INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (this "Agreement") is entered into as of April
13, 2000, by and among Hidenet Secure Architectures, Inc., a New Jersey
corporation ("Parent"), XxxxxxxXxxxxxx.xxx, Inc., a Delaware corporation (the
"Company"); IBDH LLC ("IBDH"); and NP Partners, LLC, a New York limited
liability company (the "Investor").
RECITALS
WHEREAS, the Investor, Parent and the Company are entering into a Stock and
Option Purchase Agreement (the "Purchase Agreement") on the date hereof (the
"Closing Date"), pursuant to which, among other things, the Investor is
acquiring shares of Series A Preferred Stock of the Company (the " Preferred
Shares") and will obtain an option (the "Option") to purchase shares of Parent;
and
WHEREAS, in order to induce the Investor to enter into the Purchase
Agreement, Parent, the Company and IBDH desire to grant to the Investor the
registration and other rights set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals, and the mutual
covenants set forth herein, the parties hereto agree as follows:
1. Registration Rights. The Company covenants and agrees as follows:
1.1. Definitions. For purposes of this Section 1:
1.1.1. The term "Exchange Act" means the Securities Exchange
Act of 1934, as amended.
1.1.2. The term "Registrable Securities" means (i) any and
all shares of common stock of the Public Company
issued or issuable upon conversion of preferred stock
(including without limiting the Preferred Shares) or
upon exercise of any warrants or options (including
without limitation the Option) held by the Investor
to purchase shares of common stock of the Public
Company; or (ii) shares issued in respect of shares
referred to in (i) above in any reorganization; or
(iii) shares issued in respect of the shares referred
to in (i) or (ii) as a result of a share split, share
dividend, recapitalization or combination.
1.1.3. "Public Company" means (i) Parent, if the Investor
exercised the option granted pursuant to the Purchase
Agreement or notifies the Public Company that it
intends to exercise said option, or (ii) the Company
six months after the consummation of an underwritten
public offering of the securities of the Company
pursuant to the Securities Act.
1.1.4. The terms "register", "registered" and "registration"
refer to a registration effected by preparing and
filing a registration statement or similar document
in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such
registration statement or document.
1.1.5. The term "SEC" shall mean the Securities and Exchange
Commission.
1.1.6. The term "Securities Act" means the Securities Act of
1933, as amended.
1.2. Demand Registration Rights.
The Investor will have demand registration rights as follows:
1.2.1. If the Public Company shall receive at any time after
the expiration of the seventh month from the date
hereof a written request from the Investor requesting
that the Public Company file a registration statement
under the Securities Act covering the registration of
any or all of the Registrable Securities then held by
the Investor, then the Public Company shall:
1.2.1.1. within thirty (30) days of the receipt
thereof, give written notice of such request
to all holders of securities of such Public
Company having registration rights; and
1.2.1.2. promptly file and use its best efforts to
have declared effective as soon as
practicable, the registration under the
Securities Act of all Registrable Securities
which the Investor and such holders request
to be registered.
1.2.2. If the Investor intends to distribute the Registrable
Securities covered by its request by means of an
underwriting, it shall so advise the Public Company
as a part of its request made pursuant to this
section and such Public Company shall include such
information in the written notice referred to in
paragraph 1.2.1.1. The underwriter will be selected
by the Investor and shall be reasonably acceptable to
such Public Company. In such event, the right of any
holder to include securities in such registration
shall be conditioned upon such holder's participation
in such underwriting and the inclusion of such
holder's securities in the underwriting (unless
otherwise mutually agreed by a majority in interest
of the holders) to the extent provided herein. All
holders, proposing to distribute their securities
through such underwriting shall (together with such
Public Company) enter into an underwriting agreement
in customary form with the underwriter or
underwriters selected for such underwriting.
Notwithstanding any other provision of this section
1.2.2. if the underwriter advises in writing that
market factors require a limitation of the number of
shares to be underwritten, then the number of shares
that may be included in the underwriting on behalf of
each holder shall be allocated as follows: (i) first,
the Registrable Shares held by the Investor and (ii)
second, pro ratably amongst the other holders based
upon a fraction: (a) the numerator of which is the
number of shares of such Public Company each such
holder other than the Investor requests to be
registered, and (b) the denominator of which is the
total number of shares all such holders request to be
registered. For purposes of allocation of the
securities to be included in any offering, for any
holder which is a partnership or corporation, the
partners, retired partners and stockholders of such
holder (and in the case of a partnership, any
affiliated partnerships), or the estates and family
members of any such partners and retired partners and
any trusts for the benefit of any of the foregoing
persons shall be deemed to be a single "seller" or
"holder".
1.2.3. Notwithstanding the foregoing, if such Public Company
shall furnish to the Investor a certificate signed by
the Chief Executive Officer of such Public Company
stating that in the good faith judgment of the Board
of Directors of such Public Company compliance with
this Agreement would materially interfere with such
Public Company's ability to consummate a material
transaction that such Public Company is engaged in at
such time or would be otherwise seriously detrimental
to such Public Company and its stockholders for such
registration statement to be filed and it is
therefore essential to defer the filing of such
registration statement, such Public Company shall
have the right to defer taking action with respect to
such filing for a period of not more than one hundred
and eighty (180) days after receipt of the request of
the Investor; provided, however, that such Public
Company may not utilize this right more than once in
any six-month period and provided, further that the
Public Company shall employ good faith in making all
determinations described herein, including without
limitation the duration of any deferal period.
1.2.4. In addition, neither Public Company shall be
obligated to effect, or to take any action to effect,
any registration pursuant to this Section 1.2:
1.2.4.1. After either Public Company has effected two
(2) registrations pursuant to this Section
1.2 which have been declared or ordered
effective and the Investor no longer owns
any Registrable Securities;
1.2.4.2. If less than 6 months have lapsed from the
effective date of a previous underwritten
offering resulting from a demand
registration by the Investor or less than 4
months lapsed from the effective date of a
previous other underwritten offering of the
Public Company's securities to the public;
or
1.2.4.3. If the Public Company delivers notice to the
Investor within thirty (30) days of any
registration request, of its intent to file
a registration statement for such public
offering within ninety (90) days and in fact
does file such statement; provided that the
Public Company is actively employing in good
faith all reasonable efforts to cause such
registration statement to become effective.
1.3. Piggyback Registration Rights.
The Investor will have piggyback registration rights as
follows:
1.3.1. Registration Rights. If the Public Company proposes
to register for its own account or for the account of
other security holders or both any of its stock or
other securities under the Securities Act in
connection with the public offering of such
securities solely for cash (other than a registration
relating solely to the sale of securities to
participants in a Public Company incentive stock
plan, on a Form S-8 or S-4, a registration effected
pursuant to Rule 145 under the Securities Act, or a
registration on any form which does not include
substantially the same information as would be
required to be included in a registration statement
covering the sale of the Registrable Securities),
such Public Company shall, at such time, promptly
give the Investor and each holder of securities of
the Public Company written notice of such
registration. Upon the written request of the
Investor and each holder within twenty (20) days
after mailing of such notice by the Public Company in
accordance with this section 1.3.1, the Public
Company shall, subject to the provisions of paragraph
1.3.2 below, cause to be registered under the
Securities Act all of the Registrable Securities that
each such holder has requested to be registered. The
Investor shall be entitled to an unlimited number of
such piggyback registration rights.
1.3.2. Underwriting.
1.3.2.1. If the registration of which the Public
Company gives notice is for a registered
public offering involving an underwriting,
the Public Company shall so advise the
Investor and each holder of securities of
the Public Company, as part of the written
notice given pursuant to paragraph 1.3.1. In
such event, the right of the Investor and
each holder of securities of the Public
Company to registration pursuant to this
subsection 1.3 shall be conditioned upon its
participation in such underwriting and the
inclusion of Registrable Securities in the
underwriting to the extent provided herein.
The Investor and each holder of securities
of the Public Company participating in such
registration shall, together with the Public
Company, enter into an underwriting
agreement in customary form with the
managing underwriter selected for such
underwriting by the Public Company, which
underwriter shall be reasonably acceptable
to the Investor and each holder of
securities of the Public Company
participating in such registration.
1.3.3. Notwithstanding any other provision of this
subsection 1.3, if the managing underwriter
determines that market factors require a limitation
of the number of shares to be underwritten, the
managing underwriter may limit the number of shares
to be included in such registration (the
"Underwriters' Cutback"); provided, however, that the
Underwriters' Cutback shall be restricted so that the
number of Registrable Securities in such registration
shall be no less than 10% of the shares requested to
be included in such registration.
1.3.4. In the case of an Underwriters' Cutback, the number
of shares that may be included pursuant to this
subsection 1.3 on behalf of the Investor and each
holder in such underwriting shall be allocated pro
ratably amongst the Investor and the other holders in
proportion to their interests in the Public
Corporation. For purposes of allocation of the
securities to be included in any offering, for any
seller which is a partnership or corporation, the
partners, retired partners and stockholders of such
holder (and in the case of a partnership, any
affiliated partnerships), or the estates and family
members of any such partners and retired partners and
any trusts for the benefit of any of the foregoing
persons shall be deemed to be a single seller.
1.4. S-3 Registration Rights.
1.4.1. The Investor shall be entitled to an unlimited number
of registrations on Form S-3, at any time after the
Public Company becomes eligible for such type of
registration statement.
1.4.2. The Public Company shall, 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 the Registrable Securities as are
specified in such request; provided, however, that
the Public Company shall not be obligated to effect
any such registration, qualification or compliance,
pursuant to this Section 1.4: (a) if Form S-3 is not
available for such offering by the Investor; (b) if
the sale of Registrable Securities and such other
securities (if any) is at an aggregate price to the
public (net of any underwriters' discounts or
commissions) of less than one million US Dollars
($1,000,000); (c) if the Public Company shall furnish
to the Investor a certificate signed by the President
of the Public Company stating that in the good faith
judgment of the Board of Directors of the Public
Company, it would be seriously detrimental to the
Public Company and its stockholders for such Form S-3
registration to be effected at such time, in which
event the Public Company shall have the right to
defer the filing of the Form S-3 registration
statement, for a period of not more than ninety (90)
days after receipt of the request of the Holder or
Holders under this Section 1.4, provided, however,
that the Public Company shall not utilize this right
more than once in any twelve month period; and (d) if
the Public Company has, within the twelve (12) month
period preceding the date of such request, already
effected a registration on Form S-3.
1.4.3. Subject to the foregoing, the Public Company shall
file a 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
Investor and the holders of securities of the Public
Company. Registrations effected pursuant to this
Section 1.4 shall not be counted as demands for
registration or registrations effected pursuant to
Sections 1.2.
1.5. Furnish Information. It shall be a condition precedent to the
obligations of the Public Company to take any action pursuant
to this Section 1 with respect to the Registrable Securities
that the Investor and each holder of securities of the Public
Company shall furnish to the Public Company such information
regarding itself, the Registrable Securities held by it, and
the intended method of disposition of such securities as shall
be required to effect the registration of such Registrable
Securities.
1.6. Obligations of the Public Company. Whenever required under
this agreement to effect the registration of any Registrable
Securities, the Public Company shall, as expeditiously as
reasonably possible:
1.6.1. Prepare and file with the SEC a registration
statement with respect to such Registrable Securities
and use its best 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 ninety
(90) days.
1.6.2. 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.
1.6.3. Furnish to the holders of Registrable Securities such
number of copies of 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.
1.6.4. 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 Public 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.
1.6.5. In the event of any underwritten public offering,
enter into and perform its obligations under an
underwriting agreement, including indemnification and
other customary provisions, in usual and customary
form, with the managing underwriter of such offering.
The Investor and each holder participating in such
underwriting shall also enter into and perform its
obligations under such an agreement.
1.6.6. Notify the Investor and 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 light of the
circumstances then existing.
1.6.7. Use its best efforts to furnish, at the request of
any holder requesting registration of Registrable
Securities pursuant to this agreement on the date
that such Registrable Securities are delivered to the
underwriters for sale in connection with a
registration pursuant to this agreement, if such
securities are being sold through underwriters, on
the date that the registration statement with respect
to such securities becomes effective, (i) an opinion,
dated such date, of the counsel representing the
Public 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
Public 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.
1.7. Expenses of Registration. The Public Company shall bear and
pay all expenses incurred in connection with any registration,
filing or qualification of Registrable Securities with respect
to the registrations pursuant to this Section 1 for each
holder (which right may be assigned as provided in Section
1.10), including, without limitation, all registration,
filing, and qualification fees, printers and accounting fees
relating or apportionable thereto and the fees and
disbursements of counsel for the Public Company and no more
than one counsel for all the holders of Registrable
Securities, but excluding underwriting discounts and
commissions relating to Registrable Securities and excluding
fees of legal counsel other than fees of counsel for all
holders of Registrable Securities.
1.8. Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 1:
1.8.1. To the extent permitted by law, the Public Company
will indemnify and hold harmless each holder of
Registrable Securities, 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"): (a) 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, (b) 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 (c) any
violation or alleged violation by the Public 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; and the Public Company will pay
to each such holder, underwriter or controlling
person any legal or other expenses reasonably
incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or
action, as such expenses are incurred; provided,
however, that the indemnity agreement contained in
this subsection 1.8.1 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 Public Company (which
consent shall not be unreasonably withheld), nor
shall the Public Company be liable in any case for
any such loss, claim, damage, liability, or action to
the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in
conformity with written information furnished by any
such holder, underwriter or controlling person.
1.8.2. To the extent permitted by law, each holder of
Registrable Securities will indemnify and hold
harmless the Public Company, each of its directors,
each of its officers who has signed the registration
statement, each person, if any, who controls the
Public Company within the meaning of the Securities
Act, any underwriter, any other holder selling
securities in such registration statement and any
controlling person of any such underwriter or other
holder, severally but not jointly, against any
losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons 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; and each such
holder will pay any legal or other expenses
reasonably incurred by any person intended to be
indemnified pursuant to this subsection 1.8.2, in
connection with investigating or defending any such
loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in
this subsection 1.8.2 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, that,
in no event shall any indemnity by any holder under
this subsection 1.8.2 exceed the gross proceeds from
the offering received by such holder.
1.8.3. Promptly after receipt by an indemnified party under
this Section 1.8 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 1.8, 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 one counsel mutually satisfactory to the
parties; 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 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 shall not relieve such indemnifying party
of any liability to the indemnified party under this
Section 1.8 unless the failure to deliver notice is
materially prejudicial to its ability to defend such
action. Any omission to so 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 1.8.
1.8.4. If the indemnification provided for in this Section
1.8 is held by a court of competent jurisdiction to
be unavailable to an indemnified party with respect
to any loss, liability, claim, damage, or expense
referred to therein, then the indemnifying party, in
lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or
payable by such indemnified party as a result of such
loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative
fault of the indemnifying party on the one hand and
of the indemnified party on the other in connection
with the statements or omissions that resulted in
such loss, liability, claim, damage, or expense as
well as any other relevant equitable considerations;
provided that in no event shall any Holder be
required to contribute under this subsection 1.8.4 an
aggregate amount in excess of the gross proceeds from
the offering received by such holder less any amounts
paid by the Holder pursuant to subsection 1.8.2. The
relative fault of the indemnifying party and of the
indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission
to state a material fact relates to information
supplied by the indemnifying party or by the
indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to
correct or prevent such statement or omission.
1.8.5. Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution
contained in the underwriting agreement entered into
in connection with the underwritten public offering
are in conflict with the foregoing provisions, the
provisions in the underwriting agreement shall
control.
1.8.6. The obligations of the Public Company and holders of
Registrable Securities under this Section 1.8 shall
survive the completion of any offering of Registrable
Securities in a registration statement under this
Section 1, and otherwise.
1.9. Reports under the Exchange Act. With a view to making
available to the holders of Registrable Securities the
benefits of Rule 144 promulgated under the Securities Act and
any other rule or regulation of the SEC that may at any time
permit a holder to sell securities of the Public Company to
the public without registration or pursuant to a registration
on Form S-3, the Public Company agrees:
1.9.1. to make and keep public information available as
those terms are defined in Rule 144 and to file with
the SEC in a timely manner all reports and other
documents required of the Public Company under the
Securities Act and the Exchange Act; and
1.9.2. to furnish to any holder, so long as the holder owns
any Registrable Securities, forthwith upon request
(i) a written statement by the Public Company that it
has complied with the reporting requirements of SEC
Rule 144, the Securities Act and the Exchange Act (at
any time after it has become subject to such
reporting requirements), (ii) a copy of the most
recent annual or quarterly report of the Public
Company and such other reports and documents so filed
by the Public Company, and (iii) such other
information as may be reasonably requested in writing
by any holder of any rule or regulation of the SEC
which permits the selling of any such securities
without registration.
1.10. Assignment of Registration Rights. The Investor may assign its
rights to cause the Public Company to register its Registrable
Securities pursuant to this Section 1 to a transferee of all
or any part of its Registrable Securities. The transferor
shall, within twenty (20) days after such transfer, furnish
the Public Company with written notice of the name and address
of such transferee and the securities with respect to which
such registration rights are being assigned, and the
transferee's written agreement to be bound by this Section 1.
Notwithstanding the above, in the event that the Investor
sells Registrable Securities to a transferee who is entitled
to sell all of its Registrable Securities under Rule 144
during any one quarter, then such transferee shall not have
the rights under Section 1 herein.
1.11. "Market Stand-Off" Agreement. The Investor and each transferee
thereof hereby agrees that, during the period of duration
specified by the Public Company and an underwriter of common
stock or other securities of the Public Company, following the
effective date of a registration statement of the Public
Company filed under the Securities Act, it shall not, to the
extent requested by the Public Company and such underwriter,
directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any
option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound), any
securities of the Public Company held by it as of the
effective date, except Registrable Securities included in such
registration; provided, however, that:
1.11.1. all officers and directors of the Public Company and
holders of 5% or more of the outstanding capital
stock of the Public Company enter into similar
agreements and the Public Company uses reasonable
efforts to obtain similar agreements from all other
holders of 1% or more of the outstanding capital
stock of the Public Company; and
1.11.2. such market stand-off time period shall not exceed
one hundred eighty (180) days following the effective
date of any underwritten public offering by the
Public Company of its securities.
The Investor and each transferee thereof agrees to
provide to the managing underwriter(s) of any
underwritten public offering such further agreement
as such underwriter may reasonably require in
connection with this market stand-off agreement. In
order to enforce the foregoing covenant, the Public
Company may impose stop- transfer instructions with
respect to the Registrable Securities of the Investor
and each transfer (and the shares or securities of
every other person subject to the foregoing
restriction) until the end of such period.
1.12. Termination of Registration Rights. The right of the Investor
to include Registrable Securities, in any registration
pursuant to Section 1.2 and the obligation to be subject to
the "market standoff" provisions in Section 1.11 hereof shall
terminate upon such date as a public trading market shall
exist for the Public Company's common stock and all shares of
Registrable Securities beneficially owned or subject to Rule
144 aggregation by the Investor may be sold under Rule 144
(without regard to Rule 144(k)) during any 90-day period.
2. Restriction on Sales.
The Investor shall not directly or indirectly sell, gift, dispose or assign
or transfer any securities of the Company or Parent to any person or entity
which is, directly or indirectly, a competitor of the Company or any of its
subsidiaries, unless such sale or transfer is part of the sale or transfer
of all the Company's shares or a merger, consolidation or other business
combination of the Company and such competitor.
3. Right of First Refusal.
3.1. General. For the purposes of this Section 3, the term
"Transfer" shall mean any sale, assignment, transfer,
hypothecation or other encumbrance or disposition of in any
way.
3.2. Sale Notice. In the event IBDH shall desire to make a Transfer
of common stock of Parent, IBDH shall be obligated to offer
them first to the Investor by giving notice in writing to the
Investor (hereinafter "Sale Notice"), provided, however, that
IBDH shall have the right to sell up to an aggregate of
300,000 shares of common stock of the Parent each 6-month
period without giving such Sale Notice.
3.3. Particulars of Sale Notice. In the Sale Notice IBDH shall
include the number of shares of common stock of the Parent it
wishes to Transfer (hereinafter the "Offered Shares") and the
price for the Offered Shares and all other terms therof. The
Sale Notice shall be irrevocable
3.4. Purchase Notice. The Investor may inform IBDH in writing,
within five (5) business days from the date of receipt of the
Sale Notice, as to its intention to purchase the Offered
Shares, the purchase of which shall be at the purchase price
and payment condition as provided for in the Sale Notice
(hereinafter the "Purchase Notice"). In the event the Investor
has given such Purchase Notice, the Investor shall pay the
purchase price for the Offered Shares, in immediately
available funds, within 7 business days from receipt of the
Sale Notice or when such shares were to be paid for by the
proposed purchaser, whichever is later.
3.5. Sale to Third Party. If by the end of the period referred to
in subsection 3.4 above, IBDH has not received a Purchase
Notice with respect to the total number of Offered Shares,
then IBDH may Transfer some or all of the Offered Shares to
the person or persons described in the sale notice
(hereinafter the "Offeree") within 90 business days from the
expiration of the period for submission of the Purchase
Notice, at a price not less than the price mentioned in the
Sale Notice and upon all other conditions not more favorable
to the Offeree than those provided for in the Sale Notice.
3.6. Re-offer. If IBDH shall not Transfer the Offered Shares as
aforesaid within the period of time specified in subsection
3.4, IBDH shall be obligated, before selling the Offered
Shares to another, to offer them again to the Investor in
accordance with the aforementioned procedure, and such
procedure shall apply to any further offer.
3.7. Permitted Transferees. Notwithstanding the above, IBDH shall
be entitled to transfer its shares to "Permitted Transferees"
without regard to the provisions of these Sections 3, 4 and 5.
A "Permitted Transferee" shall mean any one of the following:
(a) a person or entity that controls or is controlled by or is
under common control with IBDH or either member of IBDH; (b) a
family member of either member of IBDH or a trust for the
benefit thereof; provided that the Permitted Transferee shall
furnish to the Company and Parent a written agreement to be
bound by and comply with all provisions of this Agreement.
3.8. Expiration. The right of first refusal granted pursuant to
this Section 3, shall terminate upon the closing of a firmly
underwritten public offering of common stock of the Company or
the Parent, where the pre- money valuation is in excess of
Forty million dollars ($40,000,000) with gross proceeds to the
Parent or the Company in excess of Eight million five hundred
thousand dollars ($8,500,000) (a "Qualified Offering").
4. Co-Sale Rights.
4.1. Grant of Right. Without derogating from the provisions of
Section 3 above, to the extent that the Investor does not
exercise its right of first refusal set forth in Section 3,
the Investor shall have the right, exercisable upon written
notice to IBDH, within three (3) business days after receipt
of the Sale Notice, to participate in IBDH's sale of the
Offered Shares pursuant to the specified terms and conditions
of the Sale Notice. The number of shares of common stock of
Parent that IBDH may sell pursuant to such Sale Notice shall
be reduced, so as to allow the Investor to participate in the
sale of such number of shares which is the result of the
multiplication of the Offered Shares by a fraction: (a) the
numerator of which is the number of shares of common stock of
the Parent acquired by the Investor upon exercise of the
Option; and (b) the denominator of which is the total number
of shares of Common Stock owned by IBDH plus the number of
shares of common stock of the Parent acquired by the Investor
upon exercise of the Option.
4.2. Mechanics of Transfer. The Investor and IBDH shall transfer
their respective stock certificates to the third party offeree
upon consummation of the sale of the Offered Shares pursuant
to the terms and conditions specified in the Sale Notice to
the Investor, and such offeree shall promptly thereafter remit
to the Investor and to IBDH that portion of the sale proceeds
to which it is entitled by reason of its participation in such
sale. In the event that less than all the shares represented
by such a stock certificate are sold pursuant to Section 4,
IBDH shall instruct the Company to issue a new certificate to
the Investor representing the shares not sold.
4.3. No Effect on Subsequent Rights. The exercise or non- exercise
of the rights of the Investor hereunder to participate in one
or more sales of any Offered Shares made by IBDH shall not
adversely affect the Investor' rights to participate in
subsequent sales of Offered Shares by IBDH.
4.4. Exclusions. The co-sale right of the Investor shall not
pertain or apply to any Transfer to any Permitted Transferee
of IBDH; provided that transferee or donee shall furnish the
Investor with a written agreement to be bound by and comply
with all provisions of this Agreement.
4.5. Expiration. The co-sale right granted under this Section 4
shall terminate upon a Qualified Offering.
5. Pre-emptive Rights.
Subject to the terms and conditions specified in this Section 5, each
of Parent and the Company hereby grants to the Investor a pre-emptive
right with respect to future sales by the Company and Parent of its
Securities (as hereinafter defined), other than in a transaction
registered under the Securities Act, or a merger or other Organic
Transaction (as defined in the Company's Certificate of Designations
for the Preferred Shares) of the Company or the Parent.
5.1. General. Each time the Company or Parent offers any shares of
its common stock, or securities convertible into or
exercisable into its common stock ("Securities"), the Company
or Parent, as the case may be, shall give prior written notice
of such offering to the Investor in accordance with the
following provisions:
5.1.1. The Company or Parent, as the case may be, shall
deliver a written notice (the "Offer Notice") to the
Investor stating (i) its bona fide intention to offer
such Securities (ii) the number of such Securities
being offered, and (iii) the price and terms upon
which it is offering such Securities.
5.1.2. Within fourteen (14) business days after giving the
Offer Notice, the Investor may elect to purchase or
obtain, at the price and on the terms specified in
the Offer Notice, up to Investor's pro rata portion
necessary to maintain its equity interest in the
Company or Parent, as the case may be, on a
fully-diluted basis.
5.1.3. If all Securities referred to in the Offer Notice
which Investor is entitled to obtain pursuant to
Section 5.1.2 are not purchased as provided therein,
the Company or Parent, as the case may be, may,
during the ninety (90) day business period following
the expiration of the period provided in Section
5.1.2 hereof, offer the Unpurchased Securities to any
person or persons ("Offeree") at a price not less
than, and upon terms no more favorable to the Offeree
than those specified in the Offer Notice. If the
Company or Parent, as the case may be, does not enter
into an agreement for the sale of the unpurchased
Securities within such period, or if such agreement
is not consummated within ninety (90) business days
of the execution thereof, the right provided
hereunder shall be deemed to be revived and such
unpurchased Securities shall not be offered unless
first re-offered to the Investor in accordance
herewith.
5.2. Exceptions. The pre-emptive right in this Section 5 shall not
be applicable to (a) the issuance or sale of options
exercisable for any shares of any class of capital stock of
the Company or Parent pursuant to a stock option plan approved
by the Company's or Parent's Board of Directors to its
officers, directors, employees or consultants, (b) common
stock issuable upon the conversion of the Preferred Shares,
(c) the issuance of securities in connection with any stock
split, stock dividend or recapitalization by the Company or
Parent, (d) dividends payable in common stock; or (e) issuance
of securities to a strategic investor.
5.3. Expiration. The pre-emptive right granted pursuant to this
Section 5 shall terminate upon a Qualified Offering.
6. Bring Along Rights.
6.1. The Investor agrees that, in the event that holders owning at
least seventy percent (70%) of the total number of shares of
capital stock of the Parent (the "Proposing Shareholders")
shall have approved in writing a transaction or series of
related transactions with any person or persons regarding a
sale of all of the outstanding shares of Parent stock held by
such Proposing Shareholders, or the merger or consolidation or
other recapitalization of the Parent with another entity, or
the sale of assets of the Parent to another entity, or the
liquidation or dissolution of the Parent, such Proposing
Shareholders shall be entitled, at their option, to require
the Investor to include all of its securities in the Parent in
such transfer at the same price and at the same other terms
and conditions or to approve (by vote or written consent) such
merger, consolidation, recapitalization, sale of assets,
liquidation or dissolution, by providing the Investor with a
notice (the "Bring-Along Notice"), at least fourteen (14)
business days prior to the consummation of or vote for the
proposed transaction, setting forth in reasonable detail the
material terms and conditions of the proposed transaction and
if applicable the price per share at which the Investor shall
be required to sell its shares (which price shall be equal to
the price at which such Proposing Shareholders have agreed to
sell their shares and shall be at least two times the price
per share paid by Investor) (such entitlement shall be
referred to herein as the "Bring-Along Rights"), provided that
the Investor shall not be so obligated unless the Investor
would gain as a result of such transaction at least a 40%
annual rate of return on the purchase price paid for the
Preferred Shares and Option, the purchase price thereof shall
be payable in cash upon the closing thereof, and the Investor
shall not be required to make any representation or warranty
other than with respect to title to the Preferred Shares and
Option.
6.2. At the closing of the proposed transaction (which date, place
and time shall be designated by the Proposing Shareholders and
provided to Investor in writing at least five (5) business
days prior thereto), the Investor shall (if required by the
Proposing Shareholders, Parent or the Company), deliver
certificates evidencing all its shares, duly endorsed, or
accompanied by written instruments of transfer in form
satisfactory to the proposed purchaser, duly executed, by the
Investor, free and clear of any liens, against delivery of the
purchase price therefor.
6.3. The Bring-Along Rights shall not apply to a disposition by any
stockholder to (a) any other shareholder of the Company or
Parent or (b) an affiliate of the Proposing Shareholder
(including any family member of a stockholder or trust for the
benefit of a stockholder or family members), provided the
transferee agrees in writing to be subject to the terms and
conditions of this Agreement as if it were an original party
thereto.
6.4. The Bring-Along Rights granted under this Section 6 shall
terminate upon a Qualified Offering.
7. Restrictive Legends and Stop-Transfer Orders.
7.1. Legends. Investor understands and agrees that the Company
shall cause the legends set forth below or legends
substantially equivalent thereto, to be placed upon any
certificate(s) evidencing ownership of securities subject to
this Agreement, together with any other legends that may be
required by state or federal securities laws:
7.2. "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT").
THESE SECURITIES MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE ACT AND OTHER APPLICABLE SECURITIES LAWS."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN REGISTRATION RIGHTS AND RESTRICTIONS ON TRANSFER, AS
SET FORTH IN AN INVESTOR RIGHTS AGREEMENT BETWEEN THE ISSUER
AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY
BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH
TRANSFER RESTRICTIONS AND MARKET STANDOFF PROVISION ARE
BINDING ON TRANSFEREES OF THESE SHARES."
7.3. Stop-Transfer Notices. Investor agrees that, in order to
ensure compliance with the restrictions referred to herein,
the Company may issue appropriate "stop transfer" instructions
to its transfer agent, if any, and that, if the Company
transfers its own securities, it may make appropriate
notations to the same effect in its own records.
7.4. Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any securities that have been sold or
otherwise transferred in violation of any of the provisions of
this Agreement or (ii) to treat as owner of such securities or
to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such securities shall have been so
transferred.
8. Miscellaneous.
8.1. Successors and Assigns. 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 (including transferees of any shares of
Registrable Securities). Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the
parties hereto or their respective successors and assigns any
rights, remedies, obligations, or liabilities under or by
reason of this Agreement, except as expressly provided in this
Agreement.
8.2. Aggregation of Stock. All securities held or acquired (or
common stock issuable upon conversion thereof) by the Investor
and affiliated entities or persons shall be aggregated
together for the purpose of determining the availability or
discharge of any rights under this Agreement.
8.3. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
8.4. Notices. All notices and other communications required or
permitted hereunder shall be in writing, shall be effective
when given, and shall in any event be deemed to be given upon
receipt or, if earlier, (a) five (5) business days after
deposit with the U.S. Postal Service or other applicable
postal service, if delivered by first class mail, postage
prepaid, or inter-country delivery (fifteen (15) business days
for inter-country delivery), (b) upon delivery, if delivered
by hand, (c) one (1) business day after the business day of
deposit with Federal Express or similar overnight courier,
freight prepaid for inter-country delivery (two (2) business
days after such deposit for inter- country delivery) or (d)
one (1) business day after the business day of facsimile
transmission, if delivered by facsimile transmission; and
shall be addressed as follows:
if to the Investor:
NP Partners, LLC
00 Xxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
if to the Company, Parent or IBDH:
103 Medinat Xxxxxxxxx Xxxxxx
Xxxxxxxx 00000 Xxxxxx
Attn: Xxx Xxxxxxx
or in any other address as a party may designate by ten (10)
days' advance written notice to the other party pursuant to
the provisions above.
8.5. Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the
prevailing party shall be entitled to reasonable attorneys'
fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
8.6. Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and
either retroactively or prospectively), only with the written
consent of all the parties hereto.
8.7. Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of the
Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its
terms.
8.8. Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with
regard to the subjects hereof and thereof and supersedes all
prior agreements and understandings with respect to the
subject matter hereof.
8.9. Governing Law; Jurisdiction. This Agreement shall be governed
by and construed in accordance with the corporate laws of the
State of Delaware and, as to any matter other than matter of
corporate law, the laws of the State of New York, excluding
that body of law pertaining to conflicts of law. All disputes
arising under or in relation to this Agreement, or to the
validity, interpretation, breach, violation of term thereof,
shall be finally and solely determined and settled by the
competent court for New York, and each of the parties hereby
submits irrevocably to the jurisdiction of the court.
8.10. 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.
[Remainder of Page Intentionally Omitted;
Signatures to Follow]
IN WITNESS WHEREOF, the parties have executed this Investor Rights
Agreement as of the date first above written.
HIDENET SECURE ARCHITECUTURES, INC.
By: _________________________
Name: ________________________
Title: ________________________
XXXXXXXXXXXXXX.XXX, INC. NP PARTNERS, LLC
By: _________________________ By: _________________________
Name: ________________________ Name: ________________________
Title: Title:
------------------------ ------------------------
IBDH, LLC
By: _________________________
Name: ________________________
Title:
------------------------
IN WITNESS WHEREOF, the parties have executed this Investor Rights Agreement
as of the date first above written.
HIDENET SECURE ARCHITECUTURES, INC.
By: /s/ Xxx Fussman_____________
Name: Xxx Xxxxxxx
Title: President
XXXXXXXXXXXXXX.XXX, INC. NP PARTNERS, LLC
By: /s/ Xxxxxx By: /s/ Xxxx
Friedman_________ Hauser_____________
Name: Xxxxxx Xxxxxxxx Name: Xxxx X. Xxxxxx
Title: Chief Executive Officer Title: Manager
IBDH, LLC
By: /s/ Xxx
Fussman_____________
Name: Xxx Xxxxxxx
Title: Member
