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EXHIBIT 10.7
▇▇▇▇▇▇.▇▇▇, INC.
INVESTOR RIGHTS AGREEMENT
JUNE 21, 1996
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TABLE OF CONTENTS
Page
SECTION 1. Restrictions on Transferability, Registration Rights . . . . . . . . . . . . . . . 1
1.1 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Restrictive Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Notice of Proposed Transfers . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5 Requested Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.6 Company Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.7 Registration on Form S-3 . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.8 Expenses of Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.9 Registration Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.10 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.11 Information by Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.12 Rule 144 Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.13 Transfer of Registration Rights . . . . . . . . . . . . . . . . . . . . . . . 11
1.14 Standoff Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.15 Termination of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2. Affirmative Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . . 11
2.1 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.2 Operating Plan and Budget . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.3 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.4 Assignment of Rights to Financial Information . . . . . . . . . . . . . . . . 12
2.5 Proprietary Information Agreement . . . . . . . . . . . . . . . . . . . . . . 12
2.6 Termination of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.7 Right of First Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.8 Initial Public Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.1 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.2 Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.7 Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.8 Effect of Amendment or Waiver . . . . . . . . . . . . . . . . . . . . . . . . 14
3.9 Rights of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.10 Delays or Omissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
EXHIBIT A Schedule of Investors
EXHIBIT B Restrictive Legend
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INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (the "Agreement") is entered into as of
the 21st day of June, 1996, by and among ▇▇▇▇▇▇.▇▇▇, Inc., a Delaware
corporation (the "Company"), the persons set forth on the Schedule of Investors
attached hereto as Exhibit A (the "Investors") and, with respect to Section
1.6, Section 2.6 and Section 2.8, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
RECITALS
The Company and the Investors are entering into a Series A Preferred
Stock Purchase Agreement (the "Series A Agreement) of even date herewith,
pursuant to which the Company shall sell, and the Investors shall acquire,
shares of the Company's Series A Preferred Stock (the "Series A Preferred").
The shares of Series A Preferred are referred to collectively herein as the
"Shares."
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties agree as follows:
SECTION 1.
RESTRICTIONS ON TRANSFERABILITY; REGISTRATION RIGHTS
1.1 Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
"Conversion Shares" means the Common Stock issued or issuable
upon conversion of the Shares.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
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.
"Holder" shall mean any Investor holding Registrable
Securities and any person holding Registrable Securities to whom the rights
under this Agreement have been transferred in accordance with Section 1.13
hereof. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ shall be deemed to be a Holder, but only with respect
to a registration effected pursuant to Section 1.6 below.
"Initiating Holders" shall mean any Investors or transferees
of Investors under Section 1.13 hereof who in the aggregate are Holders of not
less than fifty percent (50%) of the Registrable Securities.
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.
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"Registration Expenses" shall mean all expenses incurred by
the Company in complying with Sections 1.5, 1.6 and 1.7 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, 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).
"Registrable Securities" means any Common Stock of the Company
issued or issuable in respect of the Shares or Conversion Shares or other
securities issued or issuable with respect to the Shares or Conversion Shares
upon any stock split, stock dividend, recapitalization, or similar event, or
any Common Stock otherwise issued or issuable with respect to the Shares or
Conversion Shares; provided, however, that shares of Common Stock or other
securities shall only be treated as Registrable Securities if and so long as
they have not been (A) sold to or through a broker or dealer or underwriter in
a public distribution or a public securities transaction, or (B) sold in a
transaction exempt from the registration and prospectus delivery requirements
of the Securities Act under Section 4(1) thereof so that all transfer
restrictions and restrictive legends with respect thereto are removed upon the
consummation of such sale. The Common Stock held by Bezos shall be deemed
Registrable Securities, but only with respect to a registration effected
pursuant to Section 1.6 below, and subject to all limitations therein.
"Restricted Securities" shall mean the securities of the
Company required to bear the legend set forth in Section 1.3 hereof.
"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.
"Selling Expenses" shall mean an underwriting discounts,
selling commissions and stock transfer taxes applicable to the securities
registered by the Holders and all fees and disbursements of counsel for the
Holders (as limited by Section 1.8).
1.2 Restrictions. The Shares and the Conversion Shares shall not
be sold, assigned, transferred or pledged except upon the conditions specified
in this Agreement, which conditions are intended to ensure compliance with the
provisions of the Securities Act. The Investors will cause any proposed
purchaser, assignee, transferee or pledgee of the Shares and the Conversion
Shares to agree to take and hold such securities subject to the provisions and
upon the conditions specified in this Agreement.
1.3 Restrictive Legend. Each certificate representing (i) the
Shares, (ii) the Conversion Shares, and (iii) any other securities issued in
respect of the securities referenced in clauses (i) and (ii) upon any stock
split, stock dividend, recapitalization, merger, consolidation or similar
event, shall (unless otherwise permitted by the provisions of Section 1.4
below) be stamped or otherwise imprinted with a legend in the form of Exhibit B
attached hereto (in addition to any legend required under applicable state
securities laws).
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Each Investor and Holder consents to the Company making a notation on
its records and giving instructions to any transfer agent of the Restricted
Securities in order to implement the restrictions on transfer established in
this Section 1.
1.4 Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities, by acceptance thereof, agrees to comply in
all respects with the provisions of this Section 1. Prior to any proposed
sale, assignment, transfer or pledge of any Restricted Securities, unless there
is in effect a registration statement under the Securities Act covering the
proposed transfer, the holder thereof shall give written notice to the Company
of such holder's intention to effect such transfer, sale, assignment or pledge.
Each such notice shall describe the manner and circumstances of the proposed
transfer, sale, assignment or pledge in sufficient detail, and shall be
accompanied at such holder's expense by either (i) a written opinion of legal
counsel who shall, and whose legal opinion shall be, reasonably satisfactory to
the Company, addressed to the Company, to the effect that the proposed transfer
of the Restricted Securities may be effected without registration under the
Securities Act, or (ii) a "no action" letter from the Commission to the effect
that the transfer of such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with respect
thereto, or (iii) any other evidence reasonably satisfactory to counsel to the
Company, whereupon the holder of such Restricted Securities shall be entitled
to transfer such Restricted Securities in accordance with the terms of the
notice delivered by the holder to the Company. The Company will not require
such a legal opinion or "no action" letter (a) in any transaction in compliance
with Rule 144 or (b) in any transaction in which an Investor which is a
partnership distributes Restricted Securities solely to partners thereof for no
additional consideration. Each certificate evidencing the Restricted
Securities transferred as above provided shall bear, except if such transfer is
made pursuant to Rule 144, the appropriate restrictive legend set forth in
Section 1.3 above, except that such certificate shall not bear such restrictive
legend if, in the opinion of counsel for such holder and the Company, such
legend is not required in order to establish compliance with any provisions of
the Securities Act.
1.5 Requested Registration.
(a) Request for Registration. In case the Company shall
receive from Initiating Holders a written request that the Company effect any
registration, qualification or compliance with respect to the Registrable
Securities, 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 commercially
reasonable efforts to effect such registration, qualification or compliance
(including, without limitation, the execution of an undertaking to file
post-effective amendments, 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 thirty
(30) days after receipt of such written notice from the Company; provided,
however, that
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the Company shall not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Section 1.5;
(1) 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;
(2) Prior to the earlier of (a) one year
following the effective date of the first public offering of the Common Stock
of the Company to the general public which is effected pursuant to a
registration statement filed with and declared effective by, the Commission
under the Securities Act (the "Initial Public Offering") or (b) the third
anniversary of the date of this Agreement;
(3) Unless not less than one half of the
Registrable Securities then outstanding are included in the request for
registration pursuant to Section 1.5(a) above;
(4) After (i) the Company has effected
two (2) such registrations pursuant to this subparagraph 1.5(a) and each such
registration has been declared or ordered effective and remained effective for
the period specified in Section 1.9(a) of this Agreement or (ii) after seven
(7) years after the date hereof or five years after the closing of the
Company's Initial Public Offering, whichever is earlier; or
(5) 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 shareholders for a registration statement to
be filed in the near future, then the Company's obligation to use its
commercially reasonable efforts to register, qualify or comply under this
Section 1.5 shall be deferred for a period not to exceed one hundred and twenty
(120) days from the date of receipt of written request from the Initiating
Holders; provided, however, that the Company may not utilize this right more
than once in any twelve (12) month period.
Subject to the foregoing clauses (1) through (5), 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 Section 1.5 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 1.5(a)(i). The right of any Holder to registration
pursuant to Section 1.5 shall be conditioned upon such Holder's participation
in the underwriting arrangements required by this Section 1.5 and the inclusion
of such Holder's Registrable Securities in the underwriting to the extent
requested, to the went 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 the Company (which managing underwriter shall be reasonably
acceptable to a majority in interest of the Initiating Holders).
Notwithstanding any other provision of this Section 1.5, if the managing
underwriter determines that marketing factors require a
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limitation of the number of shares to be underwritten, then the Company shall
so advise all Holders of Registrable Securities in writing 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, provided,
however, that the number of shares of Registrable Securities to be included in
such underwriting shall not be reduced unless all other securities are first
entirely excluded from the underwriting. 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 Registrable Securities shall not be
transferred in a public distribution prior to one hundred and eighty (180) days
after the effective date of such registration.
1.6 Company Registration.
(a) Notice of Registration. If at any time or from time
to time prior to the seventh anniversary of the date of this Agreement or the
fifth anniversary of the Company's Initial Public Offering, whichever is
earlier, 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, or (ii) a
registration relating solely to a Commission Rule 145 transaction, the Company
will (but not more than five (5) times pursuant to this Section 1.6(a)):
(i) promptly give to each Holder written notice
thereof; and 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 fifteen (15) days after receipt of such written notice from the Company
by any Holder, but only to the extent that such inclusion will not diminish the
number of securities included by holders of the Company's securities who have
demanded such registration pursuant to Section 1.5 hereof.
(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 1.6(a)(i). In such event, the right of any
Holder to registration pursuant to Section 1.6 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of Registrable
Securities in the underwriting, to the extent requested, 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. Notwithstanding any other provision of
this Section 1.6, if the managing underwriter determines that marketing factors
require a limitation of the number of shares to be underwritten, the managing
underwriter may limit the number of Registrable Securities to be included in
the registration and underwriting (up to the exclusion of all Registrable
Securities in the event of the Company's initial public offering), on a pro
rata basis based on the total number of securities (including, without
limitation, Registrable Securities) entitled to registration
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pursuant to registration rights granted to the participating Holders by the
Company; provided, however, that if such offering is not the initial offering
of shares to the public, no such reduction may reduce the number of securities
being sold by the Holders to less than fifteen percent (15%) of the shares
being sold in such offering. 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 or other holder to the nearest 100
shares. If any Holder or other holder disapproves of the terms of any such
underwriting, he or she may elect to withdraw therefrom by written notice to
the Company and the managing underwriter. Any securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration, and shall not
be transferred in a public distribution prior to one hundred twenty (120) days
after the effective date of the registration statement relating thereto.
(c) Right to Terminate Registration. The Company shall
have the right to terminate or withdraw any registration initiated by it under
this Section 1.6 prior to the effectiveness of such registration, whether or
not any Holder has elected to include securities in such registration.
1.7 Registration on Form S-3.
(a) Notwithstanding the restrictions of Section 1.6
above, if any Holder or Holders of not less than twenty percent (20%) of the
Registrable Securities requests 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 $1,000,000, 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 commercially reasonable efforts to cause such Registrable Securities to be
registered for the offering on such form. The Company will (i) promptly give
written notice of the proposed registration to all other Holders, and (ii) as
soon as practicable, use its commercially reasonable efforts to effect such
registration (including, without limitation, the execution of an undertaking to
file post-effective amendments, 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 fifteen (15) days after receipt of such written notice from the Company.
The substantive provisions of Section 1.5(b) shall be applicable to each
registration initiated under this Section 1.7.
(b) Notwithstanding the foregoing, the Company shall not
be obligated to take any action pursuant to this Section 1.7: (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)
during the period starting with the date sixty (60) days prior to the Company's
estimated date of filing of and ending on the date six (6) months immediately
following the effective date of, a registration statement (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), provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; (iii) after the Company has
effected three (3) such registrations pursuant to this Section 1.7 and each
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such registration has been declared or ordered effective and has remained
effective for the period specified in Section 1.9(a) of this Agreement; (iv)
after seven (7) years after the date of this Agreement or five (5) years after
the closing of the Company's Initial Public Offering, whichever is earlier; or
(v) 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 its
shareholders 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 one hundred twenty (120)
days from the receipt of the request to file such registration by such Holder
or Holders; provided, however, that the Company may not utilize this right more
than once in any twelve (12) month period.
1.8 Expenses of Registration. All Registration Expenses incurred
in connection with any registration pursuant to Sections 1.5 and 1.6 and the
reasonable cost of one special legal counsel to represent all of the Holders
together in any such registration shall be borne by the Company. All
Registration Expenses incurred in connection with any registration pursuant to
Section 1.7 of this Agreement and the cost of any counsel for the Holders in
any such registration shall be borne by the Holders pro rata according to the
number of Registrable Securities included by them in such registration. If a
registration proceeding is begun upon the request of Initiating Holders
pursuant to Section 1.5, but such request is subsequently withdrawn, then the
Holders of Registrable Securities to have been registered may either: (i) bear
all Registration Expenses of such proceeding, pro rata on the basis of the
number of shares to have been registered, in which case the Company shall be
deemed not to have effected a registration pursuant to subparagraph 1.5(a) of
this Agreement; or (ii) require the Company to bear all Registration Expenses
of such proceeding, in which case the Company shall be deemed to have effected
a registration pursuant to subparagraph 1.5(a) of this Agreement.
Notwithstanding the foregoing however, if at the time of the withdrawal, the
Holders have learned of a material adverse change in the condition, business or
prospects of the Company from that known to the Holders at the time of their
request, then the Holders shall not be required to pay any of said Registration
Expenses. In such case, the Company shall be deemed not to have effected a
registration pursuant to subparagraph 1.5(a) of this Agreement. Unless
otherwise stated, all other Selling Expenses relating to securities registered
on behalf of the Holders shall be borne by the Holders of the registered
securities included in such registration pro rata on the basis of the number of
shares so registered.
1.9 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, qualification and compliance and as to the completion
thereof. 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 until the
distribution described in the registration statement has been completed, but in
no event longer than sixty (60) days; and
(b) 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 Act with respect to the disposition of all securities
covered by such registration statement.
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(c) Furnish to the Holders participating in such
registration and to the underwriters, if any, 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.
(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,
unless the Company is already subject to service in such jurisdiction and
except as may be required by the Act.
(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 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
pursuant hereunder to be listed on each securities exchange or other trading
market on which similar securities issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.
(i) Use its best efforts to furnish, at the request of
any Holder requesting registration of Registrable Securities pursuant to this
Section 1, on the date that such Registrable Securities are delivered to the
underwriters for sale in connection with a registration pursuant to this
Section 1, if such securities are being sold through underwriters, (i) an
opinion, dated 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, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities
and (ii) a letter dated such date, 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, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities.
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1.10 Indemnification.
(a) The Company will indemnify each Holder, each of its
officers and directors and partners, and each person controlling such Holder
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
actual out-of-pocket expenses, claims, losses, damages or liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, preliminary prospectus,
offering circular or other document, or any amendment or supplement thereto,
incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or any violation or any
alleged violation by the Company of any rule or regulation promulgated under
the Securities Act or the Exchange Act or any state securities law 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 actual out-of-pocket expenses reasonably incurred in connection
with investigating, preparing or defending any such claim, loss, damage,
liability or action, as such expenses are incurred, provided that the Company
will not be liable in any such case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue statement
or omission or alleged untrue statement or omission, made in reliance upon and
in conformity with written information furnished to the Company by such Holder,
controlling person or underwriter specifically for use therein.
(b) 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 actual out-of-pocket expenses, claims, losses,
damages and liabilities (or actions in respect thereof), including any of the
foregoing incurred in settlement of any litigation, commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue statement)
of a material fact contained in any such registration statement, prospectus,
offering circular or other document, or any amendment or supplement thereto,
incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein, in light of the circumstances in which they were made, 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 and any other actual out-of-pocket expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, as such expenses are incurred, in
each case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by such Holder specifically for use therein.
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(c) Each party entitled to indemnification under this
Section 1.10 (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 may participate in such
defense at such party's expense; provided, however, that an Indemnified Party
(together with all other Indemnified Parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the reasonable fees and expenses of such counsel 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 of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 1.10 unless the
failure to give such notice is materially prejudicial to an Indemnifying
Party's ability to defend such action. No Indemnifying Party, in the defense
of any such claim or litigation, shall, except with the consent of each
Indemnified Party (not to be unreasonably withheld), consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
1.11 Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held
by them and the distribution proposed by such Holder or 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.
1.12 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 Restricted 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 Exchange Act.
(b) File with the Commission in a timely manner all
reports and other documents required of the Company under the Exchange Act (at
any time after it has become subject to such reporting requirements); and
(c) So long as an Investor owns any Restricted
Securities, to furnish to the Investor forthwith upon request a written
statement by the Company as to its compliance with the reporting requirements
of 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 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
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Company as an Investor may reasonably request in availing itself of any rule or
regulation of the Commission allowing an Investor to sell any such securities
without registration.
1.13 Transfer of Registration Rights. The rights to cause the
Company to register securities granted Investors under Sections 1.5, 1.6 and
1.7 may be assigned to a transferee or assignee reasonably acceptable to the
Company in connection with transfer or assignment of Registrable Securities by
an Investor (together with any affiliate); provided that (a) such transfer may
otherwise be effected in accordance with applicable securities laws, (b) notice
of such assignment is given to the Company, and (c) such transferee or assignee
(i) is a wholly-owned subsidiary or constituent partner (including limited
partners, retired partners, spouses and ancestors, lineal descendants and
siblings of such partners or spouses who acquire Registrable Securities by
gift, will or intestate succession) of such Investor, or (ii) acquires from
such Investor at least 25% of the Shares (as appropriately adjusted for stock
splits and the like) originally purchased by such Investor (or Common Stock
issued upon conversion thereof).
1.14 Standoff Agreement. Each Holder agrees in connection with any
registration of the Company's securities (other than a registration of
securities in a Rule 145 transaction or with respect to an employee benefit
plan), 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, pledge (or otherwise encumber or hypothecate), grant any option
for the purchase of, or otherwise directly or indirectly dispose of any
Registrable Securities (other than those included in the registration) without
the prior written consent of the Company and such managing underwriters for
such period of time as the Board of Directors establishes pursuant to its good
faith negotiations with such managing underwriters; provided, however, that the
Investors shall not be subject to such lockup unless the officers and directors
of the Company who own stock of the Company shall also be bound by such
restrictions.
1.15 Termination of Rights. The rights of any particular Holder to
cause the Company to register securities under Sections 1.5, 1.6 and 1.7 shall
terminate with respect to such Holder on the earlier of (a) the fifth
anniversary of the effective date of the Company's Initial Public Offering or
(b) the seventh anniversary of the date of this Agreement.
SECTION 2.
AFFIRMATIVE COVENANTS OF THE COMPANY
The Company hereby covenants and agrees as follows:
2.1 Financial Information. So long as an Investor holds at least
25% of the Shares originally purchased by such Investor and/or shares of Common
Stock issued upon the conversion thereof (as adjusted for any stock splits,
consolidations and the like), the Company will furnish to such Investor the
following reports:
(a) As soon as practicable after the end of each fiscal
year, and in any event within ninety (90) days thereafter, audited consolidated
balance sheets and statements of shareholders' equity of the Company and its
subsidiaries, if any, as of the end of such fiscal year, and consolidated
statements of income and cash flows of the Company and its subsidiaries, if
any, for such year,
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prepared in accordance with generally accepted accounting principles and
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail and certified by independent public
accountants of national standing selected by the Company. and
(b) As soon as practicable, but in any event within
forty-five (45) days after the end of each of the first three (3) quarters of
each fiscal year of the Company, unaudited balance sheets of the Company and
its subsidiaries, if any, as of the end of each such quarter, and consolidated
statements of income and cash flows of the Company and its subsidiaries, if
any, for each such quarter, all prepared in accordance with generally accepted
accounting principles.
(c) As soon as practicable after the end of each calendar
month, and in any event within 30 days thereafter, consolidated balance sheets
of the Company and its subsidiaries, if any, as of the end of each calendar
month, and consolidated statements of income and cash flows for such period and
for the current fiscal year to date, together with a comparison of such
statements to the Company's operating plan then in effect.
2.2 Operating Plan and Budget. So long as an Investor holds at
least 25% of the Shares originally purchased by such Investor and/or shares of
Common Stock issued upon conversion thereof (as adjusted for any stock splits,
consolidations and the like) the Company will furnish such Investor with the
Company's budget and operating plan (including projected balance sheets and
profit and loss and cash flow statements) for each fiscal year, as soon as
practicable after approval or adoption thereof by the Company's Board of
Directors.
2.3 Inspection. The Company shall permit each Investor, upon
reasonable notice to the Company at such Investor'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 during normal business hours as may be requested
by the Investor; provided, however, that the Company shall not be obligated
pursuant to this Section 2.3 to provide access to any information which it
reasonably considers to be a trade secret or similar confidential information.
2.4 Assignment of Rights to Financial Information. The rights
granted pursuant to Sections 2.1 and 2.2 may be assigned by an Investor to a
third party who acquires at least 50% of the Shares originally purchased by
such Investor and/or shares of Common Stock issued upon conversion thereof (as
adjusted for any stock splits, consolidations, and the like) and who is not a
competitor, or affiliated in any manner with a competitor, of the Company,
provided that the Company receives notice twenty (20) days prior to such
assignment.
2.5 Proprietary Information Agreement. The Company shall require
each person employed by, or who consults for, the Company to execute a
proprietary information confidentiality and nondisclosure agreement in
substantially the form provided to special counsel to the Investors.
2.6 Termination of Covenants. The covenants set forth in Sections
2.1 through 2.5 shall terminate on, and be of no further force or effect after,
the closing of the Company's initial public offering of Common Stock.
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2.7 Right of First Offer. Subject to the term and conditions
specified in this Section 2.7, the Company hereby grants to each Investor a
right of first offer with respect to future sales by the Company of its
Securities (as hereinafter defined).
Each time the Company proposes to offer subsequent to the offering
under the Series A Agreement any shares of, or securities convertible into or
exercisable for any shares of, any class of its capital stock ("Securities"),
the Company shall first make an offering of such Securities to each Investor in
accordance with the following provisions:
(a) The Company shall deliver a notice (Notice") to each
Investor stating (i) its bona fide intention to offer such Securities, (ii) the
number of such Securities to be offered, (iii) the price, if any, for which it
proposes to offer such Securities, and (iv) the terms of such offer.
(b) Within fifteen (15) calendar days after receipt of
the Notice, the Investor may elect to purchase or obtain, at the price and on
the terms specified in the Notice, up to an amount of such Securities equal to
that portion of such Securities which equals the proportion that the number of
shares of Common Stock then issued or issuable to the Investor upon conversion
of the shares of Series A Preferred held by the Investor bears to the sum of
the number of shares of Common Stock then issued plus the number of shares of
Common Stock issuable upon (i) conversion of all convertible securities of the
Company then outstanding and (ii) exercise of all vested options and warrants
then outstanding. An Investor shall be entitled to apportion the right of
first offer hereby granted among itself and its partners and affiliates in such
proportions as it deems appropriate.
(c) If all Securities which the Investors are entitled to
purchase pursuant to this Section 2.7 are not elected to be obtained as
provided in subsection 2.7(b) hereof, the Company may, during the sixty (60)
day period following the expiration of the period provided in subsection 2.7(b)
hereof, offer such unsubscribed Securities to any person or persons at a price
not less than, and upon terms not materially more favorable to the offeree
than, those specified in the Notice. If the Company does not enter into an
agreement for the sale of the Securities within such period, or if such
agreement is not consummated within thirty (30) days of the execution thereof,
the right provided hereunder shall be deemed to be revived.
(d) The right of first offer in this Section 2.7 shall
not be applicable (i) to the issuance or sale of shares of capital stock (or
options therefor) to employees, officers, directors or consultants for the
primary purpose of soliciting or retaining their services, (ii) to the issuance
or sale of the Company's securities to leasing entities or financial
institutions in connection with commercial leasing or borrowing transactions,
(iii) to or after consummation of the Company's Initial Public Offering, (iv)
to conversions of convertible securities or exercises of exercisable
securities, (v) to any issuances of any of the shares of Series A Preferred
authorized as of the date of this Agreement or (vi) to any issuance of
securities in connection with any acquisition, business combination,
reorganization, merger or similar event.
2.9 Initial Public Offering. The Investors agree not to take any
action or omit to take any action reasonably requested by the Company which
would prevent, block or impede the consummation of an Initial Public Offering.
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SECTION 3.
MISCELLANEOUS
3.1 Assignment. Except as otherwise provided herein, the terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the respective successors and assigns of the parties hereto.
3.2 Third Parties. Nothing in this Agreement, express or implied,
is intended to confer upon any party, other than the parties hereto, and their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
3.3 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Washington in the United States of
America.
3.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.5 Notices. Any notice required or permitted by this Agreement
shall be in writing and shall be sent by prepaid registered or certified mail,
return receipt requested, addressed to the other party at the address shown
below or at such other address for which such party gives notice hereunder.
Such notice shall be deemed to have been given three (3) days after deposit in
the mail.
3.6 Severability. If one or more provisions of this Agreement am
held to be unenforceable under applicable law, portions of such provisions, or
such provisions in their entirety, to the extent necessary, shall be severed
from this Agreement, and the balance of this Agreement shall be enforceable in
accordance with its terms.
3.7 Amendment and Waiver. Any provision of this Agreement may be
amended with the written consent of the Company and the Holders (other than Mr.
Bezos) of at least fifty percent (50%) of the outstanding shares of the
Registrable Securities; provided, however, that no amendment may impose
additional obligations upon Mr. Bezos that are not also imposed on the Holders
without Mr. Bezos' prior written consent. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each Holder of Registrable
Securities and the Company. In addition, the Company may waive performance of
any obligation owing to it, as to some or all of the Holders of Registrable
Securities, or agree to accept alternatives to such performance, without
obtaining the consent of any Holder of Registrable Securities. In the event
that an underwriting agreement is entered into between the Company and any
Holder, and such underwriting agreement contains terms differing from this
Agreement, as to any such Holder the terms of such underwriting agreement shall
govern.
3.8 Effect of Amendment or Waiver. The Investors and their
successors and assigns acknowledge that by the operation of Section 3.7 hereof
the holders of fifty percent (50%) of the outstanding Registrable Securities
(other than Mr. Bezos), acting in conjunction with the Company, will have the
right and power to diminish or eliminate any or all rights or increase any or
all obligations pursuant to this Agreement.
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3.9 Rights of Holders. Each holder of Registrable Securities
shall have the absolute right to exercise or refrain from exercising any right
or rights that such holder may have by reason of this Agreement, including,
without limitation, the right to consent to the waiver or modification of any
obligation under this Agreement, and such holder shall not incur any liability
to any other holder of any securities of the Company as a result of exercising
or refraining from exercising any such right or rights.
3.10 Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any party to this Agreement, upon any breach
or default of the other party, shall impair any such right, power or remedy of
such non-breaching party 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 party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be made 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.
[This space intentionally left blank.]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
▇▇▇▇▇▇.▇▇▇, INC.
By: ▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President and
Chief Executive Officer
FOUNDER
▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
[SIGNATURE PAGE FOR INVESTOR RIGHTS AGREEMENT]
19
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
INVESTORS:
KLEINER, PERKINS, ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇ VIII
By: L. ▇▇▇▇ ▇▇▇▇▇
---------------------------------------
General Partner of KPCB VIII
Associates, the General Partner of
Kleiner, Perkins, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ VIII
KPCB INFORMATION SCIENCES
ZAIBATSU FUND II
By: L. ▇▇▇▇ ▇▇▇▇▇
---------------------------------------
General Partner of KPCB VIII
Associates, the General Partner of
Kleiner, Perkins, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ VIII
[SIGNATURE PAGE FOR INVESTOR RIGHTS AGREEMENT]
20
EXHIBIT A
SCHEDULE OF INVESTORS
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ VII
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
KPCB Information Sciences Zaibitsu Fund II
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
21
EXHIBIT B
RESTRICTIVE LEGEND
