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, by law, or otherwise
afforded to Holders, shall be cumulative and not alternative.
5.7 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (iii) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (iv) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the party
to be notified at the address as set forth on the signature pages hereof or
Exhibit A hereto or at such other address as such party may designate by ten
days advance written notice to the other parties hereto.
5.8 ATTORNEYS' FEES. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
5.9 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
5.10 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.
20.
24
IN WITNESS WHEREOF, the parties hereto have executed this Fourth Amended
and Restated Investors' Rights Agreement as of the date set forth in the first
paragraph hereof.
COMPANY: INVESTORS:
ELOQUENT, INC. OMEGA BAYVIEW, L.L.C.
By: By:
-------------------------------- ----------------------------------
Xxxxxxx Xxxxxxxxx
Chief Executive Officer ----------------------------------
and President Authorized Signatory
CROSSLINK CROSSOVER FUND II, L.P.
By: Crossover Investment Management,
L.L.C.
Its General Partner
By:
----------------------------------
Its:
-----------------------------
CROSSLINK CROSSOVER FUND III, L.P.
By: Crossover Fund III Management,
L.L.C.
Its General Partner
By:
----------------------------------
Xxxxxxx X. Xxxxx
Managing Member
CROSSLINK OMEGA VENTURES III, L.L.C.
By: Crosslink Omega III Holdings,
L.L.C.
Its Authorized Signatory
By:
----------------------------------
Authorized Signatory
CROSSLINK OFFSHORE OMEGA VENTURES III,
A CAYMAN ISLANDS TRUST
By: Crosslink Omega III Holdings,
L.L.C.
Its Authorized Signatory
By:
----------------------------------
----------------------------------
Authorized Signatory
FOURTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
25
MENLO VENTURES VII, L.P.
By: MV Management VII, L.L.C.
Its General Partner
By:
----------------------------------
Xxxxx X. Xxxx
Its Managing Member
MENLO ENTREPRENEURS FUND VII, L.P.
By: MC Management VII, L.L.C.
Its General Partner
By:
----------------------------------
Xxxxx X. Xxxx
Its Managing Member
ONSET ENTERPRISE ASSOCIATES II, L.P.
By: OEA II Management, L.P.
Its General Partner
By:
----------------------------------
Xxxxx Xxxxxxxx
Its General Partner
ONSET ENTERPRISE ASSOCIATES III, L.P.
By: OEA III Management, LLC
Its General Partner
By:
----------------------------------
Xxxxx Xxxxxxxx
Its Managing Director
FOURTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
26
FOUNDATION CAPITAL, L.P.
By: Foundation Capital Management, LLC
Its General Partner
By:
----------------------------------
----------------------------------
Its Manager
FOUNDATION CAPITAL ENTREPRENEURS FUND,
LLC
By: Foundation Capital Management, LLC
Its Manager
By:
----------------------------------
----------------------------------
Its Manager
LIGHTHOUSE CAPITAL PARTNERS, L.P.
LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By:
----------------------------------
Its:
----------------------------------
IMPERIAL BANCORP
By:
----------------------------------
Its:
----------------------------------
TBCC FUNDING TRUST II
By:
----------------------------------
Its:
----------------------------------
FOURTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
27
---------------------------------------
XXXXXXX XXXXX
---------------------------------------
XXXXX X. XXXXXX
---------------------------------------
XXXXXXX X. XXXXX
XXXXXXX X. SAUCY AND XXXXXXXX X. SAUCY,
TRUSTEES, THE SAUCY FAMILY TRUST DATED
10/30/95
---------------------------------------
Xxxxxxx X. Saucy, Trustee
XXXXXXX X. AND XXXX X. XXXXX 1990
FAMILY TRUST
---------------------------------------
Xxxxxxx X. Saucy, Trustee
GMN INVESTORS II, L.P.
By: GMN Investors LLC
Its General Partner
By:
----------------------------------
Xxxxx X. Xxxxxx
Managing Director
JENSTAR PARTNERS I, LLC
By:
----------------------------------
Xxxxxx X. Xxxxxx
Managing Member
FOURTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
28
THE MANUFACTURERS LIFE INSURANCE
COMPANY (U.S.A.)
By:
----------------------------------
Xxxxxxx X. Xxxxxxx
XXXXX XXXXXXXX & COMPANY
By:
----------------------------------
Xxxxx X. Xxxxxxxx
President
TRANSNATIONAL GROUP SERVICES LLC
By:
----------------------------------
Xxxxx Xxxxxx
Vice Chairman
CAMBRIDGE TECHNOLOGY CAPITAL FUND, L.P.
By: Cambridge Technology GPLP, L.P.
Its General Partner
By: Cambridge Technology CGP, Inc.
Its General Partner
By:
----------------------------------
Xxxxx Xxxxxxxxx
Managing Director
EXETER CAPITAL PARTNERS IV, L.P.
By: Exeter IV Advisors, L.P.
Its General Partner
By: Exeter IV Advisors, Inc.
Its General Partner
By:
----------------------------------
Xxxx X. Xxxxxxxxx
Vice President
FOURTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
29
THE XXXXXXXXX FAMILY TRUST
By:
----------------------------------
Xxxxx Xxxxxxxxx, Trustee
XXXXXXXX ELOQUENT, L.P.
By: Spring Creek Partners
Its General Partner
By:
----------------------------------
Xxxxx X. Xxxx
General Partner
---------------------------------------
XXXXXXX XXXXXXX
---------------------------------------
XXXX XXXXXXX
---------------------------------------
XXXXX XXXXXXX
FOURTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
30
EXHIBIT A
AMENDED SCHEDULE OF INVESTORS
Menlo Ventures VII, L.P. and
Menlo Entrepreneurs Fund VII, L.P.
0000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Attn: Xxxxx Xxxx
Onset Enterprise Associates II, L.P. and
Onset Enterprise Associates III, L.P.
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxxx
Foundation Capital, L.P. and
Foundation Capital Entrepreneurs Fund, LLC
00 Xxxxxx Xxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
Attn: Xxxxxxx Xxxxx
Lighthouse Capital Partners, L.P. and
Lighthouse Capital Partners II, L.P.
000 Xxxxxx Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: Xxxx Xxxxxxxxxxxx
TBCC Funding Trust II
00000 Xxxxxxx Xxxx.
Xxxxx 0000
Xxxxxxx Xxxx, XX 00000
Attn: Ian Sutnider
Imperial Bancorp
0000 X. Xx Xxxxxxx Xxxx.
Xxxxxxxxx, XX 00000
Attn: General Counsel
Xxxxxxx Xxxxx
000 Xxxx Xxxxxx Xxxx
Xxxxxx Xxxx, XX 00000
Xxxxx X. Xxxxxx
00 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Xxxxxxx X. Xxxxx
000 Xxxxx Xxxxx
Xxx Xxxxxx, XX 00000
Xxxxxxx X. Saucy and Xxxxxxxx X. Saucy,
Trustees, The Saucy Family Trust Dated 10/30/95
00 Xxxxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Xxxxxxx X. and Xxxx X. Xxxxx 1990 Family Trust
000 Xxx Xxxxxxx Xxxxx
Xxxx Xxxxx, XX 00000
Omega Bayview, L.L.C.,
Crosslink Crossover Fund II, L.P.,
Crosslink Crossover Fund III, L.P.,
Crosslink Omega Ventures III, L.L.C. and
Crosslink Offshore Omega Ventures III, a Cayman Islands trust
x/x Xxxxxxxxx Xxxxxxx, Inc.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxx
GMN Investors II, L.P.
00 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx
JenStar Partners I, LLC
0 Xxxxx Xxxxxxx Xxxxx
Xxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
1.
31
MF Private Capital, Inc.
00 Xxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx
(with a copy to:
Xxxxx Peabody LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxx X. Xxxxx, P.C.)
Xxxxx Xxxxxxxx & Company
0 Xxxxxx Xxx
Xxxxx 000-X
Xxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxx
(with a copy to:
GATX Capital
Four Xxxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxx)
TransNational Group Services LLC
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxx Xxxxxx
The Xxxxxxxxx Family Trust
41 Dos Posos
Xxxxxx, XX 00000
Attn: Xxxxx Xxxxxxxxx, Trustee
Xxxxxxxx Eloquent, L.P.
c/o Spring Creek Partners
000 Xxxxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Attn: Xxxxx Xxxx
Exeter Capital Partners IV, L.P.
00 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx Xxxxxxxxx
Cambridge Technology Capital Fund I L.P.
00000 Xx Xxxxxx Xxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Attn: XxXxx Xxxxxxxxx
Xxxxxxx X. Xxxxxxx
000 Xxxxxxxxxx Xxx
Xxxxxxx Xxxxx, XX 00000
Xxxxx Xxxxxxx
00000 00xx Xxxxxx Xxxxx
Xxxxxxxx, XX 00000
Xxxx Xxxxxxx
0000X Xxxxxx Xxx.
Xxxxx Xxxx, XX 00000
2.
